Aguilar-Leong v Chief Commissioner of State Revenue
[2009] NSWADT 233
•11 September 2009
CITATION: Aguilar-Leong v Chief Commissioner of State Revenue [2009] NSWADT 233 DIVISION: Revenue Division PARTIES: APPLICANT
REPSONDENT
Sharon Theresa Aguilar-Leong
Chief Commissioner of State RevenueFILE NUMBER: 096027 HEARING DATES: 12 August 2009 SUBMISSIONS CLOSED: 12 August 2009
DATE OF DECISION:
11 September 2009BEFORE: Verick A - Judicial Member CATCHWORDS: First Home Owner Grant LEGISLATION CITED: First Home Owner Grant Act 2000
Duties Act 1997
Taxation Administration Act 1996
Administrative Decisions Tribunal Act 1997
State Revenue Legislation Further Amendment Act 2003
State Revenue Legislation Amendment Act 2004
State Revenue Legislation Further Amendment Act 2005CASES CITED: Kouayder and anor v Chief Commissioner of State Revenue [2008] NSWADT 169
Cullen v Chief Commissioner of State Revenue [2007] NSWADT 121
Sobhani v Chief Commissioner of State Revenue [2009] NSWADT 198
Giris v Federal Commissioner of Taxation (1969) 119 CLR 365
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 60 ALR 509
CIC Insurance Limited v Bankstown Football Club Limited (1995) 187
Deputy Commissioner of Taxation v Clark [2003] NSWCA 91
Chief Commissioner of State Revenue v Pacific General Securities Ltd & Finmore Holdings Pty Ltd (No 2) (RD) [2005] NSWADTAP 54
Federal Commissioner of Taxation v Swift (1989) 18 ALD 679
Larrson v Chief Commissioner of State Revenue [2008] NSWADT 208
Knight and Anor v Chief Commissioner of State Revenue [2008] NSWADT 83
Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19
Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21REPRESENTATION: APPLICANT
RESPONDENT
In person
A Gerard, solicitorORDERS: The decisions under review are affirmed
Introduction
1 The applicant seeks review of the respondent’s decision requiring the applicant to repay a First Home Owner Grant of $7,000 paid to the applicant on 15 January 2007 pursuant to the First Home Owner Grant Act 2000 (“the FHOG Act”), together with a penalty of 30% ($2,100).
2 The applicant also seeks review of the respondent’s decision to revoke the duty exemption granted to the applicant in accordance with the First Home Plus Concession Scheme (“FHP Concession”) under the Duties Act 1977 (“the Duties Act”) and requiring the applicant to pay the respondent:
(i) transfer duty of $9,127.00 with interest ($1,266.12) and
(ii) mortgage duty of $901.00 with interest ($125.02).
3 The grant under the FHOG Act and the FHP Concession under the Duties Act relate to the purchase by the applicant of a property situated at Quakers Hill, New South Wales (“the property”).
4 The respondent made these decisions on the basis that the applicant failed to comply with the “residence requirement” under s 12(1) of the FHOG Act and s 76(1) of the Duties Act to occupy the property as her principal place of residence for a continuous period of at least 6 months starting within 12 months after completion of the agreement to purchase the property.
5 The main issue is whether the applicant is entitled to, for the purposes of the residence requirement, the approval of a shorter period of occupation, pursuant to s 12(3)(b) of the FHOG Act and s 76(2)(a) of the Duties Act. The application also concerns two minor questions as to the liability of the applicant to a penalty under the FHOG Act and interest under the Taxation Administration Act 1996 (“the TA Act”).
Factual background
6 The applicant who is an Australian citizen returned to Australia after a period of residence in the United States with her husband and their two children in December 2005.
7 The husband is a citizen of the United States and on arrival was granted a visa to stay in Australia subject to various conditions including that he could not carry out any employment. On 18 January 2006, he applied as a partner of an Australian citizen for migration to Australia. He was granted a “bridging visa” which allowed him to remain in Australia pending the outcome of his permanent stay visa application. Under the conditions of the bridging visa he was not allowed to work during the period. He made another application on 24 July 2006 for a bridging visa and sought variation of the conditions on basis of “financial hardship” to allow him to work in Australia pending the outcome of his permanent stay application. On 1 August 2006, he was granted a bridging visa up to 25 December 2006 without any conditions, which allowed him to work in Australia.
8 On 31 July 2006 the applicant exchanged contracts for the purchase of the property. Settlement of the purchase of the property occurred on 31 August 2006. The applicant and her family moved into the property on 8 September 2006.
9 On 3 October 2006, the applicant returned to the United States. In her original explanation and in the objection she informed the respondent that she had to return to the United States as her father had a stroke. But subsequently, before the hearing of this matter, the applicant informed the respondent that her father had only suffered from depression.
10 The applicant returned to Australia on 8 November 2006 and, in her immigration passenger card on arrival, indicated that she did not intend to live in Australia for the next 12 months.
11 On 20 November 2006, the applicant entered into an exclusive managing agency agreement to rent the property.
12 On 23 November 2006, the respondent received an incomplete application for the First Home Owner Grant from the applicant. It was returned to the applicant by the respondent on 6 December 2006 requesting the applicant to provide information in respect of certain identified sections, and to provide the necessary supporting documentation required by the respondent. The application was resubmitted on 4 January 2007 and the grant was paid into the applicant’s joint bank account with her husband on 15 January 2007.
13 On 16 December 2006, the property was let to tenants under a residential lease for a period of 12 months.
14 On 25 December 2006, the applicant and her family left Australia for the United States. On her outgoing immigration passenger card the applicant indicated she was leaving Australia “permanently” and that her country of residence was the United States.
Relevant Legislative Provisions
FHOG ACT
15 The FHOG Act was introduced to encourage and assist home ownership and to offset the effect of the Goods and Services Tax on the acquisition of a first home. The scheme has been continued to assist first home buyers to purchase or build their first homes.
16 The entitlement requirements for a grant are set out in s 7 (1) of the FHOG Act as follows:
- “A first home owner grant is payable on an application under this Act if:
- (a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and
- (b) the transaction for which the grant is sought:
(i) is an eligible transaction, and
(ii) has been completed.”
17 In the applicant’s case, the “eligible transaction” was the contract for the purchase of the property in terms of s 13(1)(a) and was completed under s 13(5)(a) of the FHOG Act when the applicant was entitled to possession of the property.
18 The eligibility criteria is set out in Division 2 of Part 2 of the FHOG Act, which requires an applicant to satisfy 5 “Eligibility Criteria” to obtain a grant.
19 The relevant eligibility criterion at issue is the fifth criterion set out in s 12(1) of the FHOG Act. There are various historical versions of this provision, the version that applies in this matter is as follows:
12 Criterion 5—Residence requirement
(1) An applicant for a first home owner grant must;
(a) commence occupation of the home to which the application relates as the applicant’s principal place of residence within 12 months after completion of the eligible transaction or the period approved by the Chief Commissioner under this section, and
(b) occupy the home as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner under this section.
(2) This requirement is referred to in this Act as the residence requirement .
(3) The Chief Commissioner may, if satisfied there are good reasons to do so, do either or both of the following:
(a) approve the commencement of occupation by the applicant of the home to which the application relates as a principal place of residence more than 12 months after completion of the eligible transaction,
(b) approve the occupation of the home as a principal place of residence for a period of less than 6 months.
(4) The Chief Commissioner may, if satisfied there are good reasons to do so, exempt an applicant from the residence requirement.
(5) An approval or exemption under this section may be given by the Chief Commissioner at any time, even if the period of 12 months after completion of the eligible transaction has already expired or the applicant’s occupation of the home as a principal place of residence has already ceased.
(6) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement.
20 Subject to certain conditions, a grant can be paid under s 20 of the FHOG Act in advance in anticipation of the residence requirement. Section 23 of the FHOG Act gives the Chief Commissioner power to vary or reverse a decision made in respect of an application for a grant where he is later satisfied that the decision is incorrect.
21 Power to require repayment and impose penalties is given to the Chief Commissioner under s 45 of the FHOG Act
DUTIES ACT
22 In tandem with the grant scheme, the government also introduced the FHP Concession scheme under the Duties Act. Section 69 of the Duties Act sets out the scheme as follows:
69 The nature of the scheme
This scheme is intended to help people who are acquiring their first home. Under the scheme, the acquisition and any mortgage given to assist the financing of the acquisition is subject to a concession or exemption from duty.
23 Under s 70, the following transactions and instruments are eligible for consideration under the scheme:
- (a) agreements for sale or transfer entered into on or after 4 April 2004,
(b) transfers that occur on or after 4 April 2004 (other than transfers made in conformity with an agreement for sale or transfer entered into before 4 April 2004),
(c) mortgages over land the subject of those agreements or transfers.
24 Section 74 restricts the FHP concession to agreements or transfers for the acquisition of a first home or the acquisition of a vacant land intended to be used as the site of the first home. Under s 80 of the Duties Act, no duty is chargeable on an agreement or transfer of a dwelling valued up to $500,000 or $300,000 in the case of a vacant block of residential land if the application concerning an eligible agreement or transfer is approved by the Chief Commissioner.
25 An applicant must comply with s 76 of the Duties Act which, at the relevant time, provided as follows:
“ 76 Residence requirement
(1) The home must be occupied by the person or persons who are acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as the residence requirement .
(2) The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case:
(a) modify the residence requirement by approving a shorter period of occupation by the person or persons, or
(b) exempt the person or persons from the requirement to comply with the residence requirement.
(3) In the case of an agreement or transfer for the acquisition of a vacant block of residential land, it is sufficient that the Chief Commissioner is satisfied that the vacant block is intended to be used as the site of a home to be occupied by the person or persons who are acquiring it as their principal place of residence.
(4) The residence requirement does not apply to a person who acquires an interest in the property concerned solely for the purpose of assisting the other purchaser or purchasers in financing the acquisition.
(5) For the purpose of this section, an agreement or transfer is completed when a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered.
(6) (Repealed)”
TAXATION ADMINISTRATION ACT 1996 (“TA ACT”)
26 In reversing his decision to offer the applicant the FHP Concession under the Duties Act, the respondent included in the assessment interest at the market plus premium rates under the TA Act.
27 The relevant interest provisions are as follows:
21 Interest in respect of tax defaults
(1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division.
…
22 Interest rate
(1) The interest rate is the sum of:
(a) the market rate component, and
(b) the premium component.
(2) The market rate component is:
(a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or
(b) the rate specified for the time being by order of the Minister published in the Gazette.
(3) The premium component is 8% per annum.
(4) In this section, the Bank Accepted Bill rate in respect of any day is the yield rate for 90-day Bank Accepted Bills published by the Reserve Bank for the month of May in the financial year preceding the financial year in which the day occurs.
…
25 Remission of interest
The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.
Findings and Reasons
28 The applicant failed to occupy the property for a continuous period of at least 6 months after the completion of the eligible transaction as required by s 12(1) of the FHOG Act and s 76(1) of the Duties Act. There is no dispute that the applicant only occupied the property from 8 September 2006 to 15 December 2006.
29 In relation to the Grant and the FHP Concession, the only issue is whether the Chief Commissioner should exercise the discretion given to the Chief Commissioner by s 12(3)(b) of the FHOG Act and s 76(2)(a) of the Duties Act to modify the residence requirement by approving a shorter period of occupation by the applicant. The discretion is similar in both Acts and the respondent may, if satisfied there are good reasons to do so, approve the occupation of the property as a principal place of residence for a period of less than 6 months.
30 The Chief Commissioner’s submissions in relation to the scope of the discretion were as follows:
“55. The FHOG Act and Duties Act do not set out any express criteria, which specify what may constitute “good reasons” for the purposes of the discretionary powers. When the discretionary powers were introduced in relation to the Grant by the State Revenue Legislation Further Amendment Act 2003 (NSW) and the FHP Concession by the State Revenue Legislation Amendment Act 2004, no guidance was provided in the second reading speeches and explanatory notes to those bills as to the circumstances when the discretions should be exercised in favour of an applicant: for comment see Kouayder and anor v Chief Commissioner of State Revenue [2008] NSWADT 169 at paragraph [29] (“Kouyader”).
56. Section 12 of the FHOG Act , as applicable in this matter, was replaced with effect from 7 December 2005, the State Revenue Legislation Further Amendment Act 2005 (“the SRLFA Act ”). The Second Reading Speech to that Bill, which was cited with approval in Cullen v Chief Commissioner of State Revenue [2007] NSWADT 121 (“ Cullen ”) relevantly provided, in the context of guidance as to when the discretion could be exercised, as follows:
“ The bill also clarifies the circumstances in which the Chief Commissioner may exercise certain discretionary powers. Eligibility for the grant includes a residence requirement, which states that the applicant must occupy the home as his or her principal place of residence for at least six months commencing within 12 months of purchase … The discretions are intended to allow the grant to be retained in circumstances where the applicant genuinely intended to occupy the home as his or her principal place of residence, but failed to do so due to a change in circumstances after the purchase of the home. ” (my emphasis)
57. In Sobhani v Chief Commissioner of State Revenue [2009] NSWADT 198 (“ Sobhani ”) Judicial Member Verick stated, in the context of the relevant discretions, the following:
“The discretion is intended to allow the grant to be retained under the FHOG Act and FHP Concession to apply under the duties Act in circumstances where the applicant had a real bona fide intention to occupy and use the home as his or her principal place of residence but failed to do so due to a change in circumstances after the purchase of the home. Generally speaking, an acceptable circumstance would be one outside the control of the applicant. Without placing any limitation, the circumstances would include the need for an applicant to move interstate or overseas to carry out work duties, the serious illness of an applicant after exchange of contracts preventing occupation and use of the property, or a financial difficulty, for example loss of the income-earning job, after purchase of the property.”
58. In the respondent’s submission the discretions thus, may be exercised in favour of an applicant, where a change in circumstances after purchase of the home or application for the grant prevented , in a causal sense, the applicant from meeting the mandatory residence requirements. It follows, in the respondent’s submission, that the “good reasons” why the applicant did not meet the mandatory requirements.”
…
60. It is the case that the FHOG Act and Duties Act do not set out any express criteria, which specify what may constitute “good reasons” for the purposes of the discretionary power. In the absence of any express conditions governing the exercise of the discretion in s. 12 and s. 76, the decision-maker (ie the Tribunal) must be guided by the underlying purpose and policy of the FHOG Act and Duties Act respectively “… so far as that is manifested in” the relevant Act: see Giris v Federal Commissioner of Taxation (1969) 119 CLR 365, at 384: see for example K & S Lake City Freighters Pty Ltd v Gordan & Gotch Ltd (1985) 60 ALR 509, at 514; see also CIC Insurance Limited v Bankstown Football Club Limited (1995) 187 CLR 384, at 408 see also Spigelman CJ stated in Deputy Commissioner of Taxation v Clark [2003] NSWCA 91 (“ Clark ”), at para. [115].
61. The discretionary powers in s. 12 and s. 76 must be exercised in a manner which does not “defeat the fundamental legislative objectives of the scheme of regulation within which the dispensing power is located”: see Chief Commissioner of State Revenue v Pacific General Securities Ltd & Finmore Holdings Pty Ltd (No 2) (RD) [2005] NSWADTAP 54. As French J noted in Federal Commissioner of Taxation v Swift (1989) 18 ALD 679 in relation to the dispensing power available to the Commissioner in that case (at 696):
“The dispensing power is incidental and ancillary to the primary object of the legislation. On the spectrum of cases in which it could conceivably be exercised, there will be a threshold beyond which it would defeat the primary object of the legislation.”
31 The applicant first put her case in a letter dated 25 August 2008 to the respondent, in which she stated that after acquiring the property and when they were “starting to settle in” she “received a call from a family friend in US… my father had a stroke, immediately I had to fly to US in November, I had to stay away from my family for a month only to realize, my father needs us to care for him. We didn’t have any choice but to move back to the US… We moved back to the US with a terrible financial hardship…”
32 In a letter addressed to the Tribunal dated 14 July 2009, the applicant stated that on arrival in the United States on 3 October 2006, she found that her father had “more problems, i.e victim of fraud and very depressed”. She further stated that she “struggled to convince” her “dad to forget what had happened” and told her father that the applicant and her family will return to the United States. Attached to the letter was a copy of a bill for medical services rendered on 30 September 2006 to her father by a “medical center” in Los Angeles and an affidavit made by her father dated 17 July 2009. In the affidavit, her father stated that he had two previous strokes, the first in Australia and the second in May 2000 in the United States but that, on 30 September 2006, he was merely suffering from depression.
33 At the hearing the applicant confirmed that her case was essentially that she had to return to the United States to look after her father. In addition she submitted that her husband was not able to get employment in Australia and that she was offered her old job in the United States. She also stated that the family has intentions to return to Australia at some future date.
34 The respondent’s submissions in relation to the applicant’s father’s illness were as follows:
“82. As outlined at paragraph [67] of these submissions, the applicant points to the alleged illness of her father – which the applicant described until 14 July 2009, as a “stroke” – as a/the reason which forced her to return to the United States and, by inference, the reason why she was prevented from meeting the residence requirement.
83. The overarching difficulty for the applicant is that apart from her own assertions regarding her father’s health and a late affidavit sworn by her father in which he claims to have been a victim of an unexplained “fraud” and therefore apparently became “embarrassed” and “depressed” for a short period, there is no evidence as to what, if any, actual medical condition the applicant’s father experienced in October/November 2006. In Larrson v Chief Commissioner of State Revenue [2008] NSWADT 208 (“ Larrson ”) Judicial Member Perrignon considered an application by the applicant seeking discretionary modification of the residency requirement in the FHOG Act and Duties Act on medical grounds. To that end in Larrson Judicial Member Perrignon noted, at paragraph 38:
“To determine whether there is good reason for that exercise, regard must be had to the medical evidence .” (my emphasis)
84. Given that self serving statements made by taxpayers must “ be considered most closely and received with the greatest caution ” and given that the applicant’s assertions are tainted by her previous assertion that her father had suffered a “stroke”, in the respondent’s submission, on the state of the evidence, the applicant has not established to the required degree that an illness to her father prevented her from meeting the residence requirement by way of forcing her home to the United States to care for him. There is simply no objective evidence, which assists the applicant’s case.
…
87. In the respondent’s submission the general weight of the evidence before the Tribunal in this matter shows that the applicant and her husband, having weighed up their options and prospects in both Australia and the United States, in or around November 2006, simply decided to return home to the United States. As outlined by the applicant in her 14 July 2009 letter, “ It was a very critical decision to go back to the United States, but after analysing our situation and prospects in US and Australia at that time, my husband and I agreed to go back as a temporary remedy. ” In the respondent’s submission the discretions are not available to be exercised in favour of applicants who do not meet the residence requirement as a result of positive choices made on the basis of convenience.”
35 The difficulty the applicant has in this matter is the timing of the application for the grant. The application was first lodged on 23 November 2006. The application for the grant was considered as “incomplete” by the respondent and sent back on 16 December 2006 for the applicant to complete the identified sections and to provide the supporting documentation required by the respondent to process the application. The applicant returned the application form duly filled with some supporting documents, which reached the respondent on 4 January 2007.
36 The application was first made three days after the applicant had executed an “Exclusive Managing Agency Agreement (Residential)” with a real estate agent to allow the agent to let the property for a period of 6 or 12 months” and to re-let the property thereafter for a further period of “6 or 12 months”. The completed application was sent to the respondent from the United States. The property had been let to tenants on 16 December 2006 and the applicant with her family had settled back in the United States where they had a home, which they have owned for some years. In the completed application the applicant, inter alia, claimed that she will be occupying the property as her principal place of residence for a continuous period of 6 months commencing within 12 months after settlement. This statement was clearly false. The property had been let and was her investment property when the completed application reached the respondent.
37 In determining an application for a review, the Tribunal is required by s 63 of the Administrative Decisions Tribunal Act 1997 to have regard to the material then before it. The material before the Tribunal included the evidence that the property has remained let since 16 December 2006. It has been earning rental income for almost three years. There was some suggestion that the applicant has some future plans to return to Australia. The applicant’s case was that after “analysing” their “situation and prospects in US and Australia at that time, my husband and I agreed to go back as a temporary remedy”. But almost three years later, the applicant continues to reside in the United States. The proper inference that the Tribunal is entitled to make is that her stay there has become less “temporary” and more permanent.
38 The father’s illness, her husband’s inability to get a job in Australia and the claimed “financial difficulty” were matters known to the applicant when the completed application for the grant was sent to the respondent. Whilst it is not necessary for the Tribunal to determine whether any of these matters constituted “good reasons”, I should make the observation that there was insufficient evidence before the Tribunal, in particular in relation to the applicant’s father’s illness, to consider that question. I agree with counsel for the respondent that proper medical evidence has to be produced to establish any medical condition giving rise to the inability of an applicant to satisfy the residence requirement. In this matter other than an invoice indicating medical expenditure incurred for a particular day’s attendance at a medical centre, no other medical evidence was produced by the applicant to indicate the nature or the seriousness of the applicant’s father’s illness. I am only making these observations in passing because it is not a matter that the Tribunal has to conclusively deal with in this application.
39 But the fact of the matter is that, when the application for the grant was made, the property was already let and remains let to date. The applicant continues to live in the United States with her family and with very little or no prospect of her returning to Australia to use the property as her principal place of residence.
40 Against the factual background, it is a case where the exercise of the discretion to either exempt or shorten the period of residence, would, as submitted by Mr Gerard, “defeat the primary object of the legislation”. The object of the legislation is to provide assistance to purchase a first home.
41 The onus was on the applicant to establish, to the satisfaction of the Tribunal, that there were “good grounds” for the discretion to be exercised. Unfortunately, the applicant was not able to establish any “good reasons” for the period of residence to be shortened to the period of actual occupation instead of the statutory requirement of 6 continuous months.
42 Against the factual background, the respondent was clearly entitled under s 12(1A)(b) of the FHOG Act and s 76(2)(b) of the Duties Act, respectively, to refuse the approval of a shorter period of occupation to comply with the residence requirement.
43 If, on the other hand, the discretionary relief had been given, the respondent would have clearly “transgressed” the threshold fixed to achieve the primary objective of the relevant legislation. The primary objective of the relevant provisions is to assist people resident in New South Wales to acquire their first home and not to purchase their first investment property. The “residence requirement” ensures that the property is used and occupied as the principal place of residence by an applicant getting a grant and the First Home Plus scheme duty concession. In this matter when the grant was sought it was not for a first home but an investment property in Australia.
44 As the applicant failed to comply with the residence requirement, s 20(3)(b) of the FHOG Act required the applicant to repay the grant to the respondent within 14 days from 31 August 2007. Further, as the respondent reversed the decision under which the grant was made, the respondent, pursuant to the powers found in s 45(1)(b) of the FHOG Act, was entitled to demand repayment of the grant. In this matter, the respondent has issued an assessment. In addition, the respondent had the power under s 45(3) to impose a penalty for failure to comply with the residence requirement up to the full amount of the grant. The respondent imposed a penalty of 30 percent in this matter.
45 In this matter, the applicant was not truthful in her application and in responses to compliance enquiries. She maintained that she had to return to the United States because her father had suffered a stroke but, just before the hearing, she informed the Tribunal that he had merely suffered from depression. The property has been let for almost three years with little prospect of the applicant using it as her principal place of residence. The applicant did not inform the respondent of her failure to meet the residence requirement and has failed to repay the grant. The penalty of 30 percent imposed is in all circumstances appropriate and should not be disturbed.(see: Knight and Anor v Chief Commissioner of State Revenue [2008] NSWADT 83)
46 The matter that remains is the imposition of interest in the assessment to recover duty payable on the transfer and mortgage of the property.
47 Section 21(1) in Part 5 of the TA Act provides that if a “tax default” occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day when the payment was due until the day upon which the outstanding tax is paid. In this matter, the failure by the applicant to pay the relevant duty on the transfer and mortgage within 14 days after the end of the period she was allowed to comply with the residence requirement was a “tax default” in terms of the definition of “tax default” found in s 3 of the TA Act. The term “tax” is defined in s 3 of the TA Act to include any duty payable under a taxation law.
48 The applicable interest rate consists of a variable market rate component and a premium rate component. The market rate component fluctuates and is connected to an external rate, the Reserve Bank’s Accepted Bill rate. The premium rate component is fixed by s 22(3) of the TA Act at 8 per cent. In this matter, the respondent included both the market rate interest component and the premium rate component in the assessment issued to the applicant to recover the duty payable on the relevant transfer and mortgage.
49 The market rate component, as was pointed out by the Appeal Panel of the Tribunal in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, “is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due … otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time”.
50 The Chief Commissioner is given discretion by s 25 of the TA Act, “in such circumstances as the Chief Commissioner considers appropriate”, to remit the market rate component or the premium rate component or both by any amount.
51 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, the Tribunal indicated in what circumstances the discretion should be exercised to remit the market rate interest component as follows:
“27 In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the ‘tax default’ is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes).”
52 In this matter, there were no special circumstances before the Tribunal to warrant remission of the market rate component.
53 In the case of the premium rate component, it would depend on the level of culpability and general behaviour of the taxpayer. The factors that have been taken into account in relation to the penalty under the FHOG Act would equally apply to the imposition of the premium rate component under the TA Act. In addition to the factors mentioned earlier, the applicant has not paid the duty payable on the transfer and mortgage. When all the circumstances are taken into account, it would seem to me that the respondent was entitled to include the premium component of interest in the assessment issued to the applicant to recover the outstanding duties.
54 The decisions under review are, accordingly, affirmed.
Orders
1. The decision of the Chief Commissioner of State Revenue to recall the Grant ($7,000) and impose a penalty of 30% ($2,100) is affirmed.
2. The decision of the Chief Commissioner of State Revenue to revoke the concession granted to the applicant in accordance with the First Home Plus Scheme under the Duties Act is affirmed.
3. The decision of the Chief Commissioner of State Revenue to assess transfer duty of ($9,127.00) with interest ($1,266.12) and mortgage duty ($901.00) with interest ($125.02) is affirmed.
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