CITATION: Austinmer Bowling Club Limited -v- Chief Commissioner of Taxation [2004] NSWADT 214 DIVISION: Revenue Division APPLICANT PARTIES: Austinmer Bowling Club Limited RESPONDENT Chief Commissioner of Taxation FILE NUMBER: 036037 HEARING DATES: 26/05/2004 SUBMISSIONS CLOSED: 05/26/2004 DATE OF DECISION: 09/29/2004 BEFORE: Hole M - Judicial Member APPLICATION: Land tax exemption - not for pecuniary profit club MATTER FOR DECISION: Principal matter LEGISLATION CITED : Land Tax Management Act 1996 Taxation Administration Act 1996 CASES CITED: Gosford RSL-Club Co-operative Limited v Chief Commission of Land Tax (NSW)(1982) 82 ATC 4505 Pro-Campo Limited v Commissioner of Land Tax (NSW) (1981) 81 ATC 4270 APPLICANT REPRESENTATION: J Roach, agent RESPONDENT I Mescher, barrister ORDERS: The assessment by the Chief Commissioner of State Revenue is affirmed. Introduction 1 This is an application by the Austinmer Bowling Club Limited represented by Mr John Roach chairman against the decision of the Chief Commissioner of State Revenue to assess land tax in respect of the land owned by the club being Lot 1 and Lot 2 DP 881418. History 2 The Austinmer Bowling Club Limited owned property at Wigram Road Austinmer (the land). This property is bounded by Allen Street, Toxteth Avenue and Wigram Road. The property was formerly Lot 51 in DP7559 and Lot 11 in DP635521. 3 Prior to 11 November, 1998 the Club had been entitled to an exemption pursuant to section 10(1)(g)(iii) of the Land Tax Management Act 1956. 4 The applicant's representative submitted that following the Club considering their financial situation and subsequent upon agonised decision making as to how the Club was going to meet its liabilities a decision was made that the land be subdivided into three lots that would allow future realisation of the property. This was undertaken by way of a plan of subdivision subsequently registered on 11 November 1998 and being DP881413. This plan subdivided the land into to three lots which for ease of identification will be called the clubhouse lot being lot 3 (2 Allen Street Austinmer), the vacant land being lot 2 (20 Toxteth Avenue Austinmer) and the old derelict house being lot 1 (22 Toxteth Avenue Austinmer). 5 As at 19 December 1998 lots 1, 2 and 3 were owned by the Club and used in a way which attracted the exemption under section 10(1)(g)(iii). Following registration of the subdivision the situation in respect of the exemption changed. Lot 3 (the clubhouse) remained eligible to attract the exemption under the section. Lot 2 was vacant land and was considered by the Club to be a site for building in the future. A house was ultimately built on this property in the years 2002 to 2003 and subsequently sold in 2004. Sections 7 and 8 of the Land Tax Management Act apply to this block of land. There was no building on this block between 31 December 1998 and 31 December 2001. In the event that there had been an intention to build on that block of land prior to 31 December 2001 for a purpose complying with the requirements of the section then the principles set out in Gosford RSL-Club Co-operative Limited v Chief Commission of Land Tax (NSW)(1982) 82 ATC 4505 may have been sufficient to attract the provisions of the Act. 6 The representative of the applicant submitted that there had been an intention to build on this block in about June 1998. That intention had been to build a four bedroom house to rent out for the purposes of revenue flow and it was expected that a rental of approximately $14,000.00 per annum would be realised. Ultimately the intention was to construct a house or townhouses and then to dispose of them. 7 The representative of the applicant submitted that the derelict cottage constructed on Lot 1 had been used partly as a greenkeeper's cottage for approximately five months after the subdivision, that the cottage had then been rented to an employed person and that although rent was payable it had been unpaid, subsequently the cottage was occupied by a chef who had agreed to set up a restaurant for the Club on the Club premises and that the right to occupy the cottage was part of the package of employment benefits. The cottage was also vacant for some time. The applicant's representative submitted that as the cottage had been used for the purposes of the Club and that the greenkeeper had occupied the cottage during part of the time and that a chef employed by the Club had used the cottage for part of the time that this should be sufficient to attract the benefit of an exemption pursuant to the Act. 8 Following the initial assessment by the Chief Commissioner of State Revenue applications were made to the Chief Commissioner of State Revenue to review the decision and further applications were made to the Hardship Review Board and these applications were refused. As a result of the applications made for a review of the decision the time limit for making an application to the Tribunal had expired. Section 99(1) of the Taxation Administration Act 1996 permits an extension of that time and the respondent did not oppose the extension to allow this application to be heard in the Tribunal. 9 The applicant's representative submitted that there were three grounds to support the application being: a) that the Commissioner had made a fundamental error in not exempting Lots 1 and 2 in the new subdivision from land tax as the exemption provided in s10(1)(g)(iii) which allows property owned by a club not carried on for pecuniary profit to be exempt under those provisions; b) that the case of Gosford RSL Club Cooperative Limited v Commissioner of Land Tax supports the view that Lots 1 and 2 in the subdivision were exempt from land tax; and c) that in accordance with the written submissions made by the applicant's representative that land tax was not payable. The submissions made by the applicants representative were helpful and comprehensive. 10 Ground (a) of the applicant's representations that it was a fundamental error that land tax was assessed was supported in the applicants' submissions on the basis that the land was owned by the applicant, and the applicant is a not for pecuniary profit club. The use of the two lots is referred to later. 11 Ground (b) of the applicant's representations was to the effect that the issues addressed in the Gosford RSL case were similar in that there was a separate business owned and occupied by the club and there were various parcels of land owned by the club. Particular attention was drawn to the references by Hope JA: "Section 19(1)(g)(iii) is not as well drafted as it might be, but importantly it provides for an exemption in a way which is different to that adopted in respect of the other exemptions given in para. (g). The other subparagraphs provide exemptions in respect of land owned by or in trust for any person or society and used or occupied by that person or society solely as a site for an identified purpose, as, for example, a place of worship, a public cemetery, a public garden, a fire brigade, and so on. Subparagraph (iii) is not in this form – the exemtion (sic) which it provides is not directed to a purpose, but to ownership and occupation – "a building owned and solely occupied by a society, club or association not carried on for pecuniary profit". The building must be one which can properly be described as owned and solely occupied by (for relevant purposes) a club not carried on for pecuniary profit, but provided it can be so described then, in my opinion, it falls within the exemption. It may be that in determining whether a building is owned and solely occupied by a club, questions of degree could be involved. Thus it may be that the relationship of the "club" activities to the "business" activities is such that the "club" activities are ancillary to the business activities rather than the reverse; and it may be that different questions would arise if a business is carried on by a club in a building on an entirely different site from the club site. However it is not necessary to consider matters such as those in the present case. At any rate if the carrying on of the motel business was within power, it was ancillary to the Club's activities, and its size, nature and location, and the circumstances in which and the purposes for which the Club is running it would indicate that all the buildings on the Club's property could properly be said to be buildings owned and solely occupied by a club. Lee J took the view that the exemption extended only to buildings which were not only owned by the Club but which were occupied by the Club for purposes which were within power. The Club was registered as a community advancement society under Div. 5 of Pt. 11 of the Co-operation Act, 1924. Lee J. concluded that there was nothing within the provisions of the Act which would preclude the Club from carrying on the motel business if its rules authorised it to do so, but that having regard to its rules the carrying on of the motel business was ultra vires." This supports the view that unless the building on an entirely different site from the Club site, that is on either Lots 1 or 2 other than Lot 3 in the subdivision plan, is used or occupied solely by the Club for the purposes which were within the power of the Club then there would no exemption under section 10(1)(g)(iii). In this particular situation the greenkeeper's cottage was not occupied by the Club solely for the purposes of the Club. The vacant land which then was subsequently built upon was not occupied by the Club solely for the purposes of the Club, that is as a bowling club. 12 The respondent's representative drew attention to Pro-Campo Limited v Commissioner of Land Tax (NSW) (1981) 81 ATC 4270. In that matter there was a similarity to this matter in that there was five acres of land which were used as a campsite which were exempt from land tax under the same provision as being land owned and solely occupied by Pro-Campo Limited which was a society not carrying on business for pecuniary profit. In that particular matter there was also the issue of the employment of a permanent caretaker residing on the property and he supervised the general maintenance of the property and the use made of the property by various groups and associations who went there. Lee J went on to comment at page 4271: "The land comprises an area of 136 acres and erected upon the land are buildings which make it suitable for use as a camp. There is an amenities building, a dining and recreation hall, sleeping cabin – all furnished – and, since 1979,. an in-ground pool. There is also an old cottage which has always been on the property and another building which was at one stage used as an amenities block. An area has been set aside for car parking and there are two marked out grassed areas used for sporting activities. A roadway in and around the property leads off to the main road. The evidence is that what might be called the "settled" part of the entire area, that is the area where the buildings and car park are, is, in all, about five acres. The balance of the property has been described as "fairly rugged". There is also an area (undefined) where Christmas trees have been planted, with a view to sale as a means of fund-raising." Commenting later at page 4278: "It is clear from the evidence that the plaintiff company controls at least the "settled area" of five acres and the use of the buildings thereon. It maintains a permanent caretaker on the premises. It maintains the buildings and the furniture therein. When groups come to the property, the caretaker remains on the premises and supervises the use of the premises. The presence on the land and in the buildings of groups of persons is of a purely temporary and transient nature, being limited only to weekends; such persons are entitled to nothing more than the right to be on the land and use the facilities for the period granted to them by the company. The mere fact that other persons can come on to the land to use it in the manner indicated in the evidence in no way displaces the plaintiff as the occupier of the land and the buildings for the purposes of the paragraph, for the plaintiff has legal possession, actual possession and control of the land. The buildings are thus, in my opinion, "occupied" by the plaintiff. It follows, therefore, that if the plaintiff comes within the expression "society, club or association", it will be entitled to exemption of that part of the land comprising the five acres upon which the buildings stand. The plaintiff company is, as I have earlier pointed out, "not carried on for pecuniary profit" within the meaning of the paragraph." The respondent's representative submitted that Lot 3 in DP881418 retained the exemption and the exemption in that case was extended to the five acres which were owned and solely occupied by the society not carried on for pecuniary profit. 13 The respondent's representative submitted that the subdivision in 1998 was a crucial act and that it was fatal to the exemption being applied to the whole of the land then owned by the Club being in three lots. The submission was that the subdivision had the effect that the land which had otherwise been exempt became liable to assessment for land tax. 14 The applicant's representative submitted that the vacant lot and the lot occupied by the derelict house had been solely occupied by the Club being a not for profit organisation and that as those two lots were solely occupied by the Club that they should remain exempt from the assessment of land tax. 15 The evidence provided by the applicant in relation to the occupation and use of the vacant land and the old derelict house does not support the view that those two lots are (or were after 11 November, 1998) solely occupied within the terms of section 10(1)(g)(iii). The evidence provided disclosed that in so far as 22 Toxteth Avenue (Lot 1 in DP881418) was concerned that an old derelict house was lived in by members of the Club, being a greenkeeper, a chef, an unemployed person and was vacant from time to time. Then in so far as 20 Toxteth Avenue (Lot 2 in DP881418) was concerned that this remained vacant land until a house was built on it in 2002/2003; it is not land owned by the applicant which was used or occupied by the applicant as a site for a building owned and solely occupied by the applicant. The applicant had an intention to build upon the land however the building was not to be for the sole use of or occupation by the applicant. 16 Both 20 and 22 Toxteth Avenue were used as domestic household property and the buildings erected thereon were not occupied by the Club. 17 The applicant's representative has endeavoured to support the Club's decisions in the best possible way for the best possible advantage of the applicant. He has not had the assistance of professional advice in attending to the Club's requirements and he has discharged his duties with a thoroughness that is remarkable and that constructively assisted the Tribunal. Unfortunately the relevant section of the Land Tax Management Act is a difficult section to interpret, however, it has been subject to helpful dissection and interpretation by the two cases mentioned. Unfortunately the use of 20 and 22 Toxteth Avenue does not comply with the exemptions set out in the Act and accordingly the assessments of the Commissioner are upheld. Decision 18 I find that: The assessment by the Chief Commissioner of State Revenue is affirmed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.