Gomez-Martinez v Chief Commissioner of State Revenue

[2007] NSWADT 251

CITATION:	Gomez-Martinez v Chief Commissioner of State Revneue [2007] NSWADT 251
DIVISION:	Revenue Division
PARTIES:	APPLICANT Juan Manuel Gomez-Martinez RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	076089
HEARING DATES:	12 October 2007
SUBMISSIONS CLOSED:	12 October 2007
DATE OF DECISION:	16 October 2007
BEFORE:	Block J - ADCJ (Judicial Member)
CATCHWORDS:	Duties Act - First Home Plus Scheme - residence requirement - First Home Owners grant - reversal by administrator
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Duties Act 1997 First Home Owner Grant Act 2000
CASES CITED:	Giris Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia (1968) 119 CLR365 Federal Commissioner of Taxation v G.M. Swift and others 89 ATC 5101
REPRESENTATION:	APPLICANT In person RESPONDENT H El Hage, solicitor
ORDERS:	The decisions under review are affirmed

Part A Introduction

1 The Applicant, Mr. Juan Manuel Gomez-Martinez, seeks the review of a decision of the Chief Commissioner of State Revenue ("Chief Commissioner" or “Respondent”) requiring him to repay a First Home Owner Grant of $7,000.00 (the “Grant") issued under the First Home Owner Grant Act 2000 ("FHOG Act''), together with a penalty of 30% ($2100.00).

2 The Applicant also seeks the review of a decision of the Chief Commissioner to revoke the stamp duty exemption granted to him in accordance with the First Home Plus Concession Scheme ("FHP Concession” or the “Duty Concession”) under the Duties Act 1997 ("Duties Act''). The dutiable amount is $11,017.00.

3 The Grant and the Duty Concession relate to a townhouse and being Unit 4, 197 Epsom Road, Chipping Norton ("the property").

4 The dispute between the parties is as to whether the Applicant is entitled to an exemption from the residence requirement under the FHOG Act and the Duties Act.

5 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. It received in addition written submissions by the Respondent dated 28 September 2007 and it also received written submissions by the Applicant; the latter submissions are very lengthy indeed.

6 The Applicant was assisted by an interpreter in the Spanish language. It must be said however that the Applicant is so fluent in the English language that the services of the interpreter were hardly ever required.

7 It may be noted that the Applicant commenced with a lengthy explanation given from the bar table; that explanation took nearly two hours. That explanation then became his evidence in chief when Mr. El Hage indicated that he wished to ask the Applicant a few questions. The Applicant was then sworn as a witness on his own behalf and when he confirmed that the whole of his explanation was true and correct; thereafter the Applicant was cross-examined briefly. During his cross-examination the Tribunal accepted into evidence exhibit R1 which is a letter by BankWest dated 9 March 2006 and Exhibit R2 which is a New South Wales Police Service document as to certain aspects of the Applicant's driving record.

Part B. Factual Background

8 It is convenient at least by way of commencement to draw on the Respondent’s submissions under this head; they are contained in clauses 5 to 17 of the Respondent’s submissions which, without footnotes, are included as follows.

5 On 27 August 2005, the Applicant entered into a contract to purchase the property as sole owner. It is unclear precisely when settlement occurred. The Transfer of the property appears to have been registered on title on 13 October 2005.

6. On 5 September 2005, the vendors who sold the property to the Applicant entered into a Residential Tenancy Agreement with Mr and Mrs Khan to rent the property for the period 12 September 2005 until 11 September 2006. The Applicant states that the vendors received the rental income from the property until settlement, after which he became the recipient of the rent, as landlord. The property has been occupied by tenants since that time. The applicant has never occupied the property.

7 On 6 September 2005, the Grant was paid to the Applicant.

8 The Applicant was also granted the FHP Concession and the Transfer was stamped as being exempt from the payment of duty.

9 On 11 October 2005, the Applicant entered into a management agency agreement with Milleast Investments Pty Ltd (trading as Real Equity First National) in respect of the property.

10 On 12 October 2006, the Applicant lodged a statutory declaration with the Chief Commissioner declaring that he had occupied the property as his principal place of residence between 9 October 2005 and 1 May 2006.

11 Subsequent enquiries made on behalf of the Chief Commissioner revealed that, contrary to his statutory declaration, the Applicant had not occupied the property as his principal place of residence after his purchase. Accordingly, on 10 November 2006, the Chief Commissioner reversed the earlier decision to pay the Grant to the Applicant and imposed a 30% penalty ($2,100.00), as a result of the Applicant's failure to fulfil the residence requirement. The Chief Commissioner also reversed the decision to issue the FHP Concession and required the Applicant to pay duty in the amount of $11,017.00. The Chief Commissioner imposed interest in the amount of $1,440.17.

12 On 9 January 2007, the Applicant lodged an objection to the Chief Commissioner's decisions.

13 On 20 January 2007, the Applicant wrote to the Chief Commissioner setting out a number of matters in support of his objection.

14 On 25 January 2007 the Chief Commissioner disallowed the Applicant's objection to the decisions to recall the Grant and revoke the FHP Concession (although the full amount of the interest imposed with respect to the FHP Concession was remitted).

15 On 24 April 2007 the Chief Commissioner wrote a further letter to the Applicant confirming the earlier decision to disallow his objection.

16 On 29 June 2007, the Applicant filed an application for review in the Tribunal. The Chief Commissioner notes that the application for review appears to be out of time. Mr Gomez-Martinez has not applied for an extension of time within which to file the application for review. The Chief Commissioner does not consent or object to any such application for an extension of time.

17 In accordance with s. 28(3) of the FHOG Act, the onus is on the Applicant to establish that the Chief Commissioner's decision to recall the Grant should not be affirmed. In accordance with s. 100(3) of the Taxation Administration Act 1996 (NSW) ("TA Act"), the onus is on the Applicant to establish that the Chief Commissioner's decision to revoke the FHP Concession should not be affirmed.

9 Here too it is convenient to draw on the Respondent’s submissions which are particularly comprehensive under this head and are contained in clauses 18 to 34 reading as follows;

18. The purpose of the FHOG Act is set out in the Long Title, which provides as follows:
"An Act to encourage and assist home ownership, and to offset the effect of the Goods and Services Tax on the acquisition of a first home, by establishing a scheme for the payment of grants to first home owners; to amend the Stamp Duties Act 1920 to exempt such grants from financial institutions duty; and for other purposes."
19. The circumstances in which an Applicant is entitled to a First Home Owner Grant are set out in s. 7 of the FHOG Act. Section 7 provides (and provided at the relevant time):
"7 Entitlement to grant

(1) A first home owner grant is payable on an application under this Act if:

(a) the Applicant or, if there are 2 or more of them, each of the Applicants complies with the eligibility criteria, and

(b) the transaction for which the grant is sought:

(i) is an eligible transaction, and

(ii) has been completed.

(2) Despite sub-section (1) (a), an Applicant need not comply with the eligibility criteria to the extent the Applicant is exempted from compliance by section 8A (2), 9(2) or 12(2).

(3) Despite subsection (1) (b), a first home owner grant is payable before completion of the relevant eligible transaction, as authorised by section '20.

(4) Only one first home owner grant is payable for the same eligible transaction.

20. In the Applicant's case, the "eligible transaction" was a contract for the purchase of a home in New South Wales (see s. 13(1) (a)). The eligible transaction is taken to be completed when the purchaser becomes entitled to possession of the home under the contract and the purchaser's interest in the land comprised in the contract is registered (s. 13(5) (a)). The relevant provisions in s. 13 are as follows:
13 Eligible transactions

(1) An eligible transaction is:

(a) A contract made on or after 1 July 2000 for the purchase of a home in New South Wales, or

(b) a comprehensive home building contract made on or after 1 July 2000 by the owner of land in New South Wales, or by a person who will on completion of the contract be the owner of land in New South Wales, to have a home built on the land, or

(c) The building of a home in New South Wales by an owner builder if the building work commences on or after 1 July 2000.

(2) A contract is a contract for the purchase of a home if the contract is a contract for the acquisition of a relevant interest in land on which a home is or is to be built under the contract by or on behalf of the vendor.

…

(4) The commencement date of an eligible transaction is:

(a) in the case of a contract—the date when the contract is made, or

(b) in the case of the building of a home by an owner builder:

(i) the date when laying the foundations for the home commences, or

(ii) another date the Chief Commissioner considers appropriate in the circumstances of the case.

(5) An eligible transaction is completed when:

(a) in the case of a contract for the purchase of a home:

(i) the purchaser becomes entitled to possession of the home under the contract, and

(ii) except in the case of a terms contract, if the purchaser acquires an interest in land under the contract that is registrable under a law of the State - the purchaser's interest is registered under that law, or

(b) in the case of a contract to have a home built - the building is ready for occupation as a place of residence, or

(c) in the case of the building of a home by an owner builder -the building is ready for occupation as a place of residence."

21. For resent purposes, the relevant eligibility criterion is the fifth criterion set out in s. 12(1) of the FHOG Act. At the relevant time, s. 12 provided as follows:
" 12 Criterion 5 - Residence requirement

(1) An Applicant for a first homeowner grant must occupy the home to which the application relates as the Applicant's principal place of residence for a continuous period of at least 6 months.

(1A) However, if the Chief Commissioner is satisfied there are good reasons to do so, the Chief Commissioner may:

(i) approve a shorter period, or

(ii) exempt the Applicant from the requirement to comply with subsection (1).

(1B) The period of occupation required under subsection (1), or the shorter period approved under subsection (1A)(a), must start within 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner.

(2) If an application is made by joint Applicants and at least one (but not all) of the Applicants complies with the residence requirement, the non-complying Applicant or Applicants are exempted from compliance with the residence requirement."

22. In this case, the Grant was paid in accordance with s. 20 of the FHOG Act. Section 20(1)(b) provided at the relevant time that the Chief Commissioner may authorise the payment of a grant in anticipation of compliance with the residence requirement if the Chief Commissioner is satisfied that the Applicant who is required to comply, but has not complied, with the residence requirement, intends to occupy the home as his or her principal place of residence for a continuous period of at least 6 months commencing within twelve months after completion of the eligible transaction or a longer period approved by the Chief Commissioner. That is, under this provision, the Chief Commissioner is given power to issue a grant prior to an Applicant occupying the property as his or her principal place of residence.

23. Sub-section 20(3) of the FHOG Act provided at the relevant time that where a grant is paid in anticipation of compliance with the "residence requirement"

"the payment is made on condition that, if the residence requirement is not complied with, the Applicant must within 14 days after the end of the period allowed for compliance:

(a) give written notice of that fact to the Chief Commissioner; and

(b) repay the amount of the grant." (emphasis added)

24. The term "residence requirement" is defined in s. 3 of the FHOG Act in similar terms to s. 12(1). A failure to comply with the condition in s: 20(3) constitutes an offence, which is punishable by a maximum penalty of 50 penalty units: s. 20(4).

25.Section 23 of the FHOG Act provides the Chief Commissioner with power to vary or reverse a decision he has made in respect of an application for a grant where he is later satisfied that the decision is incorrect.

26 Section 44 of the FHOG Act provides (and provided at the relevant time):

" 44 Knowingly giving false or misleading information

(1) A person must not:

(a) make a statement, orally or in writing, to an authorised officer, or

(b) give information, orally or in writing, to an authorised officer, knowing that it is false or misleading in a material particular.

Maximum penalty: 100 penalty units.

(2) A person must not, in or in relation to an application for a first home owner grant, make a statement or give any information knowing that it is false or misleading in a material particular.

Maximum penalty: 100 penalty units."

27. Section 45 of the FHOG Act provides (and provided at the relevant time):
" 45 Power to require repayment and impose penalty

(1) The Chief Commissioner may, by written notice, require an Applicant (or former Applicant) for a first home owner grant to repay an amount paid on the application if:

(a) the amount was paid in error, or

(b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason.

(2) If, as a result of an Applicant's dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the Applicant is required to repay.

(3) If an Applicant (or former Applicant) for a first home owner grant fails to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the Applicant is required to repay.

(4) If an amount is paid in error on an application for a first home owner grant to a third party, the Chief Commissioner may, by written notice, require the third party to repay the amount to the Chief Commissioner."

28. The Tribunal has jurisdiction to determine this application by the operation of ss. 28(1) and 25 of the FHOG Act and s, 38 of the Administrative Decisions Tribunal Act 1997 .

The Duties Act

29. Under the FHP Concession scheme, an Applicant who satisfies the relevant criteria is entitled to an exemption from liability for duty in respect of certain "eligible agreements or transfers": see s. 80 of the Duties Act.

30. At the relevant time, ss. 69 and 70 of the Duties Act provided as follows:

" 69 The nature of the scheme

This scheme is intended to help people who are acquiring their first home. Under the scheme, the acquisition and any mortgage given to assist the financing of the acquisition is subject to a concession or exemption from duty.

70 Commencement

The following transactions and instruments are eligible for consideration under the scheme:

a) agreements for sale or transfer entered into on or after 4 April 2004,

b) transfers that occur on or after 4 April 2004 (other than transfers made in conformity with an agreement for sale or transfer entered into before 4 April 2004),

c) mortgages over land the subject of those agreements or transfers."

31. Relevantly, s. 74(1) dealt with eligible agreements or transfers as follows:
" 74 Eligible agreements or transfers

(1) The agreement or transfer must be for the acquisition of a first home or for the acquisition of a vacant block of residential land intended to be used as the site of a first home.

The agreement or transfer must be for the whole of the property.

The dutiable value of the dutiable property that is the subject of the agreement or transfer must be less than:

a) $600,000 if the property has a private dwelling built on it, or

b) $450,000 if the property comprises a vacant block of residential land.

Note. The dutiable value of dutiable property is the greater of:

a) the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non- monetary consideration), and

b) the unencumbered value of the dutiable property."

32. An Applicant under the FHP concession scheme must comply with s. 76, which, at the relevant time, provided as follows:
" 76 Residence requirement

(1) The home must be occupied by the person or persons who are acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as the residence requirement.

(2) The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case:

a) modify the residence requirement by approving a shorter period of occupation by the person or persons, or

b) exempt the person or persons from the requirement to comply with the residence requirement.

(3) In the case of an agreement or transfer for the acquisition of a vacant block of residential land, it is sufficient that the Chief Commissioner is satisfied that the vacant block is intended to be used as the site of a home to be occupied by the person or persons who are acquiring it as their principal place of residence.

(4) The residence requirement does not apply to a person who acquires an interest in the property concerned solely for the purpose of assisting the eligible persons under the scheme in financing the acquisition.

(5) For the purpose of this section, an agreement or transfer is completed when a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered.

(6) However, an agreement or transfer of a vacant block of residential land is not completed until the home intended to be built on the land is ready for occupation as a place of residence."

33 The FHP Concession in this case was approved by the Chief Commissioner in accordance with the provisions in s. 76A, which provided as follows at the relevant time:
" 76A Approval of application in advance of satisfaction of residence requirement

(1) The Chief Commissioner may approve an application in anticipation of compliance with the residence requirement under section 76 if the Chief Commissioner is satisfied that each Applicant required to comply with the residence requirement intends to occupy the home as his or her principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months after completion of the agreement or transfer or within a longer period approved by the Chief Commissioner.

(2) If an application is approved in anticipation of compliance with the residence requirement, the approval is given on condition that, if the residence requirement is not complied with, the Applicant must within 14 days after the end of the period allowed for compliance:

(a) give written notice of that fact to the Chief Commissioner, and

(b) pay the relevant duty to the Chief Commissioner.

(3) The relevant duty is the difference between the total amount of duty that would have been payable on the transactions and instruments the subject of the application, if they had not been eligible under the scheme, and the total amount of duty (if any) paid in respect of those transactions and instruments.

(4) person who fails to comply with the condition prescribed by this section is guilty of an offence.

Maximum penalty: 50 penalty units."

34. There is no dispute that the Tribunal has jurisdiction to review the Chief Commissioner's decision to revoke the FHP Concession: see Snow v. Chief Commissioner of State Revenue (No 2) [2005] NSWADT 278; see also Scurry v Chief Commissioner of State Revenue [2006] NSWADT 28, at para. [11.

10 The Applicant came to Australia from Colombia in 2002 as a skilled migrant. He has a degree in accountancy obtained at a university in Colombia in 1996. During his teenage years he spent some two years in the United States of America and which no doubt accounts for his fluency in English.

11 When the Applicant came to Australia, he was obliged at first to work as a bricklayer. By the time of the purchase of the property, he was employed as a financial officer by the University of Sydney, although in a position which was not permanent. The property was purchased by the Applicant at an auction on 27 August 2005. Although the Applicant had considered that his limit in respect of the property was $330,000 there was competition at the auction and in consequence of which the price paid by him was $345,000. The Applicant obtained a mortgage from Liberty Financial (“the first lender”) in an amount of $336,000 and in other words very nearly the whole of the purchase consideration. The first lender, so the Tribunal was informed, grants loans in amounts and to persons in excess of conventional limits and in particular as regards persons, to borrowers who might find it difficult if not impossible to obtain loans from the usual lending institutions on conventional terms. In this instance the loan was granted at an interest rate of 10.25% (and considerably in excess of the then applicable building society rate of approximately 6.5%) and on the basis that interest only would be payable for five years. Accordingly loan repayments of $3000 per month had to be made.

12 At the time of the purchase the Applicant was in a romantic relationship with a person who will be referred to in this decision as “Ms. V”. She is a speech therapist who also came to Australia from Colombia, although prior to the arrival of the Applicant.

13 As I have said the Applicant was at that time working for the University of Sydney as a financial officer but in a position which was not permanent. The Applicant had committed a number of driving offences and so much so that he was disqualified from driving. He said that it was anticipated that Ms. V would drive him from Chipping Norton, the suburb in which the property is situated, to the University of Sydney.

14 When the Applicant first came to Australia from Colombia he was obliged at first, and as I have said to work as a bricklayer. However he thereafter obtained employment in a blue collar capacity from a DVD factory, and later obtained employment as an accounts payable officer with Aussie Home Loans and before taking up the position with the University of Sydney. He is currently employed by Rocco Pipeline Products in Chatswood as an accountant at an annual salary of $75,000.

15 When the property was purchased the Applicant alone was the purchaser. The Applicant explained that this was so because Ms. V was already the owner of a unit and so that to include her as a purchaser would have precluded the concessions obtained by him and referred to in part A above.

16 At the time of the purchase there were, so the Applicant said, certain difficulties in his relationship with Ms. V, although he did not explain what those difficulties were. The Applicant said that she is depressive and that she has a history of suicide attempts. He is still friendly with her but he is no longer involved with her in a romantic sense. It was decided at that time that he should let the property. A management contract as referred to in clause 9 of the Respondent’s submissions quoted above was entered into; through that manager a lease was entered into on 5 September 2005 (prior to completion) with Mr and Mrs Khan (referred to as “the Khans”) at a rental of $320 per week. The Applicant described the lease in his evidence as one which was for a term of not less than six months or more than 12 months. That description was not accurate; the lease, which is included in the Applicant's submissions, established that the then owners and vendors of the property to the Applicant (Ms Sutton and Mr Harrison) leased the property to the Khans for $640 per fortnight and for a period of 52 weeks. A bond of $1280 was provided by the Khans.

17 The Khans eventually moved out of the property in May 2007. The Applicant described them as bad tenants who were often late with their rent and who left the property in a bad condition, and such that the cost of rectification was in excess of the amount of the bond, and obliging him, the Applicant, to draw on credit card facilities. In consequence of that expenditure he has substantial credit card indebtedness. After the property was repaired, and in June 2007, it was let to the Gunthorpe family for six months at a rental of $350 per week. That family is in occupation of the property at the present time. (This latter lease was not before the Tribunal)

18 The Applicant said that the period of 52 weeks in respect of the lease to the Khans was specifically chosen so as to allow a period of about one month at its end, and during which he could move into the property and thus fulfil his residential obligations in respect of the concessions referred to in Part A. Put in other words, the Applicant was fully conscious of the fact that he was obliged to move into the property as his principal place of residence within one year of purchase in order to comply with his statutory obligations.

19 In October 2007, the Applicant, aware as set out previously of his statutory obligations, filed a statutory declaration (which he admitted was false) in which he claimed a period of residence in the property. That statutory declaration is contained in tab 3 of the section 58 documents and it was signed and attested in October 2006; it provided in part that he occupied the property as his principal place of residence between 9 October 2005 and 1 May 2006. That statement was untrue; he did not ever occupy the property in any manner whatever.

20 In submitting a false declaration that Applicant was of course guilty of an offence. He subsequently and in response to investigations by the Respondent continued to contend that he did in fact occupy the property as his principal place of residence. The Tribunal was referred in this context to file notes contained in tab3 of the section 58 documents; a part of one only of them (by Carmen David) is included in this decision as follows;

Created By CARMEN DAVID Created On 15/11/2006

client called contesting assessments claimed tenants in properly are his friends, electricity is under the tenants name, the management agreement shows Applicants address in Chatswood and however he claims he lived there for 6 months. told him he has the right to object

21 The Applicant said that he took this course of action (i.e. the filing of a false statutory declaration) because of three major factors; in the first instance he had paid more for the property then the limit which he had himself imposed for himself; in the second place the interest rate was very high and thirdly there were still issues to be sorted out and resolved with Ms. V. (The relevance of these matters to the submission of the false statutory declaration is not apparent.)

22 The Applicant during the course of his evidence dealt at some length with his own health problems. He referred in particular to his arthritis and furnished as part of his submissions a number of medical certificates. Those medical certificates generally predated the acquisition of the property by a lengthy period. He referred also to a psychological condition diagnosed by his psychologist sister (who lives overseas) as an “adjustment disorder”.

23 The Applicant said that when the Khans moved out of the property he was working in Chatswood. He was disqualified from driving and ascertained that to travel from his place of employment to the property would have taken about two hours each way. During the course of his cross-examination the Applicant was referred to the documents which became Exhibit R1 and Exhibit R2. Exhibit R1 indicates that in March 2006, the loan was refinanced by BankWest and at an interest rate of 6.4%. Exhibit R2 relates to the Applicant's driving record. He was originally disqualified from driving because of a number of speeding offences. Exhibit R2 indicates that the Applicant was, after having been discovered driving while disqualified placed on a good behaviour bond and in addition the period of his disqualification as a driver was extended by 2 years to 2008. His evidence was this was not the only occasion upon which he was caught driving while disqualified.

24 The Applicant is an accountant and he would like to obtain further qualifications and so as to enable him to practise as such and hopefully in the area of corporate finance. It was put to him that in October 2006, he could have gone to the Respondent to explain that the circumstances were such that he could not comply with his statutory residential obligations and could then have sought an extension of time. He did not (and in breach of his statutory obligations) advise the Respondent that he could not comply with his residency obligations and instead submitted the false statutory declaration. He said that he acted on bad advice from a friend and that this behaviour was mistaken. (“Mistaken” does not appear to the Tribunal to be an apposite description.)

25 The Applicant repeatedly referred to his physical problems the nature of which is such that walking for extended distances is difficult for him.

26 This is a convenient juncture at which to note that the Applicant was late (and by a few months) in respect of his application. The Respondent in his submissions neither consented to nor objected to the grant of an extension of time. Mr. El Hage suggested that the Applicant’s contention that he was not late may perhaps have arisen from the fact that in the period between disallowance of his objection and his application for review there was a communication from the Respondent. It is unnecessary to deal with this aspect further in the light of the fact that the Tribunal decided to grant the Applicant an extension of time within which to bring the application and in other words to treat his application as having been made within time.

27 It is clear that when the property was purchased the Applicant could not afford it. The rental was such that it was not sufficient to cover more than a part of the monthly borrowing cost. It will be remembered that when he bought the property and immediately leased it out, he was obliged to find $3000 per month for the first lender in respect of interest. Moreover his University of Sydney salary at the time was $50,000 per annum. It follows that even with the rental derived from leasing the house the shortfall absorbed a large part of his salary. He said that having come from Colombia on his own he was anxious to have a roof over his head and moreover was keen to have a property in which he could keep a dog. However and at the time of purchase the salary derived by the Applicant was such that there was no basis (unless of course his earnings increased drastically) upon which he could live the property either then or within the statutory period within which he was obliged to take occupation of the property.

28 The Applicant said, when it was put to him that he could have (at some time after purchase) have resold the property, (and so avoid the debt burden caused by its ownership) that to do so would have involved him in a loss in that the values of properties in the area had (pursuant to web sites to which he referred) declined.

29 The current position for the Applicant is difficult. He is in debt in respect of credit card finance; he is being asked to repay the Grant and to pay the Duty Concession, and he cannot drive until his licence is restored to him and which will not for the reasons set out previously, occur until 2008. That the Applicant finds himself in this position is of course the result of his own actions, some ill-advised and some dishonest. It must be said that actions of this sort would be reprehensible enough if committed by an uneducated person and are particularly reprehensible in the case of the Applicant who is educated and a professional man

Part D Findings and case law

30 It is of course clear that the Applicant did not comply with his statutory obligations as regards the occupation of the property as his principal place of residence and that he must rely on the exercise by the Respondent of the discretionary powers vested in him. The Applicant during the hearing entreated the Respondent to do just that on the basis that at some time in the future (not specified) he will occupy the property as his residence. None of this is in fact to the point; the position is that the Respondent has refused to exercise his discretionary powers in favour of the Respondent and it falls to the Tribunal to determine whether the correct and preferable decision is such that he should do so and at this point in time.

31 The Respondent's contentions are neatly encapsulated in clauses 50 to 55 of his submissions in the following terms:

50 Having acknowledged his false statutory declaration, the Applicant points to the deterioration of his relationship with Ms V as a reason why he could not occupy the property. The surrounding circumstances leading to the dissolution of the relationship are unclear. The Respondent notes that the Applicant purchased the property in his name only. He is the only borrower under the loan to finance the purchase. There is no evidence of Ms V making any contribution to the purchase. Thus, prima facie, the Applicant assumed primary, if not sole, responsibility for the purchase of the property. The Applicant was also the sole Applicant for the Grant. That carried with it a statutory obligation on his party to comply with the residence requirement, irrespective of his relationship with Ms V. The deterioration of the relationship after the purchase did not itself prevent the Applicant from taking up residence in the property.

51 The Applicant's argument seems to be that the deterioration of his relationship meant that he couldn’t reside in the property because he had been disqualified from driving and his medical condition would have caused him difficulties in travelling between his place of work and Chipping Norton using public transport. Even if the Applicant's claims as to the restrictions caused by his medical condition are to be accepted, the Applicant's own evidence is that his medical condition was diagnosed as far back as November 2002 and, thus, existed at the time he purchased the property. Further, he was already disqualified from driving a motor vehicle at the time of purchase. The length of his disqualification is not clear. It is open to the Tribunal to draw the inference that the Applicant was aware of these matters at the time of purchase and was thus conscious of any difficulties that they may cause him in travelling on public transport.

52 Yet, despite this, the Applicant consciously elected to purchase the property at Chipping Norton. The information attached to the Applicant's Submissions relating to travel by public transport would have been available the Applicant at the time of purchase. Thus, even if the Applicant's argument can be accepted, given that at the time of the purchase (i) his medical condition existed and (ii) he was already disqualified from driving, his failure to occupy the property occurred as a result of a continuation of existing circumstances and not, for example, an unexpected event or change in situation: see Cullen, at paras. [56] and [58].

53 It is unclear what relevance the Applicant's subsequent financial difficulties (ie, his credit card debts and personal loan) and breaches of the 1aw have to the question of whether he should be exempted from the residence requirement. Firstly, as noted above, the Applicant was already disqualified from driving at the time of purchase. Secondly, the evidence concerning the Applicant's financial affairs relate to his current position (le, June/July 2007). There is no evidence relating to his financial position at the time of purchase or the 12 month period following settlement.

54 To the extent these matters are relevant, the Chief Commissioner notes that the Applicant's breaches of the law and his financial difficulties are of his own making. There is no evidence that these matters have arisen as a result of conduct other than that of the Applicant. Whether considered in isolation or in the context of the underlying circumstances of this case, they certainly do not constitute "good reasons" to depart from the obligation to fulfil the residence requirement.

55 Accordingly, it is submitted that when considered in whole, the circumstances of this case do not constitute "good reasons for the exercise of the discretion under s. 12(1A) (b) of the FHOG Act in favour of the Applicant. The Applicant has elected to lease the property since purchase. He failed to fulfil the obligation on him to inform the Chief Commissioner of his failure to satisfy the residence requirement. He provided the Chief Commissioner with a false statutory declaration. His medical condition existed at the time of purchase. He was also disqualified from driving at that time. It was his choice to purchase the property at Chipping Norton, notwithstanding these matters. The failure to occupy was not, for example, due to an unforeseen event or unexpected change in circumstances, which prevented him from occupying the property within the 12 month period after the date of completion. It is submitted that the exercise of the discretion in favour of the Applicant would defeat the primary object of the FHOG Act to provide assistance to first home owners and would be inconsistent with the stringent obligation imposed on the Applicant to fulfil the residence requirement. Equally, it would be unfair to other recipients of the First Home Owner Grant, who are required to take up occupation of their property within 12 months after completion of the purchase, to exempt the Applicant from compliance with the residence requirement in the circumstances here.

32 The Tribunal is thus faced in clear terms with the question of whether this is a case in which the discretion should be exercised in favour of the Applicant

33 In Federal Commissioner of Taxation v G.M. Swift and others 89 ATC 5101 French J made it clear (in relation to a discretion of a similar nature) that the dispensing power is incidental and ancillary to the primary object of the legislation; he noted also that there will be a threshold beyond which the primary object of the legislation would be defeated; see page 5116 as follows:

The dispensing power is incidental and ancillary to the primary object of the legislation. On the spectrum of cases in which it could conceivably be exercised, there will be a threshold beyond which it would defeat the primary object of the legislation. It is unnecessary to define that threshold for present purposes. The discretion cannot, however, be limited to the case where a person has not in any way benefited from the evasion giving rise to the recoupment tax liability. And in this respect ground 4(c) of the grounds of appeal was rightly abandoned. The absence of such a simply expressed limitation from the language of sub-s.5 (4) is indicative of the absence of any such legislative intention. That is not to say that it is not open to consider whether a person claiming dispensation under the sub-section benefited from the sale of shares in the subject company. But, it is not, as a general rule, conclusive.

34 See also French J in Swift’s case at page 5118 as follows:

It may be said that the Tribunal's exercise of its discretion has undermined the objectives of the Act. If that be so, then it is for the legislature to consider confining the dispensing power. But the conflict between the primary purpose of collecting evaded company tax and the ancillary function of dispensation has not risen here to such a level that the primary purpose is defeated. Any dispensation under sub-s.5 (4) will necessarily undermine the primary purpose, for tax which might have been collected will not be collected. That is an inescapable consequence of the operation of Sub-s.5 (4). Its invocation by the Tribunal in this case has not, in my opinion, involved the crossing of that threshold beyond which the exercise of the discretion falls outside the scope and objects of the Act.

35 One of the leading cases in this area is Giris Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia (1968) 119 CLR365. At pages 380 and 381 Menzies J noted that discretions of this nature can be difficult to exercise:

The section does confer an extraordinary responsibility upon the Commissioner of Taxation. It requires him, in every case where there is income of a trust estate in a particular year of income, to consider whether it is unreasonable "that this section should apply in relation to that trust estate in relation to that year of income". Unless he forms such an opinion the section applies. The section directs the Commissioner in forming his opinion to have regard to certain facts and circumstances but gives no guidance upon what significance should be given to the presence or absence of the facts or circumstances as specified. Moreover, there appears to be no common principle underlying the various matters specified so as to give the Commissioner a lead to other matters to which he might have regard. Accordingly, whether or not the section is to apply to a particular trust estate has been made to depend upon an opinion which the Commissioner may form, after the close of the year of income, and with no legislative guidance other than that he is to have regard to a medley of facts and circumstances. The enactment of such a provision can only be regarded as an acknowledgment by the legislature of its inability to make laws laying down prospectively what will give rise to a particular taxation liability. It leaves, as a problem for the Commissioner to decide, retrospectively and in the light of what has happened, whether the particular provision should not apply to a particular trust estate in respect of a year that has passed.

36 And at page 384 of Giris Windeyer J said:

The Commissioner is to ask himself whether it would be unreasonable that s. 99A should apply to any particular trust estate. But the idea of reasonableness seems to be here amorphous. It is, of course, true that, as a measure in fact of time, space, quantity and conduct, reasonableness is a concept deeply rooted in the common law: and so, in such cases, is the power of a court to say whether a particular decision of that fact is or is not within the bounds of reason. But, in cases of that kind, the circumstances in which the question arises provide criteria for its solution. Here the Commissioner's discretion is apparently at large. It does not clearly emerge from the Act in respect of what matter - or whose interest, that of the taxpayer or of the revenue - he is to consider whether it would be reasonable or unreasonable to apply s. 99A in the case of any particular trust estate. He is to have regard to certain stated matters; but what weight or influence each is to have is not made clear. Moreover, the Act requires that he "shall have regard to such other matters, if any, as he thinks fit". However I assume that he is to be guided and controlled by the policy and purpose of the enactment, so far as that is manifest in it. That would exclude from his consideration and matter which it would be unlawful for him to take as a criterion

37 It is the very clear view of this Tribunal that this is quintessentially a case in which to grant discretionary relief would be to transgress the boundary to which French J referred in Swift’s case. The evidence before the Tribunal points to the fact that at the time of purchase the Applicant could not afford the property; the fact that he was obliged to borrow nearly the whole of the price and on terms as to interest which were beyond his means indicates that he did not then intend to occupy the property. His entry into the management agreement pursuant to which it was leased out and the fact that it was leased even before completion, by his vendors, reinforces this view. The fact that he was obliged to lease it yet again after the Khans vacated the property is also relevant. And a year later and cognisant of his statutory obligations he sought do deceive the Respondent by a false statutory declaration; that particular offence was then compounded by false replies to officers investigating the position. I might note that Mr. El Hage referred to other cases dealing with discretionary powers but it is not necessary for me to refer to them.

38 In respect of the Grant a penalty of 30% was imposed and in respect of the duty concession interest was imposed but then remitted in full. That latter concession was in the circumstances generous. The penalty imposed was in all the circumstances not inappropriate and not such that it should be disturbed.

39 The Applicant complained that he had sought legal advice and that he gained nothing thereby other than a large legal bill. That this is so is not surprising. What is somewhat surprising is that the Applicant should have sought in the circumstances to pursue this application (and furnish submissions indicative of very considerable effort) since this decision records (as record it must) his own admission that he sought to deceive the Respondent through a false statutory declaration, and was thus guilty of dishonesty. During the course of the hearing the Applicant pointed to the fact that he is now in a country far from home and where he has no relatives. This may be so but hardly to the point since it is he who sought residence in this country and where his behaviour in relation to his legal obligations has hardly been that which is to be expected of a professional person seeking to make his way in his new country. It is perhaps relevant to note that the Applicant appeared to me to be a person who is not without intelligence (although some of his behaviour would tend to indicate otherwise). There is a possibility of his succeeding as an accountant in Australia and especially if trade with South America increases; his almost perfect English will be of assistance to him in this regard. It must be recognised however that he has displayed a very considerable (and moreover consistent) lack of judgment. This decision must of necessity go against the Applicant and it is hard to imagine how he could have expected otherwise. I might add that he cited a number of decisions of this Tribunal alleged to support his case but they do not. It is unnecessary for me to refer to them specifically.

40 Accordingly the decisions under review are affirmed.