Mohamed v Commissioner for Act Revenue (Administrative Review)
[2022] ACAT 62
•04 July 2022
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
MOHAMED v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2022] ACAT 62
AT 103/2021
Catchwords: ADMINISTRATIVE REVIEW – land rent – eligibility for discounted rate of land rent – Land Rent Act 2008 – reassessment under section 9 of the Taxation Administration Act 1999
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 9, 26, 68
Land Rent Act 2008 ss 9A, 10, 11, 12, 34
Taxation Administration Act 1999 ss 4, 9, 100, 107A
Subordinate
Legislation cited: Disallowable instrument DI2015-224: Land Rent (Total income of lessee - pre-1 October 2013 leases) Determination 2015 (No1)
Tribunal:Senior Member Prof T Foley
Date of Orders: 04 July 2022
Date of Reasons for Decision: 04 July 2022
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT103/2021
BETWEEN:
ABDIWAHAAB BARKHADLE MOHAMED
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL:Senior Member Prof T Foley
DATE:04 July 2022
ORDER
The Tribunal orders that:
The decision under review is varied such that land rent payable:
(a)for 2019-20 is $10,766; and
(b)for 2020-21 is $10,887.
The decision is otherwise confirmed.
………………………………..
Senior Member Prof T Foley
REASONS FOR DECISION
Abdiwahaab Barkhadle Mohamed (the applicant) has sought review of the decision of 15 October 2021 of the Commissioner for ACT Revenue (the respondent) to disallow an objection to his and his wife’s eligibility for a discounted rate of land rent for each financial year since June 2010 pursuant to section 12 of the Land Rent Act 2008 (the LR Act).
Jurisdiction to review the respondent’s decision is conferred on the Tribunal by sections 100 and 107A of the Taxation Administration Act 1999 (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. Pursuant to section 26, “the tribunal may inform itself in any way it considers appropriate in the circumstances.”
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 matter was heard on 24 May 2022. The Tribunal had before it the documents provided by the respondent on which its decision was based (the Tribunal documents). The applicant filed written submissions on 12 April 2022. The respondent filed submissions on 4 May 2022. The applicant was self-represented. The respondent was represented by Ms K Weir of counsel instructed by the ACT Government Solicitor.
The applicant gave evidence. Ms Evelyn McCarthy gave evidence on behalf of the respondent. Both parties made submissions and responded to questions of the Tribunal.
At the conclusion of the hearing the Tribunal reserved its decision and indicated it would provide written reasons. These are those reasons.
Background
The applicant entered into a contract dated 25 August 2009 with his wife Sagal Ahmed as joint lessees of land at 10/11 Elphick Place, Bonner being Block 6, Section 56, Bonner in the Australian Capital Territory (the property).[1] The property was rented from the Territory under the ACT Government’s Land Rent scheme introduced in 2008 (the scheme). The scheme provided the alternative of renting land from the Territory Government rather than purchasing the land to build a house. Lessees are required to pay the Commissioner land rent each year as determined under the LR Act.
[1] Tribunal documents filed 6 December 2021, pages 127-140
The applicant and his wife joined the first iteration of the scheme. A second iteration with apparently more generous provisions in terms of the income threshold and land rent rate was introduced in October 2013. The applicant sought to transfer to that scheme but that was not permissible.
For participants such as the applicant and his wife who joined the scheme prior to October 2013 the amount of land rent payable is means-tested. If the lessees can show their total income received in the previous financial year was less than a prescribed income threshold amount for that year they are entitled to pay a discounted rate of land rent. The discounted rate is 2% of the assessed Unimproved Land Value (ULV), the standard rate is 4%.[2]
[2] Respondent’s submissions dated 3 May 2022 at [6] and footnote 1 clarifies that ‘broadly speaking’ these are the rates as the LR Act allows for slightly lesser rates for each in certain circumstances. It is assumed here that the rates are 2% and 4% respectively.
At the instigation of the Tribunal in related proceedings,[3] the applicant on 24 July 2021 raised objection with the Commissioner that in certain years since entering the scheme (he says for 2010-2011 and 2013-2014) he and his wife were not given their proper entitlement to the discounted rate of land rent.[4] As part of assessing their eligibility, the ACT Revenue Office obtained from the Australian Taxation Office under its legislative authority, full income tax return information for the applicant and his wife for the relevant years.
[3] Civil dispute application XD 622/2021
[4] Tribunal documents filed 6 December 2021, page 10
On 17 August 2021 the Commissioner’s delegate made a decision under section 12 of the LR Act as to the lessees’ eligibility for the discounted rate for each financial year since June 2009.[5] As well as considering the years 2010-2011 and 2013-2014 raised by the applicant the Commissioner also reassessed and removed the previously granted discounted rate for other years such that additional liabilities were imposed for 2009-2010 ($426.79), 2011-2012 ($5,407.66) and 2012-2013 ($5,634.24).
[5] Tribunal documents filed 6 December 2021, pages 12-16
On that day the applicant raised an objection to that decision.[6] On 15 October 2021 the respondent disallowed the objection, which is a reviewable decision.[7]
[6] Tribunal documents filed 6 December 2021, pages 147-148
[7] Tribunal documents filed 6 December 2021, pages 11-16
On 12 November 2021 the applicant commenced these separate proceedings in the tribunal for review of the reviewable decision.
Following orders of the tribunal of 7 February 2022 the applicant requested an explanation of the calculations used to determine land rent payable for the years where the standard rate of land rent was applied. By letter dated 4 March 2022 the respondent provided those calculations.
The relevant law
Part 3 of the LR Act makes provision for land rent discount. Relevantly section 10-12 provide:
10 Discount—application
(1) An application for discounted land rent must be made to the commissioner.
(2) An application must include—
(a) evidence of the total income of each lessee—
(i) for the year before the application is made; and
(ii)if the total income of each lessee is more than the income threshold amount in the year in which the application is made—for that year; and
(b) details of any real property owned by each lessee.
(3) An application may be made—
(a) before the grant of the lease; or
(b)for a pre-1 October 2013 lease—at any time during the term of the lease.
11 Discount—eligibility
(1) The lessee of a land rent lease is eligible to pay discounted land rent only if—
(a)the lessee, or any of the lessees, does not own other real property; and
(b)the total income of the lessee, or the sum of the total incomes of all the lessees, does not exceed the income threshold amount for—
(i)the year in which the application for discounted land rent is made; and
(ii)the year before the application is made; and
(c) if a certificate of occupancy is issued for the lease—the lessee, or at least 1 of the lessees, lives on the parcel of land under the lease.
Note 1The Minister may determine how the lessee’s total income is worked out (see s 9A).
Note 2Income threshold amount is defined in the dictionary.
(2) For subsection (1) (a), the former owner of a parcel of land is not taken to own other real property if the former owner—
(a) owns the parcel of land; but
(b) does not own other real property.
(3) In this section:
certificate of occupancy—see the Building Act 2004, dictionary.
former owner—see section 7A (4).
12 Discount—decision on application
(1) On receipt of an application under section 10 (Discount—application), the commissioner must—
(a)if the commissioner believes on reasonable grounds that the applicant is eligible to pay discounted land rent—grant the discount; or
(b)in any other case—refuse to grant the discount.
(2) The commissioner must give the applicant written notice of—
(a)the decision under subsection (1); and
(b)if the discount is refused—the reasons for the refusal.
(3) If the commissioner grants the discount, the discount applies from—
(a)if the application for the discount was made before the grant of the lease—the day the lease is granted; or
(b)in any other case—
(i)the day on which the application for the discount was received by the commissioner; or
(ii)any other day, including a day before the application was received, which the commissioner considers appropriate.
Section 9A provides with respect to determining ‘total income’ that:
9A Total income of lessee
(1)The Minister may determine how the total income of a lessee is worked out.
(2)A determination is a disallowable instrument.
Section 34 excludes from the review powers of ACAT decisions of the Commissioner to refuse to remit interest paid or payable by a lessee with respect to any unpaid land rent under section 33(c):
34 Review of decisions by ACAT
(1)This section applies to a determination by the commissioner of an objection to a decision mentioned in section 33, other than a decision mentioned in section 33 (c).
Disallowable instrument DI2015-224 made under section 9A provides:
Total income of a lessee—
(a) includes the income of the lessee; and
(b) for a self-employed person—includes the net trading profit or gain made in the ordinary course of carrying on the person’s business, rather than the business’s turnover; and
(c) includes income from all sources, for example, benefits from a salary packaging arrangement, short term higher duty payments, short term second job payments, maintenance payments, and income that is exempt income under the Income Tax Assessment Act 1997 (Cwlth); but
(d) excludes the following:
(i)employment termination payments made for years of service under a genuine redundancy payment; and
(ii)workers compensation payments.
The Land Rent Act is a ‘tax law’ for the purposes of the Tax Act.[8] The respondent has power under the Tax Act to make one or more reassessments of a tax liability of a taxpayer. Relevantly, section 9 provides:
[8] Land Rent Act 2008 section 4(e)
Reassessment
(1) The commissioner may make 1 or more reassessments of a tax liability of a taxpayer.
(2) A reassessment of a tax liability must be made in accordance with the legal interpretations and assessment practices generally applied by the commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time.
(3) The commissioner must not make a reassessment of a tax liability—
(a)more than 5 years after the initial assessment of the liability, unless—
(i)the purpose of the reassessment is to give effect to a decision on an objection or appeal as to the initial assessment; or
(ii)at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the liability under the relevant tax law of the person in relation to whom the assessment or reassessment was made were not fully and truly disclosed to the commissioner; and
(b)for an excluded organisation in relation to which a beneficial organisation determination does not apply—if the purpose of the reassessment is to give effect to a decision that the organisation has a tax liability, or has no tax liability, under a relevant provision.
(4) The initial assessment of a tax liability remains the initial assessment of the liability for this Act even if it is withdrawn under section 13.
The applicant’s evidence and contentions
The applicant’s evidence was that his objection of 24 July 2021 was that he and his wife were not given their proper entitlement to the discounted rate of land rent for two specific years only – the financial years 2010-2011 and 2013-2014. His evidence was that he had not raised an objection for any other years. However, the Commissioner’s decision of 17 August 2021 reviewed their eligibility for the discounted rate for each financial year since June 2010. He had not asked for this. The result was that the benefit of the discounted rate they were previously given for three other financial years – 2009-2010, 2011-2012 and 2012-2013 – was reversed and they were assessed for additional land rent and interest.
During the course of his evidence the applicant conceded, on the basis of the income date obtained by the respondent from the ATO, that he and his wife did not have entitlement to the discounted rate for the two years for which he had raised objection, namely 2010-2011 and 2013-2014. He contends however that he had raised no objection to the assessment for the other three years and therefore the respondent had no basis to reassess them for those years.
The respondent’s evidence and contentions
In view of the applicant’s concession that his application for review now relates only to the three years 2009-2010, 2011-2012 and 2012-2013 Ms McCarthy’s oral evidence was confined largely to the basis of her understanding that his objection of 24 July 2021 related to all years from June 2010.[9] It was on this basis she reassessed the lessees’ eligibility for the discounted rate for each financial year since then.
[9] Exhibit R1, witness statement of Evelyn McCarthy dated 3 May 2022
Ms McCarthy’s evidence as to the point of contention was:
(a)She took the applicant’s email request of 24 July 2021 to be a request for an out of time objection to review eligibility to the discounted rate for all years since 2010.
(b)She also had regard to the contents of his application XD 622/2021, in particular paragraph 26 which contended under the heading “Review of the commissioner’s decision” that “Between 2009 and 2016, the applicants were eligible for the discounted rate of 2% under the old scheme” and in the orders sought in paragraph 29 at (c) that the “applicant was wrongly charged standard rent rate in 2010, 2013 when [he] was eligible [for the] discounted rent rate”.[10]
(c)The content of email exchanges between the applicant and the Commissioner’s office over a lengthy period, and specifically the contents of the email chain of 25 January to 28 September 2018, added to her belief that a full review was being requested.[11]
[10] Tribunal documents filed 6 December 2021, page 112
[11] Tendered as R3
Ms McCarthy also gave evidence relevant to the matter in issue detailing the reasons for her assessment of eligibility and her calculations of land rent payable which were a useful supplement to the calculations provided in the respondent’s letter of 4 March 2022.[12]
The matter at issue
[12] Exhibit R1, witness statement of Evelyn McCarthy dated 3 May 2022, annexure D
The matter at issue is the correctness of the respondent’s decision to reassess the lessees’ eligibility for the discounted rate for each financial year since June 2010. This brings into play the scope of the Commissioner’s power under section 9 of the Tax Act for reassessment.
Section 9(3) prevents the Commissioner from reassessing the applicant and his wife’s land rent liability given the reassessment (in August 2021) is more than five years after the initial assessment of their liability. However, this is subject to two possible exceptions:
(i) the purpose of the reassessment is to give effect to a decision on an objection or appeal as to the initial assessment; or
(ii) at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the liability under the relevant tax law of the person in relation to whom the assessment or reassessment was made were not fully and truly disclosed to the commissioner.
As to the first exception, the applicant says it should not apply. He contends that in all his exchanges with the respondent he only raised his and his wife’s entitlement to the discounted rate for the two years 2010-2011 and 2013-2014. He contends that remained his position in his request to lodge an objection out of time in his email of 24 July 2021. He says he raised no objection to the assessment for the other three years 2009-2010, 2011-2012 and 2012-2013. Ms McCarthy who conducted the reassessment on behalf of the respondent said she took the email request of 21 July 2021 to be an objection to all the relevant years from 2009. She says she was supported in this view by what the applicant had contended in his civil application XD 622/2021 (at that time the only application filed by the applicant), namely that between 2009 and 2016 they were eligible for the discounted rate of 2%. Further Ms McCarthy also reviewed the lengthy email exchanges between the applicant and the Commissioner, and referred in particular to the email exchanges in 2018 drawn from the subpoenaed material in support of her belief that a full review was requested.
Looking at the three relevant document sets on which the Commissioner based its view that objection had been lodged for all years since 2009 such that a global reassessment was requested raises some issues with the respondent’s position:
(a)The applicant’s email of 24 July 2021 is somewhat tortious and, with respect to the applicant, poorly formatted and poorly expressed in parts. Doing the best it can the Tribunal can decipher that he is referring to certain (prior) discounted rate applications. Some of these he has copies of “but they are not the ones in question”.[13] He has been endeavouring “after many request to get the document the decision of declining discounted application for 2010 [meaning 2010-2011] and 2013 [meaning 2013-2014] was based on…”.[14] He then provides some reversed engineered gross income estimates “proving I was eligible for [the] discounted rate for those years and did not received [the] rate discount particularly for 2010 and 2013”.[15] He then makes a specific request (amongst others) “I [am] kindly requesting the commissioner to allow me to lodge an objection out of time…”[16]. I appreciate the Commissioner’s representative would have been challenged by what the applicant was requesting, but I am not satisfied that the email is an objection with respect to all years since 2009. The Commissioner’s initial response in its letter via email to the applicant and his wife dated 17 August 2021 seems to accept this, saying under the heading “Objection”, “this Office will accept a late objection in respect of the 2010-2011 and 2013-2014 financial years. A response will be provided shortly in respect of those objections.”[17]
(b)The applicant seeks broad relief in his civil application XD 622/2021 for loss and distress he says he and his wife have suffered from their involvement in the scheme. That need not concern the Tribunal here. However, it seems reasonable for the respondent to have had regard to the contents of that application in determining the scope of her reassessment powers and the nature of the objection the applicant was raising. The applicant certainly contends he and his wife were eligible for the discounted rate of 2% between 2009 and 2016.[18] But the relief he seeks (separate from his wider claims for loss and damage) is much narrower – that they were wrongly charged the standard 4% rent rate in 2010-2011 and 2013-2014.[19]
(c)The email exchanges between the applicant and the Commissioner are lengthy and at times also tortious. I have reviewed these and had regard in particular to the contents of the email chain of 25 January to 28 September 2018 as in Exhibit R3 which Ms McCarthy says she paid particular attention to in reaching her determination that the applicant has lodged an objection to all assessments of land rent since 2009. With respect to her I see nothing in that particular email chain that supports me in the view that the respondent’s assumption was correct.
(d)I find that the exception provided for in section 9(3)(i) is not made out.
[13] Tribunal document filed 6 December 2021, page 10, at [3]
[14] Tribunal document filed 6 December 2021, page 10, at [5]
[15] Tribunal document filed 6 December 2021, page 11, at [9]
[16] Tribunal document filed 6 December 2021, page 11
[17] Tribunal documents filed 6 December 2021, pages 12-16, at [15]
[18] Tribunal documents filed 6 December 2021, page 112, at [26]
[19] Tribunal documents filed 6 December 2021, pages 112, at [29(e)]
As to the second exception, the applicant also says it should not apply. He contends that he and his wife had provided the respondent with full disclosure of all the facts and circumstances affecting their liability for land rent at the time each initial assessment was done. Looking at the three years (2009-10, 2011-12 and 2012-13) in which the respondent reassessed and then increased their liability, the respondent has no record of a discounted rate application being received.[20] The applicant’s evidence is that he did submit applications by hand in those years but has no copies. Either way there is no evidence that the applicant and his wife have made disclosure, full or otherwise. As a comparison, in one of the years where an application is available (2015-2016)[21] the applicant and his wife only provide their income tax notice assessments, rather than the required income tax returns, though this was accepted as sufficient and they were assessed as eligible for the discounted rate.
[20] Respondent’s letter of 17 August 2021, page 4
[21] Tribunal documents filed 6 December 2021, pages 44-51
However, it is when the Commissioner conducts its reassessment of all year since 2009 that all the facts and circumstances affecting the liability come to light when the Commissioner obtained full income tax return information from the ATO. Only from this can a proper assessment be made of the applicant and his wife’s “total income” under section 9A of the LR Act as DI2015-224 provides.[22] The respondent says the import of section 9(3)(ii)’s full disclosure requirement is not to assert fraud or intent to deceive on the part of the applicant and his wife but simply that all of the necessary facts and circumstances to make a proper initial assessment were found not to be disclosed. The respondent contends in the relevant three years there was no disclosure simply because discounted rate applications were not lodged and the lessees were incorrectly given the benefit of the discounted rate by administrative oversight.
[22] It is interesting to note that the Commissioner equates “taxable income” as assessed by the ATO to “total income” under section 9A in its determination
Given the lack of full disclosure a reassessment of liability for the three years in question is clearly warranted.
I find that the exception provided for in section 9(3)(ii) is made out. The Commissioner was not precluded from reassessing the applicant and his wife’s liability for the years 2009-10, 2011-12 and 2012-13 which reassessment increased their liability.
Tribunal’s conclusions on the matter at issue
The Tribunal finds that the Commissioner acted within its powers under section 9 of the Tax Act in reassessing the applicant and his wife’s liability for land rent for all years from 2009 in its reassessment of 17 August 2021. That reassessment imposed additional land rent payable of $10,320.13.[23]
[23] Tribunal documents filed 6 December 2021, pages 12-16, table on page 14
The Tribunal accepts the calculation of the amount of land rent payable by the applicant and his wife as detailed in the Commissioner’s letter of 4 March 2022 as correct. In that letter the Commissioner identified one mistake in its 17 August 2021 reassessment calculations. The Commissioner recalculated the amount payable for the years 2019-2020 ($10,766 in lieu of $13,805) and 2020-2021 ($10,887 in lieu of $13,961) such that a credit of $6,113.43 is due to the applicant against the additional land rent payable.
This mistake in calculation was not apparent to the respondent in its notice of 15 October 2021 which is the reviewable decision. As such, as the respondent concedes, the Tribunal should reflect the variation in its order.
The applicant and his wife entered into the scheme attracted by the promise that it was an affordable home ownership plan. It has not proven so for them. Their income has been such that they were seldom eligible for the discounted land rent rate at a time of comparatively low commercial interest rates. They instead have been required to pay 4% annually of a steeply escalating unimproved land value at a time when mortgage rates they might have paid in a normal house and land purchase were much lower. It is difficult not to feel sympathy for them.
Decision
The the reviewable decision is varied such that land rent payable:
(a)for 2019-20 is $10,766; and
(b)for 2020-21 is $10,887.
The decision is otherwise confirmed.
………………………………..
Senior Member Prof T Foley
| Date(s) of hearing: | 24 May 2022 |
| Applicant: | In person |
| Counsel for the Respondent: | K Weir |
| Solicitors for the Respondent: | ACT Government Solicitor |
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