Commissioner of State Revenue v Anderson [2004] VSC 152

6. The Tribunal made its decision on the basis of a number of agreed facts. They were that:

1. As at midnight on 31 December 2002 the Respondents were the registered proprietors of the following lands:

2. The Respondents resided at Mercil Road from 6 May 1991 until June 1997.

3. In June 1997, the second Respondent, Julie Anderson, was posted by her employer, Mobil Oil Australia Limited ("Mobil"), to Papua New Guinea ("PNG") for a term of three years and the Respondents moved to PNG with their daughter with the intention of returning to live at Mercil Road at the expiration of the three year posting. Ultimately, the length of the Respondents' stay in PNG was 3.5 years.

4. In November 2000, while in PNG, Julie Anderson accepted an assignment to another position with Mobil in New Zealand. That assignment was for a term of 2 years although as matters developed the Respondents did not return to Australia until late in February 2004.

5. In or about mid-January 2003, the Respondents entered into a Memorandum of Understanding for the purchase of land and the construction of a dwelling in Melbourne ("the New Land").

6. Until the Respondents entered into the Memorandum of Understanding, they intended to live at Mercil Road once they returned to Australia. The Respondents entered into the Memorandum of Understanding with the intention of living on the New Land once they returned to Australia.

7. The amount of land tax assessed for the year 2003 was $18,413.85 and the assessment did not provide for any principal place of residence exemption. If Mercil Road had been treated as exempt from tax as the Respondents' principal place of residence the amount of tax would have been $9,360.30.

8. The Commissioner accepted that Mercil Road was exempt from tax as the principal place of residence of the Respondents for the years 1997 to 2000.

21. Before the Tribunal Julie Anderson gave oral evidence that her posting to New Zealand had been extended for a number of reasons but that it appeared that it would come to an end in January 2004 and that the Respondents would not seek further to extend the duration of the posting or consider any other posting outside Melbourne.

24. The Respondents finally returned to Australia late in February 2004.

28. Section 8(1) of the Land Tax Act 1958 provides that:

"(1) ...tax on land shall in the case of each owner thereof be assessed charged levied and collected by the Commissioner for each year on the total unimproved value of all land of which he is the owner at midnight on the thirty-first day of December immediately preceding the year for which such tax is assessed charged levied and collected."

32. Section 13A provides that land is exempt from taxation if it is:

"1(a) ...land owned by a natural person that is used and occupied as the principal place of residence of that person".

"13C_._ Temporary absence from principal place of residence

(1) For the purposes of this Part, 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 place of residence after the absence; and

(c) that, in respect of the period of absence, no other land is exempt from taxation under this Part as the principal place of residence of the owner or, in the case of a trustee, as the principal place of residence of a beneficiary; and

(d) that the owner has not made any claim for exemption for land tax under a law of another jurisdiction (whether in or outside Australia) in respect of the period of absence for his or her principal place of residence or, in the case of a trustee, as the principal place of residence of a beneficiary.

(2) ...

(3) Sub-section (1) does not apply in the case of a temporary absence that continues for more than 2 years or such longer period as the Commissioner determines in a particular case."

The Tribunal's decision

43. In the Tribunal's reasons for decision it was said that:

"That provision (scil. s.13C(3)) is not happily formulated, but the case has proceeded on the footing that it gives the Commissioner a discretion to find that an absence is temporary in nature for the purposes of sub-section (1) even though it is for a period of two years or more. It will be apparent that sub-section (3) is of itself predicated on the notion that the absence must be temporary in the first place, but it is just that there is going to be a cut-off after two years. I myself would have thought there was a real question about whether or not that provision did confer a discretion on the Commissioner but since the case is conducted on the footing that it does I will proceed upon the same basis. There would certainly be a serious problem with the Act if it did not: but the intention is clear enough. As I said the facts are not in dispute and it is said that this is just a question of degree because the Act proceeds on the footing that you have to draw the line somewhere and the Commissioner contends that in all of the circumstances these people have been out too long now for the discretion to be applied and that problems could arise on a proper interpretation of this provision if the applicants were to succeed."

47. After referring to dictionary meanings of "temporary", the Tribunal continued:

"...Mr and Mrs Anderson never intended to live permanently in either of the overseas postings. On each occasion they were out of the country for a limited period which happened to get extended, but in my opinion it would be quite wrong to hold that on either occasion their absence was anything other than temporary. The question then arises as to whether or not the overall period of absence is such as to take them outside of the discretion that it is said section 13C(3) provides. The two year limit is there to provide some sort of filter or limit on a determination of what might be temporary, but if at the end of the day the uncontradicted evidence is that relevant absences were temporary and not permanent, the question might well be said to be why should the filter or limit be applied to deny the truth. At the end of the day it is, I agree, a matter of degree. If on the unchallenged evidence each of these stays was for a limited purpose and only temporary, then in my opinion it would be appropriate for the exemption to be applied in favour of the taxpayers."

52. The Commissioner's principal contention before the Tribunal and for the purposes of this appeal is that upon the proper construction of s. 13C the expression "absence of a temporary nature" is confined to absences that are relatively short and of which the duration is either defined in advance or relates to the fulfilment of a specific passing purpose. It follows in the Commissioner's contention that although the Andersons' absence in PNG was temporary - because it was relatively short and of a duration that was defined in advance or related to a specific purpose - once Julie Anderson accepted the New Zealand posting the Andersons' absence ceased to be temporary, because it was not relatively short and was not of a duration that was defined in advance or related to a specific purpose.

55. I do not accept that contention. Like the Tribunal I do not see reason to construe the expression "absence of a temporary nature" in s. 13C otherwise than according to the plain, ordinary and natural meaning of the words of the expression and, as the Tribunal said, the ordinary meaning of something which is "temporary" is something that lasts for a time only or which is made to supply a passing need, as opposed to being "permanent". Hence, if one can say of an absence that it is for a time only or to satisfy a passing need, as opposed to being permanent, it is accurate and in my view appropriate to describe the absence as being of a temporary nature; whether short or not.

58. That view of the matter finds support in the terms of sub-section 13C(3). The express limitation to absences of not greater than two years (or such longer period as the Commissioner may allow) implies that, but for the express limitation, an absence could qualify as a temporary absence though longer than two years.

61. No doubt there are limited periods of absence which would be so long that they would not be temporary for the purposes of the section. For example, if an owner absented himself or herself from a principal place of residence with the intention of returning to it in 50 years time, the absence would be for a limited time only but it could not reasonably be regarded as temporary for the purposes of the section. Once, however, one moves away from extreme cases of that kind it is not impossible to suppose that significant periods of absence could be conceived of as "temporary" for the purposes of the section. If an absence of up to two years is within the contemplation of the section, as it plainly is, may not there be cases in which an absence of three years qualifies as "temporary"? Other things being equal, what is the essential difference between two years and three years in the context of this section? And if a period of three years is within the contemplation of the section, what is to say that the section may not reach to an absence of six years, at least in some cases? After all, a period of that order is no more than the duration of many courses of study and business and professional postings and "short term work assignments or other commitments" were offered in the Second Reading Speech as exemplars of temporary absences to which the exemption was intended to apply. [2]

65. In the Commissioner's submission such questions are to be answered in accordance with the test formulated by Wilcox J in Hafza v Director General of Social Security[3] for the purposes of s. 3(1)(d) of the Social Services Act 1947. His Honour there said that:

"The Shorter Oxford Dictionary defines `temporary' as `Lasting for a limited time; existing or valid for a time (only); transient; made to supply a passing need'. The Macquarie Dictionary definition is to similar effect, with the addition of `not permanent'. In one sense any absence from Australia, which in fact comes to an end, is temporary; it turns out to have lasted for a limited - as distinct from an unlimited - time and to have been not permanent. In this sense everything in human affairs, including life itself, is `temporary'. But it is doubtful whether the word `temporary' was used in this wide sense in s. 103(1)(d). As I have pointed out, had it been intended to protect the endowment rights of persons absent abroad for lengthy periods, who ultimately return to Australia and who, in the meantime, maintain some association with Australia, it would have been enough to refer to residence in Australia. Plainly it was intended to be more restrictive than that. I think that the adjective `temporary' was used to denote an absence that was, both in intention and in fact, limited to the fulfilment of a passing purpose. The purpose might be of a business or professional nature; it might be for a holiday or for compassionate or family reasons. But, whatever the purpose, it seems to me to be implied in the concept of 'temporary' absence that the absence will be relatively short and that its duration will be either defined in advance or be related to the fulfilment of a specific, passing purpose... I think that it follows from my view as to the meaning of the word 'temporary' that the intention of the absentee is of considerable importance; indeed, it will often be decisive. If the businessman on his world sales tour should decide to abandon his plan to return to Australia at the expiration of three months and to remain indefinitely in New York, his absence from Australia will cease to be a temporary absence. It will become an indefinite absence, notwithstanding that it may turn out not to be a permanent absence. Similarly, if an endowee, who has left Australia upon a compassionate visit to a sick relative, should decide indefinitely to stay on at the relative's home after the completion of that purpose, the absence will cease to be temporary notwithstanding an intention eventually to return to Australia."

69. Thus, according to the Commissioner, a period of absence would not qualify for the purposes of the section unless the absence including the purpose of the absence were planned while the taxpayer was resident in the principal place of residence. Equally, according to the Commissioner, even if an absence including the purpose of the absence were planned by a taxpayer while the taxpayer was resident in the principal place of residence, a decision by the taxpayer while so absent to extend the period of absence for a different purpose would mean that the period of extension would not qualify (even though, according to the Commissioner, a decision by the taxpayer while so absent to extend the period of absence in order to continue pursuit of the original purpose would not preclude the period of extension constituting part of the temporary absence).

72. I do not accept that the test in Hafza is applicable to s. 13C or that the results of a taxpayer determining to extend a temporary period of absence are as the Commissioner contends. The test in Hafza was tailored to the perceived statutory purpose of a s.103(1)(d) of the Social Services Act (1947) (Cth) and, if I may say so with great respect, it was the right test for that purpose. One does not hesitate long before concluding that Commonwealth social services benefits were intended only for persons ordinarily resident in this country or, if absent from this country, absent only for short periods of a duration defined in advance or related to the fulfilment of a specific, passing purpose. But it is neither self evident nor necessarily even logical to conclude that the principal place of residence exemption in s. 13A of the Land Tax Act was intended only for those owners who are absent for periods of a duration defined in advance or related to the fulfilment of a specific, passing purpose.

75. As I have observed already it was suggested in the Second Reading Speech that the section applies to "short-term work assignments or other commitments". That much may be equivocal. But s.13C(1) 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" (which, in context, must mean despite the person being so much absent from the land that he or she is not using and occupying it as the principal place of residence), and s.13C(1)(c) expressly negates the exemption available to an absent owner where he or she is the owner of other land that attracts the exemption (which also implies that in the absence of the negation an owner could be so much absent from land that he or she had ceased to use it as their principal place of residence but the absence would still qualify as temporary for the purposes of the section). Both features of the section are consistent with a considerably broader conception of temporary absence than was thought to be applicable in Hafza.

78. Moreover, there is nothing in the terms of the s. 13C that supports the idea that an absence cannot be temporary for the purposes of the section unless the taxpayer has planned in advance the purpose or the period of an absence. There is nothing in the terms of the section that supports the existence of a distinction between a taxpayer who goes abroad temporarily for one purpose and decides while abroad to extend the period of absence in order to continue to pursue that purpose, and a taxpayer who goes abroad temporarily for one purpose and decides while abroad to extend the period of absence in order to pursue some other purpose. And such distinctions, if they existed, would be anomalous. If the section had the meaning for which the Commissioner contends, it would mean that whereas a taxpayer who went away for a planned business trip of two years duration would be entitled to exemption, retirees who went away for a trip around Australia with no fixed term in mind and returned after three months would not be entitled to exemption. It would also mean that while an employee sent by his or her employer to work in Sydney for one month and later told to stay for a second month would be entitled to exemption in respect of both months, an employee sent by his or her employer to work in Sydney for one month and later told to go to Perth for the next month would not be entitled to exemption in respect of the second month. Examples can be multiplied. I do not accept that s.13C was intended to have those effects.

82. The Commissioner contended in the alternative that whether or not the test in Hafza is applicable, when one has regard to other exemptions in Part 2A of the Act, and specifically to those provided for in ss. 13B, 13D, 13E, 13F and G and 13H, it can be seen that the Part 2A and hence s. 13C is informed by a notion of temporariness that puts a period of two years close to the limit.

85. Section 13B provides for an exemption for land which although not used continuously since 1 July of the year preceding the date of assessment, is intended to be and is continuously used and occupied as the principal place of residence of the owner or trustee for the owner for a period of at least six months from the date that the land was first so used and occupied. Section 13D provides for an exemption for land which has been used and occupied as the principal place of residence of someone who has died. It provides that, notwithstanding the death, the principal place of residence exemption continues until the first to occur of a date 12 months after the deceased's death or the vesting of the deceased's interest in the land in another person (apart from the deceased's personal representative) under a trust or administration. Sections 13F and G provide exemptions where a principal place of residence is bought or sold. With purchases, it is enough to attract exemption that the purchaser is in and using and occupying the property by 31 December of the year of purchase. With sales, it is enough to attract the exemption that the vendor continuously used and occupied the property for at least six months of the year of sale. Section 13H provides for an exemption in respect of land which was not used and occupied at the time of assessment but is subsequently shown to have been continuously used and occupied for at least six months of the year of assessment.

88. In the Commissioner's contention, the relatively short duration of the periods of absence for which ss. 13B, 13D, 13E, 13F and G and 13H provide bespeak a legislative intention that the period of extension for which s.13C(3) provides also be relatively short (which is to say, short relative to the periods of absence provided for in those other exemptions). The Commissioner acknowledges as he must that there is express provision in s.13C for an absence of up to two years, and a discretion to extend beyond that, and that both of those features are absent from the other exemptions. But the Commissioner contends that, given the relative brevity of the periods of absence for those other exemptions, it is unlikely to have been intended that an extension under s.13C(3) beyond two years be any more than marginal. In the Commissioner's submission the effect of s.13C properly construed is that an extension under s.13C(3) would ordinarily not exceed twelve months and in any event would never exceed two years.

91. This argument appears to me to have considerably more to commend it than the suggestion that a period of absence cannot be treated as temporary unless it satisfies the Hafza test. It accords with established principles of statutory construction that an act be read as a whole and that the meaning of a word or phrase be derived from its context[4]. The extent of discretionary power is also to be ascertained by reference to the scope and purpose of the legislation by which it is conferred[5].

94. Admittedly, where a provision like s.13C(3) confers a discretion to extend a period of exemption but does not provide a positive indication of how much extension may be allowed, the discretion is unconfined "except in so far as the subject matter and the scope and purpose of the statutory enactments may enable the Court to pronounce given reasons to be definitely extraneous to any objects the legislature"[6]. In those circumstances it is not for the court to restrict the ambit of the discretion by attempting the sort of precise definition and express limitation that Parliament might have included in the legislation but for one reason or another chose to leave out. But although an administrative discretion is undefined, it remains possible for the court to say that a decision made in exercise of the discretion has proceeded upon an incorrect view of the discretion or that this or that consideration is extraneous to the power[7] or, perhaps, that a decision made in purported exercise of the discretion is "so unreasonable that no reasonable authority could ever have come to it".[8] An extension which far exceeded the length of exemption available under other provisions of Part 2A might well be so regarded.

97. That is not to deny that s. 13C expressly provides for a period of up to two years - more than double most of the other exemptions - or that it is unique in providing for the possibility of further extension. The fact that Parliament did not set an outside limit upon the period of extension must mean that Parliament did not mean to limit the period but rather to provide for the possibility of extensions and perhaps even significant exemptions beyond the two year limit. But despite the singular features of s. 13C it is difficult to suppose that s. 13C was intended to provide for a period of temporary absence far beyond the periods of exemption available under other provisions of Part 2A . Consequently, while I reject the idea that a period of extension under s.13C(3) can never be more than marginal, I consider that the other provisions of Part 2A do provide at least some guidance as to the way in which s. 13C(3) is to be applied.

100. It is of course not for the court to trespass into what Mason J described in Chan v Minister for Immigration and Ethnic Affairs[9] as the forbidden field of review on the merits. Consequently, the weight to be given in any case to the duration of other exemptions is something for the decision-maker to determine according to the facts of the case. Subject to the overriding considerations to which I have referred, the exercise in each case is one of fact and degree. But failure to pay any regard to relevant considerations would be an error of law.

103. In the result, in my opinion the correct analysis of s. 13C is that the ordinary meaning of "temporary" provides the logical starting point. The word also derives its meaning as to part from the context in which it appears. To the extent that further guidance is needed, it is largely to be found in what the Tribunal aptly described as "the two year cut-off". In other words, while an absence even of significantly more than two years might well be regarded as temporary according to ordinary conceptions, "the two year cut-off" implies that unless there is good reason to extend the period beyond that point, a temporary absence of more than two years will not qualify for exemption. Finally, when it comes to the exercise of the discretion under s. 13C(3), it is appropriate to take into account the relative brevity of the periods of absence for which the other exemptions in Part 2A provide.

107. The Commissioner's final contention was that regardless of the period for which the two year limitation can properly be extended under s. 13C, the Tribunal erred in the exercise of it discretion to extend the period, by treating the condition for the exercise of discretion as if it were the criterion by reference to which the discretion was to be exercised.

110. That contention was based upon the passage of the Tribunal's reasons for decision in which it posed the following question:

"If at the end of the day the uncontradicted evidence is that relevant absences were temporary and not permanent, the question might well be said to be why should the filter or limit be applied to deny the truth.";

and upon the later passage in which the Tribunal in effect answered that question in terms that:

"If on the unchallenged evidence each of these stays was for a limited purpose and only temporary, then in my opinion it would be appropriate for the exemption to be applied in favour of the taxpayers."

In the Commissioner's submission, the Tribunal's process of reasoning as there expressed amounted to saying that because it was established that the full period of absence was "temporary" within the meaning of the section, it was appropriate to extend the two year-cut off so as to include the full period of absence: for the reason that the full period of absence was temporary within the meaning of the section.

117. I think this contention to be correct. It is not a sufficient basis for extension that the period of absence the subject of extension is of a temporary nature. The fact that a period of absence is temporary is the condition for exercise of the discretion to extend beyond two years. It cannot be a reason for deciding that it is appropriate so to extend. Otherwise, every temporary absence would qualify for exemption, no matter how long, and if that were so it would mean that the two year limitation and the discretion would be redundant.

120. It was argued for the Respondents that the Tribunal's reasons did not mean that the extension had been granted on the basis only that the absence was temporary. Rather, it was said, the Tribunal's reference to "the unchallenged evidence" was to be taken as meaning the same in effect as if the Tribunal had set out all of the agreed facts earlier listed, and the Tribunal's rhetorical question of "why should the filter or limit be applied to deny the truth" was to be read as a compendious statement of conclusion that when one has regard to all of the facts so notionally listed and bears in mind that the periods of absence were truly temporary, this is a case in which it is appropriate to extend "the two year cut off" to cover the full period of absence. I am not persuaded by that argument.

123. I accept that if the Tribunal had set out a process of reasoning of the kind suggested by the respondents it may have been sufficient. One might perhaps have wondered how much longer the Andersons would need to have been away before the Tribunal was persuaded that the period of their absence was beyond the reach of the exemption. Some might perhaps have thought that the point was well and truly passed. But the exercise was one for the exercise of discretion by the Tribunal and if the process of reasoning had been as the Respondents contend it was it would have been hard to say that the Tribunal must have failed to have regard to a relevant consideration or that it must have taken into account an extraneous consideration or that the decision was so plainly unreasonable that no reasonable authority could ever have come to it.

126. The short point is, however, that the Tribunal did not set out any such process of reasoning and, as I read the Tribunal's reasons, it is plain that the Tribunal did not adopt any such process of reasoning. The obvious and natural meaning of the Tribunal's reasons is that the Tribunal was acting and intended to convey that it was acting on the basis of no more than that the period of absence was temporary. But even if I were wrong about that and the Tribunal had followed the sort of reasoning suggested by the Respondents, the Tribunal would certainly not have gone far enough in the reasons to explain what was intended. At best the reasons would be productive of doubt about what was intended and leave one wondering about the process of reasoning that was followed.

129. Of course I bear in mind that the reasons of the Tribunal are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which reasons are expressed.[10] I also take into account that it is not necessary for the Tribunal to address every issue raised in a proceeding and that it is enough to make findings on the material facts upon which its decision turns and to explain the logic of the decision.[11] But to explain the logic of a decision requires that reasons be intelligible [12] and reasons are not intelligible if they leave the reader to wonder about the process of reasoning which has been followed. Section 117 of the Victorian Civil and Administrative Tribunal Act requires the Tribunal to furnish reasons that are intelligible. The failure to do so is an error of law in itself [13].

133. For the reasons given I do not consider that the Tribunal erred in the meaning which it as ascribed to the word "temporary" in s. 13C of the Land Tax Act. I agree with the Tribunal that "temporary" in that context has its plain and ordinary meaning. But good reason needs to be shown to extend the period of absence under s.13C(3) beyond the two year limit.

136. I am, however, of opinion that the Tribunal erred in the exercise of its discretion under s.13C(3), either by regarding the temporary nature of the absence as reason in itself to extend the time limit under s.13C(3), or perhaps by failing to make clear such other considerations to which the Tribunal had regard in the exercise of discretion.

139. Subject to what counsel may say, the orders I propose are that leave to appeal be granted and that the appeal be allowed; that the decision the subject of appeal be set aside; and that the matter be remitted to the Tribunal to be dealt with in accordance with law.

[1] As to whether a question of construction constitutes a question of law, see Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 at p. 8; Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at p.287; Collector of Customs v Agfa-Gavaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at pp. 394-5; cf. Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at p. 451

[2] Hansard, 14 May 1998, (Council) at p.1061

[3] [1985] FCA 164; (1985) 6 FCR 444 at p. 451

[4] Federal Commissioner of Taxation v Applegate [1920] HCA 61; (1979) 38 FLR 1; 79 ATC 4307 at pp. 4308 and 4316; Project Blue Sky v ABA [1998] HCA 28; (1998) 194 CLR 355 at p. 381; Pearce & Geddes, Statutory Construction in Australia, 5th Ed. at [4.18]

[5] FAI Insurances Ltd v Winneke [1982] HCA 26; (1982) 151 CLR 342 at p. 368

[6] Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492 at p. 505, per Dixon J

[8] Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] EWCA Civ 1; [1948] 1 KB 223 at pp. 229-230; Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at p. 41

[9] Chan v Minister for Immigration & Ethnic Affairs [1989] HCA 62; (1989) 169 CLR 379 at p. 391

[10] Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 271-2

[11] Our Town FM Pty Ltd v Australian Broadcasting Tribunal (No1) [1987] FCA 301; (1987) 16 FCR 465 at 481

[12] Re Palmer & Minister for the Capital Territory (1978) 23 ALR 196 at 206 per Fisher J

[13] Copperart v Federal Commissioner of Taxation 93 ATC 4780 at 4781 per Hill J, aff'd on appeal: Copperart Pty Ltd v Commissioner of Taxation (1994) 50 FCR 345, esp at p. 352, per Davies J; Transport Accident Commission (Vic) v Bausch [1998] 4 VR 249 at 260-1, per Tadgell JA; Berbers v Transport Accident Commission [2002] VSC 211, per Osborn J