Bagnall v Chief Commissioner of State Revenue

[2023] NSWCATAD 341

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Bagnall v Chief Commissioner of State Revenue [2023] NSWCATAD 341

Hearing dates:

4 August 2023

Date of orders:

22 December 2023

Decision date:

22 December 2023

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

J S Currie, Senior Member

Decision:

The decision under review is affirmed.

Catchwords:

TAXES AND DUTIES- land tax- interest- remission. Chief Commissioner’s decision not to remit either market rate component or premium component - default not outside taxpayer’s control- No Revenue NSW fault-reasonable care not taken by taxpayer.

TAXES AND DUTIES- land tax- liability- assertions of unfairness, unreasonableness.

EVIDENCE- documentary evidence- administrator’s obligation to produce documents: Administrative Decisions Review Act 1997, section 58- relevance of any document a matter for the administrator.

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW) Section 9, 58,63

Civil and Administrative Tribunal Act 2013 (NSW) section 28

Land Tax Management Act 1956 (NSW) sections 7, 8, 12, 14, 22, 72.

Taxation Administration Act 1996 (NSW) sections 3, 21, 22, 25, 96,101.

Cases Cited:

AES Wiring Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 11

B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSW LR 481

Bayton Cleaning Company Pty Limited v Chief Commissioner of State Revenue & Ors [2019] NSWSC 657

Chand v Administrative Decisions Tribunal [2011] NSWCA 131

Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19

Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184

Commissioner of Taxation v Ryan (2000) 201 CLR 109

Gunasti Chief Commissioner of State Revenue [2012] NSWADT 218

International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657

Lease-A-Leaf Property Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADTAP 41

Levitch Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215

Oueik v Chief Commissioner of State Revenue [2022] NSWCATAD 132

Oueik v Chief Commissioner of State Revenue[2023] NSWCATAP 26

Singh v Chief Commissioner of State Revenue [2016] NSWCATAD 9

Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470

Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200

Texts Cited:

Chief Commissioner’s Practice Note CPN 024 ”Interest and penalty tax guidelines” (June 2022)

Category:

Principal judgment

Parties:

John Bagnall (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Applicant (Self-Represented)
Crown Solicitor (Respondent)

File Number(s):

2023/00075345

Publication restriction:

Nil

reasons for decision

What is this matter about?

1. This matter concerns the circumstances in which interest on unpaid land tax, comprising both the market rate and the premium components, may properly be remitted.

2. The Applicant Mr John Bagnall seeks an administrative review of the decision by the Respondent, the Chief Commissioner of State Revenue (the Chief Commissioner), not to remit interest on the outstanding land tax payable by Mr Bagnall for the land tax years 2018 to 2022 in respect of his home unit in Pine Street, Chippendale (the Pine Street property).

3. Interest on a tax default by Mr Bagnall was imposed under section 21 of the Taxation Administration Act 1996 (NSW) (the Administration Act) and it comprised both the market rate component and the premium component available by operation of section 22 of that Act. Section 25 of the Act allows the Chief Commissioner, in such circumstances as he considers appropriate, to remit the market rate component or the premium component of interest, or both, by any amount.

4. Mr Bagnall asserts that the Chief Commissioner’s decision not to remit either of those components of interest was not the correct and preferable decision.

5. For the reasons which follow I have decided that the Chief Commissioner’s decision not to remit either component of interest was the correct and preferable decision and must be affirmed.

Background

6. The essential facts, as summarised in the Chief Commissioner’s written submissions, are uncontested. They are as follows.

1. At relevant times Mr Bagnall owned a property in Rose Street Chippendale (the Rose Street property), a property in Mallett Street Camperdown (the Mallet Street property) and the Pine Street property.

2. The land tax assessments calculated by Revenue NSW and issued by the Chief Commissioner for each of the 2018, 2019, 2020 and 2021 land tax years were respectively for $1,412, $1,721.30, $1,693.65 and $1,049.30. Each assessment covered the Rose Street property and the Mallet Street property only. The Rose Street Property was exempt from land tax in each of those land tax years as Mr Bagnall’s principal place of residence. The land tax assessment issued by the Chief Commissioner for the 2022 land tax year was a nil assessment. Again it covered the Rose Street property and the Mallet Street property only and the Rose Street Property continued to be exempt as Mr Bagnall’s principal place of residence.

3. However, on 28 September 2022, the Chief Commissioner, having reassessed Mr Bagnall’s land tax liability for the 5 land tax years 2018-2022, issued to Mr Bagnall a reassessed land tax assessment notice for those years in the amount of $22,625.60, including interest. The reassessment included the Pine Street property.

4. On 1 November 2022 Mr Bagnall lodged with the Chief Commissioner an objection to the assessment. He objected to the retrospective assessment of land tax on the Pine Street property, the land values shown in the assessment (on the basis of which the land tax had been assessed) and the imposition of interest.

5. On 13 January 2023 the Chief Commissioner determined the objection by wholly disallowing it and on that date notified Mr Bagnall of his determination. Mr Bagnall then commenced the present proceedings.

6. Mr Bagnall’s Application, received by the Registry on 7 March 2023, sought administrative review of the assessments themselves and in particular, review of the quantum of assessed land tax and the interest imposed upon it. But Mr Bagnall has subsequently confirmed that he now seeks the Tribunal’s review only of the Chief Commissioner’s decision not to remit the interest, comprising both the market rate component and the premium component.

Uncontested matters

7. The following relevant facts appear to be uncontested.

1. those recited at [6];

2. that the Pine Street property is and at all relevant times was a strata unit, being lot 1 in Strata Plan 69935;

3. that Mr Bagnall is and at all relevant times was the registered proprietor of the Pine Street property, having purchased it in September 2017; and

4. that the Pine Street Property was not Mr Bagnall’s principal place of residence and was not otherwise exempt from land tax in any of the land tax years under consideration.

The decision under review

8. Given that Mr Bagnall does not dispute the land tax assessments except as to the imposition of interest, the decision under review in these proceedings is the Chief Commissioner’s decision not to exercise his discretion under section 25 of the Administration Act to remit either the market component or the premium component of interest or both.

9. The Chief Commissioner’s decision on 13 January 2023 to disallow Mr Bagnall’s objection is not the decision under review: see Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184 at [28], per Basten JA; Singh v Chief Commissioner of State Revenue [2016] NSWCATAD 9 at [10]-[13].

The Tribunal’s role

10. The role of the Tribunal in determining an application for administrative review under section 63 of the ADR Act is:

… to decide what the correct and preferable decision is having regard to the material then before it, including the following:

(a) any relevant factual material,

(b) any applicable written or unwritten law.

11. For the purpose of making its decision, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision: ADR Act s 63(2). The effect of that is that the Tribunal’s role is to decide what the correct and preferable decision is, having regard to the material that is before it at the hearing. It follows that the Tribunal may take into account material that was not before the primary decision-maker.

Onus and standard of proof

12. It is of fundamental importance that in a review of this nature the applicant taxpayer has the onus of proving their case: section 100 (3) of the Administration Act , B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSW LR 481; Levitch Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215 (Levitch). The burden lies solely on the applicant. The legislation places no onus on the Chief Commissioner to prove his case.

Relevant statutory provisions

13. The principal statutory provisions relevant to the land tax and interest imposed are as follows.

Land Tax Management Act, 1956

7 Land tax on taxable value of land

Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers other than land which is exempt from taxation under this Act….

12 Taxpayer to furnish returns

(1) The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year.

(1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year.

(1B) A land tax return required to be furnished by a person must--

(a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and

(b) set out, or be accompanied by, any information, as to the following, that may be required to complete the return--

(i) the person's land ownership,

(ii) the eligibility of the land for an exemption from land tax or for a reduction in the taxable value of the land…

14 Assessments to be made

(1) Subject to this Act and the Taxation Administration Act 1996, the Chief Commissioner shall from the returns and from any other information in the Commissioner's possession or from any one or both of those sources, and whether any return has been furnished or not, cause an assessment to be made of the taxable value of the land owned by any taxpayer and of the land tax payable thereon.

(2) An assessment can be made even if the time for lodging returns has not yet expired…

72 Failure to furnish returns or information

(1) A taxpayer who fails or neglects duly to furnish any return or information as and when required by this Act or the Chief Commissioner, or who fails to include in any return any land owned by the taxpayer, is taken to have committed a tax default for the purposes of Part 5 of the Taxation Administration Act 1996

(2) In relation to the tax default--

(a) interest is payable in accordance with Part 5 of the Taxation Administration Act 1996 but accrues on the amount of land tax assessable to the taxpayer for the period commencing on the last day allowed for furnishing the return or information, or the correct particulars of land ownership, and ending on:

(i) the day on which the return or information is furnished or the correct particulars are furnished, or

(ii) the day on which the assessment calculated on the basis of the return or information that is required, or the correct particulars that are required, is made, or

(iii) the day on which the whole of the land tax assessable to the person is paid, whichever occurs first,….

Taxation Administration Act, 1996

Part 5 Interest in respect of tax defaults

Division 1 Interest

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.

(2) Interest is payable under this section in respect of a tax default that consists of a failure to pay penalty tax under Division 2 but is not payable in respect of any failure to pay interest 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.

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.

14. The effect of that legislation relevant to the present case is as follows:

1. Part 5 of the Administration Act deals with interest and penalty tax. Penalty tax is not in issue here.

2. Within Part 5, Section 21 provides that if a tax default occurs the taxpayer is liable to pay interest on the tax unpaid at an interest rate time to time applying under Division 1 of that Part.

3. By operation of Section 22 the interest rate is the sum of the “market rate component” and “the premium component” and sub-sections 22 (2) and (3) provide further definition of these terms. those terms. The market rate is the Bank accepted Bill rate rounded to the second decimal place or another rate specified by order of the Minister. The premium component is 8% per annum.

4. Section 25 of the Administration Act grants the Chief Commissioner a discretion to remit the market rate component or the premium component interest or both by any amount in such circumstances as the Chief Commissioner considers appropriate.

CPN 024

15. Revenue NSW Practice Note CPN 024 “Interest and penalty tax guidelines” (CPN 024), came into effect from June 2022.

16. CPN 024 is an important element, because it is a recent statement of the Chief Commissioner’s policy for determining whether interest will be remitted under section 25. It is a useful gauge of how the Chief Commissioner will exercise his section 25 discretion. It cites the recognised cases on the issue and it is generally consistent with the principles developed in them, but provides useful examples of how in practice the Chief Commissioner will apply those principles.

17. Relevantly CPN 024 is in the following terms:

The Chief Commissioner may remit the market rate component or the premium component of interest, or both, by any amount depending on the circumstances affecting the tax default. Where the remission of interest is warranted, the amount remitted will, generally, be either both the premium and market rate or the premium rate only….

Circumstances outside the control of the taxpayer

Where there is evidence that the default was outside the control of the taxpayer (or their representative), the Chief Commissioner may remit interest.  Events over which a taxpayer has no control include but are not limited to:

a. natural disasters such as fire or flood

b. computer system breakdowns including third party systems such as electronic funds transfer systems

c illness or death of a principal taxpayer

d Revenue NSW fault affecting receipt of payment, including processing problems

e circumstances where it is impossible to lodge or pay on time (excluding financial incapacity including hardship)….

Reasonable care taken by the taxpayer

Where there is sufficient evidence to prove that the default was within the control of the taxpayer (or their representative), but reasonable care has been taken to ensure the payment of the tax, the Chief Commissioner will usually remit the premium rate component of the interest. Events that may indicate that the taxpayer took reasonable care include (but are not limited to):

a. being honest and forthright when dealing with the Chief Commissioner

b .cooperation with the Chief Commissioner

c. the default is attributable to calculation errors

d. making diligent efforts to understand and comply with the law

e. maintaining appropriate and proper recording systems in accordance with normal practice i.e., systems that minimise the risk of tax default, allow reconciliation of the tax paid or payable with returns required to be lodged and fulfil the taxpayer's obligation under the taxation laws to maintain records for the purposes of Revenue NSW investigations or audits

f. taking reasonable steps to be aware of and comply with his/her taxation obligations and to be familiar with the legislative requirements

g. applying any relevant revenue rulings in good faith

h. seeking professional advice or private rulings for uncertain or complex matters where no revenue ruling applies, or where circumstances differ from those described in a revenue ruling

i. acting promptly to seek advice or provide information once made aware, from any source, that the taxpayer might have a tax liability

j. the taxpayer has used and reasonably relied on data, statements or other information provided by a third party.

Meeting one or more of these examples does not necessarily mean that reasonable care has been taken; all relevant factors leading to the tax default will be taken into consideration.

Note: Remission of the premium rate will only occur in special circumstances: Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 at [81]

Documentary material and submissions

18. I have received and considered the following documentary material.

1. For Mr Bagnall: the Application, attaching the Chief Commissioner’s letter confirming the disallowance of his objection to the assessments, a bundle headed “Applicant-Evidence & Submissions” (comprising 53 pages), a further bundle filed on 2 August 2023 headed “Supplemental Applicant Reply”, which attached Mr Bagnall’s affidavit of 2 August 2023. Mr Bagnall also gave sworn evidence on which he was cross-examined.

2. For the Chief Commissioner: a bundle of documents provided under section 58 of the ADR Act (the section 58 bundle), copies of the relevant assessments (which were handed up in the course of the hearing), written submissions filed on 22 June 2023, a Tender Bundle containing documents under 13 tabs and a bundle of authorities.

19. Each party has made oral submissions at the hearing.

Preliminary issues

20. There are two preliminary issues. The first is the Chief Commissioner’s objection to the filing of documents lodged with the Registry on 2 August 2023; that is, two days prior to the hearing, comprising Mr Bagnall’s affidavit of that date and a further document bundle titled “Supplemental Applicant Reply”. The objection was notified to Mr Bagnall by email on the day prior to the hearing. It was made formally at the opening of the hearing. The ground for objection was that the documents had been filed late and without the authority of any interlocutory order or direction, noting that on 11 April 2023 Mr Bagnall had been ordered to file all evidence and submissions on which he wished to rely on or before 6 July 2023. The documents in question were filed nearly a month later.

21. As a result of my discussion with Ms Morgan who represents the Chief Commissioner, I understand her to concede that any prejudice to her client by reason of the late filing might be remedied under cross-examination. On that basis, whilst I disapprove the lateness of the filing of these documents, I have admitted them subject to weight.

22. The second preliminary issue is that Mr Bagnall complains that the Chief Commissioner is in breach of section 58 of the ADR Act because the section 58 bundle does not include particular relevant documents, which I understand him to specify as extracts from the Government Gazette, Land Tax Online and Practice Notes and the text of relevant sections of the Land Tax Management Act 1956 and the Administration Act.

20. Section 58(1) (b), when read with the opening words of the section is relevant. It provides as follows:

(1) An administrator whose administratively reviewable decision is the subject of an application for review to the Tribunal must, within 28 days after receiving notice of the application, lodge with the Tribunal:

…

(b) a copy of every document or part of a document that is in the possession, or under the control, of the administrator that the administrator considers to be relevant to the determination of the application by the Tribunal.

24. The subsection thereby imposes an obligation in respect of documents within a restricted class, namely those which are relevant to the ultimate determination of the matter.

25. In my view the burden so imposed would be substantial in terms of both preparation time and cost. It would be an extensive, exacting and unnecessarily difficult one if it extended to all legal authorities, extracts from legislation or regulation or supporting government publications such as Government Gazettes and practice notes which might be relied upon.

26. Such documents are normally used primarily to support a party’s submissions; that is, in aid of the presentation of the decision-maker’s case, rather than for an evidentiary or forensic purpose. They are not the source of evidence which might assist the making of the Tribunal’s decision and so not inherently “relevant to the determination” by the Tribunal.

27. The identity of documentation to be used in support of argument including legislation might, quite reasonably, not be determined until much closer to the hearing date than the date required by the section. Directions for the parties to exchange such material can be made by the Tribunal prior to the hearing. An applicant in any such proceedings would be at liberty to seek directions for production of any particular documentation.

28. In Chand v Administrative Decisions Tribunal [2011] NSWCA 131, Giles JA at [35] agreed with the observations of the Appeal Panel of the Administrative Decisions Tribunal (ADT) in the decision then under appeal, to the effect that section 58 does not require the Tribunal to launch an enquiry into the adequacy of the filings made by the decision-maker.

29. In any case, as it happens the documents whose absence is the subject of Mr Bagnall’s complaint were indeed made available to him prior to the hearing: most of them appear to have been included in the Chief Commissioner’s Tender Bundle filed 12 days prior to the hearing and apparently served on him.

30. For those reasons there has been no breach of section 58 and Mr Bagnall has suffered any no procedural unfairness by reason of any delay in the availability of the documents to which he refers.

The real issues

31. As noted above Mr Bagnall bears the onus of establishing that that decision is not the correct and preferable one and he must establish that on the balance of probabilities and by due application of the relevant law. Here, the relevant law comprises the relevant statutory provisions, the decided cases and CPN 024.

32. The central issue for determination is whether the Chief Commissioner’s decision to decline to exercise his discretion under section 25 of the Administration Act to remit any of the interest is the correct and preferable decision.

33. That central issue can only be determined by the resolution two further issues which are conveniently identified by the headings used in CPN 024.

1. “Circumstances outside taxpayer’s control”. That is; was the land tax default due to circumstances beyond Mr Bagnall’s control; in particular, was the default due to Revenue NSW fault, in circumstances that could properly be regarded as exceptional? This issue relates to the remission of each of the market rate and premium components of interest.

2. “Reasonable care by the taxpayer”. If the default was due to circumstances which were within Mr Bagnall’s control, did he nevertheless take reasonable care to ensure payment of the land tax? This issue affects the imposition of the premium rate of interest only.

34. Those two issues are the real issues for determination in these proceedings.

Need for “exceptional circumstances”(Chief Commissioner fault) to remit market rate:

35. An additional hurdle to remission of the market rate exists. Although CPN 024 does not refer to it, it seems to be clear from Chief Commissioner of State Revenue v Incise TechnologiesPty Ltd [2004] NSWADTAP 19 (Incise Technologies) at [60] that the market rate:

..is a component that could rarely, if ever, be waived otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time….to justify ant remission of the market rate it would be necessary to show that in some way the Commissioner contributed to the default.

36. That was confirmed by this Tribunal in Oueik v Chief Commissioner of State Revenue at first instance ([2022] NSWCATAD 132) (Oueik), where it was said at [56] that:

(t)he authorities are clear that, as the market rate component of the interest imposed by the (Chief Commissioner) is intended to compensate (him) for not having the benefit of the tax payment from the time it was due, it is a component that would rarely be waived…Only exceptional circumstances would justify remission, such as where the tax default is entirely due to the fault of the Chief Commissioner or in situations completely out of the control of the taxpayer such as postal strikes, serious illness and natural disasters.

37. Significantly, although Oueik was decided at first instance shortly before CPN 024 came into effect, the Appeal Panel gave its decision in that matter, dismissing the appeal and upholding the Tribunal’s decision, on 3 February 2023, some 8 months after CPN 024 came into effect: Oueik v Chief Commissioner of State Revenue[2023] NSWCATAP 26 (Oueik Appeal) It is not clear whether CPN 024 was cited in argument or submissions in the Oueik Appeal but the reasons of the Tribunal below do not seem to have been disturbed in this regard.

38. It therefore seems to be the current law that exceptional circumstances, such as but not restricted to fault by the Chief Commissioner, would need to be established in order to justify remission of interest imposed at the market rate.

The parties’ respective cases.

39. Mr Bagnall’s initial written submissions to the Chief Commissioner include a claim that he had previously been unaware that he was liable for land tax on the Pine Street property, due to his mistaken belief that the relevant strata corporation was primarily liable for land tax on land owned by it, so that an individual lot owner within that strata plan was not liable directly for land tax, but that it was left to the strata corporation to levy each unit owner in accordance with their unit entitlement for their due proportion of the land tax. He had also previously maintained a claim based on his objection to the valuation of the strata unit.

40. Those claims are now not made. Mr Bagnall now accepts that neither of them raises an issue for determination in these proceedings and that liability for land tax on a strata unit rests with the owner of the unit and not the strata corporation.

41. He accepts that as owner of the Pine Street property he is the party liable for the land tax levied in respect of that property for each of the relevant land tax years 2018 to 2022 inclusive. He also now accepts that the valuation issue is properly pursued by way of a separate objection to the valuation through the process made available by the Valuer-General and so is not an issue in these proceedings.

42. His case is the Chief Commissioner should have exercised the discretion available to him under section 25 of the Administration Act to remit both the premium component and the market rate component of interest, because:

1. in respect of interest generally (comprising both the market rate component and the premium component), interest should be remitted because any default by him was due to circumstances outside his control or the control of his representative, being his conveyancer and specifically that there were “exceptional circumstances” of the type discussed in Incise Technologies and Oueik; namely fault and delay by Revenue NSW; and

2. in respect of the premium component, interest should be remitted because even if it is found that there was default which was within his control, he nevertheless took reasonable care (within the scope of that term as set out in CPN 024) to ensure payment of the land tax.

43. The Chief Commissioner’s case is that his decision not to remit either the market rate component or the premium component of the interest imposed upon Mr Bagnall was and remains the correct and preferable decision, because it was made in accordance with the relevant statutory provisions and in a manner consistent with the relevant case law and with CPN 024.

Consideration (1) Were there circumstances outside the taxpayer’s control

44. This issue relates to the imposition of interest generally, so the Chief Commissioner’s refusal to remit either the market rate component of the premium component is the subject of the Tribunal’s review.

45. As was observed by the Appeal Panel of the ADT in Incise Technologies at [60], the market rate component is intended to compensate the Chief Commissioner, on behalf of Revenue NSW and the Government of New South Wales, for not having had the benefit of the tax payment from the time it was due and that, for those reasons, it is a rate which:

,could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time.

46. As noted above, following the decisions in Incise Technologies and Oueik, because this issue relates to potential remission of the market rate, it would in any case be necessary, in order to justify a remission of the market rate component to demonstrate the existence of:

exceptional circumstances …. such as where the tax default is entirely due to the fault of the Chief Commissioner or in situations completely out of the control of the taxpayer such as postal strikes, serious illness and natural disasters.

Mr Bagnall’s case on this issue

47. I understand Mr Bagnall to assert that his default was due to circumstances outside his control because of administrative errors, delays and omissions by Revenue NSW which substantially contributed to his tax default.

48. In particular, he asserts that the tax default arose because Revenue NSW failed to issue the relevant land tax assessments promptly despite the electronic property title identifier (eNOS or eNOS number) for the Pine Street property being available on the register of land titles shortly after completion of his purchase of the Pine Street property.

The train of events alleged to have given rise to the “unreasonable delay”

49. Mr Bagnall says that the train of events which gave rise to Revenue NSW’s failure to act and its unreasonable delay were as follows.

1. The relevant eNOS was provided to Revenue NSW by NSW Land and Registry Services shortly after completion of his purchase. NSW Land and Registry Services (LRS) is the trading name of a private company, Australian Registry Investments Pty Limited, which maintains the NSW Property and Land Information System (LPI) under a concession from the NSW Government The LPI is the publicly-accessible register of NSW land titles.

2. Significantly, the lodgment of an eNOS enables the change in title to a property to be recorded on the LPI.

3. Annexure “J” on page AR 14 of Mr Bagnall’s “Reply Evidence and Submissions” reproduces what appears to be the relevant eNOS with an ID number of 1397347 and a status date of 4 September 2017. Mr Bagnall’s name and address appear in the section of the eNOS describing details necessary for service of notices.

4. Pages AR15 to AR 17 of Annexure “J” comprise an email exchange between Mr Bagnall and LRS‘ Customer Service and Delivery section on 27 June 2023. The advice provided by LRS by reply email at 2.20pm that day, was to the effect that once a dealing is registered on the LPI:

Revenue NSW gets updated by NSW LRS, via the ENOS

50. I did not understand Annexure “J” or that email exchange to be the subject of any direct challenge under cross-examination, as permitted by my earlier directions: see [18]-[20] above.

51. I accept that documentation (and specifically the email of 2.20pm on 27 June 2023) as evidence of LRS’ standard policy of updating Revenue NSW as to the “eNOS data”, that is, title change data, as soon as a transfer or other dealing is registered by LRS on the LPI.

52. I also accept that:

1. the lodgment of the Notice of Sale with LRS and its registration on the LPI; that is, registration on the NSW register of titles, on 4 September 2017 resulted in Mr Bagnall’s registered ownership of the Pine Street property being publicly available information on and from that date.

2. as a result of that, if Revenue NSW had, on or after that date, searched the LPI, it would have become aware that Mr Bagnall had acquired that property. As I understand the position, in accordance with its usual practices, Revenue NSW did not carry out such a search; and

3. in any case, a search was not necessary, because LRS provided transfer of title data directly to Revenue NSW (and other relevant government instrumentalities) and in this case that data confirmed the transfer of title to the Pine Street property to Mr Bagnall. That must have occurred on or shortly after 4 September 2017.

A further delay: matching the updated title information to Mr Bagnall’s account

53. Despite Revenue NSW having been told that title in the property had been transferred to Mr Bagnall, a further problem and consequent delay arose in matching that title information to the particular account maintained by Revenue NSW for Mr Bagnall. That is explained in the Chief Commissioner’s email to Mr Bagnall dated 20 April 2023, which was produced in response to a procedural direction made on 11 April 2023.

54. In it, the Chief Commissioner concedes that the following occurred. (I have abbreviated client ID numbers and birth date information in order to preserve personal information).

3……LRS provided data to (Revenue NSW) about the acquisition including data about the new owner (you). As that data did not sufficiently match the data on an existing account, MARS (being the Revenue NSW data system) created a new account for the landholding with client ID...‘625’) (which) contained the following data about you:

a. Name: John Bagnall

b. Postal address: (Mr Bagnall’s property in Rose Street Chippendale)

c. DOB …./1952.

4. No assessment was issued on the land holding account for client ID …625 as the taxable land value was under the tax-free land value threshold.

5. MARS runs periodic “sweeps” of the system to see if there are duplicate accounts that need to be merged. However the two accounts: Client ID… 638 and client ID …625 would not have been identified as duplicate accounts because the data on the accounts was not a close enough match (due the fact that)… (a) postal address did not match; (and) (b). date of birth did not match.

6. On 25 February 2022 the following data was added to client ID …638: DOB 20/05/1952. This data was provided by the ATO.

7.On 25 February 2022 MARS ran a “sweep” on the system looking for duplicate accounts. At this point the two accounts (client ID …638 and client ID …625) had the same name and same DOB. This was a sufficient match for the accounts to be identified as duplicate…and merged…The (Pine Street property) was moved to this account and client id ...625 was made redundant.

Mr Bagnall’s case as to “circumstances outside taxpayer’s control”

55. Mr Bagnall contends that that constitutes the occurrence of a tax default which has arisen due to “circumstances outside the control of the taxpayer” being “Revenue NSW fault” within the meaning of those terms in CPN 024. His case is that the Revenue NSW fault is its delay in merging the two “client IDs”. He says that a prompt merger of those two client IDs would have enabled his ownership of the Pine Street property and his other properties to be linked, so that he would have been put on notice at an earlier date of the fact that he had been assessed for and was liable for land tax in respect of the Pine Street property.

56. I am unclear as to whether Mr Bagnall asserts that there was a “computer breakdown” for the purposes of that Practice Note. As is summarised on page 7 of his initial “Evidence and Submissions” and his supplementary written submissions filed on 6 July 2023, particularly at pages AR9- AR 10 the fault on which he relies was Revenue NSW’s failure to:

“set up and/or make changes to the eNOS document…(so as) to enable the collection of the relevant or additional information at the time of (the) purchase and thereby allow the process of issuing assessments on a timely basis.

57. As I understand it, he says that the Revenue NSW failures and omissions described above caused the issue of the relevant land tax assessment to be delayed for over 7 months; between 25 February 2022 when the two accounts held for him at Revenue NSW were merged, and 28 September 2022 when the land tax assessment the subject of these proceedings was issued.

58. Mr Bagnall concedes that he has never lodged a land tax return and asserts that very few if any other land taxpayers in NSW do so, so that it cannot be the case that Revenue NSW relies on land tax returns for the information necessary to make and issue assessments.

59. He postulates therefore that:

1. in order to obtain that information, Revenue NSW must rely on existing records and the operation of the LPI and notifications through it of eNOS;

2. when title to particular land is transferred, it must be that Revenue NSW relies on the eNOS supplied to them in order to determine identity of the transferee, and

3. it must thereby ascertain the transferee’s liability for land tax, so that where appropriate a land tax assessment can be issued.

60. Mr Bagnall produces no evidentiary support for what he concedes is a postulation. But he asks that I accept it nonetheless.

61. Mr Bagnall’s case is founded upon his assertion that a duty is owed by the Chief Commissioner to any relevant taxpayer to issue a land tax assessment. As I understand his case, he asserts further than the Chief Commissioner is required to issue the relevant assessment promptly, or at least within a reasonable time, in order that taxpayers can be apprised of their land tax obligations, which in the present case would encompass an obligation on the Chief Commissioner to ensure that he, Mr Bagnall had been made aware of his land tax liability in respect of the Pine Street property.

62. Mr Bagnall says the Chief Commissioner was in breach of that obligation, and that it was the Chief Commissioner’s fault in delaying making an assessment of his land tax liability so as to include the Pine Street property which gave rise to his land tax default.

63. He contends further that if the land tax assessment relating to the Pine Street property had been issued in a more timely manner that would have displaced his belief (which he now concedes to have been unfounded) that his ownership of the that strata title property did not give rise to any personal liability for land tax.

Fault by the Chief Commissioner (or Revenue NSW)?

64. Mr Bagnall is mistaken.

65. There is no duty on the Chief Commissioner to issue land tax assessments. There is no legal foundation for such a duty. Nor is there any legal foundation for a duty on the Chief Commissioner or on Revenue NSW to make available to owners of real property (by way of assessment, or otherwise) information which will apprise them of their land tax liability.

66. The legal position is this.

1. By operation of section 72 (1) and (2) of the LTM Act read together, a taxpayer’s failure or neglect duly to furnish ( i.e. lodge) a land tax return or to furnish information as required by that Act or by the Chief Commissioner is a tax default and interest is payable on that default in accordance with Part 5 of the Administration Act. Part 5 of that Act includes all the Acts provisions which I have discussed and in particular the section permitting remission of interest, section 25.

1. Section 12 of the LTM Act effectively places the primary obligation to provide land tax information on the taxpayer. The obligation is not one imposed upon the Chief Commissioner or on Revenue NSW.

2. Subsection (1) of section 12 permits the Chief Commissioner by order in the Government Gazette to require persons in specified classes (or all persons) to furnish land tax returns. The documentation produced by the Chief Commissioner in the section 58 bundle includes copies of Government Gazettes 134, 138, 173, 384 and 648, each of which includes an order made under the LTM Act advising persons who own land in New South Wales of the requirement for them to lodge a land tax return for a particular tax year, being collectively the tax years relevant to this case.

3. Subsection 12 (1A) requires every person subject to the section 12 requirement in force in any year to furnish a land tax return to the Chief Commissioner on or before 31 January in that year. Subsection (1B) requires the information in the return to be full, complete and up to date.

4. There is no obligation at law on Revenue NSW to publish reminders concerning land tax returns or to provide assistance in completing or lodging them. As a matter of practice, Revenue NSW includes information about lodgment of returns on its website and, as I understand it, on some initial assessments; but this is not a legal requirement and not some form of legal duty.

5. There is no foundation at law for any obligation on Revenue NSW’s part to remind landowners of their obligation to lodge a return (other than through the Gazette notices) or to educate the public about land tax liability. As is submitted by the solicitors for the Chief Commissioner, the onus in respect of these matters is placed on the landowner because it is the landowner who has the factual information which governs whether a return needs to be lodged.

6. Section 14 of the LTM Act requires the Chief Commissioner to cause an assessment of land tax to be made of the taxable value of land owned by a taxpayer, that assessment to be based on returns and

..any other information in the Chief Commissioner’s possession.

8. Subsection 72 (1) of that Act provides that a failure or neglect to lodge a return or information as required by the Chief Commissioner or, pertinently, any failure “to include in any return land owned by the taxpayer” constitutes committing a tax default; and subsection (2) imposes interest calculated in accordance with the Administration Act.

67. It is no answer to these clear statutory obligations to contend, as Mr Bagnall does, that in practice very few if any landowners in New South Wales lodge a land tax return.

68. Additionally, although the list of circumstances which might constitute circumstances outside the taxpayer’s control provided in paragraphs (a). to (e). on page 3 of CPN 024 is not expressed exclusively, so that other circumstances might be considered, I did not understand Mr Bagnall to rely on any other circumstances and I can perceive none that are relevant.

Conclusion: “circumstances outside taxpayer’s control”

69. Mr Bagnall has failed to establish that the tax default was outside his control as the taxpayer.

Consideration (2) Exercise of Reasonable care by Taxpayer

70. Mr Bagnall asserts that he has taken reasonable care to ensure due payment of the land tax in question.

71. CPN 024 indicates that where the taxation default was within the control of the taxpayer, as I have found above, but reasonable care was taken to ensure the payment of the tax, the Chief Commissioner will usually remit the premium rate.

72. That section of the Practice Note addresses only remission of the premium rate and it provides a non-exclusionary list of examples of events which may indicate that the taxpayer did take reasonable care. They are set out at [32] above. But that must be read as subject to the warning note at the conclusion of that section of the Practice Note, in these terms:

Note: Remission of the premium rate will only occur in special circumstances[6]

73. Footnote [6] is a reference to the decision in Incise Technologies.

74. An indication that reasonable care has been exercised is obtained by ascertaining whether the taxpayer took reasonable care to comply with the law, undertook reasonable professional and other enquiries, or relied on professional advice and on official published views of the relevant law and indication of failure to take such reasonable care can be obtained from such factors as oversight, forgetfulness as to obligations, inadequate maintenance of records and procedures which might prevent errors: Bayton Cleaning Company Pty Limited v Chief Commissioner of State Revenue & Ors; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657.

75. In Levitch Design at [113] the Tribunal observed that the issue of what constitutes “reasonable care” stands to be assessed on an objective basis, but that :

..the particular (and subjective) circumstances relevant to the taxpayer are to be considered in applying the test. It requires that the taxpayer exercise the care that a reasonable person would have been likely to have exercised in the circumstances of the taxpayer….

76. Taking advice on the operation of the relevant provisions can amount to reasonable care for that purpose: Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470, but the engagement of an adviser with a more limited brief (the example provided in Levitch Design being a brief merely to check returns) could not of itself amount to the taking of advice on the relevant provisions. There is no evidence or indication that Mr Bagnall’s conveyancer or any other qualified person was engaged by him to provide advice on the provisions in issue.

77. It has been recognised that “reasonable care” is an objective test, but it requires the taxpayer to exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer: Levitch Design at [113]

78. The factors listed in CPN 024 are provided as a non-exclusive list of “events that may indicate that the taxpayer took reasonable care”. I have concluded, for the reasons which follow, that Mr Bagnall does not satisfy at least the following such “events”:

1. Factor (d) “ making diligent efforts to understand and comply with the law”. I cannot be satisfied that Mr Bagnall’s adoption of a position that he was not personally liable for land tax on his home unit reflected a diligent effort on his part to understand the law on the relevant issue. The view which he held was legally untenable. He was a senior lawyer, having been admitted to practice in 1977, and might have been expected to know what the law was, or at least not to assume what it was, without further personal research or obtaining specialist advice. Strata title law and revenue law may well not have been his areas of practice, but. that only underlines the perils of making assumptions about the operation of the law in areas with which one is not reasonably familiar. He could have and should have checked the position with someone qualified and experienced in one or both of those areas. There is no indication that he did this. His efforts to understand and apply the law were not diligent.

2. Similar observations and conclusions apply to factors (f) (familiarity with the legislative requirements) and (h) (seeking professional advice for uncertain matters).

79. I accept that throughout the relevant period, Mr Bagnall held the genuine belief, that the Pine Street property was not liable to land tax, as he put it, “in his hands”. But what is involved here is a question not of genuine belief but of reasonable care: whether the taxpayer has taken reasonable care to ensure payment of the tax. That must encompass taking reasonable steps to understand and apply the relevant law. As the Practice Note itself makes clear, satisfying one or more of the examples provided does not mean that reasonable care has been taken.

80. It is clear on the application of the accepted case law that Mr Bagnall has not taken reasonable care. As was said in Oueik v Chief Commissioner of Taxation [2022] NSWCATAD 132 at [57]:

..there(is) a clear obligation on (the taxpayer) to review his tax assessments carefully, to identify whether there was any property which (he) owned which was missing and, if so, to lodge notices of variation.

81. Mr Bagnall’s purchase of the Pine Street property was completed in September 2017. Subsequently he received land tax assessment notices issued on 31 January 2018, 30 January 2019, 20 February 2020, 25 February 2021, 12 January 2022 and 28 September 2022, each of which contained under “supporting information” details of the land included within the particular assessment (on an aggregated basis). Of those assessment notices all but the last omitted the Pine Street property. Mr Bagnall did not lodge any notice of variation.

Conclusion: “exercise of reasonable care by taxpayer”

82. I find that Mr Bagnall did not exercise reasonable care. In reaching that conclusion I have taken into account:

1. the apparent absence of a land tax adjustment on the settlement of the Mr Bagnall’s purchase of the Pine Street property, which meant that he was not put on notice of his potential liability for land tax on the property. (Of course that may have been because the vendor had no current land tax liability);

2. the fact that Mr Bagnall, although he is a senior legal practitioner, apparently has no substantial experience in strata title matters;

3. the fact that neither Mr Bagnall’s conveyancer not any other advisor gave him any indication of such a land tax liability; and

4. Mr Bagnall’s contention that if the Pine Street property were liable for land tax then that may well have become apparent from a Notice of Valuation of the property but that he received no such notice of valuation during relevant periods, even though he has received such notices in respect of his other properties.

Unfairness or unreasonableness

83. I am uncertain as to the extent to which Mr Bagnall relies on asserted unreasonableness or unfairness of the Chief Commissioner’s refusal to remit the interest on his land tax. In opening his case at the hearing I understood him to foreshadow his intention to demonstrate how the Chief Commissioner had acted unreasonably in failing to remit the interest, and that the construction applied by or on behalf of the Chief Commissioner to the relevant legislative provisions was unfair or otherwise unreasonable. I therefore deal briefly with those assertions.

84. The High Court decision in Commissioner of Taxation v Ryan (2000) 201 CLR 109 (Ryan) remains the primary authority on generally-expressed pleas of unfairness or injustice. The matter relevantly involved a question of whether an amended assessment of taxation could be issued in the circumstances of the case. As was said by the Court at 123:

That question cannot be answered by asserting the existence of any “policy” or “general intention” unless that policy or intention is to be found reflected in the terms of the Act. Appeals to general notions of “fairness” or “justice” do no more than attempts to mask the absence of any foundation in the legislation for the conclusion which is asserted.

85. That statement in Ryan has been upheld in revenue cases, including in this Tribunal, over recent years: for example in Gunasti Chief Commissioner of State Revenue [2012] NSWADT 218 and Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200 (“Strathavon”). In Strathavon, which came before me and in which vigorous assertions were made as to the unfairness of the Chief Commissioner’s assessments of land tax and the asserted injustice of upholding them, I concluded on the basis of the authorities in relation to this issue, at [22] , as follows:

...concepts such as fairness and justice cannot intrude into the legislative taxation scheme, notwithstanding the fact that such a scheme might in certain circumstances operate harshly. I accept that for a taxpayer in the position of (the applicant in that case) that may be a bitter pill to swallow. But that is the law.

86. That conclusion applies with equal force here.

Conclusion and order

87. It must follow that the Chief Commissioner’s decision not to remit the interest imposed, which comprised both the market rate component and the premium component, was the correct and preferable decision. It must be affirmed and I order accordingly.

ORDER

1. The decision under review is affirmed.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 22 December 2023