McKellar v Chief Commissioner of State Revenue [2004] NSWADT 22

Set aside by Appeal : Set aside by Appeal on 13/10/2004

CITATION: McKellar v Chief Commissioner of State Revenue [2004] NSWADT 22 DIVISION: General Division APPLICANT PARTIES: Trent Finlay McKellar RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 033223 HEARING DATES: 21/11/2003 SUBMISSIONS CLOSED: 11/21/2003 DATE OF DECISION: 02/02/2004

BEFORE: Needham J - Judicial Member APPLICATION: first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision MATTER FOR DECISION: Principal matter LEGISLATION CITED : First Home Owners Grant Act 2000 Land Tax Management Act 1956 Baulkham Hills Shire Council v. Mekol Pty Ltd (1970) 92 WN (NSW) 553 Allison v. Lowe [1998] Tas R 21 CASES CITED: Harris v. McKenzie (1996) 9 NSWLR 139 Newcastle City Council v. Royal Newcastle Hospital (1957) 96 CLR 493 Zakariya v. Chief Commissioner, Office of State Revenue [2003] NSWADT 26. APPLICANT REPRESENTATION: In person RESPONDENT I Mescher, barrister ORDERS: 1 The decision of the Chief Commissioner reversing the decision to issue a grant and seeking repayment of $8,400 (including a penalty of 20%) is set aside.; 2 The applicant is entitled to retain the grant.

Facts 1 Trent Finlay McKellar ("the applicant") applied on 4 July 2000 for a First Home Owner Grant of $7,000 in respect of his purchase of the property 18 Cypress Close, Bluehaven, New South Wales ("the property" or "Bluehaven"). The application was granted on 3 August 2000 pursuant to s 17 of the First Home Owner Grant Act 2000 ("the Act") and the grant paid to the applicant, who used it for the purchase of the property. 2 The applicant took a mortgage out on the property with the Commonwealth Bank. He disclosed to the Bank that the property was intended to be occupied by him as an owner/occupier rather than for investment purposes, and the loan application form in evidence reflects that disclosure. 3 At the time of purchasing the property, the applicant was (and remains) employed as an Avionics Technician with the Royal Australian Air Force. He was in a relationship with a Ms Rodgers who was then completing her nursing training at Wyong. The applicant's intention, which was not challenged, was that he and Ms Rodgers would live together in the property. 4 The property purchase settled on 25 August 2000. The applicant stayed there overnight, and moved his furniture into the house from the barracks the next day. He connected the electricity and telephone in his own name. He insured the building, but not the contents, as he did not have a large amount of furniture. He says that he resided at the property from that time until 27 September 2000, although he sometimes stayed at Ms Rogers' parents' place in Pitt Town when he was working shift work, and for a period of eight days he was away with his squadron on a rescue. 5 On 20 September 2000 the applicant instructed agents to find tenants for the property, and the property was leased from October 2000 until it was sold by the applicant recently. The applicant moved back to the Air Force base, he says, for a number of reasons:- a) He was finding the long drive from Bluehaven to Richmond difficult when called in to work urgently; b) The time spent driving did not comply with Air Force guidelines, and he was concerned that the distance and shiftwork impact may create a difficulty in his work. c) His relationship with Ms Rogers broke up due to his work commitments and travel to and from Bluehaven, and as a result his intentions of living with her at Bluehaven, and Ms Rogers contributing to the expenses, were not fulfilled. 6 As a result of the above factors, he complied with a "suggestion" from his commanding officer that he reside closer to the Air Force Base in Richmond. He said in evidence that "suggestions" from supervisors, while not "orders", were best complied with in the interests of his career. 7 Accordingly, he moved back to base, rented out the property, and has not purchased any other property. 8 On 30 January 2003 the Office of State Revenue ("OSR") wrote to the applicant requiring a statutory declaration as to residence in the property along with documentary evidence of the occupancy. The applicant complied on 13 February 2003, citing the "break-up of a personal relationship" and a resulting inability to meet financial commitments as the reasons for his moving back to the barracks. 9 On 13 March 2003 the OSR sent a notice to the applicant pursuant to s 45 of the Act, reversing the decision to award a grant and imposing a penalty of 20%. The applicant's solicitors objected on 7 April 2003, setting out broadly the same facts as set out above and contending that "he took up permanent residence in the property on 26 August 2000". 10 The objection was considered by the OSR but disallowed by letter of 20 June 2003. The applicant sought review of the disallowance by filing an application with the Tribunal on 15 August 2003, which application was within the time provided by s 28(4) of the Act. The Hearing and the Parties' Contentions 11 Each party put on written submissions and made supplementary oral submissions, the applicant giving evidence orally and by way of statement. I accept the applicant's evidence and that he gave evidence truthfully and honestly. He tendered photographs of his time of occupation of the property, which photographs are typical of a young person taking pride in his first property acquisition. The photographs show him mowing the lawn, hanging out laundry, preparing a meal in the kitchen, and the view from the property. Some of them are time-stamped in early September 2000, and the applicant gave evidence that some of them were taken during the visit of his father to the property. 12 The applicant contends that he took up permanent residence at the property, as his principal place of residence, in August 2000 and that his occupation of the property was cut short by factors beyond his control. While it is true that the RAAF residence requirement that he live closer to base than the distance between Richmond and Bluehaven was extant when he bought the property, he says he was not aware of it until his supervisor brought it to his attention. He contends that the fact that the period of residence was short – about a month – does not change the fact that when he took up residence in the property he intended to reside there permanently and in fact regarded it as his principal, and only, place of residence for that time. He says, although he provided no written evidence of the fact, that the Taxation Office recognised this when he later sold the property and was exempted from paying Capital Gains Tax on the basis that the property was at one time his principal place of residence. I mention this as part of his contentions, not because there is any binding effect of such a ruling, even if it were in evidence. 13 Counsel for the respondent put the matter on the following basis. The fact that the applicant "resided" in the premises from August until September 2000 does not mean that he "occupied" the premises as his principal place of residence. The occupation lacked the requisite degree of permanence, continuity and regularity. The respondent pointed to the fact that he "barely lived there", staying also at his girlfriend's parents' place in Pitt Town and on duty with the Air Force. Nor was it his "principal place of residence" – the respondent points to the "commercial purpose" of his renting out the premises for 11 out of the 12 months of the period given to recipients of the First Home Owner Grants for occupation of the property. 14 In oral argument, it was submitted that the period which the Commissioner considers sufficient for establishing occupation of a property as a principal place of residence is twelve months. 15 There is no suggestion that the applicant has acted fraudulently or otherwise in a reprehensible way, and the penalty imposed is because the respondent took the view that the residence requirement was not complied with on the facts, and that the applicant should have brought the circumstances to the attention of the Chief Commissioner. Consideration 16 The Act provides that a first home owner grant is payable on an application if, inter alia, the Applicant complies with the eligibility criteria – see s 7(1)(a) of the Act. The applicant complies with all eligibility criteria except, on the respondent's case, of sub-s 12(1) which provides:- "An application for a first home owner grant must occupy the home to which the application relates as the applicant's principal place of residence within 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner". 17 If this Tribunal considers that the applicant does not meet the "residence criteria" as it is referred to, then the decision of the respondent is correct and the grant, plus the penalty of 20%, must be repaid. 18 Counsel for the respondent, in his written submissions, breaks the "residence criterion" into two parts. Firstly, did he "occupy" the premises? Secondly, if so, did he occupy them as his "principal place of residence"? 19 The applicant says that he did indeed "occupy" the premises. He points to the utilities connected in his name, the photographs of his apparent living in the house, and the fact that his supervisor appeared to regard his move as an occupation outside the rules of the Air Force. 20 The respondent points to a number of cases in which "occupation", "occupy" and "occupied" have been considered in various contexts, including Baulkham Hills Shire Council v. Mekol Pty Ltd (1970) 92 WN (NSW) 553 (relating to the use of the word "occupy" in s 313(j) of the old Local Government Act 1919), Allison v. Lowe [1998] Tas R 21, Harris v. McKenzie (1996) 9 NSWLR 139 (in relation to s 18(4)(e) of the Liquor Act 1982) and Newcastle City Council v. Royal Newcastle Hospital (1957) 96 CLR 493 at 507-8. 21 The word "occupy" is not a word of precise meaning. The respondent points to the lack of continuity of his occupation of the premises, given his nights staying with his girlfriend and elsewhere. The respondent relied upon the decision of Baulkham Hills Shire Council v. Mekol Pty Ltd, where the word "occupy" used in s 313(j) of the Local Government Act 1919 excluded "persons who merely visit the premises as customers of a retail store" and that it required "some element of regularity, continuity and permanence". A more compelling authority is that of the NSW Court of Appeal in Harris v. McKenzie (1996) 9 NSWLR 139. Justice Mahoney held that "occupation" described what a person is doing in relation to particular premises and focuses upon what he does or may do in relation to the premises generally (at 152-153). In the circumstances of this case, I find that the applicant did "occupy" the property. The factors which tend me towards this view are the moving of furniture from his previous residence into the property, and the activities undertaken while he was there, some of which were shown in the photographs. 22 "Principal place of residence" is not defined in the Act. The Respondent seeks to draw an analogy between the phrase as used in the Act and the phrase "principal place of residence" in 2 3(3) of the Land Tax Management Act 1956, which requires continual use and occupation by the applicant for residential purposes and "for no other purpose". While the respondent does not seek to put the "no other purpose" gloss on s 12(1) of the Act, he contends that there should have been "no other purpose" of occupation for the entire twelve-month period of 25 August 2000 to 25 August 2001. This is, in my view, a misguided approach to the Act. The Act does not require that the applicant take up residence immediately; that much is clear from the terms of s 12(1). If the applicant had taken up residence as his principal place of residence a day or a week before the year allowed by s 12(1) elapsed, there is nothing in the section to say that that would not have been sufficient for the "residence requirement" to be fulfilled.. 23 It does not matter if the resident is for a short period of time as long as the occupation is as a principal place of residence; that is, a person's main residence (see Zakariya v. Chief Commissioner, Office of State Revenue [2003] NSWADT 26). 24 There are no grounds, in my opinion, to say that the applicant did not "occupy" the premises. As I have said, the applicant's evidence, oral, written and photographic, show that he moved items such as outdoor furniture, lawn mowers, a kettle, food, clothes and a bed into the property. He slept there. He connected utilities there. He told the Bank he intended to live there, and obtained an "owner/occupier" loan, thus providing documentary corroboration of his intention to live there and treat the property as his home. 25 The real question is whether, given the short duration of the occupation, it can be said to have been his principal place of residence. As I have said, the Act does not require a minimum period of residence, merely a period of one year in which that occupation must take place. Given the intention of the applicant to reside there permanently, and his acting on that intention by moving into the property and living there, albeit for a short period, he does comply with the "residence requirement" in s 12(1) of the Act notwithstanding the fact that he moved merely a month later owing to unforeseen circumstances. Decision 26 The decision of the Chief Commissioner reversing the decision to issue a grant and seeking repayment of $8,400 (including a penalty of 20%) is set aside. 27 The applicant is entitled to retain the $7,000 paid to him pursuant to the Act.