Chief Commissioner of State Revenue v Ghali (RD) [2012] NSWADTAP 20

Summary

This matter involved an appeal to the Appeal Panel by the Chief Commissioner from the decision of the Administrative Decisions Tribunal ("the Tribunal") in Ghali v Chief Commissioner of State Revenue [2011] NSWADT 261 that the taxpayer was entitled to the principal place of residence exemption for a property in Beecroft (“the Beecroft Road property”).

The Taxpayer initially sought review by the Tribunal of a decision by the Chief Commissioner to assess him for land tax for the 2004-2007 land tax years (“the relevant period”) with respect to the Beecroft Road property.

On 7 June 2012, the Appeal Panel of the Administrative Decisions Tribunal allowed the Chief Commissioner’s appeal, setting aside the first instance decision and affirming the Chief Commissioner’s assessment for the relevant period.

Background

The Taxpayer asserted that the property should have been treated as exempt from payment of land tax on the basis that it was his principal place of residence within the meaning of s.10(1)(r) of Land Tax Management Act 1956 (“the LTMA”).

The taxpayer asserted that his case satisfied either or both of the categories listed in cl 2(2)(a) and (b) of Schedule 1A of the LTMA, that is:

1. “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
2. 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.”

At first instance, the Tribunal held that the taxpayer’s circumstances did not fall within category (a) above, but was satisfied that they fell within category (b).

The Taxpayer’s evidence was that he had spent 6 weeks of the year during the relevant period at the Beecroft Road property, and spent the other 46 weeks of those years at another property he owned, known as the Harold Avenue property. The Taxpayer claimed that that during the relevant period, his estranged wife had ordinarily resided at the Beecroft Road property, while he slept and undertook renovations at the Harold Avenue property. He would return to the Beecroft Road property on two occasions each year of approximately three weeks duration each to conduct events that he wished to hold there associated with his ethnic and cultural background.

The Tribunal accepted the taxpayer’s evidence that he had always regarded Beecroft Road as his principal place of residence. The case of Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 (“Mesiti”) was relied upon, where a similar question had arisen as to which of two places of residence should be regarded as the principal place of residence. The Tribunal highlighted the fact that, like Mrs Mesiti, Mr Ghali occupied the land because, as its sole owner, he enjoyed control over it and exercised that control. There is no evidence that the Beecroft Road property was used for any other purpose other than residential purposes.

The Chief Commissioner’s Appeal

The Chief Commissioner raised the following question on appeal:

1. Whether:
   1. The Tribunal applied a sole purpose test and thereby failed to apply the test in cl 2(2)(b);
   2. Failed to properly and fairly consider the fact that the applicant intended to and did reside at the Harold Avenue property and did so use and occupy that property in the relevant land tax years;
2. Whether the Tribunal found that the subjective intentions of the applicant as to past and future use and occupation of Harold Avenue and Beecroft Road properties were determinative as to his use and occupation of the Beecroft Road property as his principal place of residence;
3. Whether the Tribunal applied the wrong test by finding that the applicant's use and occupation of the Beecroft Road property more closely resembled the facts of a previous case (Mesiti);
4. Whether the Tribunal erred in finding that the applicant used and occupied the Beecroft Road property as a residence in the relevant land tax years because there was no factual basis for that finding; and
5. (not pressed by the Chief Commissioner);
6. Whether the Tribunal failed to consider whether the applicant could use and occupy the Beecroft Road property as a residence or his primary residence during the relevant years in circumstances where the property was used and occupied by a tenant and his wife and thereby the Tribunal failed to consider a matter relevant to the cl.2(2)(b) test.

The Chief Commissioner further sought leave to extend the appeal to the merits of the decision at first instance.

Decision

On 7 June 2012, the Appeal Panel delivered a decision allowing the appeal, setting aside the first instance decision and affirming the Chief Commissioner’s assessment for the relevant period.

The Appeal Panel firstly canvassed the meaning to be given to the terms “residence”, “use” and “occupation” as they appear in cl.2(2)(b) of Schedule 1A of the LTMA, noting that these involve a question of fact and degree: at [27]-[28]. Where a question arises regarding whether a place is a person’s “principal place of residence”, the usual determinant will be the proportionate amount of time spent at a place. However, cases such as Mesiti demonstrate that time by itself may not be determinative of this question: at [28].

However, the Appeal Panel distinguished the Taxpayer’s circumstances from those in Mesiti. Here, the Appeal Panel found that the taxpayer had ceded to his separated wife, as a practical matter, exclusive occupation of the Beecroft Road property for 46 weeks of the year. While he retained legal control of the premises, “he could not come and go as he pleased”: at [30]. The circumstances in the present case were therefore distinguishable on this basis from those in cases such as Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 (“Flaracos”). In the Taxpayer’s case, his permitted periods of return each year could not convert the Beecroft Road property into his “residence” or a place that he “occupied” in light of his more general cession of access. The Appeal Panel accordingly upheld Ground 4 of the Notice of Appeal: at [30]-[35].

The Appeal Panel also examined the issue of the extent of reliance the Tribunal at first instance placed on the subjective intention of the taxpayer. While the authorities suggest that subjective intention objectively ascertained is a relevant factor in determining whether a place is an owner’s principal place of residence, the Appeal Panel found this factor should not have been given the weight it was in circumstances in which the Taxpayer had left the Beecroft Road property in 2001 and was absent for six years: at [39].

The Appeal Panel further noted that the discussion of the terms “use” and “occupied” by Allsop P in Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 at [23]-[25] in the context of the primary production exemption from land tax is also of assistance in construing those terms as they appear in cl.2(2)(b): at [40]

Accordingly, the Appeal Panel allowed the Chief Commissioner’s appeal, and affirmed the Chief Commissioner’s decision to assess the Beecroft Road property.

Orders

The Appeal Panel ordered that:

1. The appeal be allowed
2. The decision (of the Tribunal) under appeal be set aside
3. The decision (of the Chief Commissioner) under review be affirmed.

Link to decision

Chief Commissioner of State Revenue v Ghali (RD) [2012] NSWADTAP 20