CITATION: Percy v Chief Commissioner of State Revenue [2009] NSWADT 240 DIVISION: Revenue Division APPLICANT Michael Leonard Percy PARTIES: REPSONDENT Chief Commissioner of State Revenue FILE NUMBER: 096025 HEARING DATES: 11 June 2009 SUBMISSIONS CLOSED: 24 July 2009 DATE OF DECISION: 17 September 2009 BEFORE: Hole M - Judicial Member CATCHWORDS: Land tax exemption, lot separated into several parts, principal place of residence Land Tax Management Act 1956 LEGISLATION CITED : Conveyancing Act 1919 Valuation of Land Act 1916 Environmental Planning and Assessment Act 1979 Ryan v Commissioner of Land Tax [1982] 1NSWLR 305 CASES CITED: Chief Commissioner of State Revenue v Sacco (RD) [2008] NSWADTAP 61 McGrath and anor v Chief Commissioner of State Revenue [2007] NSWADT 46 Chief Commissioner of State Revenue v McGrath [2008] NSWSC 387 APPLICANT In person REPRESENTATION: RESPONDENT A Rider, barrister ORDERS: The tax assessment issued by the Chief Commissioner of State Revenue on 12 September 2008 is confirmed. REASONS FOR DECISION 1 Mr and Mrs Perry have been assessed for land tax in respect of a property which was subdivided into 2 lots in 2006. The property being part of the residue lot remaining after 4 subdivisions ("the subject property"). 2 The history of the subdivisions is: (a) as at 23 September 2004 there was one (1) lot; (b) on 24 September 2004 the single lot was subdivided into three (3) lots. One of those lots subsequently became road in the shape of an "H". The part of the original lot contained below the cross bar of the "H" became a separate lot and was sold prior to 31 December 2004. The remaining three parts of the original lot became the third lot albeit in three distinct parcels separated from each other by three roads and are referred to in this judgement as "the subject land". These parts of the lot were separately valued by the Valuer General for the two relevant years as separate parcels; (c) the third lot was subject to a further subdivision, the second subdivision, registered after 31 December 2005 whereby two lots were created. One lot, being the area above the crossbar of the "H" referred to in paragraph (b) above, became the subject of a sale to the local council for park. The remaining parts of the third lot were now separated by two roads, a part of a park and land being developed for housing (being the part sold as referred to in paragraph (b) above). These remaining parts of the third lot became one lot comprising two parcels joined by a vinculum. 3 This application has been made by Mr Percy. Mr and Mrs Percy are divorced and there has been a property settlement. 4 The respondent advised the applicant on 12 September 2008 by letter that, whilst reviewing the applicant's claim for dual principal place of residence exemption in relation to the address of the property, the exemption which had been applied in respect of the 2005 and 2006 tax years was incorrect. 5 The relevant dates in respect of the application are 31 December 2004 (2005 tax year) and 31 December 2005 (2006 tax year). The second subdivision was registered after 31 December 2005. 6 The applicant noted that there is a house built on the part of the subject land west of the intervening roads and that there is a house built on the subject land east of the intervening roads. 7 The local council purchased the roads which became the "H" shape referred to in paragraph 2(b) above in 2004. The local council officially opened the park, which includes the lot above the crossbar of the "H" as referred to in paragraph 2(c) above on 20 November 2005 (prior to purchasing it from the applicant and without notice to the applicant). The applicant entered into negotiations with the local council for the sale to it of this parcel and a contract for sale was entered into after 26 September 2006. 8 Pursuant to directions, the applicant provided a copy of part of the unsigned, undated contract between Mr and Mrs Perry and the local council to the Tribunal on 8 July 2009. This copy of the part of the contract discloses that there was not to be an adjustment for land tax. There is a special condition that provides that the contract is the entire agreement. There is a special condition apportioning Council Rates whereby it requires adjustment in favour of the applicant back to 22 November 2005. As at the presumed date of the contract the respondent had not reviewed the claim of the applicant for dual principal place of residence exemption. 9 The applicant appeared at the Tribunal and provided written and verbal submissions. He relied on the facts as presented. He did not provide evidence concerning the submissions as to the application for exemption pursuant to the principal place of residence provisions. Legislation 10 The relevant legislation is Land Tax Management Act 1956 ("LTMA") (a) the definitions of Joint Owners, Owner and Principal Place of Residence as set out in Section 3. (b) Schedule 1A and Schedule 2 to the LTMA. (c) the definition of Residential land as set out in Part 1 Clause 3 Schedule 1A LTMA. (d) the definition of Concessions as set out in Part 3 Schedule 1A of LTMA. (e) Section 9(2) LTMA (f) Section 27(2) Valuation of Land Act 1916: "Where lands are to be separately valued a) 27 Where lands are to be separately valued (2) Lands which do not adjoin or which are separated by a road, or are separately owned, shall be separately valued: Provided that the Valuer-General shall, subject to section 28, include in one valuation lands owned by the same person if worked as one holding for agricultural or pastoral purposes. " Applicant's submissions 11 The applicant noted that the respondent had previously exempted the subject property for the 2005 and 2006 tax years. 12 The subject land comprises two parts of the third lot created in the subdivision referred to in paragraph 2(b) above. The definition of "Lot" includes all parts of that lot. The respondent had agreed that the parts of the lot had previously been exempt and the applicant submitted that this exemption should not be changed. The applicant noted the provisions of Section 7 Conveyancing Act 1919 (definition of "existing lot") and Section 107 Environmental Planning and Assessment Act 1979 ("continuance of and limitations on existing use"). 13 The applicant drew attention to the principal place of residence exemption in Schedule 1A Clause 2 LTMA where the exemption applies to a 'parcel of residential land'; and to the meaning of residential land as set out at Schedule 1A Clause 3 LTMA in that "A parcel of residential land, generally, will refer to a single lot of land …". That the subject land qualified as a single lot as it is part of the residual lot in the subdivision referred to in paragraph 2(b) above and was the applicant's (and his wife's) primary residence and therefore qualifies under the principal place of residence rules. 14 The applicant relied on the fact that the subject land was part of a lot, that the lot was an existing lot and that it is residential land. He also submitted that there were two houses on the subject land, one on the eastern part and one on the western part. That his wife and family lived in one and he lived in the other. He did not provide any evidence of this other than his submissions. 15 The applicant stated that it was his principal place of residence. There was no evidence of that other than his submission. 16 The applicant stated that he and his family utilise the whole of the property being the lot which included the parts which are the subject land. There was no evidence of this provided except his submission. 17 The applicant sought to distinguish the test set out in Ryan v Commissioner of Land Tax [1982] 1NSWLR 305 ("Ryan") wherein Hunt J accepted that two separate titles of land may be regarded as a "parcel" of land only where they are undivided not "only by physical separation but also in use, occupation and title". 18 The applicant is clearly aggrieved by the shabby treatment by the Local Council which had acted contrary to the usual requirements concerning the acquisition of part of his, and his wife's, land. Respondent's submissions 19 The respondent's representative supplied written and oral submissions to the Tribunal. 20 The respondent has authority to reassess land tax on the subject property. It was noted that the assessment from which this application is brought is directed to both Mr and Mrs Percy and that the decision will be in respect of the assessment dated 12 September 2008. 21 The principal place of residence exemption applied for the subject years to a "parcel of residential land" that the owners used and occupied as their principal place of residence: see Schedule 1A, Clause 2(4) LTMA. That this parcel is a part of the lot containing three parts separated by vinculums and where the Valuer General had separately valued each part. 22 The respondent's representative submitted that there is no definition of the term "parcel of land" in LTMA. In Chief Commissioner of State Revenue v Sacco (RD) [2008] NSWADTAP 61 ("Sacco"), the Appeal Panel held that: "[T]he expression 'parcel of land' is of uncertain meaning and not confined to land within a certificate of title or conveyance". And further that: "Hunt J in Ryan & anor v Commissioner of Land Tax [1982] 1 NSWLR 305 at 310 formulated a test. It has acquired something of a quasi-legislative status. Hunt J said: '[I]n my view … contiguous blocks of land can comprise a 'parcel of residential land' within s 10(1)R(ii) [now Sch 1A, cl 2(1)] only where they are undivided not only by physical separation but also in use, occupation and title." 23 Revenue Ruling No LT82 does not have the force of law. The Ruling suggests that "parcel of land" is synonymous with "Lot". 24 Each of the four unities referred to in Ryan had to be satisfied for the purposes of an exemption pursuant to the land being the principal place of residence. In Sacco the Appeal Panel held that: " In our view, the four unities of Hunt J are to be assessed independently. … What is required when examining whether the two [blocks] are 'undivided (etc' is an examination of the physical situation only. " 25 The subject land in this matter, referred to by the applicant as a "Block" and as submitted by him that each "Block" was in itself a "parcel of land". The respondent's representative drew attention to Section 9(2) LTMA which provides that the "taxable value of that land is the total sum of the land value of each parcel of that land". That pursuant to Section 27(2) of the Valuation of Land Act 1916 ("VLA"), the Valuer General had separately valued the subject land and thus it is a separate parcel of land. 26 The four unities being undivided not only by physical separation but also in use, occupation and title as identified in Ryan. 27 The four entities as set out by Hunt J in Ryan (the Ryan test) had not been established. The applicant bears the onus of proving that the exemption is available and had not provided evidence that the subject land was used and occupied by him and his wife as a whole of the lot. The parts of the lot were physically divided by two roads, a park and other residential property owned by a third party. 28 That "residential land" is defined in cl.3 of Schedule 1A as: "land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings … containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner." 29 That in McGrath and anor v Chief Commissioner of State Revenue [2007] NSWADT 46 ("McGrath 2007") (which the Supreme Court upheld in Chief Commissioner of State Revenue v McGrath [2008] NSWSC 387), the Tribunal explained the operation of cl.3 and other relevant provisions in relation to the principal place of residence exemption: " The scheme of the law … restricts the exemption to one residence other than the concessions found in clause 4 of Schedule 1A of the Act. The excluded occupancies under clause 4(2) do not extend to include another freestanding dwelling … The legislature … clearly recognised that the exemption for the principal place of residence under the law only allowed the exemption for the one home of the owner. … The suggested interpretation of clauses 3 and 4 is also consistent with clause 12 of Schedule 1A of the Act which clearly restricts the principal place of residence exemption to only one residence. … Two independent residences on adjoining blocks cannot be taken to be just one residence for purposes of clause 12. They are clearly two residences. The cumulative effect of clauses 3, 4, and 12 is that the exemption for a principal place of residence will not apply to both dwellings if there are two independent dwellings on a parcel of … land of adjoining blocks. " 30 Pursuant to directions the respondent made further written submissions on 24 July 2009 in response to further submissions by the applicant. 31 In response to the applicant's submissions regarding the part of the subject land which was sold by the applicant to the local council, after 31 December 2005, the respondent submitted that as at 20 November 2005 this part of the subject land was used as public park and should be valued as that. 32 There is no estoppel created by the previous exemption from land tax. Reasons for decision 33 As at the relevant dates the applicant and his wife were the owners of the subject land together with the part of the lot that was later taken by the Local Council and the part of the lot upon which their house stands. 34 The part of the lot which became the park was transferred to the Local Council after the relevant dates and there was no provision to back date the liability for land tax. The contract did provide for the rates to be adjusted at a time prior to the date of the contract and prior to the relevant date for the 2006 land tax year. There was no evidence that the liability for land tax in respect of this part of a lot was to be adjusted in favour of the vendor (for the 2006 land tax year). 35 The applicant relied on the argument that the parts of the whole lot should be considered as a whole and that as a part of the whole lot was used as his residence then that was sufficient to satisfy the Ryan test as to unity of title. He did not provide evidence as to the use and occupation of the separate parts of the subject land or the entirety of the lot. 36 The part of the lot upon which the house stands that is used, according to the applicant, as his home is separated from the other part of the lot by two roads and a park. The other house on another part of the lot is not used as the applicant's principal place of residence. 37 Each part of the lot is capable of separate valuation pursuant to Section 27(2) VLA and it was separately valued. 38 Revenue Ruling No LT82 describes the meaning of residential land and refers to "a parcel of residential land, generally, will refer to a single lot of land …". Generally the land subject of an exemption for a principal place of residence which applies to a whole lot will be where there is more than one lot. In this matter the subject land is part of a whole lot. The four unities as described in Ryan must therefore be satisfied to permit the exemption to be applied. 39 The parts of the subject land are physically separated by two roads and another lot, there is no evidence as to the use and occupation of the whole lot being the three separated parts as opposed to the use of the one part as the principal place of residence of the owners of the lot. The only part of the four unities test which is satisfied is that there is one title only. 40 The applicant has not shown that the four parts of the test in Ryan have been satisfied. 41 The applicant indicated that he lived in a house on one part of the lot and that Mrs Percy (a co-owner) had lived in the house built on the other part of the lot. The wife provided a letter to the Tribunal stating that she did not wish to be a party to the application and that the Final Orders of the property settlement include an indemnity of the wife. 42 The subject land is three (3) parcels of residential land for the purposes of assessing land tax. 43 One part of the lot is used by the applicant husband as his principal place of residence and that part is exempt from land tax assessment for that reason. 44 The other two parts of the lot, being the part now owned by the local council as park and the part which is not used by the applicant husband as his principal place of residence are liable to assessment for land tax for the two relevant years. Orders 45 The tax assessment issued by the Chief Commissioner of State Revenue on 12 September 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.