Land tax - Construction of a dwelling house delayed at relevant times - Whether exemption for "private residential property" in s 21 or s 24 of the Land Tax Assessment Act 2002 (WA) applies - No exemption available

Land Tax Assessment Act 2002 (WA), s 4, s 5, s 7(1), s 11, s 12, s 17, s 20, s 20(1), s 20(1)(a), s 20(2), s 21, s 21(1), s 24, s 24(1), Glossary, Part 3

State Administrative Tribunal Act 2004 (WA), s 27(2)

Taxation Administration Act 2003 (WA), s 40

Brown v Commissioner of State Revenue (2001) 27 SR(WA) 249

1 In this case, the applicants owned land on which they proposed to construct a new dwelling house. The applicants had entered into an arrangement with a building company for their new dwelling house to be constructed. However, due to delays - which the applicants believe were due to the "building boom" in Western Australia - the construction of the dwelling house had been delayed.

2 Notwithstanding these unfortunate circumstances, the Tribunal found that the Commissioner was correct in finding that the "private residential property" exemptions created by section 21 and section 24 of the Land Tax Assessment Act 2002 (WA) could not be satisfied by the applicants and therefore they did not qualify for any exemption from land tax.

3 The Tribunal observed that if any exemption from land tax were to be created to cover this situation, it would need to be created by the Parliament of Western Australia.

4 Accordingly, the Tribunal affirmed the decision of the Commissioner of State Revenue to impose land tax and dismissed the review application.

5 The primary issue for determination by the Tribunal is whether the Commissioner of State Revenue (the Commissioner) was correct in disallowing the applicants' objection to the assessment of land tax for the assessment years ending 30 June 2005 and 30 June 2006 on land being Lot 58 on Plan 654 being Certificate of Title Volume 1934 Folio 744, with the street address of 30 Harvey Street, Mosman Park (the land), when at those material times the applicants owned the land, had contracted for the construction of a residential dwelling house on the land, but the construction had been delayed.

6 At all material times the applicants were the registered proprietors of the land as joint tenants.

7 In March 2003 the applicants entered into arrangements with a building company to demolish an existing dwelling house on the land in which they had been residing, in order to build a new dwelling house on the land.

8 In September 2003, the applicants rented another property for a period of 12 months with an option to extend the lease for a further six months, and commence living in that other property.

9 In December 2003, the house on the land was demolished. From at least June 2004 the land was vacant land.

10 In June 2004, the applicants advised the Water Corporation of a change in their postal address to the leased property.

11 In June 2004, the applicants terminated the arrangements with the building company as they were dissatisfied with the delay in the commencement of the building of the new dwelling house on the land and engaged another building company.

12 In November 2005, the Commissioner issued an assessment for land tax in the amount of $4670.55 to the applicants for the assessment years 1 July 2004 to 30 June 2005 and 1 July 2005 to 30 June 2006 (the assessment).

13 On 16 January 2006, the Commissioner imposed penalty tax in the amount of $240.75 as the applicants had failed to pay the land tax under the assessment.

14 By email dated 19 January 2006, the applicants objected to the assessment. By letter dated 25 January 2006, the Commissioner disallowed the applicants' objection.

15 By email dated 25 January 2006, the applicants enquired about appealing the Commissioner's decision to disallow the objection and by emails dated 25 January 2006 the Commissioner directed the applicants to apply the Tribunal for a review of the Commissioner's decision.

16 On 2 March 2006, the applicants filed an application for review before the State Administrative Tribunal under the Taxation Administration Act 2003 (WA), s 40 and nominated the address of the rental property as their postal address.

17 The applicants acknowledge that they are renting the other property. However, they say they do not consider it to be their primary residence. Rather they consider the land owned by them to be "for use" as their primary residence.

18 The applicants say they have had to endure delays in building through no fault of their own, costing them more money in rental payments and increased costs for the construction of the new dwelling house, whilst at the same time still paying council rates and water rates.

19 The applicants say the current "building boom" in Perth has caused many, sometimes lengthy, delays in the building of houses and obviously with these delays comes increased costs and the imposition/assessment for land tax. The applicants say that this is quite unfair for people, like themselves, who find themselves in this position. Delays in building equate to more rent to pay and, in the current rental climate, rental costs are increasing by about 10% on an annual basis.

20 The applicants say they have raised this matter with their local Member of Parliament and he raised the matter in Parliament on Wednesday 12 April 2006 with the Treasurer.

21 Unfortunately, from the applicants' point of view, the law relating to the assessment of land tax on land is quite clear and, for persons in the unfortunate circumstances of the applicants here, requires the payment of land tax on the land.

22 Whether or not persons in the position of the applicants have any contractual or other private law remedies against other parties in respect of any loss they have suffered, is not an issue within the Tribunal's jurisdiction.

23 Land tax is payable for each financial year for all land in the State except land that is exempt under s 11 of the Land Tax Assessment Act 2002 (WA) (LTA Act): s 5.

24 The land is exempt from land tax for an assessment under s 17 if the Commissioner grants an exemption under s 20 or it is exempt under another provision in Part 3 of the LTA Act for the assessment year: s 17 of the LTA Act.

25 Land tax payable on land for an assessment year is payable by the owner of land as at midnight on 30 June in the previous financial year: s 7(1) of the LTA Act_._

26 Land tax payable on land owned by two or more persons jointly or in common, whether as partners or otherwise, is assessed as if the land were owned by one person: s 12 of the LTA Act and the definition of "joint owners" in cl 1 of the Glossary to the LTA Act.

27 For the purposes of the LTA Act, an owner in relation to land is a person who is entitled to the land for any estate of freehold in possession: see definition of "owner" in cl 1 of the Glossary of the LTA Act.

28 The applicants were joint owners of the land at midnight on 30 June 2004 and at midnight on 30 June 2005 and so, for the purposes of land tax assessment, were liable for land tax on the land for the assessment years ending 30 June 2005 and 30 June 2006, unless some relevant exemption applied.

29 An exemption is available in respect of "private residential property", (except property held in trust) for an assessment year if, at midnight on the 30 June in the financial year before the assessment year, it is owned by an individual who uses it as his or her primary residence: s 21(1) of the LTA Act_._

30 Alternatively, "private residential property" (except property held in trust) that is owned by an individual is exempt for assessment year if:

• the construction of the private residence that forms part of the property is completed during the assessment years;

• at midnight on 30 June in the previous financial year the individual owned the land on which the private residence is constructed;

• the individual is the sole occupant of the private residence; and

• the individual uses the private residence as his or her primary residence during the assessment year;

31 Section 20(1) of the LTA Act allows a taxpayer to apply to the Commissioner for an exemption for certain categories of land, which includes a portion of "private residential property" that is used by an individual for a purpose that is not an exempt purpose, where the "private residential property" is exempt to some extent under s 21, or because of its use by the individual as his or her primary residence. The Commissioner may then grant the exemption under s 20(2) for the whole or part of the land if satisfied that there are reasonable grounds for doing so: s 20(1)(a) and s 20(2) of the LTA Act.

32 The exemptions under sections 21 and 24 of the LTA Act, and an application for exemption under s 20(1)(a) of the Act only applied to land that constitutes "private residential property".

33 Except for the purposes of s 24 of the LTA Act, the relevant definition of "private residential property" is "a lot of land on which there is a private residence": par (a) of the definition of "private residential property" in cl 1 of the Glossary to the LTA Act_._

34 For the purposes of s 24 of the Land Tax Assessment Act 2002, "private residential property" is defined as "a lot of land on which a private residence is being or has been constructed": par (d) of the definition of "private residential property" in cl 1 of the Glossary of the LTA Act.

35 "Private residence" is relevantly defined as "a building or part of a building that was occupied, or fit to be occupied and intended by the owner to be occupied as a place of residence of one or more individuals": the definition of "private residence" in cl 1 of the Glossary to the LTA Act_._

36 As at midnight on 30 June 2004 and 30 June 2005, the applicants' land was vacant land as there was no building being constructed and no building on the land at all. Thus the subject land was at all material times incapable of constituting "private residential property" for the purposes of either s 21 or s 24 of the LTA Act_._ Consequently, there was no land in respect of which an application could be made under s 20(1)(a) of the LTA Act to invoke of the exercise of discretion by the Commissioner to grant an exemption under s 20(2).

37 It also follows that, at all material times, there was no building on the land capable of being used by the applicants as their "primary residence". Accordingly that aspect of sections 20(1)(a), 21 and 24 of the LTA Act is not capable of being satisfied.

38 Further, as the facts show, at all material times the applicants resided at the other property they were leasing or renting and this constituted their primary residence at relevant times, being the place where they "ate and slept and had their settled or usual abode": see Brown v Commissioner of State Revenue (2001) 27 SR(WA) 249 at 252.

39 It follows that it was not open to the Commissioner to grant any exemption to the applicants in respect of the land tax payable on the land.

40 For the reasons set out above, the decision made by the Commissioner that there is no discretion to allow any exemption in respect of the land tax payable on the applicants' land by reason of the delays in the construction of the new dwelling house on the land, is the correct and preferable decision: s 27(2) of the State Administrative Tribunal Act 2004 (WA).

41 If an exemption for land tax is to be created in circumstances such as those faced by the applicants in this case, it will be for Parliament to amend the LTA Act to create the exemption.

42 As can be seen from the terms of s 24 of the LTA Act as it applies at present, Parliament has given some attention to the issue of an exemption where a dwelling house is in the course of construction. However, in the circumstances of the present case, s 24 is no application.

43 In these circumstances the Tribunal orders:

1. The decision of the Commissioner of State Revenue to impose land tax for the assessment years ending 30 June 2005 and 30 June 2006 in respect of the land with the street address 30 Harvey Street, Mosman Park, is affirmed.

I certify that this and the preceding [43] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

JUSTICE M L BARKER, PRESIDENT