Joukhador v Chief Commissioner of State Revenue [2015] NSWCATAD 43

Date of judgement 17 March 2015 Proceeding No. 1410452
Judge(s) R Perrignon
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Children (Education and Care Services) National Law (NSW)

Interpretation Act 1987

Land Tax Management Act 1956

Taxation Administration Act 1996
Catchwords Land tax - exemption for child care facility under section 10(1)(u) - land being developed for use as a child care facility - whether 'used for the provision of an approved education and care service'
Cases cited

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27

Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183

Gunasti v Chief Commissioner of State Revenue (2012) NSWADT 218

Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867

Loomes v Chief Commissioner of State Revenue (2014) NSWCATAD 133

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Summary

Mr Les Joukhador and Mr Michel Joukhador (“the Taxpayers”), sought review of the Chief Commissioner’s land tax assessment requiring them to pay land tax in respect of a property at Croydon (“the Property”) for the 2014 land tax year.  On the relevant taxing date the Taxpayers were in the process of developing the site as a child care centre.

The Tribunal concluded that the exemption applying to child care centres did not apply because on the taxing date the conduct of the child care operation had not commenced and the centre was not an approved facility.  the Tribunal accepted that the levying of land tax was mandated by the statute.  As such the Tribunal concluded that there was nothing unfair, unreasonable or illogical in the Chief Commissioner’s decision to comply with the statutory duty to impose land tax in accordance with the Act.

Background

In 2013 the Taxpayers purchased the Property with development approval for a child care centre. In October 2013, construction of a child care centre commenced. Due to delays caused by weather and other factors, the centre was not completed until, and ready for inspection by the Department of Education and Communities, sometime in February or March 2014.

On 23 April 2014, the Department approved the operation of a child care centre on the Property. Shortly after obtaining that approval, the child care centre commenced operations.

On 1 August 2014, the Chief Commissioner assessed the Taxpayers as liable for land tax for the 2014 land tax year in respect of the Property. The Taxpayers objected to that assessment; that objection was disallowed.

The Statutory Framework

Section 10(1)(u) of the Land Tax Management Act 1956 (“the Act”) exempts “land that is used solely for the provision of an approved education and care service” from land tax, “but only if” the service is provided by an approved provider under the  Children (Education and Care Services) National Law (NSW)) (“the National Law”), and the land is the place where children are educated or cared for by the service.  Section 5 of the National Law defines an approved education and care service as ‘an education and care service for which a service approval exists’.

Issue

The Tribunal considered whether the words “land that is used solely for the provision of an approved education and care service” implied an element of futurity, or alternatively whether the exemption only applied to use as at 31 December (“the taxing date”) [29].

Submissions

The Taxpayers submitted that the words “land that was used solely for the provision of an approved education and care service” should be construed to include land that is being developed for that purpose. They submitted that, at the relevant taxing date (31 December 2013), they intended to develop and operate the land for the sole purpose of a child care centre [2 & 18].  The Taxpayers also submitted that the Chief Commissioner’s assessment was “unfair”.

The Chief Commissioner submitted that the exemption at s.10(1)(u) of the Act only applied where the land was actually being used as a child care centre at the taxing date; further, that the land could not be used as a child care centre without the appropriate approval under the National Law. The Chief Commissioner submitted that a mere intention to use the property for the purpose of a child care centre was not sufficient to qualify for the exemption [19].

Decision

The Tribunal referred to the decision in Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 as authority that the phrase “used for” in s. 10AA of the Act could be construed as implying an element of futurity [24].  Whether that interpretation applied to s.10(1)(u) of the Act required the provision to be read as a whole. The Tribunal found that clause (ii) of s. 10(1)(u) confined the exemption to land where “children are educated and cared for by the service”. Since children can only be educated and cared for in a child care facility once the facility receives approval, the Tribunal found that “used for” in s.10(1)(u) did not imply futurity [30].  

Further, the Tribunal accepted that the approval granted on 23 April 2014 was a service approval within the meaning of s. 5 of the National Law and, accordingly, the Property could not be “used for” education or care services prior to the grant of that approval in April 2014. 

In determining whether the assessment was unfair, the Tribunal decided it must consider whether the Property ought not to have been assessed for land tax because it was unfair, unreasonable or illogical to do so. 

The Tribunal concluded that the exemption was attracted by the actual conduct of the child care operation in an approved facility [33]. The Tribunal accepted that the legislation does not provide an exemption from land tax on the basis that its imposition would be unfair or unreasonable [35]. While s. 8(1) of the Taxation Assessment Act 1996 provides that the Chief Commissioner “may” make an assessment of the tax liability of the taxpayer, the Tribunal found, with reference to the decision in Gunasti v Chief Commissioner of State Revenue (2012) NSWADT 218, that the function under s. 8 was mandatory rather than merely facultative [37].  

Furthermore, the Tribunal accepted that the levying of land tax was mandated by the statute [37].  As such the Tribunal concluded that there was nothing unfair, unreasonable or illogical in the Chief Commissioner’s decision to comply with the statutory duty to impose land tax in accordance with the Act [39].

Orders

The Chief Commissioner’s land tax assessment was confirmed.

Link to decision

Joukhador v Chief Commissioner of State Revenue [2015] NSWCATAD 43

Last updated: 18 May 2016