Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Carcary v Chief Commissioner of State Revenue [2011] NSWADT 244 Hearing dates: 7 October 2011 Decision date: 28 October 2011 Jurisdiction: Revenue Division Before: A Verick, Judicial Member Decision: The assessment for land tax year 2011 is affirmed Catchwords: Principal Place of Residence Exemption Legislation Cited: Land Tax Management Act 1956 Taxation Administration Act 1996 Cases Cited: Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 Chief Commissioner of State Revenue (RD) v Mcllroy [2009] NSWADTAP 21 Chief Commissioner of State Revenue v Aldrige [2003] NSWADTAP 50 Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 Yen-Cheng Chuang & Anor v Chief Commissioner of State Revenue [2009] NSWADT 60 Dean v Commissioner of Stamp Duties (Qld)(No2) [1966] 2 Qd R 557 Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26 Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8 Category: Principal judgment Parties: Karen Joy Carcary (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel : A Stafford (Respondent) K Carcary (Applicant in person) Crown Solicitor (Respondent) File Number(s): 116036 REASONS FOR Decision 1The Applicant is an owner of several properties including a residential property situated in the suburb of Mayfield, Newcastle ("the Mayfield Property"). All the properties were assessed to land tax for the 2011 land tax year by the Respondent under the Land Tax Management Act 1956 ("the Act"). The Applicant seeks a review of the assessment on the grounds that the Mayfield Property is her principal place of residence and exempt under s 10 (1)(r) of the Act as provided by Schedule 1A to the Act. FACTUAL BACKGROUND 2The facts are not in dispute. 3The Applicant, a single mother, has resided in Port Macquarie since 1998 and is, and was at all relevant times, employed as a Technical Manager with Essential Energy at its Port Macquarie office. 4From 1998 to 2006 she lived in rented properties with her two children. Sometime in 2006, the Applicant and her children commenced to reside with the Applicant's parents who also reside in Port Macquarie. Her children attended school at Port Macquarie. 5The Applicant purchased the Mayfield Property in 2010 with the settlement of the purchase on 25 May 2010. After refurbishment sometime in June 2010, her two children, daughter and son along with the son's partner, began to occupy the Mayfield Property. The daughter is a full time student at a technical college in Newcastle and works part time at a brewery/bar. Her son is an apprentice electrician employed by a firm in Newcastle. The son's partner is a full time student at the University of Newcastle. 6The son contributes $60 each week and his partner's parents pay the Applicant $120 "for board, which includes accommodation, some meals, electricity, gas and water". The daughter is entirely dependent on the Applicant. 7When the Mayfield Property was purchased it was a residence with two bedrooms but with the refurbishment the original family room was converted into another bedroom. 8It was established at the hearing that the Applicant stayed overnight at the Mayfield Property during the period May to the end of December 2010 as follows: May - 1 night June - 6 nights July - 9 nights August - 5 nights September - 4 nights October - 13 nights November - 5 nights December - 7 nights 9It was also established at the hearing that, with the exception of two nights (one to attend to settlement of the Mayfield Property and one night on the Applicant's daughter's birthday), all other nights at the Mayfield Property were in transit from Port Macquarie for work trips to Sydney and other places and when going on holidays to other parts of Australia or overseas. STATUTORY SCHEME 10Pursuant to sections 7 and 9 of the Act, land tax is levied and paid on all land situated in New South Wales other than that which is exempt. Ownership of land is determined under s 8 as at midnight on 31 December in the year immediately preceding the tax year, which is a calendar year. 11Exemptions are set out in s 10 and include, relevantly for the present matter, "land that is exempt from taxation under the principal place of residence, as provided for by Schedule 1A": s 10(1)(r). 12The expression "principal place of residence of a person" is defined in s 3(1) to mean "the one place of residence that is, among the one or more places of residence within and outside Australia, the principal place of residence of the person". 13Clause 2 of Schedule 1A to the Act relevantly provides: 2 Principal place of residence exemption (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 1 January 2005 or any succeeding year, if the land is: (a) 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 purposes since 1 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 place of residence. ... (4) The exemption conferred by this clause is referred to as the principal place of residence exemption . (5) the principal place of residence exemption is subject to the restrictions set out in Part 4. 14Also relevant for purposes of this matter are the following provisions contained in clause 12 of Part 4 in Schedule 1A: 12 Only one principal place of residence for all members of same family (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 all 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) An election may be made, in respect of a tax year, by the end of the period allowed for the lodging of an objection to a notice of assessment of land tax liability (being an initial assessment of land tax liability) for that tax year. (5) 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. (6) For the purposes of this clause, a family consists of the following: (a) a person and his or her spouse (if any), (b) any dependent child or dependent step-child of the person and his or her spouse (or of either of them) who ordinarily resides with the person or his or her spouse. ... (9) A person who is the child or step-child of another person is a dependent child or a dependent step-child if the person is under 18 years of age and is not legally married. ... SUBMISSIONS 15The Applicant's case was essentially that the Mayfield Property was purchased as her "family's place of residence". It was submitted that her son, his girlfriend and her daughter reside at the Mayfield Property "permanently and continuously" and that she stays at her parents' house whilst working in Port Macquarie and that she is at her "family home at all other times". 16It was submitted that the she has not changed her electoral roll or driver's licence address because she works in port Macquarie and stays at her parents' house during the week. The Applicant also submitted that she intends "to move to Mayfield permanently" when she finds "work in the Newcastle area". 17In relation to the legislative provisions, the Applicant submitted that she was only claiming the exemption in respect of one property - 13. I own a number of properties in NSW. Schedule 1A Clause 12(2) of the Land Tax Management Act 1956 (Act) states that if members of a family own more than one residence used and occupied by any of them as a PPR, the Chief Commissioner is to treat the one place of residence elected as the PPR of the family as the PPR of all members of the family in respect of a tax year. "Family" includes a dependent child (Schedule 1A Clause 12(6)(b)). Noting that a child, for the purposes of the Act, is a dependent child under 18 years of age and not legally married (Schedule 1A Clause 12(9)). My daughter Nicola turned 18 on 5 November 2010. 14. The OSR have noted in their decision of 28 March 2011 (item 18 of the Crown Solicitor's documents filed 18 May 2011) that the reason I am not entitled to claim principal residence exemption is because my daughter is not an "owner" of the property. 15. However, Schedule 1A Clause 12(2) of the Land Tax Management Act 1956 (Act) states that if members of a family own (whether jointly or separately) more than one residence used and occupied by any of them as a PPR, the Chief Commissioner is to treat the one place of residence elected as the PPR of the family as the PPR of all members of the family in respect of a tax year. Under this clause, owner is extended to include "family". 16. Therefore, when I purchased 16 Bourke St Mayfield, for the purposes of the land Tax Management Act, my daughter Nicola was part of my "family". She resided permanently and continuously at 16 Bourke St Mayfield and therefore my "family" has principal residence status. 18The Applicant also placed some reliance on decisions of the Appeal Panel in Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 and Chief Commissioner of State Revenue (RD) v McIIroy [2009] NSWADTAP 21. 19The Respondent's case was that the Applicant is not entitled to the principal place of residence exemption for the Mayfield Property because the overwhelming weight of the objective evidence was that the Applicant's principal place of residence was in fact the Port Macquarie Property. It was submitted that the Applicant only stayed at the Mayfield Property when either on holiday or in transit and that the Applicant has not established that the Mayfield Property had been continuously used and occupied since 1 July in the year preceding the tax year as required by clause 2(2)(a) of Schedule 1A. 20Relying on the decision of the Appeal Panel in Chief Commissioner of State Revenue v Aldrige [2003] NSWADTAP 50, it was submitted by the Respondent that the discretion given to the Chief Commissioner in clause 2(2)(b) "does not confer a true discretion" and operates as follows: ... if the evidence of the factual circumstances as at midnight on the taxing date of 31 December 2010 supports the land being used and occupied by the Applicant as her principal place of residence then the Tribunal must be so satisfied and likewise if the evidence does not support that contention the Tribunal cannot be so satisfied. 21In the alternative, it was submitted that, if the discretion in clause 2(2)(b) operates in certain circumstances, there were no such circumstances in this matter to justify the application of the discretion. 22It was further submitted that clause 12(2) of Schedule 1A does not enable the Applicant to 'elect' to claim the exemption in respect of the Mayfield Property because: "The Applicant does not meet the threshold in subclause (2) that gives rise to any question of election: the Applicant or her family members (as defined) do not " own (whether jointly or separately) more than one residence used and occupied by any of them as a principal place of residence " - the Applicant owns the Mayfield Property but neither she nor any of her dependent children under the age of 18 own the Port Macquarie Property. No question of being able to somehow elect between the Port Macquarie Property and the Mayfield Property under the this clause, as the Applicant's principal place of residence, arises..." CONSIDERATION 23This is an application under s 96 of the Taxation Administration Act 1996 to review the assessment made by the Respondent for the 2011 land tax year rather than the objection decision. In Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 Basten J (with whom both Giles JA and Campbell JA agreed) noted, "that the right of review under s 97 is given by reference to the operative decision of the Chief Commissioner and not to a ruling made on an objection". Section 97 is in similar terms as s 96, the former provides for applications for review to the Supreme Court and the latter applies to applications to the Tribunal. The "operative decision" in this matter is the assessment for the land tax year 2011. 24The issue before the Tribunal is essentially whether the Mayfield Property was the principal place of residence of the Applicant for purposes of 2011 land tax assessment. The Applicant relies on the provisions found in clause 2 of Schedule 1A and also on the provisions in clause 12. 25It is convenient to deal firstly with the claim under clause 12 of Schedule 1A. 26The provisions of clause 12 were considered in Paspaley . Basten J first noted the Commissioner's contention "that the question of an election only arises in the case of two or more members of a family owning separate residences and having different principal places of residence". His Honour went on to explain the operation of clause 12, in factual circumstances similar to the present matter, as follows: 56 ... An individual cannot have more than one principal place of residence (see definition in s 3(1) set out at [18] above) and therefore cannot elect which of two is to be his or her principal place of residence for the purposes of land tax. The question of election arises because there can be only one exemption in respect of a family and different members of a family may have different principal places of residence. 57 An alternative approach, which might have been relied upon by the respondent, was that the property was the principal place of residence of his daughter, who had no other ordinary place of residence. However, this approach would also misconceive the nature of the exemption, which can only apply to land used and occupied "by the owner" as his or her principal place of residence: Schedule 1A, cl. 2(1). The exemption does not identify, expansively, land used and occupied by the owner 'or any member of his or her family'; the reference, in cl 12 only, to membership of the family is restrictive, rather than expansive. The respondent can only succeed if he persuades the Chief Commissioner that the property is his principal place of residence; because he can only have one principal place of residence, no question of election arises. 27The above observations apply equally in the present matter. The Applicant is the owner of the Mayfield Property but not the Port Macquarie Property. Accordingly, no question of election arises in this matter. The only question that arises for determination is whether the Mayfield Property was her principal place of residence for the 2011 land tax year. 28The only provisions relevant to the determination of this issue are those set out in clause 2 of Schedule 1A. Subclause 2(2) sets out the main basis for the principal place of residence exemption. There are two alternative tests for the determination of the exemption under subclause 2(2). 29The test under subclause 2(2)(a) requires an owner to have continuously used and occupied the land and no other land for residential purposes since 1 July in the year preceding the tax year in which land tax is levied. In the present matter, the Applicant has, on her evidence, used the Port Macquarie Property as her place of residence. She has, in fact, resided in Port Macquarie since 1998 and from 2006 she became resident at her parents' house at Port Macquarie. She continues to live there and has all her personal belongings there. Her claim for the exemption must necessarily fail under this clause because the Mayfield Property was not the only land she used and occupied for residential purposes since 1 July 2010 to 31 December 2010. 30In any case, the Applicant also failed to establish that the Mayfield Property was her principal place of residence. The use of the term "principal" in the expression, "principal place of residence", suggests that a person may use and occupy more than one residence but the exemption is only available for the principal place of residence. In Yen-Cheng Chuang & Anor v Chief Commissioner of State Revenue [2009] NSWADT 60 I set out some of the well established principles applicable to determine whether a property constitutes an owner's principal place of residence, as follows: 20 In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of the residence in each case (per Fryberg J in Dean v Commissioner of Stamp Duties (Qld)(No2) [1966] 2 Qd R 557) 21 The onus to establish one's principal place of residence is usually discharged on the basis of various matters. It is important to note, as observed by the Victorian Civil and Administrative Tribunal in Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 that: "... while sleeping by itself in a place can be an indication of a principal place of residence, it is not the sole matter to be taken into account. One needs to look as well at where the Applicant ate; his use of electricity and furniture and fittings and other matters such as entertainment of friends in the house ... Sleeping in a place does not make a residence. It has to be the whole indicia of things that are done in a home which are described in the cases..." 22 Other indicia would include evidence of an Applicant's use of the address of the property as the residential address for purposes of his or her mail, driving licence, on the electoral roll, in immigration records, income tax returns and telephone bills. 23 In Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 the Appeal Panel of the Tribunal agreed that "to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of transient, temporary, contingent or passing nature is not sufficient, nor occupation for any other reason". The Appeal Panel also held that "the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue". (Also see Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26). 31In the present matter other than the evidence that the Applicant stayed overnight on some days whilst on holiday or in transit from Port Macquarie to other parts of Australia and on trips overseas, no other objective and independent evidence was produced that supported the claim that the Applicant had made the Mayfield Property her principal place of residence. There was no element of permanence in the Applicant's stay at the Mayfield Property. It was no more than temporary or of passing nature. 32Finally, I need to consider the alternative test, which is set out in subclause 2(2)(b). Under subclause 2(2)(b) the Chief Commissioner is allowed to grant the exemption if he is satisfied that the land is used and occupied by the person as the person's principal place of residence. This discretion is given to the Chief Commissioner to determine any case where an owner does not meet the requirements of subclause 2(2) (a). 33In Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8, I examined fully the scope of this discretion and concluded that it was a true discretion. But I also noted that its current role is somewhat limited because when Schedule 1A was introduced a full range of circumstances affecting the use and occupation of the principal place of residence were legislatively dealt with by specific provisions. The discretion, however, continues to have a role. Without attempting to set out any exhaustive list and merely by way of example, the discretion certainly applies when a property is used and occupied by an owner after 1 July in the year preceding the relevant tax year or when a property is let on a short term lease for a national interest (for example the concession was extended by the Chief Commissioner to owners during the 2000 Sydney Olympic Games). 34But, as indicated in Saboune , the discretion cannot be exercised in an arbitrary manner. Its exercise must not undermine the primary purpose and object of the exemption. The exemption under the Act is granted to an owner in respect of one property where there is clearly a bona fide use and occupation of the property as the owner's principal place of residence. 35In the present matter the evidence was that the Applicant's use and occupation of the Mayfield Property was on a fairly casual basis. There was no independent evidence that she had abandoned her principal place of residence at the Port Macquarie Property. The Applicant's own evidence was that she continued to use the Port Macquarie Property as her residence where all her personal belongings were and she was at the Mayfield Property essentially when she was in transit. The fact that the Mayfield Property was the principal place of residence of her children during the relevant period did not assist the Applicant to claim the exemption. DECISION 36The assessment for the 2011 land tax year is affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal. Registrar ********** 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. Decision last updated: 28 October 2011