Capri v Chief Commissioner of State Revenue [2007] NSWADT 70

CITATION: Capri v Chief Commissioner of State Revenue [2007] NSWADT 70

DIVISION: Revenue Division

APPLICANT PARTIES: Salvatore Capri RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 066069

HEARING DATES: 1 March 2007

SUBMISSIONS CLOSED: 1 March 2007

EXTEMPORE DECISION DATE: 1 March 2007

DATE OF DECISION: 2 April 2007

BEFORE: Hole M - Judicial Member

CATCHWORDS: Land tax exemption - principal place of residence

MATTER FOR DECISION: Principal matter

LEGISLATION CITED : Land Tax Management Act 1956 Valuation of Land Act 1916

CASES CITED: Ryan v Commissioner of Land Tax [1982] 1NSWLR 305

APPLICANT In person REPRESENTATION: RESPONDENT H El Hage, solicitor

ORDERS: The decision under review is affirmed

REASONS FOR DECISION 1 The applicant has applied for review of the decision of the respondent to refuse an exemption pursuant to the principal place of residence exemption provided under the Land Tax Management Act 1956 ("LTMA"). The respondent has assessed the applicant for the land tax years 2004, 2005 and 2006 in respect of the whole of the property at 12 Koona Street ("the subject property"). The applicant has requested that land tax be payable only in respect of the proportion of the subject property which is not used as part of his principal place of residence in proportion to the whole of the land area. 2 The applicant and his wife purchased the property at 10 Koona Street in 1982. The applicant lives in the home on that property with his wife and his family as his principal place of residence. The subject property is adjacent to the applicant's home. 3 The applicant purchased the land adjoining 10 Koona Street being 12 Koona Street, the subject property, on 29 September 2000. This property is owned by the applicant solely. The applicant has leased the subject property to tenants since the date of purchase, there being a self contained dwelling on the subject property. 4 At the time that the applicant purchased the subject property there was a fixed colourbond fence constructed across the property which divides the subject property into two (2) parts. The dividing fence between the subject property and the applicant's principal place of residence has been removed so that the back part of the subject property is capable of being used together with the applicant's principal place of residence. 5 The applicant and his wife are exempt from payment of land tax in respect of their principal place of residence at 10 Koona Street. 6 On 14 March 2006 the respondent forwarded a land tax assessment to the applicant for each of the 2004, 2005 and 2006 tax years. The land tax was assessed in respect of the subject property and in each of the assessments the property at 10 Koona Street was exempt from land tax pursuant to the exemption provisions available for the principal place of residence as set out in Section 10(1)(r) and Clause 2 of Schedule 1A of the LTMA. Each of the assessments is in respect of the subject property and a third property which is jointly owned by the applicant and his wife. 7 The applicant forwarded an objection to the respondent in respect of the assessments on 22 March 2006. This objection was considered by the respondent and disallowed on 8 June 2006. On 27 June 2006 the applicant filed this application in the Tribunal. Evidence 8 The applicant relied on the fact that there was a dividing fence on the subject property which allowed the rear section of the subject property to be used as part of his principal place of residence, and that the rear portion of the subject property is used solely by the applicant and his family as part of his backyard. The applicant further relied on the fact that the clothes line is constructed on the subject property, there is an open play area on the subject property and the applicant's compost bins and storage area for firewood and trailer are located on the rear of the subject property. 9 The applicant stated, as a ground for objection, that the part of the subject property that is used as part of his principal place of residence is 47% of the overall area of the subject property, and that the land tax should therefore be calculated on 53% of the total area of the subject property. The applicant provided various photographs which disclosed that indeed the rear of the subject property is fenced off from the remainder of the property and that various installations on that property are as he has stated. Legislation 10 Sections 7, 8 and 10(1)(r) of LTMA and the definition of "principal place of residence of a person" in Section 3 are the applicable sections in this matter. The principal place of residence exemption is set out in Schedule 1A Part 2 of LTMA. There have been amendments to the definition of principal place of residence for the land tax year commencing 1 January 2004, the land tax year commencing 1 January 2005 and the land tax year commencing 1 January 2006. The amendments relate mainly to the fact that the land tax for the year commencing 1 January 2004 was changed to facilitate the reference to a premium tax threshold. 11 The land tax for each of the 2004, 2005 and 2006 tax years is based on the ownership of the subject property as at midnight on 31 December on each of the preceding years. 12 The definition in Section 3 of "principal place of residence of a person" is the one place of residence that is, among the one or more places of residence of a person within and outside Australia, the principal place of residence of that person. 13 Section 10(1)(r) is the section where an exemption may be claimed for the owner's principal place of residence. Applicant's submissions 14 The applicant submitted that the part of the subject property at the rear comprising 47% of the area of the subject property should be included as part of the applicant's principal place of residence and that it should therefore be exempt pursuant to Section 10(1)(r) of LTMA and Clause 2 in Schedule 1A of LTMA. He submitted that this part of the subject property was used as part of his principal place of residence and that it could not be used by the tenants of the other part of the subject property and could only be used by the applicant, his family and those persons that he invited to his principal place of residence. He submitted that there was a washing line, open play area, compost bins and a storage area for firewood and trailer on this part of the subject property. 15 The applicant submitted that an appropriate way in which the land could be valued for the purposes of land tax was to take into account the separation of the front from the rear by calculating it on the basis of the percentage area of the whole site of the subject property. 16 The applicant submitted that the test to be applied was as set out in Ryan v Commissioner of Land Tax [1982] 1NSWLR 305 ("Ryan"). So that another parcel of land be included as part of the principal place of residence for the purpose of excluding the land from being assessed for land tax the test is that: (a) the land had to be undivided physically, and (b) the use of the land was the same, and (c) the occupation of the land was not divided, and (d) the title was the same. 17 The applicant submitted that the part of the subject property for which the exemption is sought is a part that may be included within the exemption of his principal place of residence as: (a) the part of the subject property was undivided physically from his principal of residence, (b) the use of the part of the subject property was the same as the use of his principal place of residence, (c) the occupation of the part of the subject property was the same as his principal place of residence, and (d) there was no difference between the title of the subject property and the land which was his principal place of residence. 18 The applicant agreed with the Tribunal that he was not able to sell the part of the subject property which he used exclusively from the tenant as it would need to be subdivided from the other part. Respondent's submissions 19 The representative of the respondent submitted that the test set out in Ryan requires that the two contiguous lots of land: (i) be undivided by any physical separation (example, there exists no physical boundaries between the two lots); and (ii) be undivided in title; and (iii) be undivided in use; and (iv) be undivided in occupation. 20 The representative of the respondent submitted that in respect of the subject property there was no physical separation between the principal place of residence of the applicant and the part of the subject property for which the applicant claims an exemption. The representative of the respondent submitted that the title was divided in that the applicant owned the subject property solely whereas his principal place of residence was owned jointly by himself and his wife, Ms Meyer, thus there was no unity of title. On this basis the two separate lots could not be considered to be "a parcel of residential land" within the meaning of Clause 2(1)(a) of LTMA. 21 The representative of the respondent submitted that part of the subject property is physically separated from the principal place of residence by a fence. The part that is so separated is the part of the subject property upon which there is erected a self contained dwelling. This dwelling has been occupied by tenants during the subject period. Further submissions were made that the applicant had access from the principal place of residence to part of the subject property, however, in order that the two lots constitute a single parcel of residential land there must be no physical separation between the two lots said comprise the single parcel of residential land. 22 In relation to the use and occupation of the two lots, the applicant used and occupied his principal place of residence for the relevant tax years. During that period part of the subject property was used by the tenants living in the dwelling on the subject property. While the applicant and his family had access to the rear of the subject property and used that part of the rear of the subject property together with his principal place of residence, this use was not sufficient to satisfy the requirement in Ryan that the two lots must undivided in use and occupation. 23 The representative of the respondent made verbal submissions in relation to the possibility that part of the subject property could be separately valued for the purposes of land tax and drew attention to the exemptions provided in the LTMA where such a possibility is restricted to those as set out in Section 10(2) and 10(2A) of LTMA. These exemptions do not apply to the subject property. Finding 24 Having regard to the test set out in Ryan it is clear that the applicant is using part of the subject property together with his principal place of residence. However there is a physical separation between the remainder of the subject property which is not used by the applicant and his principal place of residence. The other part of the subject property which is not used by the applicant is occupied by the tenant to the exclusion of the applicant. There is a physical separation between the two lots. 25 There is no unity of title between the ownership of the applicant's principal place of residence and his separate ownership of the subject property. 26 The applicant uses the part of the subject property for which he claims an exemption as part of his principal place of residence. The tenant from the applicant has the exclusive use of the part of the subject property which is fenced off from the part used by the applicant. 27 The applicant's occupation of part of the subject property is of that part which is fenced from the part which is occupied by the tenant from the applicant. The tenant is in occupation of the part of the subject property which is divided from the part that is occupied by the applicant by a fence. Therefore the occupation of the part of the subject property is insufficient to satisfy the requirement that the occupation be undivided from the principal place of residence. 28 In order that land tax may be assessed on land there must be a value determined by the Valuer General pursuant to the Valuation of Land Act 1916 ("the VLA"). If a value is to be determined in respect of part of a lot then the value would need to be determined in accordance with Section 6A of the VLA and particularly Section 6A(1): (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. 29 Section 26A of the VLA provides for valuation of parcels that form part of the site of the building. This provision permits a valuation to be made where the site of a building is subdivided into separate parcels of land solely by means of a subdivision to which Section 26A applies. The provision relates only to where the parcels form part of the site of a building. In this particular application the applicant seeks to have the sites separated by a fence into two parcels where there is an improvement erected on one part and the other part of the land is vacant. Section 26A does not provide a facility for this to occur. Accordingly there is no facility for a land value to be placed on the part of the subject property by way of a percentage for which the exemption is sought. 30 The application that land tax be payable only in respect of the proportion of the subject property which is not used as part of the applicant's principal place of residence in proportion to the whole of the land area fails and the assessments of the Chief Commissioner are affirmed. ORDER The decision under review is affirmed.