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[2009] FCA 1426
Federal Court of Australia
2009-12-03
Stone J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 The present application concerns the GST status of vacant land. On 1 June 2009, the Administrative Appeals Tribunal held that the applicant, Mr Vidler, made taxable supplies when he sold two parcels of land and rejected his claim that the sales were input taxed. The Tribunal's decision followed from its rejection of the claim that the properties were "residential premises" as defined in s 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act). In so deciding the Tribunal confirmed the respondent's objection decisions made in 2008. 2 Both properties were in Ipswich, Queensland; one at Gledson Street, North Booval and the other at Gladstone Road, Sadliers Crossing. The Tribunal also considered a separate question in relation to a third property however that property is not the subject of the present application and it is not necessary to mention it further. The facts relevant to the two properties that are the subject of the present application are not in dispute and the following summary is taken from the Tribunal's decision.
Gledson Street land 3 Mr Vidler purchased the land at Gledson Street in August 2004 for $1,000,000 and sold it in December 2004 for $2,350,000. The land comprised 2.7 hectares of vacant land and was zoned residential low density. It was connected to the electricity supply but not to the gas, water or sewerage although access to each of these services was available at the boundaries of the land.
Gladstone Road land 4 The Gladstone Road property comprised 2,428 square metres of vacant land, zoned Character Mixed Residential. The property was purchased by Mr Vidler for $175,000 in May 2004, and was subsequently sold in April 2005 for $285,900. Access to electricity, water and sewerage was available but the services were not in fact connected.
Procedural history 5 Mr Vidler did not pay GST in relation to either sale because, in his view, they were input taxed as sales of residential premises. On 30 June 2006 the Commissioner issued Notices of Assessment of GST for each sale. With respect to the Gledson St property, the notice stated that GST in the amount of $122,727 was payable, and with respect to the Gladstone Road property the amount was $10,081. 6 On 5 September 2006 Mr Vidler lodged a notice of objection against the assessments. The objection was disallowed by the Commissioner on 11 May 2007. Mr Vidler then sought review of the Commissioner's objection decision in the Administrative Appeals Tribunal. The Tribunal on 1 June 2009 found in favour of the Commissioner and affirmed the objection decision in relation to the assessments. The present application is an appeal from the Tribunal's decision.
this application 7 The application raises only one question, namely, whether vacant land, such as the Gledson Street and Gladstone Road land, is "residential premises" within the meaning of s 40-65(1) of the GST Act. Section 40-65 of the GST Act relevantly provides: Sales of residential premises (1) A sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). … 8 The definition of "residential premises" in the GST Act is to be found at s 195-1: residential premises means land or a building that: (a) is occupied as a residence or for residential accommodation; or (b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation; (regardless of the term of the occupation or intended occupation) and includes a floating home. 9 For the applicant to succeed in establishing that the sales of the two parcels of land are input taxed under s 40-65 he must show that the properties are "residential premises to be used predominately for residential accommodation". It is not entirely clear whether the requirement that the properties be "used predominately for residential accommodation" adds anything to the definition of "residential premises" in s 195-1 however the question does not arise unless the properties meet the definitional requirement. 10 It is common ground that at the time of their respective sales neither property was occupied. Consequently sub-para (a) of the definition does not apply and it is to sub-para (b) that attention must be directed. Under that sub-paragraph it is necessary to show that the property was "intended to be occupied, and [was] capable of being occupied as, a residence or for residential accommodation". 11 The respondent takes the view that vacant land, even if zoned residential can never be "residential premises" because it lacks "some form of permanent structure with living facilities" which would allow it to be used as a residence or for residential accommodation. In resisting this submission the applicant attached much importance to the disjunction between "land" and "building" in the opening words of the definition. While he may well be correct that "there is no warrant to read the word 'land' to mean land with a building on it", it is still necessary, as the applicant accepts, for the land to meet the requirements of the definition, in this case, the criteria in sub-para (b). 12 In South Steyne Hotel Pty Ltd v Commissioner of Taxation (2009) 71 ATR 228 at [17]-[39] I gave detailed consideration to the GST Act definition of residential premises including the effect of the amendments made to the definition following the decision in Marana Holdings Pty Ltd v Commissioner of Taxation (2004) 141 FCR 299. Following those amendments which added the reference to residential accommodation as well as the instruction to disregard the term of the occupation or intended occupation, I concluded, at [31], that "only the element of shelter and basic living facilities such as are provided by a bedroom and bathroom" were necessary. That conclusion was accepted by the Full Court in South Steyne Hotel Pty Ltd v Commissioner of Taxation [2009] FCAFC 155; Emmett J (with whom Finn J agreed at [30], Edmonds J at [86]. The reference to bedroom and bathroom in the above comment was given as an example only; it does not limit the concept of shelter and basic living facilities. Indeed it may well be that shelter and basic living facilities could exist without there being, in any conventional sense, a bedroom or a bathroom. 13 Given that the Gledson Street and the Gladstone Road land were not occupied at the time of sale, if they are to fall within the definition of residential premises they must, at that time, have been capable of providing some shelter and basic living facilities. In terms of the facilities available there was no material difference between the two properties; both were vacant land; electricity, water and sewerage services were available in both cases even if not actually connected at the time. With minor differences that are presently irrelevant, both properties were zoned "residential". It may well be that zoning permitting residential occupation is necessary for land or a building to be capable of providing shelter and basic living facilities but it is not sufficient. Neither the Gledson Street land nor the Gladstone Road land provided any element of shelter and basic living facilities. 14 The applicant put forward quite a different construction of the definition of residential premises to support his submission that both properties were "intended to be occupied, and [were] capable of being occupied, as a residence or for residential accommodation". The applicant called in aid the explanatory memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 (Cth) which introduced the definitional requirement that the land be "capable" of being occupied as a residence. The explanatory memorandum states at paras 1.167-1.168: 1.167 … The new definition requires that for the land to be considered residential premises it must be intended to be occupied, and capable of being occupied, as a residence. That is, it is permissible to use the land for residential purposes and the land has some facilities ordinarily associated with residency (i.e. water and sewerage). 1.168 The amendment ensures that the sales of vacant residential land will not be input taxed under s 40-65. The supply of land is not input taxed where it is:
Associate: Dated: 3 December 2009
Solicitor for the Applicant: Robert Richards & Associates
Vidler
Commissioner of Taxation
(2004) 141 FCR 299