NINNESS v COMMISSIONER FOR ACT REVENUE (Administrative Review)
[2016] ACAT 17
•17 December 2015
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
NINNESS v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2016] ACAT 17
AT 58/2015 & AT 59/2015
Catchwords: ADMINISTRATIVE REVIEW – land tax – penalty tax – taxpayer has obligation to notify commissioner – taxpayer did not exercise reasonable care and did not have reasonable excuse
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 7, 68
Land Tax Act 2004 s 9
Taxation Administration Act 1999 ss 14, 30, 31, 37, 104
Cases cited: James v Commissioner for ACT Revenue [2013] ACAT 32
Tribunal: Senior Member G Lunney SC
Date of Orders: 17 December 2015
Date of Reasons for Decision: 9 March 2016
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL) AT 58/2015
AT 59/2015
BETWEEN:
JAMIE THOMAS NINNESS
Applicant
AT 58/2015
KELLIE MAREE NINNESS
Applicant
AT 59/2015
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Senior Member G Lunney SC
DATE:17 December 2015
ORDER
The Tribunal Orders:
The decision of 30 July 2015 is confirmed.
………signed ………………..
Senior Member G Lunney SC
REASONS FOR DECISION
This is an application for a review of a decision relating to land tax which has been brought in two applications by the owners of a property in O’Malley. The decision itself is dated 30 July 2015 and a copy of it was attached to the application. It is addressed to the two applicants.
The decision was an internal review of a primary assessment which had been issued by the respondent on 23 April 2015, against which the applicants had lodged an objection. The assessment was of land tax; a fixed charge; penalty tax at 25%; and interest. The objection was disallowed. A reasons statement was attached to the notice of decision.
The applicants had purchased a residence in the Canberra suburb of O’Malley in June 2012, and it has been rented or available for rent ever since. No land tax had been paid, and it is not disputed that the assessed amount of land tax is correct and that it had not been paid. In dispute is the penalty tax that has been levied at 25%.
The liability to land tax arises under the Land Tax Act 2004 (LTA). Section 9 provides that land tax is payable on rented residential land. Section 14 requires the owner to inform the commissioner of a change in ownership not later than 30 days after the change.
The Taxation Administration Act 1999 (TAA) is also relevant. Sections 30 and 31 regulate penalty tax. Section 30(1) provides that a taxpayer is liable to pay penalty tax where there is a tax default as well as the unpaid tax. Section 31(1) provides that the rate is 25% of the amount of unpaid tax. However a later sub-section, 31(2), provides that the rate is 50% where the default was caused wholly or partly by the taxpayer failing to ‘take reasonable care to fulfil the taxpayer’s obligation under a tax law’.
Sub-section 31(5) provides for an even higher rate in certain circumstances involving intentional disregard of a tax law.
Sub-section 31(6) provides that no tax is payable where the commissioner is satisfied:
(a) the taxpayer took reasonable care to comply with the tax law; or
(b)the default happened solely because of circumstances beyond the taxpayer’s control not amounting to financial incapacity.
A later section gives the Commissioner a discretion to remit all or part of penalty tax. I set out the section in full.
37 Remission of penalty tax
1The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that—
(a) either—
(i) the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or
(ii) the circumstances that resulted in the liability for penalty tax were exceptional; and
(b) it would be fair and reasonable to remit all or part of the penalty tax.
Note The commissioner’s decision to refuse to remit penalty tax payable by a person is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the person (see s 107B).
The Applicants’ Submissions
There were two applications one each from the two owners of the property. It was directed that the matters be heard together and the applicants conducted the proceedings in concert.
Section 14 of the Land Tax Act 2004 - Notification
The applicants submitted that there had been notification of the rental of the property. This submission took two forms.
The first was that a facsimile had been sent to the respondent on 13 August 2012. The evidence indicated that the staff of the respondent’s office had conducted a search, and no facsimile was found. This circumstance was explained by the tender of a facsimile transmission document showing that the transmission had failed because the number was busy. There was no evidence that the facsimile had been resent.
The second was that rental bonds had been lodged with the Registrar General’s Office, and this was common ground. The submission could be interpreted as asserting that the Bond Office was the agent of the respondent’s office or that in some (unspecified) way the Commissioner’s office gained knowledge of, or should have gained knowledge of the fact of rental of the property. The respondent pointed out that the two offices are separate agencies for the purpose of information sharing under the Privacy Act 1988, and that there was no evidence of agency. He relied on James v Commissioner for ACT Revenue [2013] ACAT 32. This was a decision of Member Daniel.
The facts of the cases are slightly different since the document involved was the registration of a lease. In neither case was there any evidence that there had been any communication between the two offices for any relevant purpose, nor that that there was any even possibility that in the normal course of the affairs of the two offices the contents of any document lodged with one would come to the attention of the other let alone that there would be any satisfaction of the formal requirements of one office by information received at the office of the other. One matter referred to by Member Daniel was that there was no evidence of the intention of the applicant in her case to achieve a dual purpose, ie the satisfaction of the requirements of both agencies at the one time. In my view this approach exposes the fallacy of the submission advanced by the applicants in these proceedings since there was no evidence that they intended to notify the Commissioner of the rental of the property by lodging the rental bond as required by the Residential Tenancies Act 1997.
I reject the submission of the applicants that there had been notification pursuant to section 14 of the TAA, and find that there had been no such notification.
Section 31(6)(a) of the Tax Administration Act 1999 - Reasonable Care to Comply
The applicants submitted that sub-section 31(6)(a) applied because they had taken reasonable care to comply with the tax law, and that consequently penalty tax was not payable in relation to the default. They pointed to the failed fax transmission in support of this submission. I find that the steps they took could not be regarded as reasonable since they either did not ensure that the transmission had been successful, or that they failed to resend upon finding that the transmission had failed. The failed transmission notice came from their possession.
They also said that after notification of their correct address, the respondent did not resend correspondence to the correct address. I find that there was no evidentiary support for the proposition advanced that the respondent should have resent the material nor that it was reasonable for them to expect him to do so spontaneously.
In further advancement of this argument, they submitted that they had made full disclosure of the rented condition of the premises and that the ACT Government should have connected systems which would have allowed the Commissioner to have become aware of the rented nature of the property internally. There were some variations on this theme. This assertion was not supported by evidence. Whatever disclosure that they made was for another purpose and did not include the office that mattered: that of the respondent.
I find that they have not demonstrated having taken effective positive steps to ensure that they had complied with the relevant provisions of the tax law for the purposes of section 36(1)(a).
Section 36(1)(b) of the Tax Administration Act 1999 - Circumstances Beyond Control
This submission appears to be based on the delivery of a letter of 22 August 2012 from the respondent’s office to the subject property after the rental of the property and at a time when the applicants were resident in NSW. The submission apparently continues that had the letter been sent to the correct address or had been resent later they would have complied with the requirements of the Act. It is difficult to allocate any force to this submission, since the attempt to fax the land tax notification earlier that month demonstrates the applicant’s knowledge of their obligations, so that from a causation standpoint would a further reminder of their obligations made to them on 22 August 2012 have effected any change? The applicants have failed to establish to my satisfaction that that was the case.
Section 37 of the Tax Administration Act 1999 - Exceptional Circumstances
The applicants submit that at one stage between July 2013 and January 2014 unhappy differences arose in their relationship leading to separation and consequent interference with their capacity to efficiently manage their business affairs. Without turning to the many cases dealing with this expression: ‘exceptional circumstances’, marital difficulties of the extent described in evidence by the applicants do not qualify as such.
Respondent’s Final Submissions
The Notice of Assessment issued to the two applicants was dated 23 April 2015 and signed by a delegate of the Commissioner. The rate of penalty tax used in the assessment was 25%, (S 31(1) TAA). The reason for use of that rate was explained by the delegate in the assessment on the second page as follows.
Under section 31(2) of the Taxation Administration Act 1999 the amount of penalty tax payable is 50%. However, in this case, the Commissioner considers it fair and reasonable to remit penalty tax to 25% under section 37. Therefore, penalty tax at the rate of 25% has been imposed for the period 1 October 2012 to 31 March 2015.
The respondent in its outline of final submissions submitted that the Tribunal should examine the rate of penalty tax imposed and increase it to 50% because ‘the Tribunal has all the powers of the original decision maker’. While this submission is true as it stands, the above quotation indicates that a discretion to remit was exercised in issuing the notices of assessment. This is a different decision to that being examined in these proceedings
The decisions being examined in these proceedings are the decisions to disallow the objection. The only decisions available to the decision maker, and now to the Tribunal, under section 104 of the TAA are to allow the objection in whole or in part, or to disallow the objections. The decision maker on objection did not have the power to reverse the primary decision to remit penalty tax and re-instate a higher rate of tax. I reproduce section 104 below.
104 Determination of objection
(1) The commissioner must consider an objection and either allow the objection in whole or in part or disallow the objection.
(2) The commissioner must take such steps as are necessary (for example, by delegating the functions given by this section) to ensure that the individual who considers the objection is not the individual who made the assessment or decision against which the objection was lodged.
Note The commissioner’s decision in relation to an objection is a reviewable decision (see s 107A), and the commissioner must give a reviewable decision notice to the taxpayer (see s 108).
However, even if that were not the case, there are a couple of things that need to be said about the submission made. First, it deals with a discretion, and there was little evidence as to why the Commissioner made the decision, and the issue of rate of penalty tax was not the subject of specific evidence at the hearing. Apart from argument raised in the written submissions, there was no evidence from the Commissioner to indicate that his decision had miscarried in some way or that a decision under either of the higher rates was preferable to the decision that had been made and which was the subject of review.
Secondly it was not an issue that received attention in the preparation of the case by the parties. The respondent’s statement of facts and contentions contains a summary of the issues said to be involved in the case. Increasing the rate of penalty tax is not mentioned. Nor is the issue mentioned elsewhere in the documents that precede the hearing. The applicants’ application for review related to the threshold question of whether penalty tax should be assessed, not the rate at which it was ultimately assessed.
No formal application was made to consider the submission that was put at the end of the case, and the applicants had no opportunity to object or otherwise to that course. Matters of fairness and natural justice apply, as is referred to in Section 7 of the ACT Civil and Administrative Tribunal Act 2008, which I reproduce below.
7Principles applying to Act
In exercising its functions under this Act, the tribunal must—
(a)ensure the procedures of the tribunal are as simple, quick, inexpensive and informal as is consistent with achieving justice; and
(b)observe natural justice and procedural fairness.
For the reasons given above, it is inappropriate to alter the rate of penalty tax imposed.
The decision made should be affirmed without alteration of the rate of calculation of the penalty tax.
Order
The decision of 30 July 2015 is confirmed.
………………………………..
Senior Member G Lunney SC
HEARING DETAILS
FILE NUMBER: | AT 58/2015 AT 59/2015 |
PARTIES, APPLICANT: | Jamie and Kellie Ninness |
PARTIES, RESPONDENT: | Commissioner for ACT Revenue |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | Ms A Irving |
SOLICITORS FOR APPLICANT | N/A |
SOLICITORS FOR RESPONDENT | Ms G Butler, ACT Government Solicitor |
TRIBUNAL MEMBERS: | Mr G Lunney SC |
DATES OF HEARING: | 17 December 2015 |
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