Monaro Invests Pty Ltd as trustee for the Troost Family Trust v Chief Commissioner of State Revenue

[2003] NSWADT 234

CITATION:	Monaro Invests Pty Ltd as trustee for the Troost Family Trust v Chief Commissioner of State Revenue [2003] NSWADT 234
DIVISION:	Revenue Division
PARTIES:	APPLICANT Monara Invests Pty Ltd as Trustee for the Troost Family Trust RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	036006
HEARING DATES:	15/08/2003
SUBMISSIONS CLOSED:	08/15/2003
DATE OF DECISION:	10/21/2003
BEFORE:	Verick A - Judicial Member
APPLICATION:	Taxation Administration Act - liability to pay interest
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	The Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 Olah v Chief Commissioner of State Revenue [2002] NSWADT 22 Moore v Chief Commissioner of State Revenue [2002] NSWADT 49
REPRESENTATION:	APPLICANT A Troost, director of the applicant RESPONDENT S Benjamin, agent
ORDERS:	That the interest on late lodgement of the land tax return at market rate was correctly included in the land tax assessment for 1999 to 2001 tax years.

Introduction and Background

1 The applicant in this matter seeks a review of an objection decision made by the respondent refusing to remit interest imposed at market rate for late lodgement of land tax return in respect of a property owned by the applicant and situated at Villawood in New South Wales (the Villawood property).

2 The question at issue is essentially whether the respondent should remit the whole or part of the interest included in the land tax assessment for land tax years 1999-2001 by exercising his powers found in s 25 of Division 1 of Part 5 of the Taxation Administration Act 1996 (the TA Act).

3 The applicant purchased the Villawood property in September 1998. Prior to purchase of this commercial property from the NSW State Railways, the applicant had occupied it for a number of years under a lease arrangement with the NSW State Railways.

4 The applicant lodged no land tax returns in respect of the Villawood property until 19 November 2001. The respondent issued land tax assessment for tax years 1999-2002 on 30 October 2002 and imposed interest both at market and premium rates but remitted the interest imposed at the premium rate when the assessment was made. The applicant should have lodged the relevant land tax return by 31 January 1999.

Relevant Legislative Provisions

5 Section 12(1) of the Land Tax Management Act, 1956 (the LTM Act) provides that the Chief Commissioner may, in accordance with orders published in the Gazette, require all persons or specified classes of persons to furnish land tax returns. The Chief Commissioner makes such Gazette notifications annually. In addition, s 12(1A) of the LTM Act provides that every person subject to such requirement shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year.

6 Section 72(1) of the LTM Act provides that a taxpayer, who fails or neglects to duly furnish any return when required by the LTM Act or the Chief Commissioner, is taken to have committed a “tax default” for purposes of Part 5 of the TA Act. Section 72(2) of the LTM Act provides, in relation to the “tax default”, that interest is payable but accrues on the amount of land tax assessable to the taxpayer commencing on the last day allowed for the furnishing of the return and ending on the day on which the return is finally furnished. Taxpayer is defined in s 3(1) of the LTM Act to mean any person chargeable with land tax. In the present matter the applicant had failed to duly furnish a return by the due date and as such is taken to have committed under s 72(1) of the LTM Act a “tax default” for the purposes of Part 5 of the TA Act.

7 Interest imposed under s 22 of the TA Act consists of two components – the market rate and the premium component. The variable market rate component is linked to the Treasury Note yield rounded to the second decimal place and the premium component rate is fixed by s 22(3) of the TA Act at 8 per cent per annum. The Chief Commissioner is allowed under s 25 of TA Act to remit either the market rate component or the premium rate component of interest, or both, by any amount in such circumstances, as the Chief Commissioner considers appropriate.

8 In the present matter, the respondent at the time of making the relevant assessment also remitted any interest that he was entitled to impose as a premium component for the tax default in question.

The Taxpayer’s case for remission of market rate interest

9 The applicant, in its objection, claims that it was not aware of any liability to land tax until their lender to refinance the purchase sought a certificate showing that all land tax had been paid. This request “prompted” their solicitor to lodge the land tax return in November 2001. The applicant had relied on the same accounting firm for some twenty-five years to ensure lodgement of returns for all taxes it was liable for. But the applicant’s accountants overlooked the lodgement of the relevant land tax return.

10 The applicant also relied in its objection on the following other matters:

(i) the land in question had been previously owned by a state government authority and not subject to any land tax

(ii) the land tax imposed was an unexpected and additional cost to its business

(iii) due to the large amount of land tax that was payable the applicant had to borrow to pay the tax and as such incurred interest

(iv) the applicant carries on a marginal business and the land area of the Villawood property is large and not income producing as it is used as a transport yard for the parking of its trucks and trailers. This is reflected in the purchase price being lower than its assessed value.

11 At hearing, Mr Troost, a director for the applicant, made further submissions. In particular, he informed the Tribunal that the applicant was currently experiencing difficulties with planning permission in dealing with the relevant council, which has indicated that the applicant may be illegally operating its business on the Villawood land and that it was likely that the applicant may have to cease operations on the land. In addition, Mr Troost drew attention to the difficulties the applicant has had with its lenders and that additional funds had to be found to meet the land tax assessment. He also confirmed that the accountants who had failed to advise the applicant of its obligation to lodge a land tax return had been sacked.

12 In addition to the above grounds, Mr Troost made a submission on the basis that the Tribunal should take into account the delay of some 11 months from the date of lodgement of the return and the issue of the assessment by the respondent.

The Chief Commissioner’s case

13 The respondent in his statement of reasons for decision for purposes of s 58 of the Administrative Decisions Tribunal Act 1997 (the ADT Act) has provided the following grounds to support the interest imposed at the market rate:

“In the present case, interest was imposed at both the premium and market rate at the time of assessment as the taxpayer failed to lodge a land tax return as required by s 12(1A) of the Land Tax Management Act.

Accordingly, it was determined that the imposition of late lodgement interest at the reduced market rate was appropriate, because to remit the interest in full would be inequitable to other taxpayers who did lodge their return by the due date.

The letter of objection dated 18 December 2002 advised that the taxpayer was unaware of land tax, and that the accountant had overlooked the lodgement of the land tax return. However the grounds of the objection only related to the interest imposed. There was no issue with the assessed land tax. An initial return was lodged on 19 November 2001. However, a tax default did occur by the failure to lodge a land tax return, the return should have been lodged by 28 February 1999.

The advice that the taxpayer was unaware of its obligations has been previously accepted by the Chief Commissioner and that is why the interest was remitted to market rate.

The client operates a business at the property, which is subject to land tax. The land was a very expensive acquisition. It cost $1,450,000. Its price should have alerted the accountant to the probability of land tax. Having regard to these facts it is not fair and equitable for the Chief Commissioner to treat it any differently to other clients.”

14 At the hearing Mr Benjamin for the respondent also added further grounds that supported the respondent position that this was not a case for any further remission of the interest imposed at the market rate. Mr Benjamin drew attention to advertisements in the relevant year placed by the respondent in the media, which clearly sent a message to land owners that there was an obligation to lodge return if they owned taxable properties. He also emphasised that the purchase of the property by the applicant was a large transaction and its advisers ought to have informed the applicant of its land tax obligations. As to the delay of some 11 months for an assessment to be issued, he confirmed that it made no difference to the amount of interest that was imposed in respect of the relevant tax default.

Reasons and decision – whether any remission of any market rate interest imposed is warranted

15 The LTM Act clearly places the onus of lodging a land tax return in each year with the owner. In the present matter, the applicant failed to lodge the land tax return by 28 February 1999 and it was only lodged on 19 November 2001. A tax default occurred in terms of the provisions found in s 72(1) of the LTM Act and the respondent was entitled to impose interest at both the market rate and the premium rate under sections 21 and 22 of the TA Act.

16 The respondent remitted the premium component at the time of making the assessment for the relevant years and the only issue before this Tribunal is whether the amount of interest at market rate should be remitted in full or some part of it be remitted.

17 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 and Olah v Chief Commissioner of State Revenue [2002] NSWADT 22, I have broadly, stated that it is necessary to show that the tax default was in some way contributed to by the Chief Commissioner to warrant any remission of interest imposed at market rate. The reason for the imposition of market rate, is as I have indicated in Moore v Chief Commissioner of State Revenue [2002] NSWADT 49, “ essentially to compensate the state for being denied the use of funds to which it is clearly entitled to at a particular point in time” and that it can only be remitted in “a very narrow category of situations, which arise entirely outside of the control of the taxpayer”.

18 The delay of some 11 months in issuing the assessment did not in any way affect the amount of interest imposed. The respondent imposed the interest for the period commencing on the last day allowed for furnishing the return and ending on the day on which the return was furnished. This is provided for in s 72(2(a)(i) of the LTM Act.

19 The applicant’s current planning difficulties are matters that are not relevant in any way to warrant any remission of the market rate interest. In the present matter, the applicant has failed to show any special circumstances that would justify remission of the interest imposed by the respondent at the market rate.

20 There was a clear statutory duty on the part of the applicant to lodge the land tax return on a particular date but the applicant simply failed to lodge the return on the due date. The respondent has correctly accepted that the applicant was not aware of its land tax obligations in making a full remission of the interest that he was entitled to impose at the premium rate. The circumstances, however, do not in my opinion warrant any remission of the market rate interest imposed in this matter.

21 The objection decision under review is accordingly affirmed.