Mourched v Commissioner of State Revenue [2023] NSWSC 668
Background
The Land Tax Assessment included two adjacent parcels in Leppington referred to as Parcel A and Parcel B which previously formed part of a single parcel, all of which had been granted the exemption from land tax for land used solely as a childcare centre (“childcare”) pursuant to s. 10(1)(u) of the Land Tax Management Act 1956 (“LTMA”). However, in 2015, the NSW Roads & Maritime Services compulsorily acquired part of the property to create a right of access and drainage easement In connection with that acquisition, the balance of the property became lot 105 and was divided into parcel A and Parcel B. Only Parcel A retained the land tax childcare exemption.
Parcel B, situated at the rear of the property, contained a septic system used for the childcare centre located on Parcel A. A fence separated Parcel A from Parcel B to prevent the children from venturing into the area containing the septic tank.
The Tribunal found at first instance that the Appellants provided no basis, legislative or by authority, for their submission that the whole of Lot 105 had to be considered for the purpose of determining whether a relevant exemption from land tax applies. The Tribunal held this submission to be contrary to the Valuation of Land Act 1916 (“VOL Act”) and was rejected.
The Tribunal was not satisfied on the balance of probabilities that the land which comprises Parcel B in Lot 105 as at 31 December 2019, or on any other date, was solely used as the place where children were educated or cared for so as to be exempt under s. 10(1)(u).
On appeal the Appeal Panel affirmed this decision, finding that the exemption would not be attracted merely by the supply of a sewerage facility to Parcel A, and that for the exemption to apply Parcel B must be the place where actual conduct of educating or caring for children in an approved facility takes place. Accordingly, the Appeal Panel found that the Tribunal at first instance did not err in failing to find that Parcel B came within the exemption.
In the Supreme Court, his Honour identified three issues for determination:
- Is land tax able to be assessed on the parts of land which were separately valued by the Valuer-General in accordance with s 14A(4) of the VOL Act?
- Is Parcel B, on the assumption that its only use is for the septic system, entitled to the childcare exemption under s 10(1)(u) of the LTMA?
- Did the Appel Panel err by determining that the plaintiffs had not proved that the sole use of Parcel B was for the septic system?
Statutory Framework
Section 9 of the LTMA provides for taxable value as follows:
- Land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under this Act.
- The taxable value of that land is the total sum of the average value of each parcel of that land.
- The average value of a parcel of land is to be calculated, as provided for by section 9AA, on the basis of the land value of the land.
- The land value of land, in relation to a land tax year, is the value entered in the Register (maintained by the Valuer-General) as the land value of the land as at 1 July preceding each tax year.
- The fact that there is no land value entered in the Register on 31 December in a year as the land value of the land as at 1 July in that year does not prevent land tax being levied and charged and becoming payable once that land value is entered in the Register and the average value is ascertained.
Section 14CC of the VOL Act details the following requirements relating to the Register of Land Values:
- The Valuer-General is to keep a Register of Land Values in such form as the Valuer
- General thinks fit. The Register is to contain such of the following kinds of information in relation to land as is within the knowledge of the Valuer-General-
- information as to the ownership of the land,
- information as to the occupation of the land,
- information as to the value of the land,
- information as to the title of the land,
- information as to the location or description of the land,
- information as to the area of the land,
- such other kinds of information as is permitted or required by this Act or the regulations to be entered in the Register.
An entry in the Register as to a land value, allowance or apportionment factor ascertained under this Part is conclusive evidence of the ascertaining of the value, allowance or factor on the date shown in the entry.
Section 14A of the VOL Act provides for the Valuer-General’s ability to ascertain land values.
The childcare exemption from land tax is contained in s. 10(1)(u) of the LTMA which provides an exemption for:
(u) land that is used solely for the provision of an approved education and care service (within the meaning of the Children (Education and Care Services) National Law (NSW)), but only if—
(i) the service is provided by an approved provider under that Law, and
(ii) the land is the place where children are educated or cared for by the service.
Submissions
On the question of leave to appeal, the plaintiffs submitted that:
- the proper construction s. 10(1)(u) of the LTMA was of general importance, given that it had not been the subject of any decision of the Court; and
- a determination for the tax year under consideration will have ongoing importance.
The plaintiffs submitted that the Appeal Panel committed the following errors:
- In construing the word “land” in the exemption, the Appeal Panel did not have regard to the totality of Lot 105, which was the parcel of “land” upon which the childcare centre is located.
- It treated the infrastructure connected to and affixed to the childcare centre building as other than part of the building itself and therefore other than as part of the childcare centre. The exemption should have been construed as encompassing any land reasonably necessary to the use of the parcel as long as its use is ancillary or incidental to the purposes that attract the exemption.
- The reference to “place” in the exemption should be construed broadly by reference to the premises where the childcare services are being undertaken together with the services which permit the childcare centre to function.
- By having regard to the exhibits which identified land works early in 2019, the Appeal Panel took into account irrelevant considerations. There was no evidence that any other use was being made of Parcel B apart from its use for the septic system which was indispensable to the operation of the childcare centre.
Decision
Is land tax able to be assessed on the parts of land as valued by the Valuer-General in accordance with s 14A(4) of the VOL Act?
The Court accepted that this is a pure question of law and a matter of general importance, sufficient to justify the grant of leave to appeal: [34].
His Honour considered that ss. 9 and 10 of the LTMA must be read together. Section 9 provides for the assessment of land tax based on the Valuer General’s valuation but s. 10 provides a series of exemptions. The Register should not cease to be relevant for exempting land from tax where it provides the basis for the imposition of tax in the first instance: [35].
Land tax may be assessed on, and an exemption may apply to, a parcel of land contained in the Valuer General’s Register even though it is less than a single lot of land: [36].
The Court noted the plaintiffs’ submission that land tax should have been assessed on the whole lot by reason of the services on Parcel B being indispensable to the conduct of the business on Parcel A. However, his Honour cited with approval the remarks of the Tribunal in Australian Native Landscapes Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 189 (at [30]-[33]) to the effect that the Chief Commissioner has no power to question any decision to treat lots as a single parcel of land by the Valuer-General: [38].
Is Parcel B, on the assumption that its only use is for the septic system, entitled to the exemption in s 10(1)(u) of the LTM Act?
His Honour considered this issue raised a question of law involving the construction of the exemption, and in particular, the meaning of “land” and “place”.
His Honour found assistance from the definition of “land” in the Interpretation Act 1987 and a series of cases which considered what constitutes the “site” or the “land.” He concluded that, where the term “land” and the term “place” in s. 10(1)(u) are used, they include land containing ancillary services to the land in respect of which there is an unchallenged exemption: [60].
On this basis, his Honour held that, if it is established that Parcel B is only used for the septic system, it is entitled to an exemption under s. 10(1)(u) of the LTMA because of its connection with the building on Parcel A: [61].
Did the Appel Panel err by determining that the plaintiffs had not proved that the sole use of Parcel B was for the septic system?
At first instance, the Tribunal had before it:
- two letters written by the plaintiffs’ solicitors to the Chief Commissioner asserting that the sole use of Parcel B was for a septic tank used by the childcare centre on Parcel A; and
- evidence adduced by the Chief Commissioner that early in 2019 there had been preparatory exploratory work conducted on Parcel B in relation to a development application for a commercial commuter carpark lodged by the plaintiffs.
The plaintiffs adduced no evidence to show what happened on Parcel B after the preliminary exploratory work was carried out.
His Honour agreed with the Tribunal’s finding that mere assertions in letters by the plaintiffs’ lawyers did not satisfy the plaintiffs’ burden of proof to show that the land was used solely for the provision of an approved education and care service, even allowing for the fact that rules of evidence do not apply to proceedings in the Tribunal: [73], [76] – [77].
Accordingly, the Court found that the Appeal Panel was correct in refusing leave to appeal in the circumstances. Further, the Court held that the Appeal Panel was correct in upholding the Tribunal’s decision that it was not satisfied on the balance of probabilities that Parcel B was solely used as a place where children were educated or cared for: [80].
His Honour also agreed with the Appeal Panel that the question of the current use of Parcel B at the relevant time was a question of fact and not law; and as such there is no right of appeal to the Court: [74] and [81].
Orders
The Court ordered that:
- The amended summons filed 8 March 2023 be dismissed.
- The plaintiffs pay the defendant’s costs of proceedings.
Decision
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