|Date of judgement||23 September 2014|
|Judge(s)||A Verick, Senior Member|
|Court or Tribunal||NSW Civil and Administrative Tribunal|
Land Tax – Failure to Occupy Intended Principal Place of Residence – Entitlement of Issue of Reassessment
Bellinz Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 154
R v Inland Revenue Commissioners; Ex parte Unilever Plc  BTC 183
The Taxpayers’ claim, which is the subject of this decision, related to the assessment of land tax solely for the year 2008. The Taxpayers claimed that the reassessment was invalid for that year due to the fact it was made more than five (5) years after the original assessment.
Tribunal found that the reassessment for the tax year 2008 should be confirmed. However the Tribunal remitted the matter to the Chief Commissioner with regard to the question of “fairness” to ensure there had been equitable treatment of the taxpayer in making a reassessment more than 5 years after the original assessment. This issue was not raised during the hearing, but subsequently came to the Tribunal’s notice.
The Chief Commissioner considered the question of fairness based on assessing practices at the time and confirmed the reassessment was consistent with assessing practices at the time
In November 2007, the Taxpayers acquired land at Mollymook Beach (“the Subject Land”) with the intention of building a dwelling that was to be their principal place of residence.
The Chief Commissioner approved an exemption under s.10(1) and Clause 6 of schedule 1A of the Land Tax Management Act 1965 (“the Act”), which exempts vacant land acquired with the intention of building a home to be used and occupied by the owners as their principal place of residence (PPR) is exempt. Clause 6(4) of Schedule 1A provided that the exemption of land intended to be the owner’s PPR was revoked if the owners did not use and occupy the land as their PPR within 2 years, subject to the Chief Commissioner’s discretion to extend the time limit if there was a delay in constructing a residence for reasons beyond the owners’ control. (Clause 6 was amended for the 2011 and subsequent tax years to extend the time limit to 4 years and remove provision for extensions of time to be granted by the Chief Commissioner, but does not apply to this case.)
In December 2007, the Taxpayers began preparing a development application in respect of the Subject Property. However, no application was submitted at that time because the Taxpayers were informed by “various sources” that they would have difficulties in making a viable development application because of new sea-level rulings. Accordingly, the Taxpayers continued to reside in Conjola, and later in Narrawallee.
On 9 May 2011, the Chief Commissioner requested that the Taxpayers confirm they had in fact used and occupied the Subject Property as their PPR. The Taxpayers informed the Chief Commissioner of the reasons for their delay in building the residence, and an extension of time was subsequently granted by the Chief Commissioner.
The Taxpayers eventually submitted a development application with the Local Council, which was granted in early 2012. However, after making enquiries and considering the costs involved in proceeding, the Taxpayers decided to purchase a new home in Milton on 30 March 2012 and subsequently sold the Subject Property on 11 November 2013.
On 8 August 2013, the Chief Commissioner advised the taxpayers that the exemption was revoked, and reassessed the Subject Property for the years 2008 to 2013 in accordance with clause 6(6) of Schedule 1A.
The Taxpayers’ claim, which is the subject of this decision, initially related to the reassessment of land tax for all years, but subsequently limited their request for a review to the 2008 reassessment. The Taxpayers claimed that the reassessment was invalid for that year due to the fact it was made more than five (5) years after the original assessment. Under s.9(3) of the Tax Administration Act 1999 (“the TAA”) the Chief Commissioner cannot make a reassessment more than five (5) years after the initial assessment except in specified circumstances, including where the reassessment more than 5 years after the initial assessment is expressly authorised by another taxation law (s.9(3)(c) of the TAA).
The Chief Commissioner relied upon clause 6(5) of Schedule 1A of the LTMA, which required the Subject Land to be used and occupied for a period of at least 6 months for the exemption to apply, and to clause 6(6), which automatically revoked the exemption if the occupancy requirement was not satisfied, and directed the Chief Commissioner to reassess the land.
The Tribunal agreed that the Chief Commissioner had power under s.9(3)(c) of the TAA to make a reassessment more than five (5) years after the original assessment. The Tribunal found that the exemption of the subject land was revoked by clause 6(6), and the Chief Commissioner was directed to make a reassessment. The Tribunal concluded that because clause 6(4) gave the Chief Commissioner unlimited power to extend the time period within which an owner must complete construction (beyond 5 years from the time of the original assessment), the revocation and reassessment powers in clause 6(6) provided the legislative authority to reassess more than 5 years after the original assessment. The Tribunal noted the revocation power in clause 6(4) would be a Clayton’s power unless this was the case (para 30).
The Tribunal also noted that there was no general discretion in the LTMA to take into account other special circumstances where there is a failure to comply with the requirements of clause 6 (para 31).
The Tribunal confirmed the reassessment for the tax year 2008, but remitted the matter to the Chief Commissioner with regard to the question of “fairness”, having regard to any general discretion or assessing practices as generally applied in similar (reassessment) cases at the relevant time. This issue was not raised during the hearing, but subsequently came to the notice of the Tribunal.
The Chief Commissioner considered the question of fairness, but found that the reassessment was consistent with assessing practices at the time and advised the Taxpayer that the reassessment should stand.