Kozman v Chief Commissioner of State Revenue
[2013] NSWADT 143
•19 June 2013
Administrative Decisions Tribunal
New South Wales
Case Title: Kozman v Chief Commissioner of State Revenue Medium Neutral Citation: [2013] NSWADT 143 Hearing Date(s): 9 April 2013 Decision Date: 19 June 2013 Jurisdiction: Revenue Division Before: N S Isenberg, Judicial Member Decision: The decision of the Chief Commissioner is affirmed including as to penalty and interest.
Catchwords: First Home Owners Grant - First Home Plus Scheme - residence requirement - reversal by administrator - penalty and interest Legislation Cited: Administrative Decisions Tribunal Act 1997
Duties Act 1997
First Home Owner Grant Act 2000
State Revenue Legislation Further Amendment Act 2005
Taxation Administration Act 1996Cases Cited: Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50
Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41
Chief Commissioner of State Revenue -v- Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19
Cullen v The Chief Commissioner of State Revenue [2007] NSWADT 121
Deputy Commissioner of Taxation v Clark [2003] NSWCA 91
Knight and anor v Chief Commissioner of State Revenue [2008] NSWADT 83
Larsson v Chief Commissioner of State Revenue [2008] NSWADT 208
0 'Hara v Chief Commissioner of State Revenue [2011] NSWADT 289
Philpott v Chief Commissioner of State
Revenue [2008] NSWADTAP 19
Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21Category: Principal judgment Parties: Amir Kozman (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation - Counsel: M Bennett (Respondent) - Solicitors: A Kozman (Applicant in person)
Crown Solicitors Office (Respondent)File Number(s): 126076
REASONS FOR DECISION
Background
On 19 September 2009 Mr Amir Kozman ("the Applicant") exchanged Contracts for Sale of Land ("the Contract") to purchase a residence at Minchinbury in New South Wales ("the Property"). The purchase settled on 4 November 2009 and the transfer made in conformity with the Contract was registered at Land and Property Information NSW ("LPI") on 24 November 2009. The Applicant applied for and received a First Home Owner Grant ("the Grant") of $14,000 and a First Home Plus stamp duty concession ("the stamp duty concession") in relation to the purchase.
The Respondent ("the Chief Commissioner") subsequently conducted an investigation into compliance by the Applicant with mandatory conditions for the Grant and the stamp duty concession and determined that all relevant conditions had not been satisfied. The Chief Commissioner reversed the decision to provide both the Grant and the stamp duty concession and by letter to the Applicant dated 23 March 2012 advised of the new decision, issued both an Assessment Notice requiring repayment of the Grant and payment of a penalty, and a Duties Notice of Assessment requiring payment of the stamp duty previously allowed as a concession together with interest. All payments were required to be made by 13 April 2012.
The Applicant objected to the two assessment notices ("the Assessments") and as at the date of the hearing has not made any of the payments. The objections were disallowed and the Applicant seeks a review by the Tribunal of the Chief Commissioner's decisions leading to the issuing of the Assessments.
Jurisdiction
Jurisdiction to review the decisions to which objection was made is conferred on the Tribunal by s28(1) of the First Home Owner Grant Act 2000 ("the Grant Act") and s96(1) of the Taxation Administration Act 1996 ("the TA Act").
Powers of Tribunal on review
On a review the Tribunal may confirm, vary or reverse the decision of the Chief Commissioner and make orders as to costs or otherwise as it thinks fit (s29(1) of the Grant Act and s101(1) of the TA Act).
Onus of proof
The Applicant has the onus of proving his case in a review by the Tribunal (s28(3) of the Grant Act and s100(3) of the TA Act).
The law and its application to the circumstances
First home owner's grant
The purpose of the Grant Act is set out in its long title and relevantly is "to encourage and assist home ownership... by establishing a scheme for the payment of grants to first home owners".
No grant is payable under the Grant Act unless an applicant complies with certain eligibility criteria and completes the purchase of a home with an eligible transaction (s7 of the Grant Act).
One of the eligibility criteria, namely the residence requirement, is set out in s12 of the Grant Act as follows:
"12 Criterion 5-Residence requirement
(1) An applicant for a first home owner grant must:
(a) commence occupation of the home to which the application relates as the Applicant's principal place of residence within 12 months after completion of the eligible transaction or the period approved by the Chief Commissioner under this section, and
(b) occupy the home as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner under this section.
(2) This requirement is referred to in this Act as the residence requirement.
(3) The Chief Commissioner may, if satisfied there are good reasons to do so, do either or both of the following:
(a) approve the commencement of occupation by the applicant of the home to which the application relates as a principal place of residence more than 12 months after completion of the eligible transaction,
(b) approve the occupation of the home as a principal place of residence for a period of less than 6 months.
(4) The Chief Commissioner may, if satisfied there are good reasons to do
so, exempt an applicant from the residence requirement."In accordance with s13(5)(a) of the Grant Act completion of a relevant eligible transaction occurs when:
"(i) the purchaser becomes entitled to possession of the home under the contract, and
(ii) ... if the purchaser acquires an interest in land under the contract that is registrable under a law of the State-the purchaser's interest is registered under that law."
Stamp duty concession
The purpose of the scheme establishing the stamp duty concession obtained by the Applicant and reversed by the Chief Commissioner, the First Home Plus Scheme("FHP scheme"), was set out in section 69 of the Duties Act 1997 ("Duties Act") at the relevant time:
"69 The nature of the scheme
This scheme is intended to help people who are acquiring their first home.
Under the scheme, the acquisition and any mortgage given to assist the financing of the acquisition is subject to a concession or exemption from duty."The FHP scheme has a residence requirement in section 76 of the Duties Act which in all relevant respects is identical to the residence requirement for a grant:
"76 Residence requirement
(1) The home must be occupied by the first home owner... who is acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as the residence requirement.
(2) The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case:
(a) modify the residence requirement by approving a shorter period of occupation by a first home owner, or
(b) exempt a first home owner from the requirement to comply with the residence requirement.
...
(5) For the purpose of this section, an agreement or transfer is completed when a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered."Both of the residence requirements outlined above are referred to in the remainder of this decision as "the residence requirement".
Issues
The Chief Commissioner does not dispute that the Applicant acquired the Property by completing an eligible transaction. The Chief Commissioner disputes that the Applicant has complied with the residence requirement.
The issues are whether or not the Applicant has satisfied the onus of establishing the residence requirement and if not, whether there are good reasons for the Chief Commissioner to either vary the residence requirement or exempt the Applicant from complying with that requirement.
If the Applicant does not succeed, the grant is repayable and the stamp duty previously exempted is payable. In addition it is for the Tribunal to determine the amount, if any, of penalty to be paid by the Applicant in relation to the Grant and the interest payable in relation to the unpaid stamp duty.
The Evidence
The Applicant tendered an unsworn statement by Mr Nota and an unsworn undated statement with an illegible signature bearing an address adjacent to the Property.
The Respondent tendered, in addition to the s58 documents:
1) An affidavit of Elizabeth June Tsitsikronis sworn 19 March 2013 ("the Tsitsikronis affidavit") to which was annexed a copy of the Contract, personal income tax returns of the Applicant for the 2010 and 2011 financial years, and certain bank account statements of the Applicant. Each of the Contract and the income tax returns was signed by the Applicant.
2) Two facsimiles from the Office of Fair Trading detailing searches of the Rental Bond System providing details of a bond lodged in respect of the Property on 6 November 2009 for J Nota as tenant, paid out on 21 September 2010 to the tenant; and a bond lodged on 19 January 2011 and still held as at 13 November 2012 for NSW Land and Housing Corporation as tenant.
3) A letter dated 17 October 2012 from the Crown Solicitor's Office ("CSO") to the Applicant requesting certain information and documents and a reply received by the CSO on 12 November 2012.
4) A letter dated 14 November 2012 from the CSO to the Applicant requesting certain information and documents and a reply received by the CSO on 4 December 2012.The Applicant gave the following evidence in cross examination:
1) he denied that he had not moved into occupation of the Property within 12 months after completion;
2) he denied that he had not stayed in occupation for 6 months;
3) he had thought that he may have had to stay alone in the Property for the purpose of the Grant and stamp duty concession;
4) he acknowledged that he had not lived alone in the Property;
5) he may have said to officers of the Chief Commissioner that he moved into residence in November 2009 but he could not remember dates clearly;
6) he became aware of Mr Nota's problem with construction of his new home one or two days before settlement of his purchase of the Property;
7) his signature appeared immediately under special condition 17 in the Contract but he did not remember the condition and did not know about it;
8) although at the time of exchange of Contracts on 19 September 2009 the Contract had granted a 10 month lease of the Property to the vendor immediately following completion of the purchase, the front page of the Contract stated that the Property was sold with vacant possession;
9) special condition 17 in the Contract provided for a weekly rent of $370.00 for the Property after completion and that amount is the rent the vendor paid;
10) he did not know whether $370 per week was a market rent for the Property but was advised by a real estate agent in that regard;
11) he did not know why the rent was not reduced for the period when he occupied the master bedroom;
12) he lodged a rental bond for the Property shortly after completion of his purchase although he could not recall the exact date;
13) he obtained the rental bond in order to protect the Property;
14) he leased the Property to the Department of Housing after Mr Nota vacated the Property;
15) he did not know why his income tax returns for the 2010 and 2011 financial years claimed full deductions for council rates and other expenses incurred in relation to the Property and did not apportionment the expenses even though he was living at the Property, because he left the income tax returns to his tax agent;
16) he gave full instructions to his tax agent including informing the agent that he was living at the Property;
17) the tax agent did not say that the expenses had to be apportioned for private use of the Property;
18) he could not say why his income tax return for 2010, signed by him on 9 August 2010, stated that his residential address was his parents' home;
19) he did not know why the page containing the 2010 Rental Property Statement which formed part of his 2010 income tax return did not include any private use percentage in relation to expenses incurred in relation to the Property as, although he had signed the page, he had not read it;
20) he slept in the front bedroom of the Property which had an en suite bathroom and there was a bed and wardrobe in the bedroom. He stored his food in a small refrigerator near the kitchen and he had a small frypan and some crockery. He had no television or land line telephone at the Property;
21) he kept his ready use clothing at the Property and the remainder of his clothing was at his parents' home;
22) his clothes were washed at his parents' home;
23) he did not entertain any guests at either the Property or his parents' home. He would go out with his friends;
24) if he returned home during the night after a late shift at work he would sleep in the rumpus room at his parents' home instead of sleeping at the Property because he did not want to disturb the Nota family;
25) he used the master bedroom and en suite at the Property to sleep and shower and on the days when he was not working he sat in the bedroom and used his laptop;
26) sometimes he had dinner at his parents' home;
27) at all relevant times it was his intention to reside at the Property for the minimum period required by the grant conditions and then rent the Property;
28) he gave his parents' home as his residential and postal address for most but not all purposes;
29) his former bedroom at his parents' home was used as a computer room and store room after he moved to the Property;
30) he agreed that the Property had been rented for the whole of the period from completion of his purchase (4 November 2009) until the date of the hearing (9 April 2013) other than for a period from late 2010 to January 2011;
31) he did not contact the Chief Commissioner about the Nota family residing in the Property after completion because he was unaware of the Chief Commissioner's procedures;
32) when he completed the application form for the Grant he was aware of the residence requirement; and
33) he made no attempt to remove the Nota family from the Property after receiving advice from Legal Aid in about December 2009 or January 2010.
The Applicants' submissions
The submissions filed by the Applicant with the Tribunal, which can be regarded as both submissions and evidence, were identical to the submissions filed with his objection to the Assessments. The Applicant submitted that:
1) He settled the purchase of the Property on 4 November 2009 and changed certain utility records into his name and purchased building insurance.
2) His address for council and water notices for the Property and his bank statements was his parents' address, some 5 minutes walk from the Property.
3) During the settlement period one of the vendors of the Property ("Mr Nota") indicated that he wanted to remain at the Property for a short time after settlement as the house he was building was not ready for occupation, he had nowhere else to stay and it would be difficult to transfer his two young children to a new school. The Applicant agreed to allow Mr Nota and his family to remain in the Property for a short time after settlement.
4) The Applicant informed Mr Nota that he (the Applicant) had received a first home owner's grant and an exemption from stamp duty. Mr Nota stated that he was aware of the first home owners grant scheme.
5) For some months Mr Nota gave reasons to the Applicant as to why his (Mr Nota's) new home was not ready for occupation. The Applicant obtained legal advice to the effect that evicting Mr Nota would take many months and, as the Applicant understood Mr Nota would leave the Property shortly, the Applicant did not take any eviction action.
6) During December 2010 Mr Nota and his family vacated the Property and moved into their new home.
7) The Applicant did not know the appropriate procedure for dealing with an overstaying tenant.
8) He was eligible for both the Grant and the stamp duty concession "however due to the mentioned reasons the fulfilment (sic) of residing on the premises was not complete. I believe that having to pay back the grants is unfair as I tried to do the right thing and at the same time had concerns for the wellbeing and safety of Mr NOTA and his family."The Applicant tendered an unsworn statement from Mr Nota which largely supported the Applicant's submissions in relation to Mr Nota and his family remaining at the Property after settlement while their home was being built and that "The matter [presumably of remaining at the Property] was unintentional and was completely out of our hands". Mr Nota's statement also mentions that his family shared the Property with the Applicant who "remained in a room where he stayed". However Mr Nota was not available for cross examination and his statement is given limited weight.
The Applicant also tendered an undated unsworn statement, signed illegibly by a person who provided his/her address as adjacent to the Property, which included "I have seen Mr Amir Kozman at [the Property] on a regular basis... conducting various duties such as cleaning and maintenance around [the Property]..[and]..I have spoken with Mr Kozman on a number of occasions". The maker of the statement was not available for cross examination and the statement is given limited weight.
The Applicant orally submitted that:
He had given different versions of his occupation of the Property to the Chief Commissioner due to his confused recollection.
From January 2010 he stayed in the front bedroom of the Property for about 7 months. At times he worked night shifts and because he might make a noise when returning to the Property at night, and not wanting to disturb Mr Nota's family, he slept at his parents' home on those occasions.
Having his postal address at this parents' home was a matter of convenience, not a matter of residence.
The paperwork regarding his purchase was carried out by his solicitor and the agent and he lacked full understanding of all the documents.
At all times he regarded his parents' house as his home.
He was informed that he would qualify for the Grant if he lived at the Property for 6 months.In response to the Chief Commissioner's oral submissions (below) the Applicant further submitted:
1) He was confused from the start as to the Grant requirements.
2) He did live in the Property from January 2009 to August 2009.
3) He had wanted to move into the Property by himself but with the delay occurring in construction of the Nota family's home he decided he should move in anyway.
4) His use of his parents' home as a postal address was a matter of convenience.
5) The paperwork was carried out by a solicitor and agent, hardly anything by him personally, and he did not fully understand all the paperwork.
6) He was under pressure to assist the Nota family as they had nowhere else to go. He had several discussions with Mr Nota to see if they could leave the Property sooner rather than later.
7) His social life decreased during this period.
8) He believes he met the residence guidelines but circumstances arose outside his control.
9) He did not know how to move someone out of their home.
10) He always regarded his parents' home as his home.
11) He misunderstood the whole situation but did not want to be dishonest.
12) It was a coincidence that the vendor wished to remain in the Property.
13) He was told he just had to live at the Property for 6 months and intended to return to his parents' home.
14) He does not recall how special condition 17 got into the Contract.
The Respondent's submissions
Counsel for the Chief Commissioner relies on written submissions dated 3 April 2013 on behalf of the Chief Commissioner. In summary they are:
1) "the applicant bears the onus of proving his case" (at paragraph [55]).
2) The Applicant misunderstood the purpose of the Grant and stamp duty concession which "is to allow people to acquire their first home....[and] is not designed to allow people to become landlords or investors"[57] and [58].
3) "...the applicant fails the Residency Requirement in every way: he did not occupy the Property within 12 months of settlement; he did not occupy the Property for a continuous period of at least 6 months; and he did not "occupy" the Property at all in the relevant sense."[82]. The Chief Commissioner supports this submission as follows:
a) The Applicant provided 4 different versions of occupancy of the Property. The Chief Commissioner "submits that the "second version" - that the applicant leased the Property to the Notas from 6 November 2009 to December 2010, and then to other tenants from 19 January 2011 to the present - is the correct version." [62]
b) "The applicant did not commence occupation of the Property by 4 November 2010 [sic] as required by Residency Requirement."[67]
c) "There has been no period of occupation." [70] and "The applicant has failed the 6 month factor of the Residency Requirements." [71]
d) "The applicant did not intend to occupy the Property as his principal place of residence." [74]
e) "the property was purchased for profit not for a primary home". [78] and
f) "the applicant derived substantial income from the Property during the relevant period" [77].
4) The Applicant's case is that he could not occupy the Property because he was trying to do the right thing by the Nota family and could not evict them in time. This is a misunderstanding which, following 0 'Hara v Chief Commissioner of State Revenue [2011] NSWADT 289, does not assist the Applicant.
5) The Applicant did not request an extension of time in which to comply with the residence requirement.
6) There are no good reasons for the Chief Commissioner (or the Tribunal) to exercise the statutory discretion to exempt the Applicant from the residence requirement and:
"85. In the absence of express guidelines as to the exercise of this discretion the Chief Commissioner must be guided by the purpose and policy of the relevant legislation: Deputy Commissioner of Taxation v Clark [2003] NSWCA 91 at [115] per Spigelman CJ. The discretion must be exercised in a manner that does not defeat the fundamental legislative objectives of the scheme in which the discretion arises: Larsson v Chief Commissioner of State Revenue [2008] NSWADT 208.
"86. The purpose of the concessions is to enable people to acquire their principal place of residence:... It is not intended to permit would be landlords, otherwise unable to afford an investment property, the means to commence their investing."The Chief Commissioner also submitted that it was necessary for the Applicant to control and occupy the Property in order to satisfy the residence requirement not merely to reside on an occasional basis in part of the Property.
The Chief Commissioner further submitted that the Applicant never occupied the Property as his principal place of residence nor did he occupy the Property at all in a relevant sense.
Consideration
Compliance with the residence requirement
In order for the Applicant to succeed in overturning the assessments he must either prove on the balance of probability that he satisfied the residence requirement (namely he occupied the Property as his principal place of residence for a continuous period of at least 6 months and that occupation commenced within 12 months after completion of his purchase) or that there are sufficient good reasons for the Tribunal to vary the residence requirement or exempt him from complying with it.
At its highest, the Applicant's case in relation to the residence requirement is that he slept and showered in the master bedroom and en suite at the Property on many occasions from January 2010 until August 2010; he had some meals at the Property using a small refrigerator, a frypan and some crockery; he shared certain kitchen facilities with the vendors who occupied the Property from completion until December 2010; and he spent some of his daytime non-working hours in the master bedroom using his computer.
The Applicant has also acknowledged that:
1) he did not occupy the Property other than to share part of it;
2) at no time did he occupy or use the whole or even a substantial part of the Property;
3) for the whole period in which he resided at the Property he rented it for an amount determined in accordance with advice from an agent and the rent did not vary whether or not he lived there;
4) he claimed all his expenses in relation to the Property as tax deductible including when he lived there;
5) he had minimal furniture at the Property;
6) he did not entertain any guests at the Property;
7) when returning late from work he slept at his nearby parents' home rather than the Property;
8) from time to time he ate at his parents' home;
9) he kept the bulk of his clothing at his parents' home and his clothes were laundered at his parents' home not at the Property;
10) at all times he regarded his parents' home as his home;
11) it was his intention to reside at the Property for the minimum time necessary to comply with the residence requirement to obtain the Grant and otherwise he intended renting the Property;
12) he has, other than for about two months, continually rented the Property from completion of his purchase until the date of the hearing (9 April 2013), a period of 3 years 5 months, at a rent determined in accordance with advice from a real estate agent;
13) he does not deny that the rent he received was the market rent but states that he does not know what the market rent was at the time;
14) he used his parents' home as his postal address for many statutory authorities and informed several such authorities including the Australian Taxation Office and his employer that his parents' home was his residential address;
15) he did not attempt to evict the vendors from the Property despite obtaining legal advice by January 2010; and
16) while he signed documents including the Contract and his income tax returns prepared or reviewed by his solicitor or tax agent, he did not read or fully understand all such documents.The basic principles used in determining whether a person has used a home as their principal place of residence were discussed in Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 ('Ferrington'), at [42]. The Appeal Panel said:
"First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear ... Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling ... Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue ... Fourthly, to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose ... Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue ... This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of the occupation that provides the element of permanence... Sixthly, the reasons for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances..."
In applying these principles to the evidence:
1) As to the first principle, it should be noted that the ordinary meaning of the word 'principal' does not exclude the possibility of the person having another, subsidiary place of residence, such as the Applicant's parents' home where he acknowledged he slept from time to time while asserting the Property was his principal place of residence.
2) Second, in order to 'occupy' premises, the applicant must be the person "with the immediate supervision and control of the premises, and the power of permitting the entry of other persons": Ferrington at [29]. In this case, for more than 12 months from 24 November 2009, the date of completion of the purchase, the whole of the Property other than the master bedroom and en suite was occupied by the Nota family pursuant to their contractual right in the Contract. That right was expressly "that the Vendor will remain in occupation of the property following completion for a period of 10 months..". No evidence was presented by the Applicant to indicate that the Nota family was under any restriction in relation to permitting the entry onto the Property of any persons they wished to invite nor that the Applicant retained any right of immediate supervision and control while the Vendor remained in occupation. I find that the Applicant occupied the master bedroom and en suite from January 2010 to August 2010 but that this was not occupation of the Property in accordance with the Ferrington principle.
3) Third, the Appeal Panel has emphasised that a subjective intention to occupy is not enough to satisfy the principal place of residence requirement: Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50 at [14]. The Applicant's acknowledged intention was to reside in the Property for the minimum period which he understood was required in order to qualify for the Grant and that at all times he regarded his parents' home, not the Property, as his home.
4) Fourth, there must be a finding as to the 'degree of permanence'. This may be indicated, for example, by an applicant notifying relevant statutory authorities of this address, or making changes to the Property or its furnishings consistent with permanent occupation. I find that there was minimal notification to authorities or providers of services to the Property that the Property was the Applicant's residential address. Instead the Applicant informed authorities that his parents' home was his residential address. I also note the Applicant's acknowledgement that he brought minimal furnishings to the Property and that the only clothing he took to the Property was that for ready use, the bulk of his clothing remaining in his parents' home.
5) Fifth, the length of residence is not necessarily determinative: rather it is the nature of the person's occupation that is important. On the Applicant's own evidence his occupation of the Property was partial in relation to the area occupied and of a transient nature both subjectively in relation to his intent and objectively in relation to his period of residence. The Applicant also acknowledged in his written submissions that "the fulfilment (sic) of residing on the premises was not complete."
6) Sixth, the reasons for the Applicant's departure from the Property which he claims was at the relevant time his principal place of residence are difficult to regard as reasonable when considered objectively in light of his personal circumstances. The Applicant stated that during the period he slept at the Property he actually slept at his parents' home when finishing shift work at night (so as not to disturb the Nota family). However the room he slept at in the Property was the front bedroom and no evidence was presented as to how entering the front door and going directly to that bedroom would disturb the Nota family. Conversely the Applicant stated that when sleeping at his parents' home he slept in the rumpus room, not in his former bedroom. No satisfactory evidence was presented as to how that would not be intrusive to the members of his own family who resided in his parents' home at the time. The Applicant acknowledged that he ceased sleeping at the Property once he thought the minimum period of residence required to satisfy the conditions of the Grant was over and he then resumed residence at his parents' home, which he regarded as his permanent home.I find that the Applicant did reside in part of the home at the Property for some time, commencing within 12 months of completion of his purchase. However, I also find that he has not established, on the balance of probabilities, that he occupied the Property as his principal place of residence whether for a continuous period of at least six months commencing within 12 months after completing his purchase of the Property or at all.
Discretion to vary the residence requirement or exempt the Applicant from compliance with the requirement
As the residence requirement was not met the Applicant is not eligible for the Grant or the stamp duty concession unless the Tribunal reverses the decision of the Chief Commissioner not to exercise, in favour of the Applicant, the discretions in s12(3) to (5) of the Grant Act and s76(2) of the Duties Act.
The Applicant's submissions are that he intended residing at the Property in order to comply with the residence requirement but he permitted the vendors to remain in the Property after completion because it would have caused hardship to their family, including children, if they had to move elsewhere until their house was built; he was advised that removing the vendors from the Property would be complex and lengthy; he was confused as to the detail of the residence requirement and did not fully understand the Chief Commissioner's requirements and procedures; and it would not be fair if he had to repay the Grant and pay stamp duty as he was trying to do the right thing.
The Chief Commissioner's submissions are set out at paragraphs [25] to [28] above and do not need repeating.
The phrase "good reasons" is not defined in either the Grant Act or the Duties Act. Spigelman CJ stated in Deputy Commissioner of Taxation v Clark [2003] NSWCA 91 at [115]:
"Parliament has chosen to use words of great generality in the phrase "other good reason" in the various statutory provisions in which it appears. A phrase of this character must take its colour from its surroundings. The contemporary approach to statutory interpretation is literal but not literalistic and requires words to be construed in their total context."
In Larsson v Chief Commissioner of State Revenue [2008] NSWADT 208 Judicial Member Perrignon stated at [35]:
"The discretion to modify the residency requirement must be exercised, if at all, having regard to the purpose of the Acts which authorise its exercise. It ought not be exercised in such a way as to defeat the primary purpose of the legislation."
In O'Hara Judicial Member Block, in determining that he was not satisfied that there were good reasons to exercise a discretion to exempt the applicant from the residence requirement, stated at [29] that the case is "one in which to grant discretionary relief would run counter to the underlying policy and the purposes of the relevant legislation".
In Cullen v The Chief Commissioner of State Revenue [2007] NSWADT 121 at [37] Judicial Member Seve extracted the following from the Second Reading Speech by the Hon. Michael Costa on 29 November 2005 on the State Revenue Legislation Further Amendment ("SRLFA") Bill 2005 (which became the SRLFA Act 2005 and amended the discretions in s12(5) of the Grant Act ):
"The bill also clarifies the circumstances in which the Chief Commissioner may exercise certain discretionary powers. Eligibility for the grant includes a residence requirement, which states that the Applicant must occupy the home as his or her principal place of residence for at least six months commencing within 12 months of purchase. The Chief Commissioner is given the power to extend the period of 12 months, to reduce the period of 6 months, or to waive the residence requirement completely. The discretions are intended to allow the grant to be retained in circumstances where the Applicant genuinely intended to occupy the home as his or her principal place of residence, but failed to do so due to a change in circumstances after the purchase of the home."
Notwithstanding the Applicant's statement that he became aware of the Nota family's problem regarding their unfinished home one or two days before settlement, the Contract signed by the Applicant contained at special condition 17 an express condition "that the Vendor will remain in occupation of the property following completion for a period of 10 months..". If the Applicant had taken up residence in the Property 11 months after completion and had occupied the Property as his principal place of residence for a continuous period of at least 6 months thereafter, he could have complied with the residence requirement. This did not occur. Even after the Nota family left the Property in December 2010, the Applicant did not take up residence at the Property. Instead he sought another tenant and the month after the Nota family moved out, he leased the Property to NSW Land and Housing Corporation.
To exercise the Tribunal's discretion in favour of the Applicant in relation to his obligation to comply with the residence requirement would in my opinion, to use the words of Block JM in O'Hara "run counter to the underlying policy and the purposes of the relevant legislation". Accordingly I am not satisfied that there are good reasons to either modify the residence requirement in favour of the Applicant or to exempt the Applicant from complying with the residence requirement.
Grant Act penalty
The Assessment Notice dated 23 March 2012 which required repayment of the Grant also imposed a penalty of $2,800. Both were payable by 13 April 2012. The Grant has not been repaid and the penalty has not been paid. Section 45(3) of the Grant Act provides that if an applicant for a grant fails to make a repayment required under this section the Chief Commissioner may impose a penalty not exceeding the amount the Applicant is required to repay.
In support of the penalty, which equates to 20% of the amount of the Grant, the Chief Commissioner submitted:
"93. The applicant's penalty is 20%. This is justified because the applicant:
failed to make the repayment as required;
is unable to satisfy the Residency Requirements for all three reasons;
the truthfulness of his assertions to the Chief Commissioner and to this Tribunal are are (sic) to be questioned;the applicant never occupied the Property as his principal place of residence;
the Grant remains unrefunded; andthe applicant has derived rental income from the Property from the time of settlement.
94. These are considerations in support of imposing the penalties: Philpott v Chief Commissioner of State Revenue [2008] NSWADTAP 19 which approved the Tribunal's comments in Knight and anor v Chief Commissioner of State Revenue [2008] NSWADT 83 and cited in O'Hara v Chief Commissioner of State Revenue [2011] NSWADT 289 at [34] per Block JM."
Counsel for the Chief Commissioner orally submitted that the Chief Commissioner would not seek to increase the 20% penalty imposed on the Grant, although 30% would be justified, and the Chief Commissioner was mindful of the effect of the Applicant's confusion in determining the amount of penalties.
The Applicant did not expressly address the penalty issue other than as noted above and submitting that he honestly responded to the questions raised by the Chief Commissioner, that he is a responsible person with a positive attitude and respect to all members of the community, and he asks for assistance and understanding regarding this matter,.
In O'Hara, Block JM referred to Philpott and Knight at [34] as follows:
"The Tribunal refers to the recent decision of the Appeal Panel in Philpott v Chief Commissioner of State Revenue (RD) [2008] NSWADTAP 18 which approved the Tribunal's comments in its recent decision in Knight and anor v Chief Commissioner of State Revenue [2008] NSWADT 83 as to the relevant factors to be considered in determining whether a discretionary decision to impose a penalty was the correct and preferable decision. In Knight Judicial Member Verick held that the factors to be taken into account include:
(1)the truthfulness of the original statements made by the Applicant in his or her application for the grant;
(2)the surrounding circumstance including the intention of the Applicant in relation to the occupation and use of the property as his or her principal place of residence at the time when seeking the grant;
(3)the reasons for failure to comply with conditions of the grant;
(4)whether the Applicant has occupied the property as his or her principal place of residence;
(5)the candour of the Applicant in his or her responses to compliance inquiries; and
(6)whether the grant been refunded."I have had regard to the above factors and to the reasoning of the Appeal Panel in Philpot which stated at [18] "from a consideration of matters, which come before the Tribunal, the 20 percent penalty is imposed in most circumstances where no fraud is relied on by the Commissioner."
The Applicant readily admitted that he did not satisfy the residence requirement although he had attempted to reside at the Property. He sought to explain why in his opinion he could not comply with his understanding of that requirement; his confusion over the detail of the Grant conditions; and his lack of knowledge and understanding of the Chief Commissioner's procedures and the procedures for removing the Nota family from the Property. However the Applicant has had the benefit of the Grant for over three years and has also leased the property for what may well be market rent during that period. In the circumstances and having regard to the factors in Knight and the principles enunciated by the Appeal Panel in Philpot, I will not vary the 20% penalty imposed by the Chief Commissioner.
Imposition of interest
The Duties Notice of Assessment dated 23 March 2012 which required payment of $13,500 stamp duty from which the Applicant was previously granted a concession also imposed what is described in the Chief Commissioner's covering letter of 23 March 2012 as "interest and penalty tax" under the TA Act. (See page 32 of the s58 documents). No relevant payment has been made by the Applicant. It is noted that the Duties Notice of Assessment refers to interest of $2,242.34 and no penalty (page 33 of the s58 documents). The same details are contained in a First Home Benefits Investigation Report at pages 9 and 10 of the s58 documents. The Chief Commissioner's written submissions refer at [96] and [97] to charging "both market and premium interest" on the outstanding duty but state 'the Chief Commissioner did not impose penalties on the duty concession assessment" and "Division 1 of Part 5 of the Administration Act, [the Taxation Administration Act 1996] including s 21 of that Act, make clear that interest applies in the case of a tax default. The applicant is liable to pay this interest." The submissions also state that "Interest was not charged in relation to the Grant." [96] The Duties Notice of Assessment refers to interest being imposed after the due date at a then current rate of 12.62% % per annum which accrues daily (page 33 of the s58 documents).
The Applicant made no express submission in relation to the imposition of interest or penalty tax other than as referred to above.
Division 1 of Part 5 of the TA Act provides for interest in respect of tax defaults (including failure to pay stamp duty) as the sum of a market rate component and a premium component. (ss 21 and 22) Division 2 provides for penalty tax in respect of certain tax defaults up to 75% of the amount of tax unpaid.
In the present circumstances, and notwithstanding the reference at page 33 of the s58 documents to the imposition of penalty tax, it appears the Chief Commissioner has determined that no penalty tax is payable.
The Appeal Panel in Chief Commissioner of State Revenue -v- Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 at [60] stated:
"In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due." In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 ("Trust Co of Australia") Judicial Member Verick stated at paragraph 27." In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the 'tax default' is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer."
The premium component of the interest rate is a fixed 8% per annum (s22(3) of the TA Act). At [25] of Trust Co. of Australia the Appeal Panel stated "..the fixed premium rate component is a rate imposed by way of a penalty for the 'tax default' in question. A premium rate of interest is imposed where a 'tax default' is a result of some culpable conduct on the part of the taxpayer.."
I note that the Chief Commissioner did not impose any penalty tax. I have had regard to the submissions of both parties, and the principles and factors enunciated in Incise Technologies and Trust Co. of Australia. I find that interest calculated in accordance with s22 of the TA Act on the unpaid stamp duty should be paid by the Applicant but that no penalty tax should be payable in relation to the unpaid duty.
Decision
Having regard to the above findings on the material before me, the correct and preferable decision is to make the order below.
Orders
The decision of the Chief Commissioner is affirmed including as to penalty and interest.
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