Minh Ung v Commissioner for Act Revenue

[2019] ACAT 34

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

MINH UNG v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2019] ACAT 34

AT 93 of 2018

Catchwords:              ADMINISTRATIVE REVIEW – land tax – penalty tax – section 30 of the Taxation Administration Act 1999 – applicable rate of penalty tax

Legislation cited:      ACT Civil and Administrative Tribunal Act 2008 ss 9, 68

Land Tax Act 2004 s 7

Taxation Administration Act 1999 ss 4, 14, 30, 31, 34, 82,100, 107A, 108A and Sch 1

Cases cited:               Steele v Commissioner for ACT Revenue [2010] ACAT 15

Tanaskovic v Commissioner for ACT Revenue [2018] ACAT 116
Theron & Commissioner for ACT Revenue [2013] ACAT 33

Tribunal:                   Senior Member T Foley

Date of Orders:  20 March 2019

Date of Reasons for Decision:         20 March 2019

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          AT93/2018

BETWEEN:

MINH UNG

Applicant

AND:

COMMISSIONER FOR ACT REVENUE

Respondent

TRIBUNAL:   Senior Member T Foley

DATE:20 March 2019

ORDER

The Tribunal orders that:

1.        The decision under review is confirmed.

………………………………..

Senior Member T Foley

REASONS FOR DECISION

1.Minh Ung (the applicant) has sought review of the decision of 31 August 2018 of the Commissioner for ACT Revenue (the respondent) to disallow an objection to a land tax assessment issued on 22 February 2018 pursuant to the Taxation Administration Act 1999 (the Tax Act).

2.Jurisdiction to review the respondent’s decision is conferred on the Tribunal by sections 107A and 108A of, and sections 1.1 and 1.2 of Schedule 1 to, the Tax Act, which is an authorising law for the purposes of section 9 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act). The review is an application for review by the ACT Civil and Administrative Tribunal pursuant to section 68 of the ACAT Act.

3.In the reasons below, a reference to ‘ACAT’ or ‘tribunal’ refers to the ACT Civil and Administrative Tribunal generally, whereas ‘Tribunal’ refers to the member who heard the application.

The hearing

4.The matter was heard on 20 February 2019. The Tribunal had before it the documents provided by the respondent on which its decision was based (the T‑Documents), and the Submissions and Statements of Facts and Contentions of the parties. The applicant was self-represented and assisted by his daughter Queenie Ung. The respondent was represented by Mr Marcus Hassall of counsel instructed by the ACT Government Solicitor.

5.The applicant gave evidence, and both parties made submissions and responded to questions of the Tribunal.

6.At the conclusion of the hearing the Tribunal reserved its decision and indicated it would provide written reasons. These are those reasons.

Background

7.The applicant and his wife Hahn Ngoc Lam acquired a property at 4 Cambage Street, Yarralumla, being Block 11, Section 48, Yarralumla in the Australian Capital Territory (the property) in 2010.

8.The applicant rented the property for disputed periods in 2010 to 2012 to a tenant, Ms Natasha Gilmore. The house on the property was then demolished and a new dwelling was constructed in which the applicant and his wife have since resided.

9.In November 2017 the respondent investigated the rental status of the property on its review of data from the Australian Taxation Office (ATO) and elsewhere.[1]

[1] Tribunal Documents filed 17 October 2018 pages 71-72

10.On 20 November 2017, the respondent issued a residential land tax notice to the applicant pursuant to section 82 of the Tax Act following the investigation.[2] On 21 December 2017 the applicant returned the completed notice advising that the property had been rented out for certain short periods in the relevant financial years 2011, 2012 and 2013 but that he was unable to contact the real estate agent who had managed the property, and asking the respondent to work out the land tax payable based on the ATO records.[3] On 12 January 2018 the respondent sought confirmation from the applicant that the property had been leased from 16 December 2010 to 15 June 2012.[4] On 17 January 2018 the applicant advised he had no record of this but did not dispute it.[5]

[2] Tribunal Documents filed 17 October 2018 pages 73-75

[3] Tribunal Documents filed 17 October 2018 pages 86-88

[4] Tribunal Documents filed 17 October 2018 pages 89-90

[5] Tribunal Documents filed 17 October 2018 pages 91-92

11.On 22 February 2018 the respondent assessed the applicant as liable to pay land tax on the property for that period in the total sum of $33,684.49 being $13,558.88 assessed land tax, $6,779.45 penalty tax at the rate of 50%, and interest which at that time amounted to $13,346.16.[6]

[6] Tribunal Documents filed 17 October 2018 pages 95-98

12.On 20 March 2018 the applicant lodged an objection to the land tax assessment.[7] On 31 August 2018 the respondent disallowed the objection, which is a reviewable decision. On 14 September 2018 the applicant forwarded to the respondent business records relating to the rental of the property obtained from the agents Ian McNamee & Partners Pty Ltd and sought review of the land tax imposed.[8] The respondent advised the applicant that further internal review was not possible.[9]

[7] Tribunal Documents filed 17 October 2018 pages 108-112

[8] Tribunal Documents filed 17 October 2018 page 140

[9] Tribunal Documents filed 17 October 2018 page 165

13.On 24 September 2018 the applicant applied to the tribunal for review of the reviewable decision.

14.The applicant entered into a payment plan in July 2018 to pay the outstanding land tax assessment pending this hearing.[10] The respondent advised at the hearing that the full amount due had been paid and that the applicant was in fact in credit and a small refund was due to him.

[10] Tribunal Documents filed 17 October 2018 page 117

The relevant law

15.By virtue of Part 2 of the Land Tax Act 2014 (the Land Tax Act), land tax is payable on ‘rateable land’ that is ‘rented residential land’. The relevant definition for ‘rent’, in section 7 of the Land Tax Act, provides:

rent means valuable consideration for which a tenant is liable under a tenancy agreement in relation to the tenancy or a period of the tenancy.

16.The Land Tax Act is a ‘tax law’ for the purposes of the Tax Act.[11] The respondent has power under the Tax Act to make an assessment of the land tax liability of a taxpayer.[12]

[11] Tax Act, section 4(f)

[12] Tax Act, section 14

17.The respondent assesses land tax quarterly and bases the assessment on the status of the property as at four key dates — 1 July, 1 October, 1 January and 1 April. The assessments are for each whole quarter and there is no daily pro-rata land tax liability within a quarter.[13]

[13] Tribunal Documents filed 17 October 2018 page 13

18.There are a number of provisions relating to the imposition of penalty tax.

19.Where a taxpayer has defaulted, the taxpayer is liable to pay penalty tax in addition to the unpaid tax (and any interest payable).[14] The Tax Act provides with respect to the rate of that penalty:

a.       The default rate is 25%.[15]

b.       If the Commissioner is satisfied the default was due wholly or partly by the failure of the taxpayer to take reasonable care the rate is 50%.[16]

c.        If the Commissioner is satisfied the default was due wholly or partly by an intentional disregard by the taxpayer of a tax law the rate is 75%.[17]

d.       If the Commissioner is satisfied the default was the result of concealment or deliberate interference with records or the investigation by the taxpayer the rate is 90%.[18]

[14] Tax Act, section 30

[15] Tax Act, section 31

[16] Tax Act, section 31(2)

[17] Tax Act, section 31(5)

[18] Tax Act, section 34

20.A taxpayer may lodge a written objection with the respondent in relation to a land tax assessment.[19]

[19] Tax Act, section 100

The applicant’s evidence and contentions

21.The applicant's evidence was that for the relevant period the property was managed by agents, Ian McNamee & Partners. At no time did the agent alert him to his obligation to advise the respondent that the property was rented. The applicant said he advised his accountant of all rental received during this period and these sums were declared in his income tax returns. At no time did the accountant advise him of his reporting obligation to the respondent.

22.The applicant had no clear recollection of many of the events in question, given the periods at issue were in 2010 to 2012. However, and to his credit, when shown documents in cross-examination establishing certain facts, he accepted them. Relevantly, he accepted two important factual matters:

a.       that the property was rented for the assessed period, namely the third quarter 2010/2011 to the fourth quarter 2011/2012, specifically 16 December 2010 to 15 June 2012; and

b.       that he first became aware of his obligation to notify the respondent of the property being rented from the time of receipt of the 2012-2013 Rates Assessment Notice, issued on 16 July 2012, which had a notice to that effect on its face.

23.The applicant says there are extenuating circumstances relevant to his failure. His evidence was that even though Ms Gilmore had a tenancy agreement over the property for the relevant period (in fact commencing from July 2010) there were extended periods during which she did not pay rent as required. The applicant says the non-payment reached the stage where the agent took proceedings for eviction in the tribunal and the tenant was only removed following enforcement action by the Australian Federal Police (AFP).

The respondent’s contentions

24.The respondent contends that the applicant failed to notify the respondent in writing, or at all, that the property was rented during the relevant period.[20]

[20] Respondent’s statement of facts and contentions dated 10 January 2019 [32]

25.The respondent further contends that the penalty tax rate of 50% is appropriately imposed and there is no basis under section 31 that it should be altered.[21] The respondent referred to:

a.       information pamphlets regarding land tax which were included in the applicant’s annual rate assessment in each relevant year;[22]

b.       it being the applicant’s responsibility under the legislation to inform himself of his land tax liabilities;[23] and

c.       the default by the applicant being caused by his intentional disregard of his obligation to pay land tax.[24]

[21] Respondent’s statement of facts and contentions dated 10 January 2019 [30]

[22] Respondent’s statement of facts and contentions dated 10 January 2019 [32]

[23] Respondent’s statement of facts and contentions dated 10 January 2019 [31]

[24] Respondent’s statement of facts and contentions date 10 January 2019 [32]

The matter at issue

26.There is no question that land tax was properly assessed for the relevant period (if not a period longer than assessed). A property is ‘rented’ if subject to a tenancy agreement, even if rent is not being paid. There is agreement that the rate and the amount of interest imposed by the respondent is not subject to review by the tribunal. The sole matter at issue is therefore the rate of penalty tax payable by the applicant.

27.The applicant submitted the amount of penalty tax payable should be waived, or reduced to 25%. The respondent submitted it remain as assessed at 50%.

28.As the tribunal made clear in Steele v Commissioner for ACT Revenue[25] it is the taxpayer who “needs to ascertain what tax liabilities may exist”. The applicant cannot rely on the failure of his agent or accountant to advise him of this.

[25] [2010] ACAT 15 [16]

29.Similarly, the tribunal has considered, in Theron v Commissioner for ACT Revenue,[26] that “the amount of penalty tax clearly depends on culpability.”

[26] [2013] ACAT 33 [49]

30.In Tanaskovic v Commissioner for ACT Revenue,[27] the tribunal adopted the following convenient shorthand for the penalty tax levels imposed in section 31 of the Tax Act: 25% where the default is innocent; 50% when it is careless; and 75% where it is due to intentional disregard. The Tribunal accepts that characterisation of the applicant’s default. The Tribunal also accepts the applicant’s submission, in his closing statement, that this matter has placed him, and his family, under considerable stress and pressure.

[27] [2018] ACAT 116 [42]

Tribunal’s conclusions on the matter at issue

31.On the basis of the evidence, the Tribunal concludes that the property was rented for the period at least covering 16 December 2010 to 15 June 2012, if not longer. The Tribunal accepts that, for a substantial part of that period, the tenant did not pay rent and that the applicant was required to obtain an order to evict her and that this order needed police assistance to enforce.

32.The applicant gave clear evidence when shown documentary evidence that he did know of his obligation to notify at least as early as July 2012. However, he did not notify the respondent at that time or later. His obligation only came to light when the respondent commenced its investigation in November 2017. As such, the lengthy period during which interest accrued was due to the applicant’s default.

33.It is the Tribunal’s view that the penalty tax payable should be set at the level of a failure to take reasonable care. That the applicant knew of his obligation from July 2012, but did not take the care to notify the respondent until its investigation commenced, goes well beyond mere default. However, the Tribunal accepts the applicant’s submission, in his closing statement, that it was not an intentional attempt at tax evasion.

34.The Tribunal finds that the applicant’s culpability arose because he did not exercise due care. The appropriate level of penalty tax payable to reflect this degree of culpability is 50%.

Decision

35.The Tribunal confirms the decision under review.

………………………………..

Senior Member T Foley

HEARING DETAILS

FILE NUMBER:	AT 93/2018
PARTIES, APPLICANT:	Minh Ung
PARTIES, RESPONDENT:	Commissioner for ACT Revenue
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	Marcus Hassall
SOLICITORS FOR APPLICANT	N/A
SOLICITORS FOR RESPONDENT	ACT Government Solicitor
TRIBUNAL MEMBERS:	Senior Member T Foley
DATES OF HEARING:	20 February 2019