Murphy v Chief Commissioner of State Revenue
[2012] NSWADT 221
•30 October 2012
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Murphy v Chief Commissioner of State Revenue [2012] NSWADT 221 Hearing dates: 25 October 2012 Decision date: 30 October 2012 Jurisdiction: Revenue Division Before: Professor G Walker, Judicial Member Decision: The decision under review is affirmed.
Catchwords: Liability for land tax - hardship -costs in tribunals Legislation Cited: Land Tax Management Act 1956 (NSW) Cases Cited: Shah v Chief Commissioner of State Revenue [2010] NSWADT 184
Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222
York v Chief Commissioner of State Revenue [2003] NSWADT 119
Kumaran v Chief Commissioner of Sate Revenue [2006] NSWADT 26
Firestar Enterprises Pty Ltd and Town of Vincent [2007] 100
Re Cooper and Boroondara CC [2001 VCAT 2429
Bilek and Vata Investments Pty Ltd [2005] WASAT 153.Category: Principal judgment Parties: Katrina Murphy (Applicant in person)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
Henry El-Hage (Respondent)
Katrina Murphy (Applicant in person, by telephone)
Crown Solicitor's Office (Respondent)
File Number(s): 126056
REASONS FOR DECISION
Background and facts
This application seeks a review of a decision of the Chief Commissioner of State Revenue under the Land Tax Management Act 1956 (NSW) ( LTM Act) requiring her to pay land tax for the 2012 land tax year with respect to land at 41 Parr Avenue, North Curl Curl, New South Wales (the property).
The applicant had owned the property since 2005, and before that jointly with her former husband, since 1998. The property became liable to land tax when the applicant moved to Queensland in 2003 and subsequently purchased a new property in 2004.
The property was leased for several years and occupied by tenants until 23 December 2011, following service of notice by the applicant in September 2011 when she commenced the sale process. The applicant entered into a contract of sale of the property on 8 February 2012. The property was vacant from 23 December 2011 onwards.
On 20 January 2012, the Commissioner issued a notice of land tax assessment to the applicant, requiring her to pay land tax in the amount of $8,004.00 with respect to the property for the 2012 tax year (Exhibit R1).
During February and March 2012, there were exchanges of e-mails between the applicant and officers of the Office of State Revenue (OSR) relating to the assessment. The applicant indicated, and it is not disputed, that she was suffering financial hardship and could not pay the amount of land tax due under the assessment. She also requested that the Commissioner apportion the amount owing for the 2012 tax year because the sale of the property was due to be settled in March 2012. She contended that it was unfair for her to be required to pay the whole of the land tax amount for 2012 when she would own the property for only 25 percent of the calendar year.
OSR officers explained that under the LTM Act, land tax is calculated prospectively on the basis of land owned as at 31 December of the previous year. The legislation makes no provision for the levying of land tax on a pro-rata basis.
On 9 March 2012, the applicant lodged an objection to the assessment on the basis that she would cease to be the owner of the property after 21 March 2012, when the sale was expected to be settled, and should therefore not be required to pay land tax for the whole year. She also sought an exemption based on financial hardship.
The Commissioner disallowed the objection on 23 March 2012. In his determination he explained the basis on which land tax is levied and pointed out that there is no provision in the LTM Act for the pro-rata calculation of land tax in the event of an acquisition and disposal of land during the year. He went on to point out that any division of land tax on the sale of land is normally dealt with between the legal representatives of the vendor and purchaser at the time of sale, and that the OSR takes no part in such arrangements. The determination then drew the applicant's attention to the functions of the Hardship Review Board established under Division 5 of Part 10 of the TA Act and referred her to an attached fact sheet dealing with that body.
The sale of the property was settled on 30 March 2012 on receipt of consideration in the amount of $1,180,000. The applicant filed her application for review in this tribunal on 22 May 2012. Under s 100 (3) of the TA Act, the onus is on the applicant to prove her case.
Applicable legislation
Section 7 of the LTM Act is the provision imposing tax on the taxable value of all land situated in New South Wales that is owned by the taxpayer, other than land that is exempt under the Act. No exemption is applicable in this case as the property was vacant from 23 December 2011. Section 8 specifies that land tax is to be "charged on land as owned at midnight" on the 31 December immediately preceding the year for which the land tax is levied. In this case the relevant date is thus 31 December 2011. Section 9 defines the "taxable value" of the land, which is not in issue in this case.
The applicant relies on s 47 of the LTM Act:
47 Land tax to be first charge on land
(1) Land tax shall until payment be a first charge upon the land taxed in priority over all other encumbrances whatever, and where the land taxed comprises two or more parcels the land tax payable on the land taxed shall be a first charge on each and every such parcel and notwithstanding any disposition of the land or any part thereof the land or part shall continue to be liable in the hands of any purchaser or holder for the payment of the land tax so long as it remains unpaid.
(1A) The Chief Commissioner:
(a) on the application of any person, and
(b) on payment of a fee determined by the Chief Commissioner (or the making of arrangements satisfactory to the Chief Commissioner for its payment),
is to issue a certificate showing if there is any land tax charged on land the subject of the application.
The Chief Commissioner may include in the certificate the land value of the land and average value of the land in relation to a specified land tax year.
(1AA) In relation to an application for a certificate:
(a) the application is to be in a form approved by the Chief Commissioner, and
(b) a separate application must be made for each parcel of land that is separately valued under the Valuation of Land Act1916 or otherwise separately valued for the purposes of land tax assessment, and
(c) the Chief Commissioner may require further information or evidence with respect to the land concerned, or to any other land owned by the owner of that land, before issuing the certificate.
(1B) The application fee for a certificate is to be paid in such manner as may be approved by the Chief Commissioner.
(1BA) The Chief Commissioner may determine:
(a) the means by which a certificate may be issued, including electronically, and
(b) the form of a certificate, including as a document or in an electronic form or a form that may be produced from an electronic message.
(1C) A certificate issued by the Chief Commissioner under this section is conclusive evidence of the matter certified against the Chief Commissioner and in favour of any person (whether or not the person is the person to whom the certificate was issued) except a person who:
(a) had notice, when the certificate was issued, of land tax charged on the land that the certificate failed to disclose, or
(b) was an owner of the land (other than a genuine purchaser for value who has not obtained possession of the land) when the certificate was issued.
(1D) If a certificate issued under this section ( "the original certificate") is conclusive evidence in favour of a person, the person is entitled, on application and payment of the prescribed fee under subsection (1A), to be issued with a certificate that is to the same effect as the original certificate and such a certificate is to be regarded as having been issued when the original certificate was issued.
(2) The Chief Commissioner may release the land taxed, or any part of the land, from the charge imposed by subsection (1):
(a) on payment of an amount the Chief Commissioner estimates to be not less than the proportion of land tax referable to the land or part, or
(b) without payment of land tax if:
(i) the Chief Commissioner is satisfied that there is no significant risk that the land tax for which the charge is imposed will not be paid, and
(ii) a person who is or may become liable to pay the land tax is not in arrears in payment of any land tax.
(2A) Where any land sold under section 713 of the Local Government Act 1993 is liable to a charge under subsection (1), the Chief Commissioner may release the land from the charge on payment of that part of the proceeds of sale under sections 718 and 719 of that Act that is available to pay the land tax in respect of the land.
(3) The provisions of this section have effect despite anything contained in:
(a) section 34 or any other provision of this Act, or
(b) section 42 of the Real Property Act1900 .
(4) Subsection (1) does not apply to land to which section 21A (Company title units taken to be strata lots) or section 21C (Liability of lessees of land owned by Crown or council) applies.
The applicant also relied on s 106B of the TA Act:
106B Waiver of tax
(1) The Hardship Review Board may, if authorised by a taxation law to do so, waive the payment of tax, either wholly or in part, if it is satisfied that:
(a) the person liable to pay it is in such circumstances that the exaction of the full amount of tax would result in serious hardship for the person or the person's dependants, or
(b) the person liable to pay it has died and that person's dependants are in such circumstances that the exaction of the full amount of tax would result in serious hardship for them.
(2) The Chief Commissioner may exercise the functions of the Hardship Review Board under this section if the amount of the unpaid tax is less than $2,000 in any particular case for any financial year.
(3) In this section, "tax" includes:
(a) any amount payable to the Chief Commissioner under a taxation law in relation to tax, including any interest and penalty tax under Part 5, and
(b) any costs and expenses incurred in relation to the recovery of the tax or any other amount that the Chief Commissioner is entitled to recover from any such person.
Section 50 of the LTM Act was also relevant. It provides that the Hardship Review Board constituted under the TA Act may exercise its functions in relation to land tax.
Applicant's submissions
In her written submissions and also at the hearing, the applicant argued that the LTM Act is outdated and unreasonable and should incorporate a fairer system for allowing a pro-rata calculation of land tax with respect to property. Further, she submitted, the Act does provide for apportionment of the 2012 liability in s 47(2A) as it empowers the Commissioner to reduce the land tax liability for the 2012 tax year by reference to the length of ownership of the property during 2012. In any event, the land tax payable with respect to the property should be waived in accordance with the hardship provisions in s 50 of the LTM Act and s 106B of the TA Act. She had applied to the Hardship Review Board for a waiver and refund of a part of the land tax payable with respect to 2012, on the basis of hardship. The board had informed her that it would deal with her application when the outcome of the present proceedings was known, but she also understood that this tribunal has jurisdiction to way of land tax by reason of hardship.
In relation to the proposition that land tax liability is frequently apportioned between vendor and purchaser on settlement pursuant to a contractual provision, the applicant maintained that the conveyancer who had acted for her on the sale had never raised with her the question of apportionment. She had not herself read the contract of sale and did not know whether it made any provision for apportionment. Once the contract had been signed on the basis of an agreed price, there was no possibility of apportioning the land tax with the purchaser.
The applicant acknowledged that the Commissioner had exercised his powers under s 47(2)(b) to release the statutory charge over the land so as to enable settlement to proceed. She had not at that time made any commitment to paying the balance outstanding, but funds had been set aside to meet the liability. She did not dispute that most of the amount of land tax owing on the property had been paid before settlement of the sale on 30 March 2012. The balance of $6413.19 was later recovered by garnisheeing certain funds held on trust by the real estate agency that had acted on the sale, as the applicant had not paid the full amount before settlement.
Consideration
The material facts of this case are not in dispute. The applicant's essential position is that the LTM Act does provide for apportionment of land tax liability on the basis of the length of time the property has been owned during the tax year, and that if it does not, it should do so. Further, the Commissioner should waive a portion of the liability imposed because of her financially difficult circumstances.
The LTM Act does not, however, empower the Commissioner to alter the applicant's liability in circumstances where no exemption applies. Further, the Act does not provide for a pro-rata reduction of the applicant's land tax liability on the basis of the length of ownership of the property during 2012 or any other year, as the tribunal stated in Shah v Chief Commissioner of State Revenue [2010] NSWADT 184 at [16]:
[T]here is no such provision in the Act to allow land tax to be calculated on any pro-rata ownership basis. Land tax was levied pursuant to sections 7, 8 and 9 of the Act on the basis of ownership of the relevant land on 31 December 2009 for the 2010 land tax year.
To the same effect are comments in Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222, [27]:
I note there is no general discretion in the LTMA allowing the Chief Commissioner to take into account other special circumstances that may apply in respect of a landowner which are not the subject of an exemption under the Act.
As regards the contention that s 47 affects the quantum of liability for land tax, it is plain that s 47(1) does no more than make the amount of land tax payable and owing a first charge on the property. Before the balance had been recovered, the Commissioner issued a certificate to the conveyancer acting for the purchaser of the property dated 9 June 2012 releasing the land tax as a charge on the property, pursuant to s 47(2)(b). That subsection empowers the Commissioner to release the land taxed from " the charge imposed by subsection (1)". It does not release the land from liability to the land tax assessed or any part of it. The applicant appears to have been misled by the fact that s 8 provides that "Land tax shall be charged on land as owned at midnight .... ". From s 47(2) it is clear that the Commissioner's power to release relates to the charge imposed by subsection (1), not to liability. Thus the word "charge" is being used to denote liability in one section, and security in the other. Confusing the two meanings is not a mistake most lawyers would make, but the applicant was acting without the benefit of legal advice.
Finally, the applicant seeks to rely on s 50 of the LTM Act and s106B of the TA Act. She states that it is her understanding that the tribunal has jurisdiction to exercise powers in the TA Act and may instruct the Commissioner to waive land tax on hardship grounds.
It is clear, however, that this tribunal has no jurisdiction to exercise the powers conferred by Part 10 Division 5 of the TA Act, and therefore cannot waive land tax on hardship grounds: Shah v Chief Commissioner of StateRevenue [2010] NSWADT 184 at [21]; York v Chief Commissioner of StateRevenue [2003] NSWADT 119 at [10]; Kumaran v Chief Commissioner ofState Revenue [2006] NSWADT 269 at [10]. Questions of hardship are a matter falling within the powers of the Hardship Review Board, and indeed the applicant has already made an application to that body.
Costs
The respondent made a contingent application for costs, pointing out that it had made an offer of compromise to the applicant by letter dated 3 October 2012 (Exhibit R2). It had been a genuine offer and the applicant's rejection of it was relevant to costs. The Commissioner had previously fully explained in writing to the applicant how the legislation works. It had been forced to undertake a great deal of preparation and had made the offer to avoid incurring further costs for the parties and the tribunal.
The applicant replied that she did not view the letter as a genuine attempt to compromise the matter. The respondent had said she had no legal basis for her claim but she believed that she did. She thought it unfair that they could seek to charge her for costs that they had themselves incurred and which she could not in any event afford to pay. The letter of 3 October seemed to her more like a threat than an offer of compromise. She had previously told the tribunal that she found that the respondent's letters threatening and upsetting.
The tribunal has the power under s 88 of the ADT Act to award costs if it is satisfied that it is fair to do so having regard to certain criteria listed in subsection (1A), which include whether a party has made a claim that has no tenable basis in fact or law.
The respondent's letter of 3 October appears to accord with the principles laid down in Calderbank v Calderbank (1975) All ER 333. If it gave the applicant the impression of being in the nature of a threat, I think that impression may have resulted from the respondent's endeavours to comply with Calderbank principles by expressing the offer in clear and precise terms.
The Victorian VCAT, which has a largely similar cost regime, has held that great care should be taken in exercising a power to award costs, so as to ensure that the tribunal remains readily accessible to the public at relatively low cost, particularly having regard to the tribunal's obligation to act fairly and to conduct proceedings with as little formality and technicality as the applicable legislation permits (Re Cooper and Borooondara CC [2001] VCAT 2429 at [34]. Those obligations are similar to the principles enunciated in s 3 of the ADT Act. The award of costs in proceedings involving less affluent members of the community might effectively deny access to the justice system: Bilek and Bata Investments Pty Ltd [2005] WASAT 153 at [15]. If there has been no unreasonable conduct by the party, costs will not generally be awarded: Firestar Enterprises Pty Ltd and Town of Vincent [2007] WASAT 100 at [15].
While the present proceedings by the applicant had few real prospects of success, I think the applicant's conduct resulted from misunderstandings caused by her inability to afford professional legal advice rather than from unreasonableness or vexatiousness. Noting that the power in s 88 incorporates a discretionary element implied by the use of the word "may", I think it inappropriate to make a costs order in this case.
For the reasons given above, the decision under review must be affirmed.
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Decision last updated: 30 October 2012
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