York v Chief Commissioner of State Revenue

Legislation

1. Land tax is imposed on the taxable value of all non-exempt land in New South Wales: Land Tax Management Act 1956 (NSW) (LTMA), s 7. Land tax for each land tax year (a land tax year is the same as a calendar year) is charged on land owned at midnight on the 31 December immediately preceding that year: LTMA, s 8.
2. One category of exempt land is land covered by the principal place of residence exemption (PPR exemption): LTMA, s 10(1)(r). The PPR exemption is set out in Schedule 1A.
3. Clause 2(1) in the Schedule provides, in summary, that a parcel of residential land that is used and occupied by the owner as the owner's principal place of residence is exempt from land tax.
4. Clause 13 in the Schedule restricts the application of the PPR exemption where a parcel of residential land is comprised of 2 or more lots of land. Relevantly, clause 13 provides as follows: 13 Application of exemption to residence comprised of 2 or more lots (other than strata lots) (1) The principal place of residence exemption does not extend to a parcel of residential land that is comprised of 2 or more lots of land, and that is used and occupied by the owner of the lots (or by one of them) as a principal place of residence, unless - (a) the lots are adjoining, and (b) the lots are in the same ownership, and (c) the lots are the site of a single residence (excluding any additional residential occupancy that may be disregarded under clause 4). … (2) For the purposes of this clause - (a) … (a1) separate lots that are divided by a fence, wall or other structure are not to be regarded as adjoining unless access is readily available between the lots, by means of gates, doors, steps, stiles, elevators or openings or by similar means, and (b) separate buildings erected on separate lots are not to be regarded as a single residence if the buildings are separately occupied or capable of being used for separate occupation.

The issues

1. The issues in this case are to be assessed at the 'taxing point' of midnight on 31 December 2021. They are: 1. Whether the lots were adjoining: cl 13(1)(a); and 2. Whether the lots were the site of a single residence: cl 13(1)(c). It is common ground that the lots were in the same ownership at the taxing point, so cl 13(1)(b) is satisfied.
2. For issue (a) to be resolved in favour of the Applicant, access must be readily available between the lots, by means of gates, doors, steps, stiles, elevators or openings or by similar means: cl 13(2)(a1). I will call this the 'access question'.
3. For issue (b) to be resolved in favour of the Applicant, the separate buildings erected on the separate lots cannot be separately occupied or capable of being used for separate occupation: cl 13(2)(b). I will call this the 'separate occupation question'.

The facts

1. The lots in question, Number 5 and Number 7, were acquired by the Applicant in 2003. Originally they shared the same Property ID (PID), with a house at Number 5 and a tennis court at Number 7. The PPR exemption was granted for both Number 5 and Number 7, on that single PID, on 31 December 2003.
2. The two lots were separated in June 2021, and new PIDs were created. Aerial imagery taken in October 2021 shows that by then, a new house had been erected on Number 7. (It is not clear from the evidence when the construction of the new house commenced.) In August 2022 the Chief Commissioner removed the PPR exemption on Number 7 from June 2021, but the PPR exemption remains in place for Number 5.
3. The Applicant has since sold Number 7. Contracts were exchanged in October 2021. According to the Applicant the sale would have been completed before the end of the year but for the fact that an occupancy certificate for the new house was not issued until January 2022.
4. Photos included in the section 58 documents (Ex R1), such as those at pp 100-102, show a low-height stone wall, or fence, between the two lots. One of the photos at page 100 shows a milk crate sitting on Number 7, reasonably close to the stone wall. A second photo at page 100 shows two pallet crates, one on each side of the stone wall, and both of them higher than the stone wall.
5. The Applicant said during the Tribunal hearing that those photos were taken during calendar year 2021, and an aerial shot at page 30 dated 6 October 2021 also shows what appears to be that same permanent structure between the two lots. I comfortably find Number 5 and Number 7 were divided by a fence, wall or other structure as at midnight on 31 December 2021, and probably for some months before that date.
6. That same photo at page 30 shows what appears from the air to be a completed free-standing residential building with a pool in the back yard. A driveway has been laid between the front boundary and the building, and the front yard contains sections of lawn, some garden plantings and a path to the front gate. I find there were separate buildings erected on [the] separate lots at midnight on 31 December 2021.

The access question

1. The Applicant hasn't made a formal statement in these proceedings; his case rests on the various photos attached to his Administrative review application form and the assertions made in the Annexure to that form.
2. The Annexure includes the following (italics and underlining in the original): The Applicant contends that the use of milk crates, a tree stump and a pallet crate, meet the requirement that there be steps, stiles, elevators or openings or by similar means … for the purposes of access, within the ambit of Section 13(2)(a1) of the LTMA. It is evident from the photographs of the Applicant that the presence of several sections of the stone bench, which possess a height of approximately 600mm and is equivalent in height to a typical bar stool, facilitates easy sitting and swinging of legs over to easily access the adjoining lot. Despite the Commissioner's objection, which posits that the lots ought not to be deemed as adjoining, it is contended by the Applicant that the requirements set out in Clause (2)(a1) of the LTMA have been met and that access is readily available between the lots, by means of steps and/or stiles and/or openings or by similar means …
3. The Chief Commissioner submits that the photos fail to demonstrate 'readily available' access between the lots by means of 'gates, doors, steps, stiles, elevators or openings'. Instead, they suggest the only way of getting between the two lots was by climbing over the fence. That is neither one of the means specified in the clause nor a similar means to any of those specified.
4. The Chief Commissioner also submits the milk crates and pallet crates are temporary means of procuring access between the lots, and cl 13(2)(a1) requires the means of access to be permanent. Those means of access specified (gates, doors, steps, etc) are permanent in nature, and any similar means of access must similarly be permanent.
5. I agree with the Chief Commissioner's submissions. Climbing over (or alternatively walking around) a fence or wall is not a 'similar means' of access of the kind contemplated by cl 13(2)(a1). It is commonplace, at least in a suburban setting, for dividing fences to form a physical boundary between lots of land. The exception contemplated by cl 13(2)(a1) is the kind of case where that physical boundary is interrupted - and, I consider, in a permanent or at least enduring way - by an access point of the kind specified, or something similar. Pulling a box, or crate, or step-stool, up to a fence and then scaling it would not produce the 'readily available access' to which cl 13(2)(a1) is directed.

The separate occupation question

1. The Applicant's Annexure includes the following (italics and underlining in the original): The Assessment of the Commissioner concedes that the assessment for the 2022 tax year is based on the land owned as at 31 December 2021. As at 31 December 2021, which serves as relevant date for assessment purposes, the Building on Lot 7 could not be separately occupied, as there was no Occupancy Certificate issued, in respect of the Building. That Occupation Certificate was not issued until 18 January 2022. Pursuant to Section 6.9(1)(a)(b) of the Environmental Planning and Assessment Act, it is necessary to have Occupancy Certificate for the use or occupation of an existing or new building, either in its entirety or in part. The Building on Lot 7 was not able to be occupied for the entirety of 2021 and until 18 January 2022. For the purposes of Clause 2(b), the building on Lot 7 was not separately occupied or capable of being used for separate occupation.
2. Contrary to his assertion that the building at Number 7 wasn't capable of being used for separate occupation at 31 December 2021, the Applicant had stated in an email to Revenue NSW on 24 August 2022 (Ex R1, page 15): I wish to advise that we occupied both houses as a joint principal residence in accordance with the precedent set by the court case of adjoining houses in Point Piper which were similarly occupied. I have 9 children and we used both houses as if one at the time up until it was sold. I can supply utility bills which will support this.
3. I am therefore confronted with a statement that the Applicant's family 'occupied' both houses 'as if one', but a contention that the house on Number 7 at the very same time was not capable of being occupied.
4. To some extent the Applicant has retreated from the claim that the house on Number 7 was 'occupied' prior to 31 December 2021. He asserted during the Tribunal hearing that the house wasn't actually being occupied, it was only being used for 'ancillary activities' - without being precise about what those activities were.
5. But let me deal with the lack of an Occupancy Certificate. To suggest that the absence of an Occupancy Certificate means a residence is not 'capable of being used for separate occupation' focuses on the wrong word - on the word occupation rather than the word separate. Clause 13(2)(b) links back to cl 13(1)(c) and its concept of a 'single residence'. In that context, the fundamental question for cl 13(2)(b) is whether the residences are capable of being occupied separately. At midnight on 31 December 2021 they were two free-standing houses in a suburban street. In the circumstances, I draw the inference that the house on Number 7 was built for the very purpose of being sold off, so that the new owner could occupy it separately from those who remained living in Number 5. Of course the two buildings were capable of being used for separate occupation. To conclude otherwise would be bizarre.
6. For the avoidance of doubt, I take the view that the word 'capable' in cl 13(2)(b) doesn't necessarily mean capable right now, it can also encompass future possibility. The real question, having regard to the context, is whether the two buildings are stand-alone structures, complete in themselves, neither one relying on the other to make up an entire residential building. If they answer that description they are 'capable of being used for separate occupation'.
7. In any event, there is authority for the proposition that 'occupation' of a property is not confined to lawful occupation. As the Tribunal explained in Cecere v Chief Commissioner of State Revenue [2022] NSWCATAD 350 at [68]: The legislation does not require that the use and occupation must be lawful, in the sense of complying with requirements of relevant planning legislation: De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86.
8. In addition, the Applicant submitted that the lack of an Occupancy Certificate also meant the building on Number 7 could not be regarded as a 'residence' at midnight on 31 December 2021: with the result that there was only a 'single residence' for the purposes of cl 13(1)(c). For reasons similar to those just explained, I reject that submission.

Conclusion

1. The Applicant has not discharged his onus under s 100(3) of the TA Act. He had to establish that both paragraphs (a) and (c) of cl 13(1) applied, having regard to cl 13(2)(a1) and (b). He has established neither.

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: 19 October 2023