Ansari v Chief Commissioner of State Revenue

[2005] NSWADT 98

CITATION:	Ansari v Chief Commissioner of State Revenue [2005] NSWADT 98
DIVISION:	General Division
PARTIES:	APPLICANT Nazia Ansari RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	043411
HEARING DATES:	23/03/2005
SUBMISSIONS CLOSED:	04/22/2005
DATE OF DECISION:	05/06/2005
BEFORE:	Higgins S - Judicial Member
APPLICATION:	first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 First Home Owners Grant Act 2000
CASES CITED:	Chief Commissioner of State Revenue v Farrington (GD) [2004] NSWADT AP 41; Bates v Chief Commissioner of State Revenue [2004] NSWADT 13; McKellar v Chief Commissioner of State Revenue [2004] NSWADT 22; Yucel v Chief Commissioner of State Revenue [2004] NSWADT 53; Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158
REPRESENTATION:	APPLICANT A Ansari, agent RESPONDENT S Benjamin, solicitor
ORDERS:	The Tribunal:; a) affirms the decision of the Chief Commissioner to:; i) reverse, pursuant to s.23 of the First Home Owner Grant Act 2000, a previous decision made under that Act to pay the applicants a grant of $7,000; ii) require, pursuant to s.45(1) of the First Home Owner Grant Act 2000, the applicants to repay the grant of $7,000; and ; b) varies the decision of the Commissioner to impose, pursuant to s.45(3) First Home Owner Grant Act 2000, a penalty of 20% of the grant and in its place imposes a penalty of 15% of the grant (i.e. $1,050.00)

Background

1 This is an application made by Ahmed Ansari, on behalf of his daughter Nazia Ansari (“the applicant”), seeking review of a decision of a delegate of the Chief Commissioner of State Revenue (“the Commissioner”) to dismiss his daughter’s objection to the Commissioner’s decision to request that his daughter repay the $7,000 first home owner grant that his daughter had been paid pursuant to the First Home Owner Grant Act 2000 (“the FHOG Act”). The application for review also sought review of the Commissioner’s decision to impose a penalty of $1,400 in respect of the grant.

2 The basis of the Commissioner’s decision was the applicant’s failure to occupy, as her principal place of residence, the property to which the grant related, as required under s.12 of the FHOG Act.

3 It should be noted that Ahmed Ansari lodged the application on behalf of the applicant pursuant to a letter of authority from the applicant dated 30 June 2004.

Issues

4 There are only two issues in this matter. These are:

(a) Whether the applicant had “occupied” the property the subject of the grant as her principal place of residence within 12 months of having purchased the property; and

(b) In the event the Tribunal finds that the applicant failed to meet the occupancy requirements, whether a penalty of 20% was appropriate in the circumstances.

5 The factual matters in this application are not disputed. These were explained by the applicant’s father to be as follows:

(a) on 1 November 2002, the applicant was paid the grant in respect of the unit that she was purchasing. The purchase of the unit was settled on 2 November 2002. The purchase price of the unit was $215,000.00;

(b) on 24 November 2002, the applicant went overseas, to Pakistan, to be married. It was to be a traditional Pakistani marriage, which involved 2 distinct ceremonies. The first ceremony being the religious ceremony and the second ceremony being the journey of the husband and wife to the husband’s home;

(c) after the applicant left for Pakistan and shortly before Christmas of 2002, the applicant’s unit was tenanted.

(d) on 15 January 2003, the applicant was married in a religious ceremony in Pakistan;

(e) following the religious ceremony, the applicant returned to Australia and continued to reside with her parents. On her return, the applicant also lodged, on behalf of her husband, an application for permanent residency. That application was made in March 2003;

(f) the applicant’s husband was granted permanent residency in about November 2003, however he was unable to migrate to Australia at that time as his father had just died;

(g) the applicant returned to Pakistan in April 2004. After she returned, she and her husband celebrated the second part of their wedding ceremony and she has continued to reside in Pakistan;

(h) the applicant sold her unit in July 2004 for about $251,000.00. The unit had been rented out for the majority of the time she had owned it.

6 The relevant legislation is contained in the FHOG Act. That Act establishes a scheme to assist persons buying or building their first home by providing them with a grant of a prescribed amount of money. To be eligible for a grant, an applicant must satisfy the five eligibility criteria that are contained in Division 2 of Part 2 of that Act. The fifth criteria is set out in s.12(1) of the FOGH Act and provides, so far as is relevant, as follows:

“s.12(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant’s principal place of residence within twelve months after completion of the eligible transaction or a longer period approved by the Commissioner. ”

7 Sub-section 13(1) of the FHOG Act defines the term an “eligible transaction” for the purposes of the Act. In this case, there is no dispute that the unit purchased by the applicant was an “eligible transaction” as defined. Sub-section 13(5) provides that this transaction is completed when the purchaser becomes entitled to possession of the property that is the subject of the grant. In this case that was on 2 November 2002.

8 Section 20(1)(b) of the FHOG Act provides that the Commissioner may authorise the payment of a grant “in anticipation of compliance” with the “resident requirement”, if the Commissioner is satisfied that the applicant who is required to comply, but has not complied, with the residency requirement, intends to occupy the home as his/her principal place of residence within twelve months after completion of the eligible transaction. That is, under this paragraph the Commissioner is given power to issue a grant prior to an applicant occupying the property as his/her principal place of residence. The sub-section also gives the Commissioner power to extend the period within which the applicant must take up occupancy of the property as his/her principal place of residence.

9 Sub-section 20(3) of the FHOG Act provides that where a grant is paid “in anticipation of compliance” with the “resident requirement”, such payment is made on condition that, if the “resident requirement” is not complied with the applicant will within fourteen days after the end of the period allowed for compliance, give written notice of that fact to the Commissioner and repay the amount of the grant. The term “resident requirement” is defined in s.3 of the FHOG Act in similar terms to that contained in s.12. A failure to comply with subsection 20(3) constitutes an offence, which is punishable by a maximum penalty of 50 penalty units.

10 Section 23 of the FHOG Act gives the Commissioner power to vary or reverse a decision he has made in respect of an application for a grant where he is later satisfied that the decision is incorrect. However, he must do so within five years of the original decision having been made.

11 Section 24(1) of the FHOG Act provides that where the Commissioner decides to reverse an earlier decision on an application for a grant, the Commissioner is required to give the applicant written notice of the reversal and state in the notice the reasons for the reversal.

12 Section 45 of the FHOG Act gives the Commissioner the power to request the repayment of the grant. That power can only be exercised in circumstances where the grant was paid in error (see s.45(1)(a)) or where the Commissioner has reversed the decision under which the grant was made (see s.45(1)(b)).

13 There is no dispute that the applicant did not at any stage reside in the unit that was the subject of the grant. The applicant has stated that at the time she purchased the unit she intended to make the unit her home after she got married and after her husband was granted permission to reside in Australia. The applicant’s father submitted that on the material before the Tribunal this was her genuine intention at that time and that her failure to occupy the unit as her permanent place of residence was due to matters out of her control. On this basis it was submitted that the Commissioner’s decision was not the correct and preferred decision.

14 While I accept the evidence in regard to the applicant’s intention at the time she made her application and that it was based on a belief that her marriage and the requisite permission for her husband to reside in Australia would all occur within 12 months of her purchasing her unit. Although these events did ultimately occur, I find that at some time the applicant decided she no longer had any intention to make the unit her home as it was eventually sold. In my opinion that decision was made before the expiry of the requisite 12 month period and I accept it was made on the basis of her changed circumstances.

15 However, the applicant’s intention was not the only basis on which the Commissioner made the grant. As provided in s.20(1) of the FHOG Act it was made on the “anticipation of compliance” with the “residency requirements”. That is, it was made on the basis that she would meet these requirements and occupy the unit as her principal place of residence before 2 November 2003. Meeting this requirement included residing in the unit and it is not sufficient to only have an intention to do so: see Chief Commissioner of State Revenue v Farrington (GD) [2004] NSWADT AP 41; Bates v Chief Commissioner of State Revenue [2004] NSWADT 13; McKellar v Chief Commissioner of State Revenue [2004] NSWADT 22; Yucel v Chief Commissioner of State Revenue [2004] NSWADT 53; Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158.

16 Accordingly, on the basis that the applicant did not satisfy the “residency requirements” of s.12 of the FHOG Act, which was an essential eligibility criteria that the applicant had to meet in order to qualify for the grant, the decision of the Commissioner to give the applicant a grant was not correct. What is clear from the evidence is that at all times the unit was an investment property. A grant for such a purpose is clearly contrary to the objects of the FHOG Act.

17 For these reasons, in my opinion, the Commissioner made the correct and preferred decision when he determined to reverse the decision to pay the applicant the first home owner grant of $7,000. I make a similar finding in respect of the Commissioner’s decision to require the applicant to repay that grant.

Penalty

18 Where the Commissioner requests the re-payment of a grant pursuant to sub-s.45(1) of the FHOG Act, sub-s.45(2) & (3) enables the Commissioner to impose a penalty. These sub-ss provide as follows:

“45. …

(2) If, as a result of an applicant’s dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay.

(3) If an applicant (or a former applicant) for a first home owner grant failed to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay”.

19 In this case, following receipt of the Commissioner’s notice of 18 August 2004, pursuant to s.45 of the FHOG Act, the applicant repaid the amount of the grant. Accordingly, the only basis on which the Commissioner was entitled to impose a penalty was on the basis of alleged dishonesty (s.45(2)) and that the applicant had breached the condition of the grant as set out in s.20(3) of the FHOG Act (s.45(3)). In both cases the decision to impose a penalty is a discretionary one.

20 In my opinion, in this application, there is no basis on which to make a finding that the applicant acted dishonestly in respect to her application for a grant. Mr Benjamin, who appeared on behalf of the Commissioner submitted that the applicant had stated on her application for a grant that she would occupy the unit on 3 November 2002, and that this was sufficient for the Tribunal to make a finding of dishonesty. In my opinion there was no material before the Tribunal to make such a finding. A copy of the applicant’s application was not before the Tribunal and at no time was this particular allegation put to the applicant as a basis for reversing the decision to grant her application.

21 On the other hand, there is no dispute that the applicant failed to comply with s.20(3) of the FHOG Act in that she failed to repay the grant within 14 days after the period in which she was required to occupy the unit as her principal place of residency (i.e. 14 days after 2 November 2003). Accordingly, the only basis on which the Commissioner was entitled to impose a penalty was pursuant to s.45(3) of the FHOG Act.

22 In this case the Commissioner imposed a penalty of 20%. Mr Ansari, submitted that the penalty imposed by the Commissioner had failed to take into account the special circumstances of his daughter. In particular, the fact that her failure to move into the unit was as a result of matters totally out of her control, that the she had not sought to avoid her responsibilities and that she had repaid the amount of the grant as soon as she received the Commissioner’s notice.

23 Mr Benjamin, who appeared on behalf of the Commissioner, submitted that the decision of the Commissioner was correct in that the applicant had lodged her application on the basis that she would make the unit her home within 12 months of purchase and that she then failed to repay the grant, as she was required to do, when she did not make the unit her home. He also submitted that the FHOG Act specifically gives applicants, who are given a grant, 12 months to sort out their personal circumstances and if it cannot be done in this time they are able to seek an extended period of time. This the applicant did not do.

24 Mr Benjamin also provided the Tribunal with a copy of the Commissioner’s policy in respect of how his discretion is to be exercised under s.45 of the FHOG Act. In summary that policy provides as follows:

a) no penalty where an applicant makes a voluntary disclosure and re-pays the grant within the time prescribed under the Act;

b) 5% penalty where an applicant makes a voluntary disclosure and re-pays the grant outside the time prescribed under the Act;

c) 20% penalty where an applicant makes an immediate voluntary disclosure following a “show cause letter” from the Commissioner;

d) 30% penalty where an applicant is unable to satisfy the residence requirements or other eligibility requirements following a “show cause letter” from the Commissioner;

e) 100% penalty where there is an intentional disregard for the law by the applicant.

25 In my opinion there are considerable difficulties with this policy. For example, the first mentioned circumstances (i.e. (a) above) are circumstances in which the Commissioner could not impose a penalty, as s.45 of the FHOG Act would not apply, unless there was evidence of dishonesty, which would be very unlikely. The policy is also very general in nature and it does not distinguish between penalties imposed by reason of dishonesty pursuant to s.45(2) and those imposed pursuant to s.45(3). Nor does the policy allow for taking into consideration matters that are specific to a particular applicant. Notwithstanding these discrepancies I have had regard to the policy as providing general guidance on the levels of penalty.

26 In my opinion a much more helpful guide on what factors are to be taken into account when exercising this particular discretion is that set out by Judicial Member Molony in Calcaro v Chief Commissioner of State Revenue (supra) at [51]-[54]. These factors are:

a) the deterrent effect of the penalty;

b) the nature and extent of the contravention;

c) any loss or damage suffered, or gain made, as a result of the contravention;

d) the circumstances in which the contravention took place, including deliberateness of the conduct and the period over which it extended;

e) whether professional advice had been obtained in relation to the contravention, prior to the breach;

f) whether the person has previously been found by a court to have engaged in any related or similar conduct;

g) the degree of co-operation with the authorities; and

h) in the case of a natural person, the attitude of the offender.

27 Having regard to these factors and the Commissioner’s policy, in my opinion, it is appropriate that a penalty be imposed as a result of the applicant’s failure to meet the conditions of the grant. However, I find that the Commissioner’s decision of a penalty of 20% is not the correct and preferred decision. In my opinion the correct and preferred decision is a penalty of $1,050.00 or 15% of the grant amount, having regard to the following matters and findings:

a) there is a need to deter others from not complying with the FHOG Act;

b) the applicant did originally intend to occupy the unit as her principal place of residence and that due to changed circumstances she did not do so within the prescribed time and has had no intention to do so since then;

c) the applicant has at all times co-operated with the Commissioner and re-paid the grant promptly after receiving the s.45 Notice; and

d) the applicant has received the benefit of the grant in that she was able to purchase the unit, receive rent from the unit for 1½ years and profit from the sale of the unit. In this regard I note that the FHOG Act did not prohibit the applicant from tenanting the unit during the 12 months.

28 For the reasons set out above, the Tribunal:

a) affirms the decision of the Chief Commissioner to:
i) reverse, pursuant to s.23 of the First Home Owner Grant Act 2000, a previous decision made under that Act to pay the applicants a grant of $7,000;

ii) require, pursuant to s.45(1) of the First Home Owner Grant Act 2000, the applicants to repay the grant of $7,000; and

b) varies the decision of the Commissioner to impose, pursuant to s.45(3) First Home Owner Grant Act 2000, a penalty of 20% of the grant and in its place imposes a penalty of 15% of the grant (i.e. $1,050.00).