CITATION: Awan & anor v Chief Commissioner of State Revenue [2009] NSWADT 75 DIVISION: Revenue Division APPLICANTS: PARTIES: Muhammad Riaz Awan Ajchara Chinbootr FILE NUMBER: 076138 HEARING DATES: 1 August 2008, 28 October 2008, 23 March 2009 SUBMISSIONS CLOSED: 23 March 2009 DATE OF DECISION: 8 April 2009 BEFORE: Perrignon R - Judicial Member CATCHWORDS: Jurisdiction,Land tax assessments,Application of principal place of residence exemption Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 CASES CITED: Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 APPLICANT In person REPRESENTATION: RESPONDENT A Rider, barrister ORDERS: 1.The decisions made by the Chief Commissioner on 17 August 2007 to reassess the first Applicant's property at Bella Vista to land tax for the tax years 2004, 2005, 2006 and 2007 are confirmed 2.The decisions made by the Chief Commissioner on 17 August 2007 to assess the Applicants' property at Beaumont Hills to land tax for the tax years 2004, 2005, 2006 and 2007 are confirmed. REASONS FOR DECISION 1 On 31 August 2002, the first Applicant, Mr. Awan, purchased a parcel of vacant land at Beaumont Hills in Sydney. 2 Between October 2006 and May 2007, he built a home there with his wife, the second Applicant. In February 2007, he transferred a half share in the property to her, and in June 2007 they moved into the home with their children. They have continued to occupy it as their principal place of residence ever since. 3 On 19 September 2003, Mr Awan had purchased another parcel of vacant land at Bella Vista in Sydney. He originally hoped to build the family home there, but was unable to raise sufficient finance. He still owns the land. It is still vacant. 4 On 17 August 2007, the Chief Commissioner for State Revenue assessed the home at Beaumont Hills to land tax for the tax years 2004, 2005, 2006 and 2007. 5 On the same date, he reassessed the Bella Vista property to land tax in respect of the same tax years. This property had previously been exempted from land tax, because Mr. Awan had informed the Chief Commissioner of his intention to use and occupy it as his principal place of residence. 6 The Applicants seek review of the Chief Commissioner's decisions to assess their home at Beaumont Hills to land tax. 7 Mr. Awan seeks review of the decisions to reassess his property at Bella Vista to land tax. 8 By leave of the Tribunal, Mr Awan appeared for himself and his wife. In essence, he contended that either the property at Bella Vista or the one at Beaumont Hills ought to have been exempted from land tax, as: a)each was at various times his intended principal place of residence, and b)his failure to occupy the land at Bella Vista as his principal place of residence, and his delay in so occupying the land at Beaumont Hills, were due to circumstances beyond his control. 9 The issue for determination is whether either of the two properties ought to have been exempted from land tax in respect of the 2004, 2005, 2006 or 2007 tax years, by reason of the 'principal place of residence' exemption in Schedule 1A of the Land Tax Management Act 1956. Jurisdiction 10 The Tribunal's power to review decisions of the Chief Commissioner derives from section 96(1) of the Taxation Administration Act 1996, which provides relevantly as follows: "(1) A taxpayer may apply to the Administrative Decisions Tribunal for a review of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if: (a) the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, or (b) 90 days (not including any period of suspension under section 92) have passed since the taxpayer's objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection." 11 The power of review is confined to decisions which may be, and have been, the subject of objection by the taxpayer under Division 1 of the Act: Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184. 12 The Chief Commissioner submitted that the Tribunal lacked jurisdiction to review his reassessments of the Bella Vista property, because Mr. Awan had not objected to them. In support of this, the Chief Commissioner asserted as follows: a)Mr. Awan's Objection dated 21 September 2007 had related only to the Beaumont Hills property. b)Time for objecting to the reassessments of the Bella Vista property had expired: section 89, Taxation Administration Act 1996. c)Mr. Awan would now need the Chief Commissioner's permission to lodge an objection out of time, which was not forthcoming: sections 86 and 90, Taxation Administration Act 1996. d)In the absence of such permission, the Tribunal's jurisdiction was confined to reviewing his assessments of the Beaumont Hills property. 13 The Objection of 21 September 2007 specified 17 August 2007 as the date of the decisions to which objection was taken. On that date, the Chief Commissioner had given notice of the assessments and reassessments of both properties to land tax in each of the tax years. 14 By letter dated 26 October 2007, the Chief Commissioner notified Mr. Awan that his Objection was disallowed. The terms of that letter confirmed that the Chief Commissioner had determined the Objection only so far as it related to the Beaumont Hills property. No reference was made to the Bella Vista property. 15 On its face, the Objection had related to all decisions made on 17 August 2007, which included the assessments and reassessments of both properties. To establish the contrary, it would be necessary to identify a clear intention. 16 The following sentences appear in the Objection under the heading, "Grounds of Objection": "Based on these, I appeal to Land Office to consider my property [at Beaumont Hills] as principal place of residence and grant exemption for the years from 2004, 2005, 2006 and 2007. … I request to consider my appeal and grant me exemption of [the Beaumont Hills property] as a principal place of Residence instead of … Bella Vista for the years 2004, 2005, 2006 and 2007." [sic, spelling amended]. 17 The issue is whether these two sentences, expressly or by necessary implication, negated an intention to object to the assessments of the Bella Vista property. They might do so if, for instance, they amounted to an unequivocal admission that the Bella Vista property was assessable in the amounts in which the Chief Commissioner assessed it, whether or not the Beaumont Hills property was also assessable. 18 Properly construed, they do not go so far. They are in the nature of submissions, rather than grounds of objection. They express a preference that the Chief Commissioner exempt the Beaumont Hills property rather than the Bella Vista property. The words "instead of", as used in the Objection, are consistent with Mr. Awan's contention that only one, but not both, of the two properties is assessable to land tax. 19 The Tribunal construes Mr. Awan's request to exempt the Beaumont Hills property as being a submission of preference, rather than an unequivocal admission that all the reassessments of the Bella Vista property were correct. It accepts his submission that he intended by his Objection to seek review of the Chief Commissioner's assessments and reassessments of both properties. 20 The Chief Commissioner drew the Tribunal's attention to a Variation Return dated 15 January 2007, which was filed on 20 February 2007, some seven months before the Objection. In it, Mr. Awan sought exemption for the property at Beaumont Hills, and admitted that the Bella Vista property was 'taxable'. He specified neither the tax years in which the property was taxable, nor in what amounts. The document related only to the 2007 tax year. When the Objection is read together with this Return, one can see why the Chief Commissioner later construed the Objection as he did. 21 However, the Tribunal considers neither that this admission related to any tax year prior to 2007, nor – whatever its meaning - that it ought necessarily determine the proper construction of an Objection lodged seven months later. 22 That being so, the Tribunal construes the Objection as relating to all decisions made by the Chief Commissioner on 17 August 2007. Accordingly it is empowered to review the assessments of the Bella Vista property, provided that: a)Mr. Awan's objections have been determined by the Chief Commissioner, or b)the Chief Commissioner has failed to determine the objections within 90 days, and the notice requirements of section 100 (1) of the Taxation Administration Act 1996 are satisfied . 23 The Chief Commissioner submitted, and the Tribunal accepted, that in determining the Objection, he did not turn his mind to the reassessments of the Bella Vista property, because of the way in which he had construed the Objection. He indicated that he wished to turn his mind to those reassessments before the Tribunal proceeded to review them. 24 To facilitate this, the Chief Commissioner's decisions were remitted to him for reconsideration under section 65 of the Administrative Decisions Tribunal Act 1997. 25 By letter dated 29 January 2009, the Chief Commissioner notified Mr Awan that he had reconsidered his reassessments of the Bella Vista property, and had affirmed them. 26 The effect of the reconsideration was to determine the balance of the Objection, by disallowing it in respect of the reassessments of the Bella Vista property. That removed any bar to jurisdiction that might otherwise have applied under section 96(1). 27 In addition, ninety days have elapsed since the Objection was lodged. Section 100(1) of the Taxation Administration Act 1996 requires that the Applicant give 14 days written notice before filing any Application for Review following a failure to determine an Objection. 28 Mr. Awan filed Applications for Review on 21 November 2007, 7 November 2008 and 15 December 2008. The Tribunal construes the first as being an application for review of all decisions the subject of the Objection, which was annexed to it. The second and third applications referred specifically to the reassessments of the Bella Vista property. 29 The first Application, among other things, constituted notice of an intention to apply for review of the decisions in respect of Bella Vista. The Chief Commissioner appeared in response to it. The second application constituted further notice, if it were necessary. By the time the final application was filed on 15 December 2008, the notice requirements of section 100(1) had been satisfied. 30 Accordingly the Tribunal is satisfied that it has jurisdiction to review the decisions of 17 August 2007 to assess the Beaumont Hills property to land tax, and to reassess the Bella Vista property, for each of the tax years 2004, 2005, 2006 and 2007. Facts 31 Mr. Awan's submissions of fact to the Tribunal were not challenged. They may be summarised briefly as follows. 32 On 19 September 2003, Mr. Awan purchased the land at Bella Vista with the intention of building a home on it for himself and his family, and of occupying it as his principal place of residence. 33 The Beaumont Hills property, which he purchased on 31 August 2002, was intended as an investment property. 34 The contract for purchase of the land at Bella Vista obliged Mr. Awan to obtain the vendor's prior written approval to the plans for any home he intended to build. He found that it would cost him just under $750,000 to build a home to the vendor's satisfaction. 35 In about November or December 2005, Mr. Awan applied to the Commonwealth Bank for a loan to build his home at Bella Vista. He had cash available for the project of about $100,000. 36 By email dated 19 June 2006, the bank declined to lend him sufficient funds to build there. It did, however, offer to lend him enough to build a less expensive home on the land at Beaumont Hills. 37 Mr. Awan continued to hope that he might convince the bank to lend him enough to build at Bella Vista. In default of that, he intended to take advantage of what the bank had offered, by building a home at Beaumont Hills. 38 Construction of the home at Beaumont Hills commenced in October 2006, and was completed in May 2007. 39 By January or February 2007, he had come to accept that he could not convince the bank to lend him enough to build at Bella Vista, and abandoned any hope of building a home there. 40 On 15 January or 15 February 2007, he signed a Land Tax Variation Form, which was later lodged with the Chief Commissioner. Various copies of the document are before the Tribunal, bearing the different dates. In that Form, he: a)sought exemption from land tax in respect of the property at Beaumont Hills for the 2007 tax year, on the grounds that it was his intended principal place of residence; and b)acknowledged that the property at Bella Vista "is taxable". 41 In February 2007, he transferred a half share in the Beaumont Hills property to his wife, and on 15 June 2007 they moved in to the home which they had built there. 42 The Tribunal makes findings in accordance with the unchallenged evidence, and draws the following inferences from it. a)On or shortly after 19 June 2006, Mr. Awan formed an intention to use and occupy the property at Beaumont Hills as his principal place of residence. b)On the same date, he formed an intention not to use and occupy the property at Bella Vista as his principal place of residence, unless the financing situation changed. In the events which occurred, it did not. c)In fulfilment of his intention so to occupy the Beaumont Hills property, he constructed a home on it between October 2006 and May 2007. d)As at 31 December 2006 – the taxing date for the 2007 tax year - Mr. Awan intended to occupy the Beaumont Hills property as his principal place of residence, and not the Bella Vista property. e)By 15 January or 15 February 2007, Mr. Awan had abandoned any hope of occupying Bella Vista as his principal place of residence. f)As at February 2007, when a half share in the Beaumont Hills property was transferred to the second Applicant, both Applicants intended to use and occupy the Beaumont Hills property as their principal place of residence. Legislation 43 Sections 7 and 8 of the Land Tax Management Act 1956 provide: "(7) Land tax … is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act)." (8) Land tax shall be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. In this section year means the period of twelve months commencing on the first day of January." 44 Section 10(1)(r) exempts from land tax "land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A". 45 Schedule 1A was inserted into the Act by the State Revenue Legislation Further Amendment Act 2003, and came into effect on 31 December 2003. 46 At all relevant times, Clause 2 of Schedule 1A exempted from land tax residential land that was "used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose". 47 Clause 6 of the Schedule provided relevantly as follows: "6 Concession for unoccupied land intended to be owner's principal place of residence (1) An owner of unoccupied land is entitled to claim the land as his or her principal place of residence, if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence. (2) This clause does not apply unless: (a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and (b) if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and (c) the intended use and occupation of the land is not unlawful. …. (8) For the purposes of this clause: unoccupied land means land that is not being used or occupied for any purpose." 48 This version of the legislation was current for tax years 2006 and 2007. It was the same for the tax years 2004 and 2005, except that the Commissioner was then required to be 'satisfied' of the matters set forth in subclauses 6(1) and 6(2). The differences are not material to the issues in this case. 49 It is common ground that the land at Bella Vista constituted "unoccupied land", as defined, in respect of each of the tax years, as did the land at Beaumont Hills until June 2007, when the Applicants moved into their new home. Review of decisions – Bella Vista 50 Mr Awan intended to use and occupy the land at Bella Vista solely as his principal place of residence from the date of purchase in September 2003 until June 2006, when he formed an intention to use and occupy the land at Beaumont Hills as his principal place of residence. It follows that, from September 2003 to June 2006, the requirements of subclause 6(1) were satisfied in respect of the Bella Vista property. 51 The land at Bella Vista remained unoccupied because Mr Awan intended "to carry out … building or other works necessary to facilitate his … intended use and occupation of the land as a principal place of residence." Thus, during the same period, the requirements of subclause 6(2) were also satisfied. 52 But for the operation of subclauses 6(3) to 6(6) of the Schedule (see below), this might have entitled Mr. Awan to an exemption in respect of the tax years 2004, 2005 and 2006. It could not entitle him to an exemption for the 2007 tax year, because by the taxing date for that year – 31 December 2006 – he had ceased to have the intention required by subclauses 6(1) and (2). 53 Subclauses 6(3) and 6(4) of the Schedule provided as follows: "(3) This clause applies in respect of the assessment of a person's ownership of land only in the period of: (a) 2 tax years immediately following the year in which the person became owner of the land, or (b) if the land is used and occupied for residential purposes by a person other than the owner at any time after the person became owner, 2 tax years immediately following the tax year in which the building or other works necessary to facilitate the owner's intended use and occupation of the land are physically commenced on the land. (4) The Chief Commissioner may extend the period in which this clause applies if the owner of the unoccupied land demonstrates that: (a) there is a delay in the completion or, in a case referred to in subclause (3) (b), the commencement of the building or other works necessary to facilitate the owner's intended use and occupation of the land, and (b) the delay is due primarily to reasons beyond the control of the owner." 54 This version of the legislation applied in respect of the 2006 and 2007 tax years. The differences in the legislation for the 2004 and 2005 tax years were slight, and not material to the issues in this case. 55 Subclause 6(3)(a) operated to confine the land tax exemption to the two tax years immediately following purchase of the land in 2003 – that is, to the tax years 2004 and 2005 – unless the Chief Commissioner extended time under subclause 6(4). 56 Subclause 6(4) empowered him to extend time only where there had been: a) a "delay in the completion" of works, or b) in cases where subclause 6(3)(b) applied, a delay in their commencement. 57 Subclause 6(3)(b) did not apply to the Bella Vista property, because it had not been occupied by any person other than the owner. It follows that a delay in commencement of works – as occurred here - could not enliven the Chief Commissioner's power to extend time. 58 That power could only be enlivened by a delay in completion of the works. As the works were never commenced, there can have been no delay in their completion. The words "delay in their completion" in subclause 6(4) ought not be read as including delay in commencement, because the Parliament has in the same clause specified that delay in commencement enlivens the Chief Commissioner's power in situations where subclause 6(3)(b) applies. 59 As a result, the 'principal place of residence' exemption, to the extent it might have applied to the Bella Vista property, was confined at most to the tax years 2004 and 2005. 60 However, subclauses 6(5) and 6(6) of the Schedule provided as follows: "(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person's ownership of the land and to continue to so use and occupy the land for at least 6 months. (6) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly." 61 The land at Bella Vista has never been 'actually' used or occupied by Mr. Awan as his principal place of residence. It remains vacant land. 62 By the end of the period during which clause 6 applied to the Bella Vista property – that is, by 31 December 2005 - Mr Awan had failed to use or occupy it as his principal place of residence. 63 By operation of subclause 6(5), the exemption from land tax was revoked for the 2004 and 2005 tax years. By operation of subclause 6(6), that exemption was taken not to have applied. 64 It follows that the principal place of residence exemption: a)is taken not to have applied to the Bella Vista property in respect of the tax years 2004 and 2005, by operation of subclauses 6(5) and (6); b)did not apply in respect of the 2006 or 2007 tax years, by operation of subclauses 6(3) and (4); and c)did not apply to the 2007 tax year for the additional reason that, as at the taxing date on 31 December 2006, Mr. Awan did not have the intention required by subclauses 6(1) and (2). 65 For these reasons, the Commissioner's decisions to reassess the land at Bella Vista to land tax in respect of the 2004, 2005, 2006 and 2007 tax years were correct. Review of decisions – Beaumont Hills 66 Mr. Awan did not intend to use or occupy the land at Beaumont Hills as his principal place of residence until June 2006, when the bank declined to finance the development of the Bella Vista property. From that time, he intended to use and occupy the land at Beaumont Hills as his principal place of residence, even though he continued to hope until January or February 2007 that he might obtain finance for the development of Bella Vista. 67 As at 31 December 2006 – the taxing date for the 2007 tax year – the requirements of subclause 6(1) were satisfied in respect of the Beaumont Hills property. 68 For the same reasons, the requirements of subclause 6(1) had not been satisfied on any of the taxing dates relating to the 2004, 2005 and 2006 tax years. On those dates, Mr. Awan had intended to use and occupy the Bella Vista property as his principal place of residence. 69 From June 2006 to June 2007, the land at Beaumont Hills remained unoccupied because the owner or owners "[intended] to carry out, or [were] carrying out, building or other works necessary to facilitate [their] … intended use and occupation of the land as a principal place of residence". Thus, from June 2006, the requirements of subclause 6(2) were also satisfied in respect of Beaumont Hills. 70 However, to the extent that subclause 6(1) operated at all, subclause 6(3)(a) (see above) operated to confine the land tax exemption to the two years immediately following purchase of the land in 2002 – that is, to the tax years 2003 and 2004 – unless the Chief Commissioner extended time for its operation under subclause 6(4). 71 The exemption could not apply in respect of the tax years 2003, 2004, 2005 or 2006, because the owners did not have the requisite intention to use and occupy the property as their principal place of residence on the any of the relevant taxing dates. That intention was first entertained by Mr. Awan in June 2006. 72 It follows that the exemption, if it applies at all, could only apply in respect of the 2007 tax year, and then only if the Chief Commissioner extended time for the operation of clause 6. He could only do so if his power to extend time under subclause 6(4) were enlivened. 73 As indicated above, that power is enlivened only where there has been: a)a "delay in the completion" of works, or b)where subclause 6(3)(b) applies, a delay in their commencement. 74 There is no evidence that the Applicants' delay until June 2007 in using and occupying the land at Beaumont Hills as their principal place of residence was due to a delay in completion of works. The Applicants' home was completed within seven months of its commencement. 75 On the other hand, there was a delay in commencement of the works of over four years, from the date of purchase in August 2002 till their commencement in October 2006. Delay in commencement does not enliven the power to extend time unless subclause 6(3)(b) applies. That subclause does not apply to the Beaumont Hills property, as the land was never "used and occupied for residential purposes by a person other than the owner". 76 It follows: a)that the Chief Commissioner lacked power to extend time due to delay in commencement of the works at Beaumont Hills; b)that as he lacked that power, his decisions to assess the Beaumont Hills property to land tax did not include a decision to decline to extend time; and c)that the Tribunal, on review of his decisions of 17 August 2007, also lacks power to do so. 77 As a result, the period to which subclause 6 applied cannot be extended to the 2007 tax year. Because the Applicants did not intend to use or occupy the property at Beaumont Hills as their principal place of residence until June 2006, there are no grounds for applying the exemption in respect of the tax years 2004, 2005 or 2006. 78 For these reasons, the Commissioner's decisions to assess the land at Beaumont Hills to land tax for the tax years 2004, 2005, 2006 and 2007 were correct. Taxation of both properties 79 In the course of argument, Mr Awan submitted that the Chief Commissioner ought not have assessed both properties to land tax in respect of the same tax years, but should have accorded the principal place of residence exemption to at least one of them in respect of each tax year. 80 Mr. Awan was invited to make submissions on questions of law, but neither he nor his opponent was able to support this submission by reference to any statute or case law. Revenue Ruling LT 42, to which Mr. Awan referred the Tribunal, does not assist him. Even if it did, that ruling relates to legislation in force prior to the passage of the State Revenue Legislation Further Amendment Act 2003. In any event, a Revenue Ruling is incapable of overcoming the contrary effect of a statute. 81 The Tribunal is bound to apply the law as set forth in the Land Tax Management Act 1956. 82 Mr. Awan also submitted that his failure to use and occupy either property as his principal place of residence until 2007 was due primarily to circumstances beyond his control, in terms of subclause 6(3)(b). The Chief Commissioner argued to the contrary. 83 For the reasons given, subclause 6(3)(b) can only enliven the Commissioner's power to extend time where there has been a delay in completion of works, as distinct from a delay in their commencement. No delay in completion has been demonstrated in respect of either property. It is unnecessary to decide whether the delay was beyond the control of the Applicants. Orders 1. The decisions made by the Chief Commissioner on 17 August 2007 to reassess the first Applicant's property at Bella Vista to land tax for the tax years 2004, 2005, 2006 and 2007 are confirmed. 2. The decisions made by the Chief Commissioner on 17 August 2007 to assess the Applicants' property at Beaumont Hills to land tax for the tax years 2004, 2005, 2006 and 2007 are 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.