CITATION: Carey v Chief Commissioner of State Revenue [2010] NSWADT 78 DIVISION: Revenue Division APPLICANT Thomas A Carey and Jill E Carey PARTIES: RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 096097 HEARING DATES: 10 March 2010 SUBMISSIONS CLOSED: 10 March 2010 DATE OF DECISION: 24 March 2010 BEFORE: Perrignon R - Judicial Member LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 AGC (Investments) Limited v FC of T 91 ATC 4180 at 4195 Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8 BBLT Pty Limited v Chief Commissioner of State Revenue [2003] NSWSC 1003 Cameron v Chief Commissioner of State Revenue [2009] NSWADT 64 Chief Commissioner of State Revenue v Aldridge [2003] NSWADTAP 50 Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 CASES CITED: Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 56 Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 Commissioner of Taxation v Ryan (2000) 201 CLR 109 Downie v Chief Commissioner of State Revenue [2003] NSWADT 233 Greenish v Chief Commissioner of State Revenue [2007] NSWADT 282 Hiley v Chief Commissioner of State Revenue [2009] NSWADT 133 McNally v Commissioner of State Revenue [2003] NSWSC 1118 Stature v Chief Commissioner of State Revenue [2002] NSWADT 271 APPLICANT T Carey, in person and agent REPRESENTATION: RESPONDENT A Gerard, Crown Solicitor's Office ORDERS: The Chief Commissioner's assessment of 8 December 2008 is confirmed REASONS FOR DECISION 1 The applicants, Mr and Mrs Carey, seek review of a decision by the Respondent Chief Commissioner to deny them exemption from land tax in respect of their property at Gerroa, on the south coast of New South Wales. 2 The facts are not in dispute. For many years, Mr and Mrs Carey have jointly owned and occupied two residences: one at Mt Pritchard in south-western Sydney, and the other at Gerroa. 3 They have run their business from premises owned by them at Wetherill Park, which is about 10 kilometres from Mt Pritchard, and about 145 kilometres from Gerroa. 4 In general, the Carey's have resided together at Mt Pritchard in order to be near their business, and have taken their rest and recreation together at Gerroa. Over the years, they have gone there for some weekends or extended weekends, the Labour Day Holiday, summer holidays in December and January, Easter holidays and the like. 5 In each of the calendar years from 2004 to 2008 inclusive, they have divided their time between Mr Pritchard and Gerroa in the following way: a)Mt Pritchard: between 81% and 57% of their time. b)Gerroa: between 13% and 24% of their time. 6 They have also spent time elsewhere, but the bulk of their time has been shared between the two properties. 7 Their practice with regard to utility and other bills reflected their pattern of occupation. From early 2004 till early 2007, all bills relating to the Gerroa property for water, electricity telephone and Council rates were directed to their Mt Pritchard address, and thereafter to a post box at Wetherill Park. For the calendar years 2004 to 2008 inclusive, all bills relating to the Mt Pritchard home for water, electricity and phone were directed to the Mt Pritchard address. For the same periods, separate credit card bills for Mr and Mrs Carey were likewise directed to the Mt Pritchard address. 8 On the other hand, from 8 November 2003 both Mr and Mrs Carey listed their Gerroa address as their residential address with the Roads and Traffic Authority, though requiring all correspondence to be sent to a Post Office box at Wetherill Park. 9 For these reasons, it is common ground that the Carey's have used and occupied both properties as a residence, spending the majority of their time residing at Mt Pritchard. 10 Up to 2003, the Careys had been assessed to land tax on the Gerroa property. The 'principal place of residence' exemption had been applied to their Mt Pritchard home. At some time in that year, Mr Carey decided to claim the exemption in respect of the Gerroa property rather than Mt Pritchard because, as he candidly told the Tribunal, the value of the property at Gerroa had increased, and it was more advantageous to pay land tax on the Mt Pritchard property. 11 He rang the Office of State Revenue to make enquiries, and spoke with an officer there. The details of that conversation are not before the Tribunal; partly, perhaps, because it was so long ago, and partly because the Chief Commissioner has no record of it. Mr Carey recalls that he was advised to lodge a Variation Return, specifying the Gerroa property as his principal place of residence. 12 Before doing so, he telephoned again, and made further enquiries. He was referred to the Chief Commissioner's Land Tax ruling LT20, which was then current. On reading LT20, and in particular clauses 5 and 6 (extracted below), he formed the view that he and Mrs Carey were entitled to the 'principal place of residence' exemption in respect of Gerroa, even though they also resided at Mt Pritchard. Mr Carey's recollection of these two telephone conversations was not challenged, and is accepted by the Tribunal as being accurate. 13 On 17 November 2003, he lodged a Variation Return with the Office of State Revenue, specifying Gerroa as the family's principal place of residence. 14 For the next five years, from 2004 to 2008 inclusive, the Chief Commissioner assessed the Mt Pritchard property to land tax, and treated Gerroa as exempt, by reason of it being the family's principal place of residence. 15 On 29 September 2008, the Chief Commissioner made enquiries of the Careys, to determine whether the exemption was being applied to the correct property. Those enquiries were answered. Decision under review 16 On 8 December 2008, the Chief Commissioner decided to reassess the two properties to land tax for the tax years 2004, 2005, 2006, 2007 and 2008. In doing so, he applied the 'principal place of residence' exemption to the Mt Pritchard property, instead of Gerroa, and assessed the latter to land tax. He demanded payment of the difference between the land tax already paid in respect of Mt Pritchard, and that owing in respect of Gerroa. He imposed neither interest nor penalties. 17 Mr and Mrs Carey seek review of the Chief Commissioner's decision of 8 December 2008. Jurisdiction 18 They lodged an objection to the decision with the Chief Commissioner, which was disallowed. For that reason, the Tribunal enjoys jurisdiction under section 96 of the Taxation Administration Act 1996 to review the decision of 8 December 2008. Mr and Mrs Carey bear the onus of proving their case: section 100. Applicant's case 19 Mr and Mrs Carey submit that the decision under review was wrong, and that the principal place of residence exemption ought to have been applied to the Gerroa property, for three reasons: a)They did own and occupy Gerroa as their principal place of residence, whether or not they also owned and occupied Mt Pritchard as a principal place of residence. b)As members of the same family, they had the right to elect which of the two properties should attract the 'principal place of residence' exemption, and exercised that right by lodging the Variation Return of 17 November 2003. c)In the alternative, the Chief Commissioner ought not be permitted to reassess the Gerroa property as he did, because by reason of the telephoned advices received in 2003, and by clauses 5 and 6 of LT20, the Careys were led to believe that they were entitled to the exemption in respect of Gerroa, and acted on that advice, without contradiction from the Chief Commissioner for the five years to December 2008. Respondent's case 20 In summary, the Chief Commissioner responds as follows: a)By definition, no person can have more than one principal place of residence. As Mr and Mrs Carey resided together, and resided only at Mt Pritchard and Gerroa, their principal place of residence must have been Mr Pritchard or Gerroa. It cannot have been both. b)Mt Pritchard was Mr and Mrs Carey's principal place of residence, because they spent most of their time there, and on the whole received their bills there. That is so, even though they also owned and occupied the Gerroa property as a residence. c)In any event, no valid election of Gerroa as a principal place of residence was ever exercised. When Mr Carey lodged the Variation Return of 11 November 2003, there was no statutory right for family members to elect which of two residences would attract the 'principal place of residence' exemption, analogous to that now provided by clause 12(3) of Schedule 1A to the Act. That Schedule only came into operation on 31 December 2003, as part of the reforms brought about by the State Revenue Legislation Further Amendment Act 2003 . d)Even if such a right did exist, that clause is only enlivened where different family members each occupy a different residence as their principal place of residence. As Mr and Mrs Carey lived together, clause 12(3) has no operation. e)Neither the telephoned communications of 2003, nor LT20 itself, were misleading. f)Even if they were, no estoppel lies against the Chief Commissioner as a result. He remains bound to levy land tax in accordance with the relevant taxing statutes. Issues for determination 21 The issues for determination may be summarised as follows. a)Whether the Land Tax Management Act 1956 ('the Act') envisages that a person may own and occupy more than one principal place of residence. b)What was, or what were, Mr and Mrs Carey's principal place or places of residence for the tax years 2004 to 2008 inclusive. c)At any time during those tax years, whether Mr and Mrs Carey were entitled to elect which of the two properties should attract the exemption. d)If so, whether a valid election was made. e)If not, whether they were misled by the communications of the Office of State Revenue in 2003, or by clauses 5 and 6 of LT20. f)If so, whether the Chief Commissioner's reassessment ought be set aside because Mr and Mrs Carey were misled. Legislation 22 Land tax is levied and payable on the taxable value of all land in New South Wales, except land which is exempted from taxation under the Act: section 7 of the Act. For each calendar year, tax is charged on land as owned at midnight on 31 December the previous year: section 8. For the calendar years 2004 to 2008 inclusive, section 10(1)(r) provided that land attracting the 'principal place of residence' exemption under Schedule 1A was exempt from land tax. 23 Schedule 1A came into effect on 31 December 2003. Clause 2 of the Schedule provided: (1)Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing on 1 January 2004 or any succeeding year, if: a)the land has a land value in respect of the year of less than the premium tax threshold, and b)the land is ... a parcel of residential land .....' (2)Land is not used and occupied as the principal place of residence of a person unless: a)the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purpose since July in the year preceding the tax year in which land tax is levied, or b)in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence. 24 It is common ground that the value of Gerroa was less than the premium tax threshold. From 2005 onwards, subclause 2(1)(a) above ceased to apply, and the legislation changed in other ways which are not here relevant. Whether more than one principal place of residence 25 'Principal place of residence' was defined in section 3(1) of the Act to mean: 'the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person.' 26 This definition envisages that a person may reside at more than one place, as did Mr and Mrs Carey. It provides, however, that only one of those places can qualify as the 'principal' place of residence: Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8; Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [19]; Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 56 at [37]. An exception to that principle is provided in clause 7 of Schedule 1A, where a taxpayer is moving from one principal place of residence to another, and intends to dispose of the former: Aronstan. That exception is not relevant here. 27 It follows that, for any of the tax years in question, each of the applicants can have had only one principal place of residence, even if they resided at more than one address during that year and the six months which preceded it. As they resided together, that can only have been Mt Pritchard or Gerroa. It cannot have been both: McNally v Commissioner of State Revenue [2003] NSWSC 1118. Which residence was the principal place of residence? 28 It is next necessary to determine which of those two residences was the 'principal' place of residence. To some degree, the facts resemble those considered by Gzell J in McNally. In that case, a husband and wife owned and resided at two houses at Greenwich and Noraville. They divided their time between them, but spent the majority of their time residing at Greenwich. Unlike the facts in this case, Mr and Mrs McNally resided at Greenwich for about four days per week, and at Noraville for about three days per week. His Honour found that the Noraville residence did not attract the 'principal place of residence' exemption, because the taxpayers had not established that, of the two residences, it was their 'principal' place of residence. 29 The Careys' claim to an exemption in respect of Gerroa is considerably weaker than this, as they did not spend nearly so much of their time there as did the McNalleys at Noraville. 30 The word 'principal' is not defined in the Act. Construed in accordance with its ordinary meaning, it denotes the 'primary' or 'main' residence. Among the meanings ascribed to it in The Macquarie Online Dictionary are: 'first or highest in rank, importance, value, etc; chief; foremost'. 31 The question as to which of two or more residences is the 'principal' one is to be determined objectively, having regard to the extent and quality of its use and occupation: Cameron v Chief Commissioner of State Revenue [2009] NSWADT 64 at [46]. The issue has been described as one of 'fact and degree': Downie v Chief Commissioner of State Revenue [2003] NSWADT 233 at [26]. The respective amounts of time which the taxpayer spends in each residence is a relevant factor: Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 at [41]. 32 On the evidence, Mt Pritchard was the Careys' principal place of residence, because they spent most of their time residing there, and their pattern of correspondence with respect to bills indicates that they treated Mt Pritchard as their main, primary, chief or foremost residence. 33 The fact that they listed Gerroa as their residential address with the RTA is relevant, but is outweighed by the factors referred to above. The Tribunal is not convinced that the listing evidenced an intention to occupy Gerroa as their main residence, but rather was consistent with Gerroa being one of their two residences. That is so, particularly having regard to their direction to send RTA correspondence to Wetherill Park, which was within a convenient distance of Mt Pritchard. Even if, contrary to the Tribunal's view, the listing evidenced a subjective intention to occupy Gerroa as their main residence, such an intention, though relevant, is not determinative: McIlroy at [43-44]. In this case, as in McIlroy, any such intention, if it existed, would be outweighed by the objectively determined patterns of occupation. Election 34 From 31 December 2003, clause 12 of the Schedule provided relevantly as follows: (1)For the purposes of the principal place of residence exemption, only one place of residence may be treated as the principal place of residence of all members of the same family. (2)If members of a family own (whether jointly or separately) more than one residence used and occupied by any of them as a principal place of residence, the Chief Commissioner is to treat the one place of residence elected as the principal place of residence of the family as the principal place of residence of all members of the family in respect of a tax year. (3)Such an election is to be made, by or on behalf of the members of the family, in writing and must be lodged with the Chief Commissioner within the period for the lodging of objections under section 89 of the Taxation Administration Act 1996 . (4)If an election is not made, the Chief Commissioner is to treat the residence that has the highest land value for land tax purposes as the principal place of residence of all members of the family. .... 35 Section 89 of the Taxation Administration Act 1996 provides that objections must be lodged, if at all, within 60 days of service of a notice of assessment. If the Careys enjoyed any right to make an election under clause 12(3), that election must have been made within 60 days of 8 December 2008, or of the date on which they received the notice of assessment issued on that date. There is no evidence that any election was made on or after 8 December 2008. 36 The only written instrument put forward by the Careys as constituting an election was the Variation Return of 17 November 2003. As clause 12 was not then in effect, there was no right to make an election, even if there was current at that time an assessment of Gerroa to land tax. No reasons have been advanced for construing the Variation Return as having continuing effect as an election after clause 12 came into effect on 31 December 2003, and the Tribunal is not persuaded to construe it in that way. 37 In any event, no right of election can arise under clause 12(3) unless members of a family own more than one residence 'used and occupied by any of them as a principal place of residence': clause 12(2). This phrase must be read in combination with the definition of 'principal place of residence', and with clause 2(2)(a) which provides that, to qualify for the exemption, land 'and no other land' must be continuously used and occupied as a principal place of residence for the requisite period. 38 Construed in that context, clause 12(2) requires that, before a right to make an election arises, at least one family member should occupy a different residence from another family member or members. 39 Where, as here, both the family members in question resided together, clause 12(2) could have no operation, and no right of election arose. Whether applicants misled 40 It is next necessary to determine whether the Chief Commissioner has misled Mr and Mrs Carey, and if so, what consequences flow. 41 Mr Carey said that in 2003 he was advised by the Chief Commissioner's staff to lodge a Variation Return, specifying Gerroa as the principle place of residence. On its face, that appears to have been advice on how to claim the principle place of residence exemption. No suggestion has been made that the method advised was incorrect. Indeed, it succeeded in attracting the exemption for the next five years. Mr Carey did not give evidence of any conversation in which the officer concerned considered the facts, and opined on whether the property was in fact the Careys' principal place of residence. On the evidence, the Tribunal is unable to identify anything misleading about the advice given. 42 On the second occasion, Mr Carey was advised to consult LT20. Precise evidence of the terms of the conversation was not before the Tribunal, nor is there any evidence that the officer expressed any view on whether the Gerroa property actually attracted an exemption. The fact that Mr Carey was referred to a tax ruling suggests that he was being invited to make up his own mind, or seek advice, with the assistance of the ruling. The Tribunal draws that inference. 43 On reading clauses 5 and 6, Mr Carey formed the view that the principal place of residence exemption was available in respect of Gerroa. He acted on this, by lodging a Variation Return as he had been advised. 44 Clauses 5 and 6 read as follows: 'Use and occupation by the owner 5. As noted above, the owner must use and occupy the land in order to qualify for the exemption. The primary element of 'occupation' is 'possession'. However, 'possession' must extend beyond mere legal possession, to include actual control over the land. If the land has been leased to another person, the owner would not have sufficient control to satisfy the test of 'occupation'. 6. An owner need not be continuously resident on the land to meet the 'use and occupy' test. Provided the land is maintained as the owner's principal residence whenever the owner wishes to use it, the exemption will apply. This would be so even though the land may not be physically occupied by the owner at any time during a particular year.' 45 Mr Carey considered that Gerroa attracted the exemption when he considered the second sentence of paragraph 6, because the Careys 'maintained' the Gerroa property in order to occupy it as a principal place of residence, even when they were not there: 'Provided the land is maintained as the owner's principal residence whenever the owner wishes to use it, the exemption will apply.' 46 Viewed in isolation, such a construction would not be unreasonable. However, the sentence does not appear in isolation. It must be read, not only with the remaining terms of paragraphs 5 and 6, but also with paragraph 4 which preceded it, and provided as follows: 'Ruling 4. These [sic] are three basic requirements specified in section 3(3)(a) [the predecessor to clause 2(2) of Schedule 1A] namely: (a)The land must have been continuously used and owned by the occupier since 1 July preceding the commencement of the tax year; (b)It must be used for residential purposes and for no other purpose; and ( c)The owner must not have used any other land as a principal place of residence since 1 July preceding the tax year.' 47 In context, paragraphs 5 and 6 explained the concepts of use and occupation, referred to in paragraph 4(a). Paragraph 4(c) was explicit and unequivocal in its terms. It made it plain that, if Gerroa was to attract the exemption, the Careys cannot have used Mt Pritchard as a principal place of residence. Nothing in paragraphs 5 or 6 could reasonably be construed as derogating from the effect of paragraph 4(c), or suggesting that taxpayers could occupy more than one residence as their principal place of residence in any tax year. 48 For those reasons, the Tribunal does not consider that the terms of LT20 were inherently misleading, even though it accepts that Mr Carey took the view he did as a result of his – in the Tribunal's view, mistaken - construction of paragraphs 5 and 6. 49 Even if, contrary to these findings, LT20 or any other advice from the Chief Commissioner's staff was misleading in an objective sense, such a circumstance cannot prevent or excuse a taxing authority from administering the taxation legislation in accordance with its terms: AGC (Investments) Limited v FC of T 91 ATC 4180 at 4195; Stature v Chief Commissioner of State Revenue [2002] NSWADT 271 at [11-12]; BBLT Pty Limited v Chief Commissioner of State Revenue [2003] NSWSC 1003; Commissioner of Taxation v Ryan (2000) 201 CLR 109; Greenish v Chief Commissioner of State Revenue [2007] NSWADT 282; Chief Commissioner of State Revenue v Aldridge [2003] NSWADTAP 50; Hiley v Chief Commissioner of State Revenue [2009] NSWADT 133. 50 Such a circumstance would be relevant in reviewing a decision to impose interest or penalties, but no such decision was made in this case: Aldridge at [33]. 51 It follows that, on any view of the facts, no estoppel lies against the Chief Commissioner so as to prevent him from reassessing Gerroa to land tax, as he did on 8 December 2008. Determination of issues 52 For the reasons given, the Tribunal determines each of the issues as follows: 1)Subject to an exception which is not here relevant, a taxpayer may own and occupy no more than one principal place of residence in respect of any tax year, even if he or she owns and occupies a number of residences. 2)Mr and Mrs Carey occupied their home at Mt Pritchard as their principal place of residence for the tax years 2004 to 2008. 3)As they resided together, neither Mr nor Mrs Carey was entitled to elect which of their two residences should attract the 'principal place of residence' exemption. 4)Even if they had been so entitled, no valid election was made. 5)Neither the telephoned communications of the Office of State Revenue in 2003, nor the terms of LT20 relied on by Mr Carey, were misleading in nature. 6)Even if they were, no estoppel would lie against the Chief Commissioner so as to prevent, render void or otherwise prejudice the decision under review. Order 53 The Chief Commissioner's assessment of 8 December 2008 is confirmed. 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.