Fava v Chief Commissioner of State Revenue

[2024] NSWCATAD 363

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Fava v Chief Commissioner of State Revenue [2024] NSWCATAD 363

Hearing dates:

1 November 2024

Date of orders:

03 December 2024

Decision date:

03 December 2024

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

L Andelman, Senior Member

Decision:

The decision made by the Respondent on 14 February 2024 is affirmed.

Catchwords:

REVENUE LAW – Dutiable transaction - First Home Buyers’ Assistance Scheme - whether applicant met the “residential requirement in s76(1) of the Duties Act 1997 (NSW) – occupied – principal place of residence – interest – penalty tax.

Legislation Cited:

Administrative Decisions Review Act Duties Act 1997 (NSW)
Civil and Administrative Tribunal Act 2014 (NSW)
Duties Act 1997 (NSW)
Taxation Administration Act 1996 (NSW)

Cases Cited:

Bulgak v Chief Commissioner of State Revenue [2015] NSWCATAD 237

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

Dean v Commissioner of Stamp Duties (Qld) (No 2) [1996] 2 Qd R 557

Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503

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

Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; 79 NSWLR 724

Raissis v Chief Commissioner of State Revenue [2022] NSWCATAD 146

Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160

Texts Cited:

None Cited

Category:

Principal judgment

Parties:

Joseph Andrew Fava (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Self Represented (Applicant)
Crown Solicitor (Respondent)

File Number(s):

2024/00245777

Publication restriction:

N/A

REASONS FOR DECISION

1. This is an application for administrative review of a decision of the Chief Commissioner of State Revenue (“the respondent” or “the Commissioner”) to reverse the exemption from stamp duty under the First Home Buyer’s Assistance Scheme (“FHBA Scheme”) which was granted to the applicant, Mr Joseph Fava (“Mr Fava”) for the purchase of a property at Rooty Hill, New South Wales (“the property”). The application is made pursuant to 96 of the Taxation Administration Act 1996 (NSW) (TA Act).

2. Mr Fava entered into a contract for sale of the property on 16 June 2019. The contact of sale was stamped exempt pursuant to the FHBA Scheme. Settlement of the property occurred on 29 July 2019.

3. On 23 January 2024 the Commissioner issued a Notice of Investigation to Mr Fava to determine if the residency requirements had been satisfied. Mr Fava provided the Commissioner with responses, material and information as requested. On 14 February 2024 Commissioner determined that Mr Fava failed to meet the residency requirements and re-assessed duty with applicable late payment interest and penalty tax (“the decision”) as:

1. Duty: $23 635

2. Late payment interest: $7 836.21

3. Penalty tax: $5 903.75

4. Total: $37 374.96

4. On 15 March 2024, Mr Fava objected to the decision and on 9 May 2024 the respondent confirmed its decision. Mr Fava seeks administrative review of the Chief Commissioner’s decision.

5. The Tribunal’s task is to decide the correct and preferable decision having regard to the material before it; Administrative Decision Review Act 1997 (NSW) (ADR Act).For the reasons which follow I have concluded that the Chief Commissioner’s decision was the correct and preferable decision and that it must be affirmed.

Issues for consideration

6. Under the FHBA Scheme, an exemption from duty is made available to assist people who are purchasing their first home. A condition of the exemption is set out in section 76(1) of the Duties Act 1997 (NSW) (“Duties Act”) as the “residence requirement”. 

7. The requirement is:

… occupied by the first home owner as their principal place of residence for a continuous period of at least 6 months, with that occupation commencing within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer.

8. The issues for determination are whether Mr Fava occupied the property for a continuous period of at least 6 months within 12 months after settlement. If the answer to that question is yes, the second question is whether the property was occupied by Mr Fava as his principal place of residence.

Evidence before the Tribunal

9. Mr Fava relied on his Application (with an attached statement and documents) and a bundle of documents that included some photographs and invoices. The respondent relied on material filed pursuant to s 58 of the Administrative Decisions Review Act 1997 (NSW).

10. The facts before the Tribunal were not in significant dispute. Mr Fava moved into the property on 29 July 2019, which was within 12 months of completion of the transfer of title to the property to him; that having occurred on 29 July 2019.

11. That evening he had a family gathering to celebrate his achievement of owning his first home, He had sufficient furniture to furnish the property. Water and electricity were connected to the property.

12. Mr Fava furnished the property with a lounge, bed, television, table and chairs, washing machine and kitchen utensils. Mr Fava kept his clothes at the property.

13. His father helped him to build a shed on the property to store the lawn mower and other materials on around 7 October 2019.

14. Two weeks after moving into the property the hot water system failed. Mr Fava did not replace the hot water system and from this time took showers at his parent’s home on a daily basis. His parents did his washing, and he had many meals at his parent’s home. Otherwise he purchased take away food and did not cook at the property. Mr Fava’s water and electricity bills showed minimum use of the facilities.

15. Mr Fava slept at the property every night but was rarely at home as he worked long hours and had a busy social schedule. He did not entertain at the property.

16. On 28 January 2020, (a few days before the 6 months period of occupation), Mr Fava signed an agreement with a real estate agent for the property to be leased out. On 5 February 2020 he purchased and had installed a new hot water system for $1 358.50

17. Mr Fava moved out of the property on 15 February 2020, shortly after the 6 months period of occupation.

18. Mr Fava listed the address of the property on the electoral roll on 3 November 2019 and with Transport NSW from 15 August 2019. He also took out an insurance for the property.

19. Mr Fava failed to change his address from his prior address, which was his family home with Westpac, the Australian Tax Office and NRMA. He stated that it was an error to not change his address details.

20. Mr Fava organised for online purchases to be delivered to his parents’ address because some neighbours told him that parcels had been stolen in the past.

21. Mr Fava stated that “due to financial strains and other personal circumstances, I then decided it was best to move out of the property and move back with my parents to help me pay for the mortgage moving forward. I saved enough money to pay for a new hot water system so that I could then rent the property out..”

Applicant’s Case

22. The applicant’s case was that had intended to live in the property as his principal place of residence but re-paying the mortgage was causing him to experience financial strain which led to mental strain. He could not afford to replace the hot water system when it broke in or around August 2019 and decided sometime during the 6 months period to move back home with his parents and rent the property to assist with the mortgage repayments.

Respondent’s Case

23. The respondent’s case was the Mr Fava did not occupy the property because he merely slept there and that there was no evidence from the applicant that he had an intention to use the property as his principal place of residence as he decided to lease the property as soon as the relevant period ended and he replaced the hot water system for the purpose of renting out the property.

24. The respondent also placed significant importance on the fact that the use of water and electricity were very low, and that the applicant had not changed his home address with certain organisations.

Consideration

25. In construing the language of the relevant provision, it is necessary to have regard to its context and purpose. It is necessary to consider the words of s 76 in the context (in particular) of Division 1 of Part 8 of Chapter 2 as a whole, and to construe the language of the section so as to ensure consistency between all of the provision in the Duties Act more generally; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 [39].

26. The purpose of the FHBA Scheme is to help people to a acquire their first home to live in. It is not the purpose of the FHBA Scheme to help people acquire an investment property as their first purchase of residential property: ss 69, 74 and 80A of the Duties Act. The “residence requirement” in s 76, as it applied at the time required the property to be occupied during the relevant period, which was six months as the principal place of residence of the applicant.

27. Under section 100(3) of the TA Act, the applicant has the onus of proving their case on the balance of probabilities. That is, the applicant must satisfy the Tribunal that he is entitled to the exemption.

28. The question before the Tribunal is whether the applicant’s occupation of the property was sufficient to constitute occupation as a principal place of residence.

Dates of occupation

29. Mr Fava’s evidence was that he moved into the property on 29 July 2019 and moved out of the property on 15 February 2020. There was no challenge to this evidence during cross examination. These dates satisfy the minimum 6 months continuous occupation of the home “within the 12 months … after completion of the agreement or transfer”.

Principal place of residence

30. The respondent submitted that the property was not the applicant’s principal place of residence because there was not “a degree of permanence to it” and that the connection to the property was “transient, temporary, contingent or passing nature” Chief Commissioner of State Revenue v Ferrington (GD) (2004) NSWADTAP 41 (“Ferrington”) at [53].

31. Ferrington must be read with care as it was considering legislation that did not require an occupation for a continuous period of at least 6 months. Section 12 of the First Home Owners Grant Act 2000 required the person to “occupy the home to which the application relates as the applicant’s principal place of residence within twelve months.” There was no minimum period.

32. In Ferrington, at first instance and on appeal before the Appeal Panel, the Tribunal set aside the decision of the Commissioner reversing the decision to grant to the taxpayer the exemption. In that case, Ms Ferrington only occupied the property for 23 days, she moved back into her parent’s home, where she lived previously and rented the place to tenants. However the Tribunal, after considering Ms Ferrington’s “circumstances leading up to, during and subsequent to the period of occupation” found that she “took significant steps which were confirmatory of that intention (to live in the property as her principal place of residence)” [46]. Importantly, the respondent did not dispute her intention [46].

33. The term “principal place of residence” is not defined in the Duties Act. In Ferrington the Appeal Panel stated that in determining whether a property is a person’s principal place of residence, the assessment is to be undertaken on an objective basis and principal place of residence is to be given its ordinary meaning [51(1) and (2)].

34. At [51(3)] the Appeal Panel stated that the occupancy “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.” In Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160, the Tribunal, in reliance on Dean v Commissioner of Stamp Duties (Qld) (No 2) [1996] 2 Qd R 557 , stated that the conclusion is “determined by considering the extent and quality of the use of the residence”.

35. There needs to be a degree of permanence or long-term commitment to the property: Bulgak v Chief Commissioner of State Revenue [2015] NSWCATAD 237 (“Bulgak”)[96]. In Bulgak, the applicant used the property for little more than sleeping. The use of electricity was low. The applicant left early in the morning and returned late at night. For some of the time, the applicant was sleeping on outdoor furniture and or pillows. The property was tenanted for some of the time. There was no functioning toilet as the applicant was renovating the property. The applicant renovated the property with “ornate cornices, feature tiling and a fireplace to suit his taste.” [125] The applicant did not tenant the property after the six months period.

36. In Bulgak, the Tribunal accepted at [149] that:

… ordinarily a hallmark of the use of a residence that the inhabitants use the bathroom. However, I also accept that in the ordinary course of the use of any residence as a principal place of residence, from time to time the occupants may need to regularly use bathroom facilities elsewhere, say at their place of work or at a gym or at a neighbour’s house, particularly in circumstances where they are undertaking renovations.

37. In Khalil v Chief Commissioner of State Revenue [2011] NSWADT 276 the homeowner rented the property to other people, while also residing at the property and admitted that he only ever intended to stay at the property for six months. At paragraphs [35]-[36] it was stated:

In my opinion, the applicant also did not satisfy the second test to comply with the 'residence requirement'. The various indicia referred to in the cases require more than merely sleeping at the property to satisfy this test. In this matter, on the applicant's own evidence was that "he had intended to stay at the property for about six months" and then move back to his parents' house. Against the background, that he had let the property on a lease soon after its purchase and continues to lease the property to Ms Ali, the only reasonable inference that can be made is that he purchased the property as an investment property and not as a property for its occupation as his home.

His effort to satisfy the residence requirement was fairly structured when viewed against all the evidence. There was no element of permanence in the stay. The stay was not for purposes of establishing his principal place of residence but as observed by the Appeal Panel in Ferrington "for some other purpose". Here that other purpose was to be able to get the grant and the First Home Plus Concession. The six months rule was introduced because there were cases where after short periods of some days applicants moved out of the properties on various grounds and were able retain the grant. The six months period, although an arbitrary period, allows a fairer assessment of the nature and quality of the occupation of a property by an applicant. In this matter, the evidence was very clear that the applicant had no intention of making the property his principal place of residence and perhaps got the impression that by merely sleeping at the place for six months the 'residence requirement' would be satisfied. An applicant has to do more to establish that a property was occupied as his or her principal place of residence. His claim that he occupied the property as his principal place of residence must also fail.

38. I consider that the Tribunal may consider the periods before and after the occupation of the property for the purpose of determining whether the property was used as the person’s place of residence during the relevant time: Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867; 79 NSWLR 724 [4] referred to in Raissis v Chief Commissioner of State Revenue [2022] NSWCATAD 146 [61].

39. The respondent submitted that the applicant did not have an intention to reside at the property as a permanent place of residency but intended to reside there for the required residency period to obtain the FHBA Scheme and as such did not occupy it as a principal place of residence. The respondent pointed to the fact that the applicant signed an agreement with a real estate agent for the leasing of the property on 28 January 2020 and only replaced the hot water system on 5 February 2020.

40. The onus placed on the applicant in these proceedings required him to bring evidence to support his assertions. A critical assertion was that he could not afford to purchase a new hot water system in August-September 2019 and could only do so in February 2020 after he saved money.

41. The evidence in regard to Mr Fava’s salary, tax returns and bank statements was in evidence. Based on the material before the Tribunal the following observations can be made; there were no significant changes to Mr Fava’s salary between late 2019 and early 2020. Mr Fava had more money in his bank accounts in late 2019 than he did in early 2020. The cost of the new hot water system was less than $1 500. Mr Fava had savings in the bank exceeding $2 000 in late 2019.

42. Based on the contemporaneous documents before the Tribunal, I do not accept Mr Fava’s evidence that he could not afford a new hot water system in late 2019. There is no evidence of any savings made by Mr Fava from late 2019 onwards. There was no explanation as to how Mr Fava saved $1 358.50 for the purchase and installation of the hot water system. There was no change to his financial circumstances from the time he moved into the property to when he decided to move out.

43. I find, based on the evidence before the Tribunal, that Mr Fava’s decision to not replace the hot water system when it broke down demonstrated his lack of permanence to the property within the 6 months period.

44. Mr Fava decided that he would forgo being able to shower or have access to hot water at the property for about 6 months. I consider the use of a bathroom to an essential part of a home. I find that an inference is open to the Tribunal to make that Mr Fava slept in the property for just over 6 months merely to satisfy the period of occupation but he did it on a temporary or transient basis.

45. Mr Fava admitted that he decided to replace the hot water system once he decided to move out of the property and rent it out. This is compelling evidence that he did not, during the six months period have a connection to the property as a home. I do not find on the evidence that there was the necessary characteristics of permanence attached to Mr Fava’s occupation of the property.

46. The facts in this case can be distinguished from those in Bulgak as Mr Fava was not making any improvements or renovations to the property. There was no conduct by Mr Fava, considered on an objective basis which demonstrated his connection to the property.

47. I do not place much weight on the fact that Mr Fava failed to update his address with his bank, car insurance and ATO. I take into account Mr Fava’s lifestyle and his cultural and family background. I accept that Mr Fava worked long hours and did not use the kitchen for cooking meals. This lifestyle is reflected by the evidence before the Tribunal of Mr Fava purchasing readymade food. It is also reflected in the low use of electricity and water. .I do not consider, in this case, that Mr Fava’s lack of entertaining, eating at his parent’s home on a regular basis and posting online purchases to his family home as being indicative of lacking a connection to the property.

48. In making this finding, I accept that practically speaking Mr Fava would be without a principal place of residence for the six months period as I do not consider that his parent’s home was his principal place of residence.

Penalty Tax and Interest

49. The decision under review made by the Commissioner includes an imposition of a penalty tax pursuant to s 27 of the TA Act as there was a tax default. Mr Fava did not seek a remission of the penalty tax and did not make any submissions as to why the penalty should be reduced or remitted. I consider in these circumstances the correct and preferable decision is for the Commissioner’s decision to be affirmed.

49. Both market and premium interest was imposed by the Commissioner. Section 21 of the TA Act provides that a taxpayer is liable to pay interest on the amount of unpaid tax. As with the penalty tax, Mr Fava did not put forward any evidence or submission as to why the interest should be reduced or remitted. I consider in these circumstances the correct and preferable decision is for the Commissioner’s decision to be affirmed.

Conclusion

51. When Mr Fava moved into the property, he took from his family home all of his personal items and furniture that he had acquired when he lived with his parents. He resided only at the property during the relevant period. Whilst he did not use the address of the property as his address for online purchases, he explained that this was so given the lack of security of the mailbox. He said he forgot to change his nominated address on some documents. I accept his evidence. Further, he nominated the property as his residential address on AEC records and on his Transport record.

52. Mr Fava worked long hours each day. After work he played sport and socialised with friends away from the property. He often went to his parent’s home for evening meals. He purchased take away food at his workplace or to consume at the property. He did not socialise at the property. Due to the lack of hot water, he did not use the bathroom to any great degree and showered at his parent’s home on a daily basis. Essentially, he used the property for sleeping.

53. I accept that the applicant’s lack of cooking and socialising is to be seen in the context of his background and lifestyle. He worked long hours and socialised away from his home. I consider that these aspects of his lifestyle continued from when he lived with his parents.

54. Mr Fava did not renovate the property and did let the property fall into a certain state of disrepair. He did not replace the hot water system. He did not water the garden. His financial situation did not change from the time he purchased the property to the time he decided to move out of the property, which was sometime within the six months period. He decided to replace the hot water system after he decided to move out of the property and rent it out to tenants.

55. The question as to whether or not Mr Fava resided in the property as his principal place of residence is a question of fact, to be determined on an objective basis. In all the circumstances, I find that Mr Fava has not established that he did reside in the property during the relevant period as his principal place of residence.

56. Having regard to the above findings on the material before me, the correct and preferable decision is to make the order below.

Orders

57. I make the following order:

1. The decision made by the Respondent on 14 February 2024 is affirmed.

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

Registrar

Decision last updated: 03 December 2024