HOAR and COMMISSIONER OF STATE REVENUE
[2007] WASAT 83
•12 APRIL 2007
HOAR and COMMISSIONER OF STATE REVENUE [2007] WASAT 83
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2007] WASAT 83 | |
| TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | DR:49/2007 | 10 APRIL 2007 | |
| Coram: | JUDGE J CHANEY (DEPUTY PRESIDENT) | 12/04/07 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | DONALD EDGAR HOAR COMMISSIONER OF STATE REVENUE |
Catchwords: | Stamp duty Penalty Late lodgement of offtheplan conditional contract Misunderstanding as to time for lodgement Impounding of contract Commissioner's Practice TAA 1.2 |
Legislation: | Stamp Act 1921 (WA), s 17AA(2), s 17BA(5), s 113 Taxation Administration Act 2003 (WA), s 26(1)(b), s 29 |
Case References: | Miller & Anor and Commissioner of State Revenue [2006] WASAT 336 |
Orders | 1. The assessment of penalty duty is affirmed.,2. The application is dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : DEVELOPMENT & RESOURCES ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : HOAR and COMMISSIONER OF STATE REVENUE [2007] WASAT 83 MEMBER : JUDGE J CHANEY (DEPUTY PRESIDENT) HEARD : 10 APRIL 2007 DELIVERED : 12 APRIL 2007 FILE NO/S : DR 49 of 2007 BETWEEN : DONALD EDGAR HOAR
- Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Stamp duty Penalty Late lodgement of offtheplan conditional contract Misunderstanding as to time for lodgement Impounding of contract Commissioner's Practice TAA 1.2
Legislation:
Stamp Act 1921 (WA), s 17AA(2), s 17BA(5), s 113
Taxation Administration Act 2003 (WA), s 26(1)(b), s 29
(Page 2)
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicant : Mr G Hoar (Acting as Agent by Leave)
Respondent : Ms K Loh
Solicitors:
Applicant : N/A
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Miller & Anor and Commissioner of State Revenue [2006] WASAT 336
(Page 3)
Summary of Tribunal's decision
1 In January 2005, Mr Donald Edgar Hoar entered into a contract to purchase a strata title unit in a development known as Avena River Apartments which was, at that time, yet to be constructed. The contract was subject to a number of conditions, including a provision for the construction on the strata lot, after execution of the contract, of a building for residential purposes. By reason of those conditions, the contract was an "off-the-plan conditional contract" for the purposes of the Stamp Act 1921 (WA).
2 Because he lives on a remote pastoral property, Mr Donald Hoar entrusted the conduct of the purchase to his brother, Mr Gary Hoar. Because of Mr Gary Hoar's misunderstanding as to the operation of the relevant provisions of the Stamp Act, the contract was not lodged for stamping within two months, as required by s 17BA(5) of the Stamp Act. In the course of an investigation concerning the sale of the Avena River Apartments, an officer of the Office of State Revenue contacted Mr Gary Hoar and requested that he be provided with a copy of the sale agreement. Mr Gary Hoar provided a copy the following day. The contract was assessed for stamp duty in the amount of $30 960, and, in accordance with Commissioner's Practice TAA 1.2, penalty tax of 40% of that amount, or $12 384, was imposed.
3 Mr Hoar lodged an objection to the penalty tax which the Commissioner disallowed. He then sought review by the Tribunal. Mr Hoar contended that the application of a 40% penalty was unjust and unreasonable given the confusing and relatively new provisions of the Stamp Act which required lodgement of the document within two months. He argued that, had the contract been treated as being presented for stamping voluntarily, a penalty for late lodgement of only 20% of the duty would have been imposed under TAA 1.2. He argued that the eventual lodgement of the contract for stamping was inevitable in order to enable settlement to proceed, and had there been no investigation and "impounding of the agreement", the policy contained in Commissioner's Practice TAA 1.2 would have resulted in a penalty of only 20%.
4 The Tribunal considered the circumstances surrounding the lodgement of the contract, and the factors underlying the Commissioner's practice in relation to remission of penalty tax. It concluded that the circumstances did not warrant a departure from the Commissioner's normal practice, and dismissed the application for review.
(Page 4)
Background
5 By a contract made on 12 January 2005, Donald Edgar Hoar agreed to purchase apartment No 20 in the Avena River Apartments proposed to be constructed in Tanunda Drive, Rivervale. The contract was subject to a number of conditions requiring the vendor to obtain all necessary approvals for the proposed development, to construct the development and register a strata plan, and to a number of other related conditions. It is not necessary to identify the conditions in detail, because it is common ground that the contract constituted an "off-the-plan conditional contract". It is also common ground that s 17BA(5) of the Stamp Act 1921 (WA) (Stamp Act) requires that an off-the-plan conditional contract must be lodged with the Commissioner of State Revenue (Commissioner) within two months after the day on which the contract was first executed. Duty on off-the-plan conditional contracts is payable within two years after the day on which the contract was first executed or one month after the date of the assessment notice, whichever is the later (s 17AA(2) of the Stamp Act).
6 A senior investigations officer of the respondent became aware of the sale of units in the Avena River Apartments prior to completion of their construction. Apparently he conducted investigations between the period of 28 March 2006 and 11 May 2006, and in the course of those investigations obtained details of the purchasers of the apartments, including the applicant. On 15 May 2006, the officer made contact with Mr Gary Hoar, who was representing the applicant, and requested that he present the contract of sale for stamping. Mr Hoar complied with that request promptly and the following day attended the Office of State Revenue and handed the contract to the investigator. On 29 May 2006, the respondent issued an assessment for stamp duty on the sale agreement in the amount of $30 960, and for penalty tax in the amount of $12 384, which amounts to 40% of the primary duty.
7 Section 26(1)(b) of the Taxation Administration Act 2003 (WA) (TA Act) provides that a taxpayer is liable for penalty tax in an amount equal to the amount of the primary liability where the taxpayer does not lodge an instrument in accordance with a taxation act. On the basis of that provision, on late lodgement of the contract, the applicant had a statutory liability for penalty tax equal to the primary tax.
8 Section 29 of the TA Act empowers the Commissioner to remit penalty tax wholly or in part. In imposing a penalty tax of 40% of the amount of the primary tax, the Commissioner applied Commissioner's
(Page 5)
- Practice TAA 1.2. Clauses 1, 2, 3, 4, 8 and 10 of TAA 1.2 are relevant for present purposes. They provide:
"Circumstances where no remission is to occur
1. No remission of penalty tax will occur where:
1.1 a memorandum has been created under section 20 of the TAA because there are reasonable grounds for suspecting that the relevant instrument was not lodged for assessment in an endeavour to evade stamp duty or mislead the Commissioner; or
1.2 in any other case, there are reasonable grounds for suspecting that an instrument has not been lodged within the required time, in an endeavour to evade stamp duty or mislead the Commissioner.
Late lodgement of Instruments for Assessment
2. If an instrument is lodged voluntarily, penalty tax will be remitted to the following:
2.1 within 7 days of the required lodgement date – no penalty tax;
2.2 after 7 days of the required lodgement date but within 1 calendar month – 2.5% of the amount of duty;
2.3 after 1 calendar month of the required lodgement date but within 4 calendar months – 5% of the amount of duty;
2.4 after 4 calendar months of the required lodgement date but within 7 calendar months – 10% of the amount of duty;
2.5 after 7 calendar months of the required lodgement date but within 10 calendar months – 15% of the amount of duty;
2.6 after 10 calendar months of the required lodgement date – 20% of the amount of duty.
- 3. Where it is apparent that a taxpayer has lodged an instrument because an investigation was imminent, the penalty tax rates detailed in paragraph 4 are to apply.
Impounded Instruments
4. If an instrument is impounded by an investigator or other officer, penalty tax will be remitted to the following:
4.1 after 7 days of the required lodgement date but within 1 calendar month – 5% of the amount of duty;
4.2 after 1 calendar month of the required lodgement date but within 4 calendar months – 10% of the amount of duty;
4.3 after 4 calendar months of the required lodgement date but within 7 calendar months – 20% of the amount of duty;
4.4 after 7 calendar months of the required lodgement date but within 10 calendar months – 30% of the amount of duty;
4.5 after 10 calendar months of the required lodgement date - 40% of the amount of duty;
….
Further remission of penalty tax
8. As a general rule, the remission of penalty tax will not be allowed on the basis of a liable party's claim to have been ignorant of a liability to taxation, as this factor is already taken into account in the remission under paragraphs 2 and 4.
…
10. The further remission of penalty tax below the amounts specified in paragraphs 2 and 4 will be considered only in exceptional circumstances which may include, but are not limited to:
- 10.1 the late lodgement of the instrument or dutiable statement occurred as a result of advice issued by the Office of State Revenue;
10.2 the default was associated with an illegal activity of the lodging party or any other person acting on behalf of the liable party where the liable party was not involved in the activity;
10.3 the delay in lodging the instrument or dutiable statement was occasioned by the death or serious illness of the liable party or lodging party;
10.4 an investigator or other officer reports that there are other exceptional reasons which may warrant a further remission of the penalty tax and recommends to the Manager Assessments that the penalty tax be remitted in part or in full;'
10.5 a taxpayer, solicitor, settlement agent etc has made written representations detailing exceptional circumstances."
The applicant's contentions
9 The applicant seeks to have the penalty duty reduced to nil, or alternatively, to 20% of the primary duty.
10 His grounds for seeking that decision can be summarised as follows:
a) the legislation is confusing and relatively new as was acknowledged by the publication of Commissioner's Circular No 82 in February 2006 attempting to explain the provisions;
b) the penalty of 40% has been based upon "an impounded instrument" whereas the contract should have been received as a voluntary presentation so that cl 2 of TAA 1.2 is applicable;
c) given that stamping of the contract is a prerequisite for settlement of the purchase, the Commissioner's investigation served no practical purpose, and should not result in cl 4 of TAA 1.2 being applied.
(Page 8)
Confusion as to the operation of the Stamp Act
11 Mr Gary Hoar advised me during the course of the hearing that, based on information given to him by various industry participants in relation to other real estate transactions, he was of the view that provisions relating to general conditional contracts were applicable to this contract so that, up until he was contacted by the investigations officer, he did not believe that the contract was due to be presented for assessment of duty. He notes that, as late as February 2006, the Commissioner issued Circular No 82 which is designed "to clarify the differences between the … classes of eligible conditional contracts and to encourage agents to re-examine contracts that they have in their possession and are holding pending lodgement". The Circular also refers to customer education sessions being conducted by the Office of State Revenue (OSR). In response, counsel for the respondent produced a media statement issued on 13 May 2004 by the OSR explaining the amendments to the Stamp Act concerning conditional contracts which came into force on 30 June 2004. She also produced a fact sheet, which I was advised was available on the OSR website explaining the requirements in relation to the different classes of conditional contracts.
12 As Mr Gary Hoar observed, the existence of fact sheets on a website is likely to be of more value in informing those working in the conveyancing industry than individuals undertaking only occasional real estate transactions. Notwithstanding that, however, it is clear that information was publicly available, at the relevant time, for persons enquiring as to their obligations in relation to the stamping of conditional contracts.
13 Clause 8 of TAA 1.2 identifies the general approach which the Commissioner will apply where a party claims to have been ignorant of a liability to taxation. As I said in Miller & Anor and Commissioner of State Revenue [2006] WASAT 336 at [16], TAA 1.2 provides for a fair and transparent policy that seeks to provide equity and consistency amongst all taxpayers, being based on a long standing policy well known to the conveyancing industry, and providing a degree of flexibility for exceptional cases to be considered on their merits. The policy embodied in TAA 1.2 takes account, through cl 8, of ignorance of a liability to taxation. Mr Hoar contended that he was not "ignorant" of his liability, but rather labouring under a misapprehension as to the requirements for lodgement. In my view, cl 8, properly construed, covers the type of confusion under which Mr Hoar laboured and is not confined in its operation to cases of complete ignorance of any liability to taxation.
(Page 9)
14 There is undoubtedly room for debate as to the level of remission which might be extended to a taxpayer who fails to meet the requirements of the Stamp Act, but does so unwittingly and without any intention to defeat the revenue. The provisions of TAA 1.2 are designed so that, where there is an intention to evade tax or mislead the Commissioner, no remission will be granted. The remissions provided for in TAA 1.2 therefore assume an innocent omission, inadvertence or misunderstanding. TAA 1.2 provides a method of ensuring a level of consistency in the administration of the TA Act and in particular the exercise of the discretion under s 29 of the TA Act. In my view, the applicant's misunderstanding as to the operation of the Stamp Act is not a reason to depart from the operation of TAA 1.2. That is so, even if a level of confusion was, or even still is, present in the conveyancing industry concerning the identification of, and obligations in relation to, differing types of conditional contract.
Impounding of the contract
15 Mr Hoar complains that, having responded promptly to the call from the investigator, the contract should not have been "impounded". Rather, he says that after meeting and having a discussion with the investigating officer, he voluntarily handed the instrument to the officer. Accordingly, he contends that he should be treated as having voluntarily lodged the contract so that, at worst, cl 2 of TAA 1.2 is applied, and penalty duty of only 20% should have been imposed.
16 Clause 3 of TAA 1.2 provides a context for cl 4. It contemplates that where the lodgement is a consequence of the taxpayer learning of an investigation, the rates detailed in cl 4 are to apply. Clause 4 is headed "Impounded Instruments", and the rates for remission provided for in that clause apply "if an instrument is impounded by an investigator or other officer". The power to impound documents is found in s 113 of the Stamp Act. That section provides:
"If it appears to the Commissioner that an instrument in the Commissioner's possession or control (regardless of how it came to be in the Commissioner's possession or control) is chargeable with duty but has not been stamped, the Commissioner may impound the instrument until the duty and any penalty tax payable in respect of the instrument have been paid."
17 Although the use of the word "impound" tends to suggest some coercive power, s 113 is no doubt the source of power underlying the
(Page 10)
- Commissioner's usual practice in relation to documents lodged for assessment in the usual way. That practice is that the documents are retained by the Commissioner until duty is paid. In that sense, they are "impounded". In my view, cl 4 of TAA 1.2 is designed to apply to instruments coming into the possession of the Commissioner, through one of his officers, after a taxpayer has become aware of an investigation, regardless of the manner in which it comes into his possession. Clause 3 of TAA 1.2 makes that clear. It provides that the penalty rates detailed in cl 4 are to apply where "a taxpayer has lodged an instrument" because an investigation is imminent. The use of the word "impounded" in cl 4 does not contemplate some coercive action by an investigator or other officer. The triggering event for the application of cl 4 is the lodgement of a document by a taxpayer with knowledge that an investigation is imminent or underway.
18 In this case, it was contact from the investigator which prompted the delivery of the contract into the Commissioner's possession. It would not have made any difference to the application of TAA 1.2 if, following the phone call from the investigator, Mr Hoar had lodged the contract with an assessor in the usual way.
The ultimate need to submit the contract
19 The applicant contends that, because the contract would ultimately need to be submitted for stamping prior to settlement of the transaction, the investigation which triggered the application of cl 4 of TAA 1.2 was somewhat pointless. But for the investigation, Mr Hoar points out that he would ultimately have been liable only for the 20% penalty for late lodgement provided for in cl 2.
20 I was informed from the bar table that the rationale underlying the requirement to lodge off-the-plan conditional contracts within two months of execution is to avoid the risk that on-sales of units off the plan might be effected without each separate transaction being separately assessed for duty. That is an outcome which could only be brought about by breaches of the Stamp Act and the complicity of several parties in the series of transactions. Notwithstanding that, I have no reason to doubt counsel's explanation as to the rationale for the requirement. On that basis, there is a mischief to which the requirement for lodgement of the contract is directed, and Mr Hoar's proposition that off-the-plan conditional contracts must eventually be lodged for assessment is not necessarily sustainable.
21 It follows, in my view, there is no reason to depart from the general application of the provisions of TAA 1.2 based upon the proposition that
(Page 11)
- the contract would have inevitably been lodged for assessment in any event. That is not to doubt the applicant's contention that, in his case, it was always intended to lodge the contract for stamping and to complete the transaction. Had there been any suspicion of an attempt to evade duty, there would have been no remission of the 100% penalty provided for in s 26(1)(b) of the TA Act.
Conclusion
22 In the circumstances, I am of the view that there are no exceptional circumstances which warrant departure from the application of Commissioner's Practice TAA 1.2, and the application should be dismissed.
Orders
1. The assessment of penalty duty is affirmed.
2. The application is dismissed.
I certify that this and the preceding [22] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE J CHANEY, DEPUTY PRESIDENT
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