Askraba and Commissioner Of State Revenue - [2009] WASAT 58

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: FIRST HOME OWNER GRANT ACT 2000 (WA)

CITATION: ASKRABA and COMMISSIONER OF STATE REVENUE [2009] WASAT 58

MEMBER: MS J HAWKINS (MEMBER)

HEARD: 11 MARCH 2009
27 MARCH 2009

DELIVERED : 2 APRIL 2009

FILE NO/S: CC 1995 of 2008

BETWEEN: SRETEN ASKRABA
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

First home owner grant Failure to declare prior ownership of property Application to review decision to impose penalty tax Application of Commissioner's policy Applicable principles in complying Decision affirmed penalty

Legislation:

First Home Owner Grant Act 2000 (WA), s 8, s 9A, s 10, s 11, s 12, s 13, s 13A, s 24, s 26(c), s 31, s 37, s 51, s 51(2), s 52
State Administrative Tribunal Act 2004 (WA), s 27, s 29

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicant: Self-represented
Respondent: Ms H Dodd

Solicitors:

Applicant: Self-represented
Respondent: State Solicitor's Office

Case(s) referred to in decision(s):

Miller and Commissioner of State Revenue [2006] WASAT 336
Re Calcaro and Chief Commissioner of State Revenue (2004) 56 ATR 560
Re Marcus and the Chief Commissioner of State Revenue [2005] NSWADT 97

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

In this matter, Dr Askraba sought a review of a decision of the Commissioner of State Revenue in imposing a penalty tax.
The matter concerned the First Home Owner Grant Act 2000 (WA).
The Commissioner of State Revenue had imposed a penalty tax of 20% ($1,400) due to Dr Askraba failing to declare that he previously owned a property in Victoria when applying for the first home owner grant.
The matter involved a consideration of the principles that apply when imposing such a penalty.
The State Administrative Tribunal did not consider in this case that the penalty should be further remitted. The decision of the Commissioner of State Revenue was therefore affirmed.

Issue

The issue for determination in this matter is whether the decision of the Commissioner of State Revenue (the Commissioner) was correct in disallowing Dr Askraba's objection to the imposition of penalty tax under s 51(2) of the First Home Owner Grant Act 2000 (WA) (FHOG Act).
Dr Askraba seeks a review of that decision pursuant to s 31 of the FHOG Act.
The matter was the subject of a hearing on 11 and 27 March 2009. Dr Askraba represented himself and the Commissioner was legally represented by the State Solicitor's Office.
Both parties filed documentation and written submissions which have been taken into account in the determination of this matter. This includes a bundle of documents filed by Dr Askraba on 31 March 2009 subsequent to the decision in this matter being reserved. Dr Askraba had not been given leave to file any further information with this Tribunal. The respondent's counsel reviewed the further documentation and advised the Tribunal that the respondent did not consider the further documentation as relevant and that the respondent would simply rely upon the written and oral submissions previously made to the Tribunal.

Background

From about 2 October 1998 to 7 August 2000, Dr Askraba owned a flat at 3/50 Denbigh Rd, Armadale in Victoria (Victorian property).
Subsequently Dr Askraba moved with his family from Victoria to New South Wales (NSW) and ultimately to Western Australia (WA).
On 25 August 2006, Dr Askraba entered into a contract of sale for the purchase of property at 14 Middlegate Mews, Quinns Rocks (WA property).
On 20 July 2006, Dr Askraba through a finance broker applied for the first home owner grant (FHOG) in respect to the purchase of the WA property. In that application the box 'Yes' had been ticked to question 2 which asked:
is each applicant and their spouse/de facto a person who has never owned a home , solely or with some other person before 1 July 2000, in any State or Territory of Australia.
The application was approved on 2 August 2006 and the FHOG was paid on 22 August 2006.
In or about mid July 2008, as a result of further investigations by the Office of State Revenue (OSR), it was ascertained that Dr Askraba owned the Victorian property prior to receiving the FHOG.
On or about 14 August 2008, OSR forwarded an invoice to Dr Askraba for repayment of the FHOG of $7,000 and a penalty tax of $1,400, being 20% of the penalty tax which would be payable under s 51(2) of the FHOG.
By an email dated 22 August 2008, Dr Askraba objected to the payment of the penalty and the email was treated as an objection.
The Commissioner's decision concerning the objection was set out in a letter to Dr Askraba dated 14 October 2008 (the Commissioner's decision).
The Commissioner's decision explained that the FHOG had been paid to Dr Askraba on the basis that the information contained in his FHOG application was correct. It explained that subsequently the Commissioner had become aware that Dr Askraba did not satisfy the eligibility criteria required under the FHOG, namely, that he owned the Victorian property prior to 1 July 2000. This was despite having indicated on his FHOG application that he had 'never owned a home, solely or with some other person before 1 July 2000 in any State or Territory of Australia'.
The Commissioner's decision accepted that this misinformation was a result of inadvertence by Dr Askraba and as a result the Commissioner took the view that the full 100% penalty should not be imposed but remitted to a penalty of 20%. The Commissioner's decision states that such a remission was in line with the Commissioner's treatment of similar matters involving innocent or unintentional information.
Dr Askraba seeks a review of that decision.

Legislative framework

Under s 8 of the FHOG Act, a first home owner grant is payable if, amongst other things, an applicant complies with eligibility criteria.
Sections 9A to 13A of the FHOG Act set out the eligibility criteria. One of those criteria is that an applicant has not held a previous relevant interest in a residential property. This includes a relevant interest in residential property in another State.
Under s 24 of the FHOG Act, if the Commissioner decides an application and is later satisfied independently of an objection that the decision to make the grant was incorrect, the Commissioner can vary or reverse the decision.
If a grant was paid in error due to information provided by the applicant which the Commissioner considers to be false or misleading, the Commissioner may by notice in writing impose a penalty of up to 100% of the amount required to be repaid (see s 51(2) of the FHOG Act).
Under s 31 of the FHOG Act, an objector who is dissatisfied with the Commissioner's decision on an objection concerning a decision on an application for a FHOG may apply to this Tribunal for review. Section 26(c) of the FHOG Act defines a decision on the application for a FHOG to include the imposition of a penalty under s 51 of the FHOG Act.

The respondent's evidence and contentions

As this was a review hearing, the Commissioner was asked to, firstly, present its case to enable Dr Askraba to fully understand the Commissioner's decision in this matter.
The evidence relied upon by the Commissioner was contained in the bundle of documents filed on 4 March 2009.
The Commissioner submits that under that statutory framework a penalty of up to 100% of the grant may be imposed. Nonetheless, the Commissioner has a discretion, and in this case the Commissioner has taken account of the principles and objects of the FHOG Act and its own policy when imposing the 20% penalty. Under that policy, entitled 'FHOG Revenue Ruling 1', the Commissioner provides its officers with guidance on the amount of penalty to be imposed. That internal policy reveals that a penalty of 20% of the FHOG is to be imposed in cases of innocent or unintentional misrepresentations and that only in exceptional or unusual circumstances should no penalty be imposed.
As to why the penalty of 20% was imposed and why exceptional circumstances do not exist the Commissioner submitted that:
•Dr Askraba had previously owned a relevant interest in Australian residential property;
•The representation in this case was considered to be unintentional and therefore there was no intention to mislead;
•Given the misrepresentation was unintentional, in accordance with its internal policy, a 20% flat penalty was imposed. This did not relate to the time that had passed since the grant was made;
•The effectiveness of the FHOG depends on the representations made by applicants;
•The FHOG application contains several reminders to applicants as to the need to give accurate information. Reference was made to the Declaration section upon the FHOG application which requires applicants to declare that they have read and understood the eligibility criteria and that if those criteria are not met the applicant may not be entitled to receive or retain the FHOG. The FHOG application also has a warning upon it that penalties can be imposed for making false or misleading information; and
•Further, the Commissioner relied on several authorities to establish why in such circumstances a penalty was appropriate and that financial hardship itself is not enough to warrant a zero penalty. Particular reference was made to the decision of Re Marcus and the Chief Commissioner of State Revenue [2005] NSWADT 97 which was referred to as a similar case factually and one where the decision to impose a penalty of 20% was affirmed.
As a result of issues raised by Dr Askraba, during the hearing of this matter on 11 March 2009 as to the Commissioner's practices in respect to the processing the FHOG and the number of complaints received in respect to similar cases, the matter was adjourned to 26 March 2009 to enable the respondent to file any further information concerning these issues.
At the hearing on 11 March 2009, counsel for the respondent had advised that the practices of the Commissioner had changed since the inception of the FHOG scheme. Namely, the Tribunal was advised that the OSR since 2006 had changed its practice and in fact investigated the FHOG applications before any payments were made.
At the reconvened hearing on 26 March 2009, a witness statement from Mr Basilio Conti was admitted by consent without the need for Mr Conti to appear. Mr Conti’s evidence revealed that in fact the practice of the OSR had not changed since the introduction of the FHOG Act. As stated below, Mr Conti advised that on all FHOG applications, investigations are undertaken to ascertain if an applicant owns property in WA, not elsewhere.
Counsel for the respondent apologised to both Dr Askraba and this Tribunal for suggesting otherwise.
In summary, Mr Conti advised that:
•He is the team leader of grants and subsidies at OSR and has worked for the OSR for 14 years;
•The OSR's pre-approval process for the FHOG has not changed since inception;
•Pre-approval investigations have always been conducted to check for prior ownership of land in WA but not in other jurisdictions. He suggests that such a procedure would be tremendously onerous due to the sheer volume of applications received across all jurisdictions. Further, there is a need to process FHOG expediently - often within the week - as usually the purchase of a first home is dependent on the approval of the FHOG. He explained that the pre-approval checking is not uniform across all of the States but the WA OSR's approach is among the more comprehensive;
•He went on to explain that between 1 January 2006 to February 2009 there have been 48,000 grants - with only 14 complaints, 2 of which related to prior ownership; and
•He also stated that when a FHOG is received from a bank or a financier, the usual administrative practice is that information relevant to the FHOG is transmitted to OSR electronically and that the original and the copy of the FHOG application is only accessed by the OSR on an as needs basis. This procedure is carried out pursuant to a statutory administration agreement.
It was explained by the respondent's counsel that this arrangement was authorised under s 37 of the FHOG Act. Essentially, Ms Dodd for the respondent explained that the detail provided to the OSR in respect to the FHOG was as a result of detail being entered via a computer programme. The OSR does not in such situations see the FHOG application but only acts on information received from the authorised bank or financial institution via the relevant computer programme.
The Commissioner submitted that the effectiveness of the FHOG depends upon the representations made by applicants being correct. Further, the Commissioner maintains that it would be administratively onerous to expect the OSR to conduct investigations of every applicant in every jurisdiction.

Applicant's evidence and contentions

Dr Askraba attended the hearings and was self-represented. Dr Askraba made clear that he wished to proceed and explained that English was one of four languages he used. The Tribunal did offer the use of an interpreter. However, Dr Askraba made clear that he was able to understand English and express himself in English. This ability was evident throughout the hearing.
Dr Askraba does not dispute that prior to 1 July 2000 he owned the Victorian property.
He also does not dispute that he should repay the FHOG. In that regard, he has entered into an arrangement with the Commissioner to make repayments on an instalment basis. This is pursuant to s 52 of the FHOG Act. At this point, Dr Askraba is making repayments which cover the repayment of the FHOG, the penalty and the prescribed interest rate.
Although Dr Askraba accepts the requirement for him to repay the FHOG, he does not consider that he should be required to repay any penalty tax.
Dr Askraba holds a PhD in physics and is employed as a research scientist at the University of Edith Cowan, WA.
He explained that before moving to WA he lived in NSW and prior to that time he lived in Victoria.
He wanted to make clear that during his life he has been a law-abiding citizen and so when he received contact from the OSR as to his breach of the FHOG Act he was upset. He found it to be a very unpleasant experience and never had he wanted to be in such a position.
He explained that when he was attempting to purchase the WA property he used a broker. Although he completed and signed the FHOG he did not send it to the OSR but rather this was done via this agent.
He explained that when he was completing the FHOG application he found it confusing and that was part of the reason why he answered question 2, concerning owning previous property, incorrectly. Dr Askraba gave several reasons for that confusion but none are relevant as the Commissioner accepts that the mistake made by Dr Askraba on this issue was as a result of inadvertence.
Further, Dr Askraba explained that he expected his application to be thoroughly investigated before any final decision was made to pay the FHOG. He suggests this should have included checking in other States in respect to property ownership. He contends that if this had been done then he would not be in the current position, where several years after having received the FHOG, he now has to repay the FHOG and incur a penalty.
He complains that the process used by the OSR in approving the FHOG was too fast and is not appropriate given what he describes as the devastating effects it can have on a family if later it is determined they were ineligible.
Further, he says that attention should have been drawn to his FHOG application by what he describes as an apparent change having been made to the answer to question 7 on that application. Dr Askraba has obtained a copy of his original FHOG application from Bankwest. That reveals that when he forwarded the FHOG application to his broker he had answered 'No' to question 7. However, he alleges that the answer was later modified by his broker without his permission to answer 'Yes'. He says the modification was apparent as a smudge is revealed on the modified document. He suggests that this smudge should have alerted OSR to carry out a further investigation. Further, he argues that such a change was not authorised and again should have alerted OSR that the application was therefore not 'legal'.
This issue was answered by the further evidence of Mr Conti that revealed that where the FHOG application is being forwarded for approval via a bank or financial institution to the OSR, neither the original nor a copy of the FHOG application is given to the OSR. Rather, information in respect to the FHOG application is provided to the OSR via a computer programme.
As a result of this further information from Mr Conti, Dr Askraba suggested that in any event the Commissioner made a mistake in adopting such a procedure. He suggests that it was incumbent upon the Commissioner via OSR to examine his original FHOG application and the modified document. He reiterated that if such an examination had been carried out this would have alerted the OSR that his FHOG had been altered and alleges therefore, that his FHOG application was not a legally binding document.
In addition, he refers to the note at the bottom of the first page of the FHOG application form which states:
If you have answered yes to all the above questions you may be eligible for the grant. The Commissioner of State Revenue will decide whether you are eligible for the grant and you will receive written notice of the Commissioner's decision.
He suggests these words implied that the FHOG application would be thoroughly reviewed before the FHOG was paid.
As to the reference in Mr Conti's witness statement to the number of complaints made versus the number of FHOG approved, he suggests that care should be taken when having regard to these statistics as it is unknown what number of FHOG applications are the subject of audit checks.
Finally, he claims that he suffers financial hardship and so should not have a penalty imposed. He alleges that his monthly mortgage repayments are nearly half of his net monthly income. His oral evidence was that his monthly mortgage repayments are $2,300 which he says exceeds 50% of his monthly family income which he stated was $4,575. Dr Askraba has not provided any current payslips. The Tribunal noted he has provided a payslip of 7 September 2006 which reveals fortnightly net income of $2,111.66. This is not, however, current information. He suggests that the federal government defines financial family hardship exists when the repayment of a home loan exceeds 35% of the total family income. On questioning from the Tribunal, Dr Askraba advised that the interest rate applicable to his mortgage with Bankwest has decreased. This entitles him to have a lower monthly mortgage repayment. However, Dr Askraba chooses not to do so as he is endeavouring to pay off his mortgage more quickly.

Should there be full remission of the penalty?

There is no real dispute as to the background to this application.
Dr Askraba accepts that despite having represented to the contrary in the original FHOG application that he had not owned property elsewhere in Australia, investigations subsequently carried out by the Commissioner were correct and he had owned the Victorian property prior to the commencement of the FHOG Act. Dr Askraba says this was a mistake on his part because he found the FHOG application confusing. Nonetheless, he accepts that he was not entitled to the FHOG.
The Commissioner does not dispute that this misinformation was due to inadvertence by Dr Askraba and it is for that reason that the penalty tax was remitted from 100% to 20%.
I must now consider whether the Commissioner's decision to impose a 20% penalty tax should be affirmed, revoked or set aside pursuant to the relevant provisions of the State Administrative Tribunal Act 2004 (WA) (SAT Act) ( see s 27 and s 29 of the SAT Act).

Although not exhaustive, some of the factors to be considered when imposing a penalty include:
•The deterrent effect of a penalty;
•The nature and extent of a contravention;
•Any loss or damage suffered, or gain made, as a result of the contravention;
•The circumstances in which the contravention took place, including the deliberateness of the conduct and the period over which it extended;
•Whether professional advice had been obtained in relation to the contravention prior to the breach;
•Whether the person has previously been found by a court to have engaged in any related or similar conduct;
•The degree of co-operation with the authorities; and
•In the case of a natural person, the attitude of the offender.
(see Re Calcaro and Chief Commissioner of State Revenue (2004) 56 ATR 560 (Calcaro) at 571-572).
It is clear that in imposing a penalty of $1,400, being 20% of the penalty that could be imposed, the Commissioner had applied its internal policy, FHOG Revenue Ruling 1. That internal policy states that where an innocent or unintentional misrepresentation is made a penalty of 20% should be imposed. It goes on to make clear that it is only in exceptional circumstances that the penalty should be remitted to zero.
The Tribunal has previously recognised the appropriateness of having a policy concerning the remission of penalty, albeit in a different context - see Miller and Commissioner of State Revenue [2006] WASAT 336 at [16].
FHOG Revenue Ruling 1 provides for a fair and transparent policy that seeks to afford equity and consistency amongst all applicants. The policy provides flexibility in taking account of different categories of misrepresentations.
Dr Askraba has sought to suggest that despite his misrepresentation, it was for the Commissioner to immediately investigate the accuracy of the representations he made in the FHOG application.
I do not accept that submission.
There is no principle of public administration or law that mandates the making of such an enquiry. The FHOG system operates by requiring applicants to provide correct information and imposes penalties and offences in an effort to deter false information being given.
In every case, the OSR investigates whether an applicant owns property within WA. Indeed, it appears that WA may be the only jurisdiction that carries out even that preliminary enquiry. Due to the high volume of applications, I accept that it would be onerous to require the OSR to undertake searches in every other jurisdiction of Australia as to whether an applicant previously owned property. Due to the sheer volume of such applications and the need to process the applications quickly, such a system would likely be unworkable. I accept Ms Dodd's submission that the effectiveness of the FHOG depends upon the representations made by applicants being correct and that it would be administratively onerous to expect the Commissioner to conduct investigations of every applicant in every jurisdiction prior to the FHOG being approved.
Dr Askraba also contended that further investigation was warranted in his case because of what he described as the smudge on the FHOG application where his answer to question 7 had been modified without his permission. Question 7 of the FHOG application asks whether the relevant applicant has entered into either a contract for the purchase of an established home, or to have a home built or in the case of an owner builder, whether construction had commenced. Dr Askraba has shown that the unamended FHOG application showed that he answered 'No' to this question. However, the modified FHOG application shows that the answer was 'Yes".
Mr Conti made it clear that when Dr Askraba's application was being processed, as it was via a bank, the Commissioner did not have access to the original FHOG application. Further, even if it was before the Commissioner, I doubt that the modification, which Dr Askraba suggests is represented by a 'smudge', would in ordinary circumstances have alerted the Commissioner to carry out further investigations. It is likely that the change, although not authorised by Dr Askraba, was made by his broker or agent because, presumably, if a FHOG applicant had not entered into a contract to purchase, build or was as an owner builder commencing to build, the FHOG would not be paid.
Applying the factors mentioned in Calcaro (ibid), there is a need to deter others from not complying with the FHOG Act.
In this case, Dr Askraba failed to provide the Commissioner with the correct information concerning having previously owned the property in Victoria. This was accepted by the Commissioner as inadvertence.
Although Dr Askraba has co-operated to some extent with the Commissioner and is currently making repayments to the Commissioner, this was not a breach volunteered by Dr Askraba.
Further, Dr Askraba still considers that the penalty can be remitted due to his view that if the Commissioner had investigated his application prior to it being approved, the ownership by him of the Victorian property would have been uncovered. As a result, the Tribunal does not consider that Dr Askraba yet appreciates the need for full and frank disclosure on such applications. This is despite the various warnings to applicants of the consequences of not doing so upon the FHOG application.
It is for the reasons mentioned above that I do not consider that exceptional circumstances exist to warrant the penalty being remitted to zero.
As to the issue of hardship, Dr Askraba did not provide independent information from either his accountant or by the provision of a financial statement showing income and outgoings which corroborated his current financial position. He failed to provide information such as a current payslip, or current regular monthly liabilities to substantiate whether he is unable to meet payment of this penalty. Dr Askraba holds a PhD in physics and is currently employed as a research scientist with Edith Cowan University. In addition, he is meeting the repayment of the FHOG, the penalty and interest, albeit by instalments. Further, although Dr Askraba suggests that his current mortgage repayment is 50% of his family income, he did advise that he is still making mortgage repayments at the rate which applied when his mortgage commenced. He conceded that in recent times, the interest rate applicable to his mortgage has decreased. Despite that decrease, he continues to make higher monthly repayments in an effort to reduce his mortgage more quickly. In those circumstances, I do not consider that Dr Askraba has provided sufficient information to establish that he suffers such financial hardship to warrant the penalty being remitted to zero.
For the foregoing reasons, in my view, the decision by the Commissioner to assess penalty tax at $1,400, being 20% of the penalty tax which would otherwise be payable under s 51(2) of the FHOG Act, should be affirmed.

Orders

1.The decision by the respondent to disallow the applicant's objection dated 14 October 2008 is affirmed.
2.The application for review of the respondent's decision is dismissed.

I certify that this and the preceding [77] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MS J HAWKINS, MEMBER