Bennett v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2022-08-30

Introduction

This is an application to the Tribunal under s 55 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act) for a review of a land tax assessment issued to the Applicant on 26 February 2021 in respect of land she owned on a street in Tempe (which I shall refer to in these reasons as Number 38) for the 2017 to 2021 land tax years (decision under review). That land adjoins land that the Applicant also owns in the same street at Number 36 (which I shall refer to in these reasons as Number 36) which the Respondent accepts is exempt from land tax because it is the Applicant's principal place of residence.
The Applicant claims that she is also entitled to the principal place of residence exemption under Part 2 of Schedule 1 of the Land Tax Management Act 1956 (NSW) (LTMA) in respect of Number 38 because she claims Number 36 and Number 38 (collectively, the Properties) together form a parcel of residential land used and occupied by her as her principal place of residence. She claims that the two lots are the site of a single residence.
Alternatively, the Applicant claims that, if she is not entitled to a principal place of residence exemption, she is entitled to a concession on the taxable value of the land at Number 38 under clause 10B of Schedule 1 of the LTMA.
The Respondent's position is that the Properties are not together used and occupied as the Applicant's principal place of residence and the two lots are not the site of a single residence. The Respondent contends that the Applicant is also not entitled to a concession under clause 10B.
The Applicant objected to the Assessment and the Respondent disallowed that objection by notice dated 15 December 2021.
The decision is administratively reviewable by the Tribunal by virtue of s 96 of the Taxation Administration Act 1996 (NSW) (TA Act).
It is the decision to assess land tax, not the decision on the objection, which is the subject of the review: Singh v Chief Commissioner of State Revenue [2016] NSWCATAD 9 at [10] - [13].

Materials Before the Tribunal

The Applicant relied on: 1. Submissions dated 22 June 2022 and documents attached to those submissions (including a statutory declaration made by the Applicant on 8 June 2022, google map images of the Properties, photographs of the Properties and a residential tenancy agreement in respect of Number 38) marked Appendix A - Appendix T (Exhibit A1); 2. Submissions dated 2 August 2022 and documents attached to those submissions (including a further statutory declaration made by the Applicant on 1 August 2022, a statutory declaration made by a friend of the Applicant and some further photos of the Properties) marked Appendix U to Appendix Y (Exhibit A2); 3. A short video of the Properties (Exhibit A3); 4. Further submissions dated 26 August 2022 which were really in the nature of a combination of submissions and evidence and documents attached to those submissions (including a hand drawn image described as "the footprint" of the Applicant's "home", building design floorplans of "Pavilion Style Architecture" by David Reid Homes, and some further photos of the Properties) (Exhibit A4); 5. A receipt for a payment to Easy Termite Control dated 5 November 2019 (Exhibit A5).
The Applicant also gave evidence at the hearing and was cross-examined.
The Respondent relied on: 1. A bundle of documents provided pursuant to s 58 of the ADR Act (Exhibit R1); 2. A Tender Bundle of documents lodged on 19 July 2022 (Exhibit R2); 3. A Further Tender Bundle of documents lodged on 26 August 2022 (Exhibit R3); 4. A bundle of documents put to the Applicant in cross-examination (Exhibit R4); 5. Written submissions dated 13 July 2022.

LTMA

Pursuant to s 7 of the LTMA land tax is levied on the taxable value of all land in New South Wales unless it is exempt under the LTMA.
Land tax is charged on land owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied: s 8 LTMA.
Section 10 (1)(r) LTMA 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 for by Schedule 1A.
Section 3 of the LTMA defines principal place of residence as follows: principal place of residence of a person means 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 of the person.
The principal place of residence exemption and related concessions and restrictions are set out in Schedule 1A of the LTMA. Clause 2 of Schedule 1A of the LTMA provides, relevantly, 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. … (4) The exemption conferred by this Schedule is referred to as the principal place of residence exemption.
Clause 3 of Schedule 1A of the LTMA defines residential land as follows: 3 Residential land - meaning (1) In this Schedule, residential land means 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 - (a) comprised of strata lots or residential units, or (b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or (c) from any part of which income is derived. (2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted.
Clause 4 of Schedule 1A provides for a concession for land on which there is one other residential occupancy as follows: 4 Concession for land on which there is one other residential occupancy (1) For the purposes of the principal place of residence exemption, if a building or buildings used or occupied for residential purposes contains or contain a residential occupancy other than that of the owner, the use of the building or buildings for the purpose of that residential occupancy may be disregarded if - (a) the residential occupancy is an excluded residential occupancy, and (b) the building contains or buildings contain (out of a total of all rooms in the building or buildings) not more than one of those excluded residential occupancies (not including the occupancy of the owner). (2) For the purposes of this clause, each of the following residential occupancies is an excluded residential occupancy - (a) one room, (b) one suite of rooms (not being a flat) each room of which all occupants of the suite are entitled to occupy, (c) one flat, (d) one suite of rooms (not being a flat) each room of which all occupants of the suite are entitled to occupy, and one room, (e) one flat and one room, (f) 2 rooms, each of which is separately occupied. (3) Accordingly, land does not cease to be residential land because there is on the land one, but not more than one, such excluded residential occupancy, even if income is derived from the residential occupancy. (4) If land is comprised of 2 or more lots or strata lots, the excluded residential occupancy must be located on a lot or strata lot that is also used and occupied by the owner of the land for residential purposes.
Clause 10B of Schedule 1A provides a concession for multiple-occupancy land. It provides: 10B Concession for multiple-occupancy land (1) This clause applies if land owned by one person, or by 2 or more joint owners, is the site of a flat that is used and occupied by the owner, or by one of them, as a principal place of residence, and there is also situated on the land one or more other flats that are used, or adapted for use, as a separate occupation to that of the owner (not being an excluded residential occupancy that may be disregarded under clause 4). (2) Section 9C applies in respect of the land as if the land were mixed use land. (3) For the purposes of applying Division 5A of Part 1B of the Valuation of Land Act 1916 to the land, a reference in that Division to that part of the land that is occupied or used for non-residential purposes is to be read as a reference to that part of the land that is adapted for use as a separate occupation to that of the owner (and which is not an excluded residential occupancy that may be disregarded under clause 4). (4) This clause does not apply to land comprised of one or more strata lots.
Clause 13 of Schedule 1A restricts the application of the principal place of residence exemption to a parcel of residential land that is comprised of two or more lots of land, relevantly, as follows: 13 Application of exemption to residence comprised of 2 or more lots (other than strata lots) (1) The principal place of residence exemption does not extend to a parcel of residential land that is comprised of 2 or more lots of land, and that is used and occupied by the owner of the lots (or by one of them) as a principal place of residence, unless - (a) the lots are adjoining, and (b) the lots are in the same ownership, and (c) the lots are the site of a single residence (excluding any additional residential occupancy that may be disregarded under clause 4). … (2) For the purposes of this clause - … (b) separate buildings erected on separate lots are not to be regarded as a single residence if the buildings are separately occupied or capable of being used for separate occupation.

The TA applies in respect of "taxation laws" which are defined in s 4 of the TA Act to include the LTMA.
Section 96 of the TA Act provides that a taxpayer may apply to the Tribunal for an administrative review of a decision of the Respondent that has been the subject of an objection.
Section 100 of the TA Act provides that the Applicant's and Respondent's cases on an application for review are not limited to the grounds of the objection. Section 100(3) provides that the Applicant has the onus of proving the Applicant's case in an application for review.
Section 101 of the TA Act sets out the powers of the Tribunal in dealing with an application for review and provides that the Tribunal may, amongst other things, confirm or revoke the assessment or other decision to which the application relates, make an assessment or other decision in place of the assessment or decision to which the application relates or remit the matter to the Respondent for determination in accordance with its finding or decision.

Evidence

It is not in dispute that: 1. In all relevant tax years the Applicant owned two adjoining lots of land at a street in Tempe. She acquired the land at Number 36 in October 1989. She acquired the land at Number 38 in June 1994. 2. Separate free-standing houses with separate rooves were originally constructed on each of Number 36 and Number 38 during the 19th Century. Each of those houses had had brick extensions constructed at their rear prior to the Applicant purchasing the Properties. 3. In 1994 the Applicant removed the fence on the boundary between Number 36 and Number 38.
The Applicant's evidence was that at about that time she constructed something she has described as an "annex" between the rear sections of the two houses.
Her evidence in this regard is contained in two statutory declarations and the submissions dated 26 August 2022, each in slightly different detail. The Applicant also gave further evidence regarding the annex in examination in chief. She said that she constructed the annex to create a comfortable, uninterrupted larger home and to enhance her access to the backyard of Number 38. She said that she knocked "a hole in the wall" and installed doors to link Number 36 and Number 38 through this annex. She said the annex was constructed as an enclosed space with brick foundations, wooden floorboards and solid walls. She said it was built by a qualified builder with a wooden roof frame securely bolted to each of the adjoining walls with metal sheeting. Her evidence was that the two "new" wall additions were made from timber, weather boards, plaster sheeting and glazing.
The Applicant said that removal of the fence gave her access to a flowing garden and access to the back shed of Number 38 which she has used to store tools and garden equipment. She also installed two pairs of doors to access the rear of what was originally the garage on Number 38 which the Applicant has since used as a shed, study/office or workshop. She says she has used that shed at least 3 or 4 times a week for storage and also to paint or listen to music and to sort, separate and repot her orchids. She has constructed greenhouses on the rear of the block of Number 38 to accommodate her collection of over 400 orchids which she says that she has entered almost every day to water and tend to them. She has also used the verandah at the rear of Number 38 including to store materials there.
From 2016, on a number of occasions the Applicant has granted leases to tenants to occupy the "front part" of the house on Number 38. During each of the relevant tax years, Number 38 was tenanted. The Applicant says that the tenants have never had access to the backyard of Number 38, the shed or the verandah or to Number 36. When Number 38 is tenanted the doors to the annex are locked so that the tenant cannot access Number 36 and the Applicant cannot access the tenant's space.
She says that when there were no tenants occupying Number 38, she regularly entered Number 38 through the annex. Quite often she has allowed family and friends to stay at Number 38. This included her sister and her family who visited from 1994 to 2008 on weekends and school holidays and who stayed for days, or sometimes weeks at a time and another friend, Colleen, who would also regularly come and stay with her. On these occasions she said that she left the doors on either side of the annex open, even at night. She says that there have been many periods between tenancies where she has used the front room of Number 38 as a workspace for painting, drawing, reading and spending time with friends.
The Applicant says that the roof to the annex was originally a full metal roof. However, her evidence was that the entire roof of Numbers 36 and 38 including the annex roof suffered storm damage in 1999. The whole roof, including the annex roof was replaced. However, in late 2019 - 2020 the Applicant said that her home again suffered storm damage. She says that sections of walling (which I understood to be the walling of the annex) were removed in 2019 and revealed extensive termite damage. She said that in order to avoid any of the remaining walls "becoming missiles" if picked up in strong wind and causing further harm or damage, they were removed between late 2019 and early 2020. Sections of roofing were then removed where rafters had been eaten out from the inside. Temporary roofing was installed where safe to do so pending proper rebuilding by a qualified builder/roofer. At the same time, sections of the floor of the annex had also become too dangerous to walk on and she was advised that the termite infestation had to be treated before a major rebuild could occur. Her plan was to repair the annex in 2020 as time and money permitted. However, the effect of Covid-19 lockdowns has impacted her ability to engage a builder to conduct the necessary repairs. She also said that she did not want to ask her tenants to leave during the pandemic to enable her to fix the termite damage. She says these repairs would have been undertaken at least two years ago had the pandemic not intervened, but now slow progress is being made. She says that it is now her intention, once those repairs have been undertaken, to use both Number 36 and Number 38 as her residence as she had done before she had tenants.
The Applicant has provided the Tribunal with a Google Map photograph showing the Properties from above with cross-hatching showing the areas on Number 36 and Number 38 that only the Applicant has access to. She has also provided the Tribunal with recent photographs of various aspects of the Properties including the doors of Number 36 which lead out to the annex, the doors of Number 38 which lead out to the annex, a section of the damaged roofing of the annex, the damaged flooring of the annex, another photo showing where the annex joins number 38 where some of the flooring has recently been repaired, the view presently from the annex to the garden, the doors she has installed at the shed on Number 38, the greenhouses she has installed, and a pathway which she says she can access through the rear of Number 36 which also gives her access to the rear of Number 38. She has also provided a short video which shows a person exiting the doors of Number 36 which lead out to the annex, crossing the annex and entering the doors of Number 38 into what is, when tenanted, the tenant's kitchen area.
The Applicant has not provided any photographs of the Properties, in particular the annex, during the relevant tax years. This, she says, is because she did not ever consider that she would need to have such photos. The photos which she has provided do not show the walls of the annex. This, she says, is because of the damage suffered in the 2019-2020 storms and the need to remove them for safety reasons.
The Applicant has also provided the Tribunal with a hand drawn diagram which shows the floorplan of Number 38 and the areas on Number 38 which the Applicant has exclusive access to. This shows the area leased to the tenants as comprising a study, two bedrooms, a living room, eat in kitchen, bathroom and one car park (Number 38 originally had two car parks, one at the front of the property which remains available to the tenants and a garage at the rear of the property, which the Applicant has turned into her shed/workshop.
The Applicant has provided a short statutory declaration from her friend, Colleen, who states that in the years before the covid pandemic she regularly visited the Applicant. Colleen says that on many of her visits the Applicant would show her different projects she was working on, she saw the Applicant install an orchid house and she inspected other projects conducted in the Applicant's workshop.

Issues for determination

Adjacent freehold lots may attract the principal place of residence exemption under clause 2(1) (a) of Schedule 1 of the LTMA if they are a "parcel of residential land" and the land is used and occupied by the owner as the principal place of residence and for no other purpose.
Clause 13, however, qualifies that exemption. Clause 13(1) of Schedule 1 of the LTMA provides that the principal place of residence exemption does not extend to a parcel of residential land that is comprised of 2 or more lots of land that is used and occupied by the owner as a principal place of residence unless: 1. the lots are adjoining; and 2. the lots are in the same ownership; and 3. the lots are the site of a single residence (excluding any additional residential occupancy that may be disregarded under clause 4).
Prior to the insertion of clause 13 in Schedule 1A, there was no statutory guidance as to the circumstances in which two adjoining lots may comprise a parcel of residential land. Reliance was generally placed on the "four unities" test formulated by Hunt J in Ryan & Anor v Commissioner of Land Tax [1982] 1 NSWLR 301. However, In Prendiville v Chief Commissioner of State Revenue [2009] NSWADT 273, the Tribunal made it clear that after the introduction of clause 13, the position is governed exclusively by the provisions in clause 13 read together with clause 2 in determining whether two or more lots of land comprise a parcel of residential land for the purposes of the principal place of residence exemption. The Tribunal stated at [19] - [26]: "[19] Prior to the insertion of clause 13 in Schedule 1A, there was no statutory guidance as to what constituted a "parcel of residential land" for purposes of clause 2(1)(a) of Schedule 1A. In determining that question reliance was usually placed on the test formulated by Hunt J in Ryan & Anor v Commissioner of Land Tax [1982] 1 NSWLR 305 at 310: … [25] The scheme in relation to two or more lots is now governed by clauses 2 and 13 read together. … [26] There is, therefore, under the current provisions no independent role for the Ryan test in construing the meaning of "a parcel of residential land" for purposes of Schedule 1A. The position is clearly governed by the provisions found in clause 13, which has to be read with clause 2 in determining whether two or more lots constitute a parcel of residential land for purposes of the principal place of residence exemption under the LT Management Act."
Clause 4 provides a concession for land on which there is one other residential occupancy other than that of the owner. It provides that that occupancy may be disregarded if the residential occupancy is an excluded residential occupancy. Clause 4(4) provides that if land is comprised of two or more lots, the excluded residential occupancy must be located on a lot that is also used and occupied by the owner of the land for residential purposes.
The Applicant submits that she is entitled to the principal place of residence exemption for all relevant tax years in respect of both Number 36 and Number 38. She submits that she used both Properties together as her principal place of residence. She submits the exemption is not excluded by clause 13 because the lots were adjoining, under her ownership and were the site of a single residence. She submits that while part of Number 38 was leased to tenants in the relevant tax years, in each case the tenancy was an excluded residential occupancy for the purposes of clause 4(1).
It is not in dispute that Number 36 and Number 38 are adjoining lots and each is owned by the Applicant.
The issues for determination are: 1. Whether the lots are the site of a single residence (excluding any additional residential occupancy that may be disregarded under clause 4); 2. If so, whether the Properties were together used and occupied by the Applicant as her principal place of residence; 3. If the Tribunal finds in the Applicant's favour in respect of both questions (1) and (2), whether the occupancy of Number 38 by tenants was an excluded residential occupancy for the purposes of clause 4(1) of Schedule 1 of the LTMA; and 4. If the Tribunal finds against the Applicant in respect of either question (1) or (2), whether the concession in clause 10B in respect of multi-occupancy land applies.

Consideration

Section 100(3) of the TA Act makes it clear that in reviews of this nature by the Tribunal the Applicant has the onus of proving her case. This requires her to prove all matters necessary for the Tribunal to answer the statutory question in her favour on the balance of probabilities. Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [28] - [31]; Raissis v Chief Commissioner of State Revenue [2021] NSWCATAD 99.

Single residence: separate buildings erected on separate lots

Clause 13(2)(b) provides that for the purposes of clause 13, separate buildings erected on separate lots are not to be regarded as a single residence if the buildings are separately occupied or capable of being used for separate occupation.
There does not appear to be any authority on the meaning of the expression "separate buildings erected on separate lots".
In her written submissions the Applicant made extensive submissions as to the proper construction of clause 13(2)(b) submitting it should be read together with clause 4(4) and clause 13(1)(c). Her submission was that clause 13(2)(b) of Schedule 1A is qualified by clause 13(1)(c) and clause 4(4) such that the Properties will not cease to be the site of a single residence because there are separate buildings on separate lots if one of those buildings contains an excluded residential occupancy, provided the lot is also used by the Applicant for residential purposes.
At the hearing, the Applicant's argument was put differently. The Applicant submitted that the effect of clause 13(1)(c) was that the presence of an additional residential occupancy would not deny, of itself, the existence of a single site of residence. I accept that submission but I do not consider that has any bearing on the proper construction of clause 13(2)(b).
The Applicant accepted at the hearing that if the Tribunal finds that there are separate buildings erected on Number 36 and Number 38, that the lots will not be the site of a single residence for the purposes of clause 13(1)(c) because in all relevant tax years Number 38 was in fact separately occupied (and capable of being used for separate occupation) by tenants.
The question, then, is whether there were, in the relevant tax years, separate buildings erected on Number 36 and Number 38.
The Applicant submits that the term "erected" in clause 13(2)(b) should not be read as meaning originally erected. I accept that submission. In my view "erected" in this context means "standing" and whether there are separate buildings on the two lots should be determined at the relevant taxing date.
The Applicant's submission is that while there were originally separate buildings on Number 36 and Number 38, the construction of the annex created one interconnected building so that there are no longer separate buildings on the separate lots.
The Applicant's evidence as to the construction of the annex was supplemented after receipt by her of the Respondent's submissions which characterised the annex as an outside area. I consider that this was in an attempt to close what she had identified as evidentiary gaps. Nonetheless, there are numerous authorities which caution against the unqualified acceptance of self-serving statements directed towards the ultimate issue in revenue cases: Chapman v Chief Commissioner of State Revenue [2010] NSWADT 124 at [130]. As the Tribunal stated in Hashim v Chief Commissioner of State Revenue [2020] NSWCATAD 67 at [76]-[77]: 76: In those circumstances I must exercise substantial caution in accepting in any unqualified manner the statements by Mr Hashim or Ms Abbassi which assert that she made contributions to the purchase price for the Mays Hill property or which assert her ownership or equitable interest in that property. That is because such statements appear to be self-serving statements relevant directly to the issue of the validity of the Second FHOG Application and which therefore go directly to the resolution of the issue of Ms Abbassi's ownership and also to the duty exemption issue. In Warriewood Pty Ltd v FCT 93 ATC 4653, Lockhart J observed that: "Statements by taxpayers.. must be scrutinised with care, weighed against the objective facts and inferences to be drawn from the taxpayer's activities generally. 77.In that matter, Justice Lockhart also relied particularly on the observations and findings of the High Court in Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 at 403, per Fullagar J, that statements of the kind described above must "be considered most closely and received with the greatest caution".
Here, while I accept the Applicant's evidence that she had no reason to think she would need such evidence, it nevertheless remains the case that there is before the Tribunal no photographic evidence of the construction of the annex at any stage during the relevant tax years (nor for that matter between 1994 and the date on which the photographs which are in evidence were taken which I understand was sometime this year). Nor are the photographs that the Applicant has provided to the Tribunal of the Properties as they are currently, particularly in so far as the annex is concerned, of any real assistance. I note that during the course of their investigation, the Respondent asked the Applicant for photographs which showed the internal layout and external structure of the Properties but only a small number of photos were provided, none showing the internal layout. Those which were provided showed only a few aspects of the external structure. There is no photo in evidence of the annex area as a whole. A photo has been provided of a view from the annex to the garden, but not vice versa. There is no evidence as to the dimensions of the annex. Similarly the video footage that has been provided, which again was in response to a request by the Respondent for video footage showing the "general layout and structure" of the Properties shows nothing more about the Properties than the access currently between Number 36 and Number 38 through the annex (and through the doors of number 38 into their garden area). It is 49 seconds long.
Nor has the Applicant sought to corroborate her evidence by calling any other witnesses who could attest to the state of the annex either during the relevant years or otherwise. There is no evidence from any of her tenants or any of her visitors including her sister who she says spent considerable time staying in Number 38. The evidence provided by her friend, Colleen, does not refer to the annex at all but attests only to the Applicant's use of the rear of Number 38.
Further, there are aspects of the Applicant's evidence which do not appear to be consistent. For example, the Applicant said that one of the reasons she constructed the annex was to enhance her access to the garden at the rear of Number 38. However, if the annex had solid walls as described by the Applicant, it is not clear how that would enable her access to the garden unless the annex also had a door at the rear, but there has been no suggestion that that was the case.
While I accept that the annex suffered storm damage and termite damage and it is in the process of being repaired after delays caused by the covid pandemic, I agree with the Respondent that the evidence of the physical structure of the annex during the relevant years is not sufficient and the Applicant has not discharged her burden of proof in this regard.
The Applicant submitted that it was not necessary for her to establish that there was internal access between Number 36 and Number 38 in order to satisfy the Tribunal that they were not separate buildings. She pointed to the different test which is found in clause 14 of Schedule 1 relating to the application of the principal place of residence exemption to residences comprised of two or more strata lots which provides: For the purposes of this clause, 2 or more strata lots are not to be regarded as comprising a single residence unless there is internal access between all the strata lots (other than any ancillary lot), such as internal connecting doors or internal staircases
She submitted that the absence of those, or similar, words in clause 13 suggests that no internal access requirement should be read into clause 13. I do not accept that submission. Strata lots, by their nature, are contained within the same building. There is no definition of the word "building" in the LTMA. However, the Macquarie Dictionary 3rd Edition definition of building is "a substantial structure with a roof and walls, as a shed, house, department store etc".
The limited evidence of the layout of Number 36 and Number 38 also does not assist the Applicant. She has provided a floor plan of Number 38, but no floor plan of Number 36.
The Applicant submitted that she effectively built an extension of her living space, not by "going back or up" but by going "sideways". Her submission was that she transformed the buildings which were on Number 36 and Number 38 adopting a design based on a "Pavilion Style" of architecture. This is a style of architecture, she said, which considers the opposite of European design which aims to enclose and reduce heat loss. Instead, a Pavilion Style of Architecture aims to let more light and air into the building. She relied on two design floor plans for Pavilion Style architecture offered by a building company to support this submission. However, those plans do not assist the Applicant. They depict buildings of a different nature to the Applicant's buildings, in both cases houses with a wing dedicated to living areas separated by an enclosed passageway to a wing dedicated to sleeping. There is no evidence that there has been any internal re-configuration of Number 36 and Number 38 of this (or any other) nature. There is no evidence at all as to the internal layout of Number 36. The Respondent has put into evidence copies of photos from the realestate.com website from 2020 when Number 38 was being leased which describe that property as a three bedroom property and show a loungeroom, dining area, kitchen, bathroom and two bedrooms.
Accordingly, even if I were to accept the Applicant's evidence as to the construction of the annex, I do not consider that she has established that its presence transformed what were clearly two separate houses, with separate rooves, separate walls fitted out as separate houses, into a single building. It appears to me that it served as an accessway with locked doors (whether enclosed or not) between two separate buildings. This is supported by the fact that when Number 38 is tenanted that residence cannot be accessed by the Applicant and nor can the tenants access Number 36.
The description of the annex as an annex rather than an extension is also instructive. "Annex" connotes an operation independent from one's main house rather than an extension of it.
I agree with the Respondent's submission that whether the buildings are separate buildings may be informed by whether or not they are capable of separate occupation. The fact that they are capable of being separately occupied, in my view, supports the conclusion that the two buildings have not in fact been integrated into one.
The Respondent did not dispute and I accept that the Applicant has used the backyard of Number 38, the shed and the verandah in the manner she has described and that the tenants have not had access to those areas. I also accept that, when it was not tenanted, she used some rooms in the part of that property that was tenanted. However, the fact that the Applicant did use some of Number 38 for guests or for her own purposes in times when it was not tenanted does not answer the question as to whether they are separate buildings. The definition of residential land in clause 3 of Schedule 1A of the LTMA refers to land that is used and occupied for residential purposes, that use and occupation being use and occupation of a "building or buildings" designed, constructed or adapted for residential purposes. The legislation clearly envisages that a person may use more than one building for residential purposes.
Nor is the fact that the Applicant intends to use Number 38 in future for her own residential purposes relevant to the question as to whether they were or remain separate buildings.
The Applicant placed some reliance on Cooney v Chief Commissioner of State Revenue [2017] NSWCATAD 375. However, that decision does not assist the Applicant. While it is true that the Tribunal found in that case that adjoining lots with separate buildings erected on the separate lots were the site of a single residence, it did so because it found that clause 13(2)(b) did not apply because one of the houses, by reason of its significantly dilapidated state was uninhabitable and thus, not "capable of being used for separate occupation". The Applicant concedes that is not the case here.
Accordingly I find that there were during the relevant tax years separate buildings erected on Number 36 and 38 which were separately occupied or capable of being used for separate occupation such that, by reason of clause 13 (2)(b) the Properties were not the site of a single residence.
If I am wrong in my understanding that the Applicant did not press her argument that clause 13(2)(b) is qualified by clause 13(1)(c) and clause 4(4) in the manner set out in paragraph 46 above, then I also reject that submission.
Clause 13(1)(c) provides that for clause 13 to apply the lots must be the site of a single residence excluding any additional residential occupancy that may be disregarded under clause 4.
An excluded residential occupancy under clause 4 can be a suite of rooms (whether or not forming part of a building or a detached building) used or occupied as a separate dwelling or so constructed, designed or adapted as to be capable of being used or occupied as a separate dwelling. An excluded residential occupancy must be contained in a building or buildings used or occupied by the owner for residential purposes. Clause 4(4) makes it clear that if there are two or more lots, the excluded residential occupancy must be located on a lot used and occupied by the owner for residential purposes.
The Respondent accepts and I agree that a residency that is contained in a separate building to the residence of the owner may be an excluded residential occupancy provided it is part of the overall residence used or occupied by the owner for residential purposes, if that separate building is on the same lot that is the Applicant's principal place of residence.
I understood the Applicant's submission to be that the test in clause 4(4) is only whether the owner uses the lot upon which the excluded residential occupancy is located, for residential purposes and not whether the lot on which the excluded residential occupancy is located also houses the building in which the owner resides.
Such a construction gives no effect to the words "and occupied" in clause 4(4). However, even if I accepted the Applicant's construction of clause 4(4), I do not accept that that would require clause 13(2)(b) to be qualified in the manner submitted by the Applicant.
The terms of clause 13(2)(b) are quite clear. It operates to prevent the principal place of residence exemption from applying to multiple lots in any case where there are separate buildings on separate lots which are separately occupied or capable of being used for separate occupation.
As the Tribunal stated in Prendiville at [23]: Under clause 13(2)(b) "separate buildings erected on separate lots are not to be regarded as a single residence if the buildings are separately occupied or capable of being used for separate occupation". This provision ensures that the principal place of residence exemption will apply only to one residence and effectively to only one lot if there is a residence on each lot either separately occupied or is capable of separate occupation. This provision also clarifies that an owner of land in New South Wales is only entitled to the principal place of residence exemption in respect of one residence.
It follows that, as the Properties were, during the relevant years, not the site of a single residence, even if the Applicant used the Properties together as her principal place of residence, and even if the Applicant was entitled to a concession under clause 4 in respect of the tenancies, the principal place of residence exemption does not extend to the parcel of land that is comprised of both Properties.
There is, therefore, no need for me to determine whether the Applicant used the Properties together as her principal place of residence. Nor do I need to determine whether the occupation of Number 38 by tenants was an excluded residential occupancy for the purposes of clause 4 (1) of Schedule 1A of the LTMA.

Clause 10B: Concession for multiple-occupancy land

The Applicant submits that, if she is not entitled to the principal place of residence exemption in respect of both Number 36 and Number 38, she should be entitled to a concession under Clause 10B of Schedule 1 of the LTMA.
Clause 10B provides for a concession to apply where "land" owned by a person is the site of a "flat" that is used and occupied by the owner as a principal place of residence and there is also situated on the land one or more other flats that are used, or adapted for use, as a separate occupation to that of the owner (not being an excluded residential occupancy that may be disregarded under clause 4).
If clause 10B applies, s 9C of the LTMA act applies to reduce the taxable value of the land in respect of the proportion of the land occupied by the owner's flat.
The first question which arises is whether "land" for the purposes of clause 10B encompasses land comprising two adjoining lots. The Applicant submits that it does. The Respondent submits that it does not.
Neither the Applicant nor the Respondent pointed the Tribunal to any authorities which have considered the proper construction of clause 10B.
There is some support for the Applicant's argument that "land" for the purposes of clause 10B might be construed to include land comprising two adjoining lots. There are other provisions of the LTMA which envisage "land" as comprising 2 or more lots. For example, the concession granted in respect of excluded residential occupancies in clause 4 provides: (4) if land is comprised of 2 or more lots or strata lots, the excluded residential occupancy must be located on a lot or strata lot that is also used and occupied by the owner of the land for residential purposes
Further, as the Applicant submitted, clause 10B(4) provides that clause 10B does not apply to land "comprised of one or more strata lots" but there is no such restriction for land comprised of one or more freehold lots.
However, there is also some force in the Respondent's submission that, as this concession relates to the valuation of the relevant land, and as valuations are determined on a lot by lot basis, land for the purposes of clause 10B should be construed as meaning individual lots of land.
However, in light of the decision I have reached as to whether the Applicant otherwise satisfies the criteria for the concession to apply, I do not need to determine this question.
Even if I were to accept that "land" for the purposes of clause 10B can include two adjoining lots, the question then is whether the land is the site of a "flat" used and occupied by the Applicant as her principal place of residence and there is situated on the land one or more other flats used or able to be used for separate occupation.
The Applicant argues that the buildings on Number 36 and Number 38 should each be considered "flats".
The Applicant has already been granted the exemption for the whole of the land at Number 36. What the Applicant is, therefore, seeking is a concession in respect of the value of the land on Number 38 which she has exclusive use of: the backyard, the shed and the verandah of Number 38. She submits that either the taxable value of the combined parcel of land should be reduced by the value of Number 36 and the value of the parts of Number 38 she has the exclusive use of, or the taxable value of Number 38 should be reduced by the value of the parts of Number 38 she has the exclusive use of.
"Flat" is defined in s3 of the LTMA as follows: flat means a room or a suite of rooms (whether or not forming part of a building or a detached building) - (a) used or occupied as a separate dwelling, or (b) so constructed, designed or adapted as to be capable of being used or occupied as a separate dwelling.
The Applicant made extensive submissions on the definition of a flat although these submissions were not put in support of her construction of clause 10B but in support of her argument that clause 13(2)(b) should be qualified by reference to clauses 4 (4) and 13(1)(c). However, relevantly, she submitted: "flat" can include any of:

A suite a rooms, including up to three bedrooms, comprising a small dwelling where the occupant is not entitled to access, hence enjoy quiet possession, of the entire title it sits upon,
A suite a rooms, including up to three bedrooms, comprising a small dwelling where the occupant must share part of the title it sits upon with other occupants
A suite a rooms, including up to three bedrooms, comprising a small residential building adjoined to other buildings or structures, or
A small free standing residential building comprising a suite a rooms, including up to three bedrooms.

The Applicant has an exemption for the building erected on Number 36. The Applicant has not submitted, and I do not consider on any view, that those aspects of the land on Number 38 which the Applicant has exclusive access to could be considered to be a "flat" as defined by s 3 of the LTMA.
Accordingly, I do not see that there is any basis for the Applicant to be granted a concession under clause 10B in respect of that area of the land on Number 38.

Conclusion

It follows that, on the basis of the material before the Tribunal, I find that the correct and preferable decision is that land tax should be assessed in respect of the Applicant's land at Number 38 for each of the 2017 to 2021 land tax years.

Orders 1. 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: 06 October 2022

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Judgment (12 paragraphs)

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