Brataniec v Chief Commissioner of State Revenue
[2013] NSWADT 65
•27 March 2013
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Brataniec v Chief Commissioner of State Revenue [2013] NSWADT 65 Hearing dates: 18 March 2013 Decision date: 27 March 2013 Jurisdiction: Revenue Division Before: Professor GD Walker, Judicial Member Decision: The decision under review is affirmed.
Catchwords: Land tax - assessment - waiver - estoppel Legislation Cited: Land Tax Management Act 1956 Cases Cited: AGC (Investments) Ltd v FCT (1991) 91 ATC 4180
FCT v Ryan (2000) 201 CLR 109
FCT v Wade (1951) 84 CLR 105
Finance Facilities Pty Ltd v FCT (1971) 127 CLR 106
Gunasti v Chief Commissioner of State Revenue (CCSR) [2012] NSWADT 218 CCSR v Paspaley [2008] NSWCA 184 Volpatti v CCSR [2007] NSWADT 222Category: Principal judgment Parties: Elizabeth Brataniec (Applicant)
Stan Brataniec (Applicant)
Leon Craymer (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
A Gerard (Respondent)
S Brataniec (Applicant in person, with leave)
Crown Solicitor's Office (Respondent)
File Number(s): 136004
Reasons for decision
Background
The applicants, Stan Brataniec, Elizabeth Brataniec and Leon Craymer seek review of three decisions of the Chief Commissioner of State Revenue made under the Land Tax Management Act 1956 (LTM Act) and the Taxation Administration Act 1996 (TA Act) requiring the applicants to pay land tax in respect of the property at 83 Del Monte Place, Copacabana, New South Wales (Del Monte Place), for the 2008, 2009, 2010, 2011 and 2012 land tax years.
Before those assessments for the land tax years 2008 to 2012 were issued in October 2012, the applicants had not previously been assessed as liable to land tax for Del Monte Place. The issue raised by this application is whether, in those circumstances, the Chief Commissioner correctly raised the relevant land tax notices of assessment.
Mr Leon Craymer acquired an interest in 183 Clovelly Rd, Randwick, New South Wales, on 16 May 1955. On 1 May 1999, Mr and Mrs Brataniec purchased a 100 percent interest in the property situated at 72 Maxwell St, South Turramurra, New South Wales.
Since 1 May 2000, Mr and Mrs Brataniec have claimed a land tax exemption for the Maxwell Street property on the basis that it is their principal place of residence (PPR) . Mr Craymer has occupied the Clovelly Road property since 1 September 1936 as his PPR, and apparently still does.
The applicants acquired Del Monte Place on 27 November 1981, with Mr Craymer holding a 50 percent interest as tenant in common, Mr and Mrs Brataniec each holding a 25 percent interest as joint tenants.
The then Commissioner of Land Tax on 1 August 1994 issued a Land Tax Return Amnesty Notice (Exhibit R1, page 74) in respect of any land tax return filed before 31 October 1994.
Apparently before 31 October 1994, Mr and Mrs Brataniec lodged a Land Tax-Initial Return document with the Commissioner for Land Tax (Exhibit R1, p.76). In it they disclosed their respective ownership interests in Del Monte Place as well as their ownership of other land within the State.
On 22 November 1994 the Commissioner issued Mr and Mrs Brataniec with an assessment notice for the 1994 tax year based on their ownership of land at Chittaway Bay, New South Wales, and also at Rouse Hill, New South Wales. Their 1994 land tax liability did not include any amount referable to their joint 50 percent ownership of Del Monte Place. Between the lodging of the 1994 initial return and 16 August 2012 the Brataniecs and Mr Craymer did not lodge a land tax return in relation to Del Monte Place.
The Chief Commissioner on 2 August 2012 wrote to Mr and Mrs Brataniec, and also to the three applicants jointly, asking them to complete a Land Tax Questionnaire (Exhibit R1, p.6).
Mr Brataniec completed the questionnaire on 16 August 2012, disclosing his land ownership within the State and claiming a PPR exemption for the property located at 72 Maxwell St, South Turramurra (Exhibit R1, p.7). On the same date Mrs Brataniec completed a questionnaire to a similar effect, also claiming Maxwell Street as her PPR. Mr Craymer completed the questionnaire sent jointly to the applicants on 20 August 2012, claiming land tax exemption for Clovelly Road as his PPR (Exhibit R1, p.12).
Having received the completed questionnaires, the Chief Commissioner issued to the applicants a Primary Land Tax Assessment Notice for the land tax years 2008 to 2012 (Exhibit R1, pp.16-19) in respect of their joint ownership of Del Monte Place in the amount of $15,030.65. A secondary notice of assessment in respect of all Mrs Brataniec's land holdings in New South Wales in the amount of $2,889.70 was issued (Exhibit R1,pp.24-41). A secondary notice of assessment in the same amount was also issued to Mr Brataniec. Mr Craymer has no secondary liability (Exhibit R1, p.86).
All the applicants then lodged an objection to the primary notice, while Mr and Mrs Brataniec each lodged an objection to their respective secondary notices (Exhibit R1, pp.22-69).
The Chief Commissioner on 12 November 2012 partly allowed the objections to the primary notice and the secondary notices in so far as they related to the imposition of interest for failure to lodge a land tax return in accordance with s.12(2) of the LTM Act. The Chief Commissioner disallowed, however, the applicants' objections to the assessment of their primary liability to land tax in relation to Del Monte Place for the tax years 2008 to 2012.
The applicants' case
At the hearing Mr Brataniec represented all three applicants pursuant to leave granted under s.71(1)(b1) of the Administrative Decisions Tribunal Act 1997 (ADT Act). He adduced no oral evidence and instead adopted, and relied upon, the statement of grounds attached to his application for review and an accompanying letter dated 2 October 2012, together with a written submission forwarded on his behalf by the respondent's solicitors (Exhibit A1). Mr Brataniec also made oral submissions.
Mr Brataniec's statement of grounds declared inter alia that all the applicants' four properties had been declared in the 1994 initial return. When Del Monte place was omitted from the 1994 assessment, they had assumed that it was because it was their holiday home and that Elizabeth and Stan owned 50 percent as tenants in common with Leon Craymer's 50 percent, making it exempt. Under the amnesty they were still charged land tax back to 1994 for the other two properties. They had since paid $248,789 in land tax to 2012, including $19,865 for the current year. Mr Craymer is now 87, while he and his wife were 67 and 65 respectively, retired from work and living on a "minimal" income. Del Monte Place was used only by the family and friends and had never been rented out. They had never done anything wrong or illegal to warrant being charged five years of land tax for that property, having listed it in the 1994 amnesty return.
The situation arose out of an error by the Office of State Revenue (OSR), which should be made accountable for its mistakes. The applicants believed that they were audited because they objected to their Rouse Hill valuation, which was subsequently reduced by $500,000.
The letter of 2 October 2012 makes a number of similar points, and also criticises the applicants' being taxed almost $250,000 on two properties, which was more than they paid for the three properties ($188,000). Mr Brataniec felt that there was discrimination involved, as there was no additional tax for owning shares on the stock market. A more reasonable land tax threshold was needed, as well as other reforms. The annual rental income from Rouse Hill did not cover the expenses, and as he was now retired and without any earned income, he did not benefit from the negative returns produced by the imposition of land tax. The Chittaway Bay property was purchased with the intention of building their retirement home on it, and that is still their intention. He asked that land tax and all interest be waived for the years 2008 to 2011.
Mr Brataniec also felt it was unjust that some of his neighbours who might be liable for land tax would be paying it on their original valuations, as he did not think they had been informed that the value of the Brataniecs' property had been reduced by $500,000, making a saving of $2758. He believed that land tax should be imposed on the applicants only from 2012, when OSR altered its original decision, and that the applicants were being punished for the error by OSR. The remainder of Exhibit A1 is to a similar effect as the submissions outlined above.
In his oral submissions Mr Brataniec reiterated many of the points made earlier, adding that with modern technology OSR should be able to pick up cases such as these quite easily. He submitted that the respondent is estopped from assessing land tax for the 2008 to 2011 years.
Liability to land tax
As the Court of Appeal explained in Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [12] -- [14], the statutory scheme creating the liability of a landowner to land tax is structured as a two-part statutory scheme. The relevant taxing act is the LTM Act, while procedures applicable to a variety of State taxing acts are provided in the TA Act. By s 7 of the LTM Act, land tax is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers, except to the extent that land is exempt from tax under the LTM Act.
By s 8 of the LTM Act, such land tax is to be charged on land owned at midnight on the 31 December immediately preceding the year for which land tax is to be levied. Under s 9(1) of the LTM Act, land tax is payable by the owner on the taxable value of all of the New South Wales land owned by that owner which is not exempt from taxation under the LTM Act.
By s 61 of the TA Act, the Chief Commissioner is charged with the general administration of the TA Act and the LTM Act, and is empowered to do all things necessary to give effect to the taxation laws, including the LTM Act. An important function vested in the Chief Commissioner by of the TA Act is created by s 8(1): "The Chief Commissioner may make an assessment of the tax liability of a taxpayer".
Two points should be noted at the outset. First, liability to land tax is created by the LTM Act, and although the Chief Commissioner administers that Act, he does not impose the liability himself. That liability is created by direct operation of the LTM Act: Gunasti vChief Commissioner of State Revenue [2012] NSWADT 218. Secondly, although the use of the word "may" in s 8 might suggest that the Chief Commissioner has a discretion as to whether to make an assessment or not, the function has been held to be mandatory rather than merely facultative. One of the most intractable problems encountered by the courts in the interpretation of legislation has been the meaning to be placed on words such as "shall", which import some kind of obligation, as against words such as "may" which normally import a discretion in the person concerned. The courts' general approach has been to probe the true effect of the legislation in an endeavour to determine whether a provision is to be regarded as mandatory on the one hand or discretionary on the other.
The starting point for discussion of this topic is usually the statement of Lord Cairns in Julius v Lord Bishop of Oxford (1880) 5 App Cas 214 at 222 to the effect that words that do no more on their face than confer a power may be treated as mandatory if the context and structure of the legislation couples the power with a duty. In that way the apparent discretion to act may be rendered obligatory. That has been the usual approach adopted in tax legislation ( e.g. Finance Facilities Pty Ltd v FCT (1971) 127 CLR 106) and has been the interpretation upheld in land tax cases: see Gunasti at [29] -- [34].
Consequently, once the LTM Act by operation of law makes a taxpayer liable to pay land tax, the Chief Commissioner is required to act, and in so doing to give effect to the relevant taxation law, by generating an appropriate assessment: see Gunasti at [32].
It should be noted, however, that even if the Chief Commissioner were to fail to act, the liability to land tax created by ss 7,8 and 9 of the LTM Act would remain in effect.
Exemptions from land tax liability are mainly provided for in ss 10 and 10AA of the LTM Act, with certain additional qualified exemptions being found in ss 10A to 10S. There is no exemption from land tax on the basis that no rental income has been generated. Further, there is no general discretionary exemption provision: see Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222 at [27].
The Del Monte Place property is jointly owned by the taxpayers. In such cases the LTM Act imposes a layered regime of assessment, involving a primary assessment of the jointly owned land together with a separate, secondary assessment essentially dealing with each joint owner's individual interests in the land and in other land: s 27. In this case primary assessments were raised in relation to all the applicants, and secondary assessments for Mr and Mrs Brataniec. As was noted above, Mr Craymer has no secondary liability.
The applicants do not dispute that the respective primary and secondary assessments for the 2012 tax year are correct. As regards 2008 to 2011, however, they submit that (a) the Chief Commissioner is estopped from raising the assessments or, alternatively, that (b) their land tax liability for those years should be waived.
Waiver
Mr Brataniec submitted that for the reasons outlined above it was inequitable that the applicants should be liable for land tax for the years in dispute. He conceded, however, that Mr Maynard of OSR had informed him that the only avenue he could pursue in that regard was to apply to the Hardship Review Board under ss 106A to 106D of the TA Act. The board has the power under s 106B to waive the payment of tax, either wholly or in part, in cases of serious hardship. Mr Brataniec pointed out, however, that the applicants were not eligible under the hardship provisions because of their total assets, but nevertheless believed that a total or partial waiver should be granted.
As was noted above and Mr Gerard stressed, however, the legislation does not confer on the Chief Commissioner, or on any other authority, any general power to waive payment of land tax. The applicants' case on that point therefore cannot succeed.
Estoppel
The applicants contend that as the Chief Commissioner had not assessed land tax on Del Monte Place in the years following 2008, he could not then do so in 2012. But while the TA Act s 9 imposes a five year time limit on reassessments, no such limit applies to initial assessments, which those in issue were.
They also submit that the delay made to the assessments unfair and that it was also unfair to submit them to an audit because, as they believed, they had appealed against a valuation issued by the Valuer-General. The Chief Commissioner has the power, however, to make an assessment on the basis of any information from any source: s11(1) TA Act, s 14(1) LTM Act. General considerations of fairness have no application, as the High Court noted in FCT v Ryan (2000) 201 CLR 109 at 123:
Appeals to general notions of "fairness" or "justice" do no more than attempt to mask the absence of any foundation in the legislation for the conclusion which is asserted.
Next, the applicants contend that the Chief Commissioner must have failed to make use of all the information at his disposal, such as Valuer-General records, for if he had, he would have become aware that Del Monte Place might be liable to land tax and could have issued a timely assessment accordingly. His general power under s 8 of the TA Act must be read subject to s 14 of the LTM Act, which directs that the chief Commissioner "shall from the returns and from any other information in the Commissioner's possession.... cause an assessment to be made....". As he had failed to make use of all the information in his possession, the argument ran, he was estopped from issuing the assessments in question.
It is not disputed that an error was in fact made. The objection determination report notes that:
It is clear that there was an error made by OSR in not issuing an assessment in relation to the subject property in a timely manner and in incorrectly applying an exemption. Although there would not have been a liability in relation to the subject property at the time the initial return was lodged in 1994 there would have been a liability from the 2001 tax year onwards. However, as there was an exemption placed on the property (incorrectly) at this time, the assessments were not issued until compliance activity identified the potential liability in August 2012 (Exhibit R1, p 86).
None of the facts, circumstances or arguments advanced by the applicants can, however, operate to estop the Chief Commissioner from issuing an appropriate assessment. It is settled law that no estoppel can arise in such circumstances. As Kitto J observed in FCT v Wade [1951] HCA 66; (1951) 84 CLR 105 at 117, "No conduct on the part of the commissioner could operate as an estoppel against the operation of the Act...."
Similarly, in AGC (Investments) Ltd v FCT (1991) 91 ATC 4180 at p 4195, Hill J held that:
[T]here is no room for the doctrine of estoppel operating to preclude the Commissioner of Taxation from pursuing his statutory duty to assess tax in accordance with law. The Income Tax Assessment Act imposes obligations upon the Commissioner and creates public rights and duties, which the application of the doctrine of estoppel cannot be invoked by a taxpayer so as to prevent the Commissioner assessing pursuant to his duty to do so. The cases certainly support that view....
The High Court's decision in FCT v Ryan [2000] HCA 4; (2000) 201 CLR 109 at 124 is to the same effect. Specifically in the context of land tax, Block JM held in Gunasti that "Estoppel does not lie against the Chief Commissioner in the discharge of his duty to administer the taxation law" or "to prevent the Chief Commissioner from making reassessments" (at para 19).
Conclusion
The applicants do not claim that any exemption applies to Del Monte Place, nor do they dispute the correctness of the primary or secondary assessments. Their case is essentially that the assessed tax should be waived or that the Chief Commissioner should be treated as estopped from making the assessments. As those arguments cannot be sustained, the decision under review must be affirmed.
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Decision last updated: 27 March 2013
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