CALLER & ANOR v FC of T

Members:
J Block DP

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2009] AATA 890

Decision date: 19 November 2009

J Block (Deputy President)

Part A: Preliminary and introductory

1. The objection decisions under review in this matter relate to the disallowance by the respondent of objections by the applicants against amended assessments issued on 9 October 2008 in respect of the year ended the 30 June 2007.

2. The facts in respect of the applicants are the same, relating as they do to their purchase as joint tenants of the residential property situated at 32 Waugh Street Wauchope ("the property") in December 2001 for a purchase


ATC 3168

consideration of $105,000 and their sale of the property in September 2006 for $232,000. The applicants did not in their tax returns for the year ended 30 June 2007 reflect their gain. It was agreed, understandably enough, that the two applications would be heard together and in such manner that all of the evidence before the tribunal would apply to each of the applicants. Matter number 2009/0976 relates to Mr Caller (who is separately referred to as "the husband") while matter number 2009/0977 relates to Mrs Caller who is separately referred to as "the wife".

3. The applicants were represented by Mr I. Young of counsel instructed by Gilbert M. Johnstone and Company, lawyers, while the respondent was represented by Mr J. Hewitt of counsel instructed by Ms Wei-Li Su of the respondent's legal section.

4. The tribunal had before it, in respect of each of the two applications, the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, in addition it admitted exhibits as follows:

  • Exhibit A1 is a witness statement by the husband dated 13 July 2009;
  • Exhibit A2 is a witness statement by the husband dated 3 September 2009;
  • Exhibit A3 is a witness statement by the wife dated 8 July 2009;
  • Exhibit A4 is a witness statement by the wife dated 3 September 2009;
  • Exhibit R1 is a map produced by www.whereis.com which indicates that the distance between Wauchope and Walgett is some 614 km. (The tribunal was advised that the travelling time by car between Wauchope and Walgett would be between six and seven hours).

5. The tribunal received in addition Statements of Facts and Contentions and written submissions by the parties. The term "AS" refers to the applicants' submissions while the term "RS" refers to the respondent's submissions. Although the documents referred to in this clause, and in particular the submissions, indicate a dispute between the parties as to certain additional amounts which, according to the applicants should be included in their cost base (and which would be relevant only if the tribunal found against the applicants as to the main issue) the tribunal was advised by counsel at the commencement of the hearing that it would not be necessary for the tribunal to deal with these subsidiary aspects and that it would be sufficient for the tribunal to make a finding for or against the applicants as to the main issue. The main issue between the parties is as to whether the gain derived by the applicants in respect of their sale of the property was or was not wholly exempt. It may be noted that, in accordance with the amended assessments, the applicants were taxed on a proportion of their gain, and after applying the 50 per cent discount. I refer in this context to clauses 3 and 4 of RS as follows:

  • "3. On 9 October 2008, the Respondent issued Notices of Amended Assessment to each of the Applicants including a capital gain of $14,616. The Respondent calculated the cost base of the property and the capital gain on the disposal of the property as follows:
    Purchase price $105,000
    Stamp duty, legal fees $4,813
    Renovations $4,932
    Legal fees on sale $460
    Total cost base $115,205
    Sale price $232,000
    Less cost base ($115,205)
    Capital gain $116,795
  • 4. The capital gain for each Applicant was obtained by taking the figure of $116,795 above then:
    • (a) reducing it for each Applicant's 50% share of the property;
    • (b) reducing by a further 50% pursuant to the provisions for discount capital gains in Subdivision 115-A of the Income Tax Assessment Act 1997 (' ITAA 1997 ');
    • (c) applying a partial exemption based on the number of days that the Applicants resided at the property (being the period from 23 April 2004 to 8 September 2006)."

      ATC 3169

Part B: The facts

6. The facts fall within a narrow compass.

7. Prior to May 2001 the husband was a trainee police officer at the Police Academy. Upon his graduation the husband was seconded to Walgett. Walgett has a small population, a majority of whom are indigenous people. Shops and businesses are fitted with iron bars, and in general terms it would be apt to describe Walgett as a hardship post. Walgett did not figure in the husband's first preferences as to his first posting; clause 4 of exhibit A1 reads as follows:

  • "4. My original preferences noted on the Request Change to Placement Preferences form were listed in the following order as Port Macquarie, Taree and Tweed Heads."

8. However, Walgett was the husband's first choice in respect of his second preferences; clauses 7 and 8 of exhibit A1 reads as follows:

  • "7. I nominated the following locations, in order of preference, Walgett, Gosford, Wyong, Surry Hills and Hornsby as shown in Annexure 'A'.
  • 8. I selected Walgett as a first preference, as the NSW Police Force provides an incentive to officers when they complete their 3 year tenure at a Special Remote Location. Amongst other incentives, at the completion of the minimum tenure period at a Special Remote Location, officers are offered a transfer to a vacant position, not at another Special Remote Location, taking into account the range of vacancies at the time and the personal choice of the officer within that range of vacancies Please refer to page 28 of Annexure B for the relevant section of the Transfer and Tenure Policy."

9. It was clear enough that when the husband was seconded to Walgett the wife was obliged to accompany him. The applicants established a home in Walgett and at which they received their mail and other communications. The wife found employment in Walgett in an administrative post.

10. As set out previously Walgett was selected by the husband as the first of his second preferences. In accordance with the Transfer and Tenure Policy of the New South Wales Police Force the husband was required to stay in Walgett for three years; he could have left that posting, put in broad or in practical terms, only by resigning from the police force.

11. In December 2001 and in point of time after the applicants had taken up residence in Walgett they purchased the property. Because they knew that they could not occupy it the property was leased to a tenant who in the result remained in it as their tenant until they, the applicants, could take occupation of the property after the three-year term in Walgett had been completed. They in fact took occupation of the property for the first time in April 2004.

12. The property was purchased with the intent that it would be let until the completion of the husband's three-year term of service in Walgett. Put in other words the applicants put themselves in a position by their own act whereby it was not possible for them to take occupation of the property until the expiry of that period of service.

Part C: The evidence

13. The husband gave oral evidence which consisted in the main of his confirmation of the content of exhibits A1 and A2. Mr Young did ask him a few other questions and whereafter he was cross-examined by Mr Hewitt.

14. The husband's attention was drawn to clause 14 of Exhibit A1 which reads as follows:

  • "14. Accordingly in or about December 2001, the property at 32 Waugh Street, Wauchope ceased to be the main or principal place of residence of Mr & Mrs Caller, due to their relocation to Walgett."

15. It was put to the husband that clause 14 of Exhibit A1 could not be correct; this was so, so it was put to him, because it was impossible for a period of residence to cease before it ever commences. The husband at first said that clause 14 of Exhibit A1 was accurate but when pressed agreed that it was not.

16. The wife gave oral evidence in which she confirmed the content of exhibits A3 and A4 excluding clause 6 of Exhibit A3 which is similar to clause 14 of Exhibit A1. Clause 6 of Exhibit A3 reads as follows:

  • "6. Accordingly on or about December 2001, the property at 32 Waugh Street, Wauchope ceased to be the main or principal place of residence of myself and Mr Caller, due to Mr CalIer's transfer to Walgett."

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17. The witness statements of the applicants contained statements by them to the effect that they elected that the property would be their main or principal place of residence; see in this context clauses 8 and 9 of Exhibit A3 as follows:

  • "8. Myself and Mr Caller made the choice to elect the property at 32 Waugh Street, Wauchope as our main or principal place of residence and did not treat any other dwelling as our main or principal place of residence prior to the sale of the property at 32 Waugh Street, Wauchope in September 2006.
  • 9. On or about 22 April 2004, myself and Mr Caller returned to Wauchope from Walgett and took up 32 Waugh Street, Wauchope as our main or principal place of residence."

18. The witness statements by the husband contain similar statements; it will be noted moreover that clause 9 of Exhibit A3 makes it clear that the property became the main or principal place of residence of the applicants in April 2004, and not previously. The Applicants' Amended Statement of Facts, Issues and Contentions dated 2 September 2009 contains a similar statement as to the applicants' alleged choice to elect that the property was their main or principal place or residence.

19. The statements by the applicants that they were vested with a choice as to their main or principal place of residence presumably derive from section 118-145 of the Income Tax Assessment Act 1997 ("the Tax Act") and it is for this reason that section 118-145 is included in part D below, and in order to demonstrate that in these circumstances it is altogether inapplicable.

20. It is plain then that the applicants purchased the property in point of time after they had taken up residence in Walgett and on the basis that the property would be let until they could themselves occupy it after the three-year term of service in Walgett.

21. It is for this reason that the real issue before the tribunal turned on the meaning of "first practicable". Much of the argument before the tribunal turned on the question of what is meant by "practicable" in this context.

Part D: Relevant legislation and other material

22. Section 118-110 of the Tax Act reads as follows: --

" 118-110 Basic Case

  • (1) A *capital gain or *capital loss you make from a *CGT event that happens in relation to a *CGT asset that is a *dwelling or your *ownership interest in it is disregarded if:
    • ...
    • (b) the dwelling was your main residence throughout your *ownership period; and
    • ..."

23. Section 118-135 of the Tax Act reads as follows:

" 118-135 Moving into a dwelling

If a *dwelling becomes your main residence by the time it was first practicable for you to move into it after you *acquired your *ownership interest in it, the dwelling is treated as your main residence from when you acquired the interest until it actually became your main residence."

24. Section 118-185 of the Tax Act reads as follows:

" 118-185 Partial exemption where a dwelling was your main residence during part only of ownership period

  • (1) You get only a partial exemption for a *CGT event that happens in relation to a *dwelling or your *ownership interest in it if:
    • ...
    • (b) the dwelling was your main residence for part only of your *ownership period; and
    • ...
  • (2) You calculate your *capital gain or *capital loss using the formula:

    • CG or CL amount ×   Non-main residence days  
      Days in your *ownership period
    • where:
    • CG or CL amount is the *capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.

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      Non-main residence days is the number of days in your *ownership period when the dwelling was not your main residence."

25. Section 118-145 of the Tax Act is of marginal relevance; it is included for the reasons set out previously, as follows:

" 118-145 Absences

  • (1) If a *dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.
  • (2) If you use the part of the *dwelling that was your main residence for the *purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence.
  • (3) If you do not use the *dwelling for that purpose, you can treat it as your main residence under this section indefinitely.
  • (4) If you make the choice, you cannot treat any other *dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies.
  • Example:

    You live in a house for 3 years. You are posted overseas for 5 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.

    You have not treated any other dwelling as your main residence during your absences.

    You may choose to continue to treat the house as your main residence during both absences because each absence is less than 6 years.

    You can make this choice when preparing your income tax return for the income year in which you sold the house."

26. It is unnecessary for me to include the content of sections 15AA and 15AB of the Acts Interpretation Act 1901; section 15AA provides that a statute must be interpreted so as to promote its purpose and section 15AB provides that regard may be head to secondary material such as explanatory memoranda. It is unnecessary for me to cite High Court authority as to the fact that regardless of any question of ambiguity a statute must be construed purposively.

27. The provisions of the relevant explanatory memorandum in respect of section 180-135 under the head of "Change" and under the head of "Explanation" read as follows:

" Section 118-135 Moving into a dwelling.

Change

Extend the main residence exemption to take account of the time needed to move into a dwelling, ie. from acquisition until it is first practicable for the individual to move into the dwelling that becomes your main residence.

Explanation

The rewritten provision takes account of situations where, for example, there is a delay in moving in because of illness or other reasonable cause.

The exemption does not extend to cases where an individual is unable to move into the dwelling because it is being rented out. However, it would cover a period after the end of the tenancy if the owner could not take up residence immediately because of the nature of repairs required to the dwelling."

Part E: The AAT cases

28. Two decisions of this tribunal were referred to and in particular because those decisions, if correctly decided, must have the effect that the respondent is entitled to succeed in respect of the objection decisions under review.

29.
Re Chapman and Federal Commissioner of Taxation 2008 ATC 10-029; (2008) 71 ATR 689 was decided by Senior Member Sweidan in 2008. The facts in that case are similar to the facts in this case. There, too, a property was


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purchased at a time when the purchaser because of work commitments could not take occupation of it on completion. Chapman was decided in favour of the respondent; Chapman was referred to at such length in the hearing that it is desirable that I include a substantial part of the reasons for decision in that case; I refer in this context to clauses 23 to 30 (both inclusive) of the decision as follows:
  • "[23] The evidence shows that applicant acquired the property and was legally entitled to move into it immediately after settlement on 25 June 2001. The applicant chose to rent the property out. The applicant's evidence is that the vendors of the property asked that they be able to rent the property back for 6 months while their home was being completed and he agreed to do so.
  • [24] Including the initial 6 months the applicant chose to rent the property out for a total period of approximately 2 years before he moved into it.
  • [25] The applicant asserts that the respondent's CGT Determination No. 51 supports his claim that the property should be treated as his main residence for the period from when he acquired it until he moved into the property. He particularly relied on para 2(vii) of the determination which states that a relevant factor in determining whether a dwelling is a taxpayer's sole or principal residence is 'the taxpayer's intention in occupying the dwelling.'
  • [26] The tribunal finds that the determination does not support the applicant's case and if anything it points to the fact that the property should not be considered to be the applicant's main residence during the relevant period that it was not occupied by him, having regard to the fact that on his own evidence none of the tests set out in paras 2(i)-(vii) of the determination can be answered in his favour.
  • [27] CGT Determination No. 51 makes it clear that whether a dwelling is a person's sole or principal residence depends on the facts in each case. It lists some factors that may be relevant and points out that this is not an exhaustive list and also points out that the weight to be given to the listed factors depends on the circumstances of the particular case. Paragraph 3 of the determination also states that 'mere intention' to occupy a dwelling as a sole or principal residence, but without actually doing so, is insufficient to obtain the exemption.
  • [28] The tribunal finds on the applicant's evidence that while he had an intention to move into the property at some time he only moved into it when it became convenient for him to do so. The tribunal is of the view that this does not fit within the determination and falls far short of the requirements of s 118-135 of the ITAA 1997.
  • [29] In the tribunal's view the words 'the time it was first practicable' should not be read down to mean 'the time it was first convenient'.
  • [30] The tribunal notes that the explanatory memorandum to the Bill which became the Tax Law Improvement Act (No. 1) 1998 (Cth) states that s 118-135 was intended to apply to extend the main residence exemption to take into account the time needed to move into a dwelling. The memorandum states that it takes account of situations where, for example, there is a delay in moving in because of illness or other reasonable cause. It also states that the exemption does not extend to cases where an individual is unable to move into the dwelling because it is being rented out."

30.
Couch & Another v FC of T 2009 ATC 10-072 was decided by Senior Member Dunne in point of time after the decision in Chapman; once again, and in a similar fact situation the tribunal found in favour of the respondent. Senior Member Dunne referred with approval to Senior Member Sweidan's statement in Chapman that "first practicable" is not the same as "first convenient". See in this context clauses 12 and 13 of the decision in Couch as follows:

  • "12. In the present case, the applicants' evidence was that the Unit was acquired by them as their matrimonial home. It was their contention that it only became practicable for them to reside in the Unit when they returned to Adelaide in January 2006. Because of Mr Couch's postings, there had been no prior opportunity for them to live there. At the last minute, they decided to return, but the Unit was still subject to a lease. They subsequently decided that the Unit would not be suitable as a family home and proceeded to make arrangements to dispose of it. In the Tribunal's opinion, the applicants did not move into the Unit by the time it was first practicable to do so after it was acquired. The evidence shows that the applicants acquired the Unit and were legally entitled to move into it immediately after settlement on 16 June 2000. Instead, they chose to lease the property out. The Tribunal finds, on the applicants' evidence, that while they had an intention to move into the Unit at some time, they only moved into it when it became convenient for them to do so. As was said by Senior Member A Sweidan in
    Re Chapman and Commissioner of Taxation 2008 ATC 10-029; [2008] AATA 421 at paragraph 29:

    'In the Tribunal's view the words "the time it was first practicable" should not be read down to mean "the time it was first convenient".'


  • ATC 3173

    13. In considering the operation of s 118-135, the Tribunal is able to gain assistance from Chapter 2.12 of the Explanatory Memorandum to the Bill that became Tax Law Improvement Act (No 1) 1998. It reads:

    'The rewritten provision takes account of situations where, for example, there is a delay in moving because of illness or other reasonable cause. The exemption does not extend to cases where an individual is unable to move into the dwelling because it is being rented out. However, it would cover the period after the end of the tenancy if the owner could not take up residence immediately because of the nature of repairs required to the dwelling.'

  • The applicants contended that, as the Unit was not being 'rented out' but was the subject of a lease, the Explanatory Memorandum did not apply. As the Tribunal explained to the applicants at the hearing, the expression 'rented out' is commonly used and would include the situation where a property was the subject of a formal lease."

31. Mr Young contended that Chapman was incorrectly decided in that the term "first practicable" was interpreted (albeit inferentially) as if it read "first possible". I can best refer to Mr Young's contentions in this context by including clauses 4, 5, 6 and 7 of AS as follows:

  • "4. The Tribunal in Re Chapman was of the view that, within sec 118-135 the taxpayer there did not move into the residence by the time it was first practicable to do so after the property was acquired. This was said, at paragraph [23] to be because:

    'The evidence shows that the applicant acquired the property and was legally entitled to move into it immediately after settlement on 25 June 2001. The applicant chose to rent the property out.'

  • 5. At the same time the Tribunal has contrasted 'first practicable' with another expression, namely, 'first convenient' and stated at [28] and [29] as follows:

    'The tribunal finds on the applicant's evidence that while he had an intention to move into the property at some time he only moved into it when it became convenient for him to do so. The tribunal is of the view that this does not fit within the determination and falls far short of the requirements of s 118-135 of the ITAA 1997.

    In the tribunal's view the words "the time it was first practicable" should not be read down to mean "the time it was first convenient." '

  • 6. Thus the Tribunal has juxtaposed and read into what is 'first practicable' the concepts of 'immediately' and 'legally entitled'. That was the construction adopted by the Tribunal and adopted by the Commissioner here. In substance and effect, the Tribunal has construed 'first practicable' to mean 'as soon as legally possible'. At the same time the Tribunal, correctly in the submission of the Applicants, rejected a construction of 'first convenient'.

  • ATC 3174

    7. In the submission of the Applicants, 'first practicable' has a meaning falling in the middle between 'as soon as legally possible' on the one hand, as opposed to 'the time it was first convenient' on the other hand. On the basis of the authorities it means 'reasonably practicable' and what is 'feasible' in the individual circumstances of the particular case."

32. Mr Young contended that Chapman and, following Chapman, Couch were incorrectly decided because in each case the tribunal was not referred to superior court authority as to the meaning of the word "practicable" and the fact that the meaning to be attributed to that term is different from the meaning to be attributed to the word "possible". Here, too, I can best refer to Mr Young's contentions by including clauses 8 to 13 of AS as follows:

  • "8. The tribunal in Re Chapman, seemingly, did not have the benefit of being taken to the decisions in State of
    Western Australia v Rothmans of Pall Mall [2001] WASCA 25 (Court of Appeal);
    Wills v Whiteside [1987] 2 Qd R 287 (Full Court);
    Royal Society for the Prevention of Cruelty to Animals (Victoria) Inc v Marson Constructions Pty Ltd (2000) 1 VR 274 (Court of Appeal) and
    NATB v MIMIA (2003) 133 FCR 506 (Full Court). Those cases are all decisions, albeit in diverse statutory contexts, concerning the meaning of 'practicable'.
  • 9. In the Rothmans of Pall Mall case, by the particular statute of limitations, an action had to be commenced 'as soon as practicable' after the cause of action arose. Stein AJ (with whom Malcolm CJ and Wallwork J agreed) said at [24 ] as follows:

    'Leading counsel for the respondent submits that "as soon as practicable" in each provision should be read "as soon as reasonably practicable". It seems to me that this submission is correct and it is appropriate to read in the qualification of reasonableness, although it is probably inherent in the phrase in any event. The phrase does not say, as pointed out, "as soon as possible". The distinction was referred to recently by Ormiston JA in
    Royal Society for the Prevention of Cruelty to Animals (Vic) Inc v Marson Constructions Pty Ltd [2000] VSCA 38. His Honour said that the meaning of "as soon as reasonably practicable", in an arbitration clause, was sufficiently clear if one bears in mind the distinction between "possible" and "practicable". See also the discussion of the distinction by Andrews CJ in
    Wills v Whiteside,
    ex parte Wills (1987) 2 Qd R 284 at 288'. (Emphasis added)

  • 10. The decision in Royal Society for the Prevention of Cruelty to Animals case involved an arbitration clause whereby notice of a dispute was to be given 'as soon as reasonably practicable'. At paragraph [24] Ormiston JA said as follows:

    'Counsel did not cite any authorities as to the meaning of that expression or similar expressions in the context of arbitration agreements, nor do I know of any myself,7 although it is an expression frequently used in quite different contexts such as the giving of notice to or by administrative agencies and in drink-driving legislation, to give but two examples. Its meaning, however, is sufficiently clear, as long as one bears in mind the distinction between the words "possible" and "practicable". In each case it is a factual decision dependent on what might be expected of a party in all the circumstances.' (Emphasis added)

  • 11. The Queensland decision in
    Wills v Whiteside was a drink driving case where the specimen sample was to be taken 'as soon as practicable'. Andrews CJ (with whom McPherson J) agreed said at 288 as follows:

    'It is my clear view that "as soon as practicable" does not mean "as soon as possible". There is a plain distinction in meaning between these phrases according to the ordinary usage of the terminology involved . Although the terms in each phrase are not terms of precise meaning it is plain enough that "as soon as possible" in the ordinary course of events means something different from "as soon as practicable". In my view the former phrase applies a more stringent requirement to a person making the appropriate request .' (Emphasis added)


  • ATC 3175

    12. The applicants would emphasise those words, that 'as soon as possible', let alone the Commissioner's formulation in his written submissions at [16] of 'legally entitled to move into it immediately' is a much more stringent test that that of 'first practicable', which means 'first reasonably practicable'.
  • 13. The decision in
    NATB v MIMIA was an immigration case where the statute directed an immigration officer to remove an unlawful non-citizen 'as soon as reasonably practicable'. The court comprising Wilcox, Lindgren and Bennett JJ said at [47] and [48] as follows:
    • ' [47] The word "practicable" has been defined to mean:

      "[c]apable of being put into practice, carried out in action, effected, accomplished or done; feasible."

      (Oxford English Dictionary online)

      and:

      "capable of being put into practice, done, or effected, esp with the available means or with reason or prudence: feasible."

      (The Macquarie Dictionary (2nd Revised ed, 1987).

    • [48] In M38, the Full Court discussed the meaning of the expression "reasonably practicable", and, in particular, the meaning of the word "reasonably" in that expression (at [65]-[69]). Subject to one qualification, we agree with their Honours' observations. The qualification concerns their statement at [66] that "[i]n the context of 198(6) of the Act, practicability and reasonableness may, on occasion, operate in opposing senses". As the word "feasible" in both of the dictionary definitions suggests, at least some element of reasonableness is inherent in the notion of "practicable". ' (Emphasis added)"

33. It will be noted that Senior Member Sweidan did not in fact use the words "first possible" in Chapman; Mr Young contended that his decision (and in particular clauses 23, 28 and 29) have the effect that the decision must be read inferentially on this basis. To focus on clause 23 of the decision in Chapman and to read into it a view that the tribunal decided Chapman on the basis that "first practicable" means "first possible" is in my view, and having regard to the decision in Chapman as a whole, doubtful. Moreover, it seems clear that he was guided by the explanatory memorandum and, in particular, its clear statement that a period when the property is leased out cannot qualify for the exemption.

34. The tribunal accepts that the words "practicable" and "possible" are not synonymous and that it is necessary to consider the meaning to be attributed to the word "practicable". (Mr. Young referred in his submissions quoted above to some dictionary meanings.)

35. "Practicable" or "first practicable" are not words of precise import; different meanings are possible. It is necessary to consider the meaning to be attributed to the relevant expression in the context of the legislation in which it appears. I do not think that the superior court cases cited by Mr Young, and referred to in the extract from AS set out previously in these reasons, are relevant more particularly having regard to the fact that each of those superior court cases dealt with an entirely different statute and an entirely different fact situation. In my view, the manner in which "practicable" or "first practicable" are to be interpreted (that is, in the context of the legislation in which it appears) is the same as or similar to the manner in which "in connection with" (also words of wide import) have been judicially interpreted. I refer in particular in this context to
Hatfield v Health Insurance Commission (1987) 15 FCR 487 where Davies J said, at 491:

"Expressions such as 'relating to', 'in relation to', 'in connection with' and 'in respect of' are commonly found in legislation but invariably raise problems of statutory interpretation. They are terms which fluctuate in operation from statute to statute. As was said by Blackburn, Gallop & Neaves JJ in
Butler v Johnston (1984) 4 FCR 83 at 87:


ATC 3176

'It is clear that the words "in respect of" can convey a meaning of wide import, but their exact width will depend upon the context in which they appear. Reference to individual cases on different statutes is of little assistance in determining their particular meaning. The court has to construe the meaning of the words with reference to the purpose or object underlying the legislation in which they appear (s 15AA of the Acts Interpretation Act 1901 (Cth)).'

The terms may have a very wide operation but they do not usually carry the widest possible ambit, for they are subject to the context in which they are used, to the words with which they are associated and to the object or purpose of the statutory provision in which they appear. In
Ausfield Pty Ltd v Leyland Motor Corporation of Australia Ltd (No 2) (1977) 30 FLR 477 it was said at 480 by Bowen CJ, with whom Northrop J agreed, that the words 'in relation to' in s 51(2)(a) of the Trade Practices Act 1974 (Cth) require a direct relationship and by Deane J at 483 that the words require a relationship which is direct and immediate. In
Perlman v Perlman (1984) 155 CLR 474 at 484 Gibbs CJ said of the words 'in relation to' in the definition of 'matrimonial cause' in s 4 of the Family Law Act 1975 (Cth):

'The words "in relation to" import the existence of a connection or association between the two proceedings, or, in other words, that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind: see
R v Ross-Jones;
Ex parte Beaumont (1979) 141 CLR 504 at 510. An appropriate relationship may exist if the order sought in the proceedings in question is consequential on or incidental to a decree made in the completed proceedings ...' "

36. In this case the meaning to be attributed to the relevant term is fleshed out and explained by the explanatory memorandum. Mr Young contended that the explanatory memorandum is incorrect in that it goes beyond the words of the statutory provision itself. It was in this context that he drew attention, by way of example, to a situation where a taxpayer purchases property subject to a lease and so that there is at the time of completion a sitting tenant, the remainder of whose term of occupation must be honoured. Mr Young contended that it could not have been intended by the legislature that such a term could not qualify for the exemption since plainly, and at the time of completion, occupation was not possible and would not be possible until the term held by the tenant had expired.

37. Mr Young's comments as set out in the preceding clause led to a discussion of different possibilities. One possibility is that set out in the preceding clause and another is that to which the facts in this case relate. Yet a third possibility might involve a purchaser who buys property intending to take occupation but finding on completion that there is a sitting tenant in occupation under an unregistered lease and of which he, the purchaser was unaware, and of which there was no mention in the contract of sale. The facts in the last-mentioned possibility are, on any basis, remote. In the first place the existence of the lease would or should have been disclosed in the sale agreement and even if it was not, the existence of a tenant in occupation would have been disclosed by inspection of the property in question; it is highly unlikely that a person would acquire a home or prospective home without inspecting it. There is a fourth possibility which was not discussed in the hearing but which occurred to me while preparing these reasons. Assume a sale agreement which correctly and validly provides for vacant possession; assume then that a squatter takes unlawful possession of the property between contract and completion. Leaving aside the question of who must take action to eject the squatter it seems to me that the period involved in ejecting the squatter would in all probability qualify for the exemption; of course, such an illegal occupant would not be paying rent.

38. That said, I do not agree with Mr Young's contention that the purchase of a property subject to a lease (the first possibility mentioned above) is for the purposes of this case different from the situation in this case. On the facts in this case the applicants purchased the property on the basis that they would derive


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rent until they could occupy themselves; it is hard to see a relevant distinction between them and a purchaser who buys subject to a lease because the purchaser, in effect, becomes the lessor under the lease; the only difference is that the lease was entered into prior to purchase; on either basis occupation is not possible until the lease comes to an end. (Senior Member Dunne in Couch referred, albeit briefly, to a situation where occupation is not possible because a tenant is in occupation, but as I read his decision in Couch he was referring to a tenant who takes occupation after completion and where the lease would have been granted by the purchaser.)

39. It may be that section 118-135 of the Tax Act could have been worded rather more precisely, but the explanatory memorandum makes it clear that a period when the property is let out and during which rental is being derived cannot qualify.

40. In respect of any case under section 118-135 the particular circumstances of the taxpayer will be relevant and so that circumstances which allow for an exempt period in relation to a given taxpayer might not have the same effect in relation to another taxpayer. But all of this is subject to the overall proviso that any period during which the property is let out and rent is being derived by the taxpayer will not qualify for the exemption. I do not agree that the explanatory memorandum provision is, as Mr Young contended, wrong or such that it conflicts with the statutory provision itself.

Part F: Conclusion

41. In my view both Chapman and Couch were correctly decided.

42. Accordingly, the objection decisions under review must be affirmed.


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