Cameron v Chief Commissioner of State Revenue

[2009] NSWADT 64

CITATION:	Cameron v Chief Commissioner of State Revenue [2009] NSWADT 64
DIVISION:	Revenue Division
PARTIES:	APPLICANTS David Cameron and Adriana Cameron RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086027
HEARING DATES:	5 and 6 February 2009
SUBMISSIONS CLOSED:	6 February 2009
DATE OF DECISION:	26 March 2009
BEFORE:	Verick A - Judicial Member
CATCHWORDS:	First Home Owner Grant
LEGISLATION CITED:	First Home Owner Grant Act 2000 Duties Act 1997 Taxation Administration Act 1996 Administrative Decisions Tribunal Act 1997 State Revenue Legislation Further Amendment Bill 2003 State Revenue Legislation Amendment Bill 2004
CASES CITED:	Deane v Commissioner of Stamp Duties (Qld)(N02) [1996] 2 Qd R 557 Re Newman and the Commissioner for ACT Revenue (1993) 93 ATC 2105 Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 Zakariya v Chief Commissioner [2003] NSWADT 26 Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19 Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 Philpot v Chief Commissioner of State revenue (RD) [2008] NSWADTAP 18
REPRESENTATION:	APPLICANT D Palmer, solicitor RESPONDENT A H Rider, barrister
ORDERS:	The decisions under review are affirmed

REASONS FOR DECISION

Introduction

1 This is an application to review decisions made by the respondent on 6 June 2007 and affirmed by the respondent after an objection review on 14 February 2008, whereby the respondent determined in respect of the purchase of a property by the applicants situated at Casuarina Beach, New South Wales (“the Property”):

(a) that the applicants repay the respondent the sum of $7,000 paid to the applicants on 1 February 2006 pursuant to the First Home Owner Grant Act 2000 (“the FHOG Act”) (with a penalty of $1,400); and

(b) to reverse his decision to grant the applicants the First Home Plus concessions under the Duties Act 1977 (“the Duties Act”) and that the applicants pay the respondent:

(i) transfer duty of $17,855 with interest of $3,196.90 at the market plus premium rates and

(ii) mortgage duty of $1,781 with interest of $318.88 at the market plus premium rates.

2 The respondent made these decisions on the basis that the applicants did not comply with the “residence requirement” under the FHOG and Duties Acts to occupy the Property as their principal place of residence for a continuous period of at least 6 months starting within 12 months after completion of the agreement to purchase the Property.

Factual Background

3 On 18 January 2005 a contract was entered into by Mr Cameron directly with the builder of the Property to purchase the Property off the plan. The total consideration was $497,000.00 and Mr Cameron paid a deposit of $1,000.00. The Property, a townhouse, is situated near the beachfront at Casuarina Beach on the north coast of New South Wales.

4 In March 2005, Mr Cameron started up a Brisbane based IT business.

5 The applicants moved their belongings to the Property on 21 November 2005 and a telephone landline was connected to the Property on 9 December 2005.

6 On 14 December 2005, the applicants settled the purchase of the Property for a purchase price of $497,000.

7 On 29 December 2005, the applicants transferred their home and contents insurance to the Property. Electricity was connected to the Property on 21 December 2005.

8 The applicants claimed that they commenced to occupy the Property as their residence on 24 December 2005.

9 On 20 January 2006, an application was made by the applicants for a First Home Owner Grant for the purchase of the property, which was approved, and the grant paid into Mr Cameron’s bank account on 1 February 2006. At about the same time the respondent gave the applicants exemption from the applicable duty of $17,855 for the transfer and $ 1,781 for the mortgage under the First Home Plus provisions of the Duties Act.

10 On 21 July 2006, the applicants sold the Property for $785,000 gaining a gross profit of $288,000.

11 The applicants ceased occupation of the Property on 21 July 2006 and moved into their new property situated at Chelmer, a suburb of Brisbane and close to Indooroopilly.

12 The events leading to this application are usefully set out in the respondent’s submissions and are (without reference to footnotes) as follows:

28. On 27 September 2006, the Respondent received a ‘Statutory Declaration – Residency requirement’ from the Applicants in which the Applicants declared that they had both resided in the Property as their principal place of residence for a period of at least six (6) continuous months from 28 December 2005 until 28 July 2006. The Statutory Declaration attached Country Energy electricity bills for the Property for this period, which was for a nominal amounts of money.

29. On 14 March 2007, Country Energy provided the Respondent with the electricity consumption history report for the Property for the above period, which showed zero (0) electricity consumption between 4 January 2006 and 20 July 2006.

30. On 6 June 2007, the Respondent wrote to the Applicants and advised them that, based on information now available, he had reversed his decision to pay them the Grant, because they failed to meet the residence requirement within the first 12 months. The Respondent stated that, as a result of his decision, the Applicants were required to repay the full Grant of $7,000. Also, the Respondent imposed the Penalty of $1,400 because the Applicants did not notify the Respondent within 14 days of failing to meet the residence requirement. The Respondent also issued a Notice of Assessment to the Applicants for $8,400 (being the Grant plus the Penalty) payable by 26 June 2007.

31. On 6 June 2007, the Respondent also wrote to the Applicants and advised them that, based on information now available, he had reversed his decision to offer the Applicants the First Home Plus concessions, as they had failed to meet the residence requirement. The Respondent also stated that he had imposed interest (Interest), as the Applicants did not notify the Respondent that they had failed to meet the residence requirement. On the same date, the Respondent issued a Notice of Assessment to the Applicants for $23,151.78, being Duty plus the Interest.

32. On 31 July 2007, the Applicants’ solicitor (Solicitor) wrote to the Respondent and objected to the above decisions (Objection). In the objection, the Solicitor stated that the Applicants had resided in the Property from 23 December 2005 until 21 July 2006. The Solicitor stated that Mr. Cameron worked in Brisbane three (3) days a week and had a post office box in Fortitude Valley in Brisbane for 15 years. The Objection attached copies of land line telephone and (incomplete) electricity bills for the Property for the period that the Applicants owned it, invoices from Tweed Shire Council for the domestic garbage service fees for the Property and the home and contents insurance policy for the Property for the period 19 December 2005 to 26 September 2006.

33. On 7 November 2007, the Respondent wrote directly to the Solicitor requesting further information to enable him to consider the Objection.

34. On 18 December 2007, the Respondent wrote to the Solicitor again, not having received a reply to his earlier letter.

35. On 25 January 2008, Mr Cameron wrote directly to the Respondent in response to his request for further information. Among other things, Mr Cameron claimed that the low number of telephone calls recorded in the telephone bills was because he only installed the telephone line for internet purposes and that the Applicants used their mobile telephones to make calls. Mr. Cameron also claimed that he did not keep bank or credit statements for more than 6 months and that the Applicants used cash for all day to day living expenses.

36. On 14 February 2008, the Respondent disallowed the Objection on that basis that the Applicants had been unable to demonstrate that they actually resided in the Property for a continuous period of 6 months, with that occupation starting within 12 months of purchasing the Property.

37. On 10 April 2008, the Applicants filed an Application for Review of a decision made by the Commissioner of State Revenue to the Administrative Decisions Tribunal for a review of the Respondent’s decisions of 6 June 2008 to require the Applicants to repay the Grant and pay the Penalty, the Duty and the Interest. In the Application, the Applicants stated:

“ The Applicants assert there is sufficient evidence to establish that they resided at …, Casuarina for at least six months with occupation commencing within twelve months of purchase of the Property, thereby meeting the residence requirement of the grant and stamp duty exemption. ”

Evidence

13 At the hearing both the applicants gave evidence.

14 Mr Cameron in his oral evidence stated as follows:

(a) that at the end of their lease at Kangaroo Point in November 2005 they moved all their furniture and other belongings to the Property.

(b) that the Property was fully furnished and he produced a few pictures of the Property taken sometime in February or March 2006 by Mr Levy, his father in law, which indicated that the Property was furnished.

(c) after they moved to the Property he would on 2 to 3 days a week commute to Brisbane to attend to his business.

(d) at the time they moved to the Property, Casuarina was a brand new development, built on what had previously been a sand mine and only about 50% of the development had taken place. There was neither a township nor any ATM.

(e) they did their shopping in Brisbane at Indooroopilly on Wednesdays and Thursdays when they spent two nights a week at his father in law’s place.

(f) In August 2005 their first child Archie was born but his wife became quite ill and showed resentment to the child and was unable to cope, and was in an uncontrollable rage including showing anger to the child.

(g) his wife felt very isolated in Casuarina and demanded to have family support from her father and mother. They would stay with them for two to three nights each week and she would travel with him to Brisbane on other days.

(h) his wife had to seek medical advice from Dr Conn, a general practitioner at Toowong in Brisbane, every couple of months. In May 2006, their second child was born and her behaviour became worse and she had to get medication for her depression.

(i) he had a mailing box in Fortitude Valley in Brisbane for all their mail, a postal box that he has had for more than 15 years.

(j) he had used electrical appliances at the Property, which included a TV, stove, frigde and filter system for their swimming pool.

(k) he used mostly his mobile phone to make telephone calls and the landline connected to the Property for only internet purposes.

(l) they held barbeques and dinner parties during the weekend when his neighbour often joined them. His father in law would also visit them once a month.

(m) they sold the Property on 21 July 2006 because his wife was not happy to stay there and he was a reluctant seller.

15 In cross-examination, he confirmed that the Property was purchased directly from the developer whose Chief Executive Officer was his brother in law. When asked why he only used the shops at the nearby Kingscliff on two occasions during the period he resided at the property, Mr Cameron indicated that he preferred to shop in Brisbane but offered no explanation as to how he managed with fresh food purchased from Brisbane.

16 Mr Cameron was cross-examined at length about his use of telephones in the context of telephone bills produced by the applicants. He confirmed that they had three mobile phones. He used one for work, another one for “everyday purposes” and the third was used by his wife. He agreed when shown entries of phone calls that he was in Noosa from 25 December 2005 to 7 January 2006. In relation to the calls, it was put to him by Mr Rider, counsel for the Respondent, that he was in Casuarina in February for 4 days, in March only 1 day, 3 days in April, 2 days in May, 1 day in June and 3 days in July. His only response was “No”.

17 He was further cross-examined in relation to calls made from Brisbane and surrounds including calls made at very early hours of the morning on several occasions. Mr Cameron’s response was that he could have been working in Brisbane as he worked at all sort of hours because his IT clients were mostly situated in overseas locations, for example, in China and Canada. Mr Rider also asked him if he could produce any credit card bills for fuel payments and the Tribunal was told that he usually paid them with cash.

18 Mrs Cameron in her evidence stated that, after Archie was born in August 2005, she needed medical treatment from September/October 2005 from Dr Conn who prescribed anti-depression drugs and that, although Dr Conn had suggested she seek help from a specialist, she did not go to one. After her second child was born she saw other doctors because Dr Conn was away.

19 Mrs Cameron further stated that she would spend 2 days in Indooroopilly for support from her family helping with the baby. The two days were Wednesday and Thursday when she would see her friends and do shopping. She would drive to Brisbane in her own car and used credit cards for shopping. At their Property, she said they had lots of friends visiting them. She also stated that Archie’s room at the Property had a cot.

20 In cross-examination, she agreed that the only medical attention she received in Toowong was for a total for 3 days during the period. When asked about agents attending to the sale of the Property she indicated that she did not see any agents showing the Property to potential buyers.

21 Mr Levy produced an affidavit dated 3 February 2009 in which he stated that the

Applicants spent on average 2 nights a week at his home at Indooroopilly during the period that they were living at the Property. He also stated that as his wife was a teacher who worked three to four days a week, it made sense for his daughter to spend time with them for the support she needed from her immediate family.

22 In cross-examination, Mr Levy agreed that the Applicants stayed with him about 2 to 3 nights each week and it was possible for a longer period on some occasions. In re-examination he indicated that he had visited the Property and seen furniture in the lounge, dinning area and the baby’s room.

23 Mr Clifton, a real estate agent who owns a property next to the Property, produced an affidavit dated 21 January 2009 in which he stated that he had observed that the Applicants had fully fitted out their unit with furnishing and moved to it on a permanent basis. He further stated that every time he visited his property he found the Applicants at their Property.

24 In cross-examination, he confirmed that his property at Casuarina was usually rented out on short basis as a holiday accommodation and that his own place of residence was actually in Brisbane. He also confirmed that he would only visit his property every second or third weekend. He also stated that he had dinner once and a barbeque on another occasion with the applicants.

25 Mrs Emma Parr a friend of the applicants, also produced an affidavit dated 21 January 2009 in which she stated that she had spent 3 nights with the applicants and visited the applicants on another two occasions during the period they owned the Property. She further stated that when she visited the Property she noticed that the Property was fully furnished.

26 The applicants also produced an affidavit dated 3 February 2009 made by Dr Jennifer Conn, a general medical practitioner in which she stated that, in her opinion, Mrs Cameron “was suffering from post-natal depression from period September 2005” which “required treatment”. She was not made available for cross-examination.

27 In addition to the documents produced under s 58 of the Administrative Decisions Tribunal Act 1997, the respondent also made available to the Tribunal a bundle of documents marked as “Respondent’s Evidence”.

Relevant Legislative Provisions

FHOG ACT

28 Historically, the FHOG Act was introduced to encourage and assist home ownership and to offset the effect of the Goods and Services Tax on the acquisition of a first home. The scheme has been continued to assist first home buyers to purchase or build their first homes.

29 The entitlement requirements for a grant are set out in s 7 (1) of the FHOG Act as follows:

“A first home owner grant is payable on an application under this Act if:
(a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and

(b) the transaction for which the grant is sought:
(i) is an eligible transaction, and
(ii) has been completed.”

30 In the applicants’ case, the “eligible transaction” was the contract for the purchase of the Property in terms of s 13(1)(a) and was completed under s 13(5)(a) of the FHOG Act when the applicants were entitled in December 2005 to possession of the Property.

31 The eligibility criteria is set out in Division 2 of Part 2 of the FHOG Act, which requires an applicant to satisfy 5 “Eligibility Criteria” to obtain a grant.

32 For the present purposes, the relevant eligibility criterion at issue is the fifth criterion set out in s 12(1) of the FHOG Act. There are various historical versions of this provision, the version that applies in this matter is as follows:

12 Criterion 5—Residence requirement

(1) An applicant for a first home owner grant must;

(a) commence occupation of the home to which the application relates as the applicant’s principal place of residence within 12 months after completion of the eligible transaction or the period approved by the Chief Commissioner under this section, and

(b) occupy the home as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner under this section.

(2) This requirement is referred to in this Act as the residence requirement .

(3) The Chief Commissioner may, if satisfied there are good reasons to do so, do either or both of the following:

(a) approve the commencement of occupation by the applicant of the home to which the application relates as a principal place of residence more than 12 months after completion of the eligible transaction,

(b) approve the occupation of the home as a principal place of residence for a period of less than 6 months.

(4) The Chief Commissioner may, if satisfied there are good reasons to do so, exempt an applicant from the residence requirement.

(5) An approval or exemption under this section may be given by the Chief Commissioner at any time, even if the period of 12 months after completion of the eligible transaction has already expired or the applicant’s occupation of the home as a principal place of residence has already ceased.

(6) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement.

33 Subject to certain conditions a grant can be paid under s 20 of the FHOG Act in advance in anticipation of the residence requirement. Section 23 of the FHOG Act gives the Chief Commissioner power to vary or reverse a decision made in respect of an application for a grant where he is later satisfied that the decision is incorrect.

34 Power to require repayment and impose penalties is given to the Chief Commissioner under s 45 of the FHOG Act.

DUTIES ACT

35 In tandem with the grant scheme, the government also introduced the First Home Plus Concession scheme under the Duties Act. Section 69 of the Duties Act sets out the scheme as follows:

69 The nature of the scheme

This scheme is intended to help people who are acquiring their first home. Under the scheme, the acquisition and any mortgage given to assist the financing of the acquisition is subject to a concession or exemption from duty.

36 Under s 70 the following transactions and instruments are eligible for consideration under the scheme:

(a) agreements for sale or transfer entered into on or after 4 April 2004,
(b) transfers that occur on or after 4 April 2004 (other than transfers made in conformity with an agreement for sale or transfer entered into before 4 April 2004),
(c) mortgages over land the subject of those agreements or transfers.

37 Section 74 deals with eligible agreements of transfers and restricts the concession to agreements or transfers for the acquisition of a first home or the acquisition of a vacant land intended to be used as the site of the first home. Under s 80 of the Duties Act, no duty is chargeable on an agreement or transfer of a dwelling valued up to $500,000 or $300,000 in the case of a vacant block of residential land if the application concerning an eligible agreement or transfer is approved by the Chief Commissioner.

38 An applicant under the First Home Plus Concession scheme must comply with s 76 of the Duties Act which, at the relevant time, provided as follows:

“ 76 Residence requirement

(1) The home must be occupied by the person or persons who are acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as the residence requirement .

(2) The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case:

(a) modify the residence requirement by approving a shorter period of occupation by the person or persons, or

(b) exempt the person or persons from the requirement to comply with the residence.

(3) In the case of an agreement or transfer for the acquisition of a vacant block of residential land, it is sufficient that the Chief Commissioner is satisfied that the vacant block is intended to be used as the site of a home to be occupied by the person or persons who are acquiring it as their principal place of residence.

(4) The residence requirement does not apply to a person who acquires an interest in the property concerned solely for the purpose of assisting the other purchaser or purchasers in financing the acquisition.

(5) For the purpose of this section, an agreement or transfer is completed when a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered.

(6) (Repealed)”

TA ACT

39 In reversing his decision to offer the applicants the First Home Plus concession under the Duties Act, the respondent included in the assessment interest at the market plus premium rates under the Taxation Administration Act 1996 (“the TA Act”).

40 The relevant interest provisions are as follows:

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.

…

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.

(4) In this section, the Bank Accepted Bill rate in respect of any day is the yield rate for 90-day Bank Accepted Bills published by the Reserve Bank for the month of May in the financial year preceding the financial year in which the day occurs.

…

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.

Findings and Reasons for Decision

41 The principal issue in this matter was whether the applicants satisfied the “residence requirement” under the FHOG and Duties Acts. The applicants were required under both Acts to establish that they resided in the Property for a continuous period of at least 6 months starting within 12 months of 14 December 2005. Additionally, the applicants were required to establish that the Property was occupied during that period as their principal place of residence.

42 The residence requirement under s 12 of the FHOG Act required the applicants to occupy the Property “as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner”. This requirement was introduced into the FHOG Act by the State Revenue Legislation Further Amendment Bill 2003. The Minister’s Second Reading Speech to the bill, provided:

“The Bill also clarifies the residency test for the grant by requiring the applicant to reside in the home for a continuous six-month period.”

43 The change to the law was largely due to some abuse of the grant system by applicants who managed to retain the grant in circumstances where they only occupied the property for very short periods and either proceeded to let or sell the property.

44 A similar residence requirement was inserted by the State Revenue Legislation Amendment Bill 2004 in s 76 of the Duties Act. The Minister’s Second Reading Speech to that Bill made the following observation:

“The requirement to occupy the property that has been purchased also mirrors the requirement of the First Home Owners Grant Scheme.”

45 The FHOG and Duties Acts do not define the expression “principal place of residence”. It is used in a similar manner as used in the principal place of residence exemption under Schedule 1A of the Land Tax Management Act 1965. In s 3(1) of the Land Tax Management Act the expression “principal place of residence of a person” is defined to mean “the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person”. I think the same approach can be taken in determining the meaning of the expression as used in the FHOG and Duties Act. In that sense, as observed by the Australian Capital Territory Administrative Appeals Tribunal in Re Newman and the Commissioner for ACT Revenue (1993) 93 ATC 2105, “the term ‘principal place of residence’ has its ordinary meaning…and does not extend to include a place from which one is absent for a period of time.”

46 In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of a residence in each case. The test requires that only one residence can be regarded as the principal place of residence of a person. In Deane v Commissioner of Stamp Duties (Qld)(No 2) [1996] 2 Qd R 557 Fryberg J in considering the meaning of “principal place of residence’ in the context of the Stamps Act 1894 (Qld) held that the issue should be determined on an objective basis and proceeded to make the following relevant comments:

It also seems to me that the word “principal” in the definition allows a wide range of factors to be taken into account, and also implies an objective test of what is the principal place of residence. That is not to say that the intention of the person acquiring the residence is not relevant. Indeed, Mr Logan for the Commissioner conceded that intention could be taken into account as a factor in the assessment. It seems to me that intention is relevant, but not dominant. That view of the law also seems to me substantially to be the test which was applied by the respondent in the present case …
The evidence regarding the applicant’s mail, their usage of electricity, the electoral roll, the time they spent at Dewar Terrace compared with the time which they spent at Weinholt Street, the number of nights slept at each place, all combines to found a proper inference as to what was their place of abode or their residence – to put it another way, the place where their home was …
The fact of the matter is that the legislation requires more than just a purpose of acquisition, and it does not seem to me that they did enough to bring themselves within the terms of the Act.

47 In Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26 the Tribunal in the context of first home grants legislation, also held that “the subjective intention” of a person did not bring an applicant within the eligibility criteria if the person did not, in fact, reside in the property as his or her principal place of residence. It is necessary that the original subjective intention of a person does, in fact, come to fruition for the original subjective intention to be accepted. The original intention is relevant but does not play a dominant role in the final determination of a person’s principal place of residence.

48 In Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 the Appeal Panel of the Tribunal agreed that “to occupy a home as his or her principal place of residence a person’s occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor occupation for any other reason”.

49 Under the Land Tax Management Act, no period of occupation is prescribed and the matter is determined by the nature of that occupation which provides the element of permanence. But under the FHOG Act and Duties Act an applicant has “to reside in the home for a continuous six-month period” to qualify for the grant and the concessions under the Duties Act. This is a mandatory requirement and was inserted in the two Acts to ensure that there was no abuse of the grant or the concessions by applicants. Against that background, the word “continuous” when used in the relevant provisions must be given their ordinary meaning. The six-month period has to be “uninterrupted in time; without cessation” (see Macquarie Online Dictionary).

50 The Chief Commissioner is then given discretion under both Acts to deal with cases where “there are good reasons” to allow an applicant to be entitled to the grant and concessions without complying with the strict “residence requirement” set out in the law. The Chief Commissioner is given discretion to do any of the following:

(a) approve the commencement of the period of occupation of the property as an applicant’s principal place of residence more than 12 months after completion of the eligible transaction,

(b) approve the occupation of the home as a principal place of residence for a period of less than 6 months,

(c) exempt an applicant from the residence requirement.

51 The applicants’ case was put rather simply by Mr Palmer. That, on the evidence produced by the applicants, the applicants had “crossed the line” and established that they resided at the Property for a continuous period of 6 months. It was further submitted that the time spent by the applicants in Brisbane was “out of their control” and “necessary” in view of the family support needs of Mrs Cameron and that the Tribunal should exercise its discretion to discount the absences.

52 Mr Rider for the respondent submitted that the evidence given by the applicants and on their behalf by Mr Levy, Mr Clifton and Mrs Parr had to be tested against the objective evidence before the Tribunal. Mr Rider further submitted that the objective evidence, which included the mobile phone records and banking records, which were contemporary records made by third parties, did not support the applicants’ claim that they used and occupied the Property as their principal place of residence for a continuous period of 6 months prior to its sale.

53 Mr Cameron’s evidence was that the applicants only spent 2 to 3 days a week at his father in law’s place in Indooroopilly and the rest of the week at the Property. Mrs Cameron gave a similar version. However, Mr Levy in cross-examination did agree that the applicants sometimes stayed longer than the usual two to three days.

54 Mr Clifton’s evidence was not very helpful because he did not live in the adjoining unit on a permanent basis but only visited his property once every two or three weeks. Mrs Parr also did not help to establish that the applicants were there on a continuous basis because she only visited the applicants on three occasions during the relevant period.

55 The difficulty the Applicants had in discharging the onus placed on them by the law was that their telephone and banking records did not support their claim that they were at the Property during the whole period. There is some support for the applicants in December 2005 and January 2006 from telephone records that they were in the area for about 10 days in December and about six days in January. But the telephone records indicate that Mr Cameron only made a few calls in the region of the Property during the period February 2006 to July 2006. It was put to Mr Cameron by Mr Rider, on the basis of these records, that the applicants were only at the Property during the period February to July 2006 as follows:

February 4 days

March 1 day

April 3 days

May 2 days

June 1 day

July 3 days

56 Mr Cameron offered no explanation but merely denied the suggestion.

57 The telephone records also indicate that Mr Cameron’s other mobile phone, a Blackberry, which was used for business purposes, was used on some occasions at early hours of the morning. The majority of the calls, including the early morning calls, were made from Brisbane or suburbs close to Indooroopilly.

58 Mrs Cameron’s mobile records and records of the landline at the Property were not produced by the applicants. The only inference the Tribunal can draw is that they do not assist the applicants to establish that they were in residence at the Property longer than the days suggested by Mr Rider. It was claimed by Mr Cameron that the landline at the Property was only used for internet purposes but no records were produced to establish this claim.

59 The applicants moved their furniture and belongings to the Property on 21 November 2005 and spent some days in December 2005 there before going for their Christmas holidays to Noosa from 25 December to 7 January 2006. They spent some six days in January 2006 at the Property. It appears that, from 22 January 2006, they began to spend the majority of their time in Indooroopilly. It was quite obvious from Mrs Cameron’s evidence that she did not want to establish her principal place of residence at the Property. She preferred to be close to her parents and friends in Brisbane. It is difficult not to conclude that the applicants were planning to move to a suburb close to Indooroopilly long before they purchased and moved in July 2006 to their residence at Chelmer. Her evidence was that she would spend 2 to3 days each week living with her parents and, on other days, travel with her husband or drive on her own to Brisbane.

60 It was also known to the applicants that Mrs Cameron’s medical condition required family support prior to moving to the Property. A condition that Dr Conn confirmed was known to the applicants “from the period of September 2005 onwards”. This was some months before they claimed to have moved into the Property to establish their principal place of residence there. Mrs Cameron’s own evidence was that she preferred to be in Brisbane with her family and friends. Against that background it is difficult to conclude that the applicants moved into the Property in December 2005 to establish their principal place of residence there.

61 The onus was on the applicants to establish that they continuously lived at the Property for 6 months and had, during that period, established the Property as their principal place of residence. It was necessary for the applicants to establish that they resided at the Property for a continuous period of 6 months. That is the strict requirement found in both s 12 of the FHOG Act and s 76 of the Duties Act

62 On their own evidence that they spent at least 2 to 3 days each week in Brisbane, the applicants failed to establish that they occupied the Property for a continuous period of at least 6 months. But when their evidence is tested against the objective evidence the situation becomes even clearer that they did not satisfy the residence requirement. In the absence of a period of continuous occupation of the property, they also failed to establish that the Property was their principal place of residence during the relevant period. The respondent was, in those circumstances, entitled to recall the grant and also withdraw the concessions given pursuant to the First Home Plus scheme under the Duties Act.

63 It was submitted by the applicants’ solicitor that the Tribunal should exercise its discretion to discount the period spent in Brisbane in calculating the necessary 6 months period of continuous occupation of the Property as their principal place of residence. As explained, the discretion given to the Chief Commissioner under s 12 of the FHOG Act and s 76 of the Duties Act only allows the Chief Commissioner, if satisfied there are good reasons to do so in a particular case, shorten the period or exempt the person from the residence requirement. There is no discretion to treat regular absences from occupation of a property during the 6 months period as “continuous occupation” in calculating the 6 months period.

64 In Schedule 1A of the Land Tax Management Act there are special provisions dealing with absences from the property in relation to the principal place of residence exemption. The Chief Commissioner is also given a fairly broad discretion under Clause 2 (a) to determine, in the absence of a continuous use and occupation, that a property is nevertheless used as a principal place of residence. There are no such provisions in both the FHOG Act and the Duties Act.

65 The facts of this matter are quite unusual. The Property was purchased from a developer whose Chief Executive Officer was closely associated with the applicants and was sold at a price that bears little comparison to sale of similar units adjacent to the Property. The respondent did make that observation at the hearing and produced extracts of sales of other properties in the same development to support his concern that the sale price was far in excess to that paid by other buyers. Mr Cameron offered no explanation. It is also important to note that the applicants paid only $1,000 deposit to initially enter into the contract to purchase the Property. The full purchase amount was paid with the Grant and a loan from a bank.

66 Against the factual background it is not difficult to conclude that the applicants took such steps as were necessary to give the impression that it was their principal place of residence for a period of 6 months in order to obtain the grant and other duties concessions. But at all times intending to buy a property close to Indooroopilly in Brisbane and sell the Property for a large profit. To the extent that the applicants occupied the Property on those occasions when they visited the Property, such occupation was not on a continuous basis. As observed by the Appeal Panel in Ferrington such “occupation was transient, temporary, contingent or of a passing nature, or for some other purpose”.

67 The matter that remains is whether the respondent correctly imposed a penalty in recalling the grant and included an interest amount in relation to the Duties Act concessions.

68 Under s 45(1)(b) of the FHOG Act the Chief Commissioner can require repayment of a grant if the Chief Commissioner reverses the decision under which the grant was made. In this matter the Chief Commissioner has issued an assessment requiring the Applicants to repay the grant. If an applicant fails to make a repayment required under s 45 or the conditions of the grant, the Chief Commissioner may impose a penalty not exceeding the amount the applicant is required to repay. The applicants have failed to repay the grant.

69 The matters taken into account to determine the level of penalty include the actual period of occupation of the property, reasons for failure to occupy the property for the full period and whether the applicant has co-operated in having the matter resolved by making the repayment. In the present matter, only a 20% penalty was imposed and I think that was an appropriate penalty in the circumstances. The applicants did not occupy the Property for 6 months, have not repaid the grant which they have had the benefit of for over three years and did not inform the respondent of their failure to comply with the residence requirement. There are no grounds before the Tribunal to reduce the penalty.

70 Section 21(1) in Part 5 of the TA Act provides that 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 when the payment was due until the day upon which the outstanding tax is paid. In this matter, the failure by the applicants to pay the relevant duty on the transfer and mortgage within 14 days after the end of the period they were allowed to comply with the residence requirement, was a “tax default” in terms of the definition of “tax default” found in s 3 of the TA Act. The term “tax” is defined in s 3 of the TA Act to include any duty payable under a taxation law.

71 The applicable interest rate consists of a variable market rate component and a premium rate component. The market rate component fluctuates and is connected to an external rate, the Reserve Bank’s Accepted Bill rate. The premium rate component is fixed by s 22(3) of the TA Act at 8 per cent.

72 The market rate component, as was pointed out by the Appeal Panel of the Tribunal in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, “is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due … is a component that 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”.

73 On the other hand, as observed by the Appeal Panel in Incise, the premium rate of interest “is a form of penalty” and its purpose “is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time”.

74 In this matter, the respondent included both interest components in the assessment issued to the applicants to recover the duty payable on the relevant transfer and mortgage.

75 The Chief Commissioner is given discretion by s 25 of the TA Act, “in such circumstances as the Chief Commissioner considers appropriate”, to remit the market rate component or the premium rate component or both by any amount.

76 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 the Tribunal explained the circumstances when the market rate interest component can be remitted as follows:

“27 In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the ‘tax default’ is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes).”

77 In this matter, there were no special circumstances before the Tribunal to warrant remission of the market rate component.

78 In the case of the premium rate component, it would depend on the level of culpability and general behaviour of the taxpayer. The factors that need to be taken into account to determine whether the premium rate of interest should be imposed in a case include the following (see Philpot v Chief Commissioner of State Revenue (RD) [2008] NSWADT 83):

(1) the truthfulness of the original statements made in the application for the first home grant under the FHOG Act and the First Home Plus concessions under the Duties Act;

(2) the surrounding circumstances including the intention of the applicant in relation to the occupation and use of the property as his or her principal place of residence at the time when seeking the grant under the FHOG Act and concessions under the Duties Act;

(3) the reasons for failure to comply with the conditions of the grant and the concessions;

(4) whether the applicant has occupied the property as his or her principal place of residence;

(5) the candour of the applicant in his or her responses to compliance inquiries; and

(6) whether the grant has been refunded and duties payable paid.

79 It was an appropriate case to include the premium rate component interest in the assessment issued to the applicants to recover the duty payable in respect of the relevant transfer and mortgage because of the following reasons:

(1) the applicants did not comply with the conditions of the First Home Plus concessions;

(2) the failure to comply with the “residence requirement” was as a result of their own choice;

(3) they did not inform the respondent of their failure to comply with the “residence requirement”;

(4) the applicants did not provide the respondent with all the information that was sought; and

(5) the duty payable remains outstanding.

80 The decisions under review are, accordingly, affirmed.

Orders

1. The decision of the Chief Commissioner of State Revenue to recall the Grant ($7,000) and impose a penalty of 20% ($1,400) is affirmed

2. The decision of the Chief Commissioner of State Revenue to revoke the concession granted to the applicants in accordance with the First Home Plus Scheme under the Duties Act is affirmed

3. The decision of the Chief Commissioner of State Revenue to assess transfer duty of ($17,855), with interest at the market and premium rates ($3,196.90) and mortgage duty ($1,781) with interest at the market and premium rates ($318.88) is affirmed.