Gonzalez v Commissioner for Act Revenue - [2015] ACAT 61

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

GONZALEZ v COMMISSIONER FOR ACT REVENUE
(Administrative Review) [2015] ACAT 61

AT 14/105
Catchwords: ADMINISTRATIVE REVIEW – land tax – interest and penalty tax – interest not a reviewable decision – taxpayer did not exercise reasonable care – taxpayer engaged professionals – does not remove the taxpayer’s obligation to notify Commissioner –nature of investigation notice where time period to comply included – effect of erroneous address for the property in an investigation notice – no voluntary disclosure by taxpayer – error in address in notice may be relevant to remission of penalty tax

Legislation cited: ACT Civil and Administrative Tribunal Act 2008, s 68

Land Tax Act 2004 (ACT) ss 14, 53
Taxation Administration Act 1999 (ACT) ss 7, 9, 32, 33, 37, 82

Cases cited:Commissioner forACT Revenue v Dataflex Pty Ltd and ACT Civil and Administrative Tribunal [2011] ACTCA 14
Alexandrou and Ors v Commissioner for ACT Revenue (Administrative Review) [2012] ACAT 66
Belconnen Premier Inn Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 68
Deputy Commissioner of Taxation v Chen [2011] NSWDC 22
Deputy Commissioner of Taxation v Falzon [2008] QCA 327
Fieldhouse v Deputy Commissioner of Taxation (1989) 25 FCR 187
Deputy Commissioner of Taxation v Gruber [1998] 43 NSWLR 271
Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23
Highrise Concrete Contractors (Aust) Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2015] ACAT 3
James v Commissioner for ACT Revenue (Administrative Review) [2013] ACAT 32
Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15
Photo Corporation of Australia Pty Ltd v Commissioner for ACT Revenue [1994] ACTAAT 91
Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368
Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26
RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64
Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73
Secretary Department of Social Security v Marie Carruthers [1993] AATA 330

Steele v Commissioner for ACT Revenue (Administrative Review) [2010] ACAT 15
Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493
Theron v Commissioner for ACT Revenue [2013] ACAT 33
Touma v Chief Commissioner of State Revenue (NSW) [2012] NSWADT 2
Van Brummelen v Secretary to the Department of Social Security [1995] AATA 121
Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79

Tribunal: Ms L. Beacroft –Member

Date of Orders: 18 September 2015
Date of Reasons for Decision: 18 September 2015

ACT CIVIL & ADMINISTRATIVE TRIBUNAL AT 14/105

BETWEEN:
ISABELLE GONZALEZ
Applicant

AND:
COMMISSIONER FOR ACT REVENUE
Respondent

TRIBUNAL: Ms L. Beacroft – Member

DATE: 18 September 2015

ORDER

The Tribunal Orders that:

1.The decision of 26 November 2014 not to remit penalty tax is set aside.
2.A decision remitting 40% of the penalty tax is substituted.
3.To remove doubt, the result of Order 2 is that penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
4.In so far as the application seeks review of interest on land tax payable for the relevant period, it is dismissed for want of jurisdiction.

………………………………..
Ms L. Beacroft –Member

REASONS FOR DECISION

Background

The applicant, Ms Isabelle Gonzalez, is the owner of residential land (‘the property’) in the ACT. The Commissioner for ACT Revenue (‘the respondent’ or ‘the Commissioner’) administers the land tax and related legislation in the ACT.
On 28 November 2014 the applicant applied to the Tribunal for review of a decision by the Commissioner dated 26 November 2014 (‘the reviewable decision’) to disallow the applicant’s objection to an assessment of land tax dated 26 May 2014 (‘the assessment’).

Assessment and Objection

The issue of possible unpaid land tax came to the attention of the Commissioner and the Commissioner initiated an investigation (‘ACTEWAGL Search’) with a search of electricity accounts for the property on 29 April 2015.[1] Following this search, on 6 May 2015 the Commissioner issued a notice (‘section 82 notice’) advising that an investigation had begun and requiring certain information to be provided by the taxpayer. The applicant provided a response to the section 82 notice on 20 May 2014.
[1] ACTEWAGL Search, Exhibit R2
The assessment subsequently issued by the Commissioner imposed penalty tax at the rate of 50% of the tax payable, being $5737.57, and also imposed interest at the statutory rate of $6914.08. The assessment was for the rental period from 28 June 2006 until the applicant became compliant i.e. from quarter 1, 2006-07 to quarter 4, 2013-14 (‘the rental period’). The applicant did not object to the payment of the land tax, however she objected to the imposition of penalty tax and interest.
The objection was disallowed by the Commissioner in the reviewable decision. The Commissioner decided that the applicant had not notified the Commissioner within 30 days of the renting of the property, contrary to section 14 of the Land Tax Act 2004 (‘LTA’), and had not paid the land tax for the rental period as required under the LTA and TAA. The Commissioner also found no grounds for reduction or remission in the penalty tax or interest imposed.

Conduct of the hearing

A hearing was held on 31 March 2015.
The applicant appeared in person, and Ms Katavic appeared for the respondent instructed by Mr Kwan of the ACT Government Solicitor.
Prior to the hearing, the parties lodged and exchanged Statements of Facts and Contentions and lists of the authorities on which the parties relied. The Commissioner prepared a folder of relevant documents which are known as the T-Docs.
On the date of the hearing the applicant and the Commissioner handed up various documents as Exhibits. The Exhibits included a witness statement submitted by the applicant dated 26 March 2015 [Exhibit A1] and a certificate of evidence submitted by the Commissioner pursuant to section 136 of the TAA [Exhibit R4] which attached copies of rates notices and land tax brochures sent to the applicant for a period from 2007 to 2014. The Tribunal also heard sworn evidence from Ms Gonzalez in relation to the circumstances of her case.
Following the hearing both parties submitted further and final submissions. The applicant’s final submission dated 28 April 2015 included a letter from the applicant’s accountant dated 13 April 2015. In a letter dated 30 April 2015, the Commissioner objected to this letter from the accountant being accepted into evidence after the hearing had finalised.
Facts were agreed as follows:
(a)the applicant rented out the property from 28 June 2006 to present and did not pay land tax for the property until 2014;
(b)on 6 May 2014 the Commissioner issued a section 82 notice and the applicant responded to this notice on 20 May 2014; and
(c)a letter accompanying the section 82 notice mis-described the property’s address as ‘19 Inglewood St’, when it should have read ‘29 Inglewood St’.[2]
[2] Letter from ACT Revenue to applicant titled ‘Land Tax 19 Ingelwood: Block 24 Section 168 Gungahlin’, dated 6 May 2014, T-27
The contested issues are set out below:
(a)Is the applicant liable for the penalty tax and interest given she engaged professionals and is the assessment valid? In particular, who was required to notify the Commissioner of the renting of the property[3] given the applicant had at times during the period engaged a professional to do the conveyancing, a real estate agent and a tax accountant?
(b)Should the letter from the applicant’s tax accountant dated 13 April 2015, which the Commissioner objected to being admitted into evidence, be accepted into evidence given that the hearing was completed when it was submitted, and if so, what is the effect of this letter?
(c)Is the onus on the Commissioner to advise the taxpayer of the land tax liability and/or to take the initiative and issue an invoice to the taxpayer for land tax?
(d)Can the Commissioner make an assessment for a rental period beyond 5 years?
(e)Is penalty tax of 50%[4] appropriate in the circumstances, or should the penalty tax be reduced and/or remitted under various sections of the TAA?[5]
(f)What is the effect, if any, of the mis-description of the property’s address on the Section 82 notice? In particular, does this error invalidate the Section 82 notice? Does it support a reduction in the penalty tax by virtue of voluntary disclosure by the applicant[6] and/or by being remitted?[7]

Legislation

[3] Section 14 of the LTA

[4] Section 31(2)of the TAA

[5] Sections 31(3), 31(6) and 37 of the TAA

[6] Sections 32 and 33 of the TAA

[7] Section 37 of the TAA

In summary, the grounds for imposition of land tax are that the property is leased on the first day of the quarter and is rented at any time in the previous quarter.[8] The LTA provides for a written notice to be given to the Commissioner,[9] by the landowner or their agent about a property being rented and the date from which it is rented. If land tax is imposed and section 14 is not complied with by the owner nor any agent, then interest and penalty tax (in addition to the land tax) is payable by the landowner.[10] The LTA has separate criminal penalty provisions that can apply to agents in certain circumstances,[11] but these provisions do not relieve the owner of liability for compliance with land tax requirements and any penalty tax or interest imposed.[12]
[8] Section 8(2), (3)(b) of the LTA
[9] Section 14 of the LTA
[10] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79, [72]
[11] Section 53 of the LTA
[12] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79
Failure of the taxpayer to pay land tax is treated as a tax default under the TAA.[13] The amount of penalty tax is payable at a statutory rate depending on the circumstances of the default,[14] and in some circumstances is not payable,[15] can be reduced,[16] and/or can be remitted.[17]
[13] Section 19A(5)(a) of the LTA
[14] Section 31 of the TAA
[15] Section 31(6) of the TAA
[16] Sections 31(3), 32, 33 of the TAA
[17] Section 37 of the TAA
For unpaid land tax, the default rate of penalty tax is 25%[18] of the unpaid tax. The Commissioner can increase the rate to various higher levels depending on the circumstances. In this case, the Commissioner increased the rate of penalty tax to 50%, which applies if the default was “caused wholly or partly by a failure by the taxpayer…to take reasonable care”.[19] This higher rate applies unless there is a ‘reasonable excuse’[20], the tax default “happened solely because of circumstances beyond the taxpayer’s control”[21] or the penalty tax is remitted.[22]
[18] Section 31(1) of the TAA
[19] Section 31(2) of the TAA
[20] Section 31(3) of the TAA
[21] Section 31(6)(b) of the TAA
[22] Section 37 of the TAA
While not relevant to this case, where there is an intentional disregard of a tax law, the rate increases to 75%.[23] The rate of 90% applies if the taxpayer or their agent conducts themselves in various unsatisfactory ways after being notified that an investigation is to be a carried out.[24]
[23] Section 31(5) of the TAA
[24] Section 34 of the TAA
The amount of interest payable for a tax default is set out in the legislation.[25] The Commissioner can remit all or part of the interest in certain circumstances,[26] however the Commissioner did not remit the interest in this case.

Tribunal’s Jurisdiction and Powers

[25] Section 19A of the LTA and section 26 of the TAA

[26] Section 36 of the LTA

The burden of showing that an objection should be sustained is with the taxpayer, the applicant in this case.[27] The Tribunal’s main task in this case is to decide if the taxpayer has shown that the objection should be sustained.[28]
[27] Section 101(3) of the TAA
[28] Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26; Touma v Chief Commissioner of State Revenue [2012] NSWADT 2
The Tribunal may confirm, vary or set aside the decision being reviewed. If the decision is set aside, the Tribunal may make a substitute decision or remit the matter for decision back to the decision-maker in accordance with any directions or recommendations of the Tribunal.[29]
[29] Section 68 of the ACT Civil and Administrative Tribunal Act 2008
Where a taxpayer defaults on their tax liabilities, interest is payable, and may be remitted. However, decisions about interest and any remittal are not reviewable by the Tribunal.[30]

Applicants’ Contentions

[30] Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73, [11]; section 38 of the LTA and section 107A and schedule 1, item 1.2 of the TAA

The Applicant’s contentions on the 6 contested issues listed in paragraph 12 above are summarised below.

Is the applicant liable for the penalty tax and interest given she engaged professionals and is the assessment valid?

In her submissions and evidence the applicant suggested that the applicant’s conveyance professional, accountant and/or real estate agent had some or all the responsibility for the tax default. In summary, she submitted that these professionals should have advised her of her land tax liabilities and/or notified the Commissioner on her behalf. In the applicant’s Statement of Contentions she raised that the property was managed by an agent for the first 2 years “who failed to inform the commissioner and certainly failed to advise me [the landowner] of the land tax obligations”; she also raised that the applicant engaged an accountant for the period 2006-2014, who “has not questioned me about missing land tax payments…[and] failed to alert me to non-compliance”.[31]

Should the letter from the applicant’s tax accountant dated 13 April 2015, which the Commissioner objected to being admitted into evidence, be accepted into evidence given that the hearing was completed when it was submitted, and if so, what is the effect of this letter?

[31] Applicant’s Statement of Contentions, 15 March 2015, pages 1-2

In her final submission, the applicant attached a letter from her accountant (which the Commissioner objected to being admitted into evidence as explained above) that relevantly said “It is my opinion that Isabelle Gonzalez was not made aware of the requirement to be registered for Land Tax”.[32] She submitted this letter in support of her claim that the accountant had not advised her of land tax and also that she had demonstrated reasonable care.

Whether the onus is on the Commissioner to advise the taxpayer of the land tax liability and/or to take the initiative and issue an invoice to the taxpayer for land tax?

[32] Letter from the applicant’s accountant, dated 13 April 2015, attachment to applicant’s final submissions

The applicant also contended that the Commissioner had failed in its duty to her as follows:
[she had] “notified the commissioner and attended their offices on several occasions…made them aware that the property was being rented...
…the ACT Revenue Office did not notify me at the time of purchasing the property that notification for a rented property needed to be done in writing. They did not tell me that informing the ORS and lodging the bond is not deemed as notification of the leased property...
ACT Revenue does not appear to have a system in place to audit rental properties on a regular basis… [h]ad they done this earlier, the default payment on land tax would …not have been as high...
... it is unreasonable to expect an ordinary person to know that notifying the ORS [Office of Regulatory Services] is not considered a notification to the commissioner (sic) the property has been rented.[33]
[33] Applicant’s Statement of Contentions, 15 March 2015
The applicant contrasted her experience with the property with that of another property she rented out in Ngunnawal from May 2013 (‘the Ngunnawal property’). Once she lodged the bond and advised the ORS that the Ngunnawal property was being rented, she “immediately received the land tax assessments together with the Rates notices every quarter, which has been paid accordingly.”[34]

Can the Commissioner make an assessment for a rental period beyond 5 years?

[34] Applicant’s witness statement, dated 26 March 2015, page 3, Exhibit A1

The applicant submitted in her final submission that the TAA[35] did not allow a land tax assessment for a rental period beyond 5 years and thus the associated penalty tax and interest was not validly imposed.

Is penalty tax of 50% appropriate in the circumstances?

[35] Section 9(3) of the TAA

The applicant submitted that her circumstances demonstrated she had exercised reasonable care, and/or had a reasonable excuse and/or had mitigated risks of a default with the effect of either reducing the penalty tax rate to 25% or 0%[36], and/or the penalty tax should be remitted.[37]
[36] Sections 31(3) and (6) of the TAA
[37] Section 37 of the TAA
In her final submission, in support of her submission about reasonable care and mitigating risks of a default, she elaborated that she had engaged “an experience conveyor [sic]” for the purchase, a “registered real estate agent …2006-2008” and an “accountant firm …for most of the 2006-2014 period”.[38] The applicant cited an Australian Tax Office (‘ATO’) Ruling MT 2008/1[39] in support of her submission that she had exercised reasonable care.[40] In particular, she submitted that she had met all the criteria for a reduction in penalty tax under paragraph 12B of ATO Ruling MT 2008/1 which is set out below:
[38] Applicant’s final submissions, page 3
[39] Australian Taxation Office, Penalty relating to statement: meaning of reasonable care, recklessness and intentional disregard, MT 2008/1, 12 November 2008
[40] Applicant’s final submissions, page 2
Under subsection 284 75(6) you are not liable to an administrative penalty under subsection 284 75(1) or 284 75(4) if:
(a) you engage a registered tax agent or BAS agent; and
(b) you give the registered tax agent or BAS agent all relevant taxation information; and
(c) the registered tax agent or BAS agent makes the statement; and
(d) the false or misleading nature of the statement did not result from:
(i) intentional disregard by the registered tax agent or BAS agent of a taxation law; or
(ii) recklessness by the agent as to the operation of a taxation law.

What is the effect, if any, of the mis-description of the property’s address on the section 82 notice?

The applicant raised in her written response to the section 82 notice that she “acquired the property incorrectly quoted in your letter… as 19 Inglewood St…”.[41] In her evidence at the hearing the applicant said that upon receipt of the letter accompanying the section 82 notice she noticed that the address was not the address of the property she owned, so “I just mentioned it in … [the] letter [to ACT Revenue]…I didn’t resolve it. …I questioned whether [ACT Revenue] had the facts straight. I’m questioning now whether they had the incorrect information somewhere in their records and whether they sent a notice of assessment for land tax to the wrong address”.[42] In her Statement of Facts and Contentions the applicant said that “the letter [that accompanied the Section 82 notice] was addressed to the wrong address…which shows the council’s records management and IT system is not working properly. It may well be possible that my correspondence was lodged against another property address or person”.
[41] Applicant’s Response to Section 82 Notice dated 20 May 2014
[42] Transcript dated 31 March 2015 pages 29-30
In her final submission the applicant cited authority[43] for the Section 82 notice being invalid due to the error in the address. She further contended that “[g]iven …the letter by ACT Revenue…is invalid…, my letter dated 20 May 2014 …amounts to voluntary disclosure pursuant to s32 of TAA 1999”.[44] On this basis she claimed a reduction in the penalty tax. She also submitted that the error was relevant to a remission of penalty tax under section 37 of the TAA.

Respondent’s Contentions

[43] Secretary Department of Social Security v Marie Carruthers [1993] AATA 330
[44] Applicant’s final submission dated 28 April 2015, page 2

The Respondent’s contentions against the 6 issues listed in paragraph 12 above are summarised below.

Is the applicant liable for the penalty tax and interest given she engaged professionals and is the assessment valid?

The respondent contended that the applicant had the onus of notifying the Commissioner that her property was rented; further that this duty remained with the taxpayer even where she engaged a range of professionals to assist her and/or if these professionals also had a duty to notify the respondent of the renting of the property.[45] The respondent cited a range of authorities and referred to Revenue Circular GEN008 Penalty Tax, paragraph 6 (‘ACT Revenue Circular GEN008’) to support this contention.[46] The respondent raised that the Commissioner cannot issue an invoice for the land tax if they are not notified of the renting of the property.[47]
[45] Respondent’s Statement of Facts and Contentions, page 6
[46] Respondent’s reasons for decision page 6; Jokhan and Jokhan v Commissioner for ACT Revenue [2012] ACAT 15; Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73; Steele v Commissioner for ACT Revenue (Administrative Review) [2010] ACAT 15; Theron v Commissioner for ACT Revenue [2013] ACAT 33
[47] Respondent’s Statement of Facts and Contentions, page 5
The respondent further contended that the applicant’s dealings with the ORS in regard to lodgment of a bond and also the communications with the Commissioner about the change in postal address for receiving rates notices do not constitute notice under section 14 of the LTA for the purposes of land tax.[48]
[48] James v Commissioner for ACT Revenue (Administrative Review) [2013] ACAT 32
In regard to interest, the Commissioner submitted that decisions to impose interest and not to remit it are not reviewable by the Tribunal.[49]
[49] Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73, [11]; section 38 of the LTA and section 107A and schedule 1, item 1.2 of the TAA
Given the above contentions, the respondent submitted that the applicant did not comply with the requirements for land tax. The applicant’s contention, raised only in her final submission, that the TAA[50] did not allow a land tax assessment beyond the last 5 years, was not explicitly responded to by the Commissioner.

[50] Section 9(3) of the TAA

In regard to the letter from the applicant’s accountant that was submitted by the applicant after the hearing, the respondent contended that the letter introduced new evidence and should be disregarded by the Tribunal.[51]

Is penalty tax of 50% appropriate in the circumstances?

[51] Respondent’s final submissions dated 30 April 2015

The respondent accepted that the applicant had not intended to commit a tax default. However, the respondent submitted that penalty tax at the rate of 50% was appropriate in the circumstances. The respondent contended that the applicant had not exercised reasonable care and has no reasonable excuse. “Mere ignorance or oversight does not justify a reduction of penalty tax.”[52] In any case the applicant had received general information about land tax in her rates notices over many years and more recently general information about land tax on the site where she changed online the address for receiving rates notices.[53]
[52] Respondent’s Statement of Facts and Contentions, page 4; Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73
[53] Rates Postal Address Update Form (Exhibit R3); certificate pursuant to section 136 of the TAA (Exhibit R4)
Further, the applicant did not take steps to mitigate the circumstances that led to the default, did not have exceptional circumstances to justify a reduction or remittal of the penalty tax and it would not be fair and reasonable to do so.[54] The respondent contended that the validity or otherwise of the section 82 notice is not relevant to the exercise of a discretion to remit penalty tax under s37 TAA since the case remains “unremarkable”.[55]

What is the effect, if any, on the applicant’s case of the mis-description of the property’s address in the section 82 documents?

[54] Respondent’s Statement of Facts and Contentions, page 4; Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73
[55] Respondent’s final submissions, page 7

The respondent contended that the mis-description of the property’s address was in a covering letter to the section 82 notice, not the notice itself. The respondent contended that it is not a requirement for a notice to specify a period for the taxpayer to comply with a notice, and therefore the covering letter which in this case did specify a period, is not by virtue of this content part of the notice.[56]
[56] Section 82(4) of the TAA; Respondent’s final submissions, page 5
Even if the letter with the mis-description of the address for the property was part of the section 82 notice, the respondent submitted that the notice was valid since the correct block and section was provided on the letter and the correct address and the correct block and section were provided on the accompanying documents. The respondent submitted that the applicant’s evidence about the effect of the error in the letter accompanying the section 82 notice was inconsistent: “the respondent submits that this [the applicant’s claim of volunteering information]… is inconsistent with the evidence given by the Applicant under cross-examination regarding her knowledge and understanding of the correctness of all the details in …[the notice] relating to her property”.[57] The respondent also placed weight on the fact that the applicant did respond to the notice in a relevant manner and on time which the respondent argued showed she knew and understood that it concerned the property.
[57] Respondent’s letter objecting to the applicant submitting her accountant’s letter dated 13 April 2015, dated 30 April 2015
The respondent contended that a reduction of the penalty tax, due to the applicant’s voluntary disclosure before being informed that an investigation was to be undertaken[58] or before it began[59] was not available to her. Whether the notice was valid or not valid, the applicant had not made a voluntary disclosure prior to the start of the investigation. The Commissioner did not provide notice of the commencement of an investigation to the applicant; however the respondent is not required to do so.[60] The section 82 investigation was initiated on 29 April 2014 with the ACTEWAGL search, which pre-dated when the applicant provided the information about the renting of the property to the Commissioner on 20 May 2014.
[58] Section 32 of the TAA
[59] Section 33 of the TAA
[60] Commissioner for ACT Revenue v Dataflex Pty Ltd and ACT Civil and Administrative Tribunal [2011] ACTCA 14
The respondent cited authority that clarified the approach to be taken in considering the effect of errors in a notice.[61] The respondent cited further authority to support their contention that the mis-description was not a “material error” and does not affect the ‘sense, nature and substance’ of the document as a whole”.[62]

Findings and Decision

Is the applicant liable given she engaged professionals and is the assessment valid?

[61] Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493
[62] Respondent’s final submissions, page 5; Deputy Commissioner of Taxation v Gruber [1998] 43 NSWLR 271 cited in Deputy Commissioner of Taxation v Chen [2011] NSWDC 22; Deputy Commissioner of Taxation v Falzon [2008] QCA 327 cited in Deputy Commissioner of Taxation v Chen [2011] NSWDC 22; Van Brummelen v Secretary to the Department of Social Security [1995] AATA 121; Fieldhouse v Deputy Commissioner of Taxation (1989) 25 FCR 187

First, I consider the question of whether the letter from the applicant’s accountant dated 13 April 2015 should be accepted as evidence. The applicant did not call the accountant to give evidence at the hearing and the letter was submitted after the hearing. In the interests of natural justice and procedural fairness the letter is not accepted into evidence. If the preferred view is that the letter should be accepted into evidence, the Tribunal notes that the letter adds little probative value to determining the contested issues. Without relying on the letter, the Tribunal finds that the applicant was a credible witness, and accepts that she was ignorant of her land tax obligations in regard to the property despite engaging a range of professionals. However this does not excuse her from liability for penalty tax or interest for the reasons set out below.
The Tribunal accepts the arguments of the respondent that the liability for interest and penalty tax falls on the owner even though she engaged various professionals. Any duty or liability of a professional person engaged by the taxpayer does not necessarily relieve the taxpayer of their duty or liability regarding land tax or any associated penalty tax or interest. There is consistent authority for this finding, most recently the Wade case.[63]

Whether the onus is on the Commissioner to advise the taxpayer of the land tax liability and/or to take the initiative and issue an invoice to the taxpayer for land tax?

[63] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79

The Tribunal accepts the respondent’s submissions that there is a positive obligation on the taxpayer to make enquiries about their tax liabilities, and there is no positive obligation on the Commissioner to issue an invoice in the absence of notification pursuant to section 14 of the LTA about the renting of the property. The cases of Theron[64] and Steele[65] held that there is an onus on landlords to enquire about tax obligations. The principle that the onus is on the taxpayer was set out in relation to payroll tax in the Photo Corporation[66] case, and confirmed by the Tribunal in Belconnen Premier Inn.[67] It may be that the system which is employed by the Commissioner is inconsistent (for example the system operated differently in regard to the applicant’s Ngunnawal property) and that it may be able to be more effective in identifying situations where professionals engaged by landowners overlook land tax requirements. Despite this, it remains the responsibility of the taxpayer to make sure that the professionals they engage are discharging their obligations properly, and landowners are at liberty to take action against professionals who fail in their duties.
[64] Theron v Commissioner for ACT Revenue [2013] ACAT 33
[65] Steele v Commissioner for ACT Revenue (Administrative Review) [2010] ACAT 15
[66] Photo Corporation of Australia Pty Ltd v Commissioner for ACT Revenue [1994] ACTAAT 91
[67] Belconnen Premier Inn Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 68
The Tribunal notes that the question of whether notification to ORS or other government agencies for example the ACT Land Titles Office constitutes full compliance with the taxpayer’s obligation to notify the Commissioner for the purposes of land tax has been considered by the Tribunal in numerous cases.[68] The Tribunal has consistently found that in the context of current government arrangements, the notification requirement by the taxpayer under section 14 of the LTA is not met if different government entities are the object of the notification, and that the notification needs to be to the Commissioner or their Office (ACT Revenue Office).

Can the Commissioner make an assessment for a rental period beyond 5 years?

[68] James v Commissioner for ACT Revenue (Administrative Review) [2013] ACAT 32; Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79 and Scott and Anor v Commissioner of ACT Revenue (Administrative Review) [2013] ACAT 73

The applicant submitted in her final submission that section 9(3) of the TAA did not allow a land tax assessment for a rental period beyond 5 years and therefore the associated penalty tax and interest was not validly imposed. In the Hay[69] case the Tribunal accepted that where the liability for land tax has been outstanding for over 5 years (dating as far back as 2002 in the Hay case), the Commissioner may issue an assessment for the period/s for which land tax was payable beyond 5 years under section 7 of the TAA Act. Section 7 is a general power for assessing a tax liability.[70]
Is penalty tax of 50% appropriate in the circumstances, and/or should the penalty tax be reduced and/or remitted under various sections of the TAA?
[69] Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23
[70] Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23, [48]
The Tribunal finds that the applicant did not take reasonable care for the purposes of section 31(2) TAA. The applicant made much of the fact that she had engaged and relied on various professionals, and cited authorities[71] in support of this submission. The Tribunal notes that the applicant in the Alexandrou case was found to have intentionally disregarded his tax obligations and failed to demonstrate grounds for remitting the penalty tax, so the relevance of that case to the applicant’s case here is not clear. In the Hay case, the applicant was found to have failed to take reasonable care but the Tribunal accepted that he should have a reduction in the penalty tax due to the combined effect of his personal circumstances which differed markedly from the applicant here: in the Hay case the applicant’s circumstances included:
…the severe mental illness of a relative for whom he cared, the ill-health and medical emergencies of another relative for whom he also cared, his family and work responsibilities, and the impact on him of each of these circumstances and the totality of these circumstances.[72]
[71] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79; Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23 and Alexandrou and Ors v Commissioner for ACT Revenue (Administrative Review) [2012] ACAT 66
[72] Hay v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 23 [33]
Similarly in the Wade case, where the applicants successfully argued for a reduction in penalty tax, the applicants’ personal circumstances differed from the applicant here in important respects: they were unexpectedly detained overseas for the entire rental period, and experienced issues with their agent while also having no direct receipt of mail sent by the Commissioner.[73]
[73] Wade & Tan v Commissioner for ACT Revenue (Administrative Review) [2014] ACAT 79, [100]
In regard to ATO Ruling MT 2008/1, the Tribunal notes that this Ruling relates to Commonwealth legislation and not ACT legislation relevant to land tax, and in any case the applicant did not produce evidence that she had provided the tax agent with ‘all relevant information’ as per paragraph 12B(b) of the ATO Ruling MT 2008/1. The ACT Revenue Circular GEN008 referred to by the respondent is of most relevance here; it is consistent with the authorities and supports a finding that the applicant failed to exercise reasonable care.

What is the effect, if any, on the applicant’s case of the mis-description of the property’s address in the Section 82 documents?

First considering the issue of whether the error in the address was an error in the notice itself, or an error in an accompanying letter as the respondent argues. The Tribunal agrees with the respondent that it is not a requirement for a section 82 notice to specify a period for the taxpayer to comply. However once the Commissioner provides in writing a time period by which the taxpayer must comply, the plain meaning of section 82(4) of the TAA is that the written material which sets out the time period is part of the notice: section 82(4) provides that penalties apply if the taxpayer does not “comply…within the period specified in the notice”. The Tribunal finds that the letter accompanying the section 82 notice, which set out the period by which the applicant had to comply, in this case is not a mere covering letter but it forms part of the notice.
Considering whether the section 82 notice is valid, the applicant cited the Carruthers[74] case. In Carruthers a notice was found to be invalid since it did not specify the correct manner of notification required under the relevant legislation. The applicant cited Carruthers as authority for her submission that the section 82 notice is invalid due to the error in the address of the property in one part of that document.: “the penalty relating to the period covered by this notice should be set aside because there is a requirement for strict compliance where penalties apply [on the basis of]…the long-standing common law principle that statutes are to be construed strictly where penalties apply”.[75] On this basis she argued that she made a voluntary disclosure in responding to the invalid notice.
[74] Secretary Department of Social Security v Marie Carruthers [1993] AATA 330
[75] Applicant’s final submissions page 1, [11] citing Carruthers
The Tribunal has reviewed the authorities provided by the respondent to support the respondent’s contention that the section 82 notice is valid. The Tribunal finds that the section 82 notice is invalid for the following reasons.
The Tribunal accepts that “[t]here is no general principle that uncertainty in an executive instrument spells invalidity”[76] as stated in the Telstra Corporation case. That case states that “the statutory notices should be reasonably construed and the requirement for clarity is not to be applied in a precious or hypercritical fashion”.[77] The respondent referred to another authority that presented this caution, where the Tribunal in that case did not accept that the:
misspelling of the applicant’s name [in correspondence that sought information about income for ongoing receipt of a disability pension] to such a minimal extent [the name was spelt Van Brummela instead of Van Brummelen, but the address as accurate] constitutes a ground sufficient to say that the letter was not a notice.[78]
[76] Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493
[77] Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493 [39], citing Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368, [375]
[78] Van Brummelen v Secretary to the Department of Social Security [1995] AATA 121, [12]
The Telstra case re-states the principle as being that statutory notices:
must convey, with reasonable and sufficient clarity and certainty, the subject matter with which they deal and enable the recipient to know what is required if their issue is to be a valid exercise of statutory power…[t]the severity of …penalties or consequences….that flow …are relevant factors in identifying the requisite degree of certainty….Account is to be taken of the statutory context in which the issue of a statutory notice arises.[79]
In that case, following a course of prior correspondence between the parties, a statutory ‘consultation notice’ was issued to a “sophisticated, well-advised company with significant…experience”[80] to provide information it held, representing a step towards the issuing if necessary of a further notice, the competition notice. The court found that both the consultation and competition notices were “clear in their terms to the extent necessary for Telstra, an experienced and sophisticated participant in the industry, to understand.”[81] However the notices differed in the kind of conduct they each described, accordingly, the consultation notice failed to comply with the statutory requirements and the competition notice should not have been issued.
[79] Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493, [36]-[37]
[80] Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493, [40]
[81] Ibid [263], [236]

The Telstra case cites the Fieldhouse[82] case. That case also emphasises the importance of context when considering the effect of any error in the notice, particularly the circumstances and nature of the recipient of any notice: “[where the penalty of not complying is serious]…an ambiguity in a notice which an addressee is unable to resolve for himself must, where that ambiguity could mislead him, operate to invalidate, to that extent, the notice”.[83] The court found that the ambiguity in that case was “more apparent than real. Given the context … a reasonable person in the position of the addressee of the notice would in my view be left in no doubt as to the information or documentation which he is required to furnish”.[84] The recipients of the notices in that case were professional advisors associated with companies, and the notices were found to be valid.
[82] Fieldhouse v Deputy Commissioner of Taxation (1989) 25 FCR 187
[83] Ibid [30]
[84] Ibid [44]
The applicant in this case is not a taxpayer who claims any special knowledge of tax and she felt secure in that she had the support of various professionals who had not raised land tax for the property with her. The Tribunal accepts that the applicant was genuinely confused about the relevance of the notice to her when she received it due to the error in the address on one part of that notice. The residential address rather than the block and section was the description of the property which was most readily identifiable by the applicant. Given this error in one of the addresses provided, the error (despite the other accurate descriptions), caused her confusion. The Tribunal does not accept the respondent’s claim that the applicant’s evidence was inconsistent on this point – while she accepted at some point after receipt of the notice that the block and section were correctly described in the notice and that the address for the property in one part of the notice was accurate, the presence of an inaccurate address for the property in another part of the notice nonetheless caused her confusion. Her confusion about whether the notice was relevant to the property was heightened by the fact that she had received an invoice for land tax for the Ngunnawal property that she rented out without notifying the Commissioner.
An additional significant aspect of the context of the notice in this case that the notice was the first correspondence by the Commissioner with the applicant specifically about land tax for the property. In the Van Brummelen case the context was that the applicant was already in receipt of a disability pension and had a course of correspondence that preceded the letter/notice at issue in the case, which assisted the recipient to interpret the error in the notice. Similarly, in the Telstra case, there had been a course of prior correspondence between the parties prior to the notice being issued.
The Tribunal does not accept that the applicant’s response to the notice removes any doubt that it is invalid. The applicant responded to the section 82 notice promptly and without any advice from any professional.[85] The Tribunal notes that if she had not responded to the notice, the notice stated that failure to provide the information “renders an owner liable to pay a penalty of up to 90%.” The applicant responded and raised the error in the address for the property in the notice. She continued to raise the error in these proceedings, and raised in her evidence at the hearing the associated question whether the respondent “sent a notice of assessment for land tax to the wrong address”.
[85] Transcript of proceedings 31 March 2015 page 30
The error in the description of the very property to which the land tax notice relates is a material error and not trivial. Similar to the statement of the amount of the liability in the notice in the Gruber case, the description of the property in this notice is surely the most important aspect of the notice.[86] The error does affect the ‘sense, nature and substance’,[87] it does infect the whole notice with the error, since the error appears on a notice where a contradictory address for the property to which the notice relates is also provided. In the Chen case the errors were in elements of the notice that summarized other claims that were not at the heart of the notice, but included for mere convenience.[88] The respondent in this case suggests that since 3 of the 4 descriptions of the property in the notice were accurate, the one inaccurate description could be eliminated by the applicant. However, the applicant was not in a position to resolve which descriptors were accurate, and in any case it is not appropriate to require the applicant to work out the respondent’s intentions.[89]
[86] Deputy Commissioner of Taxation v Chen [2011] NSWDC 22 [21], citing Deputy Commissioner of Taxation v Gruber [1998] 43 NSWLR 271
[87] Deputy Commissioner of Taxation v Chen [2011] NSWDC 22 [23], citing Deputy Commissioner of Taxation v Falzon [2008] QCA 327
[88] Deputy Commissioner of Taxation v Chen [2011] NSWDC 22 [25]
[89] Secretary Department of Social Security v Marie Carruthers [1993] AATA 330
The Tribunal finds that the applicant was not a skilled recipient of the notice, had not had any prior specific correspondence to assist her interpret an error in the notice, responded to the notice which contained a penalty for non-compliance, nonetheless remained confused about whether it was accurate, was not in a position to resolve this concern herself, and the error was a material error that infected the whole notice given its nature and context. On this basis the Tribunal finds that the section 82 notice is invalid.
However, the Tribunal accepts the respondent’s submission that the applicant did not therefore make a voluntary disclosure.[90] The section 82 investigation was initiated on 29 April 2014 with the ACTEWAGL search, which pre-dated when the applicant provided the information about the renting of the property to the Commissioner on 20 May 2014.
[90] Sections 32 and 33 of the TAA
The Tribunal does not accept the respondent’s contention that the error and/or the validity of the section 82 notice is not relevant to the exercise of a discretion to remit penalty tax under section 37 of the TAA and that the case “remains unremarkable.”[91] The Tribunal accepts the applicant’s submission that the error in the circumstances of this case is relevant to a consideration of remission of penalty tax.
[91] Respondent’s final submissions, page 7
The circumstances set out above that support the finding that the section 82 notice is invalid also support a finding that the circumstances that resulted in the liability for penalty tax were exceptional.[92]
[92] Section 37(a)(ii) of the TAA
Considering whether the remission of penalty tax is fair and reasonable[93], fairness and reasonableness requires some level of consistency in decision making, although it does not extend so far as to bind future decision makers. Previous cases must be considered. The applicants in the Steele case were granted a remission. It is difficult to distinguish the circumstances in Steele from the present applicant - none of them had heard of land tax and all of them had employed agents upon whom they relied to manage their properties, and all acted honestly and without intent to deceive. The Tribunal finds that given the circumstances of the case and the Steele case, it would not be unfair or unreasonable to allow the present applicant a remission.
[93] Section 37(b) of the TAA
The Tribunal accepts that it would be unfair if the taxpayer in this case had a full remission since this would mean they gained the benefit of the money for the period for which it was unpaid and subsequently paid no penalty. Even a 50% remission would be excessive, as that would put them in the position of someone with a reasonable excuse, which the Tribunal has found not to be the case. Therefore, the Tribunal remits 40% of the penalty tax imposed. To remove doubt, the result of the Tribunal’s finding is that a penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
The Tribunal has considered the issue of deterrence and balanced this with the requirement to determine the correct or preferable decision. In this case, even with a remission of penalty tax, some penalty tax is payable for the relevant period of unpaid land tax. Further, the interest imposed on the applicant is a deterrent to non-compliance.
It is important to clarify that the nature of exceptionality in this case is such that if any of the facts were different or less well evidenced, the applicants’ circumstances would not have been exceptional. A remission is not automatically available where there is an error in a notice or where the notice is invalid. The onus on the taxpayer to inform themselves about their tax liabilities still remains.

Summary of Findings

The Tribunal finds that:
(a)the letter from the applicant’s accountant dated 13 April 2015 is not accepted into evidence;
(b)the liability for interest and penalty tax falls on the owner even though she engaged various professionals, and any duty or liability of a professional person engaged by the taxpayer does not necessarily relieve the taxpayer of their duty or liability regarding land tax;
(c)there is no positive obligation on the Commissioner to issue an invoice in the absence of notification to the Commissioner or their agent about the renting of the property;
(d)in the context of current government arrangements, the notification requirement by the taxpayer to the Commissioner is not met if different government entities are the object of the notification, and the notification needs to be to the Commissioner, the ACT Revenue Office or agent;
(e)where the liability for land tax has been outstanding for over 5 years the Commissioner may issue an assessment for the period/s for which land tax was payable beyond 5 years under section 7 of the TAA Act - section 7 is a general power for assessing a tax liability;
(f)the applicant did not take reasonable care and does not have a reasonable excuse;
(g)the letter accompanying the section 82 notice, which set out the period by which the applicant had to comply, in this case is not a mere covering letter but it forms part of the notice;
(h)the section 82 notice is invalid;
(i)the applicant did not make a voluntary disclosure;
(j)the applicant was not a skilled recipient of the notice, had not had any prior specific correspondence to assist her interpret an error in the notice, responded to the notice which contained a penalty for non-compliance, nonetheless remained confused about whether it was accurate, was not in a position to resolve this concern herself., and the error was a material error that infected the whole notice given its nature and context;
(k)the error and the invalidity of the section 82 notice is relevant to the exercise of a discretion to remit penalty; and
(l)the circumstances that resulted in the liability for penalty tax were exceptional and it would not be unfair or unreasonable to allow the present applicant a remission.
The decision about interest and any remittal are not reviewable by the Tribunal.
The Tribunal orders as follows:
(1)The decision of 26 November 2014 not to remit penalty tax is set aside.
(2)A decision remitting 40% of the penalty tax is substituted.
(3)To remove doubt, the result of Order 2 is that penalty tax will be imposed at 30% (instead of 50%) of land tax payable for the relevant period.
(4)In so far as the application seeks review of interest on land tax payable for the relevant period, it is dismissed for want of jurisdiction.
………………………………..
Ms L. Beacroft
Member

HEARING DETAILS

FILE NUMBER:	AT 14/105
PARTIES, APPLICANT:	Isabelle Gonzalez
PARTIES, RESPONDENT:	Commissioner for ACT Revenue
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	Ms Katavic
SOLICITORS FOR APPLICANT	ACT Government Solicitor
SOLICITORS FOR RESPONDENT	Self-Represented
TRIBUNAL MEMBERS:	Ms L. Beacroft - Member
DATES OF HEARING:	31 March 2015