Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Perumal v Chief Commissioner of State Revenue [2015] NSWCATAD 85 Hearing dates: 14 April 2015 Decision date: 28 April 2015 Jurisdiction: Administrative and Equal Opportunity Division Before: G Walker, Senior Member Decision: Application dismissed in part, to proceed to hearing in part. Catchwords: LAND TAX – principal place of residence concessions –applicability. Legislation Cited: Land Tax Management Act 1956 Cases Cited: Re Aston and Chief Commissioner of State Revenue [2006] NSWADT 148; Re Summerville and Chief Commissioner of State Revenue [2006] NSWADT 159. Category: Principal judgment Parties: Maximus Perumal (first applicant), Nikanthi Perumal (second applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: T Davy (Respondent) Solicitors: M Perumal (Applicant in person and represented second applicant) Crown Solicitor's Office (Respondent). File Number(s): 1410694 Judgment 1. The applicants Maximus and Nikanthi Perumal on 4 December 2014 applied to this tribunal for review of an assessment dated 8 August 2014 assessing the applicants as liable to pay the sum of $3455.35 in land tax for the 2013 land tax year. At a directions hearing on 10 March 2015 it was decided that a special hearing would be held to decide a preliminary point of law concerning the proper construction of the Land Tax Management Act 1956 (LTM Act). The preliminary hearing was held on 15 April 2015. 2. A statement of agreed facts was tendered at the hearing (exhibit R2). The agreed facts included the following. 3. The substantive proceedings concern the applicability of an exemption from land tax for a principal place of residence (PPR) in respect of two properties, Frederick Street, Killara (the former residence) and Ryrie Street, Mosman (the new residence). The applicants purchased the former residence on 12 August 1988 and entered into a contract to sell it on 13 December 2012. The sale was completed on 15 February 2013 and the transfer registered on 27 March 2013. 4. The applicants purchased the new residence on 15 January 2007, the transfer being registered on 21 February 2007. This residence was tenanted until about 20 July 2011. Sydney Water services were supplied to the new residence from 9 March 2012 to 30 June 2012 and 15 March 2013 to 30 June 2013. On 11 April 2012 the applicants entered into an agreement with Wales Built Pty Ltd to construct a new residence on the property. On 20 November 2012, AGL Ltd wrote to the applicants at the former residence confirming their gas supply connection to the new residence, and duly supplied gas to Mosman from 7 January 2013 to 19 March 2013. Energy Australia Ltd supplied electricity to the new residence from 8 January to 15 April 2013. Mosman Municipal Council issued a final occupation certificate for the new residence on 10 April 2013, and a home and contents insurance policy for it was issued by GIO Insurance on 24 April 2013. 5. The respondent issued a first land tax assessment for the 2013 tax year on 16 January 2013, which allowed the PPR exemption for the former residence and taxed the new residence for the 2013 tax year. On or about 21 February 2013 the applicants wrote to the respondent stating that the new residence at Mosman had been used and occupied as their PPR from 22 December 2012 and the former residence was sold on 13 December 2012. 6. The respondent applied the concession for sale of former PPR (schedule 1A, clause 7 of the LTM Act) to both the new residence and the former residence and issued a nil reassessment on 29 July 2013. 7. The respondent on 8 August 2014 issued a third assessment for the relevant tax year in the amount of $3455.35, which is the assessment in issue in the present proceedings. That assessment exempted the new residence (Mosman) and taxed the former residence (Killara) and was issued on the basis that the PPR concession under schedule 1A, clause 7 did not apply to Killara as the Mosman residence was not acquired with in the 6 month period preceding the relevant tax date as required by clause 7. 8. In subsequent correspondence the applicants contended that they should not be assessed for land tax for the 2013 tax year for the former residence at Killara as it was sold before the relevant tax date, contracts for sale having been exchanged on 13 December 2012. The respondent replied that while the former residence was sold within 6 months before the taxing date, the new residence at Mosman was not acquired within the 6 months preceding the tax date and was therefore ineligible for the concession under clause 7. The applicants lodged an objection to that assessment on 18 September 2014, which was disallowed on 7 October 20 214. Following receipt of a final notice for $3508, the applicants paid the sum outstanding on 15 October 2014. The preliminary question of law 1. The question to be decided is whether clauses 6 and 7 of schedule 1A of the LTM Act can apply to exempt more than one property owned by a single taxpayer or joint taxpayers. This entails considering (1) whether clause 7 applies to the applicants, (2) whether clause 6 applies to the applicants, and (3) whether both clauses can be applied to the applicants in respect of a single tax year. Relevant legislation 1. The relevant clauses of schedule 1A read 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. Note. It is an offence under section 55 of the Taxation Administration Act 1996 to make a statement to a tax officer, or give information to a tax officer, orally or in writing, knowing that it is false or misleading in a material particular. (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. (3) This clause applies in respect of the assessment of a person's ownership of land only in the period of: (a) 4 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, 4 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) (Repealed) (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. (7) This clause does not apply in respect of land owned by a person if: (a) the person or any member of the person's family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or 9D or under this Schedule, or (b) the person owns land outside New South Wales that is the principal place of residence of the person or a member of the person's family (within the meaning of clause 12), or (c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it. (8) For the purposes of this clause: unoccupied land means land that is not being used or occupied for any purpose. 7 Concession for change to 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 (the 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 principal 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. (d) (Repealed) (3) The principal place of residence exemption cannot be claimed for both a former residence and a new residence under this clause for more than one taxing date. (3A) A principal place of residence exemption that applies, by operation of this clause, to land not actually used and occupied by a person at the relevant taxing date is revoked if 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) (Repealed) Applicant's submissions 1. The applicants lodged written submissions by letter on 6 February, 9 March, 10 April and 14 April 2015. They argued inter alia that the unoccupied land concession under clause 6 applied to the Mosman property for the 2013 land tax year as the old dwelling there was demolished and a new house built in 2012, the new house being handed over to the applicants on 22 December 2012. They acknowledged that the changes of address had not been notified on public records on a timely basis, but said that as they visited Killara regularly until mid-February 2013 to attend to the garden and other maintenance tasks, collecting the mail was not an issue. They maintained that the exchange of contracts for the sale of the property on 13 December 2012 established that the former residence was sold within the 6 months preceding the taxing date. The old house at Mosman was demolished and the new one that was built in 2012 was handed over to the owners on 22 December 2012. The intent of clause 7(2)(b) was that the requirement that the applicants become the owners of the new residence within the 6 months preceding the tax date had been satisfied as "ownership of the new residence" commenced on 22 December 2012. 2. The applicant submitted that the unoccupied land concession under clause 6(1) and (3) applied to the Mosman property for the 2013 year as the old residence (the old house) was demolished in April 2012 and a new one built and completed by December 2012, being handed over on 22 December. The requirement under clause 7(2)(b) that the taxpayer should become the owner of the new residence no earlier than six months before the tax date had also been satisfied when the newly built dwelling was handed over on 22 December 2012, and since then it had been the applicants' PPR. Clause 7(5)(b) applied to the disposal of the former PPR at Killara as the contracts for sale were exchanged on 13 December 2012, before the relevant tax date. 3. The applicants sought clarification of the words "owner of a new residence" as including the date when ownership was handed over for a newly built residence, and that they therefore satisfied all the criteria in clause 7. Under contractual obligations between builder and parties commissioning construction of a new residence, ownership and rights to take possession of a newly built residence passed to the purchaser only on payment for construction. Thus the applicants obtained ownership of the new residence at Mosman on 22 December 2012. The Council had not issued an occupation certificate until April 2013 because some outside work, including a road realignment, were not been completed until then. 4. Mr Perumal concluded by acknowledging that if his interpretation of clause 7(2)(b) were incorrect, in that ownership of the property was not transferred when construction of the residence was completed and handed over by the builder, then clause 7 would not apply. In that event the Mosman property would be the applicants' PPR, in accordance with the current assessment, and clause 6 would be irrelevant. Consideration 1. The basic taxing provision is s 7 of the LTM Act, which provides that land tax at such rates as may be fixed by statute 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 exempt land. Whether land is owned for the purposes of the relevant tax year is determined by application of s 8, which provides that land tax shall be charged on land as owned at midnight on the 31st December immediately preceding the year for which the tax is levied. The tax is payable by the owner of land on the taxable value of all the land owned by that owner that is not exempt under the LTM Act: s 9. 2. The "owner" of land is defined in s 3 to include inter alia every person who jointly or severally, whether at law or in equity, is entitled to the land for any state of freehold in possession. In this case it is common ground that the applicants were formerly the registered proprietors under the Real Property Act 1900 of the Killara land until the transfer to the purchaser was registered on 27 March 2013. 3. It is also agreed that the applicants purchased their new residence at Mosman on 15 January 2007, the transfer to them as registered proprietors being registered on 21 February 2007. 4. A number of provisions of the LTM Act exempt certain land from land tax, principally s 10, which in s 10(1)(r) states that land is exempt from taxation under the principal place of residence exemption, as provided for by schedule 1A. Clause 2 of schedule 1A defines the principal place of residence exemption as follows: 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. (3) If the owner of land is entitled to the exemption conferred by this Schedule, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption. (4) The exemption conferred by this Schedule 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. 1. The restrictions in Part 4 are not relevant for present purposes. In the application of the PPR exemption, clause 7 creates a special concession where an owner of land has sold a former PPR and has become the owner of a new residence that is being, or is intended to be, used and occupied by the person, as his or her PPR. It is a deeming provision that operates by treating the two properties as one PPR, provided that the conditions in clause 7, which is reproduced above, are met. As can be seen by the repeated use of the conjunction "and" in clause 7, the requirements there set out are cumulative and must therefore all be satisfied if the concession is to apply. 2. Those requirements include cl 7(2)(b), which provides that the Chief Commissioner must be satisfied that "the person became the owner of the new residence within the period of 6 months before the relevant taxing date". The applicants acknowledge that requirement to be crucial to their case for an exemption for both properties. The Chief Commissioner has no discretionary power to waive that requirement. 3. The operation of that requirement is illustrated by Re Aston and Chief Commissioner of State Revenue [2006] NSWADT 148. That case on cl 7 was decided on two grounds, one of which was that the taxpayer remained the owner of property despite having entered into an agency agreement with a view to selling it. That ground is not relevant for present purposes. The other ground is, however. The relevant tax date in that case was 31 December 2004. The new residence, however, had been acquired either in late 2003 or early 2004. Block A-DCJ had this to say: The new residence… was acquired, as set out previously in this decision, either in late 2003 or early 2004 and thus outside the period of 6 months prescribed by Cl 7(2)(b) of Sch 1A. It is important to remember that cl 7 of Sch 1A contains what amounts to a package in respect of the concession referred to therein and being a concession referable to the sale by a taxpayer of his former principal place of residence it is necessary, in other words, to comply with all of the provisions of cl 7. 1. The applicants contended that they did not become the owners of the Mosman property until the builder, Wales Built Pty Ltd, transferred possession to them on 22 December 2012 upon receiving payment. No authority was cited for that proposition. The applicants rely on the document headed "Agreement and Particulars of Contract" dated 17 March 2011. That document, however, describes the applicants as the "Owner" in six different places. Wales Built is referred to throughout as the "builder" and there is nothing to suggest that any legal or equitable title is intended to be transferred to the builder or that it will be transferred back to the applicants on receipt of payment. The only available inference is that the applicants entered into that agreement as owners. As there is no other evidence to establish that the applicants were anything other than the registered proprietors in fee simple of the Mosman property from no later than 21 February 2007, the inescapable conclusion is that the applicants did not become the owners of the new residence at Mosman within the period of 6 months before the relevant taxing date. Consequently, the concession in cl 7 cannot apply. 2. As regards cl 6, the application of the unoccupied land concession depends first of all on whether the Mosman property was occupied or unoccupied as at 31 December 2012. If it was occupied as the applicants' PPR, it could not be unoccupied land and cl 2 would apply so as to exempt it from tax. If it was unoccupied, the question would become whether the applicants were entitled to have their actual use and occupation of the Killara property taken into account under schedule 1A. If so, they would not be entitled to the benefit of cl 6. 3. The respondent contended that in order to come within cl 6 the applicants would need to establish that they did not own the Killara property at the relevant taxing date and were not using it as their PPR. The respondent submitted that there was insufficient evidence to enable the tribunal to decide that question of fact, but pointed out that the applicants' submissions dated 6 February 2015 indicated that the applicants were still performing maintenance tasks on the Killara property until February 2013 and that it was unlikely that possession had been given. No evidence had been adduced to the contrary. Consequently, the applicants remained of the legal owners by virtue of s 26(1). 4. The agreed facts, however, show that water, gas and electricity services were being supplied to the Mosman property in the applicants' names. While that might appear to raise a prima facie inference that Mosman was the applicants' PPR on the relevant tax date, the fact that the home and contents insurance policy was not taken out until 16 January 2013 somewhat weakens that inference. At all events, the respondent has indicated an intention to adduce evidence on the question of whether Killara or Mosman was the applicants' PPR on the relevant date. Consequently, the tribunal cannot make a finding of fact without considering that evidence and any evidence to the contrary that the applicants may seek to lead. 5. The applicants' preferred position was that both ccl 6 and 7 applied, so that both properties were exempt. The respondent's reply was that the tribunal in Re Summerville and Chief Commissioner of State Revenue [2006] NSWADT 159 had pointed out at [21] that by virtue of the definition of principal place of residence in s 3, a taxpayer can have only one place of residence and by implication had found that ccl 6 and 7 could not both apply at the same time. While that proposition appears to be correct, it is not necessary to decide the point in view of the conclusion I have reached that cl 7 does not apply in the present case. The application thus cannot proceed in so far as it relies on cl 7. 6. The application should therefore proceed to a hearing on that basis, unless, as Mr Perumal indicated, the applicants prefer to withdraw the application and accept the existing assessment which grants them the PPR concession in relation to the Mosman property. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal Registrar 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 Amendments 04 May 2015 - corrected case name to read 'Perumal v Chief Commissioner of State Revenue' in coversheet 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: 04 May 2015