Denton v Chief Commissioner of State Revenue

[2024] NSWCATAD 206

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Denton v Chief Commissioner of State Revenue [2024] NSWCATAD 206

Hearing dates:

2 May 2024, 29 May 2024

Date of orders:

25 July 2024

Decision date:

25 July 2024

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

J Sullivan, Senior Member

Decision:

The decision under review is affirmed.

Catchwords:

TAXES AND DUTIES — Consideration of penalties and interest — no reasonable care — no remission

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)

Taxation Administration Act 1996 (NSW)

Treasury and Revenue Legislation Amendment Act 2023 No 26 (NSW)

Cases Cited:

Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657; (2019) 109 ATR 879

Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd (2020) 103 NSWLR 772

Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19

Coles Myer Finance Ltd v Commissioner of State Revenue [1998] VSC 184

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

Galle v Chief Commissioner of State Revenue [2022] NSWCATAD 285

Golden Age & Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWCS 249

Guimaraes v Chief Commissioner of State Revenue [2024] NSWCATAD 95

Hirere Pty Ltd v Chief Commissioner of State Revenue (NSW) (2004) 57 ATR 476

Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215

Nhem v Chief Commissioner of State Revenue [2024] NSWCATAD 9

Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227

RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64

Shah v Chief Commissioner of State Revenue [2022] NSWCATAD 311

Van der Zanden v Chief Commissioner of State Revenue [2022] NSWCATAD 283

Texts Cited:

None Cited

Category:

Principal judgment

Parties:

Chayaphorn Denton (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

G Denton (Agent) (Applicant)
Crown Solicitor (Respondent)

File Number(s):

2024/000254530

Publication restriction:

None

REASONS FOR DECISION

1. The applicant, Ms Chayaphorn Denton, entered into an agreement to purchase a parcel of land in New South Wales as a joint tenant with her husband. She was assessed to surcharge purchaser duty (SPD) on her 50% interest. She objected to the assessment, which included penalties and interest, but the objection was disallowed.

2. After filing the application to the Tribunal, but before the hearing, the applicant accepted the liability to SPD. This application was pressed in respect of penalties and interest only.

Jurisdiction and Onus of Proof

3. The Tribunal has jurisdiction to hear this matter: s 96 of the Taxation Administration Act 1996 (NSW) (TA Act), s 9 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act) and s 30 of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act).

4. The Tribunal’s task is to decide what the correct and preferable decision is having regard to the material before it at the time of the hearing: ADR Act, s 63(1).

5. The applicant bears the onus of proof: 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 Ltd v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36]. The standard of proof is the balance of probabilities.

Relevant legislation

6. The statutory scheme relating to SPD, interest and penalties is set out below. Although there is no longer a dispute regarding the liability to SPD, the context is relevant to the matters in issue.

Surcharge Purchaser Duty

7. SPD is chargeable on a transfer or an agreement for sale or transfer of residential-related property to a foreign person: Duties Act 1997 (NSW) (Duties Act), s 104L. Residential-related property includes residential land in NSW: Duties Act, s 104K(a).

8. Section 104J of the Duties Act provides that a “foreign person” is a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).

9. Section 4 of the FATA defines a foreign person as an individual who is not “ordinarily resident” in Australia. Section 5(1) of the FATA provides that 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.

10. Section 104J(3) provides that for the purposes of charging SPD on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises. Relevantly, under ss 104Q and 12, a liability for duty arises when a transfer of dutiable property occurs, and that where such a transfer is effected by an instrument, liability arises when that instrument is first executed.

11. Section 104W provides that SPD is to be paid within three months after the liability to pay the duty arises.

Interest

12. A failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay is called a tax default: TA Act, s 3(1).

13. If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid, calculated on a daily basis: TA Act, s 21(1).

14. The interest rate is the sum of the market rate component, and the premium component: TA Act, s 22(1).

15. Section 25 of the TA Act provides for the remission of interest.

1. Commencing from 1 February 2024, s 25 was amended by the Treasury and Revenue Legislation Amendment Act 2023 No 26 (NSW) (Amendment Act) to provide as follows:

25   Remission of Interest

(1)    The Chief Commissioner may remit interest.

(2)   The Chief Commissioner may issue guidelines setting out how interest must be remitted under this division.

(3)   If guidelines are issued, interest must be remitted only in accordance with the guidelines.

(4)   The imposition or remission of penalty tax is not relevant to the imposition or remission of interest.

2. Prior to that amendment, s 25 provided:

25   Remission of interest

The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.

16. The respondent confirmed that no guidelines have been issued under the new s 25(2).

Penalty tax

17. Sections 26 and 27 of the TA Act provide for the imposition of penalties for a tax default:

26   Penalty tax in respect of certain tax defaults

(1)  If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.

(2)  Penalty tax imposed under this Division is in addition to interest.

(3)  Penalty tax is not payable in respect of a tax default that consists of a failure to pay—

(a)  interest under Division 1, or

(b)  penalty tax previously imposed under this Division.

27   Amount of penalty tax

(1)  The amount of penalty payable for a tax default is, subject to this Division—

(a)  25% of the amount of tax unpaid, or

(b)  if the taxpayer is a significant global entity within the meaning of the Income Tax Assessment Act 1997 of the Commonwealth—50% of the amount of tax unpaid.

(2)  The Chief Commissioner may increase the amount of penalty tax payable in respect of a tax default to 75% of the amount of tax unpaid if the Chief Commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law.

(3)  The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that—

(a)  the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or

(b)  the tax default occurred solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.

18. Section 29(1) of the TA Act provides for a 20% reduction as follows:

(1)  The amount of penalty tax determined under section 27 is to be reduced by 20% if, after the Chief Commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is completed, the taxpayer discloses to the Chief Commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

19. There is also a discretion to remit penalty tax under s 33 of the TA Act:

1. Commencing from 1 February 2024, s 33 was amended by the Amendment Act to provide as follows:

33   Remission of penalty tax

(1)    The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount.

(2)   The imposition or remission of interest is not relevant to the imposition or remission of penalty tax.

2. Prior to that amendment, s 33 provided:

33   Remission of penalty tax

The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount.

Material before the Tribunal

20. The applicant relied on the application filed on 19 January 2024 and submissions and documents attached to that application (A1). The applicant also filed further submissions on 24 May 2024.

21. The respondent relied on documents filed under s 58 of the ADR Act (R1), submissions dated 12 April 2024 (R2) and a tender bundle filed on 15 April 2024 (R3).

22. Following the hearing of this matter held on 2 May 2024, the respondent notified the Tribunal and the applicant that the applicant had not, in fact, received a copy of the respondent’s s 58 documents in advance of the hearing. Accordingly, so that the additional documents could be reviewed by the applicant, I allowed the parties to make further written submissions, and for a further short hearing to be held on 29 May 2024.

The facts

23. The applicant is a Thai citizen. She is not an Australian citizen.

24. In September 2014, she moved to Australia to join her husband, Mr Denton (a New Zealand citizen) under a New Zealand Citizen (Family Relationship) visa. She has lived permanently and continuously in Australia since that time.

25. In December 2019, she applied for Australian permanent residency via a Skilled – Independent visa (subclass 189).

26. Pending that application being processed, she was granted a Bridging A visa on 3 January 2020. That visa took effect on 31 August 2020 when her New Zealand visa expired.

27. While the applicant’s permanent residency application was still pending, she and her husband bought a residential block of land. Contracts were exchanged on 4 December 2020. Settlement occurred on 29 January 2021 and the transfer of the property was registered on that date.

28. The applicant and Mr Denton:

1. acquired the land as joint tenants;

2. used a conveyancer recommended by the real estate agent; and

3. paid transfer duty in respect of the acquisition.

29. The applicant was granted a Skilled – Independent (subclass 189) permanent visa on 26 March 2021.

30. Following the purchase, Mr and Mrs Denton entered into a contract for the building of a home on the property. The builder was placed into administration and they subsequently lost their deposit of $23,000.

31. They engaged a new builder, but were then subject to a large blow out in costs due to COVID and related increases in material costs. Subsequently multiple interest rate rises have further jeopardised their ability to complete the build and service the loan going forward. The house, however, is now completed. They moved in and have lived there continuously.

The investigation

32. On 1 August 2023, the respondent requested information from the conveyancer, including the Purchaser/Transferee Declaration Forms (Declaration Forms) completed by Mr and Mrs Denton. The conveyancer provided the information on 5 August 2023.

33. On 3 August 2023, the respondent sent a Notice of Investigation (NOI) addressed to “C & GJ Denton” which stated as follows (original emphasis):

Dear Sir/Madam

This letter constitutes the commencement of an investigation… to determine if you are liable for Surcharge Purchaser Duty ……

Revenue NSW has obtained information, including data relating to your International Movement Records from the Department of Home Affairs. Based on this information, it appears that you may be liable for Surcharge Purchaser Duty in relation not a transaction concerning the above property.

Revenue NSW records show that, a Contract for Sale of Residential-Related Property known as [Address] was executed on 04 December 2020 (the transaction date).

On the transaction date:

Chayaphorn Denton was not a foreign person, because she was:	Gregory John Denton was not a foreign person because he was:
• A Temporary Resident of Australia	• A citizen of New Zealand, Finland, Germany or South Africa

What do you need to do?

If the information above is correct and you are liable for Surcharge Purchaser Duty, please email [address] to arrange for an assessment….

If the information above is not correct, please provide the documents, records and information listed in Attachment A…

If no response is received from you by the due date, a Notice of Assessment may be issued to you for the amount of $18,800 in addition to penalty tax of at least $4,700 and any interest that may have accrued on a daily basis…

34. This was incorrect, as it said the applicant was not a foreign person.

35. On 8 August 2023, following a phonecall from Mr Denton to the respondent, an updated NOI was issued by email. The only change was to correct the above error to “Chayaphorn Denton was a foreign person” (my emphasis) and to extend the due date for a response by 5 days. However, the covering email still referred to the 3 August 2023 letter:

… More information about the investigation process and methods of lodgment can be found in the attached documents. A copy of this letter has also been sent to you by post on 3 August 2023.

36. The same day (8 August 2023), Mr Denton emailed the respondent attaching the relevant visa information for his wife.

37. On 14 August 2023, the respondent advised as follows:

We have considered your reasons for the tax default and unfortunately there are insufficient grounds to grant Surcharge Purchaser Duty, penalty or interest waiver. However, in consideration of the circumstances surrounding the tax default, the client made a disclosure, in writing, during the investigation. Penalty tax is to reduce to 20%, and full interest is to apply. Interest and penalty will be applied in accordance with the legislation.

38. The Investigation Report dated 17 August 2023 stated that “Client willingly provided all information when requested”.

39. On 18 August 2023 the respondent issued a letter confirming the finalisation of the investigation, and attached a Duties Notice of Assessment (NOA) with a due date for payment of 8 September 2023.

40. Under the NOA, SPD of $18,800 was imposed, together with a penalty of $3,760 and interest of $4,263. The penalty was 20% of the unpaid tax. There was no remission of interest.

41. The applicant’s objection was lodged on 3 September 2023. It was disallowed on 30 November 2023. In the reasons for decision, the respondent stated (inter alia), that the NOI was issued on issued on 3 August 2023, and that the objection was lodged on 15 November 2023. However, as noted above, the NOI was re-issued on 8 August 2023, and the objection was lodged on 3 September 2023.

42. The applicant filed her application to the Tribunal for administrative review on 19 January 2024.

43. On 8 February 2024, the applicant (via her representative) advised the respondent by email that she now understood and accepted the liability to SPD and no longer sought to challenge that in the review by the Tribunal. Accordingly, she only sought review of the imposition of interest and penalty tax.

Applicant’s submissions

44. In summary, the applicant submits as follows:

1. It is unfair that she should be assessed for interest and penalties where it was not clear on the face of the documents the specific requirements in order to satisfy the tests of being a “foreign resident”;

2. She had applied for Australian Permanent Residency more than 12 months prior to the purchase of the property, had received a bridging visa and was granted permanent residence shortly after settlement. The land was purchased for the purpose of building her home which she intended to live in permanently;

3. The purchase was not a speculative housing purchase by a foreign investor, or contrary to the interests of genuine legal immigrants. Indeed, for all intents and purposes, the respondent applied the law in a way that penalises those very genuine immigrants (the applicant now being a permanent resident);

4. If the applicant and her husband had been aware of the liability to SPD, she would not have become a joint tenant purchaser; rather, the property would have been purchased solely in her husband’s name with no liability for SPD arising;

5. There was a lack of clarity and information on the “poorly designed” Purchaser/Transferee Declaration Form:

1. The term “a person who is ordinarily resident in Australia” was by its nature ambiguous and read as a statement of plain English regather than a legal definition. It was not highlighted in bold, nor underlined or in any way prefixed to suggest there was a legal definition which needs to be referred to or legally interpreted.

2. While there was further explanation via the website link, it was convoluted, required multiple clicks through several pages and a level of interpretation which was very difficult to follow.

6. There was no action by the respondent to assess the visa information provided (i.e. the visa number) despite lodgment of the form. The information on the main website link under the hearing “Declaring your foreign status” stated:

Declaring your foreign status

When you acquire residential-related property in NSW, you must complete a purchaser/transferee declaration form and provide supporting documents so we can determine if you must pay surcharge purchaser duty.

Accordingly, having provided the information on the Revenue NSW form, it was the applicant’s expectation that the information would be checked, and any misinterpretation would be clarified and pointed out during the submission process.

7. The applicant submitted: “Surely there is a requirement to make reasonable efforts to assist taxpayers understand and meet their obligations and make assessments based on all of the information provided.”

45. The applicant pointed to the cases of Galle v Chief Commissioner of State Revenue [2022] NSWCATAD 285 (Galle) and Shah v Chief Commissioner of State Revenue [2022] NSWCATAD 311 (Shah) and said that in those cases, which were relevantly similar, interest and penalties had either been remitted or not imposed.

Respondent’s submissions

46. The respondent submitted, in summary:

1. The reasons for the delay in granting the permanent residency visa are irrelevant;

2. The respondent has no legal duty to advise taxpayers of their obligations under the law. But in any event, the respondent warned the taxpayer on the Purchaser/Transferee Declaration of the need to consult their website and the information contained on it;

1. There is no evidence that the applicant sought or received external advice or contacted Revenue NSW for assistance;

2. Being unaware of your obligations is not a ground for remission of interest or penalties; and

3. The cases of Shah and Galle concerned different circumstances and do not support a remission of the penalty or interest.

47. The respondent submitted that based on the information provided, the applicant (who has the onus of proof) had not produced sufficient evidence to conclude that she took reasonable care, or established any other grounds for the remission of penalties or interest.

CONSIDERATION

The decision under review

48. The Tribunal’s role is to conduct an administrative review of the relevant “decision”; in this case, it is the original decision of 18 August 2023 because that “has been the subject of an objection”: s 96(1) of the TA Act.

49. The applicant, who bears the onus of proof, no longer disputes the assessment of SPD. The assessment to SPD is therefore affirmed to be the correct and preferable decision.

50. For completeness, the Tribunal has previously held that an individual who holds a bridging visa (which I observe may have no identifiable “expiry date”, in the case of a Bridging A visa) is, at that particular time, a foreign person for the purposes of SPD: see Van der Zanden v Chief Commissioner of State Revenue [2022] NSWCATAD 283 and (more recently), Guimaraes v Chief Commissioner of State Revenue [2024] NSWCATAD 95. This is regardless of meeting the 200 day test in s 5(1)(a) of the FATA.

51. The applicant submits that the Tribunal should remit the following:

1. the penalty of $3,760 (which included a reduction from 25% to 20% under s 29 of the TA Act); and

2. interest of $4,263.69 (imposed at the market and premium rate).

Penalties

Section 27(3) of the TA Act

52. Section 27(3) of the TA Act provides a discretion to the Commissioner (and, here, the Tribunal) to “determine that no penalty tax is payable”. However, that discretion is only engaged if the Tribunal is satisfied that –

(a)  the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or

(b)  the tax default occurred solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.

“a person acting on behalf of the taxpayer”

53. In the context of transactions involving the purchase of real property, a taxpayer will usually engage the services of a conveyancer or solicitor.

54. In this case, the taxpayer is the applicant. Mr Denton acted on her behalf. They both, in turn, engaged the services of a conveyancer. The conveyancer therefore also acted on her behalf.

Reasonable care – s 27(3)(a)

55. It is therefore necessary to first look at the relevant facts relating to the actions of each of these persons, and then to ascertain whether they took “reasonable care to comply with the taxation law”. This requires a determination of whether the person exercised the care that a reasonable person would be likely to have exercised in the circumstances of that person (including in respect of enquiries made and advice sought or received): see Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227 at [95]; RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64 at [23]; Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 21 (Levitch) at [113]; also the instructive Supreme Court decision of Richmond J in Golden Age & Hannas the Rocks v Chief Commissioner of State Revenue [2024] NSWSC 249 (Golden Age) at [70] and [111].

The applicant

56. The applicant relied upon Mr Denton to act on her behalf in completing the Declaration Form and communicating with the conveyancer. That reliance was appropriate, and understandable, given their relationship and the applicant’s limited English skills. It does not demonstrate that she failed to exercise reasonable care, but it requires an examination of what was done by her husband.

57. The relevant enquiry therefore moves to the actions of Mr Denton.

Mr Denton

Oral evidence of Mr Denton at the hearing

58. The applicant was represented at the hearing by her husband with the Tribunal’s permission.

59. The Tribunal requested Mr Denton to give sworn oral evidence at the hearing and be cross-examined. The respondent did not object to this course.

60. Mr Denton told the Tribunal that he communicated with the conveyancer by phone and email, on behalf of himself and his wife. He said he did not meet with the conveyancer in person. He said that the conveyancer sent the Declaration Forms to him, but just told him to fill them out and return the forms to her. He said that the conveyancer did not mention anything else about SPD, or visa status, or any possible SPD liability. He confirmed in cross-examination by the respondent that he did not ask the conveyancer any questions about the forms.

61. Mr Denton said that he looked at information on the Revenue NSW website before he completed the forms for himself and his wife to sign. He said that he had clicked on the link in the Declaration Form, but it just took him to the home page on the Revenue NSW website, so he had to dig around a bit to find the information.

62. He said that he couldn’t remember exactly what he read on the website, but he spent some time reading through it. After doing so, he was satisfied that there was nothing he read that caused him to believe that they would be liable to any SPD.

63. On cross-examination by the respondent’s representative, Mr Denton said:

1. that he had no record of what he read on the website (e.g. no written notes, and no print-outs);

2. he didn’t recall reading anything about a bridging visa; and

3. he had not contacted Revenue NSW for assistance, because “he didn’t think there was any problem”.

Relevant findings regarding Mr Denton

64. I found Mr Denton to be an honest and reliable witness. Having regard to his evidence, and the materials before me, I find as follows:

65. Mr Denton is not a lawyer, nor does he have any legal training.

66. He read through information on the Revenue NSW website at the time he was in the process of completing the forms for himself and his wife. I accept that it is not now possible to prove that fact with certainty, but I find that to be the case on the balance of probabilities.

67. The “Purchaser/Transferee Declaration – Explanatory Notes and Supporting Evidence” (Explanatory Notes) was read by Mr Denton, although perhaps not in its entirety.

68. I accept that Mr Denton did not recall reading anything about a bridging visa. I note that the version of the Explanatory Notes at the relevant time on the website was as at R3 at Tab 3 (June 2019, OOA 076). The text of that version:

1. contained the statutory definition for “ordinarily in Australia”;

2. did not refer to a “temporary visa”, or a “bridging visa”;

3. did not include the table which was in the later version of the Explanatory Notes; and

4. did not direct the reader to any other information published by the Commissioner, specifically Ruling G009 “Definition of a foreign person” (R3 – Tab 4) which has been referred to in the respondent’s submissions.

69. He formed the view, after his reading of the material, that no liability for SPD arose.

70. I find that Mr Denton, based on the above, and having regard to his lack of legal expertise, made diligent efforts to read and understand the material. He also understood that Revenue NSW would be assessing the form.

71. However, I also find as follows:

1. Mr Denton engaged a conveyancer;

2. The conveyancer sent the Declaration Forms to Mr Denton to be completed, without any specific instructions;

3. Mr Denton completed the visa information on the Declaration Form for the applicant incorrectly, stating that the applicant had a “sub-class 189” visa (i.e. a permanent resident visa);

4. Mr Denton did not send a copy of the visas to the conveyancer; and

5. Mr Denton did not ask questions of the conveyancer or confirm the position.

72. I also note that Part B of the Declaration Forms of both Mr and Mrs Denton under “Type of land acquired” were completed as “House – owner occupied” rather than “Vacant land – residential”. I understood from the respondent’s submissions that it was vacant land that was purchased, but nothing of particular importance turns on this.

73. Nonetheless, I find that a reasonable person in the circumstances of Mr Denton (with no legal training, and completing formal documentation relating to a purchase with significant duty potentially payable, and knowing the status of his wife’s current visa) would have:

1. completed the visa information correctly, such that it did not refer to a “sub-class 189” (permanent resident) visa;

2. sent that correct information to the conveyancer, together with copies of the relevant visas; and

3. requested the conveyancer to confirm that his understanding was correct in respect of SPD.

74. There is no duty on the Commissioner to warn a taxpayer regarding their liability to SPD. It is a self-assessment system. The information issued at the time by Revenue NSW may have been less than helpful (and has now been amended), and the guidance on the form may have caused an impression that it was not a self-assessment system, but it is.

75. Ultimately, Mr Denton did not complete the form accurately which – if done - may have triggered a line of enquiry by his conveyancer to confirm the status of his wife’s visa. And he did not request any confirmation specifically from the conveyancer. In Levitch, the Tribunal stated (at [113]) in respect of taking advice:

… Taking advice on the operation of the relevant provisions can amount to reasonable care for the purposes of s 27: The Smith’s Snackfood Case at [96-100]. In my view, simply hiring or relying on an accounting to prepare returns or assuming that an adviser would review returns, is not of itself a “taking advice” on the operation of relevant provisions: cf Snowy Hydro Ltd v Commissioner of State Revenue [2010] VSC 221; (2010 79 ATR 118 at [81-82]; on appeal, Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] BSCA 145 at [170], [171].

76. Accordingly, I find that Mr Denton did not exercise reasonable care.

The conveyancer

77. There is no evidence regarding the actions taken by the conveyancer, other than the evidence provided by Mr Denton which establishes that no specific assistance was provided (or sought) in respect of the completion of the form.

Conclusion on the discretion in s 27(3)(a)

78. I have found above that the applicant relied on Mr Denton, and that Mr Denton did not take reasonable care. There is no evidence to conclude that the conveyancer took reasonable care, but the onus is on the taxpayer. In any event, it is relatively clear that no specific advice was requested, or given. Even if the conveyancer had exercised reasonable care, it does not require the exercise of the discretion. It is dependent on the totality of all actions of the parties, when considered together. As stated in Nhem v Chief Commissioner of State Revenue [2024] NSWCATAD 9 (Nhem) (at [63]-[64])

An additional justification for a refusal to exercise the discretion in those circumstances is obtained by having regard to the combined result of the behaviour (the acts and omissions) of the taxpayer and the person acting for them. If that combined result is that the Chief Commissioner is unable to make a proper assessment of duty because the relevant behaviour includes a failure to take reasonable care (as here) or a failure to provide complete and accurate information (as here) then, whether or not it was the intention of either of the relevant parties to mislead (and there was none established here), the Tribunal may be justified in refusing to interfere with the Chief Commissioner’s decision not to exercise the section 27 (3) discretion.

79. As the precondition has not been satisfied, there is no basis upon which to exercise a discretion to reduce the penalties to nil under s 27(3)(a).

Caused solely by circumstances outside the taxpayer’s control - s 27(3)(b)

80. I agree with the respondent’s submissions and find that there is no basis upon which to exercise my discretion to reduce the penalties to nil under s 27(3)(b) of the TA Act.

81. It is clear that the liability to SPD did not arise because it was caused solely by factors outside the applicant’s control.

Section 33

82. Section 33 of the TA Act provides a discretion to remit penalty tax if the respondent considers it appropriate. It is a broad and unfettered discretion: Hirere Pty Ltd v Chief Commissioner of State Revenue (NSW) (2004) 57 ATR 476 at [24]-[25], [31].

83. However, in Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657; (2019) 109 ATR 879, Ward CJ held at [301] that she did not consider that the general discretion in s 33 should be exercised:

… where there has been a finding that reasonable care has not been established and in the absence of some special circumstance to warrant the exercise of the discretion notwithstanding the absence of a finding of reasonable care.

84. This position was reinforced by the Court of Appeal in Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd (2020) 103 NSWLR 772 at [149]-[150].

85. I do not find that there are any “special circumstances” that justify a remission of penalty in this case.

86. The alleged obligations of the respondent put by the applicant have been discussed above. I accept that the permanent residence visa, if issued before the transaction, would have led to no liability to SPD. I also accept that if the applicant had been aware of the correct position, the property may not have been purchased in joint names. However, I do not agree that the intent of the legislation is at odds with the position that applied at the relevant time, notwithstanding Ms Denton was later issued her permanent residency visa.

Interest

87. Interest may be remitted pursuant to s 25 of the TA Act.

88. As set out above, s 25 was amended on 1 February 2024. The respondent has confirmed that no guidelines have been issued pursuant to the amended s 25(2) of the TA Act and so there is no relevant change at the present time in the nature of the discretion conferred by s 25: see Golden Age at [24].

Interest – Market rate component

89. The market rate component is intended to compensate the Commissioner for not having the benefit of the tax payment from the time it was due, and so approximates the ordinary lending interest rates. It is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. See Golden Age at [101], Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 (Incise Technologies) and the Commissioner’s Practice note CPN 024.

90. Having regard to the facts set out above, I agree with the respondent’s submissions that there are no exceptional circumstances that would justify any remission of the market rate component.

Interest – Premium component

91. The “premium component” of interest was considered by Richmond J in Golden Age who said at [102] ff:

102   In my view it is necessary to approach the remission question by recognising that the premium component is penal in nature and serves the purpose of both imposing a penalty and deterring taxpayers from delaying payment of duty in what is essentially a self-assessment regime. Consequently, the culpability of the taxpayer in failing to pay the duty liability by the due date is an important matter in the exercise of the discretion. I do not accept the Commissioner’s submission that it is a penalty at the “low end” of the scale. Depending upon the period of the delay in payment, the penalty arising from the premium component can be very significant as it was in the present case (being 24% of the duty assessed on the premium).

103   In Incise Technologies, the Appeal Panel identified (reflecting a submission made by the Commissioner in that case) four cumulative criteria which are relevant to the exercise of the discretion under s 25:

(1)   All principal tax that is owing and not in dispute has been fully paid;

(2)   There has been cooperation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments;

(3)   Such cooperation has occurred prior to any investigation being commenced by the Commissioner or, at the very least, within a reasonable time after the request for information had been made by the Commissioner; and

(4)   There has been no wilful default by the taxpayer in not paying tax on time.

104   The Appeal Panel noted in Incise Technologies at [63] that the first of these criteria could be clarified to be “all principal tax that has been assessed and is not in dispute has been fully paid at the time of the request for remission of interest” and that while they were all relevant and appropriate matters for consideration, they were not exhaustive. That the four criteria are not exhaustive has been confirmed in subsequent cases, eg. Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [179] and Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [105]-[106].

105   The Court was referred to the Commissioner’s guidelines on interest and penalty tax appearing on the Revenue NSW website, which state:

The premium rate of interest may be reduced if there is evidence you took reasonable care, or made a voluntary disclosure before the commencement of an investigation. However, for the purpose of payroll tax, the premium rate of interest is not reduced.

…

When determining whether reasonable care was taken we’ll consider whether you:

● Kept complete and accurate records

● Made a diligent effort to understand and comply with the law;

● Sought expert advice on uncertain or complex matters;

● Were honest in your dealings with us.

We’ll also consider your:

● Understanding of the law;

● Commercial experience;

● Access to expert advice;

Meeting one or more of these criteria does not necessarily mean that reasonable care has been taken. All factors leading to the tax default are taken into consideration.

106   It was accepted in Adams Bidco at [158]-[162] that whether the taxpayer has taken reasonable care to comply with the taxation law is a relevant consideration for the exercise of the discretion under s 25; see also Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 at [86]; Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 at [301]. I agree that whether the taxpayer took reasonable care is relevant to the remission of the premium component under s 25. In particular, it is necessary to consider whether there are factors which mitigate the taxpayer’s behaviour in failing to pay its tax liability on time and, in this regard, it is necessary to consider the steps (if any) taken by the taxpayer to comply with the taxation law, whether those steps were reasonable and the explanation for why, despite those reasonable steps, the tax default occurred.

92. In respect of criteria 1 in Incise Technologies, Mr Denton advised the Tribunal that a payment plan for the SPD had been agreed with the respondent. At the hearing, he confirmed that payments had been made, and said that it was “almost all paid”. There was no suggestion that payments had not been met in accordance with those arrangements. In these circumstances, although there may have technically been amounts of principal tax which were still “owing”, they were not yet “due” (see Coles Myer Finance Ltd v Commissioner of State Revenue [1998] VSC 184 at [22]). In these circumstances (and noting that the principal tax amount was still “in dispute” until recently conceded), I find that this criteria was satisfied in substance.

92. In respect of criteria 2, 3 and 4 in Incise Technologies, I find that there was cooperation by the applicant in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; such cooperation occurred within a reasonable time after the request for information had been made by the Commissioner; and there has been no “wilful” default by the applicant in not paying tax on time (per Golden Age at [108]). The co-operation was acknowledged in writing by the respondent, as stated above in these reasons at paragraph 38 above.

93. However, as found above, Mr Denton did not exercise reasonable care. Accordingly, I agree with the submissions of the respondent and, based on my findings above that no discretion has arisen under s 27(3), there are no relevant “special circumstances”. Accordingly, I do not propose to exercise the discretion to remit the premium rate of interest under s 25 of the TA Act.

Consideration of Shah and Galle

95. I should address the cases of Shah and Galle as these have been specifically raised by the applicant.

96. In Shah, the Tribunal also discussed the relevant criteria in Incise Technologies in considering whether the applicant had exercised “reasonable care”, in both consideration of interest and penalty remission, citing the 4 criteria in Incise Technologies and stating as follows (at [73]):

73. …While not determinative, I also note that the Applicant’s English is limited and he relied on a conveyancing lawyer to assist him with the purchase. While I accept the Respondent’s submission that there is little evidence of the communications which took place between the conveyancer and the Applicant, I accept the Applicant’s evidence that he was not advised that he may have a liability to surcharge purchaser duty. I accept that he genuinely believed that he was a permanent resident. The Respondent pointed the Tribunal to that part of the Declaration signed by the Applicant which directs him to review the Respondent’s website for information about surcharge purchaser duty before completing the Declaration submitting that he could have done so and become aware of his liability to surcharge purchaser duty. However on the face of the Declaration (which the Applicant would have had difficulty reading in any event) there is no explanation of the term “ordinarily resident” or to the fact that temporary visa holders will be considered foreign persons. In all of the circumstances, I consider that the Applicant has demonstrated that he took reasonable care within the meaning of InciseTechnologies and that it is appropriate to remit the premium component of the interest in full.

97. I find that the facts in that case are sufficiently distinguishable. In this case, there was no reason for Mr Denton to believe that his wife was a permanent resident at the time the form was completed. He was clearly aware that she was not. It was the totality of the circumstances in Shah, not just the relevant information published by Revenue NSW and the failure of a conveyancer to assist, that led to the decision in that case.

98. In Galle, as noted by the respondent, the Chief Commissioner determined to remit penalty and interest when considering the taxpayer’s objection, and the question of whether interest and penalty should be remitted was not the subject of review by the Tribunal and was never considered. That decision is not a precedent for the Tribunal to remit penalty and interest in the present case.

Orders

99. I make the following orders.

1. The decision under review is affirmed.

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

Decision last updated: 25 July 2024