Cullen v Chief Commissioner of State Revenue
[2006] NSWADT 252
•28/08/2006
CITATION: Cullen v Chief Commissioner of State Revenue [2006] NSWADT 252 DIVISION: Revenue Division PARTIES: APPLICANT
Daniel Barry Cullen
RESPONDENT
Chief Commissioner of State RevenueFILE NUMBER: 066035 HEARING DATES: 15/08/2006 SUBMISSIONS CLOSED: 08/15/2006
DATE OF DECISION:
08/28/2006BEFORE: Verick A - Judicial Member CATCHWORDS: First Home Owners grant - reversal of original decision MATTER FOR DECISION: Principal matter LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
First Home Owner Grant Act 2000CASES CITED: Wayne Gibson v Chief Commissioner of State Revenue [2006] NSWADT 211
Bates v Chief Commissioner of State Revenue [2004] NSWADT 13
Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41
Snow v Chief Commissioner of State Revenue (No 1) [2005] NSWADT 244REPRESENTATION: APPLICANT
RESPONDENT
In person
S Benjamin, agentORDERS: The decision under review is set aside and the matter remitted to the respondent for reconsideration in accordance with these reasons.
Background
1 The applicant is the registered proprietor of a residence situated at 44 Mathews Parade, Corindi Beach (“the property”). He purchased the property in the year 2004 and settlement occurred on 15 April 2004.
2 The applicant applied for a first home owner grant under the provisions of the First Home Owner Grant Act 2000 (the “Act”) to assist him to purchase the property as his first home and received a grant of $7,000. Subsequently the respondent recalled that grant and imposed a penalty. The decision to recall the grant with a penalty is the subject of this application for review.
3 In addition to the documents furnished by the respondent under section 58 of the Administrative Decisions Tribunal Act 1997, the applicant provided a written statement and also made a viva voce statement at the hearing under oath. The respondent was given the opportunity to cross-examine the applicant but little turns on the examination.
4 The applicant is employed in the Australian Defence Force and during the relevant time was based in Sydney. Sometime in early 2004, he decided to purchase the property in which he could live on the assumption that the army would transfer him from Sydney to either Coffs Harbour or Grafton. He applied for a transfer and was given assurance that he could move but to date he has not been able to obtain the transfer. He is currently on long service leave from the army.
5 The property has been let, initially to the vendor for a short period and subsequently, from about 16 August 2004, to various other tenants. The leases in each case have been for periods not exceeding six months. The applicant had hoped to move in before the end of 2004 but was not able to do so because the army did not support his request for a transfer to either Coffs Harbour or Grafton. Currently, he is hoping to leave the army and seek employment in the area in which the property is situated to allow him to occupy the property as his principal place of residence.
Relevant Legislation
6 The Act was introduced to encourage and assist home ownership and contains a complete scheme dealing with government financial grants to enable residents of New South Wales to purchase or build their first homes. The entitlement requirements for a grant are set out in s 7 of the Act. There is no dispute that the applicant was entitled to a grant.
7 In addition, Part 2 of Division 2 of the Act requires the applicant to satisfy 5 Eligibility Criteria to obtain a grant. This matter relates only to Criterion 5, the “Residence Requirement”, which is set out in s 12 of the Act. There are, historically, the following versions of this provision -
- 07 Dec 2005 to date (the current version)
01 Dec 2005 to 06 Dec 2005 (the fourth version)
27 Nov 2003 to 30 Nov 2005 (the third version)
22 Apr 2002 to 26 Nov 2003 (the second version)
19 Jun 2001 to 21 Apr 2002 (the original version)
8 In the present matter the third version applies and it states as follows:
- “(1) An application for a first home owner grant must occupy the home to which the application relates as the applicant’s principal place of residence for a continuous period of at least 6 months.
(1A) However, if the Commissioner is satisfied there are good reasons to do so, the Chief Commissioner may:
- (a) approve a shorter period, or
(b) exempt the applicant from the requirement to comply with subsection (1).
(2) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement.”
9 At the relevant time the term “residence requirement” was defined in s 3 of the Act in the following terms:
- “ residence requirement means the requirement that an applicant for the first home grant must occupy the home to which the application relates as the applicant’s principal place of residence within 12 months after the completion of the eligible transaction or a longer period approved by the Chief Commissioner.”
10 Section 13 of the Act sets out what an “eligible transaction” is for purposes of s 12. There is no dispute the purchase of the property was an “eligible transaction” for purposes of s 12 of the Act. The respondent in recalling the grant has taken the view that the applicant has failed to satisfy the “residence requirement” set out in s 12 of the Act.
11 The respondent has exercised his power under s 45 of the Act, which allows the respondent to recover a grant and impose a penalty where the applicant fails to satisfy the eligibility requirements. There are five historical versions of s 45. In the present matter the current version, which applies from 7 December 2005 to date, was the relevant provision. The relevant version of Section 45 provides:
- “ 45 Power to require a repayment and impose penalty
(1) The Chief Commissioner may, by written notice, require an applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if:
- (a) the amount was paid in error, or
(b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason.
(3) If an applicant (or former applicant) for a first home owner grant fails to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay.
(4) If an amount is paid in error on an application for a first home owner grant to a third party, the Chief Commissioner may, by written notice, require the third party to repay the amount to the Chief Commissioner.”
12 In order to satisfy Criterion 5 as set out in the third version, an applicant has to establish the following requirements:
- (1) that the applicant occupied the property for a continuous period of 6 months within 12 months of the purchase of the property;
(2) that the property was occupied as the applicant’s principal place of residence and
(3) that purchase of the property was an “eligible transaction”.
13 The law gives the Chief Commissioner a discretion under s 12 to approve a shorter period or exempt an applicant altogether from compliance with this requirement. This discretion can be exercised by the respondent in circumstances where the respondent is satisfied that there are “good reasons to do so”.
14 In Wayne Gibson v Chief Commissioner of State Revenue [2006] NSWADT 211 I set out the following useful observations in relation to the “residence requirement”, which are equally relevant in respect of this matter -
- “18 The Tribunal in a number of cases has considered the relevant legislative provisions and a great deal of guidance is available from these cases to understand their scope and extent of their application. In Bates v Chief Commissioner of State Revenue [2004] NSWADT 13, Judicial Member Higgins has, in a succinct and elegant manner, set out in paragraph 39 of the decision useful principles of general application as to the meaning of “occupation” and “principal place of residence”, the two terms that determine the operation and scope of s 12 of the Act, as follows:
- (a) The terms “occupy” and “principal place of residence” should be given their ordinary meaning having regard to the objects and purposes of the Act. That purpose being similar to the above-mentioned tax rating cases in that the legislative scheme of the Act is to provide first home owners some relief towards the cost of purchasing their first home. Accordingly, in the context of this Act, in my opinion “occupy” means to reside in the property. However, that residence must also be such that it is the person’s “principal” place of residence or to use the terms of the title of the legislation the person’s “home”. This, in my opinion, requires the occupation to be ongoing and involves an element of permanence.
(b) Whether an applicant has “occupied” the property as his/her “principal place of residence” as prescribed under the Act, is a question of fact that is to be assessed objectively having regard to all the circumstances. The intention of the applicant is relevant but is not determinative of the issue. Nor is the fact that the applicant resided in the property for a short period of time during the relevant period. These matters, if established, must be considered in light of all the evidence including where the applicant resided otherwise during the relevant period, the reasons given by the applicant for not residing or continuing to reside at the property, whether the reasons for not residing at the property were as a result of matters entirely out of the control of the applicant and the nature of the applicant’s residence at the property. This list is by no means exhaustive, as each case must be considered in the context of its own particular facts.
- 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; and
Fourthly, to occupy a home as his or her principal place of residence a person’s occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose.”
15 In this matter there was no dispute as to the purchase of the property being an “eligible transaction” for purposes of the grant application.
Findings and Decision
16 There is really no dispute that the applicant has not occupied the property since its purchase for any length of time. The applicant’s case is essentially set out in his written statement as follows:
- “Being employed in the Defence Force I applied for a posting to the Coffs Harbour region prior to purchasing the property. After speaking to my career adviser I was told that I would be able to get a posting to that region at the end of that year. I proceeded with the purchase under the assumption that this would happen in due course and I would fulfil my obligation to live in the property for the required amount of time. This didn’t occur and I was left stranded once more by the Defence Force with little to no course of action available to me. To date I have made several attempts to get posted to the Coffs Harbour region to no avail.
The other point I would like to raise is that I believe the requirements for the first home owners grant is discriminatory to myself. This is after all the first property I have purchased and seeing how it is only a one off grant it should make no difference whether or not I live in or use it as an investment property. The government should be encouraging people to invest in their future not making it harder.”
17 The difficulty faced by the applicant to satisfy the “residence requirement” is understandable. There is also some merit in his claim that the law is discriminatory.
18 A similar difficulty by a member of the Australian Defence Force was highlighted in Snow v Chief Commissioner of State Revenue (No1) [2005] NSWADT 244 where the applicant, a naval officer, was not able satisfy the residence requirement because he “remained a serving member of the Defence Force with a posting to an important military vessel”. In that case, the Tribunal correctly reached the conclusion that the applicant’s “principal place of residence remained accommodation provided by the Navy (either aboard ship or in the single men’s barracks)”.
19 In Snow the Tribunal considered the “residence requirement” in Section 12 in its original version which read as follows:
- “(1) An application for a first home owner grant must occupy the home to which the application relates as the applicant’s principal place of residence within 12 months after completion of the eligible transaction or a longer period approved by the Commissioner.
(2) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement.”
20 There was in the law at that time only an opportunity for applicants to seek a longer period to satisfy the occupation test. The law was subsequently amended and the provisions of the third version of section 12, which apply to this matter, allow the Chief Commissioner to exempt an applicant from the requirement to comply with the “residence requirement” if the Chief Commissioner is satisfied that there are good reasons to do so. In the present matter, the Chief Commissioner’s decision was based on the failure of the applicant to reside at the property for a continuous period of six months within 12 months of the purchase of the property. Whilst that decision of the Chief Commissioner was correctly made, in fairness to the applicant the Chief Commissioner ought to have, in accordance with the terms of the law, considered his discretion to exempt the applicant from the requirement to comply with the “residence requirement”. The respondent clearly failed to direct his mind to the circumstances that may have warranted an exemption from compliance with the “residence requirement” in this matter.
21 The provisions of the relevant version of s 12 do not require that an applicant should make a request for the Chief Commissioner to exercise his discretion. The discretion should be exercised by the Chief Commissioner quite independently in cases where “there are good reasons to do so”. The law recognises that in some cases applicants cannot satisfy this requirement but should not be denied the grant. Various examples can be suggested which may warrant the exercise of this discretion. For example, a person may purchase a property for immediate occupation as his or her principal place of residence but due to serious illness or the need to perform occupational duties overseas over an extended period the person is unable to satisfy the “residence requirement” within the period allowed. There are other examples including the situation highlighted in Snow.
22 Whilst I have not conclusively considered the exercise of this discretion in this matter, I am nevertheless of the opinion that there are “good reasons” why the applicant has not been able to occupy the property since its purchase. The respondent in both exercising his power under s 45 of the Act to recall the grant and subsequently in considering the applicant’s objection, which highlighted the reasons why he was not able to occupy the property, was required to consider whether the discretion should be exercised favourably in the applicant’s case. The respondent failed to consider his discretion found in s 12(1A) in both instances.
23 The respondent relied only on the “residence requirement” – the failure by the applicant to occupy the property for a continuous period of six months within 12 months of the purchase of the property. Having made a decision on the “residence requirement”, the respondent ought to have then considered whether there were “good reasons” for his discretion in s 12 (1A) to be invoked. The respondent clearly erred in not considering the application of the discretion in this matter.
24 The matter that remains is that of the penalty imposed by the Chief Commissioner pursuant to s 45 of the Act. The basis on which a penalty may be imposed is contained in subsections 45 (2) and (3) of the Act. The Chief Commissioner may impose a penalty not exceeding the amount an applicant is required to repay. In this matter the Chief Commissioner imposed a penalty of 20% of the total amount that the applicant was required to repay. Unfortunately, the respondent’s assessment issued on 16 January 2006 under section 45 did not nominate the relevant subsection under which he had imposed the penalty. The assessment merely states that a penalty of $1400 has been included in the assessment. A footnote to the assessment indicated that if the amount was not paid by the due date a penalty of up to 100% may be imposed on any amount still outstanding.
25 It is important to note that the Chief Commissioner is only entitled to impose a penalty under s 45(2) of the Act in cases where “as a result of an applicant’s dishonesty, an amount is paid by way of a first home owner grant”. “Dishonesty” is conduct that lacks honesty and can be considered as deceitfulness or fraud. In imposing penalties under this provision, it is necessary for the respondent to show that there was a deliberate attempt by an applicant to obtain the grant by some misleading or false misrepresentation. It is not enough, in my opinion, for the provision to apply in circumstances where, due to either some unforseen event or the non-occurrence of a seriously anticipated event, there is failure on the part of an applicant to comply with the “residence requirement” under the Act.
26 There was no evidence before the Chief Commissioner that this applicant had been dishonest. The law recognises that occupation may not in some cases occur immediately and applicants are allowed the grant if they have plans to occupy the property within 12 months of purchase. In the present matter, the applicant when seeking the first home grant placed a great deal of reliance on his career adviser in the army who had told the applicant that he would be able to get a posting to the Coffs Harbour region by the end of 2004. Unfortunately, the Australian Defence Force let him down and the posting never eventuated. The applicant is currently seeking employment in the Coffs Harbour region so that he will able to occupy the property as his principal place of residence.
27 Under s 45(3) the respondent is entitled to impose a penalty where an applicant fails to pay an amount demanded by the respondent in an assessment made under section 45 or where an applicant fails to repay the grant if required by a condition of the grant. The first limb of s 45(3) would only apply where an applicant fails to pay the amount demanded in an assessment issued under s 45. Hence in this case only the provisions of the second limb of s 45(3) are relevant. The respondent was entitled to impose a penalty as he concluded that the applicant had not complied with the “residence requirement”. But in the circumstances that the respondent is now required to reconsider his principal decision to recall the grant, the whole question of imposing a penalty under s 45 should also be reconsidered on a de novo basis.
28 The decision of the respondent is set aside and the matter is remitted to the respondent for reconsideration in accordance with these reasons.
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