KOSONEN and COMMISSIONER OF STATE REVENUE

[2009] WASAT 135

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   DEVELOPMENT & RESOURCES

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION:   KOSONEN and COMMISSIONER OF STATE REVENUE [2009] WASAT 135

MEMBER:   JUSTICE J A CHANEY (PRESIDENT)

HEARD:   DETERMINED ON THE DOCUMENTS

DELIVERED          :   3 JULY 2009

FILE NO/S:   DR 76 of 2009

BETWEEN:   JOHN RICHARD KOSONEN

KAYE PATRICIA KOSONEN
Applicants

AND

COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Land tax assessment - Land held on trust - Application for reassessment beyond time limit - Reassessment refused for being beyond time - Whether refusal correct

Legislation:

Land Tax Assessment Act 1976 (WA), s 5, s 14, s 15(3)(b), s 20(2)
Public Sector Management Act 1994
State Administrative Tribunal Act 2004 (WA), s 29, s 60(2),
Taxation Administration Act 2003 (WA), s 16(2)(b), s 17, s 40
Transfer of Land Act 1893 (WA), s 55, s 55(2)

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Applicants:     Self-represented

Respondent:     Ms K Dodd

Solicitors:

Applicants:     Self-represented

Respondent:     State Solicitor's Office

Case(s) referred to in decision(s):

Nil

REASONS FOR DECISION OF THE TRIBUNAL: 

Summary of Tribunal's decision

1. This matter involved consideration of s 17 of the Taxation Administration Act 2003 (WA). Mr John Kosonen and Mrs Kaye Kosonen sought a review of a refusal by the Commissioner of State Revenue to reassess land tax assessments paid by them from 1996 ‑ 2000. The land tax assessments included land that was held by them as trustees. The parties accepted that s 15(3)(b) of the Land Tax Assessment Act 1976 (WA) does not allow the value of land beneficially owned by a person to be aggregated with the value of other land held by him as a trustee.

2. The matter involved determining whether a reassessment was able to be made more than five years after the original land tax assessments were made. The Tribunal concluded that due to the time limits imposed under s 17 of the Taxation Administration Act 2003 (WA) the Commissioner of State Revenue, and therefore the Tribunal, was unable to grant a reassessment.

3. The Tribunal also concluded that the effect of s 17 of the Taxation Administration Act 2003 (WA) cannot be altered by a consideration of whether the practices adopted by the Commissioner of State Revenue were inconsistent with the provisions of the Public Sector Management Act 1994 (WA).

4. The decision of the Commissioner of State Revenue was therefore affirmed and the application dismissed.

Issue

1. The issue for determination in this matter is whether the decision of the Commissioner of State Revenue (Commissioner) was correct in disallowing the objection of Mr John Kosonen and Mrs Kaye Kosonen (the Kosonens) in respect to a reassessment of land tax paid by them for the 1996/1997, 1997/1998, 1998/1999 and 1999/2000 assessment years (the original assessments).  The original assessments were based upon aggregated land holdings held by the Kosonens and included land held by the Kosonens as trustees.

2. There is no dispute between the parties that the aggregation provisions of the Land Tax Assessment Act 1976 (WA) (LTA Act) do not apply to aggregate the value of land beneficially owned by a person with the value of other land held by that person as a trustee (see s 15(3)(b) of the LTA Act). In this case, the Kosonens sought a refund from the Commissioner (by letter dated 6 June 2005) in respect to land held as trustees included in the original assessments. The reassessment of the original assessments was disallowed by the Commissioner by reference to s 17 of the Taxation Administration Act 2003 (WA) (TA Act). In effect, the Commissioner maintained that as the reassessment was five years after the original assessments, he was precluded from allowing the reassessment. As a result of further correspondence between the parties, the Kosonens lodged an objection by letter dated 1 December 2008. The Commissioner disallowed that objection by letter dated 2 February 2009, again by reference to s 17 of the TA Act.

3. The Kosonens seek a review of the Commissioner's decision to disallow their objection pursuant to s 40 of the TA Act.

4. In determining this issue, the Tribunal must consider:

   a)whether s 17(1) of the TA Act precludes the taxpayer from applying for a reassessment more than five years after the original assessments were made; and

   b)whether s 17(4) of the TA Act prevents the Commissioner from making a reassessment more than five years after the original assessments were made.

5. The matter has been the subject of several directions hearings. At the last of the directions hearings on 28 April 2009, it was ordered that the matter be determined on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act).

6. Both parties filed documentation and written submissions which have been taken into account in the determination of this matter.

Background facts

1. There is no real dispute as to the background to this matter, which is set out as follows:

   a)On 30 March 1996, the Kosonens entered into a contract for the purchase of Lot 501, Quarry Street, Fremantle (Fremantle Property).  The Kosonens purchased the property as joint tenants, as trustees for the Transmarine Shipping Agency Pty Ltd Superannuation Fund.

   b)The contract for the Fremantle Property was lodged at the Commissioner's office for over‑the‑counter stamping on 2 April 1996.

   c)The purchase of the Fremantle Property was recorded under Transfer of Land G166814T.  Pursuant to statutory requirements, the transfer of land, along with the certificate of title for the Fremantle Property, do not reveal that the property is held on trust.

   d)The Kosonens paid $7,023.75 in land tax for the 1996/1997 year, based upon an aggregated total land holdings value of $662,500, including the Fremantle property.

   e)The Kosonens paid $6,777.25 in land tax for the 1997/1998 year, based upon an aggregated total land holdings value of $691,000, including the Fremantle Property.

   f)On 10 December 1998, the Commissioner issued a land tax assessment to the Kosonens for the 1998/1999 year.  The assessment notice separately listed the values attributable to the Kosonens' various properties, including the Fremantle Property.

   g)The land tax assessment notice was accompanied by a brochure.  The 1998/1999 brochure provided that 'for each different land ownership (for example, individual, partnership, trust, company etc) separate notices of assessment will issue'.  The brochure also set out what a taxpayer was to do if the assessment was incorrect.

   h)On 4 November 1999, the Commissioner issued a land tax assessment to the taxpayers for the 1999/2000 year.  The assessment notice listed the values attributable to the Kosonens' various properties, including the Fremantle Property.

   i)The land tax assessment notice was accompanied by a brochure, 'Land Taxes 1999/2000' which included advice on 'what to do if there is an error in your assessment'.

   j)On 22 September 2000, the Commissioner issued a land tax assessment to the Kosonens for the 2000/2001 year.  The land tax assessment notice was accompanied by a brochure, 'land taxes 2000/2001' which provided, 'You must notify this Department for a reassessment of your liability if land that you own beneficially has been assessed together with land you own as a trustee'.

   k)The Kosonens did not contact the Commissioner until 2005 to inform the Commissioner that the Fremantle Property was land held by the Kosonens as trustees for the Transmarine Shipping Agency Pty Ltd Superannuation Fund.  They informed the Commissioner that the Fremantle Property had been incorrectly assessed together with land held by Kosonens beneficially.

   l)The Fremantle Property continued to be assessed together with land held by the Kosonens beneficially until the 2005/2006 land tax year.

   m)On 6 June 2005, the Kosonens wrote to the Commissioner requesting a reassessment of land tax for the 1997/1998 to the 2004/2005 assessment years.  The request was on the grounds that the Fremantle Property was held by the taxpayers as trustees for the Transmarine Shipping Agency Pty Ltd Superannuation Fund, and, as such, should have been assessed separately to the property beneficially held by the Kosonens.

   n)As a result, on 6 July 2005, the Commissioner issued a reassessment notice for the 2000/2001 to 2004/2005 assessment years, refunding $20,400.63 to the Kosonens.

   o)On 9 June 2008, the Kosonens requested that the Commissioner issue a reassessment notice for the 1996/1997 to 1999/2000 years.

   p)On 13 June 2008, the Commissioner rejected the Kosonens' application for a reassessment of their land tax for the periods more than five years after the original assessments were made.

   q)On 19 November 2008, the Kosonens further requested a reassessment.

   r)On 24 November 2008, the Commissioner wrote to the Kosonens, stating that the Commissioner did not have the power to reassess more than five years after the original assessment was made.

   s)On 1 December 2008, the Kosonens objected to the Commissioner's 24 November 2008 decision not to reassess more than five years after the original assessment was made.

   t)On 22 December 2008, the Commissioner wrote to the Kosonens, stating that their 1 December 2008 letter had been accepted as an objection under the provisions of the TA Act.

   u)On 2 February 2009, the Commissioner wrote to the Kosonens disallowing the objection.

   v)On 22 February 2009, the Kosonens sought review by the State Administrative Tribunal.

Legislative framework

1. At the time of the relevant assessments, land tax was administered under the LTA Act.

2. Pursuant to s 14 of the LTA Act, land tax was payable by the owner of land upon the aggregated unimproved value of all the land owned by him.

3. 'Owner' in relation to land for the purposes of the LTA Act was defined as including 'every person entitled to the land for any estate of freehold in possession' (see s 5 of the LTA Act).

4. A trustee in whom the legal estate of taxable land was vested is liable for the taxes payable on the land as if such land were his own (see s 20(2) of the LTA Act).

5. The aggregation provisions in the LTA Act do not apply to aggregate the value of land beneficially owned by a person with the value of other land held by him as trustee (see s 15(3)(b) of the LTA Act).

6. Importantly, in this case, neither the certificate of title nor the transfer of land of a property may contain reference to the property being held on trust (see s 55(2) of the Transfer of Land Act 1893 (WA) (TL Act)).

Reassessments - Legislative Framework

1. Under the TA Act, the Commissioner may make a reassessment on the application of a taxpayer (see s 16(2)(b) of the TA Act).

2. However, a taxpayer is not entitled to apply for a reassessment more than five years after the original assessment was made (see s 17(1) of the TA Act).

3. Except in limited circumstances, the Commissioner may also only make a reassessment within five years after the date of the original assessment or on an application made within five years after the date of the original assessment (see s 17(4) of the TA Act). The limited circumstances for a reassessment by the Commissioner beyond the five‑year time limit are:

   a)if the Commissioner has been directed in the course of review proceedings to make a reassessment, the Commissioner may make a reassessment at any time after the previous assessment was made (see s 17(2)(a) of the TA Act); or

   b)where there are reasonable grounds for suspecting that there has been an evasion of tax or that the previous assessment was made on the basis of false or misleading information (see s 17(2)(a) of the TA Act).

4. Pursuant to s 29 of the SAT Act, when exercising its review jurisdiction the Tribunal has the same functions and discretions to those exercisable by the Commissioner.

Commissioner's contentions

1. In summary, the Commissioner contends that due to the time limits imposed under s 17 of the TA Act, the Commissioner is unable in this case to make a reassessment. The Commissioner accepts that s 17(2) of the TA Act allows in certain circumstances reassessments beyond the five‑year time limit. However, the Commissioner maintains that the circumstances described in s 17(2) of the TA Act do not apply.

1. The Commissioner has also made submissions to address submissions raised by the Kosonens concerning the administration of the Office of State Revenue.  It is not necessary to summarise all of those submissions.  I note, however, that the Commissioner maintains that in determining this matter the Tribunal is not required to have regard to the Public Sector Management Act 1994 (WA) (PSM Act) and in making a reassessment under the TA Act, the Tribunal only has the same powers and functions of the Commissioner under the TA Act.

2. Further, the Commissioner submits that there is nothing in the relevant legislation to suggest that in administering land tax, the Commissioner has the power to take into account information put before the Commissioner in administering stamp duty.

The Kosonens' contentions

1. The Kosonens' contentions are set out in their statement of issues, facts and contentions.  That document incorrectly referred to the Public Administration Act 1994.  Mr Kosenen advised the Tribunal, by letter dated 11 June 2009, that this was an error and the reference should have been to the PSM Act.

2. It is important to note at the outset that the Kosonens make no submissions as to the proper construction of s 17 of the TA Act.

3. Rather, the Kosonens' submissions focus on whether the Commissioner had proper standards of financial management, record‑keeping and accounting in place pursuant to the PSM Act.

4. The Kosonens suggest that as the Commissioner collects both stamp duty and land tax, the contract for the sale of land of the Fremantle Property by offer and acceptance should have been kept by the Commissioner. It is argued that if this was kept, it would have shown that the purchasers of the Fremantle Property included in the original assessments were 'John Richard Kosonen and Kaye Patricia Kosonen as trustees for the Transmarine Shipping Agency Pty Ltd Superannuation Fund'. They argue that as s 55 of the TL Act prevents the certificate of title or the transfer of land containing a reference to property held on trust, the Commissioner should have a mechanism (such as a computer program) to record this information.

5. To support such a system, the Kosonens refer to the PSM Act.  They argue that pursuant to the PSM Act, public sector bodies should have in place systems to ensure that there is full cooperation between all departments.  They maintain that if this had occurred the Commissioner would have been aware from the outset that the Fremantle Property was owned by the Kosonens as trustees and would not have included it when aggregating the value of total land holdings beneficially held by the Kosonens.

6. The Kosonens maintain that government departments should be seen to collect revenue to which they are legally entitled, and not benefit from their own inefficiency of management and public administration, irrespective of when the event occurred.

Findings and consideration

1. As previously stated, the facts in this matter are not in dispute.

2. Therefore, all that must be determined is whether the Commissioner was correct in disallowing the objection concerning reassessment of the land tax paid by the Kosonens in the original assessments.

3. The original assessments concerned land tax assessments made for the 1996/1997, 1997/1998, 1998/1999 and 1999/2000 assessment years which included the Fremantle Property.

4. The Kosonens requested the Commissioner make a reassessment on 6 June 2005.

5. There is no dispute between the parties that this request was more than five years after the original assessments were made by the Commissioner.

6. Further, there appears to be no dispute between the parties that had the application for reassessment been made in time and the same information provided to the Commissioner, then it is likely that the land tax would have been reassessed, as it has been for the assessment years 2000/2001 to 2004/2005.

7. The Commissioner's decision to disallow the objection is based solely on the five‑year time limit imposed in s 17 of the TA Act.

8. As the Tribunal has the same powers of the Commissioner in this matter, I must determine whether the decision to disallow the objection, based on an application of s 17 of the TA Act, was correct.

9. Section 17(1) of the TA Act makes clear that a taxpayer is not entitled to apply for a reassessment more than five years after the original assessment was made.

10. In this case, the application for reassessment was clearly made outside the five‑year time limit.

11. Section 17 of the TA Act does also allow the Commissioner to make a reassessment, even where no application has been made by a taxpayer. However, again, s 17(4) of the TA Act places a time limit of five years on such reassessments, requiring them to be either within five years of the original assessment, or on an application made within five years after the date of the original assessment.

12. Section 17(2) of the TA Act sets out limited circumstances in which this five‑year limit, imposed upon the Commissioner by s 17(4), can be extended. The first of those circumstances is described in s 17(2)(a) of the TA Act and is where the Commissioner has been directed in the course of review proceedings, such as these proceedings, to make the reassessment. The second of those circumstances is described in s 17(2)(b) of the TA Act and is where there are reasonable grounds for suspecting that there has been an evasion of tax or where the previous assessment was made on the basis of false or misleading information. There is no suggestion by the parties that this second situation applies. Accordingly, the exception described in s 17(2)(b) of the TA Act does not apply. As to s 17(2)(a), the explanatory memorandum to the TA Act states the following:

    The first power is necessary in any case where the decision falls outside the normal 5 year reassessment period outlined in subclause (4).  This power will ensure that no restrictions are placed on giving proper effect to court or tribunal decisions.

13. The ordinary meaning to be given to s 17(2)(a) of the TA Act is that the Commissioner is able to make a reassessment beyond the five years from the date the original assessment was made, in order to give effect to a decision of a court or tribunal on review. So, where a person seeks a review of a decision concerning a reassessment within five years after the date of the original assessment, and the decision upon review is more than five years after the date of the original assessment, the Commissioner is entitled, pursuant to s 17(2)(a) of the TA Act, to give effect to such a decision. This is despite the time limit imposed under s 17(4) of the TA Act. In this case the application for reassessment, and the Commissioner's reassessment, all occurred more than five years after the original assessment in respect of which review is now sought.

14. Accordingly, none of the circumstances mentioned in s 17(2) of the TA Act, by which time can be extended, apply in this case.

15. Therefore, I do not consider that, pursuant to s 17 of the TA Act, the Commissioner had, or the Tribunal in his place has, a discretion to make a reassessment beyond the five‑year time limit imposed in that section.

16. The effect of s 17 of the TA Act cannot be altered by a consideration of whether the practices adopted by the Commissioner are inconsistent with the provisions of the PSM Act. Even if some non‑compliance with the PSM Act was found to exist, that would not alter the operation of s 17. The PSM Act sets standards for the public sector and establishes a Commissioner to oversee compliance with those standards. It does not provide for any rights of review to this Tribunal in respect to alleged non‑compliance with the standards which it prescribes. Section 17 of the TA Act effectively prohibits the Commissioner reassessing more than five years after the original assessment. Neither the Commissioner, nor the Tribunal, could ignore that prohibition because some non‑compliance with the PSM Act had occurred.

1. This case therefore highlights the need for taxpayers to carefully check assessments from the Commissioner, to ensure that the information upon which it is based is correct.

2. Taxpayers are reminded of the need to do so in the land tax brochures that accompany such assessments. If the Kosonens had drawn this error to the Commissioner's attention within the relevant time period, it is more than likely that the reassessment would have been allowed. However, as they did not, and as the TA Act does not give the Commissioner a general discretion to waive the time limits imposed under s 17 of the TA Act, a reassessment in this case is unable to be made.

3. Accordingly, as the exceptions set out in s 17(2) of the TA Act do not apply, the Tribunal considers that the Commissioner's decision to disallow the objection, based on the application of s 17 of the TA Act, was correct.

4. The Commissioner's decision should therefore be affirmed and this application dismissed.

Orders

1.The application is dismissed.

2.The decision of the Commission dated 2 February 2009 is affirmed.

I certify that this and the preceding [50] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

JUSTICE J A CHANEY, PRESIDENT