Mr CES Shaw instructed by the solicitor for the Commissioner of State Revenue.

Decision: (1) The amended assessment dated 8 February 2000 is affirmed.

(2) The amended assessment dated 3 April 2000 is varied by being reduced to nil.

1. This case concerns two assessments of land tax where a retirement village is located at the corner of Springvale Road and Highbury Road, Burwood East. At the date relevant to the amended 1999 assessment (the end of the calender year 1998) and for the date relevant to the amended 2000 assessment (the end of the calender year 1999) 21 townhouses and 45 apartments were constructed; two of those 21 townhouses and 8 of those 45 apartments were occupied.

2. The amended 1999 assessment was made on 8 February 2000 in the amount of $65,585.75. It was the subject of an objection dated 7 April 2000. There is a challenge to the validity of this objection. The amended 2000 assessment was made on 3 April 2000 in the amount of $135,510.30. Notices of Objection were given on 9 March, 7 April and 24 May 2000. There is no challenge to the validity of these objections.

3. Evidence was led from two witnesses about the development of the land and its use at the time of the two assessments. Documentary evidence was tendered. None of that evidence was the subject of any challenge. The site was acquired with a substantial building formerly used by the ABC for Radio Australia. It has capacity for 45 apartments. Up to 63 units were built. There was also a bowling green, tennis courts and common areas for a pool, a gymnasium, a room, a hairdresser and the like. It looks from the plans and the model as if the site was not fully developed at the times relevant to the assessment. It is the case of the Commissioner that the taxpayer is not able to claim the exemption from land tax provided to retirement villages because areas of both land and accommodation were not being used at the relevant times.

4. The submissions of Counsel will I think appear from the discussion of the two issues, the one procedural, and one substantive, that were left. Counsel for the taxpayer had written a memorandum of advice which had formed part of the correspondence forming the objections. Counsel for the Commissioner put in substantive written submissions. Each side took the opportunity to put in further written submissions. They closed on Friday 15 March 2002. In the way of things, the supplementary submissions were twice as long as the originals.

5. The Land Tax Act 1958 provides, in s. 6, that owners of land are to be charged each year with "a duty of land tax upon land for every dollar of the unimproved value "of the land in accordance with the provisions of the Act. The relevant exemption is in s. 9(1)(j):

"land which is used and occupied as a retirement village and for no other purpose."

Such land is, subject to the Act, exempt from land tax. S. 8 provides that the assessment is made on the total unimproved value of all the land of the owner as at 31 December of the year preceding the year of assessment.

"Retirement village" is defined in s. 3 of the Act as follows:

"'Retirement village' means a complex containing residential premises (whether or not including hostel units) predominantly or exclusively occupied by retired persons in pursuance of:

(a) a residential tenancy agreement or any other lease or licence; or

(c) the ownership of residential premises subject to a right or option of repurchase on conditions restricting the subsequent disposal of the premises."

S. 9 contains two further provisions that were referred to.

"(2AA) Land does not cease to be used and occupied for the purpose of a retirement village merely because any building or improvement on the land is used or occupied for a purpose ancillary to that purpose.

(2AB) If the Commissioner is satisfied that part only of land is used and occupied as a retirement village and for no other purpose, the unimproved value of the land must be reduced for the purposes of land tax by an amount calculated in accordance with the

B is the area of the land used and occupied as a retirement village and for no other purpose

"The Commissioner may from time to time amend an assessment by making such alterations or additions to it as he thinks necessary to ensure its completeness and accuracy, and shall notify to the taxpayer affected every alteration or addition which has the effect of imposing any fresh liability or increasing any existing liability and unless made with the consent of the taxpayer every such alteration or addition shall be subject to objection in the same manner and to the same extent as the original assessment but the validity of an assessment shall not be affected by reason only that any of the provisions of this Act have not been complied with."

Part 11A (ss. 13AA to 13L) contains elaborate provisions relating to the principal place of residence exemption. They are not relevant to this application except that they show that the consequences of "residence" may take a lot of working out. (What, for example, happens if there is a temporary absence or part of the premises are used for business?)

S. 24A(1) provides that a person who is dissatisfied with the assessment of the Commissioner may give notice to the Commissioner within 60 days of the notice of assessment an objection in writing against the assessment. S. 26(1)(a) contains the provision familiar in these state taxing acts that says the taxpayer shall be limited to the grounds stated in the objection unless the court or tribunal otherwise orders.

5. The provisions dealing with retirement villages were all introduced by Act number 74 of 1991. The Explanatory Memorandum said of those provisions:

Clause 11 implements recommendation 4.11 of the Fordham Land Tax Review that an exemption be introduced which ensures an exemption for all retirement villages, whether operated commercially or for charitable purposes. For technical reasons the granting of an exemption for all retirement villages registered under the Retirement Villages Act 1986 (Victoria), as recommended by the Review, will not achieve the desired objective. Clause 11, in conjunction with the definition of "retirement village" in clause 4, provides an exemption for land used as a retirement village and for land used for purposes ancillary to a retirement village. When land is not wholly used for the purposes of a retirement village this clause provides for a partial exemption by a pro-rata reduction in the unimproved value of the land subject to tax. These provisions are based on the comparable NSW provisions."

6. The sequence of events relevant to a consideration of the validity of the objection in respect of the amended 1999 assessment is as follows.

* The first 1999 assessment was issued on 29 October 1999. It assessed 49 items of property for a total assessment of $71,407.20.

* By letter of 15 November 1999, the taxpayer objected on the basis that seven items of property were occupied as at 31 December 1998 and were therefore exempt from land tax under s. 9.

* The Commissioner wholly allowed the exemption sought and issued an amended assessment dated 8 February 2000. This notice assessed the taxpayer for the remaining 42 items of property to which there was no objection in the letter of 15 November 1999.

* The original assessment and the objection to it were therefore resolved by the decision on the objection and the issue of the amended assessment.

* On 7 April 2000 the taxpayer objected to that amended assessment. The objection was lodged on the basis that the property was used and occupied as a retirement village. The taxpayer, through its agent, provided a copy of the opinion of counsel for the taxpayer.

* On 6 December 2000 the SRO said it was not able to treat the letter of 7 April 2000 as a valid objection because s. 19 limits the objection rights of a taxpayer in respect of amended assessments to alterations in or additions that had the effect of imposing a fresh liability.

The scheme of the federal predecessor of s. 19 was considered by the High Court in Trautwein v FCT [1936] HCA 77; (1936) 56 CLR 63 in a manner that does not assist the taxpayer in this case.

7. If you look at s. 19, you will see there may be a real issue of whether the right of objection is limited to amendments that have the effect of increasing liability. However that may be, the section does limit the rights of objection to additions or alterations and not to the amended assessment. The Act does impose time limits for objections. It does proceed on the footing that objections in respect of amendments will be limited to the amendments and not give the taxpayer another bite at the cherry. The additional difficulty for the taxpayer in this case is that it did not have a bite at the whole cherry in the first place. It had only a limited objection and it got a ruling on that. I do not think it can now seek to reopen its original objection and have it extended under s. 26 so as to challenge, well outside the time contemplated by the Act, the original assessment on the ground it now seeks to invoke. As I see it, the taxpayer could only succeed if it could treat its current objection as incorporating the original, and then got its limitation lifted, so that it was now objecting, and within time, to the whole of the original or amended assessment. I do not believe this can be done. It follows in my view that the objection in respect of the amended 1999 amended assessment was not one the disallowance of which could properly lead to an application to this tribunal.

8. The more difficult question is the substantive one. The statutory line of liability or exemption is as follows:

* The owner of the land is chargeable with land tax on it according to its unimproved value pursuant to s. 6. The tax is payable unless a right of exemption is found.

* Land used and occupied as a retirement village and for no other purpose is exempt under s. 9(1)(j).

* The land constitutes a "retirement village" within s. 3 if it is a complex containing residential premises predominantly or exclusively occupied by retired persons pursuant to one of the rights referred to.

* If the Commissioner is satisfied that part only of the land is used and occupied as a retirement village and for no other purpose, the unimproved value must be reduced for the purposes of land tax in the manner set out in s. 9(2AB).

9. As I followed it, the argument turned only on the last of these issues, s. 9(2AB). There was no dispute that there was a "retirement village" on this land, either according to ordinary usage or according to the definition in the Act. We are talking of a complex that contains residential premises. It may also contain, as this complex does, other facilities, such as the bowling green and lounge facilities. Those facilities will be predominantly if not exclusively used by retired persons, but it might require a stretch of language to say that they - the bowling green or the lounge - are occupied by retired persons, either predominantly or at all. That requirement in my opinion attaches to the residential premises, and not the balance of the complex. So you have in the very definition of "retirement village" two distinctions - there are the residential premises and then there is the rest of the complex; there is the requirement that the residential premises be predominantly or exclusively occupied by retired persons but no such requirement in respect of the balance. There was no dispute about the right of occupation deriving from one of the three sources of rights referred to in the definition.

10. In my view, a retirement village does not cease to be a retirement village within the meaning of the Act simply because some of its residential premises are not occupied. I do not think you need something like Part 11A to get to that result. In my view the requirement of predominant or exclusive occupation by retired persons is a requirement in respect of premises that are occupied, and not those that are not occupied at all. The requirement of occupation by retired persons has an obvious enough purpose, but I do not think that the definition should be narrowly interpreted so as to deprive retirement villages of the protection of the exemption just because the project has not filled up.

11. If the relevant land was occupied by a retirement village, as defined, does s. 9(2AB) operate so as to reduce the exemption or, to look at it another way, impose the tax? One answer may be to say that I am satisfied that all of the land is used and occupied as a retirement village and for no other purpose - in the sense that I am satisfied that the whole of the land is only used or occupied as a retirement village. No other purpose was identified, or could have been identified, on behalf of the Commissioner. Rather it was said that I could not be satisfied that all of the land is used and occupied in the manner indicated because some of the units and some parts of the land were not occupied at all.

12. If I am correct in looking at how the definition of retirement village should be applied, then it might seem odd if that conclusion were to be defeated by a narrow, literal interpretation of another part of the Act. I do not think this should be the case. In my view, on its proper interpretation, the exception to the exemption in s. 9(2AB) applies where part of the land is being used for a purpose other than that of a retirement village - not where part of it is just not used or occupied at all. So read, the provision is not unnecessary. It plainly has a function to perform - in dealing with, say, retail operations on the land or even the hiring out of a tennis court or bowling green to people other than retired persons - but it does not operate so as to go to the heart of the exemption on grounds of policy that are difficult to isolate. It would not in my view be right as a matter of principle to seek to extend this exception in such a way as to defeat the exemption unless that result is reasonably plain and unless the calculations referred to in the formula - which relate to unimproved value of the land - can be sensibly performed. I may also say that I see no warrant for the interpretation being contended for by the Commissioner in the Explanatory Memorandum.

13. Counsel for the Crown said that the evident policy of the Act was to exempt retirement villages so that retired people living in them would not have to pay land tax. He said it was therefore the object of the Act to reduce the exemption to the extent to which a village may not be occupied. A wish to look after retired people may be a discernible policy objective, but I wonder whether I am in a position to determine how developers might seek to pass on any land tax, whether existing contractual arrangements would enable them to pass on the tax, or the extent to which the relevant market would permit them to do so, or the extent to which charities, which are referred to in the Explanatory Memorandum, may otherwise be subject to the tax - there was apparently a desire to see that all retirement villages, charitable and commercial, were treated equally. If you were to proceed on the footing that any land tax was to be reduced by the extent to which the village was not occupied, and all such tax was to be shared among those living in the village, there might be some hardship for some retired people. Those who had invested in a village which found itself going out of favour might for that reason, and for that reason alone, find themselves subject to an increase in outgoings because of the way in which the tax was imposed. It bears repeating that to the extent to which the exemption is defeated, the Crown is establishing a right to tax land that was not otherwise taxable. I mention these matters simply as showing the difficulty that mere lawyers might have in understanding just how the business end of these sorts of developments might operate.

14. It follows that I specifically reject two submissions made on behalf of the Commissioner. The first of these submissions is that the term "used for no other purpose" includes "not being used for any purpose at all". I do not think this is correct, either as a matter of language or from a consideration of the scheme of the law. The requirement that land be used for no other purpose is in my view contravened by using the land for some other purpose, and not by failure to use the land for any purpose at all. A provision in a statute or a lease that a shop must be used as a massage parlour but not as a brothel would not be contravened if the owner ceased business and did nothing at all with the shop. A proscription of doing X is not a proscription of doing nothing - if you want to require someone positively to do something, you have to say so. Take the example of s. 9(1)(ha) (considered in the case referred to by the Commissioner of Abbott v Commissioner of Land Tax [1985] VicRp 15; [1985] VR 164). The exemption is for land "used solely or primarily for the business of primary production". It is one thing to build a golf course on a farm. But what if the farmer just decides to leave half of her paddocks empty and not use them? Would she be using the land for some other purpose? Should she lose her exemption? The answer to each question in my opinion is no.

15. The second submission of the Commissioner that I reject is that if any part of the land is not used for any purpose at all - a notion that has its own difficulties - the exemption does not apply at all, and it is only by resort to s. 9(2AB) that the taxpayer can seek a partial exemption. This is in my view an unwarranted inversion of the law. The law requires you to see whether the land is used and occupied as a retirement village and then you see whether that entitlement should be reduced because the land is used for some other purpose - perhaps as a mini golf-course. The drafting may be less than ideal, but I do not think that the answer is to say that the charging provision of the law is to be found in the qualification to the exemption to the charging provision.

16. Doubtless opinions might differ on the interpretation of this law, but there is a real issue of whether the relevant assessments have been made according to law in any event. There will be an evident difficulty in adjusting a tax on the unimproved value of land by reference to differentials in the use of improvements, in this case the occupation not only of land, but units and apartments. The Commissioner described the process applied. He said that the rating authority (here the City of Whitehorse) values the site value of the land. It then uses that figure to attribute a value to each occupancy on a pro rata basis pursuant to s. 13DC of the Valuation of Land Act. Each unit in a retirement village and each room in a hostel is attributed a valuation. Land tax is assessed on this pro rata valuation figure. In this case "land tax was simply charged on the unoccupied occupancies and not the occupied ones". As a result, the Commissioner says, no separate figures are needed for the amenities or the gardens or other common facilities. Counsel for the Commissioner went on to submit that if the Tribunal were not satisfied with the way the Commissioner has applied the formula in the manner I have described "it may be that appropriate orders can be made in that regard that the Commissioner should rather apply the pro rata formula prescribed by s. 9(2AB)". It is, I think, evident that the statutory formula has not been applied. If that is so, the assessment could not stand. While I am grateful for the invitation, I am not in a position to frame directions as to how the statutory apportionment should be effected, and the Commissioner hardly needs me to tell him that he should act in accordance with the Act. The difficulty in applying the formula to unoccupied improvements is in my opinion a further reason to reject the construction contended for by the Commissioner.

17. It follows in my view that in respect of both assessments, although I am now only effectively considering one of them, the assessment was not properly made. It follows in my view that the amended 2000 assessment should be set aside.

(1) the objection date of 7 April 2000 to the amended assessment made on 8 February 2000 was correctly disallowed; and

(2) the amended 2000 assessment made on 3 April 2000 should be varied by being reduced to nil. (That is, I think, the consequence of my conclusions, but if this is not so, the parties can bring it to my attention).