Gangemi v Chief Commissioner of State Revenue

[2008] NSWADT 194

CITATION:	Gangemi v Chief Commissioner of State Revenue [2008] NSWADT 194
DIVISION:	Revenue Division
PARTIES:	APPLICANTS Joseph Isidoro Gangemi Yvonne Dawn Gangemi RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086011
HEARING DATES:	30 June 2008
SUBMISSIONS CLOSED:	30 June 2008
DATE OF DECISION:	18 July 2008
BEFORE:	Block J - ADCJ (Judicial Member)
CATCHWORDS:	Land tax - assessment of interest
MATTER FOR DECISION:	Application for remission of interest at the market rate on land tax for the 2006 year
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125; Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151; De Carle v Chief Commissioner of State Revenue [2008] NSWADT 9; Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19; Giunta v. Chief Commissioner of State Revenue (RD)[2005]NSW ADTAP 11; Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT; Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21; Downs v. Chief Commissioner of State Revenue [2002] NSWADT 51; Olah v. Chief Commissioner of State Revenue [2002] NSWADT 22; Macsif Pty Ltd v. Chief Commissioner of State Revenue [2007] NSWADT 116.
REPRESENTATION:	In person A Champion, solicitor
ORDERS:	The decision under review is affirmed

Part A; Introduction.

1 The decision under review relates to interest charged on land tax levied under the Land Tax Management Act 1956 (NSW) ("LTMA") in respect of the property at 4 Wayfield Road, Glenhaven, New South Wales ("the property" or "the subject property") for the 2006 and 2007 land tax years (collectively "the relevant years"). Each individual relevant year is referred to by reference to the actual year and being, by way of example, the 2006 year.

2 The Applicants did not object to the actual land tax imposed in respect of the relevant years. The only issue between the parties relates to interest for the 2006 year only, and confined in respect of the 2006 year to the market rate, the premium rate having been remitted. No interest at all was charged in respect of the 2007 year.

3 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act, and in addition written submissions by the parties. As will be noted, the Tribunal has drawn to some considerable extent on the written submissions furnished by the Respondent.

4 There are in fact two Applicants, who were represented by Dr. Gangemi, who is one of the Applicants, and who is referred to individually (unless the context expressly otherwise requires) as "the Applicant". In some cases the Respondent is referred to as the “Chief Commissioner” and so that these terms should be regarded as interchangeable.

5 It is convenient in the first instance to draw on the Respondent’s submissions under the head of “Background” and as to which there does not appear to be any dispute; accordingly clauses 3 to 10 of the Respondent’s submissions, (but without footnotes), read as follows: --

3 On 13 November 2007, the Chief Commissioner issued to the Applicants a land tax Notice of Assessment requiring the payment in the amount of $71,666.55 in respect of the 2006 and 2007 land tax Years, in relation to the subject property. The Applicants were granted the principal place of residence exemption with respect to their property at 617 Old Northern Road, Glenhaven NSW (which has a frontage at 2 Wayfield Rd, Glenhaven NSW). The Chief Commissioner enclosed with the Notice of Assessment, a Land Tax Variation Return Form and a Land Tax Factsheet.' The 2006 Assessment included a $7,619.95 component for `Interest on Late Lodgement', but remitted $4,368.67, bringing the figure to a market rate of $3,251.28 outstanding. There was no interest applied to the 2007 assessment.

4 On 21 November 2007, the Applicants wrote to the Chief Commissioner, objecting to the interest component of the 2006 assessment. The Chief Commissioner treated that letter as an objection and proceeded to make a determination. In the objection, the Applicants stated that they were not at fault for the late payment of land tax for 2006, as they were never served with a Notice of Assessment prior to the instant one. The Applicants stated they were never before notified by the Chief Commissioner in relation to land tax over the subject property, and that all required steps were taken at settlement. Their solicitors advised that the Chief Commissioner should have issued assessment notices after the purchase of the property in 2005. The Applicants stated that they were willing to pay land tax for the 2006 and 2007 land tax years, but not willing to pay interest on late payment.

5 On 18 December 2007, the Applicants wrote again to the Chief Commissioner, and enclosed a personal cheque for payments of the 2006 and 2007 land tax assessments, with the exclusion of monies to cover the interest applied to the 2006 assessment.

6 On 2 January 2008, the Chief Commissioner disallowed the Applicant's objection. In his letter to the Applicants, the Chief Commissioner referred to s. 12(1) of the LTMA which provides that the land owner or their agent bear the onus to lodge land tax returns with the Office of State Revenue. The Chief Commissioner noted that the Applicant's had become liable for land tax as of midnight 31 December 2005, and the due date for the return is 30 April of each year. The onus, pursuant to s.12 of the LIMA, was on the Applicants to lodge that initial return by 30 April 2006.

7 The Chief Commissioner noted in the letter to the Applicants that the LTMA and the Tax Administration Act 1996 ("TA Act') require the imposition of interest and penalty tax upon a failure to lodge a relevant return by the due date. Interest was imposed for late lodgement, and then reduced to the market rate component. The Chief Commissioner advised that with a view to fairness to all taxpayers, remitting the market rate of interest in this case was not warranted.

8 On 23 January 2008 the Applicants again wrote to the Chief Commissioner, noting that it is the responsibility of the Office of State Revenue to react and contact a purchaser after a property is purchased, supplying the purchaser with the relevant documentation so as an assessment may be commenced. The Applicants argued that there is no consistency in the manner taxpayers are treated by the Office, and that they are not tax defaulters, given that they paid in December 2007 a Notice of Assessment issued only in November 2007.

9 On 6 February 2008, the Applicants filed an Application for Review in the Administrative Decisions Tribunal, challenging the decision of the Chief Commissioner to impose interest on the 2006 land tax assessment. The Applicants do not challenge their liability to pay land tax for either the 2006 or 2007 land tax years.

10 On 14 March 2008, the Applicant paid to the Chief Commissioner, $3251.28 being the amount of interest in dispute. The Applicant seeks reimbursement of this amount.

6 The Applicant said (and I am quoting from his actual words which I took down as he said them): --

In the past I have always received an account from the land tax office and here there has been a delay of two years - the part that is contradictory is that the onus is on the landowner. If a landowner does not lodge a return then the land owner is in default -- this seems to be a contradiction with respect to a non-legal interpretation of the word "default". My understanding of a landowner’s obligation is that I am to furnish a return as acquired by the Act (section 72 (1)) and if I don't furnish such a return and then I come into default. But before I can be in default seemingly in failing to lodge a return under section 12(1)(a) of the act, section 12 (1) provides that the Commissioner can publish by order in the Gazette, which as I have already explained, lay people do not read on a regular basis. I think that the operative word is the word "may". I think I am trying to say that under section 12(1) (a) he has to lodge a return and under section 12 (1) the Commissioner may publish in the Gazette. My problem is imposed when I buy land -- this time it took the Commissioner two years to charge me interest. As a lay person I find it hard to accept. Lay people need to have confidence that the system is workable. Legal submissions have been made but I did not understand them. I am not in a position to give an opinion on the legal aspects as such. Why was I not set an account? Is this inefficiency or what?

7 The Applicant said that he had received advice from a solicitor (who practices in Castle Hill) as to his legal position. He said that the Applicants have purchased other property over a number of years and in particular through companies. The subject property is in fact next door to the residence in which the Applicants reside and in respect of which they claimed the principal place of residence exemption.

8 The Applicant said that whenever real property is purchased notice is given to all of the authorities who will render accounts. He said also that whenever a person purchases property the Respondent's sends that person a form. (As to what precisely was meant in this latter context was not clear).

9 Ms. Champion explained that whenever real property is purchased, a notice is given to the Land Titles Office and which furnishes inter alia the name or names of the purchaser and the price. This is done in particular because it enables the local council to send rates notices thereafter to the new owner. The Respondent is of course aware of the purchase because he receives the relevant duty which is payable in respect of the sale. The Respondent does not and cannot know whether the subject property will be occupied the purchaser or by contrast leased out to tenants. The Respondent may thereafter send out questionnaires designed to elicit this information.

10 It is of course clear that the entire process is one of self-assessment. The Applicants were obliged to furnish land tax returns and they did not do so. The Tribunal notes that the Applicants have considerable experience in real property and would have known that this is so. This is all the more the case when it is remembered that the Applicants, as set out previously, obtained legal advice.

Part C; the relevant legislation

11 Here too it is convenient to draw on the Respondent’s submissions; (without footnotes) clauses 11 to 16 read as follows:

11 In accordance with s. 100(3) of the TA Act, the onus is on the Applicant to prove their case in these proceedings.

12 Section 21(1) in Pt 5 of the TA Act provides that if a "tax default" occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment, until the day it is paid, at the interest rate from time to time applying under Pt 5 Div 1 of the TA Act. Section 3 of the TA Act provides that a tax default means "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". Where a tax default occurs, a taxpayer is also liable to pay penalty tax in addition to the amount of tax unpaid (pursuant to s. 26(1) of the TA Act).

13 In accordance with s. 12 of the LIMA, taxpayers are required to furnish land tax returns to the Chief Commissioner. As at the relevant time of 31 December 2005, s.12 provided:

12. Taxpayer to furnish returns

(1). The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year.

(1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year.

(1B) A land tax return required to be furnished by a person must:

(a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and

(b) set out, or be accompanied by, such information as to the person's land ownership as may be required to complete the return.

(1C) If land is the subject of a trust, the land tax return must also:

(a) set out, or be accompanied by, such information in relation to the trust and the beneficiaries of the trust as may be required to complete the return, and

(b) state the trustee's opinion as to whether the trust is a special trust.

(ID) If 2 or more trustees are legal owners of the land that is the subject of the trust, the return is to be lodged jointly by those trustees.

(2) The Chief Commissioner may at any time require any person to furnish a return or a further and fuller return setting forth a full and complete statement of all or any land owned by the person, or in respect of which the person is agent or trustee, at midnight on the thirty-first day of December in any year including the year one thousand nine hundred and seventy-three or at midnight on the thirty-first day of October in any preceding year, with such other particulars as the Chief Commissioner requires, and whether or not any return has previously been made by that person in respect of land owned by the person, or in respect of which the person is agent or trustee, on that date.

(3)All the provisions of this Act shall extend and apply to any return made or required in accordance with subsection (2)."

14. Section 72(1) of the LTMA provides that a taxpayer who "fails or neglects duly to furnish any return or information as and when required by this Act or the Chief Commissioner, or who fails to include in any return any land owned by the taxpayer, is taken to have committed a tax default for the purposes of Part 5" of the TA Act. Pursuant to s. 72(2) of the LTMA, in relation to the tax default:

"(a) interest is payable in accordance with Part 5 of the Taxation Administration Act 1996 but accrues on the amount of land tax assessable to the taxpayer for the period commencing on the last day allowed for furnishing the return or information, or the correct particulars of land ownership, and ending on:

(i) the day on which the return or information is furnished or the correct particulars are furnished, or

(ii) the day on which the assessment calculated on the basis of the return or information that is required, or the correct particulars that are required, is made, or

(iii) the day on which the whole of the land tax assessable to the person is paid,

whichever occurs first, and

(b) penalty tax is payable in accordance with Part 5 of the TaxationAdministration Act 1996 on the amount of tax unpaid."

15 As for the rate of interest that applies under Pt 5 Div 1 of the TA Act, s. 22(1) provides that the interest rate is the sum of the market rate component and the premium component, as follows:

Interest rate

(1) The interest rate is the sum of:

the market rate component, and

the premium component.

(2) The market rate component is:

unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or

the rate specified for the time being by order of the Minister published in the Gazette.

The premium component is 8% per annum.

In this section, the Bank Accepted Bill rate in respect of any day is the yield rate for 90-day Bank Accepted Bills published by the Reserve Bank for the month of May in the financial year preceding the financial year in which the day occurs."

16 Pursuant to s. 25 of the TA Act, the Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the interest payable in respect of a tax default.

1. Chief Commissioner's obligation to issue Notice of assessment

Notwithstanding that s. 12 of the LTMA provides only that the Chief Commissioner may publish in the Gazette an order requiring all persons to furnish land tax returns for specified years, and that s. 12(1A) requires that every person subject to the requirement, shall furnish a land tax return regarding all land tax owed, s. 14 directs that the Chief Commissioner shall, whether or not any return has been furnished, cause an Assessment to be made of the land tax payable. This creates an implicit or positive obligation upon the Chief Commissioner to make an assessment of liability.

A Notice of Sale, to which the Chief Commissioner had access at all times after registration of title, was provided to Land and Property Information upon filing of the Transfer of Title following settlement on the subject property in June 2005.

2. Time at which interest may be imposed

Section 39 of the LTMA provides that land tax is payable as required by the relevant Notice of Assessment and no payment is required sooner than 30 days after service of the Notice of Assessment. The relevant Notice of Assessment in this matter is dated 13 November 2007, so no payment was required before 3 December 2007, or within 30 days of service of that Notice of Assessment.

Further, the Notice of Assessment itself states that interest will only be imposed on outstanding or overdue accounts, and pursuant to s. 39, the account can only be deemed outstanding after 30 days following service of the Notice.

Section 21 if the TA Act provides that interest is only charged following tax default, and is calculated to commence at the end of the last day for payment. In this case the last day for payment is no earlier than 3 December 2007, or 30 days following service of the Notice of Assessment. Therefore, there is no provision for the calculation of interest prior to the issue of the Notice of Assessment unless there is a tax default.

Interest applied to a Notice of Assessment pursuant to s.15 of the TA Act can only be so applied following a tax default. Pursuant to the definition of "tax default" in s.3 of the TA Act, such cannot occur until 30 days after service of the Notice of Assessment.

The Chief Commissioner may only apply interest after a tax default, and given that the Applicant has 30 days from the service of the Notice of Assessment, no default of payment occurred and therefore no interest is payable.

12 The total amount of interest payable in this matter in respect of the 2006 year would, but for the fact that premium rate interest has been remitted be $7,619.95. However, the Chief Commissioner remitted the premium rate, leaving an interest liability of only $3,251.28. The Applicants subsequently paid the latter amount, in relation to which they now seek reimbursement, for the reasons outlined in their submissions. As set out previously no interest at all was levied for the 2007 year.

13 Section 12 of the LTMA clearly provides that the burden of lodging a land tax return on or before the due date is placed upon the taxpayer; (see Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125, at para. [14]). That requirement applies indiscriminately to all taxpayers. It is noted that in this case, the Applicants employed the services of a solicitor to assist with matters in relation to the property and its purchase.

14 The requirement in s. 14 of the LTMA that the Chief Commissioner cause an assessment to be made, does not remove a taxpayer's obligation under s.12 to furnish land tax returns each year in which they are liable to pay.

15 In Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151, I stated as follows (at para. [16]):

"The complaints by the Applicant as to non-notification by the Respondent are without foundation. The [LTMA] Act is framed on the basis of owners of land or [sic] obliged to furnish returns; the Tribunal refers in particular but not only to section 12 of the Act."
See further De Carle v Chief Commissioner of State Revenue [2008] NSWADT 9.

16 The Applicants' reference to s. 39 of the LTMA does not assist their case. That section is concerned with payment of the amount of land tax imposed as set out in an Assessment issued by the Chief Commissioner. Section 39 concerns the date at which payment of land tax is required, rather than the date at which a tax default occurs. Section 39 does not, in any way, affect the requirement in s. 12 that taxpayers lodge a land tax return on or before the due date.

17 The Chief Commissioner has imposed, taking into account the remission of premium rate interest, a market rate of interest with respect to the 2006 land tax year as a result of the Applicants' failure to lodge a return with the Chief Commissioner, as required under s.12 of the LTMA.' Pursuant to s. 72 of the LTMA, such failure to lodge a land tax return will occasion a "tax default", and once the default occurs the taxpayer is liable to pay interest on the amount of land tax assessable, such calculation to commence on the last day allowed for the furnishing of the return.

18 The relevant principles governing the imposition and remission of market interest were considered by the Appeal Panel of this Tribunal in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19 ("Incise Technologies"); [60] the Appeal Panel ruled:

"In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see 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. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation." (emphasis added)
See also Giunta v. Chief Commissioner of State Revenue (RD) [2005] NSW ADTAP 11, at paras, of paras. [21] and [25].

19 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, Verick JM stated as follows in relation to the imposition and remission of the market rate interest (at paras. [25] & [27]):

"25 The market rate component would reflect the use by the party in question of the relevant amount of money on one hand, and the lack of use of the relevant funds by the state on the other. But the fixed premium rate component is a rate imposed by way of a penalty for the 'tax default' in question. A premium rate of interest is imposed where a 'tax default' is a result of some culpable conduct on the part of the taxpayer. The Chief Commissioner can also impose a penalty tax under s 26 of the TA Act in cases where more serious tax defaults occur due to deliberate conduct of taxpayers.

27 In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the 'tax default' is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes)." (emphasis added)

The Chief Commissioner remitted the premium rate component of interest: see Tab 1 of the s. 58 Documents.

20 See also Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21 at para. [8], Downs v. Chief Commissioner of State Revenue [2002] NSWADT 51, at para [30], Olah v. Chief Commissioner of State Revenue [2002] NSWADT 22, at para. [30] and Macsif Pty Ltd v. Chief Commissioner of State Revenue [2007] NSWADT 116, at para. [22], particularly in relation to the principle that "exceptional circumstances" will be required to justify a remission of market rate interest.

Part E CONCLUSION

21 Consistently with the principles set out in the cases referred to in the preceding Part, the Chief Commissioner's decision to impose interest, and at the market rate only, in respect of the 2006 year was in fact generous and cannot be faulted... Despite the assertions made by the Applicants, the onus is on the taxpayer to lodge a tax return with respect to the properties he or she owns. The Applicants failed to do so. Further, having regard to the cases referred to in the preceding Part, there are no exceptional circumstances which would justify remission of the market rate of interest imposed. Nor can it be said that the taxpayer's tax default arose through some fault of the Chief Commissioner.

22 At the risk of labouring the point the Applicants are experienced in respect of real property and moreover had legal advice although the value of that legal advice (and the Tribunal does not know exactly what advice was obtained) may have been of doubtful value. In this case there was a clear default by the Applicants who were obliged to furnish returns and did not do so; the fact that they received an assessment after the lapse of two years is in no way relevant. The subject property was rented out from the time of its purchase and clearly attracted land tax from the outset. The Respondent saw fit not only to remit the premium rate interest in respect of the 2006 year and thus in that 2006 year levy the market rate only but, and even more generously did not impose any interest at all for the 2007 year. This application by the Applicants was always hopeless and considerable trouble and expense and time might have been saved if this had been made clear at the directions hearing stage or if mention was made at that stage the Applicants have not heeded it

23 Accordingly the objection decision under review must be affirmed.