Vidler v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 1480/2009)
Judgment date: 1 June 2010
Date published: 13 July 2010
Decision outcome: Favourable

Summary of decision:
Outlines the Tax Office's response to this case which concerned whether land that is zoned for residential use but which contains no shelter or basic living facilities is 'residential premises' as that term is defined in section 195-1 of the GST Act.

Overview of facts:
The appellant bought and subsequently sold two blocks of land. Each block was zoned residential, did not contain any buildings or living facilities and was either connected to, or had access at the boundary of the property to, utilities such as sewerage, water, gas or electricity. The appellant treated each sale as an input taxed sale of residential premises under subsection 40-65(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). | Issues decided by the court | The issue was whether land that is zoned for residential use and has access to utilities but which contains no shelter or basic living facilities (i.e. vacant land) is 'residential premises' as defined in section 195-1 of the GST Act. In particular, whether it came within paragraph (b) of the definition - 'land or a building that...is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation'. | The Full Federal Court considered the earlier cases of Marana Holdings Pty Ltd v C of T (2004) 141 FCR 299 and South Steyne Hotel Pty Ltd v Co T (2009) 180 FCR 409 and in a joint judgement affirmed the decision of the primary judge (Stone J) that, to satisfy the definition of residential premises (more particularly, in this case, paragraph (b) of the definition), land must contain some shelter and basic living facilities at the time of sale. The Court (at [29]), noting that the definition of residential premises had been amended following Marana although not to remove the requirement of a residence, stated that "in disagreeing with some aspects of Marana but not with others, the Parliament is to be taken to have approved the latter". | Conformably with Marana , the Court [32] found that the word 'capable' in the expression 'capable of being occupied, as a residence or for residential accommodation' must involve more than an ability in the future (i.e. after the supply) to make the land or building suitable for occupation as a residence or for residential accommodation. | In agreeing with Stone J at first instance, the Court rejected the argument that land is "capable" of being occupied as a residence, even if it is vacant, if it is able to be connected to water and sewerage facilities. The Court [31] held that the word "occupied" in the phrase "capable of being occupied" connotes living within or inhabiting a structure and said that "[i]t is . . . quite artificial to speak of someone 'occupying' vacant land 'as a residence or for residential accommodation'". | The Court [37] accepted the Commissioner's argument that it would be absurd if the mere existence of a tap in the middle of an acre of vacant land transforms the land into "residential premises" for the purposes of GST Act. | The Court's [38] ultimate conclusion was that no error has been shown in the primary judge's conclusion that, at the time of sale, neither parcel of vacant land was 'residential premises' within the meaning of s 40-65(1) of the GST Act because it was not capable of being occupied as a residence or for residential accommodation. As was the case before the primary judge, the Court said it was not necessary to determine whether, at the time of sale, the properties were 'intended to be occupied as a residence or for residential accommodation'.

Issues decided:
The issue was whether land that is zoned for residential use and has access to utilities but which contains no shelter or basic living facilities (i.e. vacant land) is 'residential premises' as defined in section 195-1 of the GST Act. In particular, whether it came within paragraph (b) of the definition - 'land or a building that...is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation'. The Full Federal Court considered the earlier cases of Marana Holdings Pty Ltd v C of T (2004) 141 FCR 299 and South Steyne Hotel Pty Ltd v Co T (2009) 180 FCR 409 and in a joint judgement affirmed the decision of the primary judge (Stone J) that, to satisfy the definition of residential premises (more particularly, in this case, paragraph (b) of the definition), land must contain some shelter and basic living facilities at the time of sale. The Court (at [29]), noting that the definition of residential premises had been amended following Marana although not to remove the requirement of a residence, stated that "in disagreeing with some aspects of Marana but not with others, the Parliament is to be taken to have approved the latter". Conformably with Marana , the Court [32] found that the word 'capable' in the expression 'capable of being occupied, as a residence or for residential accommodation' must involve more than an ability in the future (i.e. after the supply) to make the land or building suitable for occupation as a residence or for residential accommodation. In agreeing with Stone J at first instance, the Court rejected the argument that land is "capable" of being occupied as a residence, even if it is vacant, if it is able to be connected to water and sewerage facilities. The Court [31] held that the word "occupied" in the phrase "capable of being occupied" connotes living within or inhabiting a structure and said that "[i]t is . . . quite artificial to speak of someone 'occupying' vacant land 'as a residence or for residential accommodation'". The Court [37] accepted the Commissioner's argument that it would be absurd if the mere existence of a tap in the middle of an acre of vacant land transforms the land into "residential premises" for the purposes of GST Act. The Court's [38] ultimate conclusion was that no error has been shown in the primary judge's conclusion that, at the time of sale, neither parcel of vacant land was 'residential premises' within the meaning of s 40-65(1) of the GST Act because it was not capable of being occupied as a residence or for residential accommodation. As was the case before the primary judge, the Court said it was not necessary to determine whether, at the time of sale, the properties were 'intended to be occupied as a residence or for residential accommodation'.

ATO view of decision:
The decision confirms the Commissioner's view, as expressed in GST Ruling GSTR 2000/20 (paragraph 25), that vacant land of itself can never have sufficient physical characteristics to mark it out as being able to be, or intended to be, occupied as a residence or for residential accommodation.

Administrative treatment:
None | Implications on current Public Rulings & Determinations | None, other than to confirm the Commissioner's view as expressed in GST Ruling GSTR 2000/20 (paragraph 25)

Case references: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 (1997) 141 ALR 618 Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309 [2004] HCA 40 Marana Holdings Pty Ltd v Commissioner of Taxation (2004) 141 FCR 299 2004 ATC 5068 57 ATR 521 South Steyne Hotel Pty Ltd v Commissioner of Taxation (2009) 180 FCR 409 2009 ATC 20-145 74 ATR 41 South Steyne Hotel Pty Ltd v Federal Commissioner of Taxation (2009) 71 ATR 228 2009 ATC 20-090 [2009] FCA 13
Subject references: Goods and services tax Residential premises Whether vacant land without living facilities can be residential premises Whether residential zoning and access to services sufficient.