Howe v Chief Commissioner of State Revenue
[2009] NSWADT 200
•28 July 2009
CITATION: Howe v Chief Commissioner of State Revenue [2009] NSWADT 200 DIVISION: Revenue Division PARTIES: Applicant:
Respondent:
Gregory Stuart Howe and Louise Anne Howe
Chief Commissioner of State RevenueFILE NUMBER: 086094 HEARING DATES: 16 February 2009
DATE OF DECISION:
28 July 2009BEFORE: Hirschhorn M - Judicial Member CATCHWORDS: Land tax exemption – primary productionTaxation Administration Act – remission of interest LEGISLATION CITED: Land Tax Management Act 1956
Administrative Decisions Tribunal Act 1997
Taxation Administration Act 1996CASES CITED: Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 153 ALR 490
Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSW ADT 271
Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19
Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19
McDonald’s Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6
Ettamogah Mob Australia Pty Ltd & Ors v Chief Commissioner of State Revenue [2005] NSWADT 22
Colusso and Ors v Chief Commissioner of State Revenue [2008] NSWADT 79
Reysson Pty Ltd v Chief Commissioner of State Revenue [2009] NSWADT 17REPRESENTATION: Applicant Representative:
Respondent Representative:
In person
Dr Roy, of CounselORDERS: (1) The decision of the Chief Commissioner that the Property is subject to land tax in each of the 2004, 2005 and 2006 land tax years is affirmed.
(2) The decision of the Chief Commissioner not to remit any of the market rate component of interest in relation to the 2005 and 2006 land tax years is affirmed.
(3) The decision of the Chief Commissioner not to remit any of the premium component of interest in relation to the 2005 and 2006 land tax years is set aside. Instead, the full premium component of interest is to be remitted in both the 2005 and 2006 land tax years.
REASONS FOR DECISION
Introduction
1 This matter involved an application for review of an objection decision of the Respondent dated 28 June 2008 which disallowed in whole the objections of the Applicants in respect of land tax assessments issued for the 2004-2008 land tax years inclusive in respect of a property at 183-189 Shipley Rd, Blackheath (“the Property”).
2 The objection decision of the Respondent was to the effect that the Property did not fall within the relevant exemption from land tax for land used for primary production pursuant to either Section 10(1)(p) of the Land Tax Management Act 1956 (“LTMA”) for the 2004-2005 land tax years inclusive or Section 10AA of the LTMA for the 2006-2008 land tax years inclusive.
3 The Tribunal noted at the hearing that the Applicant’s written submissions had referred to the “2003, 2004 and 2005 land tax years” as being the relevant years in dispute. At the hearing the Applicant clarified, in response to a question from the Tribunal, that the relevant land tax years and matters in dispute were as follows:
b. Primary tax and penalties for the 2005 land tax year (i.e. in respect of property owned by the Applicants as at midnight on 31 December 2004); anda. Primary tax and penalties for the 2004 land tax year (i.e. in respect of property owned by the Applicants as at midnight on 31 December 2003);
c. Penalties for the 2006 land tax year (i.e. in respect of property owned by the Applicants as at midnight on 31 December 2005).
4 The Applicant prepared written submissions with attached documents and relied on these as well as oral submissions made by Ms Howe, via telephone, at the hearing.
5 The Respondent filed the documents required by Section 58 of the Administrative Decisions Tribunal Act 1997 (including a supplementary set of documents) and relied on these together with written submissions and oral submissions at the hearing.
Facts
6 The facts were not in dispute between the parties (except perhaps in relation to the nature and circumstances of telephone conversations between Ms Howe and two employees of the Office of State Revenue on 23 November 2004 and February 2008 which are referred to below).
7 The Applicants have been the registered owners of the Property since 2003.
8 In the relevant land tax years, the Applicants also owned two other properties, one of which, being a property at Bonnet Bay, was their principal place of residence for land tax purposes.
9 It was common ground between the parties that no primary production, within the meaning in the LTMA, took place on the Property in any of the land tax years in question.
10 On 23 November 2004 Ms Howe says that she had a telephone conversation with someone from the Office of State Revenue (“OSR”) called Vicki. Ms Howe kept a handwritten note of the conversation on a document that contained a copy of Section 10 LTMA.
11 The note stated that:
Vicki from the OSR confirmed an exemption from land tax would apply to Shipley Rd as it is over 10 acres and zoned non urban. When quoted DP No, she stated an exemption had already been placed on the land but in relation to 193-192 Shipley Rd. Vicki advised that as the land was over 10 hectares automatic exemption.
12 Following this, Ms Howe said she sent a letter to the OSR on 27 November 2004. This letter (which was attached to the Land Tax 2005 Registration Form) stated:
This exemption has also been confirmed verbally by your office.Please note 183-185 Shipley Road Blackheath has been included at item 4b, Exemption for primary production land. The City of Blue Mountains Council, as indicated in the attached section 149 planning certificate, has zoned 183-189 Shipley Road Blackheath as “rural”. Accordingly, 183-189 Shipley Road Blackheath is subject to the exemption to land tax under Section 10(p)(ii) of the Land Tax Management Act of 1956 No 26.
13 Ms Howe said she did not hear anything further from the OSR following the telephone call and her letter.
14 The Respondent produced in its supplementary Section 58 documents, a copy of the letter from the Applicants dated 27 November 2004 together with a copy of the 2005 Land Tax Registration form (handwritten date on the top of 30 November 2004) and a Section 149 certificate for the Property dated 11/8/03. The zoning of the land in section 2 says “L.E.P No 1991 Rural Conservation – No subdivision Environmental Protection”.
15 In January 2008, Ms Howe said she decided to check the matter again but could not locate Section 10(1)(p)(ii) in the LTMA. The decision to check the matter was made after the Applicants received the 2008 property valuation notices for their properties. Ms Howe rang the OSR and spoke to someone called Kate on 6 February 2008. Ms Howe informed Kate that she was unable to find Section 10(1)(p)(ii) and requested from her the date that the section had been removed from the LTMA. Kate was unable to supply the date that it had been removed however it appears that there was then some general discussion between them about the operation of the primary production exemption.
16 Although the precise details of the conversation are not recorded in Ms Howe’s note, the discussion appears to have culminated in Kate advising that she would proceed to issue assessments to Ms Howe. Ms Howe said that she asked Kate to first look at their file and the disclosures that had been made and Ms Howe says that Kate stated that it was her job to issue assessments without any official notification from the client.
17 The Respondent produced in the Section 58 documents, some internal notes of a telephone call on 4 February 2008 between Ms Howe and Kate. The substance of the notes confirms that Ms Howe said the land at Blackheath had never been used as primary production land and that the Applicants had lodged something back in 2004 to say that as the land was zoned rural the exemption should apply. The note says Kate advised Ms Howe, that under the current section 10AA, the land must be dominantly used for primary production and Kate had an obligation to now remove the exemption and also the Applicants would have to lodge a primary production land claim to validate current claims. Kate also noted that it was the Applicant’s obligation to update the OSR if circumstances changed.
18 On 6 February 2008, land tax assessments were issued to the Applicants for the 2004 to 2008 land tax years inclusive. As stated above, the relevant land tax years for the purposes of the present application are the 2004-2006 land tax years inclusive:
(a)The land tax for the 2004 year was $329.50.
(b)The land tax for the 2005 year was $1,728.40 and interest of $336.77.
(c)The land tax for the 2006 year was $2,293.00 and interest of $573.37 (although as Ms Howe confirmed at the hearing she was only seeking review in relation to the imposition of interest in the 2006 land tax year).
19 There were no “penalties” imposed on the Applicants. I understood that the reference to “penalties” at the hearing of the matter by Ms Howe was referring to the “interest” as this was the subject of their objections to the OSR. Dr Roy, Counsel for the Respondent, confirmed at the hearing, in response to a question from the Tribunal, that both the “market” rate and “premium” rate of interest had been imposed in the case of the Applicant’s assessments.
20 The documents tendered by the Applicants indicate that they paid the land tax and interest for the 2004-2008 years inclusive by way of 3 instalments on 16 March 2008, 15 April 2008 and 15 May 2008 (although they noted in their objections that the payment did not represent any admission as to liability for land tax and interest (where relevant) for the 2004 and 2005 years and interest for the 2006 land tax year).
21 The Applicants objected to the 2004, 2005 and 2006 assessments in separate letters all dated 31 March 2008. The objections indicated that the Property had been deemed “rural” under a Section 149 certificate and its primary purpose was for the provision of native flora and fauna.
22 The Respondent issued a notice of objection decision on 28 June 2008. The decision denied the objections and stated that the land was not exempt under former Section 10(1)(p) of the LTMA in the 2004 and 2005 land tax years nor under Section 10AA LTMA in the 2006-2008 land tax years. There was no specific reference to interest (at either the market or premium rate) in the objection decision.
Relevant legislative provisions
23 Pursuant to Sections 7, 8 and 9 of the LTMA, land tax is levied each year on the land value of all land in New South Wales owned by a taxpayer at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied other than land which is exempt from taxation under the LTMA.
24 Section 10 of the LTMA sets out certain categories of land that are exempt from land tax under the LTMA. In the present proceedings, the exemption relied upon by the Applicants was under Section 10(1)(p)(ii) for the 2004 and 2005 land tax years.
…10 Land exempted from tax
(1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act:
(p) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1991 or any succeeding year, land that:
(i) is land used for primary production in the course of the carrying on of a business of primary production, or
(ii) is land used for primary production (whether or not in the course of carrying on a business of primary production) if the land is within a “rural” or “non-urban” zone under a planning instrument or (in the case of land not within a zone under a planning instrument) is land that the Chief Commissioner is satisfied is rural land.
25 The term “land used for primary production” was for those land tax years defined in Section 3 LTMA as follows:
Land used for primary production means land used primarily for:
(a) the cultivation thereof for the purpose of selling the produce of such cultivation,
(b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce,
(b1) the purpose of commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) and the commercial farming of fish, molluscs, crustaceans or other aquatic animals,
(c) the keeping of bees thereon for the purpose of selling their honey,
(e) the propagation for sale of mushrooms, orchids or flowers,(d) a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or
and includes all land owned by a society registered as a rural society under the Co-operation, Community Settlement, and Credit Act 1923 , as amended by subsequent Acts.
26 From the 2006 land tax year and following, Section 10(1)(p) was repealed and instead Section 10AA contained the relevant exemption from land tax for land used for primary production. Section 10AA is in the following terms:
10AA Exemption for land used for primary production
(1) Land that is rural land is exempt from taxation if it is land used for primary production.
(2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land:
(a) has a significant and substantial commercial purpose or character, and
(b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).
(3) For the purposes of this section, land used for primary production means land the dominant use of which is for:
(a) cultivation, for the purpose of selling the produce of the cultivation, or
(b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or
(c) commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) or the commercial farming of fish, molluscs, crustaceans or other aquatic animals, or
(d) the keeping of bees, for the purpose of selling their honey, or
(e) a commercial plant nursery, but not a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or
(f) the propagation for sale of mushrooms, orchids or flowers.
(b) the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land.(4) For the purposes of this section, land is rural land if:
(a) the land is zoned “rural”, “rural residential” or “non-urban” under a planning instrument, or
27 The Second reading speech to State Revenue Legislation Further Amendment Bill 2005 (subsequently enacted as Act No 111 of 2005) indicated the following in relation to the primary production land exemption amendments which first applied for the purposes of the 2006 land tax year:
Amendment of the Land Tax Management Act
The bill makes amendments to various exemptions from land tax.
The Local Government Act definition of "farmland" contains a more precise business test. The bill amends the land tax provisions to be consistent with that definition. These amendments will ensure consistency as between land tax and council rates, in relation to the classification of primary production land in urban zones.Land currently qualifies for a land tax exemption if it is within a rural or non-urban zone and is used primarily for primary production; or if it is within an urban zone and is used in the course of carrying on a business of primary production.
28 It is apparent from the above Second Reading Speech therfore that the amendments were concerned with the exemption in former Section 10(1)(p)(i) in order to align this with the Local Government Act definitions of business rather than involving any “change” to the exemption in relation to “rural or non urban land” that had previously been in Section 10(1)(p)(ii) and is relevant to the Applicants’ proceedings.
Issue
29 The issues to be decided by the Tribunal are as follows:
b. Whether there should be any remission of interest, (i.e. the market rate component and/or the premium component) imposed on the Applicant in respect of the 2004, 2005 and 2006 land tax years, pursuant to Section 25 of the Taxation Administration Act 1996 (“TAA”)?a. Whether the Property was exempt from land tax pursuant to Section 10(1)(p)(ii) LTMA in respect of the 2004 and 2005 land tax years?
Applicant’s case
30 The Applicant’s case was essentially that the Property was exempt from land tax in respect of the 2004 and 2005 land tax years under Section 10(1)(p)(ii) LTMA on the basis that the Property was deemed to be in a “rural” zone under a planning instrument. The Applicants say that the emphasis in Section 10(1)(p)(ii) is on the “rural” zoning rather than primary production activities. If the section had intended it to be necessary to require both primary production activities and the land to be rural zoned then it should have used the word “and” rather than “if”. The Applicants argue that the uncertainty in the section is the reason it was repealed and replaced from 7 December 2005.
31 The Applicants also said that the OSR have a duty of care to provide an advisory service to the public and that information provided by them has been relied on by the Applicants. As I understood it at the hearing, the Applicant was referring in this regard to the information provided on the telephone call with the OSR in 2004.
32 In the alternative, the Applicants argued that the Respondent should remit all penalties in full as they provided advice concerning the application of the Section 10(1)(p)(ii) exemption that the Applicants relied on for the purposes of the 2004, 2005 and 2006 land tax years.
The Respondent’s case
33 In answer to the matters raised by the Applicants, the Respondent’s case was essentially the following:
a. The interpretation of Section 10(1)(p)(ii) LTMA by the Applicants was erroneous. Both under this section and the current exemption in Section 10AA, the Property needs to be “land used for primary production”. If this was not the case, and the words “land used for primary production” were redundant then it would lead to an absurd result that all land in NSW zoned “rural” or “non-urban” would be eligible for land tax exemption.
b.The alleged failure of the Respondent to “reject” the Applicant’s earlier letter to the OSR did not amount to an acceptance by the Respondent that the Property was exempt from land tax. There is significant case authority to the effect that no estoppel can be effective against the operation of a Statute. The Applicants are obliged under Section 12 of the LTMA to furnish land tax returns and to pay land tax and the Respondent is not obliged to confirm exemption applies or is correct nor the liability of the Applicants to pay land tax.
c. There was no estoppel in respect of the operation of the LTMA that arose by reason of anything an OSR officer may have said to the Applicants by telephone.
d. There is no obligation on the part of the Respondent to ensure that taxpayers are aware of their liabilities (i.e. in the context of the repeal of Section 10(1)(p)(ii) and replacement with Section 10AA LTMA).
f. In relation to the premium component, at the hearing, the Counsel for the Respondent referred to false information being given in the 2004 letter to the OSR and that the telephone call by Ms Howe in February 2008 was not in the nature of a voluntary disclosure but more of a “fishing expedition” seeking information about the primary production exemption. Ms Howe was asked for her file number by the OSR person taking the call.e. There are no grounds for remission of the market rate component of interest. It compensates the Respondent for not having the benefit of the tax payment from the time it was due. The Chief Commissioner has not in any way contributed to the tax default. There are no “exceptional circumstances” in the present case.
Discussion and Reasons for Decision
The exemption in Section 10(1)(p)(ii) LTMA for the purposes of the 2004 and 2005 land tax years
34 In this case, in respect of the proper construction of Section 10(1)(p)(ii) LTMA, the Tribunal is of the same view as that put forward by the Respondent. That is, in respect of both sub-paragraphs (i) and (ii) of Section 10(1)(p) there is a fundamental requirement that there be land that is “land used for primary production”. The land that satisfies this requirement is specifically defined in Section 3 LTMA.
35 If land is used for primary production within the definition in Section 3, then there is then the added requirement in the closing words of either Section 10(1)(p) sub-paragraph (i) that the land must be used for primary production in the course of carrying on a business of primary production or in sub-paragraph (ii) that the land is within a “rural” or “non-urban” zone under a planning instrument (or land that the Commissioner is satisfied is rural land).
36 It seems to me that provided that land is used for primary production within the meaning in Section 3, the task of sub-paragraphs (i) and (ii) is to provide additional but alternative requirements for the land to be exempt from land tax. If the use of the land for primary production reaches the scale that it can be said to be in “the course of carrying on a business of primary production” then it will be exempt under sub-paragraph (i).
37 Regardless however of whether or not the primary production reaches the scale of a business of primary production, the land will be exempt under sub-paragraph (ii) it the land is zoned as rural or non-urban land under a planning instrument (or the Commissioner is satisfied there is rural land). It is conceivable for example that sub-paragraph (ii) might extend to say a hobby farm (i.e. where the primary production activities might not be of such a scale or type as to constitute the carrying on of a business) but yet the particular land involved is zoned as rural or non urban land).
38 I agree with the Respondent that pursuant to both former Section 10(1)(p) and current Section 10AA LTMA, the relevant land must be “land used for primary production” within the meaning of that term in Section 3. There is no difference between the two provisions in this regard.
39 As set out above, the purpose of the amendments to the LTMA in 2005 was not to “change” the requirements of the exemption in former Section 10(1)(p)(ii) but rather to amend the exemption previously contained in Section 10(1)(p)(i) to align what is regarded as “in the course of the carrying on of a business of primary production” for the purposes of the LTMA with definitions in Local Government Acts. It appears that the re-writing of former Section 10(1)(p)(ii) occurred as simply a consequence of the changes to former Section 10(1)(p)(i).
40 Although the primary production exemption from land tax was indeed re-drafted and re-organised in December 2005, in fact the combination of current Section 10AA(1) and (4) is in extremely similar terms to the exemption that previously appeared in Section 10(1)(p)(ii).
41 It seems to me that the Applicants have interpreted the closing words of sub-paragraph (ii) as a definition in itself of “land used for primary production” i.e. if land is zoned as “rural” land then it satisfies the definition of land used for primary production and is therefore exempt from land tax. There are two major reasons that I think that that particular construction cannot follow.
42 Firstly, the closing words of Section 10(1)(p) refer to “land that…” and then the criteria to be satisfied are provided in either subparagraphs (i) or (ii). The criteria in each sub-paragraph are two-fold, firstly that the land is land used for primary production and secondly that (i) it be in the course of carrying on a business of primary production or (ii) the land itself have particular features (i.e. zoned “rural” or “non-urban” under a planning instrument).
43 Secondly, there is of course a specific definition of “land used for primary production” in Section 3 LTMA. This phrase has its own distinct meaning in the context of the LTMA and for the purposes of the exemption in former Section 10(1)(p). The meaning of this definition has been considered by the Tribunal (including the Appeal Panel of the Tribunal) on previous occasions (refer: Colusso and Ors v Chief Commissioner of State Revenue [2008] NSWADT 79, Reysson Pty Ltd v Chief Commissioner of State Revenue [2009] NSWADT 17).
44 It is possible the Applicant was not aware in 2004 when they considered the matter that “land used for primary production” was a defined term in the LTMA perhaps because the definition appears in a different section to Section 10(1)(p). The LTMA does not have system for indicating the presence of defined terms in contrast to, say, some Federal income tax legislation which typically uses an asterix (*) immediately before a particular defined term.
45 As a matter of statutory interpretation, a Court (or the Tribunal as the case may be) must strive to give meaning to every word in a statutory provision such as Section 10(1)(p)(ii) (Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 153 ALR 490 at 510). It is clear, in my view, that in order to be exempt, pursuant to Section 10(1)(p)(ii) the land must be used for primary production as defined, as a primary requirement and, as a secondary requirement, the land must be zoned as “rural” or “non-urban” under a planning instrument (or the Chief Commissioner must be satisfied there is “rural” land).
46 In the present case, the Applicant’s appeal in relation to liability for primary land tax in the 2004 and 2005 land tax years must therefore fail on the basis that it was common ground between the parties that the Property was not used for primary production in those years (or indeed at all).
47 Although I do accept that Ms Howe spoke to a person from the OSR in 2004 (I note this was not challenged by the Respondent nor was any request made to cross-examine Ms Howe about this matter) and there is clearly no doubt that the Applicants sent a letter to the OSR in late 2004 (that accompanied their 2005 land tax registration form) that set out the basis for the exemption claimed by the Applicants, there is a long line of decided cases that establish that there can be no estoppel against the operation of a Statute such as the LTMA. The Tribunal stated in Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSW ADT 271 at [12], for example:
The accepted view is…clearly that no conduct on the part of revenue can operate as an estoppel against an obligation imposed by revenue legislation to assess for the correct amount of tax, subject, of course, to any specific statutory provisions which prevent the revenue from exercising its statutory duties.
48 Accordingly, it is not possible for the Applicants to successfully assert that any comments made by Vicki and/or the lack of any reply by the Respondent to the Applicant’s 2004 letter grounded an estoppel such that the Respondent was unable to issue the land tax assessments to the Applicants for the land tax years in question.
49 The Appeal Panel of this Tribunal also helpfully explained the nature of a taxpayer’s obligations arising under Sections 7 and 12 of the LTMA in Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19 in the following terms at [2]:
Once the land value crosses the threshold for land tax, the land owner is required to lodge an initial return: LTM s 12 (1A). As the Commissioner has noted, this is a self assessment approach.
50 Further at [17]:
The position, unfortunately for Mr Giunta and for many taxpayers, is that this law, like many tax laws, imposes the obligation to pay tax without making any concession to the argument that there is any duty on the tax collector to inform the taxpayer of the liability in advance. As I said in the course of argument, it would be very rare indeed for a tax law to work on the basis that the onus was on the tax collector to let the taxpayer know first before a liability attaches.
Remission of interest in relation to the 2004-2006 land tax years inclusive
51 The 2004 assessment before the Tribunal does not indicate that any interest was imposed in relation to that year and accordingly no question of remission pursuant to Section 25 TAA appears to arise in relation to that land tax year.
Market rate
52 The Respondent confirmed at the hearing of the matter that interest had been imposed on the 2005 and 2006 assessments at both the market rate and the premium rate.
53 Section 3 TAA defines a “tax default” in the following terms:
tax default means a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay.
54 Sections 21 and 22 TAA set out the obligation of a taxpayer to pay interest in respect of a tax default as follows:
21 Interest in respect of tax defaults
(1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division.
(2) Interest is payable under this section in respect of a tax default that consists of a failure to pay penalty tax under Division 2 but is not payable in respect of any failure to pay interest under this Division.
22 Interest rate
(1) The interest rate is the sum of:
(a) the market rate component, and
(b) the premium component.(2) The market rate component is:
(a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or
(b) the rate specified for the time being by order of the Minister published in the Gazette.(4) In this section, the Bank Accepted Bill rate in respect of any day is the yield rate for 90-day Bank Accepted Bills published by the Reserve Bank for the month of May in the financial year preceding the financial year in which the day occurs.(3) The premium component is 8% per annum.
55 Section 25 TAA provides for the circumstances in which the Respondent (or the Tribunal standing in the shoes of the Respondent on review) may remit interest:
The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.25 Remission of interest
56 As has been expressed by the Tribunal (including the Appeal Panel of the Tribunal) on prior occasions (refer Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19 at [60], Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19 at [21]), in the ordinary circumstances of an omission to pay tax which is then made up later, the Government is entitled to ask for some interest in order to compensate it for the time value of money (i.e. the late payment of tax) even though it may not have arisen by the taxpayer in any way conniving to pay the tax late.
57 The Appeal Panel said in the Incise Technologies case at [60]
This [the market rate component], as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time….
58 In Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19, the Appeal Panel stated that the observation of the Appeal Panel in the abovementioned case should, as Gzell J noted when considering the indications given by the Commissioner in a Revenue Ruling “not be used as a fetter upon the discretion which is couched in general terms and must be exercised according to its language and depending on the facts of each case”: McDonald’s Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6 at [100].
59 In the present case, in my view, the facts do not appear to provide any basis for the remission of the market rate of interest. Although it is true that the Applicants sent a letter to the OSR in 2004 that set out their “position” in relation to the Property and the exemption they were claiming at least in relation to the 2005 land tax year, there was no onus on the Respondent to respond to that letter, nor could the letter ground an estoppel against the Respondent issuing land tax assessments to the Applicants as stated above. There was nothing else in the facts to indicate in any way that the Respondent had contributed to the tax default that occurred.
60 As set out above, I have found that the Applicants were not entitled to a land tax exemption in the 2004-2006 land tax years inclusive as the land was not used for primary production. Although this is a case where it appears that the Applicants have misinterpreted the requirements of the legislation rather than deliberately avoided payment of land tax in relation to the Property, I do not see any reason why the Respondent should not be compensated through the market rate component for the time value of money in respect of land tax that should have been paid on a timely basis for the Property for the 2004-2006 land tax years inclusive. On this basis, I agree with the decision of the Respondent that there should be no remission of the market rate of interest in respect of the 2005-2006 land tax years inclusive.
Premium component
61 In The Ettamogah Mob Australia Pty Ltd & Ors v Chief Commissioner of State Revenue [2005] NSWADT 22, the Tribunal referred to the reasoning of the Appeal Panel in the Incise Technologies case as having disclosed four requirements that are relevant to consider in respect of the remission of the premium component but noted that there could be other circumstances where it would be appropriate to remit the premium component.
62 The four matters referred to in the Incise Technologies case at [62]-[63] were as follows:
- (1) all principal tax that is owing and not in dispute has been fully paid;
(2) there has been co-operation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments;
(3) such co-operation by the taxpayer has occurred prior to any investigation being commenced by the Commissioner (voluntary disclosure) or, at the very least, within reasonable time after requests for information have been made by the Commissioner – i.e. the taxpayer has taken reasonable care; and
(4) there has been no wilful default by the taxpayer in not paying tax on time.
63 At paragraph [61] of the same case, the Appeal Panel observed that:
61 ... [T]he premium rate is a form of penalty. Its purpose, as we see it, is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. The ‘market rate’ component approximates ordinary lending interest rates. Taxpayers may withhold tax simply to invest the money in schemes and projects that have a higher potential earnings; and may be content to carry the late payment surcharge were it only at the market rate. The ‘premium rate’ is intended as we see it to operate as the key disincentive to delaying tax payments. For that reason, the TA Act imposes both the market rate component and the premium rate component in respect of late payment. The Commissioner is then given a discretion to remit the market rate component or the premium rate component or both by any amount (s 25).
64 In terms of the present case in examining the four matters above:
(1) The evidence before the Tribunal indicates that all principal tax that has been assessed (even land tax and interest in dispute) has been paid by the Applicants in 3 instalments as requested by the OSR.
(2) Ms Howe co-operated with the OSR in her telephone call to them in February 2008 by providing her file number and admitting that no primary production occurred on the land. This ultimately enabled the assessments to be issued. In respect of the two “versions” of the telephone call, I find that Ms Howe had looked for and could not find the exemption in Section 10(1)(p)(ii) and was making a genuine call to the OSR to find out if it had been repealed and/or where it was now located? As the conversation progressed, Ms Howe freely admitted that there was no primary production on the land and from this and her telephone call in the first place, the assessments issued.
(4) There is nothing in the facts to suggest that there was any wilful default by the Applicants in not paying their tax on time. The Applicants took what I have found to be an incorrect interpretation of the legislation however there is nothing to suggest that this was wilfully done. Instead the action of Ms Howe in calling the OSR in 2004 and then sending a letter to accompany the 2005 land tax return seem to indicate to me that she wanted to disclose the matter and attempt to “confirm” the position. Although there is of course no obligation on the OSR to confirm a liability to land tax and it is essentially a “self assessment” system, it is apparent that, in reality, taxpayers are not always aware of this fact (i.e. refer also Giunta at [15]-[18] and the relief provisions can be exercised in appropriate cases.(3) The co-operation by Ms Howe occurred prior to any investigation being commenced by the Chief Commissioner. Indeed the telephone call to the OSR was made by Ms Howe herself and I find that she was interested in her land tax affairs and was trying to check whether or not the Property was now exempt as she could not locate Section 10(1)(p) in the current legislation. Although I agree with the Respondent that the telephone call was not in the nature of a “voluntary disclosure”, in a sense, from Ms Howe’s perspective at least, there was nothing to disclose at that point since she was acting under the misapprehension that the Property was exempt from land tax under former Section 10(1)(p). She was trying to confirm what the position was for the current land tax year as she could no longer find former Section 10(1)(p) in the legislation. The free admission that there was no primary production on the land enabled the assessments to issue and to avoid the need for any further investigation by the OSR.
65 I cannot see any other facts that would otherwise tend against the remission of the premium component of interest in this particular case. I do not accept the submission that the 2004 letter gave false information. The letter stated that the Council had zoned the property as “rural” (which was correct) and accordingly the property was subject to the exemption under Section 10(p)(ii) (a legal conclusion that was incorrect but followed, in the Applicant’s view, from the previous sentence). There was certainly no claim by the Applicants in the 2004 letter that primary production was being carried out on the land.
66 Having regard to the fact that the Applicants satisfy the four factors above and there being no other facts that tend against the discretion being exercised, in this particular case, I consider that the premium component of interest should be remitted.
67 For the above reasons, I make the following orders:
(1) The decision of the Chief Commissioner that the Property is subject to land tax in each of the 2004, 2005 and 2006 land tax years is affirmed.
(3) The decision of the Chief Commissioner not to remit any of the premium component of interest in relation to the 2005 and 2006 land tax years is set aside. Instead, the full premium component of interest is to be remitted in both the 2005 and 2006 land tax years.(2) The decision of the Chief Commissioner not to remit any of the market rate component of interest in relation to the 2005 and 2006 land tax years is affirmed.
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