• Legal database
Legal database

Federal Commissioner of Taxation v. Tourapark Pty. Limited.

Judges:
Bowen CJ
Brennan J
Deane J

Court:
Full Federal Court

Judgment date: Judgment handed down 14 November 1980.

Bowen C.J., Brennan and Deane JJ.

Subdivision B of Div. 3 of the Income Tax Assessment Act 1936 contains provisions relating to an allowable deduction called an Investment Allowance. It is calculated as a proportion of expenditure of a capital nature incurred in respect of the acquisition or construction of a new unit of ``eligible property in relation to which (the) Subdivision applies'' (sec. 82AB).

The present appeal is concerned with a taxpayer's claim for an investment allowance in respect of the acquisition by it of ten caravans used by it in its business. It is the proprietor of the Canberra Motor Village. upon land leased to it by the Commonwealth of Australia for use for the purpose of a Tourist Caravan and Camping Park. During the relevant income year (the year ended 30 June 1977) the taxpayer provided accommodation in its caravans and in motel units. The caravans, though capable of moving on their wheels, were placed on concrete blocks and connected to supplies of water and electricity. There is now no dispute that the caravans answer the description of ``eligible property'', the substantive matter in issue being whether they are property ``in relation to which this Subdivision applies''.

The case arises on a reference by the No. 1 Board of Review, at the request of the appellant, of certain questions of law for the opinion of the Supreme Court of New South Wales pursuant to sec. 196. The questions and the answers to those questions given by the Supreme Court (Woodward J.) are as follows:

``(i) Are the aforesaid caravans, plant or articles within the meaning of section 54(1) of the Income Tax Assessment Act 1936 as amended by Acts passed to 30 June 1977?

Answer: Yes.

(ii) Are the aforesaid caravans eligible property within the meaning of section 82AQ(1) of the said Act?

Answer: Yes.

(iii) Were the aforesaid caravans, units of property acquired by the taxpayer for use wholly and exclusively by the taxpayer for the purpose of providing assessable income otherwise than by -

  • (a) the leasing of such units; or
  • (b) the granting to other persons of rights to use such units

within the meaning of section 82AA(a)(ii) (A) and (C) respectively of the said Act?

Answer: Yes.

(iv)Did the taxpayer lease the aforesaid caravans or otherwise grant a right to

ATC 4505

another person to use the caravans within the year of income after the caravans were first used by the taxpayer within the meaning of section 82AG(1)(b) of the said Act?

Answer: No.''

The appellant was given leave to appeal to this Court, on condition (inter alia) that he did not challenge the answers to questions (i) and (ii) in respect of the relevant income year. The answers to questions (iii) and (iv) accordingly determine whether the caravans were property ``in relation to which this Subdivision applies'', for the Subdivision applies to the caravans if the answers given are right and it does not apply if either answer is wrong.

The element of deductibility conveyed by the phrase ``property in relation to which this Subdivision applies'' is material to several provisions in the Subdivision. The principal section in which the phrase appears is sec. 82AA which, subject to the following provisions of the Subdivision, defines the property in relation to which the Subdivision applies. Section 82AA(a) reads:

``82AA. Subject to the following provisions of this Subdivision, this Subdivision applies in relation to a unit of eligible property acquired or constructed by the taxpayer that is -

  • (a) in the case of any taxpayer, for use by the taxpayer wholly and exclusively -
    • (i) in Australia; and
    • (ii) for the purpose of producing assessable income otherwise than by -
      • (A) the leasing of the eligible property;
      • (B) the letting of the eligible property on hire under a hire-purchase agreement; or
      • (C) the granting to other persons of rights to use the eligible property;''

The Subdivision is thus made to apply in relation to property that is ``for use by the taxpayer wholly and exclusively in Australia... for the purpose of producing assessable income''. There is no doubt but that the subject property was to be, and was in fact, used wholly and exclusively in Australia for the purpose of producing assessable income. The issue is whether the means of producing assessable income comes within subpara. (A), (B) or (C) of sec. 82AA(a)(ii).

The term ``leasing'' in subpara. (A) is given an extended definition by sec. 82AQ. ``Lease'' in relation to property is defined to mean ``grant a lease of the property or let the property on hire otherwise than under a hire-purchase agreement''. In the result, eligible property which is acquired by a taxpayer for use by granting a lease of the property, by letting the property on hire (whether or not under a hire-purchase agreement), or by granting to others rights to use the property, is not property to which the Subdivision applies, and no investment allowance is deductible in respect of the capital cost of that property. The appellant submits that the respondent acquired the caravans for use for the purpose of producing assessable income by letting the caravans on hire, or alternatively by granting to its customers rights to use the caravans, and accordingly the appellant challenges the answer given to question (iii). The matter raised by question (iv) is in substance the same as that which is raised by question (iii). Question (iv) is founded upon sec. 82AG(1)(b) which denies application of the Subdivision to property if, during the 12 months after the property was first used or installed ready for use, the taxpayer ``leased the property, let the property on hire under a hire-purchase agreement or otherwise granted a right to another person to use the property''.

The questions are founded upon virtually the same statutory language: para. (b) of sec. 82AG(1) varies from subpara. (A), (B) and (C) of sec. 82AA(a)(ii) in only one respect material for present purposes: sec. 82AG includes ``otherwise'' between the second and third classes of user described in both provisions. Clearly enough, that section is intended to ensure that, if an investment allowance would be deductible pursuant to sec. 82AA in respect of eligible property, the property not being acquired or constructed for use in any of the ways described in subpara. (A), (B) or (C), the deduction should be lost if the property be put to use in any of those ways during the first year. The correlation of purpose between subpara. (A),

ATC 4506

(B) and (C) of sec. 82AA(a)(ii) and para. (b) of sec. 82AG(1) is manifest, and the provisions must be taken to have corresponding meanings. In sec. 82AG(1) the phrases corresponding with subpara. (A) and (B) describe particular ways in which rights to use property may be granted to another other than the ways comprehended by the phrase corresponding with subpara. (C). Section 82AA(a)(ii) is to be similarly construed, and thus the generality of the language of subpara. (C) is not restricted by the context of subpara. (A) and (B), for the uses described in subpara. (A) and (B) are but particular ways in which rights to use property may be granted to another.

And therefore the relevant issue which arises under sec. 82AA(a) is whether the caravans were acquired for use by the taxpayer wholly and exclusively for the purpose of producing assessable income otherwise than by the granting to other persons of rights to use the caravans. Under sec. 82AG the relevant issue is whether the taxpayer granted a right to any other person or persons to use the caravans. It is agreed that there was no difference between the use for which the caravans were acquired and the use to which they were in fact put.

The answers to the questions so understood are to be resolved by reference to the facts stated by the Board of Review in the reference to the Supreme Court. Paragraph 10 of the case states:

``10. When a person arrives at this Motor Village and requires accommodation he reports to the Motor Village office... and is asked what type of accommodation he is seeking. If the answer is a caravan, then he is asked the number of berths he requires, the number of people to be accommodated and for how long. If a caravan is available the office receptionist fills in what is designated as a guest account consisting of an original and two copies. This records inter alia the person's name and address, car registration number, type of accommodation, number of nights, arrival date, departure date, number of persons and the amount due in respect of the accommodation. The customer is then asked for the amount due and when this has been paid he is given the original as a receipt together with a copy of (a plan) indicating the location of the allotted caravan, a key to the caravan and information as to the whereabouts of the various facilities and amenities.''

The receipt which is issued is called a licence, and on its back is printed, inter alia, the following:

``By accepting this receipt, I hereby agree that the money this day paid to you confer upon me a licence to occupy the caravan, caravan site, motel unit or mobile home referred to on the face hereof or any other nominated by you in lieu thereof for the period stated thereon and subject to the conditions printed below.

...

  • 6. The occupier of each site shall ensure that the site is at all times kept clean and tidy and no surplus gear left on the ground or under caravans.
  • 7. The caravan site, caravan, motel unit or mobile home is to be vacated by 10 a.m. on the day of departure otherwise further charges may be incurred.
  • ...

The licence is a personal licence and shall extend only to the number of persons listed on the face hereof.

I agree that I shall occupy the site, caravan, motel unit or mobile home allotted to me at the said park and use the parking facilities at my own risk in all things...

This licence does not in any way constitute a tenancy.''

Paragraph 12 of the case states:

``12. The conditions set out on the back of the original are not drawn to a prospective occupant's attention prior to the occupant's money being taken. Such conditions are not drawn to an occupant's attention after the money has been taken unless subsequently the occupants of the caravan create some problem for the taxpayer. A prospective occupant does not sign that document or any other. Apart from an inventory of crockery and cutlery no notices are displayed in the

ATC 4507

caravans or motel rooms. A notice is displayed in the grounds indicating dogs are not allowed.''

Whether the conditions form part of a particular customer's contract or not, a customer who makes the payment demanded of him and who is given the key of an identified caravan acquires a ``right'' in relation to the caravan, the nature of the right depending upon the terms of the contract which he makes with the taxpayer (
Radaich v. Smith (1959) 101 C.L.R. 209 at p. 222). The kind of right which a customer has is at least a right in the nature of a licence, that is, ``an authority to do something which would otherwise be wrongful or illegal or inoperative'' (
F.C. of T. v. United Aircraft Corporation (1943) 68 C.L.R. 525 at p. 533 per Latham C.J.). That right is granted to him by the taxpayer in the sense in which ``granting'' is used in subpara. (C). In subpara. (C) that term is not used in its technical sense, but in a sense which is defined by the Oxford Dictionary: ``an authoritative bestowal or conferring of a right''.

The respondent's argument is that the right granted to a customer was a right to occupy a caravan, not a right to use it. But use and occupation are not antonyms and premises may be both used and occupied at the same time. Thus, in Council of
The City of Newcastle v. Royal Newcastle Hospital (1959) A.C. 248; (1959) 100 C.L.R. 1, the Privy Council, finding that the relevant land was used, left open the question whether the land was also occupied. When that case was before the High Court, Taylor J. said ((1957) 96 C.L.R. 493 at p. 515):

``The word `used' is, of course, a word of wide import and its meaning in any particular case will depend to a great extent upon the context in which it is employed. The uses to which property of any description may be put are manifold and what will constitute `use' will depend to a great extent upon the purpose for which it has been acquired or created.''

Land is amenable to concurrent use by the owner and another, a proposition so manifest that Gibbs A.C.J. thought it unnecessary to cite authority for it:
Ryde Municipal Council v. Macquarie University (1978) 23 A.L.R. 41 at p. 45. His Honour's observations on concurrent use in that case are apposite to the present case:

``A person who owns land may be said to use it for his own purposes notwithstanding that he permits someone else to occupy it, even under a lease. That is almost beyond argument when the owner's purpose is to acquire income. In the ordinarily accepted meaning of the word a building is `used' for the purpose of acquiring income if rents are derived from it, and an owner of premises who leases them is making use of those premises by employing or applying them for the purpose of letting.''

Stephen J., at p. 53, refers to an owner's use of land by its ``being made available for use by others''.

In the present case, the caravans were acquired in order that those who might wish to be accommodated in them and to enjoy their facilities might be granted the right to do so in consideration of the payment of a fee. By occupying and enjoying the facilities of a caravan a customer uses it, and uses it ``for the purpose for which it has been acquired or created''. There is no inconsistent use by the taxpayer (who sells the right to occupy and enjoy the facilities of the caravan) and by its customer (who occupies it and enjoys its facilities).

It follows that the caravans are property falling within the exclusions expressed in subpara. (C) of sec. 82AA(a)(ii), and para. (b) of sec. 82AG(1), unless the use to which those provisions prima facie refer must be read down in order to allow room for the operation of other and particular provisions of the Subdivision. The provision which is said to require the reading down of the general exclusions expressed in subpara. (C) and para. (b) is sec. 82AF(1).

In form, sec. 82AF(1) denies application of the Subdivision to the several classes of property specified in it, including household appliances (wireless and television receivers included), and furniture and furnishings of various kinds. But exceptions are made in favour of taxpayers who carry on a business of providing accommodation for tourists and travellers, and the exceptions are said to require the reading down of the general exclusions in subpara. (C) and para. (b). The exceptions are:

ATC 4508

household appliances, furniture and furnishings that are for use in a business carried on by the taxpayer a substantial part of which consists of the provision by the taxpayer of accommodation for tourists or travellers (para. (a)(i) and (b)(i) of sec. 82AF(1); and

household appliances, furniture and furnishings that are for use in premises used or held for use by the taxpayer principally for the purpose of deriving income in the nature of rent by the provision of accommodation for tourists or travellers (para. (a)(ii) and (b)(ii) of sec. 82AF(1)).

It was argued that, as sec. 82AF is expressed to exclude property from the application of the Subdivision, the exceptions designate property to which it is the legislative intent that the Subdivision does apply. Even on the assumption of such a general legislative intent, however, the exceptions acquire that character under sec. 82AF itself: by excepting the designated property from exclusion, that section, on the stated assumption, would indicate an apparent intent that the Subdivision apply to the designated property. The property specified in the exceptions is not, on that assumption, designated as property to which the Subdivision applies in virtue of the provisions of sec. 82AA(a); and it is not necessary to hold that the use by tourists or travellers of accommodation provided for them cannot constitute a use of property under subpara. (C) of sec. 82AA(a) merely in order that the property specified in the exceptions to sec. 82AF(1) attract the operation of sec. 82AA(a). In order that sec. 82AA(a) and sec. 82AF(1) be read together, all that would be necessary would be to regard the exceptions to sec. 82AF(1) as designating property to which the Subdivision is intended to apply in virtue of that section, and to limit the meaning and operation of subpara. (A), (B) and (C) of sec. 82AA(a)(ii) so that they did not exclude the designated property from the categories of property to which the Subdivision applies. The special provisions of a statute do not affect the meaning and operation of general provisions in the same statute more than is necessary to allow for the operation of the special provisions.

In the Supreme Court, Woodward J. was attracted by a view of sec. 82AA(a) which limited the exclusions arising under para. (ii)(A), (B) and (C) to leasing, letting on hire, etc., in the course of providing finance. His Honour reached this view because he saw ``no significance in confining the use of the expression `providing finance' to the definition of `leasing company' in sec. 82AQ''. Though we are conscious that this approach is consistent with a particular view of what the Subdivision seeks to achieve, it appears to us that sec. 82AQ gives a meaning to ``providing finance'' only in reference to the definition of ``leasing company'' and the Act must be construed accordingly. The significance of the provisions of sec. 82AQ(2) to the definition of ``leasing company'', and the significance of ``leasing company'' so defined is to be found in those provisions of the Subdivision which especially ordain the entitlement of lessors being leasing companies and their lessees to an investment allowance.

In the result, no ground appears for limiting the meaning and operation of subpara. (A), (B) and (C) of sec. 82AA(a)(ii), and in the present case either subpara. (C) or subpara. (A) denies the application of the Subdivision to the caravans in respect of which an investment allowance is claimed.

Question (iii) should be answered ``no''; question (iv) should be answered ``yes, in that it granted to other persons rights to use the caravans''. The appeal should be allowed but, in accordance with the conditions upon which leave to appeal was given, the appellant must pay the respondent's costs.

The Court orders that:

1. The appeal be allowed.

2. The order of the Supreme Court of New South Wales be varied by substituting for the answers given to questions (iii) and (iv) the following answers:

Question (iii) - Were the aforesaid caravans, units of property acquired by the taxpayer for use wholly and exclusively by the taxpayer for the purpose of providing assessable income otherwise than by:

  • (a) the leasing of such units; or
  • (b) the granting to other persons of rights to use such units within the meaning of

    ATC 4509

    sec. 82AA(a)(ii)(A) and (C) respectively of the said Act?

Answer: No.

Question (iv): Did the taxpayer lease the aforesaid caravans or otherwise grant a right to another person to use the caravans within the year of income after the caravans were first used by the taxpayer within the meaning of sec. 82AG(1)(b) of the said Act?

Answer: Yes, in that it granted to other persons rights to use the caravans.

3. The appellant pay to the respondent its costs of the appeal.


Back to top

This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.