Md Samsul Islam v Commissioner of State Revenue [2023]

Background

By a contract for sale dated 16 September 2022, the Applicant purchased the Property subject to an existing tenancy, the fixed term of which expired on 9 January 2023. Completion of the Applicant’s purchase occurred on 16 October 2022. The Applicant began use and occupation of the Property on 22 January 2023.

On 1 February 2023, the Chief Commissioner issued a Land Tax Assessment notice for the 2023 land tax year (“Assessment”). The Assessment levied land tax on the Property on the basis that it was not exempt from land tax.

The Applicant lodged an objection to the Assessment on 3 February 2023, contending that the principal place of residence applied to the Property, notwithstanding that it was subject to an existing tenancy, as he was unable to remove the tenant from the property. That objection was disallowed by the Chief Commissioner on 24 February 2023.

The Applicant then commenced this proceeding by way of an application for administrative review filed with the Tribunal on 3 March 2023.

Statutory Framework

Schedule 1A of the LTMA provides for the details of the principal place of exemption. Cl 2 provides for an exemption from land tax in respect of residential land used and occupied by an owner as their principal place of residence (and for no other purpose), and requires as a precondition for its operation:

1. the land to either have been continuously used and occupied by the person for residential purposes since 1 July in the year preceding the year in which land tax is levied (LTMA, sch 1A cl 2(a)); or
2. the Chief Commissioner to be satisfied that the land is used and occupied by the person as that person’s principal place of residence (LTMA, sch 1A cl 2(b)).

Clause 6 of Schedule 1A provides a concession in respect of “unoccupied land” that is intended to be the owner’s principal place of residence. For cl 6 to apply, the following criteria must be met:

1. the land is unoccupied because the owner intends to carry out (or is carrying out) building or other works necessary to facilitate their intended use and occupation of the land as a principal place of residence (LTMA, sch 1A cl 6(2)(a));
2. if building or other works have physically commenced, no income has been derived from the use and occupation of the land since that commencement (LTMA, sch 1A cl 6(2)(b)); and
3. the intended use and occupation must not be unlawful (LTMA, sch 1A cl 6(2)(c)).

For the purposes of cl 6, “unoccupied land” is defined to mean “land that is not being used or occupied for any purpose” (LTMA, sch 1A cl 6(8)).

Submissions

Applicant's submissions

The Applicant contended that the principal place of residence exemption applied on the following grounds:

1. it was always his intention to use and occupy the land as his “principal place of living”. He was unable to do so before 22 January 2023 because he had to “honour the previous tenancy contract between the tenant and the previous landlord” and could not lawfully remove the tenant earlier;
2. as he had planned to live in the property, he had a plan to renovate it; and
3. the Assessment was unfair as it effectively “penalised” the Applicant for being unable to legally remove the tenant until January 2023.

Chief Commissioner's submissions

The Chief Commissioner submitted:

1. the relevant taxing date for the 2022 land tax year was midnight on 31 December 2022. At that time, the Applicant did not use or occupy the Property as his principal place of residence. The Applicant’s intention to use the property as a principal place of residence was not relevant. Rather, the applicable test was whether the Applicant actually used and occupied the property on the taxing date;
2. the Applicant’s plan to renovate the house did not engage cl 6 of Sch 1A of the LTMA because at the taxing date of midnight on 31 December 2022, there was still a tenant using and occupying the Property; and
3. the Chief Commissioner’s function of administering assessments of land tax is mandatory rather than discretionary. The authorities clearly establish that, in Revenue matters, a claim based only on unfairness grounds will not be successful.

Decision

Ground 1 – Intention to use and occupy the Property as his PPR

SM Currie reiterated that the “imposition of land tax is based on actual use and occupation” of the Property at the taxing date, being 31 December 2022 (at [30]). He confirmed that the authorities established that a subjective intention to occupy was not alone sufficient to bring a property within the exemption provision (at [31]).  As at midnight on 31 December 2022, the tenant, not the Applicant, had actual use and occupation of the Property such that the Property could not have been the Applicant’s principal place of residence for the 2023 land tax year. Therefore, that ground failed.

Ground 2  - Applicant’s plan to renovate the property

SM Currie considered that the Applicant’s reliance on cl 6 of Sch 1A of the LTMA was misplaced. That provision would have only been relevant if the property consisted of “unoccupied land” intended to be the Applicant’s principal place of residence within 4 years (at [34]). It clearly was not the case that the land was “unoccupied”; the Property at the relevant time was a developed site and occupied (at [35]). Accordingly, that ground also failed.

In relation to the third ground, SM Currie considered Commissioner of Taxation v Ryan  (“Ryan”) as the primary authority for this issue. In Ryan, Gleeson CJ, Gummow and Hayne JJ said (at 123 (CLR)):

That question is not answered by asserting the existence of any “policy” or “general intention” unless that policy or intention is to be found reflected in the provisions of the Act. Appeals to general notions of “fairness” or “justice” do no more than attempt to mask the absence of any foundation in the legislation for the conclusion which is asserted..

SM Currie noted that the above principle had been upheld in multiple revenue cases in the Tribunal (at [38]). He noted that, although the Applicant may feel disappointed by the result, the Chief Commissioner had applied the legislative regime made by Parliament to fulfill his duty to collect revenue (at [40]). That being so, this ground also failed.

In light of the above, SM Currie concluded that the Assessment was the correct and preferable decision (at [46]).

Orders

1. The Assessments were confirmed.

Link

As the judgment was delivered ex tempore, there is no link to the decision.