Deans v Chief Commissioner of State Revenue

Issue

1. The issue to be determined in this application is whether Ms Deans is entitled to be exempted from liability to land tax over the property at Clontarf on the basis that this property is her principal place of residence. Specifically, whether the Tribunal can be satisfied that either: 1. Ms Deans continues to use and occupy the property at Clontarf as her principal place of residence; or 2. where Ms Deans no longer has the use and occupation of the property at Clontarf as her principal place of residence, the Tribunal can be satisfied that she does not own other land which she uses as her principal place of residence in circumstances where, in each relevant year Ms Deans has: 1. rented out the property at Clontarf to tenants; and 2. lived in an apartment at Potts Point which she owns jointly with her spouse and in respect of which the Chief Commissioner has granted an exemption based on that property being Ms Deans' principal place of residence.

Legislative Context

1. The Land Tax Management Act, s 7 provides that: Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act).
2. As may be seen from that provision, land tax is levied on all land in New South Wales unless a relevant exemption applies.
3. The liability to land tax arises by the direct operation of the Land Tax Management Act; it is not a tax imposed by the Chief Commissioner, rather the Chief Commissioner is obliged due to his general administration of the taxation laws to assess liability to land tax; Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218 at [24] - [34].
4. The Land Tax Management Act, s 10(1)(r) and Sch 1A provide for the "principal place of residence exemption". This is the only relevant exemption in this application.
5. The Land Tax Management Act, Sch 1A, cl 2 provides that land is only exempted from taxation where: (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.
6. A taxpayer's "principal place of residence" is defined by Land Tax Management Act, s 3, in the following terms: 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.
7. There is also no general discretion in the Land Tax Management Act allowing the Chief Commissioner to take account of circumstances which are not the subject of a specific exemption; Volpatti v Chief Commissioner of State Revenue (2007) 67 ATR 312; [2007] NSWADT 222 at [27].
8. The Land Tax Management Act, Sch 1A also provides for concessions by which the principal place of residence exemption is extended. Relevant to this application is the concession from land tax liability provided in the Land Tax Management Act, Sch 1A, cl 8 where there has been an absence from a former residence. The concession provides that: (1) A person is taken, for the purposes of the principal place of residence exemption, to continue to use and occupy land formerly used and occupied by the person as a principal place of residence (a former residence), after the person ceases to so use and occupy the former residence, if the Chief Commissioner is satisfied that- (a) the person used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months, and (b) the person does not own any other land used and occupied by the person as a principal place of residence.
9. The former residence concession provided in the Land Tax Management Act, Sch 1A, cl 8 has several elements, relevantly: 1. The clause only applies where the Chief Commissioner is satisfied that no income has been derived from, a lease or other arrangement exceeding six months, or where income is derived it is no more than is reasonably required to cover rates and charges and maintenance costs of the owner; Land Tax Management Act, Sch 1A, cl 8(6) and cl 8(7). 2. The Chief Commissioner must be satisfied that the person used and occupied the former residence as a principal place of residence for a continuous period of at least six months; Land Tax Management Act, Sch 1A, cl 8(1)(a). 3. The Chief Commissioner must be satisfied that the person does not own other land used and occupied by that person as a principal place of residence; Land Tax Management Act, Sch 1A, cl 8(1)(b).
10. Both the exemption provided by the Land Tax Management Act, Sch 1A, cl 2 and the concession provided by Sch 1A, cl 8 contain the phrase "use and occupation" which was suggested by Basten JA to be a hendiadys - a term of single meaning using two nouns joined by a conjunctive - and therefore the meaning of "use" and "occupation", while not synonymous terms, need not be considered separately from each other; De Marco v Chief Commissioner of State Revenue (2013) 83 NSWLR 44; [2013] NSWCA 86 at [71].
11. Whether land is used and occupied by a person as their principal place of residence is a matter of fact; Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1 at 4; Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378 at 386; [2013] NSWCA 340. The Tribunal is therefore required to apply the statutory language to the facts of each case.
12. The Land Tax Management Act, Sch 1A also provides for further restrictions by which an exemption from land tax based on principal place of residence may apply. One such restriction is found at Sch1A, cl 12. That restriction is concerned with ensuring that only one place of residence per family (as defined) is capable of being treated as the principal place of residence and is expressly referred to in Sch1A, cl 8. In this case, Ms Deans and her spouse have been granted an exemption from land tax over the property they own jointly at Potts Point for each relevant year.

Facts

1. Ms Deans owns a half-share in two properties in New South Wales, one at Potts Point and the other at Nimbin. The Chief Commissioner has granted an exemption from land tax otherwise payable: 1. on the property at Potts Point on the basis that this property is a principal place of residence; and 2. on the property at Nimbin on the basis that the land is zoned as rural or non-urban and used for primary production.
2. Additionally, Ms Deans owns solely two other properties in New South Wales including the property at Clontarf. Ms Deans has been assessed as being liable for land tax with respect to both the properties she owns. Ms Deans objects only to the assessment to land tax with respect to the property at Clontarf.
3. Ms Deans has stated in her submission to the Tribunal that: 1. She inherited the property at Clontarf. While Ms Deans does not state when the property was transferred to her, she has sought to have this property declared as her principal place of residence from 1993. 2. Ms Deans maintains a fear of violence from a close relative who has a history of violence towards her and other family members. Due to the on-going threat to her safety, Ms Deans and her family moved into the property she and her spouse own jointly at Potts Point. Ms Deans and her family continue to reside at the Potts Point property though she has recently taken steps to return to the Clontarf property. 3. The Clontarf property, while rented, remains the place where her furnishings and belongings are stored and the rental agreements she has in place with her tenants provide for the storage of and access to those belongings. 4. Ms Deans is unable to afford the taxation debt arising from the assessments to land tax made with respect to the years ended 30 June 2017 to 2021.
4. Ms Deans has rented out the property at Clontarf to various tenants and has received rental income from those rental tenancies. It is unclear precisely when the property at Clontarf was originally subject to a lease. Ms Deans states that the entire property has been rented out from about 2016 and before that time a suite of rooms has been rented out while she and her family remained living there.
5. Among the documents lodged by the Chief Commissioner pursuant to the Administrative Decisions Review Act, s 58 are records obtained from Rental Bond Board and the Australian Taxation Office concerning the Clontarf property. Those records show: 1. the property at Clontarf was available to be rented out from about 9 February 2014 and likely was rented out from about 28 July 2015. 2. Ms Deans listed the property she owns in Nimbin as her residential address for the year ended 30 June 2016 and in all later relevant years she has stated her residential and postal address to be the property at Potts Point.
6. Also among the Chief Commissioner's s 58 documents are copies of electricity bills for the property at Potts Point - all of which are addressed to Ms Deans. The bills cover the period from about March 2019 to March 2021 and were provided by Ms Deans to the Chief Commissioner. In her covering email, Ms Deans states: "These bills cover the period 2018 to today. Prior to that the apartment was tenanted."
7. This statement is not supported by the attached electricity bills which only cover the period from March 2019 to March 2021. There is no information about bills covering any period in 2018. Consistent with the rental information from the Australian Taxation Office, these electricity bills and her covering email suggest that Ms Deans' principal place of residence changed from Clontarf firstly to Nimbin and then Potts Point over a three year period from about 2016 to 2019 period but it is not clear precisely when she moved from each property and I consider it more likely than not that, by 1 July 2017, the property at Potts Point was Ms Deans principal place of residence.
8. The Chief Commissioner asked Ms Deans to provide evidence of contents insurance over the furniture and other personal property which she stated had been stored at the Clontarf property. Ms Deans provided no evidence of insurance, explaining that, to save money, she never took out a home contents policy. I do not consider the lack of contents insurance to be determinative of any matter in this case.
9. In addition to his submissions, the Chief Commissioner lodged further documents including copies of four residential tenancy agreements for the property at Clontarf covering the period from about April 2018 to November 2021. Each of those tenancies was managed via a real estate agent.

Consideration and Findings

1. There is no challenge to Ms Deans' assertion that she left the property at Clontarf and moved to her property at Potts Point because she feared for her safety. However, Ms Deans' reasons for moving from the property at Clontarf, though compelling and unfortunate, are not relevant to any consideration under exemption or concession provisions of the Land Tax Management Act.
2. The rental agreements provided with the Chief Commissioner's submissions show that the Clontarf property was not used or occupied by her from March 2018 and for the entirety of the years ended 30 June 2019, 2020 and 2021. In particular, the agreements stipulate that Ms Deans is to give the tenants vacant possession of the property from the commencement of the lease. Ms Deans had no right of access other than, a licence to store some of her personal belongings in a storage area near the garage.
3. The Chief Commissioner submits that the terms of the residential tenancy agreements make it plain that Ms Deans could not have used or occupied at the property at Clontarf for the duration of these agreements. I agree with that submission.
4. The relevance of these rental tenancy agreements for Ms Deans is to support her contention that she retained some use and occupation of the Clontarf property - in effect that it remained her principal place of residence. She says most of her furniture and belongings remained at the Clontarf property and each of the rental agreements had stipulated that, in renting the property out, Ms Deans would retain access to the lower level of the property at Clontarf where her belongings were stored. However, Ms Deans has not been able to establish the correctness of this assertion on the evidence before the Tribunal because: 1. In all of the agreements, the standard terms governing the landlord's access to the premises are not amended in any way. 2. Each of the agreements provide that Ms Deans is to give to the tenant vacant possession to the premises. 3. While each tenancy agreement contains numerous and specific additional terms, the first three agreements do not contain any stipulation or condition allowing Ms Deans to store personal property at the rented house or access the personal property. The 20 October 2020 tenancy agreement provides, by way of an additional item, that the landlord has items stored in a room off the garage. Pursuant to that agreement, access to those stored items appears to require notice being given to the tenants in the normal course. 4. In all but the October 2020 tenancy agreement, an additional term is included which stated that the property at Clontarf is an investment property and which allows Ms Deans to issue a 30-day notice of intention to sell during the fixed term of the lease.
5. While I accept that Ms Deans does intend to return to the Clontarf property, that fact alone does not demonstrate present use and occupation of that land; Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378; [2013] NSWCA 340 at [34].
6. Taking account of the fact that Ms Deans says she rented out the whole property at Clontarf from about 2016, I find that the property at Clontarf was rented out exclusively to tenants from at least 1 July 2017.
7. I find that the terms of the residential tenancy agreements were that Ms Deans would provide vacant possession to the tenants and thus, I have concluded, that Ms Deans did not have use and occupation of the property at Clontarf from at least 1 July 2017 and that the property was not her principal place of residence from at least that date.
8. Even in circumstances where there existed some arrangement whereby Ms Deans stored various items at the Clontarf property, I do not find that such use of the land can be construed as "use and occupation of the land as a principal place of residence" such that the property at Clontarf could be considered Ms Deans' principal place of residence pursuant to Land Tax Management Act, Sch 1A, cl 2(b).
9. Based on the concession by Ms Deans that the entirety of the Clontarf property has been rented out from about 2016 together with the information provided by the Rental Bond Board and Australian Taxation Office, I am satisfied that the Clontarf property was not Ms Deans' principal place of residence for any of the relevant years and she is not entitled to an exemption from land tax with respect to the property at Clontarf pursuant to the Land Tax Management Act, Sch 1A, cl 2.
10. The concession provided in Land Tax Management Act, Sch 1A, cl 8 does not apply in this case because; 1. The Rental Bond Board and Australian Taxation Office information show that Ms Deans received rental income from the Clontarf property in the years ended 30 June 2017 and 2018. Consequently, I find that the property at Clontarf was rented out by Ms Deans at a fixed market rent in excess of six months in each period and that the rent received was more than reasonably required to cover various expenses associated with the property. 2. Each of the residential tenancy agreements show that, for the period from about April 2018 and for the entirety of the years ended 30 June 2019, 2020 and 2021 the property at Clontarf rented out at market rent and for a period of more than six months in each year. In circumstances where there is a fixed market rate rental Ms Deans cannot satisfy the requirements under; Land Tax Management Act, Sch 1A, cl 8 for those periods; Beashel v Chief Commissioner of State Revenue (2008) 71 ATR 774; [2008] NSWADT 103 at [45] - [46]. 3. In the 2016 financial year, Ms Deans moved her family to properties she owned jointly with her spouse; firstly to their property at Nimbin and then to their property at Potts Point. Consequently, from at least 1 July 2017, Ms Deans owned other land which she used as her principal place of residence and therefore the exemption under Land Tax Management Act, Sch 1A, cl 8 does not apply. 4. Lastly, Ms Deans has already been granted a principal residence exemption with respect to the jointly owned property at Potts Point, and so no exemption would have been available to her pursuant to Land Tax Management Act, Sch 1A, cl 12 had she qualified for a concession under Sch 1A, cl 8.
11. As to Ms Deans' final submission, concerning the financial stress associated with the taxation liability sought to be imposed on her; I am cognisant that the imposition of a taxation liability on a person may create a financial burden. However, as noted above, the liability to land tax is created by the operation of statute, not by the Chief Commissioner's process of assessment. While regrettable, any financial difficulty arising for Ms Deans in meeting her taxation obligations are not matters which are relevant to these proceedings.
12. In determining the application for review, the Tribunal is empowered, pursuant to the Taxation Administration Act, s 101, to confirm or revoke the assessment or other decision to which the application for review relates.
13. For the reasons set out above, Ms Deans has not demonstrated that she is entitled to an exemption or concession from her liability to land tax. The assessments to which this review relates should be confirmed.

Order 1. The Commissioner's decision under review is confirmed.

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: 13 January 2022