Caroline and Richard Findlay ("the applicants") were assessed by the Chief Commissioner of State Revenue ("the respondent") as being liable for land tax for the 2018 to 2022 land tax years for their Sydney property ("the Property"). The applicants seek the Tribunal's review of that assessment.
[2]
Issue
The issue for determination is whether the principal place of residence exemption ("PPR") in Schedule 1A of the Land Tax Management Act 1956 (NSW) ("LTMA") applies.
[3]
Background
The property consists of vacant land purchased by the applicants in July 2017. In March 2018, an owner builder permit was obtained for a two-storey home, inground pool and retaining walls to be constructed on the Property. Due to difficulties obtaining finance, building on the Property did not proceed.
The respondent wrote to the applicants on 26 September 2018 to advise there was a potential liability for land tax on the Property.
The applicants lodged a land tax registration return on 5 October 2018, and claimed a land tax PPR exemption on the property as their principal place of residence. This resulted in a "nil" land tax assessment notice being issued on 1 November 2018 for the 2018 land tax year.
In May 2019, builders were engaged, and a contract was signed in October 2019. Hills Shire Council approved a development application in October 2020; construction commenced in November 2020; practical completion was reached by 17 December 2021 and hand over of the dwelling was on 21 January 2022. The applicants moved into their new home on 2 February 2022.
The applicants were advised in May 2022 that the respondent was reviewing the PPR exemption and information was requested to verify that the exemption requirements had been met. On 1 June 2022, the applicants applied for the PPR exemption for the period from 29 June 2017 through to 2 February 2022, being the date that they had moved into the home.
On 15 June 2022 the applicants were advised that as they had not provided the requisite evidence of commencing to use and occupy the Property for a continuous six-month period prior to 31 December 2021 (the expiry date of their PPR concession), the concession was revoked. A notice of assessment for the 2018-22 years was issued for land tax for the amount of $30,129.30.
An objection to the assessment was lodged by the applicants on 17 June 2022, which was refused by the respondent on 29 July 2022.
The applicants have applied to the Tribunal for a review of this decision.
[4]
Legislation
Pursuant to s 7 of the LTMA, land tax is levied on the taxable value of all land in New South Wales unless it is exempt under the LTMA.
Land tax is charged on land owned at 31 December preceding the year in which the tax is levied: LTMA, s 8.
The PPR exemption is set out in the LTMA, Sch 1A, cl 2. During the relevant tax years it provided as follows:
2 Principal place of residence exemption
(1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is:
(a) a parcel of residential land, or
(b) a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots.
(2) Land is not used and occupied as the principal place of residence of a person unless:
(a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or
(b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence.
(3) If the owner of land is entitled to the exemption conferred by this Schedule, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption.
(4) The exemption conferred by this Schedule is referred to as the principal place of residence exemption.
(5) The principal place of residence exemption is subject to the restrictions set out in Part 4.
"Residential land" is defined in LTMA, Sch 1A, cl 3 which, during the relevant years, provided as follows:
3 Residential land - meaning
(1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings:
(a) comprised of strata lots or residential units, or
(b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or
(c) from any part of which income is derived.
(2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted.
Note -
Clause 4 allows one residential occupancy to be disregarded in applying the principal place of residence exemption. Clause 5 allows the use of land for purposes ancillary to a business conducted at a different place to be disregarded in certain circumstances.
Schedule 1A, cl 6 contains the PPR exemption for unoccupied land which during the relevant years provided:
6 Concession for unoccupied land intended to be owner's principal place of residence
(1) An owner of unoccupied land is entitled to claim the land as his or her principal place of residence if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence.
Note -
It is an offence under section 55 of the Taxation Administration Act 1996 to make a statement to a tax officer, or give information to a tax officer, orally or in writing, knowing that it is false or misleading in a material particular.
(2) This clause does not apply unless:
(a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and
(b) if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and
(c) the intended use and occupation of the land is not unlawful.
(3) This clause applies in respect of the assessment of a person's ownership of land only in the period of:
(a) 4 tax years immediately following the year in which the person became owner of the land, or
(b) if, after the person became owner and before the building or other works physically commence, the land is used and occupied for residential purposes by another person - 4 tax years immediately following the tax year in which the other person ceases to use and occupy the land for those purposes.
(4) Without limiting subclause (3)(a):
(a) this clause does not apply in respect of the assessment of a person's ownership of land in a period referred to in subclause (3) (b) unless the Chief Commissioner is satisfied that, by the end of the first of the 4 tax years concerned:
(i) the building or other works will be, or have been, physically commenced, or
(ii) significant steps will be, or have been, taken to enable those works to physically commence, and
(b) if the building or other works are not physically commenced by the end of that tax year (or the Chief Commissioner is not satisfied that, by the end of that tax year, significant steps have been taken to enable those works to physically commence):
(i) the principal place of residence exemption applying by operation of this clause to the land is taken not to have applied to the land in respect of that tax year (unless subclause (3) (a) applied to the assessment in that tax year), and
(ii) land tax liability is to be assessed or reassessed accordingly.
(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person's ownership of the land and to continue to so use and occupy the land for at least 6 months.
(6) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly.
(6A) For the purposes of section 9(3)(c) of the Taxation Administration Act 1996, any reassessment under this clause is authorised to be made more than 5 years after the initial assessment.
(7) This clause does not apply in respect of land owned by a person if:
(a) the person or any member of the person's family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or 9D or under this Schedule, or
(b) the person owns land outside New South Wales that is the principal place of residence of the person or a member of the person's family (within the meaning of clause 12), or
(c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it.
(8) For the purposes of this clause:
unoccupied land means land that is not being used or occupied for any purpose.
It is noted that the applicants have the onus of proving, on the balance of probabilities, that the PPR exemption applies to the Property for the relevant years. They must prove all matters necessary to enable the Tribunal to answer the statutory question in their favour. In the absence of that evidence the assessment will prevail: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25.
[5]
Materials relied on
The applicants relied on the timeline of events; statement of Craig Bringolf dated 21 October 2022; NRMA Certificate of Home Buildings and Contents 2021-22; and an updated email from the valuer, Belinda Botzolis.
They did not file any evidence or submissions.
The respondent relied on the tender bundle filed with the submissions dated 18 November 2022, and the Administrative Decisions Review Act 1997 (NSW), s 58 documents.
It is noted that the parties requested that the matter be determined on the papers. Accordingly there was no hearing and the Tribunal has relied on the materials provided.
[6]
Submissions of the parties
The applicants in their objection and on this application for review contend that they had intended to build a home on the Property as their PPR. The applicants conceded that they did not move into the property until 2 February 2022. While practical completion was expected by September 2021, there were extenuating circumstances including the lockdowns and other restrictions of the COVID-19 pandemic which caused the delay to construction as a result of shortage of labour and suppliers. This was what prevented them from moving into the property within the four years required in cl 6(5) (ie by 31 December 2021). The applicants want these reasons taken into account in determining tax liability.
The applicants also seek the PPR exemption for the 2022 land tax year which they contend should be allowed as they moved into the Property shortly after the cut-off date of 31 December 2021.
The respondent, while sympathetic to the situation, states that the Chief Commissioner does not have discretion to either extend the four year time period or to waive the land tax where the relevant statutory requirements have not been met. As the applicants had not commenced occupation of the Property within the four year period required, they do not satisfy cl 6(5) and the PPR exemption is not available to them for the 2018 to 2021 land tax years.
For the 2022 land tax year, as at the relevant taxing date for the land tax year (being 31 December 2021), the applicants were not yet in use and occupation of the Property, the PPR exemption also does not apply to the Property.
[7]
Consideration
There was no dispute about the expression use and occupation. As noted by the respondent, they are separate and cumulative requirements: see Knowles v Municipality of Newcastle (1909) 9 CLR 534 at 545.
"Use" has regard to the purpose for which the land is put: Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 at 533. Occupation, while not the same as legal possession, requires possession and the control of possession see Christie at 533-534.
Intention alone, without actual present use and occupation does not establish the PPR exemption. In Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378 at [34]:
"[34] The reasoning of the Tribunal was erroneous for one or both of two reasons. Either it took the view that the intention of the appellant to return to Beecroft Road, once he had completed renovations at Harold Avenue (a process which took six years and was not completed within the relevant period), demonstrated 'use and occupation' of Beecroft Road, or it took the view that the use of the property by his wife, with his permission, constituted use for residential purposes. So far as the first view is concerned, an intention to use and occupy land in the future does not by itself demonstrate present physical use and occupation. So far as the second view is concerned, the statutory reference to use and occupation of the land as a residence is to use and occupation by the owner as his or her residence, not use and occupation by another person with his or her consent. Were it otherwise, an owner would always use and occupy residential premises as a residence, but that would not conform to the statutory purpose."
Further, a change in events after the taxing date cannot inform the use and occupation of the property: Metricon Qld Pty Limited v Chief Commissioner of State Revenue (No 2) [2016] NSWSC 332 at [132]-[133]; Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9 at [52] and Raissis v Chief Commissioner of State Revenue [2021] NSWCATAD 99 at [35]-[40].
As noted above, there is no factual dispute in this matter. The issue is really whether a discretion can be exercised to allow the exemption in the extenuating circumstances which delayed the applicants from using and occupying their Property.
I am not satisfied on the facts that the PPR exemption applies for the 2018 to 2021 nor the 2022 land tax years. The applicants were not in use and occupation of the Property at any time prior to 2 February 2022 being outside the relevant taxing dates for each of the 2018 to 2022 land tax years.
Further, the Tribunal (and the respondent) has no ability to exercise a discretion to allow the PPR exemption. There is no statutory authority in the LTMA or elsewhere, for the exercise of a discretion on grounds of unfairness; or to extend the four year period or to waive the requirement that the Property be used and occupied within the four years. This has been confirmed in numerous cases including Valencia v Chief Commissioner of State Revenue [2017] NSWCATAD 261 at [56], [73]-[76]; Ebrahimi v Chief Commissioner of State Revenue [2022] NSWCATAD 303 at [20]-[23]; Raissis at [36]-[38].
Further, concepts of natural justice or lenience are also not relevant to the statutory task the Tribunal is required to undertake on a merits review. In Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 123, the High Court stated:
"But the question for decision is what are the circumstances in which an amended assessment may lawfully be issued? That question is not answered by asserting the existence of any 'policy' or 'general intention' unless that policy or intention is to be found reflected in the provisions of the Act. Appeals to general notions of 'fairness' or 'justice' do no more than attempt to mask the absence of any foundation in the legislation for the conclusion which is asserted."
In the present case, as the applicants did not use and occupy the Property at any time prior to 2 February 2022, the PPR exemption in cl 6 of Schedule 1A of the LTMA for the 2018 to 2021 land tax years does not apply and the PPR exemption in cl 2 of Schedule 1A of the LTMA is not satisfied for the 2022 land tax year.
[8]
ORDER
The respondent's decision of 15 June 2022 is affirmed.
[9]
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: 05 May 2023