Wilks -v- Chief Commissioner of State Revenue [2002] NSWADT 248

CITATION: Wilks -v- Chief Commissioner of State Revenue [2002] NSWADT 248 DIVISION: Revenue Division APPLICANT PARTIES: Christopher David Wilks RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 026018 HEARING DATES: 18/11/2002 SUBMISSIONS CLOSED: 11/18/2002 DATE OF DECISION: 11/27/2002

BEFORE: Block J - Judicial Member APPLICATION: Land tax exemption - principal place of residence MATTER FOR DECISION: Principal matter LEGISLATION CITED : Land Tax Management Act 1956 CASES CITED: APPLICANT REPRESENTATION: In person RESPONDENT D Martin, agent ORDERS: 1. The decision under review is affirmed

1 The decision under review in this matter is the disallowance by notice dated 15 April 2002 by the Respondent of an objection dated 11 December 2001 by the Applicant in respect of a land tax assessment for the 2001-year. ("relevant year") 2 I note by way of preface that land tax is calculated in relation to any given year by reference to land owned on the last day of the preceding year. In respect of the relevant year the relevant date was 31 December 2000. 3 The Applicant furnished the Tribunal with a written submission. It indicates inter alia that in August 2000 he purchased vacant land situated at 3 The Tor Walk, Castlecrag ("the Castlecrag Property") and on which he intended to construct a residence. A development approval having been obtained in January 2001, construction commenced in September 2001 and completion is anticipated in December 2002. His submission goes on to specify that he was "Residing at 9 Bank Street, McMahons Point as a temporary residence pending completion of construction. Owned property". (I refer to that residence in these reasons as the "McMahons Property.) The McMahons Property was acquired in April 1998 and the Applicant lived in it until it was vacated just before Christmas in December 2001. It is clear that he was resident in it on 31 December 2000 and, as appears from his objection letter dated 11 December 2001, he was resident in the McMahons Property at the date of that objection. 4 The Respondent furnished the Tribunal with the Land Tax Questionnaire ("Questionnaire") signed by the Applicant on 17 October 2001 and received by the Respondent on 22 October 2001; in clause 2 of the Questionnaire the Applicant claimed a principal place of residence exemption in respect of the McMahons Property. That exemption was (correctly) granted. 5 The Respondent also furnished the Tribunal with the Applicant's land tax assessment issued on 22 October 2001 (numbered 13596035270) in respect of the relevant year. It indicated that an exemption was granted in respect of the McMahons Property under section 10(1) (r) of the Land Tax Management Act 1956 (the Act"); it indicates also that tax was assessed in respect of the Castlecrag Property and in addition other properties owned by the Applicant.. (The other properties owned by him and included in the assessment are not relevant for the purposes of this decision.) 6 It is to be noted that the taxable value of the Castlecrag Property was $1,310,000; the taxable value of the McMahons Property was considerably less.. 7 As I have said the McMahons Property was acquired in April 1998 and the Applicant resided in it thereafter until just before Christmas 2001. In his objection letter dated 11 December 2001 the Applicant referred to it as the "Property in which I currently reside." 8 Also as set out previously the Applicant moved out of the McMahons Property into just before Christmas 2001. He then moved into a rented unit in Sydney. This was done, so I was informed, specifically so as to ensure that as at 31 December 2001 he, the Applicant, would not be resident in it in relation to the next succeeding (2002) year of tax and thus entitling him to take advantage of the concession provided by section 10T of the Act read with ruling LT 42 (to be referred to more fully later in these reasons). It would seem that this step, taken at no little inconvenience to the Applicant and his family because the Applicant's wife was then pregnant, was preceded by discussions with and advice from the Respondent. I was informed that it achieved the desired result in that in respect of the 2002 land tax year the section 10T concession was allowed in respect of the Castlecrag Property. 9 In accordance with his submission the Applicant claimed that the McMahons Property was his temporary residence. The Applicant said at the hearing that it became temporary after he acquired the Castlecrag Property because he intended to construct a new residence on the Castlecrag Property. The Applicant's use of the word "temporary" in this context was not altogether accurate. The McMahons Property was his principal place of residence from the time when he acquired it in April 1998, and until he vacated it just before Christmas in 2001. It was temporary only in the limited sense that he intended, having regard to his intention to construct a new residence on the Castlecrag Property, to sell it at some convenient time; indeed a sale of the MacMahons Property was eventually completed in May 2002. 10 The term "principal place of residence" is defined in section 3 (1) of the Act as follows: "principal place of residence" of a person means the one place of residence that is, among the one or more places of residences of the person within and outside Australia, the principal place of residence of the person." 11 Under section 10 (1) (r) of the Act an exemption is provided in respect of the principal residence in the following terms": (c) Section 10T of the Act provides for a concession for unoccupied land intended to be the owner's principal place of residence in the following terms: "(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose ………………(remainder of section not relevant)" 12 Section 10T of the Act allows a concession for unoccupied land intended to be the owner's principal place of residence, in the following terms: "(1) If the Chief Commissioner is satisfied that the owner of land (or, if there are joint owners, any one or more of them) intends to use and occupy the land solely as his or her principal place of residence, that intended use and occupation of the land is to be regarded as its actual use and occupation for the purposes of section 10 (1) (r). (2) This section does not apply unless: (b) the Chief Commissioner is satisfied that the intended use and occupation of the land is not unlawful, and (c) while the owner is the owner, the land is not used or occupied except as his or her principal place of residence. (2A) Subsection (2) (a) does not apply in respect of the land referred to in subsection (4) (b). (3) A person is not entitled to have his or her intended use and occupation of land taken into account for land tax purposes if: (a) the person or any joint owner of the land is entitled to have his or her actual use and occupation of other land taken into account under section 9C or 10 (1) (r), or………………….(remainder of section is not relevant)" 13 LT 42 is a ruling entitled "Exemption-Land intended to be the Owner's Principal Place of Residence dated 2 December 1992 and which relates to the section 10T concession. Clause 4 of LT42 (which is relevantly in accord with section 10T of the Act) provides that an exemption is available where certain conditions are satisfied and importantly under clause 4(v) where "the owner did not already own land or a strata lot(s) in NSW which was used and occupied as that owner's principal place of residence". (It should be noted that the date of Ruling LT42 is 2 December 1992; since that date there have been amendments to section 10T but not amendments which are relevant for the purposes of this decision) 14 The Applicant also referred to and relied on section 3(3) of the Act which provides: " "For the purposes of this Act, in respect of any year in which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of a person unless: (a) that land or flat and no other land or flat has, since the first day of July that preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for not other purpose, or (b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person's principal place of residence." 15 In the same context the Applicant referred to ruling LT20 (Principal place of residence) dated 8 November 1989 and in particular clauses 11 and 12 of that ruling. The second sentence of clause 11 reads as follows: "However a property may be the owner's principal place of residence for a particular tax year even if the owner temporarily resides elsewhere during part (or all) of the relevant year (see para.5 above)" And the last sentence of clause 11 reads as follows. "Another case where the exemption would continue to apply is where the owner travels from place to place but maintains the property for occupation as and when required" 16 Clause 12 of the ruling deals with the Respondent's discretion where one or more of the requirements of section 3(3) (a) of the Act are not met. In this instance those requirements were met in respect of the McMahons Property 17 Clause 2.5 to 2.9 of the Applicant's submission read as follows: "2.5 In building the premises at 3 The Tor Walk I am supporting this state's economy and yet are effectively penalized by the levying of significant land tax 2.6 Under Section 3(3) (b) of The Land Tax Management act 1956 it seems that the Commissioner has discretion to determine the "principal place of residence" 2.7 Revenue Ruling No. LT 0202 clause 11 confirms "a property may be the owner's principal place of residence for a particular tax year even if the owner temporarily resides elsewhere during part (or all) of the relevant year 2.7 Revenue Ruling NoLT020 clause 12 states; "The Chief Commissioner has discretion to grant exemption where one or more of the requirement in Section 3(3) (a) are not met. I hereby respectfully request that the Chief Commissioner utilise such discretion. 2.9 The existence of Revenue Ruling no LT 042 confirms the Commissioner's desire to not inequitably levy tax on Taxpayers who acquire land with the intention of building on that land their "principal place of residence" 18 The Applicant also claimed that it is inequitable to levy tax where a residence is not rented out but to refrain from levying tax where the property is rented out. He was thereby referring to the fact that if he had rented out the McMahons Property prior to 31 December 2000 he could have claimed the section 10T concession in respect of the Castlecrag Property. The fact is however that he did not.rent out the McMahons Property prior to 31 December 2000. 19 The fact that the Applicant completed the Questionnaire on the basis that he claimed and received a principal place of residence exemption in respect of the McMahons Property may not be determinative even though it is clear that the objection was lodged only after the Applicant came to appreciate the difference in tax cost having regard to the large difference in taxable value as between the Castlecrag Property and the McMahons Property. It is not necessary for me to decide the point. The concession under section 10T was available only where the Applicant was not entitled to an exemption for another property under section 10(1) (r) and the plain fact is that he was so entitled in respect of the McMahons Property in relation to the relevant year. This is so having regard also to section 3(3) (a) of the Act and the fact that that property had been "continuously used and occupied ….for residential purposes" since the preceding 1 July. The McMahons Property may at that time and from the Applicant's subjective point of view have been owned by him on a temporary basis in the sense that he intended to sell it at a convenient time thereafter but that is not the point. The plain fact is that once the McMahons Property qualified for the section 10(1) (r) exemption in relation to the relevant year (and it clearly did) then and in respect of the Castlecrag Property the section 10T concession was not available. 20 For the sake of completeness I note that section 3(3)(a) of the Act applies because the McMahons Property was "continuously used and occupied. ……for residential purposes since the preceding 1 July" (i.e. 1 July 2000) and section 3 (3) (b) confers a discretionary power only "in any other case" and so that this subsection is not relevant in this situation. LT 20 is designed to deal with a different situation. LT42 does not apply having regard to clause 4(v) referred to previously in these reasons 21 The Applicant claims that the Respondent should grant relief under some discretionary power. Having regard to the plain words of the legislation to which I have referred there is in fact no such discretion, leaving aside any question as to whether if there was such a discretion it should be exercised in favour of the Applicant, and bearing in mind that he lodged an objection as something of an afterthought and after he had received an exemption in respect of the McMahons Property, and being the less valuable property. At the risk of labouring the point, it is necessary to focus on the position at 31 December 2000. On that date the McMahons Property qualified for the principal place of residence exemption; it was claimed and was (in my view correctly) granted in respect of the McMahons Property. Because it was so claimed and granted it precludes the grant in respect of the relevant year of the exemption in relation to the Castlecrag Property. Nor is it open to the Applicant to seek to reopen the assessment on the basis that, having regard to the values involved he would have preferred to receive the exemption in respect of the Castlecrag Property. 22 In the circumstances the decision under review must be affirmed.