Kojima v Commissioner for Act Revenue (Administrative Review)
[2021] ACAT 35
•3 May 2021
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
KOJIMA & ANOR v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2021] ACAT 35
AT 88/2020
Catchwords: ADMINISTRATIVE REVIEW – land tax – deferral of stamp duty in relation to an established property – first home owner grant – home buyer concession – residency requirement – penalty tax – failure to meet residency requirement of stamp duty deferral – requirement to occupy the home as a principal place of residence for a continuous period of at least 12 months – where a former tenant purchases the property – where an individual is financially impacted by the imposition of penalty tax
Legislation cited: Duties Act 1999 ss 75, 75A, 75AB, 75AC
First Home Owner Grant Act 2000 s 12
Tax Administration Act 1999 ss 29, 31, 37
Subordinate
Legislation cited: Duties (Amount Deferred) Determination 2007 (No 1) DI2007–248
Taxation Administration (Amounts Payable—Interest) Determination 2015 (No 1) DI2015-3
Taxation Administration (Amounts Payable—Interest Rates) Determination 2017 (No 1) DI2016–146
Taxation Administration (Amounts Payable—Interest) Determination 2015 (No 3) DI2015-333
Cases cited:Kessey v Commissioner for Revenue [2019] ACAT 83
Tribunal: Senior Member G Lunney SC
Date of Orders: 3 May 2021
Date of Reasons for Decision: 3 May 2021
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 88/2020
BETWEEN:
CHIAKI KOJIMA
First Applicant
TOMASZ BRODAWKA
Second Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL:Senior Member G Lunney SC
DATE:3 May 2021
ORDER
The Tribunal orders that:
The matter that is the subject of the decision under review is remitted to the Commissioner:
(a)with the direction that in any reassessment the amount of penalty tax be not more than $350;
(b)with the recommendation that interest charged be reconsidered pursuant to section 29 of the Taxation Administration Act 1999.
………………………………..
Senior Member G Lunney SC
REASONS FOR DECISION
This is an application for review of a decision by the Commissioner for ACT Revenue. It was filed on 30 November 2020, and relates to a decision by the respondent made on 20 November 2020 which was the internal review of an original decision made by the Commissioner on 29 May 2020. That decision related to a notice of reassessment issued after an investigation of whether the applicants had failed to meet a residency requirement of a deferral of payment of duty under Part 2.6A of the ACT Duties Act 1999 (Duties Act).
Background and evidence
The applicants had rented an apartment in Phillip, ACT in February 2015. The lease was expressed to be from 24 February 2015 and was signed by the applicants on 10 February 2015.
Early in 2016 the then owner of the premises wished to sell the apartment, and a sale to the applicants was negotiated through real estate firm Rumbles Real Estate with a sales report being issued on 11 February 2016.
A contract for sale was drawn up by solicitors acting for the vendor and forwarded to solicitors acting for the applicants. This was sent to the applicants covered by a letter dated 23 February 2016. The contract was exchanged on 16 March 2016. The settlement date was 8 April 2016.
The applicants applied for deferral of stamp duty on the contract of sale to the Commissioner.[1] It was signed by the applicants on 27 February 2016. The form showed that the applicants had not applied for a First Home Owner Grant (FHOG). It also said that they had not applied under the Home Buyer Concession Scheme (HBCS). They did disclose that they were purchasing an established property.
[1] Exhibit C page 30
They were advised in the form in section 3 that if they were buying an established property, they had to be eligible for the FHOG except for the requirement that the property be new or substantially renovated.
In filling out the application form, the applicants indicated ‘yes’ to the following question:
Will at least one applicant be occupying the home as their principal place of residence for a continuous period of at least 12 months, with the period of occupation starting within 1 year after the completion date of the eligible transaction?
Legislation
Part 2.6A of the Duties Act establishes a process whereby home buyers who qualify buying properties which also qualify can defer payment of assessed stamp duty for up to five years. It was accompanied by an obligation to pay interest. The beneficiaries of the scheme were persons who qualified under the FHOG and HBCS. There was one exception: persons who otherwise qualified under the FHOG but were buying an ‘old’ property. The applicants qualified under this exception.
Deferral eligibility is defined in section 75AA of Part 2.6A of the Duties Act 1999 as follows:
Part 2.6A Deferred payments—home buyers
75 Definitions—div 2.6A.1
In this part:
…
eligible person means a person who—
(a) is an eligible home buyer under the home buyer concession scheme; or
(b) is eligible for a first home owner grant under the First Home Owner Grant Act 2000; or
(c) would be eligible for a first home owner grant under the First Home Owner Grant Act 2000apart from the person’s home not being a new home under that Act, section 12B.
eligible property—means a residential lease the value of which is not more than the upper property value threshold under the home buyer concession scheme.
home buyer concession scheme means the home buyer concession scheme under the Taxation Administration Act.
NoteA reference to an Act includes a reference to the statutory instruments made or in force under the Act, including any regulation (see Legislation Act, s 104).
At the hearing, the respondent tendered an internal office document[2] which showed approval of the applicants under the HBCS on the basis of paragraph (c) in the definition. Because they were purchasing an old property, they did not apply and were not considered for the FHOG but would have qualified had they done so.
[2] Exhibit D
Other sections of the Act are relevant. Section 75AB provides as follows:
(1) An eligible person may apply to the commissioner to defer payment of duty payable by the person on a dutiable transaction that is—
(a)the transfer of an eligible property; or
(b)an agreement for the sale or transfer of an eligible property.
Section 75AC provides:
(1) The commissioner must, on receipt of an application under section 75AB, approve the deferral of payment of duty payable by the applicant if—
(a)the applicant is an eligible person; and
(b)the duty is, or would be, payable on—
(i)the transfer of an eligible property; or
(ii)an agreement for the sale or transfer of an eligible property.
There are three pieces of subordinate legislation, disallowable instruments which relevantly affect Part 2.6A.
The first is the Duties (Amount Deferred) Determination 2007 (No 1) DI2007–248. This provides that the minimum amount of duty deferred must be $1,000.[3]
[3] Duties Act section 75AD(1)(c)
The next is the Taxation Administration (Amounts Payable—Interest) Determination 2015 (No 1) DI2015-3. As per Clause 2, the determination is taken to have commenced on 26 October 2007. Other clauses apply interest to deferred duty.
The other relevant determination is the Taxation Administration (Amounts Payable—Interest Rates) Determination 2017 (No 1) DI2016–146. This is made under the Tax Administration Act 1999 (TAA) but parts are specified as applicable to Part 2.6A of the Duties Act. As a transitional provision it extends the operation of DI2015-3 to 30 June 2017.
Calculation of interest for the applicants’ deferral was governed by DI2015-3.
In order to meet eligibility for the FHOG, the applicants had to meet a number of criteria set out in the First Home Owner Grant Act 2000 (FHOG Act). There was a residential criterion set out in section 12 of the Act as follows:
Division 2.2 Eligibility criteria for applicants
…
12 Criterion 5—Residence requirements
(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant’s principal place of residence for a continuous period of at least 1 year.
(2) However, if the commissioner is satisfied there are good reasons to do so, the commissioner may—
(a)approve a shorter period; or
(b)exempt the applicant from the requirement to comply with subsection (1).
(3) The period of occupation required under subsection (1), or the shorter period approved under subsection (2) (a), must start within 1 year after completion of the eligible transaction to which the application relates or a longer period approved by the commissioner.
(4) The commissioner may give an approval or exemption under this section within 18 months after completion of the eligible transaction to which the application relates.
(5) If an application is made by joint applicants and at least 1 (but not all) of the applicants complies with the residence requirements, the non-complying applicant or applicants are exempted from compliance with the residence requirements.
In their application for deferral, the applicants declared that they would reside in the premises for 12 months. They thus fulfilled this eligibility criterion under the FHOG Act and became bound by the provisions of that Act.
Under that criterion the period of residence was to commence within one year of completion of the sale, being the date of settlement.
The decision under review
The reviewable decision to disallow the applicants’ objection to the original assessment is at Exhibit C page 20. The reasons statement is at Exhibit C page 22.
The decision refers to the Taxation Administration (Amounts Payable—Interest) Determination 2015 (No 3) DI2015-333. The decision relies on section 6(3)(b)(i) of this determination as the source of the residential obligation: “at least one of the persons named in the grant, or transfer, or agreement will: reside in the subject property as their principal place of residence for a continuous period of 1 year”. The decision also attributes the applicants’ eligibility for stamp duty deferral to their eligibility for the HBCS, under section 75AA(a).
This appears to be incorrect as DI2015-333 is subordinate legislation to the TAA and the HBCS, in which eligible property is limited to “new and substantially renovated homes and land only” (see section 7 of the Explanatory Statement of DI2015-333). The HBCS has not applied to ‘old’ property since the 2012-13 budget (see section 3 of Explanatory Statement DI2015-333).
Exhibit D, which is the departmental deferral recommendation approval sheet, shows that the applicants were approved for stamp duty deferral under section 75AA(c) of the Duties Act: “eligible for a first home owner grant under the FHOG 2000 apart from the person’s home not being a new home…”. This evidence indicates that the applicants’ eligibility was correctly identified in the course of the approval process.
Consideration
The application form issued by the ACT Revenue Office for deferral of duty contained two references to the residency requirement in Clause 6 of the determination. The first was in section 4 of the form which was headed “Eligibility declaration by applicants purchasing established property”. They were asked the following:
Will at least one applicant be occupying the home as their principal place of residence for a continuous period of at least 12 months, with the period of occupation starting within 1 year after the completion date of the eligible transaction?
The form was signed by each applicant, and they signified their agreement to the above question by ticking a ‘yes’ box next to the question.
The same form of wording is used as item 9 of a declaration on the next page of the application form.
The Tribunal is satisfied that the contract was exchanged on 16 March 2016 and the settlement date was 8 April 2016.[4] It is also satisfied that when the applicants moved out of the subject premises, they were about two months short of the 12 month period referred to in the FHOG Act which expired on either 7 or 8 April 2017.
[4] Exhibit C page 25
The applicants assert that the relevant date is the date of exchange of contracts. They moved out of the premises with the intention of moving to and establishing residence in Sydney on 1 February 2017.[5]
[5] Exhibit A
The legislation and the wording of the application form are complex as is the term ‘completion date’ used as a conveyancing term of art in both. It was apparent during the hearing that the applicant Kojima, who was the only one to give evidence, had English as a second language, and did not have a clear understanding of that term or the concept of completion of a contract. That observation is confirmed by her evidence at paragraph 15 of Exhibit A, her witness statement:
15. We also wish to mention that if we have informed by the ACT revenue office, explaining that conventionally the occupancy is defined by the “the settlement date”, we could have been more careful about this regulation. I could have readily prolonged the stay in ACT for the further 2 months. The penalty of $3,250.00 and interests of $4,991.18 together ($8,241.18) is similar to my 2 months disposal income and if include the rent to be paid in the other location, it would exceed my salary.
However, the date the applicants ceased occupation was within 12 months of both the date of exchange and the date of completion, so that any non-compliance was not due to a mistake as to which was the critical date. Furthermore, the applicants in an email to the respondent on 21 May 2020, conceded that they may have moved out “a couple of weeks short”.[6]
[6] Exhibit C page 70
The Tribunal accepts the evidence of applicant Kojima outlined in paragraph 6 of her statement that they were both unable to obtain jobs in the ACT and therefore had to move out of the apartment to find work elsewhere. That evidence is somewhat ameliorated by her statement referred to above.
That paragraph does indicate the financial impact of the penalty tax on at least one of the applicants, but the evidence is silent as to the impact on the second.
Penalty tax is imposed pursuant to Division 5.2 of the TAA. Under subsection 31(5), the respondent has a discretion not to impose penalty tax in certain circumstances. There is no submission that the special circumstances apply in this case and the Tribunal is satisfied that is the case.
Section 37 of the TAA provides as follows:
37 Remission of penalty tax
The commissioner may, if the commissioner considers it appropriate in the circumstances, remit penalty tax by any amount.
In Kessey v Commissioner for Revenue [2019] ACAT 83, Member Warwick made the following observations about the operation of section 37:
71. Under section 37 of the TAA, the Commissioner may, if the Commissioner considers it appropriate in the circumstances, remit penalty tax by any amount. The conditions or factors to be considered in exercising this discretion are not expressly stated. The discretion must be exercised within the boundaries created by the subject matter, scope and purpose of the statute and of the particular provision by which the discretion is conferred.
72. In considering whether it is appropriate to remit penalty tax by any amount, the Tribunal must take into account subject matter, scope and purpose of the LTA, the TAA, and in particular section 37 of the TAA. The Tribunal must keep in mind the purpose for which land tax is imposed and paid. The Tribunal must keep in mind that the imposition of penalty tax and interest is intended to promote compliance with the self-reporting scheme for land tax, and to provide general deterrence of tax default. The Tribunal must keep in mind the legislative intention that the taxpayer is liable for any default by the taxpayer’s agent. The Tribunal must keep in mind that section 37 does not require special or exceptional circumstances for the remission of penalty tax. Keeping all these matters in mind, the Tribunal must consider whether the penalty (as imposed by the Commissioner) is harsh, having regard to the particular circumstances of the taxpayer.
The Tribunal concludes that there was no deliberate ignoring of the residential requirements of the scheme. They were aware of the residential requirement, but were confused about the detail. The information contained in the applicant Kojima’s statement indicates a significant impact on her of the combination of interest and penalty. The Tribunal infers that there would be a similar impact on the second respondent. They lived in the premises for an extended period and made a decision to leave based on what the Tribunal sees as being significant economic reasons. The reason for the tax default was carelessness in not thoroughly investigating the complex requirements of the scheme in circumstances in which they had an incomplete understanding. To adopt the words of Member Warwick, the amount of the default imposition of penalty tax led to a harsh effect in the circumstances of the applicants. The deterrent effect of the penalty on others renders it undesirable to remit the penalty completely, however the circumstances support a penalty of not more than $350.
The Tribunal accepts the respondent’s submission that the interest is not reviewable.
Order
The matter that is the subject of the decision under review is remitted to the Commissioner:
(a)with the direction that in any reassessment the amount of penalty tax be not more than $350;
(b)with the recommendation that interest charged be reconsidered pursuant to section 29 of the Taxation Administration Act 1999.
………………………………..
Senior Member G Lunney SC
| Date(s) of hearing | 12 March 2021 |
| First Applicant: | In person |
| Second Applicant: | In person |
| Solicitor for the Respondent: | Ms S Gasser, ACT Government Solicitor |
0