Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Hall v Chief Commissioner of State Revenue [2014] NSWCATAD 64 Hearing dates: 1 May 2014 Decision date: 15 May 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: A Verick - Senior Member Decision: The assessment for 2013 land tax year is affirmed Catchwords: Taxes & Duties - Land Tax - Exemptions - Principal Place of Residence - New and old residences - Land Tax Management Act, Schedule 1A, clause 7. Legislation Cited: Land Tax Management Act 1956 Land Tax Act 1956 Administrative Decisions Tribunal Act 1997 Civil and Administrative Tribunal Act 2013 Administrative Decisions Review Act 1997 Cases Cited: Summerville v Chief Commissioner of State Revenue [2006] NSWsADT 159; 63 ATR 24 Aston v Chief Commissioner of State Revenue [2006] NSWADT 148; 63 ATR 61 Category: Principal judgment Parties: Stephen Keith Hall and Kyle Anne Hall (Applicants) The Chief Commissioner of State Revenue (Respondent) Representation: Counsel K Day (Respondent) S Hall (Agent for Applicants) M Twohill,Crown Solicitor (Respondent) File Number(s): 1360080 reasons for decision 1The applicants, Mr and Mrs Hall, seek review of a decision made by the respondent to deny them the principal place of residence exemption from land tax in respect of their jointly owned property situated at Curl Curl ("the Curl Curl property") under the Land Tax Management Act 1956 ("the Act") in respect of the 2013 land tax year. 2The respondent, however, granted the applicants the exemption in respect of their property situated at North Manly ("the North Manly property") for the 2013 land tax year. 3The matter in issue is essentially whether the applicants are entitled to the concession under clause 7 in Schedule 1A of the Act which, in the prescribed circumstances, allows an owner selling his old residence and purchasing a new residence the principal place of residence exemption for both properties. 4This application was instituted in the Revenue Division of the Administrative Decisions Tribunal ('the ADT') pursuant to the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). On 1 January 2014, the ADT, with a number of other Tribunals in New South Wales, were abolished and their jurisdiction and functions integrated into the Civil and Administrative Tribunal of New South Wales ('the NCAT') established under the Civil and Administrative Tribunal Act 2013 ('the NCAT Act'). Because the proceedings in this matter were 'unheard proceedings' on 1 January 2014 as defined in clause 6(1) of Schedule 1 to the NCAT Act, they 'are taken to have duly commenced in NCAT and heard and determined instead by NCAT' (Clause 7(1)). This decision is accordingly a decision of NCAT. Factual Background 5The Tribunal had before it the documents made available by the respondent under s 58 of the ADT Act (now the Administrative Decisions Review Act 1997), the respondent's written submissions, an affidavit filed by Mr Hall on behalf of the applicants, copies of the relevant legislation, ruling and case law. No other evidence was produced at the hearing. 6Mr Hall represented himself and on his wife's behalf at the hearing. 7In his affidavit sworn on 21 March 2014, Mr Hall has set out the relevant factual background and the applicants' submissions. 8The facts are not in dispute. 9The applicants have, since 2006, owned and occupied until 31 January 2013, the North Manly property as their principal place of residence. 10On 17 March 2012, the applicants exchanged contracts to purchase the Curl Curl property. The dwelling on the Curl Curl property had, at the time of purchase, 'partially collapsed and was uninhabitable'. It was purchased 'for the sole purpose of demolishing the existing dwelling and building a new house to live in as soon as possible due to the significant debt financing costs'. 11On 13 May 2012, the applicants entered into a contract with Democorp Pty Ltd 'for the demolition of the existing dwelling' at the Curl Curl property. 12Settlement of the purchase of the Curl Curl property occurred on 17 May 2012 with the registration of the transfer on 5 June 2012. 13On 18 May 2012, the applicants lodged a development application with the Warringah Council for the demolition of the existing dwelling on the Curl Curl property that was approved on 4 June 2012. 14On 18 May 2012, the applicants also arranged with Metricon Homes Pty Ltd for the design and construction of a new residence on the Curl Curl property. On 28 June 2012, the applicants entered into a building contract with Metricon Homes Pty Ltd 'following the initial period of design development and preparation of the tender'. 15On 6 July 2012, the demolition of the existing dwelling on the Curl Curl property was completed. 16On 3 October 2012, planning approval was given to the applicants for the construction of a new residence on the Curl Curl property. The construction commenced on 13 November 2012. 17The applicants did not immediately sell their North Manly property after purchasing the Curl Curl property because the applicants 'needed somewhere to live during the initial demolition/construction phase'. They were also advised by the mortgage broker 'to secure bridging finance to do so'. 18The applicants, however, on 7 November 2012 entered into an agency agreement with a real estate agent for the sale of their North Manly property. They exchanged contracts for the sale of the North Manly property on 3 December 2012 with the settlement occurring on 18 January 2013. The transfer was registered on 31 January 2013. 19On 1 July 2013, the respondent wrote to the applicants informing them that they may have a land tax liability for the 2013 land tax year in respect of properties jointly owned by them. In addition to the two properties, the applicants also owned a property situated at Condobolin in the relevant year. A response was received on 8 July 2013, in which the applicants stated that the principal place of residence exemption should apply to the Curl Curl property and that while building their intended new home they were living in rental accommodation. 20On 18 September 2013, the respondent issued a Land Tax Assessment for the 2013 land tax year in respect of the Condobolin and Curl Curl properties. The respondent granted the principal place of residence exemption to the North Manly property. 21The applicants lodged an objection dated 15 October 2013 claiming that, in accordance with the respondent's Revenue Ruling No LT 82 Ver 2 (The Principal Place of Residence), the Curl Curl property was their principal place of residence effective from 3 December 2012 when they exchanged contracts for the sale of their former home (the North Manly property). 22In a letter dated 25 October 2013, the applicants were informed that their objection had been disallowed. They were also informed that whilst they satisfied paragraph (a) of clause 7(2) in Schedule 1A of the Act, they failed to satisfy the requirement set out in paragraph (2)(b) on the following grounds: Information available to the Chief Commissioner demonstrates that you became the owners of ...(the "new residence") on 17 May 2012. This date is not within the 6 months before the relevant taxing date (31 December 2012) as prescribed by the Act. The Chief Commissioner does not have discretionary power in this regard. Relevant Legislative Provisions 23Land tax is, under s 7 of the Act, levied and paid on the taxable value of all land situated in New South Wales that is owned by taxpayers, other than land that is exempt under the Act. The tax is levied at rates set under the Land Tax Act 1956. 24Ownership of land for purposes of land tax is determined under s 8 of the Act. Land tax is charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which land tax is levied. The land tax year is the period of twelve months commencing on the first day of January. 25Land tax is payable under s 9 of the Act by the owner of the land on the taxable value of all the land owned by the owner that is not exempt from taxation under the Act. 26Section 10 of the Act is the main provision dealing with land exempted from land tax and, relevantly, provides: 10 Land exempted from tax (1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G, and 10P, be exempted from taxation under this Act: ... (r) land that is exempt from taxation under the principal place of residence exemption, as provided by Schedule 1A, 27Clause 2 in Schedule 1A of the Act defines the principal place of residence exemption in the following terms: 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, or (b) a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots. (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 principal place of residence. 28The principal place of residence exemption is, as defined in s 3 of the Act, restricted to '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'. However, clause 7 in Schedule 1A of the Act, provides, relevantly, an exemption to two residences owned by a person in circumstances when an owner is selling the old residence and acquiring a new residence. Clause 7 is in the following terms: 7 Concession for sale of former principal place of residence (1) If the Chief Commissioner is satisfied that, on a taxing date (the relevant taxing date): (a) a person is the owner of land (former residence) that was the principal place of residence of the person on the relevant taxing date or was the principal place of residence of the person on the preceding taxing date, and (b) the person is the owner of other land (the new residence) that is being or is intended to be used and occupied by the person as his or her principal place of residence, both the former residence and the new residence are taken, for the purpose of the principal place of residence exemption, to be used and occupied by the person as the person's place of residence on the relevant taxing date. (2) This clause applies in respect of land owned by a person only if the Chief Commissioner is satisfied that: (a) the former residence has not been used or occupied except as the person's principal place of residence, and no income has been derived from the use or occupation of the residence, since the preceding 1 July, except: (i) income derived from an excluded residential occupancy (within the meaning of clause 4), or (ii) income derived under a lease or licence entered into by the purchaser under a contract for the sale of the former residence for a period pending completion of the sale, and (b) the person became the owner of the new residence within the period of 6 months before the relevant taxing date, and (c) since the person became owner of the new residence the new residence has not been used or occupied except: (i) as the person's principal place of residence, or (ii) by a tenant under a lease entered into by the previous owner, and (d) the person intends to dispose of the former residence within 6 months after the relevant date. (3) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person at the relevant taxing date, the exemption is revoked if: (a) the person fails to dispose of the former residence within 6 months after the relevant taxing date, or such further period as may be approved by the Chief Commissioner, or (b) the person is not actually using and occupying the new residence as his or her principal place of residence by the next taxing date immediately following the relevant taxing date. (4) The effect of the revocation is that the principal place of residence exemption is taken not to have applied in respect of the tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly. (5) For the purposes of this clause, a person disposes of a former residence if: (a) the person ceases to be an owner of the former residence, or (b) the person enters into an agreement for the sale of the former residence. Consideration 29The single issue in this matter was whether the applicants were entitled to the principal place of residence exemption for both the Curl Curl property and the North Manly property for the 2013 land tax year. 30In order to get the principal place of residence exemption pursuant to clause 7 in Schedule 1A of the Act for two residences in any particular land tax year, an owner has to establish four matters - 1. That the former residence was the owner's exempt residence on the taxing date or on the preceding taxing date and that the owner has not derived any income from the use or occupation of the residence, other than from an 'excluded residential occupancy' permitted by clause 4, or from a lease or licence arrangement with the purchaser prior to completion of the sale of the former residence. 2. That the new residence was acquired within the period of 6 months preceding the taxing date. 3. That the new residence since acquisition has not been used or occupied except as the owner's principal place of residence, or by a tenant under a lease entered into by the previous owner. 4. That the owner intends to dispose of the former residence within 6 months after the relevant date. 31The respondent's case was essentially that the applicants were able to satisfy the requirement set out in clause 7(2)(a) but have failed to satisfy clause 7(2)(b) because - The applicants acquired the Curl Curl Property outside the timeframe stipulated in Clause 7(2)(b). Clause 7(2) is expressed to apply in respect of land owned by a person "only" if the Chief Commissioner is satisfied of the matters specified in (a) to (d). The Commissioner has no discretion to apply Clause 7 where (b) is clearly not satisfied. The concession available pursuant to Clause 7 is, by reason of Clause 7(2)(b), only available if the Applicants had become the owners of the new residence (ie, the Curl Curl Property) within the 6 months before the relevant taxing date, that is, during the period between 1 July 2012 and 31 December 2012 (see Re Summerville v Chief Commissioner of State Revenue [2006] NSWADT 159; 63 ATR 24 (Hole JM), at [21], [28]; Re Aston and Chief Commissioner of State Revenue [2006] NSWADT 148; 63 ATR 61 (Block JM), at [8]). 32The applicants' case was that they were not aware of the provisions of clause 7 when they purchased the Curl Curl property and they were also not advised of the law by their estate agent or solicitor. They were also not given any advice by officers of the respondent when they paid the transfer duty for the purchase of the Curl Curl property. 33At the hearing, Mr Hall for the applicants submitted that, if they had known that the law required the new residence to be purchased within the period of 6 months before the relevant taxing date, they would have sold their old residence before the 31 December 2012. In any case, it was submitted that the law applied unreasonably and in an inequitable manner to them because if a person purchases a new residence on 1 July the owner is 'given up to 18 months to dispose of their former principal place of residence'. It was also submitted that the applicants had difficulty to understand why the respondent is given a discretionary power under clause 7(2)(d) to extend time to dispose of the old residence but no discretionary power in relation to the 6 months period with regard to clause 7(2)(b). 34I understand the applicants' submissions and they may have done the transactions differently if they had been properly advised or aware of the way the provisions of clause 7 apply. But there is no provision in the Act to provide any relief to them from the land tax that has been assessed in the circumstances. As explained above the law in relation to the purchase of the new residence is rigid and requires the new residence to be acquired within the 6 months period from the relevant taxing date. The only option that was available to them was to sell their old residence prior to the 30th December 2012. That, of course, did not occur and thus they are liable to land tax in respect of the Curl Curl property for 2013 land tax year. Decision 35The assessment is accordingly affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. 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: 15 May 2014