Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Theophilas v Chief Commissioner of State Revenue [2017] NSWCATAD 89 Hearing dates: 16 February 2017 Date of orders: 24 May 2017 Decision date: 24 May 2017 Jurisdiction: Administrative and Equal Opportunity Division Before: R Hamilton SC, Senior Member Decision: Decision under review is affirmed Catchwords: Revenue Law-land tax; principal place of residence exemption; concession for unoccupied land intended to be the owner's principal place of residence; concession for absences from former residence; discretion to treat land as principal place of residence; only one principal place of residence for all members of the same family. Legislation Cited: Land Tax Management Act 1956 Taxation Administration Act 1996 Cases Cited: Spiros Theophilas v Chief Commissioner of State Revenue [2014] NSWCATAD 100;[2015] NSWCATAP 39;[2015]NSWCATCD 121;[2016] NSWCATAP 111 Paspaley v Chief Commissioner of State Revenue [2008] NSWCA 184 Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 Category: Principal judgment Parties: Spiros Theophilas (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: Applicant self-represented, Assisted by Ms Callaghan Mr A Rider (Respondent) Solicitors: Applicant self-represented. Crown Solicitor's Office File Number(s): 2015/00383349, 1510455 REason for decision 1. This is a matter involving the operation of the principal place of residence (PPR) exemption under s. 10(1)(r) and Schedule 1A of the Land Tax Management Act 1956 (LTMA). It comes before the Tribunal pursuant to s96 of the Taxation Administration Act 1996 (TAA). The taxpayer objected to a Notice of Assessment to Land Tax for the 2015 land tax year under s86 TAA; the Chief Commissioner determined the objection (s91 TAA); and served a Notice of Determination on the taxpayer (s93 TAA) with which determination the tax payer is dissatisfied. The powers of the Tribunal on review are set out in s101 TAA. FACTS 1. The land in question is a property at Randwick NSW which had a house in which the taxpayer lived for 18 years, before he entered into a contract for demolition and building of a new house which necessitated his moving out. 2. The issue of the operation of the PPR exemption to the Randwick property in the 2013 and 2014 land tax years has been previously considered by the Tribunal and the Appeal Panel in respect of each land tax year separately. (Spiros Theophilas v Chief Commissioner of State Revenue [2014] NSWCATAD 100 (Theophilas No1); [2015] NSWCATAP 39 (Theophilas No.2); [2015] NSWCATCD 121(Theophilas No.3); [2015] NSWCATAP 111(Theophilas No.4)) In each case the matter has been decided against the taxpayer. 3. I adopt the basic summary of facts contained in para. 3 of Theophilas No.3 above: "The undisputed facts are that the appellant acquired the property the subject of the appeal, 82 St Marks Road, Randwick in late 1992; he lived there from early 1993 until September 2012 [sic-should be 2011]. Until 1999 his niece, Katherine Grigorakis, lived in Randwick with the appellant. On 18 July 2011 the appellant entered into a contract with Cosmopolitan Homes Pty Ltd for the demolition of the residence at Randwick and the construction of a new residence. Immediately before the demolition in September 2011 the appellant moved out of Randwick and lived at a property at Panania, which he had inherited. After demolition of the residence at Randwick, some site works were carried out by Cosmopolitan Homes, but in November 2011 Cosmopolitan Homes went into liquidation and construction of the new residence at Randwick ceased. Home warranty insurance for the project was not paid until May 2013 and Prohora Building Pty Ltd was subsequently engaged by the appellant to complete the construction of the new residence at Randwick. The appellant moved out of the Panania property in December 2013 to a property in Arncliffe, not owned by him". 1. The Tribunal dealt with the evidence concerning the use of the Panania property during calendar 2013 at paras. 86-89 of the decision in Theophilas No.3 which was upheld on appeal. The Tribunal found, on the evidence, that the Panania property remained his PPR as at 31 December 2013 (the relevant taxing date for the 2014 land tax year). 2. For the 2015 land tax year in dispute here the taxpayer's evidence relevantly covered further developments during calendar 2014 and 2015 (and in particular as at 31 December 2014 which is the point at which the PPR exemption is to be applied) in his situation and living arrangements. The material areas of difference between calendar 2013 and calendar 2014 involved - * Slightly reduced electricity, water and telephone use at the Panania property (but continued use of the property for storage, washing and usually one night a week sleeping purposes, plus regular maintenance.The taxpayer said in para.4 of his affidavit of 3 October 2016 that "After my 2014 hearing and appeal.." he had reduced his connection with the Panania property but this was at a time later than that relevant to the 2015 land tax year); * correction of his address on the electoral roll; * his increasing time spent at his elderly parents' residence at Lurnea to care for them (which led to renovations performed in May 2015 - after the relevant taxing date of 31 December 2014- to a bedroom there for his use);and * delays in progress of building at Randwick due to a dispute with a neighbour over alignment of the dividing fence. 1. Mr Theophilas' niece Miss Grigorakis stated in an affidavit (dated 3 October 2016 at paras 4 and 5) that she had lived at the Randwick property with the taxpayer (her uncle) while working for him at his service station in the years 1993-1999; she stated that her employment involved a great deal of trust and she says she may have been considered his agent; but she gave no evidence of her authority in relation to the Randwick property. She was not cross examined. It is probably fair to assume she was in the position of a lodger or share house contributor (rather than a tenant) and as a practical matter she may have been able to take minor decisions on her uncle's behalf in respect of the property, but did not have the ability to control the property. 2. The taxpayer relied principally on clauses 6(3)(b) and 8(1)(b) of Sched 1A LTMA to advance his claim for PPR exemption on his Randwick property. 3. Clause 6 of Sched 1A provides 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. 1. This clause does not apply unless: 1. 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 2. 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 3. the intended use and occupation of the land is not unlawful. 1. This clause applies in respect of the assessment of a person's ownership of land only in the period of: 1. 4 tax years immediately following the year in which the person became owner of the land, or 2. 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. 1. (Repealed) 2. 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. 3. 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. 4. This clause does not apply in respect of land owned by a person if: 1. 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 2. 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 3. 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. 1. For the purposes of this clause: "unoccupied land" means land that is not being used or occupied for any purpose." 1. I find that during the 2014 calendar year, up until the taxing date of 31 December 2014, the evidence establishes that there was no significant change to the taxpayer's utilisation of the Panania property. Electricity, water, and Telstra accounts for the period were tendered informally without objection. Comparative power and water usage figures for the 2013 to 2016 (excluding Q4) were handily summarised in what I treated as submission documents of the taxpayer. The differences between calendar 2013 and calendar 2014 are minor. For example total electricity used in the last quarter of 2013 was 1809 KWs and in last quarter of 2014 1551 KWs: total water used in comparative quarters 59KLs to 51KLs. A larger reduction in the use of electricity and water and telephone services occurred in the 2015 calendar year, too late to be taken into account as it was after the taxing date. The taxpayer's evidence was that the hot water system at Panania was leaking and it may have been repairs to that system in 2015 which lead to reduced consumption during 2015. 2. Telstra bills for 2014 show only a slight decline in some billing periods in utilisation. In the quarterly billing period spanning 31 December 2014, 42 calls from the Panania phone are recorded. 3. Accordingly, I find that as at 31 December 2014 Panania was still the PPR of Mr Theophilas. Clause 6(7)(a) of Sched 1A operates to deny the exemption in the 2015 land tax year for the reasons previously given in Theophilas No.3 which was upheld on appeal in Theophilas No.4.There was no real change in the facts during calendar 2014 concerning Panania from those upon which the earlier decisions for the 2013 and 2014 land tax years were based. I do not consider I can depart from the conclusions reached in the series of four previous cases involving this taxpayer on essentially the same facts. 4. This is sufficient to dispose of the argument for exemption under cl.6 of Sched 1A. However, Mr Theophilas submitted that the while his niece was living with him at the Randwick property she was using and occupying the land for residential purposes within the meaning of Cl.6(3)(b).This was essentially the same argument as was raised in the challenges to the 2013 and 2014 assessments. 5. The Chief Commissioner submitted that there was insufficient evidence as to the precise status of Miss Grigorakis' relationship to the subject property, and furthermore it did not amount to 'use and occupation' as that phrase is used in Cl.6(3)(b). 6. The New South Wales Court of Appeal has recently discussed the meaning of the word "use" in the context of the exemption from land tax of land where the dominant use is for defined forms of primary production (CCSR v Metricon Qld Pty Ltd [2017] NSWCA 11). The Court reminded us that the word "use" takes its meaning from the statutory context in which it is found (at [45]). 7. The meaning of the compound phrase "used and occupied" in Cl.6(3)(b) of Sched.1A was discussed in non- binding remarks (obiter dicta) of the Appeal Panel in Theophilas No.4 at paras.[85]-[93]. There could be room for argument about its meaning where the facts are established to a greater degree of specificity than here, but the evidence here is wholly insufficient as to the status of Miss Grigorakis in relation to the Randwick property even if it were relevant. 8. Mr Theophilas further submitted that he was entitled to an exemption under Cl.8 Sched 1A (headed "Concession for absences from former residence"). Without setting out the clause in full, the exemption can only apply "if the Chief Commissioner is satisfied that: 1. …, and 2. the person does not own any other land used and occupied by the person as a principal place of residence." (Cl.8(1)(a) Sched. 1A) 1. Having found on the facts that the Panania property was used and occupied as his PPR for the 2015 land tax year (and thus Panania is exempt as advised to the taxpayer by the Chief Commissioner) this concession is not available for the Randwick property. 2. Mr Theophilas alternatively argued that under Cl.2(2)(a) Sched.1 the Chief Commissioner should have been satisfied that the Randwick property is used and occupied by him as his PPR. The Chief Commissioner's representative pointed out the fatal flaw in that argument. 3. Land to be exempt as the PPR of the owner must be a "parcel of residential land" (Cl.2(1)(a)), or a strata lot or lots. 4. To qualify as "residential land" there must be a building or buildings designed, constructed or adapted for residential purposes on the land which is or are used and occupied for residential purposes (Cl. 3(1)). Clearly this is not possible for land (such as the Randwick property) on which the house has been demolished or is, at best, partly built. 5. Mr Theophilas also sought to rely on Cl.12 Sched. 1A (headed "Only one principal place of residence for all members of the same family") to argue in the alternative that assuming Panania was still his PPR for the 2015 land tax year, he was, he said, a 'family of one' who had more than one PPR. Because he had not made an election as to which was his PPR the Chief Commissioner was required to treat the residence that has the highest land value (Randwick) as the PPR of the family of one. 6. This argument suffers from the fatal flaw mentioned above. The contextual indicators are against such an interpretation. Although the definition of "family" in Cl.12(6) covers situations where there is no spouse, and also where there are no dependent children, references to "all members of the same family" point strongly to the need to have at least two persons involved to constitute a family. The decision of the Court of Appeal in CCSR v Paspaley [2008] NSWCA 184 confirms this to be the correct interpretation. 7. The decision under review is 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: 24 May 2017