Gogulan v Chief Commissioner of State Revenue [2023] NSWCATAD 162
Background
The Applicants purchased the relevant Property which they claimed was entitled to the principal place of residence exemption on 9 November 2015. During the relevant land tax years (2018 to 2022), they also owned other properties in their joint names and Mrs Gogulan’s separately owned other land.
The Property was leased to tenants at various points in time. Dr Gogulan at various time occupied the Property. On 20 November 2017, a development application for demolition of an outbuilding and construction of a dual occupancy was approved. Between January and October 2019 construction works took place (although the original dwelling on the Property was not the subject of those works).
On 4 January 2018, the Applicants lodged with the Chief Commissioner a Land Tax variation return seeking an exemption from Land Tax pursuant to cl 6 of Sch 1A of the LTMA. In support of the return, the Applicants provided the Chief Commissioner with the determination of their development application and a development plan for the renovation of the property.
On 16 January 2018, the Chief Commissioner approved the request for exemption under cl 6, which was to take effect from 22 June 2017, and issued an assessment for the 2018 Land Tax year showing nil land tax payable in respect of the Property. The assessment also included a note to the effect that, at the completion of the building works and prior to the expiry of the 4 year exemption period provided for in cl 6, the Applicants must initially occupy the Property as a principal place of residence for a period of at least six months; if that condition was not met, the exemption would then be revoked and the Applicants’ land tax liability would be re-assessed.
On 5 August 2022, the Applicants lodged a completed land tax questionnaire, indicating that they were claiming the principal place of residence in respect of the Property from 20 January 2017 to 20 January 2020.
On 23 August 2022, the Chief Commissioner advised the Applicants that there was insufficient evidence that the Property was eligible for either the principal place of residence exemption (in cl 2 of Sch 1A of the LTMA) or the intended principal place of residence exemption (in cl 6 of Sch 1A of the LTMA). The Chief Commissioner then issued an assessment in respect of the 2018 to 2022 Land Tax years (“Assessment”), which revoked the intended principal place of residence exemption which had been applied previously.
Statutory Framework
Clause 2 of Schedule 1A of the LTMA relevantly provides that residential land that is used and occupied as a principal place of residence of an owner is exempted from Land Tax, provided that:
- the land (and no other land) has been continuously used and occupied by the owner since 1 July in the year preceding the land tax year; or
- the Chief Commissioner is satisfied that the land is used and occupied by the owner as the person’s principal place of residence on the taxing date (midnight on 31 December preceding the tax year).
Clause 6 of Schedule 1 A provides a concession from land tax in respect of land that is unoccupied but is intended to be the owner’s principal place of residence.
The exemption in clause 6 only applies in respect of a person’s ownership of the land for, relevantly, 4 years immediately following the year in which the person became the owner of the land (Sch 1A, cl 6(3)(a)). The Applicants were required by clause 6(5) of Schedule 1A of the LTMA to establish that prior to the expiry of the four year exemption period, they actually used and occupied the Property as their principal place of residence. Clause 6(5) also requires that they continued to do so for a period of at least 6 months. If the requirement in clause 6(5) is not satisfied, clause 6(5) operates to revoke the exemption.
Clause 8 of Schedule 1A of the LTMA provides a concession from land tax in respect of absences from former residences where the owner resumes use and occupation of that residence as their principal place of residence within 6 years. For the clause to apply, the Chief Commissioner must be satisfied that:
- the owner had used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months (Sch 1A, cl 8(1)(a)); and
- no income was derived from the use or occupation of the former residence in the preceding tax year unless:
- it was for a period of 6 months or less (Sch 1A, cl 8(6), read with cl 8(7)(a)); or
- the income derived was no more the sum of cover council, utilities and maintenance costs (Sch 1A, cl 8(6) and cl 8((7)(b)).
Submissions
Applicant's submissions
The Applicants contended that, during the Land Tax years in dispute, the Property fell within the scope of cll. 2, 6 or 8 of Sch 1A of the LTMA because:
- Dr Gogulan had lived in the Property for a period of time and they had no other principal place of residence;
- the Applicants had other land holdings, but those properties were tenanted. The residence where Mrs Gogulan and the children lived was a rental property and so could not be claimed as a principal place of residence;
- their strength and ties were with the Property as they were involved in planning, designing and building the second dwelling on the Property, and they had always intended to live there;
- they had been previously granted the clause 6 exemption and had provided all relevant documentation at the time the exemption was granted in 2018, and again in 2020 when the exemption was reviewed, to enable the Chief Commissioner to have made the correct decision in relation to the exemption in the first place;
- for the purposes of cl 8, the Applicants were not receiving market rent in relation to the property and, at least for 2019, were only receiving rent sufficient to cover maintenance charges; and
- the Chief Commissioner ought to have reissued an assessment when the cl 6 exemption expired in 2021 and should not have suddenly revoked the exemption. Had they known that the exemption would not be available in respect of the Property, they would have re-structured their affairs differently.
Chief Commissioner's submissions
The Chief Commissioner case was that the Property was not subject to any of the exemptions or concessions in Sch 1A contended for by the Applicants. Dr Gogulan’s occupation of the property did not have the requisite degree of permanence and the requirements set out cll. 6 and 8 were not met.
The Chief Commissioner further submitted that he was entitled to reassess the Property under the Taxation Administration Act as liable for land tax in 2022, in circumstances where the relevant criteria were not met.
Decision
The Tribunal made the following findings:
Principal Place of Residence Exemption – clause 2 of Schedule 1 of the LTMA
The PPR exemption under cl. 2 could not apply because:
- the question was whether the Tribunal could be satisfied that the Property, although not actually occupied by Dr Gogulan on 31 December in the year preceding any of the relevant tax years, “was, nonetheless, used and occupied by him as his principal place of residence in any of the years preceding the relevant tax years” (at [77]);
- there was not sufficient “objective evidence as to the extent or quality of Dr Gogulan’s use of the Property during this period” to be satisfied the property was his PPR (at [81]);
- the period of Dr Gogulan’s occupation of the Property was only a matter of a few weeks, and while “the shortness of the term of occupation is not determinative … [there] clearly was not a degree of permanence” (at [83]) so as to constitute it as his principal place of residence during the period;
- in any event, it was not in dispute that the Property was leased to tenants during each of the years preceding the relevant land tax years. As such, in all relevant years the Property was used by the Applicants as an investment property and was not used for residential purposes and no other purpose as required by clause 2 of Schedule 1A of the LTMA (at [96]); and
- accordingly, the principal place of residence exemption contained in clause 2 of Schedule 1 of the LTMA does not apply in respect of the Property for any of the relevant tax years (at [98]).
The cl. 6 concession could not apply because:
- the Property was tenanted during each of the relevant tax years, and it did not in fact comprise “unoccupied land” for the purposes of clause 6 (at [100]-[101]);
- in any event, whether or not the exemption had been correctly granted by the Chief Commissioner in 2018, the fact that the Applicants did not use and occupy the Property as their principal place of residence before the expiry of the 4 year exemption period, and continued to do so for a period of six months, meant that the exemption was revoked by clause 6(5) of Schedule 1A (at [111]).
The concession in clause 8 could not apply as:
- the Applicants had not established that the Property was used and occupied as their principal place of residence for a continuous period of at least six months before ceasing to use and occupy it as such (at [113]); and
- the Property was rented for a period of more than six months in each of the 2017, 2018, 2020 and 2021 years, meaning that income was derived from the use of the Property (and whilst the income received in 2019 was significantly less, there was not sufficient evidence to conclude it was no more than to cover maintenance costs) (at [114]).
- It followed that the Property did not meet the criteria for the exemption and concessions set out in cll 2, 6 or 8 of Schedule 1A of the LTMA in respect of the 2018 to 2022 land tax years (at [123]).
Finally, the Tribunal noted that it had not been established that the Chief Commissioner made any error in initially granting the exemption, however, “even if he did, matters such as those are not relevant to the validity of the Assessment. No conduct on the part of the Chief Commissioner can operate as an estoppel against him administering the legislation” (at [117]).
Orders
- The Assessments were confirmed.
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