CITATION: Perry Properties Pty Limited v Chief Commissioner of State Revenue [2009] NSWADT 48 DIVISION: Revenue Division APPLICANT Perry Properties Pty Limited PARTIES: RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 086037 HEARING DATES: 1 December 2008 SUBMISSIONS CLOSED: 1 December 2008 DATE OF DECISION: 5 March 2009 BEFORE: Hole M - Judicial Member CATCHWORDS: Revenue Ruling No LT78, single accommodation, family or shared accommodation LEGISLATION CITED : Land Tax Management Act 1956 Social Security Act 1947 (Cth) APPLICANT P Singleton, barrister REPRESENTATION: RESPONDENT A Rider, barrister ORDERS: 1. The decision of the Chief Commissioner of State Revenue dated 14 April 2008 is confirmed. REASONS FOR DECISION 1 The applicant is a company that purchased a property at Glebe on 27 January 2006 which is now operated as a boarding house. A Land Tax Notice of Assessment was forwarded to the company on 21 September 2007 by the Office of State Revenue ("OSR") in respect of the land tax year 2007. 2 The sole director of the company, Mr Vince Perry, completed an "Application for Exemption – Boarding Houses" form on 24 September 2007 which was forwarded to the OSR. The OSR responded to the application by letter dated 25 September 2007 refusing the application on the following basis: "I refer to your recent application for exemption from land tax for land used as a boarding house for the 2007 tax year. On the basis of the information provided exemption from Land Tax for the 2007 tax year cannot be allowed for the subject property as at least 80% of the accommodation was not provided at less than the maximum tariff allowed under Revenue Ruling LT 78. Vide your application all rooms within the premises have accommodation for 4 boarders with a total weekly tariff in excess of $400. Revenue Ruling LT 78 states tariffs cannot be more than $300 per week for shared accommodation, as for the term 'shared accommodation' as with many of the terms used in the Revenue Ruling relates to meanings of words and cases decided under Common Law and as such it is not necessary to have them defined under Land Tax legislation. In the Treasurers guidelines 'accommodation' may mean one room, two rooms etc, or a large room partially divided by a curtain or partition, on deciding the tariff limits for each occupancy, the amount received for each occupancy (be it one room or more) is the deciding factor for exemption. For an independent ruling please forward any queries to the Office of State Revenue Policy Unit or alternatively a formal objection to the assessment should be lodged within 60 days of the 2007 assessment being issued." Further correspondence ensued between the applicant and the OSR. The OSR forwarded a letter to the applicant dated 14 April 2008 disallowing the objection of the applicant to the Notice of Assessment issued on 21 September 2007. On 1 May 2008 the applicant filed the application. 3 The applicant was represented by Mr Singleton, Barrister, and the respondent by Mr Rider, Barrister. Both parties supplied comprehensive written submissions to the Tribunal. 4 Mr Perry provided a statement to the Tribunal and gave evidence. His evidence was, in my opinion, honest and straightforward. Mr Perry placed reliance on his staff and attested to their honesty, ability and qualifications. Legislation 5 Section 10Q(1) of the Land Tax Management Act 1956 ("LTMA") applies to low cost accommodation. This section provides an exemption if the land is used and occupied primarily for low cost accommodation and any application for the exemption is made in accordance with the section and the Chief Commissioner is satisfied that the land is so used and occupied in accordance with guidelines approved by the Treasurer for the purposes of the section. 6 Section 10Q(2) LTMA provides that the guidelines approved by the Treasurer pursuant to Section 10Q(1) may include provisions with respect to: "(a) the circumstances in which accommodation is taken to be low cost accommodation, (b) the types and location of premises in which low cost accommodation may be provided, (c) the number and types of persons for whom the accommodation must be provided, (d) the circumstances in which, and the arrangements under which, the accommodation is provided, (e) maximum tariffs for the accommodation, (f) periods within which tariffs may not be increased, (g) the circumstances in which the applicant is required to give an undertaking to pass on the benefit of the exemption from taxation (or, if subsection (4) applies, the reduction in taxation) to the persons for whom the accommodation is provided in the form of lower tariffs." 7 Section 10Q(4) LTMA provides for a reduction where part only of the land or premises is exempted. 8 Section 10Q(5) LTMA provides that any exemption or reduction must be applied for in an approved form and any required evidence is provided to the Chief Commissioner. 9 Revenue Ruling No. LT78 was issued by the Office of State Revenue in respect of Land Tax Year 2007. This ruling provided that:- "Guidelines Approved by the Treasurer 3. The approved guidelines for the 2007 tax year are as follows: (i) land that is used as the site of a boarding-house will be entitled to an exemption from land tax for the 2007 tax year where, during the year ended 31 December 2006, in respect of at least 80% of the accommodation available to boarding house residents: (a) occupation was by long term residents (a long term resident is considered to be a person who resided at a boarding-house for 3 consecutive months or for any periods totalling 3 months); and (b) where full board and lodging was provided, the maximum tariff charged was no more then*: $269 per week for single accommodation or $450 per week for married or shared accommodation or where less than full board and lodging was provided, was not more than*: $180 per week for single accommodation $300 per week for family or shared accommodation (ii) where the requirements of paragraph 3(i)(a) above could not be met, land used and occupied primarily for a boarding house may still qualify for exemption provided: (a) at least 80% of the accommodation that was actually occupied was occupied by long term residents; and (b) at least 80% of the accommodation available to boarding-house residents was either occupied or was available for occupation at tariffs within the limits shown in paragraph 3(i) (iii) where less than 80% of the accommodation available to boarding house residents was occupied by long term residents, owners seeking an exemption must provide an explanation of the reasons that this requirement was not met and such circumstances will be considered on a case-by-case basis; (iv) The owner must provide a statutory declaration stating that, in respect of at least 80% of the accommodation available to boarding house residents, the tariff for full board and lodging during the whole of 2007, will not exceed*; $277 per week for single accommodation or $463 per week for family or shared accommodation or where less than full board and lodging is provided, the tariff will not exceed*: $185 per week for single accommodation or $309 per week for family or shared accommodation." The facts 10 The applicant purchased the subject property in January 2006. There is a five level building constructed on the property. There are 40 accommodation rooms, a reception area and a live-in manager's unit. Each of the 40 rooms contains 4 single beds in the form of 2 double bunks. A double bunk consists of two single beds, one above the other. Each room has an en-suite bathroom. There are communal kitchen, dining and laundry facilities for use of all 'lodgers'. The 'lodgers' provide and cook their own food and do their own laundry. 11 The applicant conducts a business informally known as "Roof Top Travellers Lodge". The rooms are let to 'lodgers' in the course of the business. Evidence was provided by the applicant as to the occupancy of the premises over the period 1 January 2006 to 31 December 2006. This evidence was accepted by the respondent as representing the occupancy. 12 Mr Perry stated on behalf of the applicant that:- "(3) At least 80% of the accommodation that was actually occupied was (as confirmed by business records of the Applicant that I have inspected) occupied by long-term residents (being residents who resided at the hostel for more than three months) and at least 80% of the accommodation available to hostel residents was either occupied or was available for occupation at less than $180 per person per week (namely, for $112.50 per week). (6) None of the lodgers during the 2007 tax year resided in the hostel subject to a Residential Tenancy Agreement pursuant to the Residential Tenancies Act 1987. (7) The lodgers were provided with lodging, but not board." 13 Land Tax in the sum of $60,393.35 was assessed by the Office of State Revenue ("OSR). The amount has been paid by the applicant pursuant to that assessment which is subject of this application. 14 Revenue Ruling No. LT78 issued for the 2007 Tax Year. Clause 3(b) refers to the maximum tariff charged was to be no more than:- "$180 per week for single accommodation or $300 per week for family or shared accommodation" The ruling does not define "single accommodation" or "family or shared accommodation". 15 The respondent provided a copy of LT23 issued on 14 February 1990. This Ruling related to exemption of "Boarding Houses" providing accommodation for low income earners. This Ruling equated the maximum tariffs to a percentage of "single aged pension" for "single accommodation" and a percentage of the "married aged pension" for "family or shared accommodation". The reference to the described pensions was to terms defined in the Social Security Act 1947 (Cth). These definitions provided that the "single" rate applied to persons who lived by themselves and the "married" rate applied to persons who were married and living together. Evidence 16 The applicant's representative drew attention to the occupancy report attached to Mr Perry's statement which disclosed the occupancy of 38 rooms. Attention was drawn to the weekly tariffs charged per person and the occupancy of particular persons over the prescribed period of "3 months" set out in Clause 3(i)(a) of Revenue Ruling LT78. Submissions 17 Both representatives submitted that the provisions set out in Revenue Ruling LT78 supported each of their clients' contention. Each representative provided written and oral submissions which were comprehensive and of great assistance. Applicant's submissions 18 The applicant's representative relied on the evidence supplied in the statement and sworn evidence of Mr Perry to disclose that in relation to the items in Clause 3 of the Guidelines (Revenue Ruling LT78): (i) the land was used as the site of a boarding house during the requisite period in respect of where at least 80% of the accommodation was available to boarding house residents. (a) occupation was by residents for 3 consecutive months (or any periods totalling 3 months) and (b) the maximum tariff charged was no more than: $180 per week for single accommodation (where less than full board and lodging was provided (no family or shared accommodation having been provided) (ii) when the accommodation provided was such that the boarding house was less than 100% occupied then at least 80% of the accommodation was occupied of that actually occupied by long term residents and at least 80% of the accommodation available to boarding house residents was occupied or available for occupation at a tariff of $180 per week or less for single accommodation. (iii) this requirement did not apply as 80% of the accommodation was available in the terms of the sub-clause. (iv) The representative of the owner had supplied a statutory declaration in respect of the whole of 2007 concerning tariffs to be charged. 19 The applicant's representative submitted that the term "accommodation" as referred to in Clause 3(b) of Revenue Ruling LT78 had a broader and more flexible meaning than "room". That the word meant to accommodate by providing a residence. That there was no basis to import the proposition that accommodation can only be a room or rooms, or the whole of a room. 20 The applicant's representative submitted that when considering what is meant by "single accommodation" or "family or shared accommodation" it is appropriate to construe the meaning of these terms in that single accommodation is for a single person and family accommodation is for a family and shared accommodation is for a group. Consideration should be given to what is the arrangement for a single person and what is provided, therefore do not consider the accommodation first and then add an adjective to it. Thus accommodation does not mean "a single room". Where a room was partitioned, then this was obviously a separated accommodation. In this instance the area which was defined as the area for single use by a person was by the bunk beds horizontally and vertically by the sides of the bed thus 4 individuals could be accommodated where all 4 have use of the whole of the room excluding the beds to which others using that room have been assigned. 21 The applicant's representative further submitted that the applicant charged each 'lodger' $112.50 per week, thus satisfying the requirement of clause 3(b) in that this was less than the maximum tariff for "single accommodation". 22 Attention was also drawn to the text of the letter referred to at paragraph 2 wherein the possibility of dividing a room vertically by a curtain was canvassed. The applicant's representative submitted that the further division of the room horizontally by the top bunk's base of the two bunk beds was analogous with a strata subdivision of the room into four separate "accommodations" while each lodger had exclusive use of the bed and shared use of the other facilities. Respondent's submissions 23 The respondent's representative submitted that the applicant had not discharged the onus of proving that the provisions of Section 10Q should be applied to exempt the land from land tax for the 2007 Land Tax Year. 24 Further that the "Occupancy Report" provided by the applicant disclosed several anomalies and that it could not be relied upon to support the contention that clauses 3(i)(a) or 3(ii)(a) of Revenue Ruling No LT78 had been satisfied. 25 In his analysis of the meaning of the words "single accommodation" and "family or shared accommodation" in clause 3(i)(b) of Revenue Ruling No LT78 the respondent's representative submitted that the word "accommodation" must be considered in context. Thus single accommodation would ordinarily be considered to be of or relating to one room and family or shared accommodation would ordinarily be a room used or shared by more than one person. 26 The respondent's representative drew attention to Revenue Ruling No LT79 relating to low cost accommodation where a Residential Tenancy Agreement has been entered into. In this revenue ruling the accommodation is referred to by reference to "one bedroom accommodation", "two bedroom accommodation" etc. This definition in Revenue Ruling No LT79 is as opposed to the definition in Revenue Ruling No LT78. Reasons 27 Revenue Ruling LT78 does not disclose a definition of "single" accommodation or "married or shared" accommodation. Historically the reference relates to the "single" or "married" (or de facto) aged pension under the Social Security Act 1947 (Cth). This historical connection allowed a tariff to be charged which related to the "accommodation". No definition of "single" or "family" or "shared" is provided in the LTMA. In the absence of any relevant authority defining these words in relation to accommodation it was then necessary to consider those words as they are shown in the Revenue Ruling. 28 The ordinary meaning of "single accommodation" is therefore that which applies being accommodation for a single person and correspondingly "married accommodation" would be for married persons. What "shared accommodation" means could be where two or more persons who are not married share an accommodation. 29 The definition of "accommodation" appears to refer to "a room". Although there is no assistance in LTMA or in Revenue Ruling LT78 in this regard. Revenue Ruling LT78 does refer to "80% of the accommodation" without any definition other than referring to "single accommodation" and "family or shared accommodation". 30 It is common ground that if the accommodation (room) was divided by a curtain in a manner that effectively two separate "rooms" were available for separate occupation then this could be sufficient to provide two single (or perhaps family or shared) accommodations. This is suggested in the letter referred to in paragraph 2. The criteria then to be met would be the amount charged, thus if $360 per week or less had been charged for each room as subdivided (i.e. generally two single accommodations) then the requirements of clause 3 of Revenue Ruling LT78 would have been satisfied. The evidence disclosed that each person was charged $112.50 per week. 31 The difficulty with subdividing each room (or some of the rooms) horizontally to create four separate "single" accommodations is that to suggest that the subdivision occurs in accordance with the placement of the upper bunk would ignore the inability for the upper bunk to be occupied whilst preserving the separate occupation of the lower bunk. It is not practical to assume that this requirement for separated accommodations could occur in these circumstances. 32 If it was possible to subdivide the accommodation into four separate discrete areas then the tariff charged would be, on evidence provided, less than $180 per week per room and could be accumulated to $720 per week for the four "virtual" rooms. As the applicant's tariff was $112.50 per week the accumulated amount would be $450 per week. 33 The applicant relied on the suggestion that an accommodation may be one room or a large room divided by a curtain or partition as referred to in the letter dated 25 September 2007 from the OSR. If such curtaining or partitioning had occurred to create separate "rooms" within the accommodation relying only on vertical subdivision and the occupancy requirements and the tariff requirements of clause 3 of Revenue Ruling LT78 had been complied with then the exemption may have been available. 34 The applicant provides low cost accommodation at a budget rate and assists the community with this provision. The structuring of the division of the accommodation does not satisfy the ordinary meaning of "single accommodation" as it is referred to in Revenue Ruling LT78. Orders 1. The decision of the Chief Commissioner of State Revenue dated 14 April 2008 is confirmed. 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