Chen v Chief Commissioner of State Revenue

[2024] NSWCATAD 164

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Chen v Chief Commissioner of State Revenue [2024] NSWCATAD 164

Hearing dates:

14 May 2024

Date of orders:

18 June 2024

Decision date:

18 June 2024

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

J Sullivan, Senior Member

Decision:

(1)   The assessments of surcharge land tax for the 2019, 2021, 2022 and 2023 land tax years in respect of the Narara Property are affirmed.

(2)   The assessments of surcharge land tax for the 2021, 2022 and 2023 land tax years in respect of the Niagara Park Property are affirmed.

(3)   The Tribunal has no jurisdiction to review the assessment of surcharge land tax for the Niagara Park Property for the 2019 land tax year.

Catchwords:

TAXES AND DUTIES — Land tax — Surcharge land tax — “foreign person” — Exemption for principal place of residence — Circumstances outside the control of the owner

Legislation Cited:

Administrative Decisions Review Act 1997

(NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Duties Act 1997 (NSW)

Foreign Acquisitions and Takeovers Act 1975 (Cth)

Land Tax Act 1956 (NSW)

Land Tax Management Act 1956 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Chief Commissioner of State Revenue v Aldridge [2003] NSWCATAP 50

Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41

Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238

Commissioner of Land Tax v Christie [1973] 2 NSWLR526

Commissioner of Taxation v Ryan (2000) 201 CLR 109

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

EK Anderson Investments Pty Ltd ATF Cacs Property Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 84

Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614

Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216

Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81

Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340

Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19

Gupta v Chief Commissioner of State Revenue [2006] NSWADT 187

Khalil v Chief Commissioner of State Revenue [2011] NSWADT 276

Laviva Nominees Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 84

Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266

Lo v Chief Commissioner of State Revenue [2013] NSWCA 180

Single v Chief Commissioner of State Revenue [2006] NSWADT 334

Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301

Taylor v Caldwell (1863) 3 B&S 826

Wang v Chief Commissioner of State Revenue [2023] NSWCATAP 331

Texts Cited:

None

Category:

Principal judgment

Parties:

Ms Peizhen Chen (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Mr Z G Zheng - (Applicant)

Crown Solicitor - (Respondent

File Number(s):

2023/00296906

Publication restriction:

None

REASONS FOR DECISION

1. Ms Peizhen Chen (Ms Chen) is the applicant. She owns the following properties:

1. a residential property at Narara (Narara Property); and

2. a residential property at Niagara Park (Niagara Park Property).

2. She was assessed to surcharge land tax for the above properties for the 2019, 2021, 2022 and 2023 land tax years. The 2020 land tax year is not in dispute.

3. The applicant:

1. says the surcharge land tax should be waived because she was prevented from returning to Australia by COVID-19 border closures. This was out of her control, similar to a “force majeure”. For this reason, she could not meet the 200 day “in Australia” requirement;

2. says that the Narara Property was her principal place of residence and was therefore exempt from surcharge land tax; and

3. criticises the respondent for making numerous “mistakes” – including not warning her of any liability to surcharge land tax until 2023 (6 years after it was introduced), not giving her the opportunity to change her affairs many years earlier, and issuing assessments which were wrong.

4. The respondent says:

1. the applicant met the statutory requirements for surcharge land tax, and did not qualify for any exemptions;

2. there is no discretion to waive the surcharge land tax; and

3. the applicant did not object to the 2019 surcharge land tax assessment for the Niagara Park Property, so the Tribunal has no jurisdiction to review it.

Materials before the Tribunal

5. At the hearing, the applicant relied on the following materials:

1. (original) application for administrative review filed on 18 September 2023 (A1); and

2. submissions and accompanying documents filed on 9 November 2023 (A2), 27 February 2024 (A3), and 7 April 2024 (A4).

6. The respondent relied on the following materials:

1. documents filed on 10 October 2023 pursuant to s 58 of the Administrative Decisions Review Act 1997 (ADR Act), in respect of the Narara Property assessments (R1);

2. submissions filed on 19 December 2023 (R2);

3. a Tender Bundle filed on 19 December 2023, which included documents produced in response to subpoenas issued to Sirris Pty Ltd (Trading as Living Group Real Estate) and the Department of Home Affairs (R3);

4. documents filed on 5 March 2024 pursuant to s 58 of the ADR Act, in respect of the Niagara Park Property assessments (R4);

5. further submissions filed on 16 April 2024 (R5); and

6. a Bundle of Authorities filed on 8 May 2024 (R6).

7. The applicant filed further submissions and documents on 28 May 2024 (after the hearing), as permitted. The respondent continued to rely upon their previous submissions.

Background and Facts

8. Ms Chen is a Chinese citizen. She moved to Australia around 2000 and considers Australia to be her home.

9. Ms Chen is now 87 years old. She did not attend the hearing or give a statement. She was represented at the hearing by her son, Mr Zheng, via a Cantonese interpreter.

Properties in NSW

10. Ms Chen bought the Niagara Park Property jointly with her husband in 2003. After her husband died (and for all years in dispute) she held it as to 100%.

11. She bought the Narara Property in her name (solely) in 2015.

Australian visas

12. Ms Chen has never been an Australian citizen.

13. On 23 December 2017, Ms Chen was issued a Return (Residence) (class BB subclass 155) visa. That visa contained a travel facility until 23 December 2022.

14. On 8 January 2023, Ms Chen was granted a further Return (Residence) (class BB subclass 155) visa. That visa contained a travel facility until 8 January 2024.

Days spent in Australia

15. Movement records from the Department of Immigration evidence Ms Chen’s actual presence in Australia.

16. During the relevant periods, Ms Chen was in Australia and overseas as follows:

Date arrived in Australia	Date departed Australia
27 April 2016	10 January 2018
27 June 2018	30 October 2019
5 May 2023	-

17. She was actually present in Australia for each relevant calendar (and land tax) year for the following number of days:

1. 198 days in the 2018 calendar year (2019 land tax year);

2. 303 days in the 2019 calendar year (2020 land tax year);

3. 0 days in the 2020 calendar year (2021 land tax year);

4. 0 days in the 2021 calendar year (2022 land tax year);

5. 0 days in the 2022 calendar year (2023 land tax year).

Travel plans and COVID-19

18. The applicant flew out to Guangzhou in China from Australia on 30 October 2019, arriving on 31 October 2019. She had been issued a return ticket on 19 July 2019, which evidenced her scheduled flight to Australia returning on 30 April 2020.

19. Unfortunately, with the onset of the COVID-10 pandemic, both China and Australia had their country borders closed for departures and arrivals. In China, the quarantine laws were much stricter than Australia, and lasted until the end of 2022. Entire cities were locked down, and laws were introduced making it an offence for elderly people being a passenger on a plane.

20. And so the return flight to Australia was cancelled and Ms Chen had to stay in China. I accept (as does the respondent) that her inability to return to Australia on the scheduled date was outside her control.

21. Due to her age and illnesses, the applicant was very vulnerable to COVID-19. Her son said she was frail and in bad health; she had severe heart problems, blood pressure problems, serious osteoporosis and was on long term medication. She used a walking frame as a fall was a dangerous possibility. Some of her friends passed away after being infected with COVID-19.

22. While in China, she lived in a unit in Guangzho. Although she was cared for (and isolated) in China, she was unable to return to Australia, even when the borders finally reopened, without greatly compromising her safety. Despite these risks, she managed to finally return to Australia on 5 May 2023.

The Narara Property

23. I accept that Ms Chen was settled and living in Australia before she left for China in 2019. But it isn’t clear from the evidence when, and whether, she actually resided at the Narara Property.

24. On the Narara Property is a house. It is divided into two separate living spaces. Each of these spaces (which I will call “21 Narara” and “21A Narara”) were the subject of executed lease agreements with tenants:

1. 21 Narara – this was referred to by the applicant as the “back half of the house and one car space”, comprising 4 bedrooms, 2 bathrooms, a kitchen and garage. The floor plan provided by the applicant to the respondent shows 21 Narara as having a kitchen, Family Room, 2 bathrooms, a laundry (marked “Dry”), 3 bedrooms and a room marked “Activities”. The applicant confirmed it was leased from 16 February 2019 to 14 February 2020. According to documents obtained on summons, 21 Narara was also leased for the following periods:

1. 15 February 2020 to 14 February 2021 (R3, p.92);

2. 10 April 2021 to 8 April 2022 (R3, p.77); and

3. 9 April 2022 to 7 April 2023 (R3, p.61).

These lease agreements referred to the premises’ street address as “21” being leased, although they also described the premises as including “4 Bed, 2.5 Bath, 1 Car”, and some stated a maximum number of occupants as 3.

2. 21A Narara – this was referred to by the applicant as the “front half” or “6 bedroom side”, comprising 6 bedrooms, 2 bathrooms, laundry and galley kitchen. The floor plan provided by the applicant to the respondent shows 21A Narara as having a lock-up garage, 6 rooms (“Guest room”, “Games”, “Living”, “Master Suite”, “Media” and “Bed 2”), 2 bathrooms, no kitchen or laundry, and said “Front half of the house was kept for my mother, Peizhen Chen, and my family to reside in”. In an email to the respondent dated 7 August 2023, the applicant’s son said that this part of the house “was not rented out”. However, according to documents obtained on summons, 21A (described as “21-27a” on the leases) was leased for the following periods, stating it was for “5 bed 2 bath 1 LUG”:

1. 4 May 2019 to 29 November 2019 (R3, p.16 - unsigned) – for a maximum of 5 persons residing in the premises;

2. 27 February 2020 to 26 May 2020 (R3, p.30) – for a maximum of 10 persons residing in the premises; and

3. 11 July 2020 to 10 July 2020 (sic – read as 10 July 2021) (R3, p.44) – for a maximum of 7 persons residing in the premises.

25. Documents received under summons also show that a rental bond was lodged for 21A Narara on 11 November 2022 and was refunded on 16 June 2023 (R3, p.220), and that rental income was received in respect of both properties for each of the income years ended 30 June 2019 to 30 June 2022 (R3, pp.12-15).

26. Mr Zheng, the applicant’s son (who represented her at the proceedings) advised the respondent in his emails that:

1. Ms Chen originally lived at the Niagara Park Property.

2. After the house was built on the Narara Property, Ms Chen moved there on 15 April 2017. Mr Zheng, his wife and their children moved in as well with Ms Chen. As her only son in Australia, they normally live with her together “so we can better look after her”.

3. Ms Chen originally set up the AGL electricity account for the Narara Property in 2017. As Ms Chen paid the council rates and water bill, but her son didn’t pay rent to her directly, he decided to change the accounts for electricity and gas into his name.

4. After Ms Chen came back from China on 7 May 2023, she moved back to the Narara house.

27. However, other evidence produced by the respondent shows the following:

1. In an email dated 21 March 2023, Mr Zheng informed the respondent that he lived in Epping and Pennant Hills during the relevant period.

2. Mr Zheng informed the respondent on 31 March 2023 that Ms Chen has been living with he and his children in “Central Coast NSW”.

3. Mr Zheng’s electoral roll details list the Niagara Park property as his address from December 2005 to June 2018 and April 2019 to October 2021, and property at Epping from June 2018 to April 2019.

4. Mr Zheng’s driver’s licence details list the Niagara Park Property as his address from 13 December 2005 to 11 June 2019, property at Epping from 11 June 2019 to 10 December 2021, and property at Pennant Hills Road as his address from 10 December 2021.

5. Electricity and gas bills produced by the applicant for the Narara Property were sent to Mr Zhang at the Niagara Park Property address.

28. Mr Zheng also advised the Tribunal during the course of the hearing:

During COVID, we lived at Epping. We rented a property. During COVID, the children were attending uni etcetera, and it was best to be closer.

…

[Regarding Narara], the intention is to rent 9 rooms [of the Narara Property] only [meaning that his mother always had a room there available for her use]. Sometimes she [Ms Chen] went to Epping.

…

Sometimes I live in Niagara Park and sometimes at other places. I live one or 2 days at various places. I drive everywhere. I don’t want to change the address [on documents]. It doesn’t mean I’m always at that place.

Background to these proceedings

29. On 12 November 2022, the respondent wrote to the applicant advising her to lodge a land tax return in respect of potential surcharge land tax liability. The letter was sent to the Narara Property. The applicant says this was not received because the tenant did not pass it on to them. The letter said, in part (my emphasis):

Why you are receiving this letter?

From 2016, Surcharge land tax applies to foreign owners of residential land in NSW. Each year, we issue assessment notices for land tax and surcharge land tax. Information available to us indicates you were not an Australian citizen or ordinarily resident, as you were not a permanent resident and/or did not meet the annual 200-day residential requirement from 2017. We are requesting that you review and update your details to ensure that your assessment is correct.

30. In respect of this letter, the applicant says:

1. This was the first time the respondent sent a letter, and the first time any mention had been made of a potential liability arising many years earlier.

2. The applicant was present in Australia for the whole of the calendar year 2017. I accept there is no issue with any year prior to the 2018 calendar year (2019 land tax year) in these proceedings.

3. Contrary to the letter, no assessment notices had ever been issued (or received), nor any client ID number provided.

4. (As I understand), the applicant did not receive this letter at the time, which was delivered to the Narara Property address when it was leased, and the tenant did not pass it on.

31. On 9 December 2022, the respondent issued the same letter again, to the same address, with a different Correspondence ID number.

32. On 9 January 2023 a land tax assessment notice was issued to Ms Chen for the 2019 – 2023 land tax years. This was also sent by post to the Narara Property. She was assessed for surcharge land tax for the Narara Property for the 2019, 2021, 2022 and 2023 land tax years (but not the 2020 land tax year) in the amount of $60,013.30 (the Narara Assessments).

33. On 2 March 2023, the respondent sent Ms Chen an “Overdue Land Tax” notice, together with a copy of the 9 December 2022 correspondence. This was also sent by post to the Narara Property.

34. The applicant’s son says that he only received the Overdue Land Tax notice on 21 March 2023 after the tenant left, and that he was “shocked with it”.

35. On 21 March 2023, the applicant’s son wrote to the respondent requesting details of overdue land tax. This was followed by a call to the respondent on 28 March 2023.

36. On 31 May 2023, the respondent wrote to the applicant advising that, if the applicant wished to challenge the Narara Assessments, she should lodge an objection.

37. On 10 June 2023, an objection to the Narara Assessments was lodged on behalf of the applicant (the Narara Objection).

38. During the course of determining the Narara Objection:

1. The respondent requested further information on 22 June 2023, and the applicant’s son provided a response on 6 July 2023;

2. The applicant lodged a Variation Return on 21 July 2023, stating she was “ordinarily resident” in Australia;

3. The respondent requested further information on 24 July 2023, and the applicant’s son provided a response on 31 July 2023;

4. The respondent wrote to the applicant’s son on 2 August 2023 in respect of the request for further information;

5. On 3 August 2023, the applicant lodged a Variation Return disclosing her ownership of the Niagara Park Property and seeking the principal place of residence exemption for the Narara Property from 15 April 2017;

6. On 4 August 2023 and 7 August 2023 further information was provided on behalf of the applicant in support of the Narara Objection; and

7. On 9 August 2023, the applicant’s son wrote to the respondent in respect of the grounds of the Narara Objection.

39. On 10 August 2023, the respondent issued a notice disallowing the applicant’s Narara Objection in full (the Narara Objection Decision).

40. On 10 August 2023, the respondent reassessed land tax payable by the applicant and issued a land tax reassessment for the 2019, 2020, 2021, 2022 and 2023 land tax years. Relevantly, Ms Chen was assessed to surcharge land tax in respect of a 50% interest in the Niagara Park Property (as well as 100% of the Narara Property) for the 2019, 2021, 2022 and 2023 land tax years (the August Niagara Park Assessments). This was incorrect, as Ms Chen owned 100% of both properties during those years.

41. The applicant filed an Application for Review with the Tribunal on 18 September 2023 in respect of the Narara Objection Decision on 10 August 2023.

42. On 18 December 2023, the respondent reassessed Ms Chen as liable for surcharge land tax based on 100% ownership of the Niagara Park Property for the 2019, 2021, 2022 and 2023 land tax years (the Niagara Park Reassessments).

43. On 18 December 2023, Ms Chen lodged a Variation Return seeking the principal place of residence exemption from land tax (not surcharge land tax) for the whole of the Narara Property.

44. The Niagara Park Assessments were the subject of an objection lodged by the applicant lodged on 19 January 2024. However, the objection lodged by the applicant referred only to the 2021, 2022 and 2023 land tax years (Niagara Park Objection). It made no reference to the 2019 land tax year.

45. On 31 January 2024, the respondent disallowed the Niagara Park Objection in full (Niagara Park Objection Decision).

46. On 27 February 2024, the Tribunal ordered (by consent) that the administrative review application include administrative review of the respondent’s surcharge land tax assessments on the Niagara Park Property.

CONSIDERATION

Jurisdiction

47. This administrative review is conducted under jurisdiction conferred by the ADR Act and s 30 of the Civil and Administrative Tribunal Act 2013 (NSW). The Tribunal’s task is to decide what the correct and preferable decision is having regard to the material before it, including any relevant factual material and any applicable written or unwritten law: ADR Act, s 63(1).

48. And in determining this application for administrative review s 63(3) of the ADR Act provides that the Tribunal may decide:

(a) to affirm the administratively reviewable decision, or

(b) to vary the administratively reviewable decision, or

(c) to set aside the administratively reviewable decision and make a decision in substitution for the administratively reviewable decision it set aside, or

(d) to set aside the administratively reviewable decision and remit the matter for reconsideration by the administrator in accordance with any directions or recommendations of the Tribunal.

The Niagara Park assessment to surcharge land tax for the 2019 land tax year

49. Under s 96 of the Taxation Administration Act 1996 (NSW) (TA Act), a taxpayer may apply to the Tribunal under the ADR Act for administrative review of a decision of the Chief Commissioner “that has been the subject of an objection under Division 1”.

50. However, the applicant did not lodge an objection to the assessment of surcharge land tax for the Niagara Park Property for the 2019 land tax year (see paragraph 44 above). I accept the submissions of the respondent and find that the Tribunal has no jurisdiction to conduct an administrative review of that assessment to surcharge land tax.

51. Accordingly, the references below to the 2019 land tax year apply only to the Narara Property.

Overview of Surcharge Land Tax

52. Land tax is charged, under s 8 of the Land Tax Management Act 1956 (NSW) (LTM Act), on land owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. Accordingly, the thirty-first of December is referred to as the “taxing date” for land tax purposes. So, 31 December 2018 is the taxing date for the 2019 land tax year, 31 December 2020 for the 2021 land tax year and so on.

53. From the 2017 land tax year onwards, surcharge land tax is payable under the Land Tax Act 1956 (NSW) (LTA) in respect of residential land owned by a “foreign person” at the relevant taxing date: LTA, s 5A(1). It applies even if the land was bought before surcharge land tax commenced.

54. “Foreign person” has the same meaning as in Chapter 2A of the Duties Act 1997: LTA, s 2A.

55. For the land tax years 2019, 2021 and 2022, surcharge land tax is charged at a rate of 2% of the taxable value of the residential land. For the 2023 land tax year, the rate is 4%.

56. Surcharge land tax is payable in addition to any land tax (if any) payable in respect of the residential land: LTA, s 5A(3).

57. A foreign person is exempt from liability to pay surcharge land tax in respect of the land for a land tax year where the land is their principal place of residence, but only if the person is eligible for the exemption under s 5B: LTA, s 5A(4)(g).

58. Section 5B provides the residence requirement for the principal place of residence exemption for surcharge land tax. Other than a discretion noted in paragraph 59 below (which does not apply), there is no material change between the legislation in force for the 2019–2022 land tax years and subsequent year. In summary, s 5B requires that:

1. the person must be a permanent resident at midnight on 31 December of the previous year; and

2. the person must intend to use and occupy the land as the principal place of residence for a continuous period of 200 days in the land tax year. This requirement is referred to as “the residence requirement”, and if that requirement is not actually complied with:

1. surcharge land tax is payable as if the exemption had never applied; and

2. the failure to comply with the residence requirement is taken to be a tax default.

59. For the 2023 land tax year, s 5B(2A) and (2B) provided as follows:

(2A) A person does not use and occupy land as the person’s principal place of residence during a period of the person’s physical absence from Australia.

(2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person’s brief physical absence from Australia.

Onus of Proof

60. The applicant, and not the respondent, has the onus of proving her case: TA Act, s 100(3). That means she must prove all matters necessary for the Tribunal to answer the statutory questions in her favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 (Cornish Investments) at [36]. The standard of proof is the balance of probabilities.

61. The Commissioner is not required to prove that the assessments were correctly made or that they should be sustained or supported by evidence. Accordingly, unless the appellant shows by evidence that an assessment is incorrect, it will prevail: see Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 (Dalco) at 624, approving Mason J in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89.

62. As a result, the onus is on the applicant to produce evidence that shows there is no liability under the statutory provisions. In the absence of that evidence, the assessments issued by the Commissioner will prevail as correct, as the starting point is that there is no entitlement to any exemption: Cornish Investments at [36]; Dalco at 623.

The Applicant was a “foreign person”

63. “Foreign person” is defined in s 104J of the Duties Act (relevantly) as follows:

(1) In this Chapter—

foreign person means a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section.

…

(2) The definition of foreign person in the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth is modified as follows—

(a) an Australian citizen is taken to be ordinarily resident in Australia, whether or not the person is ordinarily resident in Australia under that definition,

…(b) a New Zealand citizen who holds a special category visa, within the meaning of section 32 of the Migration Act 1958 of the Commonwealth, at any particular time is taken at that time to be an individual whose continued presence in Australia is not subject to any limitation as to time imposed by law.

64. Under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), a foreign person is an individual who is not “ordinarily resident” in Australia, defined under s 5(1) of the FATA as follows (with my underlining):

(1) An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if:  

(a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and  

(b) at that time:  

(i) the individual is in Australia and the individual’s continued presence in Australia is not subject to any limitation as to time imposed by law; or  

(ii) the individual is not in Australia but, immediately before the individual’s most recent departure from Australia, the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law.

65. For the purpose of the LTA, the question is whether the applicant was a foreign person at midnight on 31 December of the year prior to the relevant land tax year.

66. I find that the applicant was a foreign person for each relevant land tax year in these proceedings (2019, 2021, 2022 and 2023):

1. The modifications in s 104J(2) of the Duties Act do not apply because Ms Chen has never been an Australian citizen or a New Zealand citizen.

2. She is a ‘foreign person’ if she is an individual who is not “ordinarily resident” in Australia: s 4 of the FATA.

3. To be “ordinarily resident” she must satisfy both of s 5(1)(a) and s 5(1)(b) of the FATA.

4. She did not satisfy the requirement in s 5(1)(a) of the FATA, because (as noted at paragraph 17 above) she had not actually been in Australia during 200 or more days in the period of 12 months immediately preceding midnight on 31 December of the preceding year to each of the 2019, 2021, 2022 and 2023 land tax years, namely the 2018 calendar year, the 2020 calendar year, the 2021 calendar year or the 2022 calendar year. (As she met the 200 day requirement for the 2019 calendar year, no surcharge land tax assessments issued for the 2020 land tax year.)

5. The words “has actually been in Australia” require physical presence in Australia: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [59].

6. Accordingly, as s 5(1)(a) of the FATA is not satisfied, there is no need to consider the second (additional) requirement in s 5(1)(b) of the FATA.

67. There is no discretion in the legislation that allows the Tribunal to override the clear terms of s 5 of the FATA. This is despite the impact of COVID-19 restrictions, or otherwise. The Tribunal has previously confirmed this in Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 (Chu) at [29]:

The position in this State is quite clear: in order to be “ordinarily resident” in Australia the taxpayer must have been physically present in Australia and the reasons for a person not actually being in Australia for the 200-day period are not relevant.

68. I therefore find that the applicant was a foreign person for the purpose of the 2019 and 2021 to 2023 land tax years because she was a foreign person within the meaning of the FATA: s 104J(1) of the Duties Act.

69. Accordingly, the correct and preferable decision is that she was subject to surcharge land tax under s 5A of the LTA in respect of the Narara Property and the Niagara Park Property unless an exemption applies.

The Residence Requirement in s 5B of the LTA (Narara Property only)

70. The applicant submits that she meets the requirements for an exemption under s 5B of the LTA in respect of the Narara Property, consistent with the Variation Return lodged on 3 August 2023 which sought exemption from 15 April 2017.

71. In order to meet the requirements of the exemption in s 5B of the LTA, she must prove on the balance of probabilities that, for each land tax year in dispute:

1. she was a permanent resident at midnight on 31 December of the previous year;

2. she “used and occupied” the Narara Property as a residence for a continuous period of 200 days in the relevant land tax year; and

3. the property was her principal place of residence.

Permanent resident

72. I am satisfied that the applicant was a permanent resident at midnight on 31 December 2018, 2020 and 2021.

73. However, the respondent submits that the applicant cannot meet the permanent resident requirement for the s 5B exemption for the 2023 land tax year. I quote from their written submissions below:

The Resident Return (subclass 155) visa granted to the Applicant on 23 December 2017 is a permanent resident visa that granted the Applicant to remain in Australia indefinitely.

However, it only permitted the Applicant to travel to Australia, or travel outside Australia and then return to Australia, within the 5 year travel facility period, that is until 23 December 2022. As the applicant was outside Australia at the time her 5 year travel facility period expired on 23 December 2022 her visa ceased to have effect pursuant to s 82(5) of the Migration Act 1958 (Cth) and she could not return to Australia as a permanent resident without being granted a further visa. A further Resident Return (subclass 155) visa was not granted to the Applicant until 8 January 2023.

Accordingly, at midnight on 31 December 2022, the Applicant was not a permanent resident and so did not satisfy s.5B(1)(a) of the LTA for the 2023 land tax year.

74. In simple terms, as confirmed by the applicant’s representative at the hearing, the applicant was not in possession of a valid Australian visa as at midnight on 31 December 2022. An application for the new visa was lodged prior to 31 December 2022, but a new visa did not issue until 8 January 2023 and was not stated to have any retrospective effect.

75. I accept the submissions of the respondent and find that s 5B(1)(a) was not satisfied for the 2023 land tax year because the applicant was not a permanent resident of Australia as at midnight on 31 December 2022.

76. As a result, the applicant is precluded from claiming an exemption under s 5B of the LTA for the Narara Property for the 2023 land tax year.

Use and occupation of the Narara Property

77. For the remaining land tax years for which the applicant was a permanent resident at the relevant time, the exemption only applies if she “used and occupied” the land as her principal place of residence for a continuous period of 200 days in the land tax year.

78. As noted by the respondent, the concepts of “use and occupation” have been considered in cases such as Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 at 533-534, and Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340 at [24] and [31]. The relevant principles can be summarised as follows:

1. The “use” of the land must be devoted to a dwelling house;

2. Occupation includes more than legal possession – it involves an element of control, of preventing or being in a position to prevent the intrusion of strangers, and physical presence on the land and fencing are evidence of occupation. However, continuous physical presence does not have to be shown in order to establish occupation.

3. The statutory reference to use and occupation of the land as a residence is to use and occupation by the owner as his or her residence, not use and occupation by another person with his or her consent.

79. I accept that the applicant may have spent time at the Narara Property from time to time during some of the relevant land tax years, but I cannot be satisfied on the basis of the evidence before me that she used and occupied the property for the relevant “continuous period of 200 days in the land tax year”. My reasons are set out below.

The Lease Agreements

80. In the absence of evidence to the contrary, the executed lease agreements establish that both 21 Narara and 21A Narara operated for the terms stated on each agreement.

81. Tenancy of the Narara Property is inconsistent with the use and occupation of the property by Ms Chen as her principal place of residence during any land tax year.

1. At common law, a lease is a demise of real property that vests in the tenant the right to exclusive possession of the property. A transaction under which a person takes merely the right to use premises, without exclusive possession is a licence and not a lease: Taylor v Caldwell (1863) 3 B&S 826. 

2. There is nothing in the terms of the leases that reserves a room, or any part of the leased premises, to Ms Chen. Accordingly, any period of the tenancy cannot be used for the calculation of a “continuous” period of use and occupation by the owner for residential purposes: see Chief Commissioner of State Revenue v Aldridge [2003] NSWCATAP 50 at [20]-[21], Khalil v Chief Commissioner of State Revenue [2011] NSWADT 276 at [31].

82. Having regard to the terms of the lease agreements (see paragraph 24), Ms Chen could not “use and occupy” the Narara Property for a continuous period of 200 days in the 2019 or 2021 land tax year.

83. I find that the test was not satisfied in the 2021 or 2022 land tax years because the applicant was physically outside Australia for the period from 30 October 2019 to 5 May 2023.

Principal place of residence

84. I agree with the respondent’s submissions that even if the applicant can demonstrate that she resided at the Narara Property for a period of time, there is insufficient evidence to conclude on the balance of probabilities that it was her principal place of residence for the required 200 day period in any of the land tax years in dispute.

85. I agree that the following propositions are well established, as submitted by the respondent:

1. The term “principal place of residence” is not defined. It can mean “main” as well as “only”, and does not exclude having another, subsidiary, place of residence: Single v Chief Commissioner of State Revenue [2006] NSWADT 334 at [16].

2. The following criteria were set out by the Appeal Panel of this Tribunal in Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 at [42], and has been applied in many subsequent decisions, including in the context of s 5B of the LTA:

First, the words “principal place of residence” should be given their ordinary meaning in the context in which they appear.

Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling.

Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue.

Fourthly, to occupy a home as her principal place of residence a person’s occupation must have a degree of permanence to it…

Fifthly, the short length of a person’s residence, while relevant, is not determinative of the issue…

86. Where a person has more than one place of residence, which of those residences will be the “principal place of residence” is dependent upon the respective rights in respect of the two properties, the strength of ties and connection with the residence including where family members reside, the nature and quality of the occupation of the residences, and the amount of time that each residence is occupied.

87. Ms Chen was in China and resided at the unit at Foshan, Guangdong throughout the 2021 and 2022 land tax years. Periods of physical presence in a residence are of considerable significance in determining whether it is used and occupied as a principal place of residence: Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 at [8], [39].

88. In any event, even for the periods she was present in Australia, Ms Chen has not established on the evidence that she used and occupied the Narara Property with the requisite degree of permanence to establish that it was her principal place of residence. 

89. I have had regard to the following evidence:

1. Electricity and gas bills for the property – these were issued to Mr Zheng, apparently posted to the Niagara Park Property address. At the hearing he explained that it was “better if bills get sent to him to pay”. However, as noted by the respondent, the dates on the bills corresponded to periods in which the Narara Property was leased to tenants, and do not actually evidence the applicant residing at the property.

2. Incoming passenger cards – on both cards in evidence (dated 26 June 2018 and 5 May 2023) the applicant declared her intended residence in Australia as the Niagara Park Property.

3. Visa application dated 20 December 2022 – the applicant listed an address in Pennant Hills Road as her residential address. During the hearing, Mr Zheng has noted that he rented this property and lived there with his family, and that sometimes Ms Chen went to this house.

4. There are various photographs of the applicant at the Narara Property; however, these are undated.

5. The applicant said that the real estate agent made mistakes in relation to the Narara Property leases, and the intention was to rent 9 rooms only, with the applicant still living there. However, this explanation does not evidence Ms Chen’s actual occupation at that premises.

6. Invoices were issued to Ms Chen for works done on the Narara Property in the 2023 year, and in any event do not demonstrate that Ms Chen used and occupied that property as her principal place of residence.

7. I have also had regard to Mr Zheng’s evidence that Ms Chen resided at the Narara Property with him, but I am unable to establish this to the required degree having regard to the contradictory evidence noted at paragraph 27 above.

90. I therefore cannot be satisfied that the Narara Property was Ms Chen’s principal place of residence during any of the relevant land tax years.

“Unfair and Unjust”

91. I must address the applicant’s overarching submissions that the assessments to surcharge land tax are unfair and unjust. She points to a number of reasons, including those which I have summarised below:

1. She was not in control of her absence from Australia, which was solely due to the COVID-19 pandemic (“which caused more than 704 million cases and 7 million deaths worldwide”), resulting border closures, and her health issues which delayed her return to Australia until May 2023.

1. The respondent delayed informing her of her liability to surcharge land tax until many years after the event. They had all the information to advise and assess her many years earlier. She therefore had no knowledge of her liability, and no choice to change her affairs with the benefit of this knowledge (e.g. being aware of periods of absence from Australia and arranging travel accordingly, considering selling her property, or seeking Australian citizenship) to put herself in a position to not be subject to the tax.

2. As a part of the government, the respondent “should play the role of education, publicity, explain and guidance, rather than simply imposing fines and collecting interest”.

3. At all relevant times, she was elderly, in ill health, and therefore unable to travel without serious risk to her safely.

4. The respondent made numerous mistakes in respect of the issue of the assessments, including sending notices to incorrect addresses.

5. It is unfair that the delay gives rise to interest that accrues.

92. As submitted by the respondent, the onus is on the applicant to make enquiries as to whether she is liable to surcharge land tax: Gupta v Chief Commissioner of State Revenue [2006] NSWADT 187 at [33]; Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19. There is no obligation on the respondent to make enquiries as to her liability: EK Anderson Investments Pty Ltd ATF Cacs Property Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 84; Laviva Nominees Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 84.

93. There is also no discretion given to the Chief Commissioner (or, therefore, to this Tribunal) if the surcharge land tax is payable under the statutory provisions:

1. Appeals to leniency or fairness are not relevant when considering the validity of an assessment. The High Court in Commissioner of Taxation v Ryan (2000) 201 CLR 109 said the following (at 123):

But the question for decision is what are the circumstances in which an amended assessment may lawfully be issued? That question is not answered by asserting the existence of any “policy” or “general intention” unless that policy or intention is to be found reflected in the provisions of the Act. 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.

2. The Tribunal has also repeatedly emphasised that the factors contributing to an applicant’s failure to satisfy a statutory requirement are irrelevant (unless, of course, the statute itself says otherwise): Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38]; Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [80]. Also, the Tribunal has no overriding discretion to waive tax that is otherwise payable: Chu at [30]. In the context of s 5B of the LTA, the Appeal Panel stated the following in Wang v Chief Commissioner of State Revenue [2023] NSWCATAP 331 at [68] – [69]:

As we have already noted, the principal place of residence exemption from surcharge land tax is available ‘only if’ the requirements (eligibility criteria) of s 5B(1) are met. These requirements include the matters prescribed in s 5B(1)(b), which must be read together with s 5B(2) and (3). As can be seen from the terms of these subsections they are very specific in their terms and are limited to an intent to use and occupy the land as the person’s principal place of residence in accordance with ‘resident requirement’ and an actual use and occupancy of the land as the person’s principal place of residence in accordance with ‘resident requirement’. If these terms are not satisfied, neither the LTM Act, nor the Land Tax Act make provision for a person’s personal circumstances to be taken into account.

Hence, it is for this reason that the Tribunal has held a number of times that the personal circumstances of the tax-payer are of no relevance in determining whether s 5A or 5B apply: see for example; Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [47], Wei v Chief Commissioner of State Revenue [2023] NSWCATAD 161 at [27(2)], Song at [80], Chu at [30], Lawrence at [38], Du at [47] and Matiushenko at [20].

Interest

94. The applicant also raised the unfairness of interest being charged on the assessments, having regard to the whole of the circumstances.

95. I note that no penalties were imposed on the assessments.

96. It appears from my reading of the assessment notices that there was no interest imposed for any period up to the date of issue of the assessments or, if it was, it was remitted. The reasons for this (including any remission decisions) were not in evidence before me at the hearing. Nor did the applicant make any submissions directly addressing grounds for remission of interest.

97. I nonetheless affirm the respondent’s decision.

Conclusion

98. The Tribunal does not have jurisdiction to review the surcharge land tax assessment in respect of the Niagara Park Property for the 2019 land tax year.

99. In respect of both the Narara Property and the Niagara Park Property, Ms Chen has failed to establish that she was not a “foreign person” for any of the land tax years in dispute.

100. In respect of the 2023 land tax year, Ms Chen was not a permanent resident as at 31 December 2022. Accordingly, she does not qualify for an exemption under s 5A for the 2023 land tax year for the Narara Property.

101. In respect of the Narara Property, Ms Chen has failed to establish that she complied with the residence requirement in respect of the Narara Property for the 2021 or 2022 land tax years. Accordingly, the exemption in s 5A of the LTA does not apply.

102. The correct and preferable decision is therefore to affirm the surcharge land tax assessments for the Narara Property (for the 2019, 2021, 2022 and 2023 land tax years) and the Niagara Park Property (for the 2021, 2022 and 2023 land tax years).

Orders

103. I make the following orders:

1. The assessments of surcharge land tax for the 2019, 2021, 2022 and 2023 land tax years in respect of the Narara Property are affirmed.

2. The assessments of surcharge land tax for the 2021, 2022 and 2023 land tax years in respect of the Niagara Park Property are affirmed.

3. The Tribunal has no jurisdiction to review the assessment of surcharge land tax for the Niagara Park Property for the 2019 land tax year.

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

Registrar

Amendments

19 June 2024 - Paragraph 41: date changed from 18 December 2023 to 18 September 2023.

Paragraph 75: s.5B(1)(b) changed to s.5B(1)(a)

Decision last updated: 19 June 2024