Perry Properties Pty Ltd v Chief Commissioner of State Revenue  NSWADTAP 13
|Date of judgement||2 April 2012||Proceeding No.||119032|
|Judge(s)||K O’Connor DCJ, President
S Frost, Judicial Member
J Schwager, Non-Judicial Member
|Court or Tribunal||Administrative Decisions Tribunal Appeal Panel|
|Legislation cited||Administrative Decisions Tribunal Act 1997
Land Tax Management Act 1956
Taxation Administration Act 1996
|Catchwords||STATE REVENUE - Appeal - Land Tax - Low Cost Accommodation - Exemption - Long Term Residence Criteria - Whether criteria confine calculation to the assessable period - Held, so confined - If not met, do criteria allow for exercise of discretion to allow exemption - Held, no - Appeal dismissed - Land Tax Management Act 1956, s 10Q; Revenue Ruling LT 78|
|Cases cited||AT v Commissioner of Police  NSWCA 131
Chief Commissioner of State Revenue v McGrath & Anor  NSWSC 387
Perry Properties Pty Limited v Chief Commissioner of State Revenue  NSWADT 48
Perry Properties Pty Ltd v Chief Commissioner of State Revenue (RD)  NSWADTAP 6
Perry Properties Pty Ltd v Chief Commissioner of State Revenue  NSWADT 145
Valastar Pty Ltd v Chief Commissioner of State Revenue  NSWADTAP 84
On 2 April 2012, the above decision was published in this matter by the Appeal Panel of the Administrative Decisions Tribunal. The proceedings arose from a decision by the Chief Commissioner that the taxpayer was not eligible for an exemption from payment of land tax for the operation of a boarding house. The Appeal Panel dismissed the substantive Appeal, as well as a cross-appeal brought by the Chief Commissioner with respect to the issue of costs awarded below.
The taxpayer commenced operating a boarding house in Glebe, NSW (“the property”) on 26 January 2006. The taxpayer subsequently applied to the Chief Commissioner for exemption from payment of land tax for the 2007 tax year pursuant to s.10Q of the Land Tax Management Act 1956 (“the LTMA”). Section 10Q relevantly provided as follows:
Land is exempted from taxation under this Act leviable or payable in respect of the year commencing on 1 January 1995 or any succeeding year if:
the land is used and occupied primarily for low cost accommodation, and
the Chief Commissioner is satisfied that the land is so used and occupied in accordance with guidelines approved by the Treasurer for the purposes of this section…
The guidelines approved by the Treasurer for exemption with respect to the 2007 land tax year were found in Revenue Ruling LT 78 (Land Used Primarily for a Boarding House – 2007 Tax Year).
The Chief Commissioner disallowed the taxpayer’s request for exemption at the assessment stage and on objection, and the taxpayer sought review of this decision in the Tribunal. The Chief Commissioner’s decision was affirmed at first instance (see Perry Properties Pty Ltd v Chief Commissioner of State Revenue  NSWADT 48). A subsequent appeal was allowed by the Appeal Panel (see Perry Properties Pty Ltd  NSWADT 145), and the matter was remitted to a single member of the Tribunal for further consideration.
On remittal, the Tribunal affirmed the Chief Commissioner’s initial decision. Relevantly, the Tribunal found that the taxpayer had failed to satisfy the following requirement in LT78:
The approved guidelines for the 2007 tax year are as follows:
land that is used as the site of a boarding-house will be entitled to an exemption from land tax for the 2007 tax year where, during the year ended 31 December 2006, in respect of at least 80% of the accommodation available to boarding house residents:
occupation was by long term residents (a long term resident is considered to be a person who resided at a boarding-house for 3 consecutive months or for any periods totalling 3 months); and
where full board and lodging was provided, the maximum tariff charged was no more than*:
$269 per week for single accommodation or $450 per week for married or shared accommodation
or where less than full board and lodging was provided, was no more than*:
$180 per week for single accommodation or $300 per week for family or shared accommodation
where the requirements of paragraph 3(i)(a) above could not be met, land used and occupied primarily for a boarding house may still qualify for exemption provided:
at least 80% of the accommodation that was actually occupied was occupied by long term residents; and
at least 80% of the accommodation available to boarding-house residents was either occupied or was available for occupation at tariffs within the limits shown in paragraph 3(i)
where less than 80% of the accommodation available to boarding house residents was occupied by long term residents, owners seeking an exemption must provide an explanation of the reasons that this requirement was not met and such circumstances will be considered on a case-by-case basis…
The taxpayer had argued that in determining whether a person was a “long term resident” of the boarding house during the year ending 31 December 2006, paragraph 3 allowed account to be taken of periods of occupancy by that person totalling 3 months or more in any boarding house that arose after 31 December 2006. The Tribunal rejected this construction, holding instead that paragraph 3 required this inquiry be limited to periods of occupancy in the boarding house in question during the 2006 land tax year only. As only 45% of the occupied beds in the property were occupied by persons who stayed at the property for periods totalling 3 months in 2006, the Tribunal held that the taxpayer had failed to satisfy paragraph 3 of LT78. Further to this finding, the Tribunal held that if the taxpayer was entitled to rely on occupation during periods after 31 December 2006, it would be required to demonstrate that occupation during these periods was lawful, in the sense of being compliant with a relevant development consent. The Tribunal was not satisfied that this onus had been discharged.
On appeal, the taxpayer argued that the Tribunal erred as follows:
In applying paragraph 3(i)(a) of the LT78, the Tribunal incorrectly ruled that periods of occupancy by a resident after 31 December 2006 could not be taken into account in considering whether that person was a “long term resident” in 2006 for the purposes of that paragraph (treated as two discrete in the notice of appeal);
the Tribunal should have exercised the discretion said to arise under paragraph 3(iii), whereby a taxpayer could be granted an exemption under s.10Q where the criteria in sub-clauses 3(i) or 3(ii) were not satisfied; and
the Tribunal had erred in holding that the style of accommodation of the property was not compliant with the relevant planning consent, and therefore not eligible for the exemption by reason of being unlawful.
The taxpayer further applied for leave to extend the appeal to the merits of the original decision.
The Chief Commissioner cross-appealed on the basis that the Tribunal erred in not awarding costs at first instance.
Appeal Panel Decision
In relation to the first issue raised by the taxpayer, the Appeal Panel was satisfied that LT78 confined consideration of eligibility for exemption for the 2007 tax year to events occurring during the (preceding) 2006 land tax year. Textually, the appearance of the phrase “during the year ended 31 December 2006” at the head of paragraph 3 conditioned the temporal scope of the subsequent sub-clauses, including the definition of “long-term resident” in paragraph 3(i)(a). In the view of the Appeal Panel, this reading was consistent with the “context, purpose and orderly operation of legislation of this kind” (at para ). By allowing occupancies in subsequent years to be taken into account, the interpretation advanced by the taxpayer would provide an incentive for taxpayers to delay filing their (land tax) returns until figures for occupancy provided a basis for exemption for a particular tax year. Such an outcome would interfere with the orderly operation of the legislation (at para ).
In relation to the second issue raised by the taxpayer, the Appeal Panel rejected the taxpayer’s submission that paragraph 3(iii) provided the decision-maker with a broad discretion to apply the exemption where the conditions in sub-clauses 3(i) and 3(ii) were not satisfied and the taxpayer was able to provide a cogent explanation as to why this had occurred. The Appeal Panel held that structurally, the scheme in sub-clauses 3(i) and 3(ii) provided two alternative means of qualifying for the exemption. In this context, paragraph 3(ii) provided the taxpayer with a less onerous means of qualification by granting the exemption where 80% of the accommodation actually occupied (as opposed to 80% of all accommodation) was occupied by long-term residents during the 2006 land tax year (at -). Rather than providing the decision-maker with an independent discretion to grant the exemption in spite of a failure to satisfy sub-clauses 3(i) and 3(ii), sub-clause 3(iii) was directed to enabling the decision-maker to be satisfied that the application of the lower base-line in sub-clause 3(ii) was reasonable in the circumstances. As such, and despite somewhat awkward drafting, sub-clause 3(iii) operated as an additional sub-paragraph to sub-clause 3(ii).The Appeal Panel therefore rejected the taxpayer’s contention that it operated as an independent discretionary ground for exemption in applying LT78 (at ).
Due to its rejection of the taxpayer’s primary contentions, the Appeal Panel did not consider it necessary to consider the third issue raised by the taxpayer (the need for compliance with planning consent). Leave to extend the appeal to the merits of the primary decision was also refused.
The Appeal Panel dismissed the Chief Commissioner’s cross-appeal in relation to the award of costs at first instance, on the basis, inter alia, that the failure of the taxpayer to discharge its onus of proof at first instance did not constitute sufficient reason to disturb the general position under s.88 of the Administrative Decisions Tribunal Act 1997(“the ADT Act”) that each party bears its own costs. The Appeal Panel noted that while the outcome of a case may be relevant to the exercise of the Tribunal’s discretion to award costs (citing AT v Commissioner of Police ), the discretion should be exercised mindful of the overall access objectives informing the ADT Act (at ). The Appeal Panel further declined to award the Chief Commissioner’s costs on appeal, on the basis that the taxpayer’s construction of LT78, while tenuous, was at least arguable (at -).