Carberry v Chief Commissioner of State Revenue [2018] NSWCATAD 157

Date of judgement 24 July 2018 Proceeding No. 2017/00141443
Judge(s) C Ludlow, Senior Member
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Income Tax Assessment Act 1936 (Cth)

Income Tax Assessment Act 1997 (Cth)

Land Tax Management Act 1956

Taxation Administration Act 1996
Catchwords REVENUE – land tax – principal place of residence exemption – property not used and occupied by owner – meaning of income – conditions for exemption not met – land tax assessments affirmed
Cases cited Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8

Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8

Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222

Background

These proceedings concerned a review of the Chief Commissioner’s decision to assess the taxpayer for land tax on land at Bayview (“the Land”) for the 2014 to 2016 land tax years (“the Relevant Period”). The Chief Commissioner determined that the Land did not qualify for the principal place of residence (PPR) exemption under clauses 4, 6 or 8 of Schedule 1A of the Land Tax Management Act 1956 (“the Act”). These clauses allow the PPR exemption to apply to an owner’s intended PPR and for temporary absences from an owner’s PPR.

The key facts are:

  1. On 18 November 2013, the taxpayer purchased the Land.

  2. In November/December 2013, the taxpayer commenced preliminary works to convert the dwelling on the Land into two separate residences. As at 31 December 2013, the Land was unoccupied.

  3. In February 2014, the taxpayer suspended work due to an unexpected delay in settling an insurance claim.  He had planned to use the money from the claim to fund the building works on the Land.

  4. From February 2014 to April 2017, the taxpayer leased the existing dwelling to tenants. As at 31 December 2014 and 31 December 2015, the Land was used and occupied by tenants.

  5. Around late April or early May 2017, the taxpayer moved into and occupied the premises.

  6. By November 2017, building works for the secondary dwelling on the Land were complete, and the two residences on the Land were then advertised as being available for rent.

Statutory Framework

The issues in dispute were whether the principal place of residence (PPR) exemption under clauses 2 and 6 of Schedule 1A of the Act should have been applied to the Land for the Relevant Period.

In determining whether clause 6 applied (intended PPR) the Tribunal had to consider:

  1. whether the taxpayer intended to use and occupy the Land “solely” as his principal place of residence;

  2. whether the Land was “unoccupied” at the relevant times;

  3. whether the taxpayer derived any “income” from the use and occupation of the Land since the commencement of building works on the Land; and

  4. whether the Chief Commissioner applied the correct version of the Act for each of the land tax years in the Relevant Period;

Submissions

The taxpayer submitted that the Land should have been treated as his principal place of residence under clauses 2 and 6 of Schedule 1A of the Act. In particular, he claimed that:

  1. under clause 4 of Schedule 1A a tenant’s use of a second residence could be disregarded for the purposes of the principal place of residence exemption;

  2. “income” for the purposes of clause 6(2)(b) should be interpreted to mean “profit” or “income less expenses incurred” or “taxable income”. In this case, the taxpayer submitted that he had not derived any “income” because he had not earned any profit over and above the expenses that he had incurred for the building works on the Land. The taxpayer further relied on the meaning of “income” in clause 8(7)(b) in support of his argument; and

  3. the Chief Commissioner had applied an incorrect version of clause 6 in assessing the Land;

The Chief Commissioner submitted that the taxpayer had failed to discharge the onus of proof under s.100(3) of the Taxation Administration Act 1996, contending that:

  1. the taxpayer had not established that he intended to “solely” use the Land as his principal place of residence. In this regard, the Chief Commissioner relied on documentary evidence which showed that the taxpayer had planned and built a second dwelling on the Land;

  2. the taxpayer has earned income during the Relevant Period, because “income” for the purposes of clause 6 should take on its ordinary meaning (that is, “revenue”, “receipts” or “something that comes in”) and not be interpreted to mean profit or income less any deductions;

  3. the Land was leased to tenants between February 2014 and April 2017, and therefore it was not “unoccupied land” under clause 6; and

  4. the Chief Commissioner had applied the correct versions of the Act in assessing the Land for land tax throughout the Relevant Period.

Decision

The Tribunal was not satisfied that the taxpayer intended to “solely” use the Land as his principal place of residence. Therefore the concession for unoccupied land intended to be the owner’s PPR under clause 6 of Schedule 1A did not apply (at [14]).

The Tribunal determined that “income” should be given its ordinary meaning in the absence of any contrary intention demonstrated in the Act (at [21]).  The Tribunal held that the entire rent received by the taxpayer constituted his income for the purposes of clause 6(2)(b).

The Tribunal also considered that clause 8 of Schedule 1A (“Concession for absences from former residence”) had no application to the taxpayer’s case, because he had not established that he had previously used the land as his principal place of residence for at least 6 months (at [23]).  In any event, clause 8(7)(b) suggested that the ordinary meaning of “income” should apply (at [24]) (and the amount of rental income during the Relevant Period exceeded the sum of council, water and energy rates and charges and maintenance costs).

The Tribunal held that the taxpayer had failed to establish that the Land was “unoccupied land” within the meaning of clause 6(8) as the Land had been leased and it had generated rental income throughout the Relevant Period (at [29]).

The Tribunal confirmed that the Chief Commissioner had applied the correct versions of clause 6 at all relevant times, namely the versions applying on the relevant taxing dates of 31 December in 2013, 2014 and 2015 (at [31]).

Order

The assessments for the land tax years 2014 to 2016 are affirmed.

Link to decision

Carberry v Chief Commissioner of State Revenue [2018] NSWCATAD 157

Last updated: 16 August 2018