Pandanas Qld Pty Ltd v Chief Commissioner of State Revenue; Harris v Chief Commissioner of State Revenue; O'Shea v Chief Commissioner of State Revenue; Brown v Chief Commissioner of State Revenue

Disputed Fact

1. What is the subject of dispute on the facts is the assertion put on behalf of each applicant that each individual unit was "new" when the applicants took possession. This becomes important because, as the name of the scheme, the New Home Grant Scheme" implies, the scheme is intended to assist new home buyers only. Section 81 of the Duties Act 1997 provides that its object is to: " ... provide assistance in the purchase or construction of a new home
2. The applicants assert that the vendor to them, Pottsville Beach Pty Limited, undertook renovation and re-configuration work on the motel in 2013 and 2014 to the extent that when they took possession the units were new.
3. Mr Shane Harris, who appears for the applicants by leave, was a director of Pottsville Beach Pty Limited and its sole shareholder. He asserted that "all units were new and unused when owner's (sic) took possession". [1] That appears to be the only evidence before the respondent upon which the applicants relied to justify a conclusion that they were "new" for the purposes of the statutory scheme.
4. However, Mr Harris did give oral evidence before the Tribunal and he was cross examined. Documents were also produced in response to summonses.
5. Mr Harris gave evidence that in fact there always have been what he described as "permanent" residents at the motel and that that continued "up to this day". I understood him to mean by "permanent" long stay guests of up to 90 days in some cases. He understood that it was "legal" for guests to stay for up to 90 days and that he had seen a document to that effect He also explained that there is a mix of units including some two bedroom units. He also explained that the units were rated on a residential zoning basis.
6. During cross examination Mr Harris explained that he was a builder and that he had carried out much of the renovation works himself. He had not been able to find many of the invoices and documents evidencing the work performed as everything was at first put in storage and then not retained as the management rights to the letting of the units had been sold and they were no longer needed. He had consulted with his accountant who was unable to assist to any extent in finding records, saying that the management was conducted through a "bare trust" with the apparent consequence that there were no tax returns or records.
7. There were some records evidencing the installation of air conditioning units in 2011. There were invoices for some curtains. There was an invoice for a shower screen for unit 25 and carpets for units 8 and 9. There was an invoice for carpet in a "high volume" area. There were invoices from Premier Bench Tops for kitchen bench tops, doors and drawers. Mr Harris explained that the structure of the kitchens was sound so he had put on new bench tops, cupboard doors and drawers so that they "looked new".
8. Notwithstanding the paucity of records, Mr Harris maintained that he had undertaken a "complete strip" of the units to renovate them.

Onus of proof

1. The Tribunal's procedures are informal [2] and the rules of evidence do not apply. Nonetheless, it is for the applicants to prove their cases on the balance of probabilities. So much is entirely uncontroversial. The respondent referred the Tribunal authorities applicable to revenue cases. In particular, the respondent referred to the decision of Mason J (as he then was) in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89 where he said: "The Act does not place any onus on the Chief Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with [the taxpayer's onus] for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail."
2. The Tribunal was also referred to Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2013] NSWADTAP 25 at [36] .
3. In my opinion, the applicant bears an onus to prove on the balance of probabilities all of the factual matters necessary to enable the Tribunal to answer the relevant statutory questions in its favour.

The Strata Units were not new

1. I accept that it may be that more work was done to renovate the motel premises than the available records now suggest. Mr Harris was present and he says that he did much of the work himself. However, I am not persuaded on the balance of probabilities that the evidence establishes that the work was so extensive as to permit the units to be described as "new" in the ordinary meaning of the word.

Relevant Statutory Provisions

1. There are, however, some statutory provisions which are relevant and to which I have been referred.
2. I have referred to section 81 of the Duties Act 1997 above. Essentially, it provides that the New Home Grant Scheme is to provide assistance for the purchase of a new home. Subsection 83(2) defines a new home purchase in the following terms: "an agreement for the sale or transfer, or a transfer, of land in New South Wales that is the site of a new home that is complete and ready for occupation."
3. Section 87G defines "home" and "new home" as follows: "home" means a building (affixed to land) that: 1. may lawfully be used as a place of residence, and 2. is, in the Chief Commissioner's opinion, a suitable building for use as a place of residence." "new home" means a home that has not previously been occupied or sold as a place pf residence."
4. Subsection 83(7) provides that a reference to a "new home" includes a reference to a "substantially renovated home". Subsection 83(8) defines a "substantially renovated home" as follows: "(a) that is a new residential premises within the meaning of section 40-75 (1) (b) of the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth; and, (b) that, as renovated, has not been previously occupied or sold as a place of residence."
5. Subsection 40-75(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 provides: 1. "Residential premises are new residential premises if they (b) have been created through substantial renovations of a building ..."
6. Section 195-1 in turn defines "substantial renovations" in the following terms: "substantial renovations" of a building are renovations in which all, or substantially all, of a building is removed or replaced. However, the renovations need not involve removal or replacement of foundations, external walls, interior supporting walls, floors, roof or staircases."

The Strata Units were not new due to "substantial renovations"

1. I am not satisfied that the evidence establishes that on the balance of probabilities the works performed to renovate the motel satisfy the statutory requirements to be described as "substantial renovations" so as to fall into the statutory definition of a new home. As I see it, the evidence does not establish that all or substantially all of the building was removed or replaced. The applicants bear the onus of proof in this matter as I have mentioned above and I am not satisfied that the onus has been discharged.
2. On this basis I would dismiss each of the applications.

The Strata Units could not be categorised as "homes"

1. However, even if I am wrong in this conclusion, I am not satisfied that the units can be described in each case as a "home", whether new or not, in any event. I have already referred to the statutory definition of a "home" as a building which may lawfully be used as a place of residence.
2. The respondent has referred the Tribunal to the decision of the Full Federal Court in Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307. The court considered the concept of a residence at some length. It concluded at [26]: "clearly both 'reside' and 'residence' have the connotation of permanent, or at least long-term commitment to dwelling in a particular place."
3. Mr Harris did refer in his evidence to "permanents" living in the units. He also referred to having seen a document which permitted guests to stay for up to 90 days. The applicants were granted leave at the conclusion of the hearing to file any document evidencing that authorisation. None has been filed. I have mentioned that I understood Mr Harris to be referring to persons who may stay for periods in the order of 90 days when he was referring to "permanents". I have real doubt that the units in this instance could qualify as residences.

The Strata Units could not lawfully be used as residences

1. Perhaps more importantly though, is the appearance of the word "lawfully" in the statutory provision. Can a unit in the motel complex "lawfully" be used as a place of residence?
2. The strata By-Law to which reference has already been made expressly does not allow it. Clause 31 provides that all the units "shall only be used for short term holiday/tourist accommodation purposes" and "shall not be used for any form of permanent residential occupation".
3. There has been some degree of uncertainty as to whether it is correct to characterise a strata By-Law as a "law', in the sense of being delegated legislation. The respondent has helpfully referred me to a number of authorities. I prefer the analysis of Dowsett J in Re Taylor [1995] 2 QdR 564 at 570 that a by-law is a law binding on all persons to whom it applies and not merely an agreement. The preponderance of authority seems to me to support that position.
4. In my opinion the units of the motel complex cannot lawfully be used as a residence.
5. My conclusion is therefore that the strata titled units of the motel complex owned respectively by the applicants in this case cannot satisfy the statutory definition of a "home" for the purposes of section 81 of the Duties Act 1997 and the New Home Grant Scheme referred to therein and I so hold.
6. On this basis also each application must be dismissed.

Endnotes

1. Section 58 Documents, Tab 62, page 346.
2. Civil and Administrative Tribunal Act, section 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: 04 April 2017