Carey and Butt v Commissioner for Act Revenue
[2015] ACAT 85
•9 December 2015
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
CAREY & BUTT v COMMISSIONER FOR ACT REVENUE
(Administrative Review) [2015] ACAT 85
AT 15/51 and 52
Catchwords: ADMINISTRATIVE REVIEW – land tax – interest and penalty tax – interest not a reviewable decision – taxpayer did not exercise reasonable care and did not have reasonable excuse –taxpayer has obligation to notify Commissioner – incomplete disclosure by taxpayer prior to investigation – no intentional disregard of a tax law–incomplete voluntary disclosure prior to investigation and/or misunderstanding by taxpayer that property being developed is exempt from land tax may be relevant to remission of penalty tax
Legislation cited: ACT Civil and Administrative Tribunal Act 2008, s 68
Land Tax Act 2004 ss 8, 9, 11, 14, 15, 19A, 36, 53
Taxation Administration Act 1999 ss 26, 31, 32, 33, 34, 37, 101, 104
Cases cited:Commissioner forACT Revenue v Dataflex Pty Ltd and ACT Civil and Administrative Tribunal [2011] ACTCA 14
Belconnen Premier Inn Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 68
Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23
Highrise Concrete Contractors (Aust) Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2015] ACAT 3
HJA Holdings Pty Ltd & Ors v ACT Revenue Office (Administrative Review) [2014] ACAT 24Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15
Photo Corporation of Australia Pty Ltd v Commissioner for ACT Revenue [1994] ACTAAT 91
Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26
RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64
Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73
Steele v Commissioner for ACT Revenue (Administrative Review) [2010] ACAT 15Theron v Commissioner for ACT Revenue [2013] ACAT 33
Touma v Chief Commissioner of State Revenue (NSW) [2012] NSWADT 2Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79
Tribunal: Ms L. Beacroft – Member
Date of Orders: 9 December 2015
Date of Reasons for Decision: 9 December 2015
ACT CIVIL & ADMINISTRATIVE TRIBUNAL AT 15/51 and 52
BETWEEN:
JAN CAREY
Applicant – AT 15/51
ERIC BUTT
Applicant – AT 15/52
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Ms L. Beacroft – Member
DATE: 9 December 2015
ORDER
The Tribunal Orders that:
1.The decision of 1 June 2015 not to remit penalty tax is set aside.
2.A decision remitting 40% of the penalty tax is substituted.
3.To remove doubt, the result of Order 2 is that penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
4.In so far as the application seeks review of interest on land tax payable for the relevant period, it is dismissed for want of jurisdiction.
………………………………..
Ms L. Beacroft – Member
REASONS FOR DECISION
Background
The applicants, Ms Jan Carey and Mr Eric Butt, are the joint owners of residential land (‘the property’) in the ACT. The Commissioner for ACT Revenue (‘the respondent’ or ‘the Commissioner’) administers the land tax and related legislation in the ACT.
On 30 June 2015 the applicants applied to the Tribunal for review of a determination by the Commissioner dated 1 June 2015 (‘the reviewable decision’) to disallow the applicants’ objection to an assessment of land tax dated 16 January 2015 (‘the assessment’).
Assessment and Objection
Following the receipt by the Commissioner of an email dated 27 October 2014[1] sent by Ms Carey on behalf of both the applicants, the Commissioner initiated an investigation on 6 November 2014.[2] The investigation involved a range of searches including of electricity account holders for the property (‘ACTEWAGL Search’). On 21 November 2014 the Commissioner issued a notice (‘section 82 notice’) advising that an investigation had begun and requiring certain information to be provided by the taxpayer. Ms Carey, on behalf of both the applicants, made further disclosures about the renting of the property to the Commissioner by phone on 8 December 2015[3], and the applicants provided a written response to the section 82 notice on 2 January 2015.
[1] T-52
[2] Respondent’s statement of facts and contentions, dated 2 October 2015, page 2
[3] Respondent’s Land Tax Investigation Report, dated 16 January 2015, T-75
The assessment was issued by the Commissioner on 16 January 2015, which included penalty tax at the rate of 50% of the tax payable[4], being $12,513.39, and interest at the statutory rate, being $20,012.59. The assessment was for the rental period from 1 July 2004, being quarter one 2004-05, until 31 March 2014, being quarter three 2013-14 (‘the rental period’)[5]. Penalty tax was not imposed for quarter four 2013-14 to quarter 2 2014-15 since the applicants had advised the Commissioner that the property was rented from February 2014.[6] Further, the Commissioner imposed no land tax, interest or penalty tax for quarter three 2003-04 even though it appears the property was rented during this quarter.[7] The applicants did not object to the payment of the land tax, however they contended that the land tax should be reduced and that the penalty tax and interest were excessive in their circumstances.
[4] Section 31(2) of the Taxation Administration Act 1999
[5] Notice of Assessment, dated 16 January 2015, T-78
[6] Reasons statement, dated 1 June 2015, page 8, T-41
[7] Email from Russell Stroud, ACT Revenue, dated 1 June 2015, T-96
The objection was disallowed by the Commissioner in the reviewable decision. The Commissioner dismissed the applicants’ submission about reducing the amount of land tax. The Commissioner confirmed the penalty tax at 50% and imposition of statutory interest, finding that the applicants had not notified the Commissioner within 30 days of the renting of the property, contrary to section 14 of the Land Tax Act 2004 (‘LTA’), and had not paid the land tax for the rental period as required under the LTA and the Taxation Administration Act 1999 (‘TAA’). The Commissioner found no grounds for reduction or remission in the penalty tax or interest imposed.
In the proceedings before the Tribunal the Commissioner submitted that the rate of penalty tax should be increased to 75% of the tax payable[8], on the grounds that the failure to pay land tax was caused wholly or partly by an intentional disregard for the tax law.[9]
Conduct of the hearing
[8] Respondent’s statement of facts and contentions, dated 2 October 2015, page 6
[9] Section 31(4) of the TAA
A hearing was held on 23 October 2015.
The applicants appeared in person, and Ms Katavic appeared for the respondent instructed by Ms Chandra of the ACT Government Solicitor.
Prior to the hearing, the parties lodged and exchanged a number of statements of facts and contentions and lists of the authorities on which the parties relied. The Commissioner submitted a certificate of evidence pursuant to section 136 of the TAA dated 30 September 2015, which attached copies of rates notices for the property and land tax brochures which were sent to the applicants for the property for the rental period, and also copies of similar documents for another property (the ‘Bentham property’), which was owned by the applicant Mr Butt for a similar period. The Commissioner prepared a folder of relevant documents which are known as the T-Docs.
On the date of the hearing the Tribunal heard sworn evidence from both applicants and accepted the respondent’s chronology of events as an exhibit [Exhibit: R1]. At the hearing both parties advised the Tribunal that no further and final submissions were required.
Facts were agreed as follows:
(a)the applicants rented out the dwelling on the property and were liable for land tax for the rental period and had not notified the Commissioner;
(b)the property was subject to a Development Application approved 6 June 2005, development activity occurred at the property during the rental period and a Certificate of Occupancy/Use for a second dwelling at the property issued on 31 August 2015; and
(c)Ms Carey, on behalf of both applicants, emailed the Commissioner on 27 October 2014 confirming that the property had been rented, and following this the Commissioner undertook various searches, initiated an investigation, and issued a section 82 notice to which the applicants responded.
The contested issues are set out below:
(a)Is the land tax correctly assessed given the tenants of the property did not have access to part of the land due to it being developed?
(b)Is penalty tax of 50%[10] appropriate in the circumstances, or should the penalty tax be reduced and/or remitted[11], or increased[12], under various sections of the TAA.
Legislation
[10] Section 31(2)of the TAA
[11] Sections 31(3), 31(6) and 37 of the TAA
[12] Section 31(4) of the TAA
In summary, the grounds for imposition of land tax are that the property is leased on the first day of the quarter and is rented at any time in the previous quarter.[13] The LTA provides for a written notice to be given to the Commissioner,[14] by the landowner or their agent about a property being rented and the date from which it is rented. If land tax is imposed and section 14 is not complied with by the owner nor any agent, then interest and penalty tax (in addition to the land tax) is payable by the landowner.[15] The LTA has separate criminal penalty provisions that can apply to agents in certain circumstances,[16] but these provisions do not relieve the owner of liability for compliance with land tax requirements and any penalty tax or interest imposed.[17]
[13] Section 8(2), (3)(b) of the LTA
[14] Section 14 of the LTA
[15] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79 at [72]
[16] Section 53 of the LTA
[17] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79
Failure of the taxpayer to pay land tax is treated as a tax default under the TAA.[18] The amount of penalty tax is payable at a statutory rate depending on the circumstances of the default,[19] and in some circumstances is not payable,[20] can be reduced,[21] and/or can be remitted.[22]
[18] Section 19A(5)(a) of the LTA
[19] Section 31 of the TAA
[20] Section 31(6) of the TAA
[21] Sections 31(3), 32, 33 of the TAA
[22] Section 37 of the TAA
For unpaid land tax, the default rate of penalty tax is 25%[23] of the unpaid tax. The Commissioner can increase the rate to various higher levels depending on the circumstances. In this case, in the reviewable decision the Commissioner increased the rate of penalty tax to 50%, which applies if the default was “caused wholly or partly by a failure by the taxpayer…to take reasonable care”.[24] This higher rate applies unless there is a ‘reasonable excuse’[25], the tax default “happened solely because of circumstances beyond the taxpayer’s control”[26] or the penalty tax is remitted.[27]
[23] Section 31(1) of the TAA
[24] Section 31(2) of the TAA
[25] Section 31(3) of the TAA
[26] Section 31(6)(b) of the TAA
[27] Section 37 of the TAA
Where there is an intentional disregard of a tax law, the rate increases to 75%.[28] While not relevant to this case, the rate of 90% applies if the taxpayer or their agent conducts themselves in various unsatisfactory ways after being notified that an investigation is to be a carried out.[29]
[28] Section 31(5) of the TAA
[29] Section 34 of the TAA
The amount of interest payable for a tax default is set out in the legislation.[30] The Commissioner can remit all or part of the interest in certain circumstances,[31] however the Commissioner did not remit the interest in this case.
[30] Section 19A of the LTA and section 26 of the TAA
[31] Section 36 of the LTA
The decision being reviewed by the Tribunal is the determination[32] made by the Commissioner about the objection to the assessment. The Commissioner’s determination in regard to the objection is constrained by section 104 of the TAA, which says the Commissioner must either “allow the objection in whole or part or disallow the objection.”[33]
Tribunal’s Jurisdiction and Powers
[32] Section 104 of the TAA
[33] Section 104 of the TAA
The burden of showing that an objection should be sustained is with the taxpayer, the applicant in this case.[34] The Tribunal’s main task in this case is to decide if the taxpayer has shown that the objection should be sustained.[35] Where a reviewable decision makes a finding of intentional disregard of a tax law, “the taxpayer must positively satisfy the Tribunal that the ‘state of mind’ circumstances did not exist”.[36]
[34] Section 101(3) of the TAA
[35] Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26; Touma v Chief Commissioner of State Revenue [2012] NSWADT 2
[36] Touma v Chief Commissioner of State Revenue (NSW) [2012] NSWADT 2 at [54]
The Tribunal may confirm, vary or set aside the decision being reviewed. In reviewing the decision about an objection, the Tribunal is not limited to the grounds in the objection[37]. If the decision is set aside, the Tribunal may make a substitute decision or remit the matter for decision back to the decision-maker in accordance with any directions or recommendations of the Tribunal.[38]
[37] Section 108B of the TAA
[38] Section 68 of the ACT Civil and Administrative Tribunal Act 2008
The Tribunal’s power to make a substitute decision is constrained by section 104 of the TAA, the power given to the Commissioner to make a determination about an objection (refer to paragraph 17 above). The plain meaning of this provision does not appear to allow for the decision-maker, being the Tribunal in review proceedings, to determine a higher penalty to that imposed in the assessment (unless this option is put forward in the objection by the taxpayer which is unlikely).[39]
[39] Section 104 of the TAA
Where a taxpayer defaults on their tax liabilities, interest is payable, and may be remitted. However, decisions about interest and any remittal are not reviewable by the Tribunal.[40]
Applicants’ Contentions
[40] Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73, [11]; section 38 of the LTA and section 107A and schedule 1, item 1.2 of the TAA
The applicant’s submissions on the two contested issues listed in paragraph 11 above are summarised below.
Is the land tax correctly assessed given the tenants did not have access to part of the property since it was being developed?
The applicants submitted that the area of land subject to the development activity was not available to tenants, it was allocated another address by the planning authority[41], and was fenced off for safety and had a structure on it for the workers.[42] The applicants pointed out that the LTA allows for the apportionment of land tax on property where there are multiple dwellings[43], and the land tax should be similarly apportioned in this case considering that some of the land at the property was not available to tenants. The applicants submitted that the land tax exemptions for certain developers under the LTA[44] supports the submission that they should have their land tax apportioned since they, the applicants, were developers of the property.
What is the appropriate penalty tax in the circumstances?
[41] Letter to Mr Butt from ACT Planning and Land Authority, dated 22 June 2005, attachment 1 to applicants’ statement of facts and contentions, dated 9 October 2015
[42] ACTmap Aerial view of the property, attachment E to applicants’ statement of facts and contentions, dated 16 September 2015; oral evidence of Mr Butt, 23 October 2015
[43] Section 15 of the LTA
[44] Section 11 of the LTA
The applicants submitted that their circumstances demonstrated that they had exercised reasonable care, and/or had a reasonable excuse with the effect of either reducing the penalty tax rate to 25% or 0%[45], and/or the penalty tax should be remitted.[46]
[45] Sections 31(3) and (6) of the TAA
[46] Section 37 of the TAA
The applicants provided documentary evidence[47] and gave oral evidence that they had used tax professionals to advise them about their rental properties, and they suggested that these professionals had some or all the responsibility for the tax default. In her oral evidence Ms Carey said she had made contact with her accountant about the proceedings, however they had not responded.
[47] Invoice from Deloitte Private for professional services for the year 2013, attachment 2 to applicants’ statement of facts and contentions, dated 9 October 2015
The applicants contended that the Commissioner had failed to effectively communicate to them that land tax was payable. In her oral evidence Ms Carey said she did not receive a land tax brochure with the rates notices until 2013-14. She confirmed that she did receive and read the latter mentioned land tax brochure, and for this reason she sent the email dated 27 October 2014 to the Commissioner (see paragraph 11 above). She said that the brochure appeared to her to be providing information to taxpayers about a new land tax requirement. Therefore she only turned her mind to renting history during 2013-14; her oral evidence was that she mentioned the date of 2 February 2014 in her email because it was her recollection of the date during 2013-14 when the property had been most recently rented to a group of students.
The applicants both submitted that they did not have intentional disregard for a tax law. Ms Carey explained the reasons for contents of her October 2014 email as set out in paragraph 26 above. In his oral evidence Mr Butt explained that while he did pay land tax on the Bentham property, he regarded this property as being subject to unusual grandfathered planning conditions. He also said that due to his experience as a professional in the construction industry he understood that developers did not usually pay land tax. Mr Butt explained in his evidence that for these reasons he did not ever conclude that he was liable for land tax for the property until this matter came to his attention.
Respondent’s Contentions
The respondent’s submissions against the two issues listed in paragraph 11 above are summarised below.
Is the land tax correctly assessed given the tenants did not have access to part of the property since it was being developed?
The respondent contended that the land tax was correctly assessed since the property was one parcel of land and did not have multiple dwellings rented for the rental period.[48] The structure on the property for workers was not a dwelling since it was not used for living[49], and the Certificate of Occupancy for the new dwelling did not issue until after the rental period, ie 31 August 2015.[50] Any land that the tenants may not have had access to was therefore irrelevant to the assessment of land tax.
[48] Sections 9, 15 of the LTA
[49] Section 15(5) of the LTA
[50] Certificate of Occupancy and Use, attachment 3 to the respondent’s statement of facts and contentions, dated 2 October 2015
The respondent submitted that while there are various exemptions for land tax under the LTA, including for a parcel of land owned by a corporation carrying on business as a builder or land developer[51], these did not apply to the applicants or the property for the rental period.
What is the appropriate penalty tax in the circumstances?
[51] Section 11 of the LTA
The respondent contended that the applicants had the onus of notifying the Commissioner that their property was rented; further that this duty remained with the taxpayer even where they engaged third parties to assist them.[52] Ignorance and oversight by the taxpayer does not justify a reduction in penalty tax.[53] In any case the respondent provided evidence that the applicants had been sent brochures informing them of land tax with the rates notices for the property over the rental period.[54]
[52] Respondent’s statement of facts and contentions, dated 2 October 2012, page 8
[53] Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73 at [11]
[54] Certificate issued pursuant to section 136 of the TAA, attachment 6 to respondent’s statement of facts and contentions, dated 2 October 2015
The respondent submitted that the applicants had not exercised reasonable care and had no reasonable excuse, and referred to a line of authority to support this submission.[55]
[55] Steele v Commissioner for ACT Revenue (Administrative Review) [2010] ACAT 15, Theron v Commissioner for ACT Revenue [2013] ACAT 33 and Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15 cited in reasons statement, dated 1 June 2015, page 7, T-41
In the proceedings before the Tribunal the respondent introduced a submission that the applicants had intentional disregard for a tax law. In summary the basis of this contention was that one of the applicants, Mr Butt had paid land tax for the Bentham property and therefore “was aware of their land tax obligations regarding rented property”[56], and cited authority to support this submission.[57] The respondent contended that while the objection confirmed a penalty tax rate of 50%, the Tribunal could set aside the decision and substitute a decision that imposes the higher penalty tax rate of 75%, being $18,769:98.[58]
[56] Respondent’s statement of facts and contentions, dated 2 October 2012, page 7
[57] Touma v Chief Commissioner of State Revenue [2012] NSWADT 2
[58] Respondent’s statement of facts and contentions, dated 2 October 2012, page 10
The respondent submitted that the applicants did not have circumstances to justify a reduction or remittal of the penalty tax and it would not be fair and reasonable to do so. In particular the respondent submitted that the October 2014 email sent by Ms Carey to the Commissioner did not disclose fully the rental history of the property. As a result the Commissioner conducted an investigation, without prior notice to the taxpayer as the law allows[59], and subsequently issued a section 82 notice. In these circumstances the respondent submitted that the applicants did not make a voluntary disclosure pursuant to sections 32 and 33 of the TAA and therefore any associated reductions in penalty tax are not available to them.[60] In any case, the Commissioner further contended that a decision to not allow reductions in penalty tax under sections 32 and 33 TAA are not reviewable decisions.[61]
[59] Respondent’s statement of facts and contentions, dated 2 October 2012, page 6, citing Commissioner forACT Revenue v Dataflex Pty Ltd and ACT Civil and Administrative Tribunal [2011] ACTCA 14
[60]Respondent’s statement of facts and contentions, dated 2 October 2012, page 6
[61] Respondent’s statement of facts and contentions, dated 2 October 2012, page 6
In regard to interest, the Commissioner submitted that decisions to impose interest and not to remit it are not reviewable by the Tribunal.[62]
Findings and Decision
Is the land tax correctly assessed given the tenants did not have access to part of the property since it was being developed?
[62] Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73 at [11]; section 38 of the LTA and section 107A and schedule 1, item 1.2 of the TAA
The Tribunal accepts the arguments of the respondent as set out in paragraphs 29 to 30 above.
In arriving at this conclusion, the Tribunal makes no adverse findings about the credibility of the applicants. The Tribunal accepts that Mr Butt held a genuine but unfortunately incorrect view that as developers of the property he and Ms Carey were exempt from land tax for the property. The Tribunal also accepts that Mr Butt genuinely believed the Bentham property differed in regard to land tax liabilities, due to a view he formed over many years and from meetings with government officials that the Bentham property is subject to unusual grandfathered requirements.
What is the appropriate penalty tax in the circumstances?
The Tribunal finds that the applicants did not take reasonable care. The Tribunal accepts the respondent’s submissions that there is a positive obligation on the taxpayer to make enquiries about their tax liabilities and there is no positive obligation on the Commissioner to do so (in the absence of notification pursuant to section 14 of the LTA) about the renting of the property. The cases of Theron[63] and Steele[64] held that there is an onus on landlords to enquire about tax obligations. The principle that the onus is on the taxpayer was set out in relation to payroll tax in the Photo Corporation[65] case, and confirmed by the Tribunal in Belconnen Premier Inn.[66]
[63] Theron v Commissioner for ACT Revenue [2013] ACAT 33
[64] Steele v Commissioner for ACT Revenue (Administrative Review) [2010] ACAT 15
[65] Photo Corporation of Australia Pty Ltd v Commissioner for ACT Revenue [1994] ACTAAT 91
[66] Belconnen Premier Inn Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 68
The onus falls on the applicants even though they engaged various professionals. Any duty or liability of a professional person engaged by the taxpayer does not necessarily relieve the taxpayer of their duty or liability regarding land tax or any associated penalty tax or interest. There is consistent authority for this finding.[67] It may be that the system which is employed by the Commissioner to administer the land tax laws can be improved for example, it may be able to be more effective in identifying situations earlier where taxpayers or professionals engaged by landowners overlook land tax requirements. Despite this, it remains the responsibility of the taxpayer to make sure that the professionals they engage are discharging their obligations properly, and landowners are at liberty to take action against professionals who fail in their duties.
[67] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79
The Tribunal finds that the applicants have no reasonable excuse. In the Hay case the applicant was found to have a reasonable excuse and obtained a reduction in the penalty tax, due to the combined effect of his personal circumstances which differed markedly from the applicant here. In the Hay case the applicant’s circumstances included:
…the severe mental illness of a relative for whom he cared, the ill-health and medical emergencies of another relative for whom he also cared, his family and work responsibilities, and the impact on him of each of these circumstances and the totality of these circumstances.[68]
Unlike in the Hay case where the Tribunal found that the taxpayer had a reasonable excuse, in this case the applicant taxpayers confirmed in oral evidence that they had no circumstances that reduced their capacity to manage their affairs.
[68] Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23 [33]
In regard to the respondent’s submission to raise the penalty tax to 75%, the Tribunal notes that it appears that it has no power to increase the penalty to 75% for the reasons set out in paragraph 20 above. The Tribunal does not need to make a finding in respect of the latter issue, since the Tribunal finds that there is no intentional disregard for a tax law by the applicants in this case.
Both Mr Butt and Ms Carey explained any inconsistencies in their evidence (refer to paragraphs 26, 27 and 37 above), and the Tribunal accepts that they are truthful witnesses. The Tribunal notes that the Commissioner in its assessment, which was also confirmed in the reviewable decision, did not find a basis for intentional disregard by the applicants of a tax law. Demonstrating an intentional disregard by the taxpayer of a tax law requires more than unsatisfactory compliance.[69] This case can be distinguished from the circumstances and evidence in the Jokhan case, where the Tribunal found that the taxpayers had not ‘adequately explained’ failures to act and there was other evidence to support a finding of intentional disregard.[70] Similar to the Tribunal’s finding in regard to one witness, McNeice, in the Touma case, I find that both the applicants in this case have ‘positively satisfied’ me that they did not have an intentional disregard of a taxation law.[71]
[69] Highrise Concrete Contractors (Aust) Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2015] ACAT 3 at [61] citing HJA Holdings Pty Ltd & Ors v ACT Revenue Office [2014] ACAT 24
[70] Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15 at [33]
[71] Touma v Chief Commissioner of State Revenue (NSW) [2012] NSWADT 2 at [54], [55] and [56]
The Tribunal accepts the Commissioner’s contention that in this case there was not full disclosure by the applicants prior to the investigation, and any reductions in penalty tax under sections 32 and 33 of the TAA are therefore not applicable.
In regard to interest, the Tribunal finds that decisions to impose interest and not to remit it are not reviewable by the Tribunal due to a lack of jurisdiction.
When considering whether the remission of penalty tax is fair and reasonable[72] previous cases must be considered. Fairness and reasonableness requires some level of consistency in decision making, although it does not extend so far as to bind future decision makers.
[72] Section 37(b) of the TAA
The applicants in the Steele case were granted a remission. It is difficult to distinguish the circumstances in Steele from the present applicants – all of them were ignorant of the land tax liabilities for the property, had employed agents upon whom they relied to manage their properties, and acted honestly and without intent to deceive. An additional significant factor in this case is that the Commissioner received an email from one of the applicants before any investigation began, albeit an email that was incomplete in its disclosure and only mentioned a date being when the property was most recently rented to a group of students. Nonetheless it was this email from Ms Carey that first alerted the Commissioner to possible unpaid land tax for the property. An additional factor in favour of a remission for the applicants is that one of the applicants held genuine but unfortunately incorrect views about land tax laws, which he had arrived at due to his professional experience with the construction industry.
The Tribunal finds that given the circumstances of the case and the Steele case, it would not be unfair or unreasonable to allow the present applicant a remission. Both the Theron[73] and Scott[74] cases can be distinguished from the circumstances here; in the latter two cases the applicants’ reasons for non-compliance were largely about the busyness of their lives. Whereas in this case there are exceptional circumstances including the misunderstanding held by one applicant about the land tax liabilities for land being developed and the incomplete disclosure prior to the investigation by the other applicant. The Jokhan[75] case is distinguishable because it is a case where intentional disregard by the taxpayer was found to be proved, which is not the case here.
[73] Theron v Commissioner for ACT Revenue [2013] ACAT 33
[74] Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73
[75] Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15
The Tribunal accepts that it would be unfair if the taxpayers in this case had a full remission since this would mean they gained the benefit of the money for the period for which it was unpaid and subsequently paid no penalty tax. Even a 50% remission would be excessive, as that would put them in the position of someone with a reasonable excuse, which the Tribunal has found not to be the case here. Therefore, the Tribunal remits 40% of the penalty tax imposed. To remove doubt, the result of the Tribunal’s finding is that a penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
The Tribunal has considered the issue of deterrence and balanced this with the requirement to determine the correct or preferable decision. In this case, even with a remission of penalty tax, some penalty tax is payable for the relevant period of unpaid land tax. Further, the interest imposed on the applicant is a deterrent to non-compliance.
Summary of Findings
The Tribunal finds that:
(a)land tax was correctly assessed and the fact that tenants of the property did not have access to part of the land since it was being developed is not relevant to the calculation of land tax in this case;
(b)the liability for interest and penalty tax falls on the owner even though they engaged professionals, and any duty or liability of a professional person engaged by the taxpayer does not necessarily relieve the taxpayer of their duty or liability regarding land tax;
(c)the applicants did not take reasonable care and do not have a reasonable excuse;
(d)there was incomplete voluntary disclosure by the applicants prior to the investigation, the Commissioner is not required to give the taxpayer notice of any investigation and sections 32 and 33 TAA do not apply in this case;
(e)the circumstances that resulted in the liability for penalty tax were exceptional and it would not be unfair or unreasonable to allow the present applicants a remission, particularly considering the email from one of the applicants which first alerted the Commissioner to possible unpaid land tax for the property, and also that the other applicant held a genuine but incorrect view about land tax laws which he had arrived at due to his professional experience with the construction industry
(f)a decision about interest and any remittal are not reviewable by the Tribunal due to a lack of jurisdiction.
The Tribunal orders as follows:
(1)The decision of 1 June 2015 not to remit penalty tax is set aside
(2)A decision remitting 40% of the penalty tax is substituted.
(3)To remove doubt, the result of Order 2 is that penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
(4)In so far as the application seeks review of interest on land tax payable for the relevant period, it is dismissed for want of jurisdiction.
………………………………..
Ms L. Beacroft
Member
HEARING DETAILS
FILE NUMBER: | AT 15/51 & 52 |
PARTIES, APPLICANT: | Jan Carey & Eric Butt |
PARTIES, RESPONDENT: | Commissioner for ACT Revenue |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | Ms Katavic |
SOLICITORS FOR APPLICANT | Self-Represented |
SOLICITORS FOR RESPONDENT | ACT Government Solicitor |
TRIBUNAL MEMBERS: | Ms L. Beacroft - Member |
DATES OF HEARING: | 23 October 2015 |
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