FSX v Chief Commissioner of State Revenue [2023] NSWCATAD 219
Background
In December 2020, the Applicant purchased a parcel of land from a company controlled by the Applicant and her husband. The ground floor was separately designated either for commercial use or residential use, or both residential and commercial use. The property was subject to an existing development consent for the demolition of existing buildings and construction of a new 3 to 4-storey building, shop-top housing development. To fulfill the development consent, the Applicant began the process of building a 4-storey residence on the land, with spaces on the ground floor separately designated for commercial or residential use, or both.
The Chief Commissioner assessed the land for land tax for the 2021 and 2022 tax years on the basis that it was not actually occupied ‘solely’ for the Applicant’s principal place of residence (PPR) and the use of the land solely for that purpose was unlawful for the purposes of the exemption for an intended PPR under Clause 6 of Schedule 1A.
The parties agreed to a set of agreed facts at [8], which included:
2. It is prohibited under the Local Environment Plan for development consent to be granted for residential accommodation on the land without a commercial space on the ground floor.
3. The Local Environment Plan provided:
shop top housing means one or more dwellings located above ground floor retail premises or business premises
Note: Shop top housing is a type of residential accommodation.
6. Subject to fulfilment of condition 3, certain areas on the ground floor are able to be lawfully used and occupied exclusively for non-residential (commercial) purposes. They may not lawfully be used for residential purposes.
7. No consent to use of those areas has been sought by FSX pursuant to condition 3.
8. In the absence of an application for initial use, the areas marked red must remain vacant
13. Condition 9 of the development consent requires that a glass shop front for window display purposes be retained.
It was agreed by the parties that the ground floor plan was exclusively designated for commercial use and that this space may not lawfully be used for residential purposes.
Statutory Framework
The criteria for exemption of unoccupied land intended to be an owner’s PPR is stipulated in cl. 6 of Schedule 1A, and includes:
6. Concession for unoccupied land intended to be owner’s principal place of residence
1. An owner of unoccupied land is entitled to claim the land as his or her principal place of residence if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence.
2. This clause does not apply unless:
a. the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and
b. if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and
c. the intended use and occupation of the land is not unlawful.
Submissions
Applicant’s Submissions
- Whether the Applicant intended to use and occupy the land ‘solely’ as her PPR
The Applicant and her husband relied upon their affidavits, which stated that they intended the premises to be solely occupied by them, there were no intention for the ground floor to be used nor occupied by others, and there was only one ‘initial thought’ of running a genuine commercial space at ground level, which was abandoned in 2010: at [9].
The Applicant relied upon two expert reports of a town planner. The first report noted that ‘shop top housing’ was the only mechanism available to comply with the Local Environment Plan (“LEP”) and any that other residential accommodation would have been prohibited with no prospects of gaining development consent: at [10]. The report stated that it was common for commercial premises to be left vacant in such developments: at [11] and that the intended use and occupation was lawful as a majority of the area was used exclusively for residential purposes: at [12].
A supplementary report was also submitted, which stated that the December 2021 amendment to the definition of ‘shop top housing’ did not affect the development consent, as it was issued many years prior and concluded that without development consent to an initial commercial use, designated commercial areas must be vacant.
Whether the exclusive use as a PPR was lawful
The Applicant submitted that the Council was satisfied that the submitted plans fell within the definition of shop-top housing, and the consent remained current: at [28]. Regarding whether the intended use of the land solely for residential purpose was lawful, the Applicant relied upon Bowen J’s judgment in Commissioner of Lan Tax v Christie, submitting that the meaning of ‘use’ was separate from occupation: at [33]. Relying on Metricon Qld Limited v Chief Commissioner of State Revenue (No 2), the Applicant submitted that the ground floor is put to advantage to facilitate the actual use of the land as the Applicant’s PPR because it is incorporated into the architectural designs and construction: at [34]-[35].
Chief Commissioner's submissions
- Whether the Applicant intended to use and occupy the land ‘solely’ as her PPR
The Chief Commissioner relied upon an expert report prepared by a town planner. The Report stated that residential accommodation was prohibited under the LEP unless it was a ‘shop top housing’ development, and that development consent was required for the Council to apply the existing definition of ‘shop top housing’ as amended on 31 December 2021. The Report stated that the floor plans should have had areas marked as exclusively for commercial or residential use, and that if the Council become aware of the Applicant’s intention never to use the commercial areas, it would characterise the development as residential accommodation and prohibit the development, noting that sole residential use was not a permissible development during the 2021 and 2022 land tax years, and therefore was prohibited development.
The Chief Commissioner submitted that the designated ground floor areas for commercial use in the approved plans and the materially different intentions asserted by the Applicant in these proceedings (as opposed to when seeking Council consent for shop-top housing with designated commercial spaces) meant that there was no intention to use and occupy the land solely as a PPR.
Whether the Applicant intended to use and occupy the land ‘solely’ as her PPR
The Chief Commissioner submitted that the exclusive use as a PPR was unlawful on two grounds:
- it contravenes the terms of the development consent, which was for both residential and commercial use, and
- it contravenes the LEP, under which the land is zoned ‘B1 Neighbourhood Centre’.
Decision
- Whether the Applicant intended to use and occupy the land ‘solely’ as her PPR
With reference Chief Commissioner of State Revenue v Ferrington, Perrignon SM noted that a person’s intention is gauged objectively with regard to all of the circumstances of the case: at [18]. Perrignon SM found that the Applicant and her husband’s evidence were unequivocal in showing their sole intention was to use and occupy the land as their residence. Despite the presence in the floor plans of areas designated for commercial use, the Applicant had left the areas vacant, which supported the view that the Applicant’s intention was to solely occupy the land for residential purposes.
The Senior Member was satisfied that all the circumstances pointed to the veracity of the evidence of the Applicant and her husband as to the true intentions. The Senior Member were therefore satisfied that the Applicant intended to use and occupy the land solely as her PPR as required by clause 6(1): at [26].
Whether the exclusive use as a PPR was unlawful
Perrignon SM was not satisfied that the change in definition to ‘shop-top housing’ varied the terms of the 2015 development consent: [28]-[30]. Likewise, he was satisfied that the approved modifications to the plans remained current and therefore the development (in accordance with those plans) remained lawful: at [30].
On the issue of the lawful use of the land, the Senior Member noted that land which is left vacant is not necessarily unused or unoccupied, with reference to Council of the City of Newcastle v Royal Newcastle Hospital : at [32].
Perrignon SM accepted the interpretations in Christie and Metricon, finding that use of the land was to the advantage of facilitating the Applicant’s sole intention to occupy the land for residential purposes: [36]. The Senior Member also found that the Applicant’s intention to leave the designated commercial spaces vacant while using and occupying the land as her PPR amounted to an intention to use the commercial spaces for that purpose: at [37].
As the parties agreed that such use would be unlawful, Perrignon SM concluded that the requirement in cl. 6(2)(c) that the intended use and occupation was not unlawful was not satisfied: at [38]-[39].
Orders
The decisions of the Chief Commissioner with respect to the 2021 and 2022 land tax years must be confirmed.
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