Carvalho v Commissioner of State Revenue (Review and Regulation) [2017] VCAT 1295

The 2016 land tax assessment of the respondent is confirmed.

1. On 30 November 2016, the Commissioner of State Revenue (Commissioner) referred this application to the Tribunal at the request of the applicants, Astrid and Kenneth Carvalho, under section 106 of the Taxation Administration Act 1997 (Vic) (TA Act).
2. Mr and Mrs Carvalho seek review of the Commissioner's decision[1] to disallow their objection[2] to the Commissioner's assessment under the Land Tax Act 2005 (Vic) (LT Act) of land tax of $5,431.47 for the 2016 land tax year in respect of a property owned by Mr and Mrs Carvalho at 124 Ashburn Grove, Ashburton (Ashburton Property).[3]
3. On a review or appeal of a land tax determination, the taxpayer has the onus of proving his or her case.[4] The standard of proof is the balance of probabilities.[5] In the context of the primary production exemption from land tax, in CDPV Pty Ltd v Commissioner of State Revenue (CDPV),[6] Croft J said of the onus:

The Commissioner is, as observed in the Commissioner's submissions, at an evidentiary disadvantage inasmuch as those who are seeking an exemption have within their control almost all of the evidence in relation to what is occurring on the Land and why things were or were not done on the Land. The Commissioner can only really point to objective circumstances with a view to determining the position. Consequently, I accept that, when the Court is faced with a case of this nature, and particularly where, as in this case, the Court is faced with very uncertain evidence, a focus must be maintained on whether the onus has been met.[7]

1. Mr and Mrs Carvalho contend that the Ashburton Property has been their principal place of residence (PPR) since 1997 and continued to be their PPR between 1 July and 31 December 2016 (Relevant Period), and so was exempt from land tax.[8]
2. The Commissioner's case is that Mr and Mrs Carvalho did not reside at the Ashburton Property as their PPR or, alternatively, have failed to discharge the onus of proof to show that they did.
3. On 1 August 2017, I heard Mr and Mrs Carvalho's application. The Commissioner was legally represented. I heard evidence and submissions and reserved my decision.

1. The LT Act imposes land tax in respect of each year on all taxable land in Victoria, with the owner of taxable land being liable to pay land tax.[9]
2. A taxpayer is to be assessed for land tax on the total taxable land of which he or she was the owner on midnight on 31 December immediately preceding that year.[10]
3. Taxable land is defined in the Act to mean all land that is not exempt land.[11]
4. Mr and Mrs Carvalho rely upon the PPR exemption contained in section 54(1) of the LT Act that, so far as relevant, reads as follows:
   • (1) Subject to this Division, the following land is exempt land -
     • (a) land owned by a natural person that is used and occupied as the principal place of residence of that person;

(2) Subject to section 55, subsection (1)(a) or (b) only applies if the land has been used and occupied as the principal place of residence of the owner or vested beneficiary -

• (a) since 1 July in the year preceding the tax year;

1. The LT Act does not define the expression 'principal place of residence'. However, in Chief Commissioner of State Revenue v Ferrington,[12] the New South Wales Administrative Decisions Tribunal Appeal Panel identified a number of common principles (Ferrington Principles) in determining a person's PPR, as follows:-

'Firstly, the words "principal place of residence" should be given their ordinary meaning in the context in which they appear...

Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling...

Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue...

Fourthly, to occupy a home as his or her place of principal residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose...

Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue...

Sixthly, the reason for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances...' [13]

1. Although that decision was made in the context of the first home owners grant in New South Wales, those principles have also been applied in a number of VCAT decisions concerning the PPR exemption from land tax.[14]
2. In D'Amelio v Commissioner of State Revenue,[15] Judge Macnamara said of the Ferrington Principles:-

In my view Principles 1 to 3 of the Ferrington principles are general commentaries as to how the inquiry should be approached. I am cognisant of them and I believe that I am approaching this enquiry in accordance with their terms. Principle 4 is the first substantive one I believe. This is the principle which requires a degree of permanence in connection to a place rejecting as adequate for the purposes an occupancy which is transient, temporary, contingent or of a passing nature.

1. In considering whether particular land is used or occupied as the PPR of a person, account must be taken of every place of residence of the person.[16] It follows from that, and the ordinary meaning of the word 'principal', that 'where a taxpayer has access to two or more properties it will be a question of fact and degree to determine if a particular property has been proven to be the principle (sic) place of residence of that taxpayer'.[17]

Background as to ownership and use of properties

1. Mr and Mrs Carvalho became the registered proprietors of the Ashburton Property on 10 June 1988. The PPR exemption was applied to the property from 1 January 1997 until the time that the 2016 land tax assessment was issued on 27 January 2016.
2. Mr and Mrs Carvalho also own another property together at Unit 1, 27 Ashburn Grove, Ashburton which they acquired on or about 5 December 2012. No evidence was given as to the use of this property.
3. In addition, Mr Carvalho owns a property at 215 Gale Road, Maroubra, New South Wales (Maroubra Property), which he acquired as a joint tenant with Verna De Souza on or about 22 February 2006. Ms De Souza is Mrs Carvalho's sister.
4. The Maroubra Property has two units. Despite being joint tenants, Mr Carvalho contended that he is the owner of Unit 2, which he has always leased to tenants, while Ms De Souza owns and occupies Unit 1. While that may reflect an understanding between Mr Carvalho and Ms De Souza, as joint tenants they each have an interest in the whole property at law.
5. The Maroubra Property benefits from a PPR exemption from land tax in New South Wales (NSW). Mr Carvalho contended that, in NSW, the PPR exemption is available to joint owners where only one of those joint owners uses the property as their PPR. While not making a formal concession on the point, the Commissioner noted that in order to qualify for the PPR exemption in NSW, 'Mr Carvalho did not need to occupy the Maroubra Land as his principal place of residence.'[18]
6. Relevantly, Mr and Mrs Carvalho gave evidence that when they are in Sydney they stay at the Maroubra Property, ie. in Unit 1.
7. The only other property of relevance is a property at 24 Graham Street, Newport, Victoria which is occupied by Ms Joy McCartan, Mr Carvalho's older sister.

1. The Commissioner tendered a folder containing some 51 documents in support of the land tax assessment which had been raised. At the hearing, the Commissioner also tendered one further document being Victorian electricity benchmarking data from the website of AGL Energy.
2. Ms Pierce relied on the first four of the Ferrington Principles and submitted that VCAT should affirm the Commissioner's decision as the objective evidence was overwhelmingly against Mr and Mrs Carvalho residing at the Ashburton Property permanently as their PPR having regard to the following matters (some of which should be read in the context of the summary of the evidence of Mr and Mrs Carvalho below):
   • Incoming passenger cards for Mr and Mrs Carvalho, when returning from overseas holidays indicated, in almost every instance, that their intended address and contact address was the Maroubra Property.
   • The vague nature of evidence from Mr Carvalho's sister that Mr and Mrs Carvalho frequently stayed at her house to look after her, contrasted with the evidence of Mr and Mrs Carvalho at the hearing that Mr Carvalho mostly returned home after looking after his sister during the day.
   • The unexplained failure to call Mr Wong and Mr Nayak to give evidence and be cross-examined on their written statements in support of meeting Mr and Mrs Carvalho at the Ashburton Property.
   • The evidence of utilities usage for the relevant period between 1 July and 31 December 2015, including no gas usage at all, no water usage for the period between July and October 2015 and minimal usage between November and December 2015 and electricity usage that was well below the benchmark for a 1 person household.
   • The evidence that large parts of the kitchen and bathroom at the Ashburton Property were in a state of disrepair and were difficult to use.
   • The redirection of Mr and Mrs Carvalho's mail from the Ashburton Property to the Maroubra Property for a six year period from October 2009 to September 2015.
   • The use of the Maroubra Property as the nominated address in an application to the Australian Securities and Investments Commission (ASIC) to retrieve unpaid moneys relating to a compulsory acquisition.
3. In the alternative, Ms Pierce submitted that Mr and Mrs Carvalho had not discharged their onus of proof.

1. Mr and Mrs Carvalho filed a small number of documents with VCAT as attachments to emails dated 26 April and 16 June 2017, and one further letter from Yarra Valley Water dated 18 July 2017 about excessive water usage that was handed up in the hearing.
2. Mr and Mrs Carvalho gave evidence that:
   • The Ashburton Property had been their PPR since 1998 and they continued to consider it their PPR through the Relevant Period. They said that the property was fully furnished and that it was their only residence, which they used whenever they were in Victoria.
   • While they spent a lot of time in Sydney, to look after Mrs Carvalho's mother until she passed away in 2011 and because Mrs Carvalho could more easily obtain and renew contract employment in the airline industry in Sydney (and Mr Carvalho could work anywhere), they stayed in Victoria for more than 6 months in every year.
   • They had insufficient funds to repair the kitchen and bathroom after receiving a quote from a plumber in 2010 indicating a cost of $32,320 for kitchen repairs, underground drain repairs and bathroom renovations.
   • Mr Carvalho spent a lot of time with his sister in Newport to assist her with her medical conditions, but returned to the Ashburton Property at night.
3. Mr and Mrs Carvalho said the fact that they used the Ashburton Property as their address for insurance and voting purposes supported that it was their PPR and sought to address the matters raised by Commissioner as follows:-
   • They used the Maroubra Property on their incoming passenger cards as they generally flew in and out of Sydney and interpreted "intended address" as the first point of entry, rather than their permanent address.
   • Mr Carvalho spent a lot of time at his sister's house to look after her, and would have showers there.
   • Mr Wong and Mr Nayak worked and they didn't think it was essential for them to attend in person.
   • In relation to the utilities usage, they didn't use gas because they either ate out or used a microwave, and their water usage showed peaks and troughs when looked at over an extended period. Further, the low usage could be explained as they used the showers at a neighbourhood pool or facility.
   • They did not undertake the kitchen or bathroom repairs because they were concerned the costs could be higher than quoted.
   • The redirection of the mail resulted from a combination of vandalism to the mailbox at the Ashburton Property and that they forgot to terminate the redirection.
   • The nomination of the Maroubra Property on the ASIC form was because that address had been used as the postal address for the investments to which the compulsory acquisition related.
4. Mr and Mrs Carvalho contended that, if they were not living at the Ashburton Property, it would have been foolish of them to forgo the income they could have derived by renting it out.

1. Mr and Mrs Carvalho have failed to discharge the onus of proof to show that, on the balance of probabilities, the Ashburton Property was their PPR for the Relevant Period, ie. from 1 July to 31 December 2015.
2. While Mr and Mrs Carvalho may have spent some time at the Ashburton Property when in Melbourne and subjectively regarded it as their PPR, the Ferrington Principles require a focus on the objective evidence. That evidence strongly favours a conclusion that they spent most of their time - and resided - elsewhere, most likely at the Maroubra Property.
3. In coming to this conclusion I take into account the following matters:
   • On their own evidence, Mr and Mrs Carvalho have been spending at least 6 months of each year outside Victoria, worked in Sydney and stayed at the Maroubra Property whenever they were in Sydney.
   • The low utilities usage suggests that, even when Mr and Mrs Carvalho were in Melbourne, they were not living at the Ashburton Property. It is simply not credible to suggest that they could live in a property as their PPR without using any water even to flush a toilet or wash their hands or boil a kettle of water.[19] Further, if the reason for low water usage was concerns about leaks and excessive charges, then it would be expected that someone living in the property as their PPR would attend to any necessary repairs to make the property liveable.
   • The letter from Mr Carvalho's sister stating that he and Mrs Carvalho 'have been frequently staying in my house during the last 6 years during many weekdays' was contradicted by the evidence of Mr and Mrs Carvalho that Mr Carvalho mostly returned to the Ashburton Property overnight and that Mrs Carvalho did not want to stay with Mr Carvalho's sister as she didn't find her friendly.
   • I can give little weight to the letters from Mr Wong and Mr Nayak given neither of them attended to give evidence, nor explain their absence, and in any event the letters are vague as to time frames.
   • The redirection of the mail to the Maroubra Property is suggestive that Mr and Mrs Carvalho spent much of their time there, otherwise they would have needed Mrs Carvalho's sister to provide details of bills to pay on a regular basis.
   • The evidence given by Mr and Mrs Carvalho about the ASIC form in their responses to the State Revenue Office, namely that the Maroubra Property was nominated so that Mrs Carvalho's mother could have something to do that would keep her mentally alert, and initially maintained at hearing, was inconsistent with the final position as outlined in paragraph 28. I reject that explanation which was only proffered after it was pointed out that the ASIC communication which had been tendered was dated some 3 years after Mrs Carvalho's mother had passed away.
4. That Mr and Mrs Carvalho did not rent out the Ashburton Property does not necessarily mean that it must have been their PPR. Indeed, their own evidence suggests it was in need of significant repair before it would be fit for habitation. It would have required considerable expenditure - that Mr and Mrs Carvalho indicated they could not afford - in order to be available for rental.[20]

Application for leave to add further ground of review

1. In closing submissions, Mr and Mrs Carvalho sought to rely on a publication of the Commissioner in relation to the continuing availability of the PPR exemption in situations involving temporary absences of up to 6 years.
2. Ms Pierce clarified that this publication was referring to section 56 of the LT Act which provides that:

land is taken to be used and occupied as the principal place of residence of a person despite the person's absence from the land if the Commissioner is satisfied --

(a) that the absence is temporary in nature; and

(b) that the person intends to resume use or occupation of the land as his or her principal residence after the absence; and

(c) that, in respect of the period of absence, no other land is exempt land under this Division or under a law of another jurisdiction ... as the principal place of residence of the owner...

1. Section 56 was not raised in Mr and Mrs Carvalho's objection to the assessment or at any time earlier in the hearing. However, as Mr and Mrs Carvalho were unrepresented, I drew their attention to section 109 of the TA Act which provides that, in a review, a taxpayer is limited to the grounds of review in their objection, subject to the leave of the Tribunal. Given the indication that Mr and Mrs Carvalho wished to rely on any arguments available to them, I treated the issue raised as a request for leave.
2. The Commissioner submitted that the section would not be engaged due to the PPR exemption claimed for the Maroubra Property and, in any event, objected to leave being granted.
3. I reserved my decision on this application.
4. In Harry One Pty Ltd v Commissioner of State Revenue,[21] Hollingworth J referred with approval to the description of the equivalent provision in Federal tax legislation as 'an unfettered discretion remedial in nature to overcome a mischief resulting in injustice'.[22]
5. In Conder Towers Pty Ltd v Commissioner of State Revenue,[23] Pagone J considered the discretion in section 109 of the TA Act and granted leave in circumstances where:
   • the additional ground had been notified to the Commissioner several months before the hearing;
   • no prejudice was caused to the Commissioner by permitting the taxpayer to rely on the additional ground;
   • the evidence supporting the ground had been filed before the hearing and no evidence was sought to be tendered by the Commissioner in opposition; and
   • the point was discrete, confined and added little time to the hearing of the proceeding.
6. As evident from the first consideration referred to in Conder Towers, the time of making an application for leave to add an additional ground can be important. In Love v Commissioner of State Revenue,[24] Senior Member Davis indicated that he would have denied leave to a self-represented applicant to raise an additional ground where it was only raised after all evidence had been called, stating that:

In any event, s.109 of the TAA limits the taxpayer's case to his ground of objection. In this particular instance there was no issue about the clearance certificate in the taxpayer's ground of objection. In any event, even if Mr Love had requested leave to argue such ground, bearing in mind that Mr Love only raised it in his reply, in a hearing where evidence had been called and submissions were basically finished, I do not believe it would have been appropriate to grant leave in those circumstances, even for a self-represented person.[25]

1. In this case, the additional ground was only raised towards the end of the hearing and after evidence had closed. Earlier in the hearing, I had asked Mr and Mrs Carvalho whether there were any other documents or evidence that they wanted me to consider and they indicated there were none.
2. Although not necessarily determinative, there would be some prejudice to the Commissioner in this case, given that he has not had any opportunity to consider the exemption under section 56 of the LT Act and, if leave were granted, it would involve a further day of hearing with attendant costs that cannot be compensated by way of a costs order under the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act).[26]
3. Importantly, no evidence was filed by Mr and Mrs Carvalho in support of the ground. Rather all the evidence provided was being put to VCAT in support of the proposition that the Ashburton Property was used and occupied as their PPR, as opposed to being temporarily vacant. Given the conclusions which I have already drawn about the evidence presented by Mr and Mrs Carvalho, they would be facing a difficult evidentiary burden seeking to convince me that I should accept a completely contrary position.
4. In terms of the merit associated with the additional ground, and without formally deciding the matter, the prospects of success ground appear to be limited in light of the requirement in paragraph (c) of section 56 that no PPR exemption is being claimed in respect of other land during the period of absence. This is because of the clear evidence that the Maroubra Property, of which Mr Carvalho is a joint owner, has benefitted from a PPR exemption in NSW.
5. Of course, VCAT has obligations to act fairly, to comply with the rules of natural justice and conduct proceedings with as little formality and technicality as possible.[27] However, it also has an obligation to 'determine each proceeding with as much speed, as the requirements of this Act and the enabling enactment and proper consideration of the matters before it permit'. In this latter respect, as noted above, if leave were granted, a further day of hearing would be necessitated. There would be an additional hearing fee payable by Mr and Mrs Carvalho, as well as possible costs associated with any evidence they sought to introduce. Such costs may well be disproportionate with the amount in dispute ($5,431.47), noting that proceedings for prior years were struck out as Mr and Mrs Carvalho were unable or unwilling to pay the relevant fees.
6. While a decision to deny leave to an unrepresented party should not be taken lightly, in this case all the relevant considerations as outlined above suggest leave ought not be granted in this case. Accordingly, I refuse the application for leave.

1. Having found that Mr and Mrs Carvalho have failed to discharge the onus of proof to show that the Ashburton Property was their PPR for the Relevant Period, and refused leave for the section 56 ground to be raised, I confirm the land tax assessment made by the Commissioner for the 2016 Land Tax Year.

[2] By emails dated 21 February and 16 May 2016.

[3] Originally Mr and Mrs Carvalho also sought review of assessments for the 2011 to 2014 land tax years, but the proceedings relating to those assessments were struck out by the Tribunal by order dated 3 February 2017 as a result of their failure to pay the filing fees.

[5] Rainn Pty Ltd v Commissioner of Land Tax [2016] VCAT 402 [8].

[6] [2016] VSC 322.

[12] [2004] NSWADTAP 41; (2004) 57 ATR 170.

[13] Ibid para [42] (references omitted).

[14] See, for example, Ward v Commissioner of State Revenue [2016] VCAT 1307.

[15] [2012] VCAT 265.

[17] Luxon v Commissioner of State Revenue [2016] VCAT 1466 [55].

[18] Respondent's Legal Submissions [37].

[19] Similar conclusions have been drawn in other cases, see Patel v Commissioner of State Revenue [2012] VCAT 913 [13], Fallaw v Commissioner of State Revenue [2014] VCAT 199 [19] and Woff v Commissioner of State Revenue [2014] VCAT 477 [9].

[20] See Shields v Deliopolous [2016] VSC 500.

[21] [2007] VSC 13.

[22] Ibid [30], citing Northop J in McLean v Commissioner of Taxation [1996] FCA 1459; (1996) 66 FCR 106.

[23] [2012] VSC 107.

[24] [2014] VCAT 476.