|Date of judgement||21 December 2017|
|Judge(s)||SE Frost, Senior Member|
|Court or Tribunal||New South Wales Civil and Administrative Review Tribunal - Administrative and Equal Opportunity Division|
Land tax – principal place of residence exemption – adjoining blocks, each containing a residence but one of them dilapidated and uninhabitable – whether principal place of residence exemption applies to both blocks
The Applicants owned and lived in a property at 25 Shellcove Road, Kurraba Point (No. 25) since December 2004 which, being their principle place of residence (PPR), is exempt from land tax in accordance with Schedule 1A of the Land Tax Management Act 1956 (NSW) (“the Act”). On 28 August 2014, the Applicants purchased the adjoining property at 27 Shellcove Road (No. 27). Following the purchase, the Applicants removed fencing and a stone wall along the boundary separating the two lots.
Since the purchase neither the Applicants nor anyone else has lived in No. 27. However, the Applicants submitted, and the Chief Commissioner agreed, that No. 27 has been “used” by the Applicants and their family since its acquisition. Uses set out by the Applicants included to maintain privacy to No. 25 (being the principle place of residence), for the storage of building materials, rubbish, plants, gardening and sporting equipment, as a point of access for themselves, tradesman and delivery drivers and as a site for constructing furniture and conducting preliminary building works in respect of the other lot. It was also agreed that the building on No. 27 has, at all times, not been used as a residence and was in a dilapidated state, evidenced by the condition of electrical wiring, plumbing and amenities, water leakage and asbestos and lead risks.
The “four unities” test in Ryan v Commissioner of Land Tax (NSW)  NSWLR 305; 82 ATC 4178 provides that two lots can constitute a single “parcel of residential land” only if they are undivided physically and in their use, occupation and title. The disputed aspect between the parties was the unity of use aspect.
The Applicants submitted that the land tax PPR exemption applying to No. 25 should extend to No. 27, as both blocks, being adjoining properties, form a single parcel of land which was their principle place of residence.
The Chief Commissioner disagreed, contending that No. 27 should not be subject to the exemption, as it is not their primary residence and it is not “residential land”. This was because, at the relevant time, it was not occupied or habitable, meaning that even if both lots formed one parcel, that parcel could not be considered “residential land”.
The Tribunal concluded that the ”four unities” test mandates that the four unities be considered collectively and not separately. The Tribunal concluded that the parcel comprising both lots was capable of being “residential land”, even though No. 27 by itself did not meet the criteria within the legal definition.
The Applicants’ physical uses of No. 27 were accepted by the Tribunal as typical uses for residential land. In relation to the use of No. 27 as a “buffer” for No. 25, referring to Chief Commissioner of State Revenue v Metricon Qld Pty Ltd  NSWCA 11, the Tribunal accepted that inactivity in respect of lot 27 can be considered “use”, if lot 25 is deriving a benefit or advantage as a result. It follows that the Applicants established that No. 25 and No. 27 together satisfy the Ryan ”four unities” test, so that the two lots together should be treated as a “parcel” of land.
Clause 13(2)(b) of Schedule 1A provides that 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 Tribunal concluded that the building on No. 27 was not capable of such use. The Tribunal noted the decision in Prendiville v Chief Commissioner of State Revenue  NSWADT 270, that an uninhabitable property can only be considered capable of separate occupation if it requires only minor expenditure to render it habitable. In this case, it was estimated by the Applicant that it would cost almost $900,000 to restore the building on No. 27 to a habitable state. The Tribunal considered that in its current state it was incapable of residential use and unaffected by the clause 13 restriction.
The land tax assessments for the years 2015 and 2016 were revoked.