ASTON AND COMMISSIONER FOR ACT REVENUE
[2007] ACTAAT 5
•2 April 2007
AUSTRALIAN CAPITAL TERRITORY
ADMINISTRATIVE APPEALS TRIBUNAL
CITATION:ASTON AND COMMISSIONER FOR ACT REVENUE [2007] ACTAAT 5 (2 APRIL 2007)
AT06/77
Catchwords: Land tax – appeal against assessment imposing interest and penalty tax – interest payable after issue of assessment – whether tax default was caused by failure of taxpayer (or person acting on his behalf) to take reasonable care to fulfil the taxpayer’s obligations under a tax law – consequence of failure of respondent to record notification of tenancy agreement in relation to taxpayer’s property – whether taxpayer took reasonable care to comply with a tax law.
Land Tax Act 2004, ss 9, 14, 17, 19, 31, 48
Legislation Act 2001, s 84
Rates Act 2004
Rates and Land Tax Act 1926, s 22A
Taxation Administration Act 1999, ss 4, 6, 30, 31, 32, 34, 36, 37, 82, 88
Tribunal:Mr M H Peedom, President
Date:2 April 2007
AUSTRALIAN CAPITAL TERRITORY )
ADMINISTRATIVE APPEALS TRIBUNAL ) NO: AT06/77
GENERAL DIVISION )
RE: PETER ASTON
ApplicantAND: COMMISSIONER FOR
ACT REVENUE
Respondent
DECISION
Tribunal : Mr M H Peedom, President
Date : 2 April 2007
Decision :
The decision under review is set aside and substituted by a decision that the applicant is liable to pay land tax in the sum of $4,809.51.
…………………………..
President
AUSTRALIAN CAPITAL TERRITORY )
ADMINISTRATIVE APPEALS TRIBUNAL ) NO: AT06/77
GENERAL DIVISION )
RE: PETER ASTON
ApplicantAND: COMMISSIONER FOR
ACT REVENUE
Respondent
REASONS FOR DECISION
2 April 2007 Mr M H Peedom, President
Background
The applicant in this case entered into an agreement for the purchase from the Defence Housing Authority (“the DHA”) of the Crown lease of residential land at Block 8 Section 3 Division of Amaroo (“the property”) on 19 March 2002. Transfer of the property took place on 7 May 2002.
2. At the time of purchase the property was rented to a tenant and was subject to a 9 year lease extension. The tenant continued in occupation following the transfer of ownership and the property has been subject to a tenancy agreement continuously to the present date.
3. The applicant requested the DHA to manage the property and to attend to all administrative arrangements relating to it, including the notification of government agencies of the change of ownership details. For these services he paid the DHA a commission rate of 12% of the annual rental.
4. Pursuant to these arrangements the DHA forwarded a letter, signed by the applicant, to the Manager, ACT Revenue advising his name as the new owner of the property and his address as c/- the DHA. The letter also advised that the property was leased to the DHA and he authorised the Revenue Office to forward any future rates notices to the DHA at an address in Canberra.
5. The letter, dated 13 May 2002, was forwarded by facsimile to the Revenue Office and confirmation of the transmission was provided on 30 May 2002. Thereafter, all notifications by the respondent to the applicant of the unimproved value of the property, the amount payable by way of rates and other communications regarding the property were sent to the applicant at the address given in the letter dated 13 May 2002.
6. Following what were described as routine investigations, the Revenue Office sent a letter dated 23 February 2006 to the applicant advising that recent enquiries made by the Revenue Office indicated that the property may be rented and that the land tax status of the property was in issue. The letter forwarded a questionnaire and requested that it be completed and returned. The completed questionnaire was dated by the applicant as 7 March 2006. The questions asked by the questionnaire and the answers given were as follows:
1.Is the above-mentioned property currently rented or has it been at any time in the past? Y/N (Y circled)
Comments:Rented to Defence Housing Association
2.If the answer to question 1 is “yes”, please advise the period/periods the property has been rented (include dates):
Dates of rental: 7th May 2002 – current
3.Did you notify this office of the property being rented? Y/N (Y circled)
DHA were asked to liase with ACT Councils/Government
4.If you did notify this office of the property being rented, please provide details of your notification (please attach a copy of any documents to support your claim)
5.If you did not notify this office of the property being rented, please state the reasons:
We had presumed that DHA had looked after communication with ACT Revenue.
7. On 16 March 2006 an assessment of land tax was issued for the period 1 July 2002 to 31 March 2006. Land tax was assessed at the statutory rate for 15 quarters, a total of $4,809.51. The notice of assessment included a sum of $1,107.02 being penalty tax calculated at 25% of the unpaid land tax and interest at the rate of 13.63% on the amount outstanding of $1,037. The notice of assessment stated that the total amount of $6,954.20 was payable by 15 April 2006.
8. On 10 April 2006 the Revenue Office received the applicant’s formal letter of objection to the imposition of penalty tax and interest with the $50 objection fee.
9. On 13 September 2006 the Commissioner’s delegate disallowed the objection. The delegate stated that he was satisfied that the applicant had failed to take reasonable care in complying with his tax obligations, but had no intention to avoid paying taxes and that the penalty of 25% was appropriate. The delegate was also satisfied that the legislation required the payment of interest on the unpaid tax.
10. The applicant has now applied for the review of the decision of the respondent’s delegate disallowing the objection.
The hearing
11. At the hearing of the appeal the applicant represented himself. The respondent was represented by Mr P Walker, of counsel.
12. The applicant tendered in evidence a letter to the Tribunal dated 2 February 2007 in which he set out factual information consistently with that recorded in paragraphs 1 to 6 above.
13. In answer to questions asked by Mr Walker the applicant said that he was aware at the time he purchased the property that it was subject to a liability to pay land tax. He said that after he received the questionnaire from the Revenue Office he had spoken to the DHA and had been advised that they did not have a copy of a letter advising the respondent that the applicant had purchased the property and that it was tenanted. He had later gone back to the DHA and asked them to look at the whole of their file in relation to the property. The letter dated 13 May 2002 was then found and sent to him by facsimile on 29 September 2006.
14. The applicant stated that he had a vague recollection of a conversation with a Mr R Lewis from the Revenue Office after he had received a copy of the respondent’s decision dated 13 September 2006 which disallowed his objection who told him that if he had a copy of advice to the Revenue Office that the property was the subject to a tenancy agreement, he should provide it to that office and the penalty tax would be waived. He denied a suggestion put to him that he had told Mr Lewis he would take the matter to court and ask for costs. He said that he had not sent a copy of the letter dated 13 May 2002 earlier to Mr Lewis because the Revenue Office had taken no effective steps to investigate his claim that he had provided it with advice of the sale and tenanting of the property and he had lost confidence in the Revenue Office. He thought that the better course was to take the matter to the Tribunal. He could not recall receiving a land tax assessment from the respondent in relation to another property he had rented to friends.
15. Mr Lewis, an officer of the Revenue Office gave evidence on behalf of the respondent. He said that he had a telephone conversation with the applicant on or about 10 October 2006. He asked the applicant to provide a copy of the advice which the applicant said had been given to the Revenue Office that the property was tenanted and that would result in penalty tax and interest being remitted but there would need to be a written request for that. Mr Lewis said that he could not account for the fact that the Revenue Office did not have a copy of the letter dated 13 May 2002 when he spoke to the applicant. He thought there must have been an administrative oversight. He first received a copy of the letter dated 13 May 2002 as an attachment to the application for review of decision.
The legislation
16. At the date of sale of the property land tax was imposed on rateable land that was rented and not exempt from land tax by section 22A of the Rates and Land Tax Act 1926 (repealed) (“the repealed Act”). The repealed Act was repealed by the Rates Act 2004 with effect on 1 July 2004. The repeal did not affect any liability acquired, accrued or incurred under it (see section 84(1)(c) Legislation Act 2001).
17. Section 9 of the Land Tax Act 2004 (“the LTA”) imposed land tax on rented residential land as from 1 July 2004.
18. Section 14(1) of the LTA provides:
14 Commissioner to be told if residential land rented
(1)A person who becomes the owner of a parcel of land that is leased for residential purposes, and becomes or continues to be rented by a tenant on the change of ownership, must tell the commissioner in writing within 30 days after the day the person becomes the owner—
(a) that the parcel has begun or continued to be rented; and
(b) the date when the rental began.
(2)If a parcel of land that is leased for residential purposes becomes rented by a tenant, the owner of the parcel must tell the commissioner in writing about the rental (including the date the rental began) within 30 days after the day the rental begins.
(3)This section does not apply if the owner of the parcel of land is a corporation.
19. Section 17(1) of the LTA makes land tax payable by the owner of the land. Section 17(3) of the LTA provides that an assessment notice for land tax payable for a quarter must state the date for payment. The payment date must not be earlier than 4 weeks after the date of the notice (see section 17(4)). Section 19 of the LTA provides for interest to be payable on an amount of unpaid land tax in accordance with a formula.
20. Pursuant to section 48 of the LTA tax payable under the repealed Act is taken to be payable under the LTA. The LTA is made a “tax law” for the purpose of the Taxation Administration Act 1999 (“the TAA”) by section 4(g) of the TAA. The purpose of the TAA is to make general provision in relation to the administration and enforcement of other tax laws (see section 6(1) TAA).
21. The Dictionary to the TAA contains a definition of “tax default” in the following terms:
tax default means a failure by a taxpayer to pay, in accordance with a tax law, the whole or part of tax that the taxpayer is liable to pay.
22. Section 30 of the TAA relevantly provides:
30 Penalty tax in relation to certain tax defaults
(1)If a tax default happens, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.
(2) Penalty tax imposed under this division is in addition to interest.
Section 31 of the TAA provides:
31 Amount of penalty tax
(1)The amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid, subject to this division.
(2)The amount of penalty tax payable in relation to a tax default is 50% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer’s obligations under a tax law.
(3)Subsection (2) does not apply if the tax payer satisfies the commissioner that the taxpayer (or a person acting on behalf of the taxpayer) had a reasonable excuse for the failure.
(4)Subsections (2) and (3) apply to a tax default that happened before their commencement in the same way as they apply to a tax default that happened after their commencement.
(5)The amount of penalty tax payable in relation to a tax default is 75% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a tax law.
(6)No penalty tax is payable in relation to a tax default if the commissioner is satisfied that—
(a)the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or
(b)the tax default happened solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.
Section 32 of the TAA provides:
32 Reduction in penalty tax for voluntary disclosure
The amount of penalty tax determined under section 31 is reduced by 80% if, before the commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out, the taxpayer discloses to the commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.
Section 34 of the TAA provides:
34 Increase in penalty tax for concealment
The amount of penalty tax payable in relation to a tax default is 90% of the amount of tax unpaid if the commissioner is satisfied that, after the commissioner has informed the taxpayer that an investigation is to be carried out and before the investigation is completed, the taxpayer (or a person acting on behalf of the taxpayer)—
(a)deliberately damages or destroys records required to be kept under the tax law to which the investigation relates; or
(b)fails, without reasonable excuse, to comply with a requirement made by the commissioner under division 9.2 for the purposes of determining the taxpayer’s tax liability; or
(c)hinders or obstructs an authorised officer exercising functions under that division for that purpose; or
(d) otherwise shows intentional disregard for a tax law.
Note 1 The Legislation Act, dict, pt 1 defines fail to include refuse.
Note 2 Table 34 contains a summary of the effect of s 31 to s 34:
Table 34 Rates of penalty tax
column 1
Itemcolumn 2 column 3 column 4 column 5 basic rate disclosure before
investigation beginsintentional
disregard for tax lawbefore notification after notification 1 Failure to take reasonable care 25% 5% 20% 90% 2 Failure to take reasonable care and no reasonable excuse 50% 10% 40% 90% 3 Intentional disregard of the law 75% 15% 60% 90%
Section 37 of the TAA provides:
37 Remission of penalty tax
The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that—
(a) either—
(i)the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or
(ii)the circumstances that resulted in the liability for penalty tax were exceptional; and
(b) it would be fair and reasonable to remit all or part of the penalty tax.
Submissions
23. The applicant submitted to the Tribunal that it was clear that the Revenue Office had received notification from the applicant that he had purchased the property in May 2002 and had thereafter let it to a tenant. It had used the information provided by the DHA to issue rates and other notices to the correct address. He asserted that the DHA was well known to be a large leasing organisation of residential property in Canberra and it was unreasonable for the Revenue Office to fail to make enquiries of the DHA that would have shown that he had given notice of the tenancy arrangements in respect of the property within the period of 30 days after purchase in which he was required to notify the Revenue Office. He contended that the Revenue Office had behaved in a predatory manner by assessing him to penalty tax at a rate of 25% and then requesting the Tribunal to increase that rate to 90% of the tax unpaid.
24. Mr Walker informed the Tribunal that the respondent accepted that the Revenue Office had received the letter dated 13 May 2002 advising of the change of ownership of the property and that it continued to be tenanted. He said that the respondent also accepted that the letter, by mistake, had not been processed in a way that resulted in its records showing that the property was the subject of a rental agreement. As a consequence, no assessment of land tax payable in respect of the property was made prior to 16 March 2006 but that rates notices in respect of it had been sent to the applicant at the address notified in the letter dated 13 May 2002. He accepted that interest was only payable and accrued on any outstanding balance of land tax from 16 April 2006, the day following the date specified for payment in the notice of assessment dated 16 March 2006.
25. He said that, although the Commissioner had, in a statement of facts and contentions lodged with the Tribunal, sought the imposition of penalty tax at the rate of 90% in accordance with section 34 of the TAA, the respondent now sought to have penalty tax imposed at the rate of 50%, as provided for by section 31(2) of the LTA in lieu of 90% as provided for by section 34. He identified the tax default of the applicant as his failure, by 15 April 2006, to pay the land tax to which he was assessed by the notice dated 16 March 2006. He identified the cause of the tax default as the failure of the applicant to respond to the request made by question 4 of the questionnaire by providing details of the notification (attaching a copy of it) to the respondent as requested. He submitted that this failure occurred some time after the receipt by the applicant of the letter dated 23 February 2006. He accepted that a the time of receiving the letter dated 23 February 2006 the applicant did not have a copy of the letter dated 13 May 2002 but noted that section 31(2) made the applicant liable for any failure of a person acting on his behalf. In this case, he submitted the DHA was acting on behalf of the applicant and had failed to provide a copy of the letter dated 13 May 2002 to the respondent as requested by the Revenue Office. It followed, he submitted, that the applicant was liable in accordance with section 31(2) for that failure.
Reasons for decision
26. Land tax imposed and duly assessed in accordance with the LTA and the TAA is, as noted above, made payable by the owner of the land (section 17(1) LTA). Provision for exemption and remission from land tax is contained in the LTA but is beyond the scope of the Tribunal’s powers in this appeal as is the power of the respondent to extend the time for payment of land tax or to allow it to be paid by instalments.
27. The obligation of a person to provide information relevant to a determination of a tax liability is imposed by section 82(1) and section 88(1) of the TAA. Section 82 relevantly provides:
82Power to require information, instruments or records or attendance for examination
(1)The commissioner may, for a purpose related to the administration or enforcement of a tax law, by written notice served on a person, require the person—
(a)to provide to the commissioner (either orally or in writing) information that is described in the notice; or
…………..
(c)to produce to the commissioner a record or other document described in the notice that is in the person’s custody or control.
Section 88(1) provides:
88 Failing to comply with requirement of inspector
(1)A person must not, without reasonable excuse, fail to comply with a requirement of an authorised officer under this division.
28. The letter dated 23 February 2006 was signed by a person purporting to be an inspector of the Revenue Office. There was no evidence before the Tribunal as to whether the person who signed the letter did so as a delegate of the respondent pursuant to section 82 or as an authorised officer for the purpose of section 88 of the TAA. No evidence of a delegation or authorisation was provided to the Tribunal.
29. It is a requirement of section 82(2) that if a notice under section 82(1) is given to determine that person’s tax liability, the notice must state that the requirement is made for that purpose. Section 82(4) makes it an offence, without reasonable excuse, to fail to comply with the requirements of the notice.
30. The letter to the applicant from the respondent dated 23 February 2006 forwarding the questionnaire to the applicant expresses its purpose as being to establish whether the property was subject to land tax. There was insufficient information available to the Tribunal to determine whether the purpose of the letter was also to determine the applicant’s tax liability, in which event the letter would have failed to satisfy the requirements of section 82(2) of the TAA.
31. Irrespective as to these matters, the obligation imposed by both section 82(1) and section 88(1) is to comply with a “requirement”. The ordinary meaning of the word “requirement” imports the making of a demand or the imposition of an obligation (see Macquarie Dictionary definition of “requirement”).
32. The terms of the letter were, in my view, expressed as no more than a request and fall short of any language that may be regarded as the imposition of a requirement for the purpose of either section 82(1) or section 88(1) of the TAA. The fact that the letter contained a warning that the giving of false or misleading information was a serious offence does not change the proper characterisation of the letter as a mere request.
33. It follows, in my view, that the failure relied upon by the respondent as the cause of the applicant’s tax default does not involve a failure by the applicant to take reasonable care to comply with his obligations under a tax law for the purpose of section 31(2) of the TAA.
34. Even were the failure to respond to the request made by question 4 of the questionnaire to be regarded as a failure to take reasonable care to fulfil an obligation under a tax law, it would also be necessary for the Tribunal to be satisfied that that failure was the whole or partial cause of the applicant’s tax default in order to determine the amount of any penalty payable pursuant to section 31(2).
35. The scheme of the LTA and the TAA which gave rise to the liability of the applicant in this case to pay land tax in respect of the property involved, in sequence: the purchase and tenanting of the property by the applicant; the notification within 30 days of the respondent by the applicant of those events; the making and issuing of an assessment at the appropriate time of the amount of the liability; and the payment by the applicant of the amount duly assessed within the time specified.
36. Clearly, the legislation imposes the obligation on the applicant to bring to the notice of the respondent the facts that give rise to a liability to pay land tax. The provision of that information enables a determination of the amount payable by the taxpayer. In this case, the applicant did all that was initially required of him to enable his liability to pay land tax to be assessed and notice of the amount of his liability to be given to him. The failure that was the true cause, in my view, of the breakdown in the sequence of events so as to result in a liability of the applicant to pay land tax, was the failure of administrative arrangements within the Revenue Office to ensure that it properly recorded and dealt with the information provided to it on behalf of the applicant.
37. Nor, in my view, can the failure of the applicant or the DHA on his behalf to respond to question 4 of the questionnaire be regarded as the cause of his tax default. The answers given by him to questions 1 and 2 of the questionnaire provide the necessary information to enable his liability to be determined and an assessment of that liability to be made. All that the provision of a DHA copy of the letter of 13 May 2002 would have achieved was to provide confirmation to the Revenue Office that its administrative procedures for dealing with the notification of the tenanting of the property were deficient.
38. I conclude that the amount of any penalty tax payable by the applicant is not to be determined in accordance with section 31(2) of the TAA. Any penalty tax is, therefore, to be determined in accordance with section 31(1).
39. Section 31(1) is expressed as “subject to this division”. Within Division 5.2 of the TAA section 31(6) (set out above) provides for circumstances in which no penalty tax is payable. Section 31(6) of the TAA recognises that there are circumstances in which a tax default may occur despite the absence of fault on the part of the taxpayer and is designed to avoid the injustice that would be involved by the imposition of a monetary penalty in such circumstances.
40. It would, in my opinion, be an oppressive and unintended interpretation of section 31(6)(a) of the TAA that any failure to comply with a tax law even though unconnected with a tax default could be relied upon to avoid the potential benefit of that provision. In my opinion, in the context of section 36 when read as a whole, the reference in section 31(6)(a) of the TAA to “the tax law” is a reference to a tax law that was not complied with which was a cause of the tax default. As I have previously concluded, the tax law upon which the respondent relied as the cause of the tax default had no connection with the applicant’s failure to pay the land tax payable by him. The tax law that enabled a proper assessment of the applicant’s liability to be made was section 14 of the LTA. The evidence shows that the applicant made arrangements for the notification to the respondent in accordance with that section to be undertaken by the DHA. The evidence also shows that the DHA discharged the applicant’s obligation to provide the required information to the respondent. Such failure as occurred was that of the Revenue Office.
41. In the circumstances, I conclude that the applicant took reasonable care to comply with the relevant tax laws and, pursuant to section 36(1)(a) of the TAA, the Tribunal should conclude that no penalty tax is payable.
FORM 33
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Member's Staff
________________________________________________________________________
PART A FILE NO: AT06/77
APPLICANT: PETER ASTON
RESPONDENT: COMMISSIONER FOR ACT REVENUE
PARTY JOINED: N/A
COUNSEL APPEARING: APPLICANT:
RESPONDENT: MR P WALKER
PARTY JOINED:
SOLICITORS: APPLICANT:
RESPONDENT: ACT GOVERNMENT SOLICITOR
PARTY JOINED:
OTHER:APPLICANT: SELF
RESPONDENT:
PARTY JOINED:
TRIBUNAL MEMBER/S: MR M H PEEDOM, PRESIDENT
DATE/S OF HEARING: 14 MARCH 2007 PLACE: CANBERRA
DATE OF DECISION: 2 APRIL 2007 PLACE: CANBERRA
_______________________________________________________________________
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION (X)
COMMENTS: After the conclusion of the hearing, the Tribunal received further written submissions from the respondent dated 23 March 2007 and the applicant in reply dated 28 March 2007.
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