Cheng and Anor and Commissioner of State Revenue
[2008] WASAT 52 (S)
•6 MARCH 2008
CHENG & ANOR and COMMISSIONER OF STATE REVENUE [2008] WASAT 52 (S)
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2008] WASAT 52 (S) | |
| 05/03/2008 | |||
| FIRST HOME OWNER GRANT ACT 2000 (WA) | |||
| Case No: | CC:1958/2007 | 16 MAY 2008 AND DETERMINED ON THE DOCUMENTS | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) | 5/03/08 | |
| 1/08/08 | |||
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Application is allowed Commissioner to refund the $9,840.00 paid by the applicants in relation to stamp duty and the $8,400.00 paid in relation to the first home owner grant, together with interest No order as to costs | ||
| B | |||
| PDF Version |
| Parties: | BING CHENG XIAO YAN GE COMMISSIONER OF STATE REVENUE |
Catchwords: | First Home Owner Grant Act 2000 (WA) Residency requirement not met by applicants Determination to require repayment of grant and concession on stamp duty Determination to impose penalty tax of 20% Applicant claimed exceptional circumstances, namely child's ill health and misunderstanding due to poor command of English |
Legislation: | First Home Owner Grant Act 2000 (WA), s 13, s 13(3), s 21(5), s 29 Stamp Act 1921 (WA), s 75AG State Administrative Tribunal Act 2004 (WA), s 27, s 27(2) Taxation Administration Act 2003 (WA), s 26, s 37(2), s 43(3) |
Case References: | Cheng and Commissioner of State Revenue [2008] WASAT 52 Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82 |
Orders | 1. The application is allowed.,2. The Commissioner is to refund the $9,840.00 paid by the applicants in relation to stamp duty and the $8,400.00 paid in relation to the first home owners grant together with interest at the prescribed rate of 6% pursuant to s 43(3) of the Taxation Administration Act 2003 (WA).,3. There is no order as to costs. |
Summary | The applicants purchased a property in Western Australia in August 2005. They lived in the property until October 2005, when they moved back to China.,The Commissioner of State Revenue paid the first home owner grant in September 2005, and later sought repayment of the grant and the concession on stamp duty when the Commissioner determined that the applicants had not satisfied the residency requirement set out in s 13 of the First Home Owner Grant Act 2000 (WA).,The applicants, through their representative, objected to the decision to require repayment of the grant and the decision to impose penalty tax.,The Commissioner disallowed the objection.,The applicant, again through his representative, then sought review by the Tribunal.,After an initial finding in Cheng and Commissioner of State Revenue [2008] WASAT 52 that the Tribunal did not have sufficient evidence to determine whether exceptional circumstances existed, the Tribunal received further evidence from one of the applicants, Mr Bing Cheng.,The Tribunal found that an exceptional circumstance arose in which it was not unreasonable for the applicants to return to China and accordingly that the residence condition should be waived.,The Tribunal held that the applicants should not have been obliged to refund the amount of the first home owner grant provided with penalty tax, or repay the amount of the concession on stamp duty provided with penalty tax.,Accordingly, the Tribunal allowed the application and ordered the amounts paid by the applicants to be refunded. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : FIRST HOME OWNER GRANT ACT 2000 (WA) CITATION : CHENG & ANOR and COMMISSIONER OF STATE REVENUE [2008] WASAT 52 (S) MEMBER : JUSTICE M L BARKER (PRESIDENT) HEARD : 16 MAY 2008 AND DETERMINED ON THE DOCUMENTS DELIVERED : 6 MARCH 2008 SUPPLEMENTARY
DECISION : 1 AUGUST 2008 FILE NO/S : CC 1958 of 2007 BETWEEN : BING CHENG
- XIAO YAN GE
Applicants
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
First Home Owner Grant Act 2000 (WA) - Residency requirement not met by applicants - Determination to require repayment of grant and concession on stamp duty - Determination to impose penalty tax of 20% - Applicant claimed exceptional circumstances, namely child's ill health and misunderstanding due to poor command of English
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Legislation:
First Home Owner Grant Act 2000 (WA), s 13, s 13(3), s 21(5), s 29
Stamp Act 1921 (WA), s 75AG
State Administrative Tribunal Act 2004 (WA), s 27, s 27(2)
Taxation Administration Act 2003 (WA), s 26, s 37(2), s 43(3)
Result:
Application is allowed
Commissioner to refund the $9,840.00 paid by the applicants in relation to stamp duty and the $8,400.00 paid in relation to the first home owner grant, together with interest
No order as to costs
Category: B
Representation:
Counsel:
Applicants : Mr Y Cheng (Representative)
Respondent : Ms J Jones
Solicitors:
Applicants : Mr Y Cheng (Representative)
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Cheng and Commissioner of State Revenue [2008] WASAT 52
Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82
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Summary of Tribunal's decision
1 The applicants purchased a property in Western Australia in August 2005. They lived in the property until October 2005, when they moved back to China.
2 The Commissioner of State Revenue paid the first home owner grant in September 2005, and later sought repayment of the grant and the concession on stamp duty when the Commissioner determined that the applicants had not satisfied the residency requirement set out in s 13 of the First Home Owner Grant Act 2000 (WA).
3 The applicants, through their representative, objected to the decision to require repayment of the grant and the decision to impose penalty tax.
4 The Commissioner disallowed the objection.
5 The applicant, again through his representative, then sought review by the Tribunal.
6 After an initial finding in Cheng and Commissioner of State Revenue [2008] WASAT 52 that the Tribunal did not have sufficient evidence to determine whether exceptional circumstances existed, the Tribunal received further evidence from one of the applicants, Mr Bing Cheng.
7 The Tribunal found that an exceptional circumstance arose in which it was not unreasonable for the applicants to return to China and accordingly that the residence condition should be waived.
8 The Tribunal held that the applicants should not have been obliged to refund the amount of the first home owner grant provided with penalty tax, or repay the amount of the concession on stamp duty provided with penalty tax.
9 Accordingly, the Tribunal allowed the application and ordered the amounts paid by the applicants to be refunded.
Issues
10 The issues for determination in these proceedings are whether the Commissioner of State Revenue (Commissioner) was correct in disallowing the applicants' objection to the Commissioner's decision to require the applicants to repay a first home owner grant and a concession
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- on stamp duty and pay penalty tax in relation to those repayments under the First Home Owner Grant Act 2000 (WA) (FHOG Act), Stamp Act 1921 (WA) (Stamp Act) and the Taxation Administration Act 2003 (WA) (TA Act).
Background to this decision
11 In its earlier decision in relation to these same issues in Cheng and Commissioner of State Revenue [2008] WASAT 52, the Tribunal explained that it was unable to conclude the review application because it considered that more relevant information may be available for presentation to the Tribunal to assist it in making its final determination.
12 The Tribunal further explained, for example at [12], that the Tribunal would like to hear directly from the applicants concerning the circumstances in which they ceased living in the home the subject of the first home owner grant and also to receive appropriate medical evidence concerning the health of the applicants' infant son at the time the family left Australia and returned to China in October 2005.
13 Since that decision was published the Tribunal has received further evidence in the matter on these issues, through one of the applicants, Mr Bing Cheng.
Evidence of the applicant
14 On 16 May 2008, Mr Bing Cheng gave evidence in the proceedings. Mr Bing Cheng gave his evidence by telephone from Shanghai, China. Mr Bing Cheng gave his evidence through a Mandarin speaking interpreter based in Perth. The applicants continued to be represented in the proceedings by Mr Bing Cheng's brother, Mr Yong Cheng, who speaks both Mandarin and English.
15 Mr Bing Cheng in his evidence confirmed that he and his wife Xiao Yan Ge, are the parents of their son Ye Cheng, who was born on 7 December 2003.
16 Mr Bing Cheng also confirmed that he is a Buddhist. He speaks Mandarin and only speaks English a little and not very well.
17 At the time of giving evidence, Mr Cheng was living in Shanghai and was unemployed.
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18 At the time Mr Bing Cheng and his wife purchased the property the subject of these proceedings in Perth their infant son was a little over one and a half years of age.
19 Mr Bing Cheng said that he did not understand that the first home owner grant he received in relation to the purchase of the property was subject to a condition that he should occupy the home for a continuous period of six months after he commenced occupation.
20 As to the length of occupation, Mr Bing Cheng confirmed that after about three months he and his wife and infant son had returned to China. He said that the reason was that his child got sick and the condition was becoming worse.
21 In relation to the child's illness Mr Bing Cheng explained through the interpreter that:
Since birth and then before they arrived in Australia the child's health was always in good condition. However, after their arrival the child started to cough a lot, and non-stop. They went to see a doctor many times, even the child was sent to the hospital a few times, and Mr Cheng told me one incident - he could not remember which day, but it was in the month of September. The child was - had a very high temperature, to such a stage that the child had the - you know when someone has high fever and they try to - they will have a fit …
22 Mr Bing Cheng gave evidence about the child's illness and hospitalisation and general medical treatment and that was by and large consistent with notes concerning hospitalisation and medical treatment of the child previously presented to the Tribunal and noted in the earlier decision.
23 Mr Bing Cheng said that when he, with his wife, returned to Shanghai it was because of the child's health:
What he has just told me was to them, the child is the most important person in the family, especially for a boy, and then the reason they returned to Shanghai, the main reason is for the child's health. They wanted to go back to China to wait until the child's health is - has fully recovered, then they will come back to Australia later.
24 Mr Bing Cheng further explained the importance of the child in the family in these terms:
On our Chinese culture offspring is very important, so my boy is just, like - is all of myself, and also my boy is to - my wife only got one elder sister, and then she only - she doesn't have any boys, and then so my boy will
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- help me to extend our family names and all those - so boys in our Chinese culture is very important.
25 In response to a question from the Tribunal as to why the applicants could not have stayed in Perth and with the help of the doctors and hospitals assist their son to full recovery, Mr Bing Cheng responded:
This is one thing I wanted to let you know earlier, but I didn't have a time in my first explanation. On the day that my child had high fever, we went - we went to Joondalup Hospital, and then due to language barriers the hospital organised an interpreter for us. Perhaps the interpreter didn't explain very clearly for us, and then we had to wait a few hours before my son could be treated. Under this environment I not very happy about it, and then lack of confidence - and other thing is when I bought the house, there are a few things I was not satisfied about as well.
So when I look back to the accommodation and health system in Perth, plus my language barrier, I - I lost confidence in the - in this environment, and compare with that - in Shanghai, which - where I was - I'm more familiar with the system, and I found that it would be a better alternative for my child to receive treatment back in Shanghai, because at least everything is more convenient for us.
26 Mr Bing Cheng indicated to the Tribunal that generally having returned to Shanghai, his boy is now a lot better compared to his time in Perth.
27 Mr Bing Cheng indicated that the only property he now has in Perth is a car.
28 He also indicated that he came back to Perth last summer to look around to see if there were any business opportunities for him.
29 Mr Bing Cheng was cross-examined by counsel for the Commissioner, particularly relating to the means of funding the purchase of the property and the allocation of the proceeds of sale when he later sold the property. The applicant confirmed that he purchased the property from his brother, Mr Yong Cheng (who was appearing for him in the proceeding) and had also obtained finance through a financial institution. Generally speaking it had appeared that the house property was purchased for about $260,000 with $160,000 lent by the finance institution. The applicant borrowed from his brother in respect of the balance of about $100,000.
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30 Mr Bing Cheng indicated he initially brought to Australia about $100,000 and was planning to use that money to start up an information technology business.
31 Mr Bing Cheng explained that he did not immediately repay his brother the money he borrowed from him, because "he is my brother".
32 As to the $100,000 that he borrowed from his brother the applicant indicated that he has made an arrangement with his brother that he would pay him later, and still owes the money.
33 Mr Bing Cheng explained that at the time he sold the property after leaving Australia, he asked his brother to hold the proceeds of sale because, when he eventually returns to Australia, his brother will return the funds to him. Mr Bing Cheng explained that if he took the proceeds of sale out of Australia back to China then he may have problems in taking the money out of China again.
34 Mr Bing Cheng further explained in cross-examination his living arrangements in China and relationship with his parents.
Commissioner's final submissions
35 Counsel for the Commissioner submits that the applicants bear the onus of establishing that the decision to which an objection relates is incorrect under s 29 of the FHOG Act and by reason of what was said in Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82 (Serana) at [106], [166] and [171].
36 The Commissioner submits that the applicants have failed to meet the burden of proof as the evidence adduced is insufficient to satisfy the Tribunal that there are good reasons to reduce the required residency period.
37 The Commissioner emphasises that he is responsible for the administration of first home owner grants on behalf of the Commonwealth of Australia. The object of the grant is to assist first home owners to purchase their first home. Consequently there is a residency requirement to ensure that that objective is met.
38 The residency requirement as set out under s 13 of the FHOG Act, requires that applicants with a grant live in the property for a continuous period of six months commencing in the first 12 months after the completion date of the transaction.
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39 The Commissioner points out, as is the case, the applicant was in occupation for a period of less than three months and accordingly did not satisfy the residence requirement.
40 Section 13(3) of the FHOG Act provides the Commissioner with the discretion, however, to reduce the period that the applicants are required to occupy the property if satisfied that there are good reasons for doing so.
41 The Commissioner says that, as administrator of the FHOG Act, he is required to treat all applicants "equitably".
42 The Commissioner says that it would be inappropriate for him in the administration of the FHOG Act to allow an applicant to avoid the obligations attached to a grant by accepting an applicant's explanations as to why he failed to comply, absent any objective evidence to support the explanation. To do so would create problems in the administration of the FHOG Act and would allow applicants to easily circumvent the obligations imposed.
43 Consequently the Commissioner requires applicants to adduce objective evidence to substantiate their inability to reside in a property for the requisite period.
44 The Commissioner says that his practice, developed in consultation with other Australian jurisdictions who administer the grants, is to be satisfied that there are good reasons to reduce the residency period if circumstances arise that are "exceptional and unforeseeable" at the time of the eligible transaction. These circumstances may relate to the grant property itself but may relate to other circumstances concerning an applicant.
45 Counsel for the Commissioner refers to the evidence given by Mr Bing Cheng by telephone from Shanghai, including that portion of the transcript referred to above. Counsel also refers to further transcript of the evidence of the applicant from p 27 as follows:
INTERPRETER: It's not - I have said to you before that not justbecause of my child's sickness that we returned to China. The main reason is the fear that we had, because his situation is getting worse and worse here, and then we worried about him, and then we were - we were in fear of his health situation being worse and worse. It's a kind of fear.
BARKER J: Yes, thank you. Ms Jones, any more questions?
JONES, MS: Yes, your Honour. The medical notes that have been provided to the Tribunal show that the child wasn't getting worse; that he
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- was actually getting well. Do you remember going to see the doctor in October 2005, and they said your baby was getting well?
INTERPRETER: I cannot remember when - why we saw the doctor in October - in October 2005, but around that time we have already determined to return to China due to our fear, and then also at that time she (sic) was coughing. Actually my child has been coughing all the time until before he was - before we went back to China.
And then when the child had a high temperature and a seizure it occurred twice, and then three, four days after this incident, we bought ticket to return to China.
46 Counsel for the Commissioner notes this evidence of Mr Bing Cheng as well as the medical records referred to in the earlier proceeding and earlier decision and submits that the applicants' child was not diagnosed with a medical condition that required any ongoing medical treatment.
47 Counsel submits that although the medical certificates provided by the applicants show that the child had a cough and required hospitalisation on one occasion, there is no evidence that links living in the grant property or living in Australia to the cough or fever or convulsion or that the child had an illness which prevented the applicant occupying the grant property or living in Australia. That is to say the child did not have an illness that needed to be treated outside Perth or Australia.
48 In summary then, the Commissioner submits that the evidence presented to the Tribunal was not that the child had an ongoing medical condition which prevented the applicant from remaining in the grant property but rather it appears that they returned to China based upon their "feelings and emotions" including:
• the fear that their child would have poor health if they remained in Australia;
• dissatisfaction with the grant property they had purchased, notwithstanding the applicants had stayed in the grant property while purchasing it;
• dissatisfaction with Australia's medical system; and
• problems associated with the applicants' understanding of English.
49 Counsel for the Commissioner submits that this evidence should be insufficient to satisfy the Tribunal that there are exceptional or
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- unforeseeable circumstances and this evidence merely constitutes the applicants' feelings and does not evidence an inability to reside at the property or in Australia.
50 Counsel submits that to accept the applicants' explanation and not to require repayment of the grant would "undermine the integrity of the FHOG Act".
Final submission made on behalf of the applicants
51 Mr Yong Cheng as representative of the applicants filed a long written submission of some 27 pages, following the taking of the telephone evidence of Mr Bing Cheng. The submission contained a number of references to past aspects of the handling of the matter by the Office of State Revenue, as well as references to the dealings of solicitors in the State Solicitor's Office in relation to the matter, and of counsel who represented the Commissioner at the hearings.
52 The various comments made by Mr Yong Cheng in this regard were inappropriate and out of place and need not be referred to or detailed here in any further respect. Mr Yong Cheng is not a lawyer and in many respects does not seem to fully appreciate that the Tribunal's task on review proceedings such as this is to make the "correct and preferable" decision under s 27(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), as at the time of the decision upon review, and not by reference to past times.
53 In any event, so far as the Tribunal's experience is concerned, the various comments made by Mr Yong Cheng in his written submission about various persons involved for or on behalf of the Commissioner are not only inappropriate but plainly misconceived and wrong.
The Tribunal's decision
54 The Tribunal, having received the direct telephone evidence of Mr Bing Cheng about the circumstances in which he decided to leave Australia, considers that this is not a case where the applicants should be obliged to refund the grant initially made.
55 The Tribunal considers this position to be so whether or not the applicants bear any onus of establishing that the decision on the application to which an objection relates is incorrect, pursuant to s 29 of the FHOG Act.
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56 It must be borne in mind that in creating this onus, s 29 of the FHOG Act appears in subdivision 2 of division 6 of the FHOG Act, dealing with objections before the Commissioner. Subdivision 3 deals with the review before the Tribunal and there is no separate onus provision in this subdivision. Rather, the Tribunal is obliged by s 27 of the SAT Act to produce the correct and preferable decision at the time the decision is being reviewed. No formal onus provision appears to exist in such circumstances.
57 Counsel for the Commissioner submits that the onus created by s 29(2) of the FHOG Act not only applies in objection proceedings before the Commissioner but also in review proceedings before the Tribunal. Support for this proposition is said to be given by observations of Buss JA in Serana at [106], [166] and [171]. Martin CJ however did not make any express reference to this provision in his judgment, with which Steytler P agreed. However, Steytler P also agreed with the reasons given by Buss JA for dismissing the appeal.
58 Buss JA at [106] expressly noted the onus provision (in that case s 37(2) of the TA Act) that applies to an objection proceeding before the Commissioner, and at [107] expressly recognised that in review proceedings in the Tribunal, under s 27 of the SAT Act, those proceedings are de novo and that the correct and preferable decision must be made at the time of the decision.
59 While at [166] and [171] Buss JA makes reference to the onus provision, as I understand what his Honour there said, he was making the point that a practical onus fell on the applicant when it sought review of the Commissioner's decision in the Tribunal disallowing an objection, to negative certain propositions.
60 In any event, whether or not there is an onus on the applicant in revenue proceedings in the Tribunal establishing that the application to which an objection relates is incorrect, I am satisfied here that it has been met on the evidence I have received.
61 I do not think it is appropriate to characterise the applicants' decision to cease occupying the grant property and return to China with their family as merely as one based upon their "feelings and emotions".
62 It is more correct to say that the applicants found themselves in a new country with which they were generally unfamiliar, and not speaking English as their first language and being faced with the health difficulties of their child, understandably sought refuge in their country of origin.
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- This is an unusual circumstance, and one that undoubtedly involves the subjective decision making of the applicants. That they chose to return to China to live in such circumstances may not have been a decision that every person in their circumstances would necessarily have made. To some extent it may be said that their concerns about the health of their child were a little unrealistic in light of the medical evidence. Nonetheless to characterise their decision as subjective is not to say that it was not honestly held and from their perspective not reasonable.
63 In the event, taking into account the circumstances in which the applicants found themselves, I am satisfied that an exceptional circumstance arose in which it was not unreasonable for the applicants with their infant son to return to China.
64 In so finding, I am content to apply the test ordinarily applied by the Commissioner that an applicant should display an exceptional or unforseen circumstance before the residence condition is in effect waived.
65 For these reasons, the applicants should not be obliged to refund the grant initially made.
66 For these same reasons, this is not an appropriate case for the imposition of a penalty under s 21(5) of the FHOG Act.
67 In relation to the reduction of stamp duty, s 75AG(9) of the Stamp Act provides that:
If a transferee is required to repay an amount under section 21 or 51 of the FHOG Act, or would be required to repay an amount if a first home owner grant had been paid to the transferee, duty on the instrument of transfer is not, or is no longer (as the case requires) chargeable under this section.
68 As I have held that the applicants are not obliged to repay the first home owner grant payment, s 75AG(9) of the Stamp Act read with s 75AG(10) does not require or entitle a reassessment of the stamp duty liability.
69 Accordingly, the applicants are not obliged to repay the concession they received on stamp duty.
70 It follows from this that no penalty tax under the Stamp Act is payable by the applicants. Although the applicants failed to provide information required by a taxation act, namely that they had not complied with the residency requirement, the amount of penalty tax payable in this instance is $0. Under s 26(3) of the TA Act the amount of penalty tax is
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- equal to the amount the taxpayer would be liable to pay if the circumstances giving rise to the liability to pay penalty tax had not occurred. As I have found that the applicants are not required to repay the concession they received on stamp duty, the breach of s 26(1) of the TA Act had no material effect on the applicants' taxation liability.
Conclusion and Order
71 For the above reasons, the applicants are not required to repay the amount of the first home owner grant, the amount of concession on stamp duty, or any penalty tax.
72 The Tribunal orders that:
1. The application is allowed.
2. The Commissioner is to refund the $9,840.00 paid by the applicants in relation to stamp duty and the $8,400.00 paid in relation to the first home owners grant together with interest at the prescribed rate of 6% pursuant to s 43(3) of the Taxation Administration Act 2003 (WA).
3. There is no order as to costs.
I certify that this and the preceding [72] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE M L BARKER, PRESIDENT
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