OLNEY v COMMISSIONER FOR ACT REVENUE (Administrative Review)
[2019] ACAT 122
•24 December 2019
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
OLNEY v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2019] ACAT 122
AT 110/2018
Catchwords: ADMINISTRATIVE REVIEW – land tax – the meaning of ‘rented residential land’ – whether there was a residential tenancy agreement or an occupancy agreement – whether penalty tax should be imposed at a lesser rate or remitted – decision confirmed
Legislation cited: Land Tax Act 2004 ss 7, 12, 14, 19, 19A, 38
Legislation Act 2003 s 141
Taxation Administration Act 1999 ss 29AA, 30, 31, 37, 82, Dictionary, 107A, Schedule 1.2
Residential Tenancies Act 1997
Revenue Legislation Amendment Act 2019
Subordinate
Legislation cited: Land Tax Amendment Bill 2018
Cases cited: Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation [2008] FCAFC 54
Aslan v Murphy [1990] 1 WLR 766
BHP Billiton Direct Reduced Iron Pty Ltd (ACN 058 025 960) v Duffus, Deputy Commissioner of Taxation [2007] FCA 1528
Bruton v London and Quadrant Housing Trust [2000] 1 AC 406
Freeman Wiser v Havelock Housing Association Inc [2014] ACTSC 138
Hay v Commissioner for ACT Revenue [2014] ACAT 23
John Noble v Centacare [2003] ACTSC 37
Jokhan & Commissioner for ACT Revenue [2012] ACAT 15
Kesteven and Commissioner for ACT Revenue [1999] ACTAAT 36
Lewis v Bell [1985] 1 NSWLR 731
Noblett and Mansfield v Manley [1952] SASR 155
Radaich v Smith (1959) 101 CLR 209
Scott and Anor v Commissioner for ACT Revenue [2013] ACAT 73
Street v Mountfoud [1985] 2 All ER 289
Theron & Commissioner for ACT Revenue [2013] ACAT 33
Thompson v Ward (1871) LR 6 CP
Torrisi v Oliver [1951] VLR 380
List of
Texts/Papers cited: Revenue Legislation Amendment Bill 2019 – Revised Explanatory Statement
Tribunal: Member T Warwick
Date of Orders: 24 December 2019
Date of Reasons for Decision: 24 December 2019AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 110/2018
BETWEEN:
ROBERT OLNEY
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Member T Warwick
DATE: 24 December 2019
ORDER
The Tribunal orders that:
1. The decision under review is confirmed.
………………………………..
Member T Warwick
REASONS FOR DECISION
1. The applicant, Mr Robert Olney, is the owner of residential property in Chifley in the ACT.
2. The respondent is the Commissioner for ACT Revenue (Commissioner), who administers the land tax and related legislation in the ACT.
The investigation and assessments
3. On 7 February 2018, the Commissioner issued a notice pursuant to section 82 of the Taxation Administration Act 1999 (the TAA). The notice formed part of an authorised investigation. The notice required the applicant, as a property owner, to provide information relevant to establishing whether the property owner is liable for land tax.
4. From the notice it appears that the Commissioner, in the course of routine tax compliance inquiries with the Australian Taxation Office, became aware that the applicant had reported, in his income tax returns, rental income for the Chifley property, with a commencement date of 1 August 2007.
5. On 12 February 2018, the applicant responded to the section 82 notice. The applicant confirmed that the premises were occupied by Ms Andrew from 1 August 2007 to date, and he described the arrangement as “lodger under occupancy agreement.”
6. The applicant provided the following additional information:
Our agreement was that I would retain full control of the property. My belief is that this makes her a lodger and that our arrangement is in the nature of an occupancy agreement rather than a residential tenancy agreement (as defined in the Residential Tenancies Act).
…
I consider our arrangement to be in the nature of an occupancy agreement rather than a residential tenancy agreement (as defined in the legislation). According to section 7 of the Land Tax Act the term “rent” only relates to a tenant in a tenancy agreement, therefore is not notifiable if there is no tenancy agreement.
7. On 13 February 2018, the Commissioner sent an email to the applicant, requesting a copy of the occupancy agreement.
8. On 14 February 2018, the applicant replied as follows:
Please find attached occupancy agreement as requested.
You will notice that it is dated today. Until now we have not considered it necessary to formalise our arrangement in written form. In order to meet your request I have created this written agreement, which accurately reflects the understanding we have had from the outset.
9. The applicant attached an agreement in the following terms:
Occupancy Agreement (ACT Residential Tenancies Act 1997 Part 5A)
Between Robert Olney as Grantor, and Lynette Andrew as Occupant
I, Robert Olney, owner of 44/7 Medley Street Chifley ACT, hereby grant to Lynette Andrew the right to occupy as a lodger the abovementioned premises for an indefinite period, on the basis that I retain complete control over the premises, including the right to enter at any time, and that I may terminate this agreement at any time with appropriate notice.
I Lynette Andrew, hereby agree and accept that my occupation of the abovementioned premises is on the terms set out in this agreement.
Grantor Name Robert Olney, signed
Occupant Name Lynette Andrew, signed
Date of this agreement 14-2-18
10. On 21 February 2018, the Commissioner issued a notice pursuant to section 82 of the TAA. The notice required Ms Andrews to provide certain information. On 5 March 2018, Ms Andrews made a Statutory Declaration, declaring the following information:
The owner has never lived in the property with me
The owner has never used or maintained any of the rooms for his use whilst I have lived here.
The owner has been at the property 15 to 20 times per year.
The owner does not give me notice to enter the property.
The owner does not provide any services such as cooking meals/cleaning.
11. On 23 March 208, the Commissioner issued a notice of assessment, advising of the following charges:
Land Tax (Q2 2007-2008 to Q3 2017-2018)
$10,833.49
Penalty @ 50% (Q2 2007-2008 to Q2 2017-2018)
$5,100.80
Interest
$5,692.36
Total amount due
$21,626.65
12. On 30 April 2018, the applicant wrote to the Commissioner, requesting the above assessment be reconsidered. On 15 June 2018, the applicant wrote to the Commissioner, enclosing further submissions.
13. On 12 November 2018, the Commissioner reconsidered and confirmed the above assessment. The Commissioner provided a Reasons Statement.
14. On 6 December 2018, the applicant wrote to the Commissioner, enclosing further submissions. On 10 December 2018, the applicant applied to the Tribunal for an order that the Commissioner’s reconsideration decision be set aside.
15. The issues in dispute are summarised as follows:
(a) in relation to land tax:
(i) whether land tax, as assessed, is payable;
(b) in relation to penalty tax:
(i) whether penalty tax, as assessed, is payable; and
(ii) if penalty tax is payable, whether the penalty tax, as assessed, is appropriate, or should be reduced and/or remitted in the circumstances; and
(c) in relation to interest
(i) whether interest, as assessed, is payable; and
(ii) if interest is payable, whether the interest, as assessed, is appropriate, or should be reduced and/or remitted in the circumstances.
Overview of the land tax system
16. The liability for land tax arises under the Land Tax Act 2004 (the LTA).
17. For present purposes, in very general terms, land tax is imposed on land that is “rented residential land.” More specifically, land tax is payable if the property is rented on the first day of the quarter, and was rented at any time in the previous quarter.
18. The LTA establishes a self-reporting system for land tax. The LTA requires a property owner to notify the Commissioner, within 30 days, in writing, if the land becomes rented by a tenant. The onus is on the landowner to disclose the rental of a residential property to the Commissioner, and when the rental commenced.
19. The applicant argues that the property was not rented by a ‘tenant’ under a ‘tenancy agreement’. For this reason, the applicant did not notify the Commissioner that the property was occupied by Ms Andrews. For this reason, the Commissioner did not consider the whether the applicant was liable for land tax arising from the agreement, until the Commissioner commenced the investigation.
Overview of the penalty and interest provisions
20. The liability for penalties and interest arises under the LTA and the TAA. The penalty tax provisions were amended by the Revenue Legislation Amendment Act 2019. The relevant amendments are discussed below.
21. The imposition of penalty tax and interest is intended to promote compliance with the self-reporting scheme for land tax, and to provide general deterrence of tax default. A landowner who promptly reports that a property is rented, and who pays the applicable land tax, will be better off than a taxpayer who defaults and is subjected to penalties and interest.
22. A tax default means a failure by a taxpayer to pay, in accordance with tax law, the whole or part of the tax that the taxpayer is liable to pay. A tax default also means a failure to comply with a notification obligation under section 14 of the LTA.
23. In the event of a tax default, the property owner is liable for penalty tax under section 30 of the TAA.
24. The rate of penalty tax is determined under section 31 of the TAA. With effect up to and including 30 June 2019, the rate of penalty tax was 25%, unless another provision applied to increase or decrease the penalty tax. Relevantly, subsection 31(2) provided that the rate of penalty tax is 50% where the Commissioner was satisfied that the default was caused wholly or partly by a failure to take reasonable care to fulfil the taxpayer’s obligations under the tax law. Subsection 31(3) provided that the increased rate of 50% did not apply if the taxpayer satisfied the Commissioner that there was a reasonable excuse. These were the provisions at the time that the Commissioner imposed penalty tax, and at the time that the Commissioner reconsidered and confirmed the penalty tax, which is the subject of the present application.
25. Section 31 of the TAA has been amended, with effect from 1 July 2019.
26. In the Overview of the Revised Explanatory Statement of the Revenue Legislation Amendment Bill 2019, the amendment is discussed as follows:
The Bill amends the penalty tax provisions to re-align the 25 per cent rate as the “base default” penalty rate. Previously the 50 per cent rate was an additional rate for tax defaults where the Commissioner for ACT Revenue is satisfied that the default was caused wholly or partly by a failure to take reasonable care.
This amendment clarifies that the 25 per cent penalty tax rate will be applied for tax defaults. Under existing provisions where the Commissioner is satisfied that a taxpayer took reasonable care to comply with tax laws, no penalty is payable.
The Commissioner may apply the 50 per cent rate if satisfied that the tax default was caused by the taxpayer delaying the payment of tax, delaying the provision of information required to the assessment of tax, or providing information required under a tax law that is incorrect, incomplete or misleading. This rate is also applicable in instances of repeat tax defaults.
These amended penalty tax arrangements will apply to tax defaults occurring before or after 1 July 2019.
This is expected to result in fewer taxpayers being subject to the 50 per cent penalty tax rate from 1 July 2019. However this is not expected to result in a change of outcome for those taxpayers currently subject to the application of the 50 per cent penalty tax rate as the circumstances specified in these amendments are consistent with the circumstances for a failure to take reasonable care described in Revenue Circular GEN006.2 of 6 July 2018.
27. Later in the Revised Explanatory Statement, the amendment of subsection 31(2) is discussed as follows:
These clauses amend the penalty tax provisions of the TAA to ensure that in the event of a default by a taxpayer the base penalty tax payable is at 25 per cent.
Under subsection 31(2) the 50 per cent penalty tax rate remains but applies at the discretion of the Commissioner for specified circumstances. Those circumstances involve the conduct of the taxpayer such as delays relating to payment or provision of information … The amended penalty tax arrangements apply from 1 July 2019 to tax defaults occurring before or after the commencement of the subsection.
28. Subsection 31(5) of the TAA provides that penalty tax is not payable in relation to a tax default if the Commissioner is satisfied that:
(a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or
(b) the tax default happened solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the tax payer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.
29. The TAA provides for the remission of penalty in certain circumstances. With effect up to and including 27 March 2019, section 37 provided that penalty tax may be remitted if the Commissioner is satisfied that “reasonable steps to mitigate” or “exceptional circumstances” are present, and further if the Commissioner is satisfied that it would be “fair and reasonable” to remit all or part of the penalty tax. This was the provision at the time that the Commissioner imposed penalty tax, and at the time that the Commissioner reconsidered and confirmed the penalty tax, which is the subject of the present application.
30. In some respects, the applicant’s case is similar to Scott and Anor v Commissioner for ACT Revenue [2013] ACAT 73 (Scott). In Scott, the tribunal accepted that the tax default occurred due to a number of factors, including that the taxpayers were not aware of the liability to pay land tax, their conveyancing solicitors provided incorrect advice, and their lifestyle made them busy and stressed. In that matter, the tribunal found that the applicants did not take reasonable care and did not have a reasonable excuse. The tribunal found that the circumstances were not exceptional.
31. In some respects, the applicant’s case is similar to Theron and Commissioner for ACT Revenue [2013] ACAT 33, where the tribunal found that the applicants were not aware of the liability to pay land tax, and that their lifestyle made them busy and stressed. In that case, the tribunal found that the applicant did not take reasonable care and did not have a reasonable excuse. The tribunal found that the circumstances were not exceptional.
32. With effect from 28 March 2019, section 37 was replaced. Section 37 now provides that “The commissioner may, if the commissioner considers it appropriate in the circumstances, remit penalty tax by any amount.” The purpose of this legislative amendment was to bring consistency to the various acts administered by the Commissioner for ACT Revenue.
33. The Revised Explanatory Statement discusses the amendment as follows:
The remission of interest and penalty tax provisions are not consistent across the TAA and other taxation legislation, and could lead to inconsistencies in application. A general remission power for interest and penalty tax is inserted for consistent application for all tax lines. Consequential amendments to the Land Tax Act and Rates Act that contain interest remission provisions are made to align with these TAA changes.
34. The Tribunal may review ‘reviewable decisions.’ Reviewable decisions include decisions that impose penalty tax under section 31 of the TAA, and decisions not to remit penalty tax under section 37 of the TAA. However, not all decisions by the Commissioner are reviewable decisions. Notably, decisions by the Commissioner to impose interest, or declining to remit interest, are not reviewable by this tribunal (discussed below).
The hearing
35. Before the commencement of these proceedings, in correspondence with Commissioner’s Office, the applicant described the facts and circumstances relevant to the renting of the property from time to time. This correspondence is in evidence before the Tribunal.
36. For the purpose of these proceedings, the applicant filed witness statements by himself and by Ms Andrews. The applicant also filed an outline of his facts, circumstances and contentions, and various annexures.
37. The Commissioner prepared a bundle of documents held by the Commissioner and relevant to the decision under review (the T documents). The Commissioner also filed a written outline of submissions, and bundle of authorities.
38. The matter proceeded to hearing on 3 April 2019. Counsel for the Commissioner cross-examined the applicant regarding his description of relevant events and circumstances. Counsel for the Commissioner also cross-examined Ms Andrews. The Commissioner did not adduce any direct evidence to challenge the evidence of these witnesses.
39. At the hearing, Counsel for the Commissioner, and the applicant, made oral submissions. On 27 July 2019, the Tribunal invited the parties to file further submissions in relation to the effect of the amendments to sections 31 and 37 of the TAA (discussed above).
40. The evidence of the applicant and Ms Andrews was generally consistent. There were no significant inconsistencies or contradictions. The applicant made appropriate concessions in his evidence. For instance, in cross-examination, he was asked whether, in making his inquiries, a relevant consideration was whether he would prefer not to pay land tax. The applicant answered “I suppose anybody would rather not pay land tax if they did not have to.”
41. The Tribunal finds that the applicant honestly described the relevant events and circumstances in his various communications with the Commissioner, and in his evidence and submissions to the Tribunal. And the Tribunal finds that Ms Andrews honestly described the relevant events and circumstances.
42. In his submissions to the Commissioner, and to the Tribunal, the applicant raised a number of issues and contentions. The Tribunal will consider these issues and contentions below.
The circumstances of the agreement between the applicant and Ms Andrews
43. In about 1985, the applicant purchased a property in Chifley. In about 2007, the applicant purchased a second property, in Curtin. He moved to the second property, leaving the Chifley property vacant. Also in 2007, Ms Andrews returned from working overseas. The applicant and Ms Andrews had been good friends for many years, arising from their mutual interest as musicians. Ms Andrews asked to rent the vacant unit in Chifley, and the applicant agreed.
44. The Tribunal accepts that the applicant wanted to assist Ms Andrews with accommodation. His preference was to enter into an agreement that was simple, and that would not attract land tax.
45. Before entering into an agreement with Ms Andrews, the applicant was aware that land tax applied to certain rental arrangements in the ACT. The applicant conducted research on-line, regarding his potential liability to land tax on the Chifley property. The applicant has detailed this research in his submissions. In the course of his research, the applicant accessed the following sources of information:
(a) the Residential Tenancies Act 1997;
(b) the Land Tax Act 2004;
(c) ACT Government webpage listing resources on the topic “renting;”
(d) “The renting book” (an information book for tenants and property owners and real estate agents, published by the ACT Government); and
(e) “Occupancy Tips” (linked from the Tenant’s Advice Service, published by the Tenant’s Union, which is supported by the ACT Government).
46. The applicant provided printouts of the above materials (except the Acts), attached to his submissions. The applicant retrieved the said materials from archive, using the Wayback Machine. Notably, the materials provided are the versions that were available on-line in 2009. The applicant asserts that these 2009 materials are “the same” as the materials that he accessed on-line in 2007. The applicant notes that the various materials were publications by, or linked from, the ACT Government.
47. Based on the above research, the applicant concluded as follows:
that if we agreed that the occupancy was on the basis that I retained control of the property by continuing to be able to enter and by not giving the right of exclusive possession of the premises, we would have an occupancy agreement, the occupant being a lodger rather than a tenant, and … that’s what we agreed on. While I feel justified in asserting that this was an entirely reasonable conclusion to make (and that I was led to make it by the information provided by and or pointed to by the ACT Government), I appreciate that the various documents include statements to the effect that the information provided is advisory in nature.
48. There was no written agreement between the applicant and Ms Andrews. The terms of the oral agreement, as described by the applicant, included:
(a) Ms Andrews would pay $200 per week rent. (Note, this rental rate was well below the market rate. In about 2011, at the suggestion of Ms Andrews, the rent was increased to $250, which was still below market rate. As at the date of hearing, the rent remained at $250).
(b) The applicant “retained control of the premises,” in that he retained the ability to enter the premises without notice at any time.
49. The agreement had several unusual features:
(a) The electricity account for the Chifley premises remained in the name of the applicant, and Ms Andrews paid the charges.
(b) The applicant says that he entered the premises up to 10 to 15 times each year. These entries were made without giving notice, and without any prior arrangement. These entries were for a range of purposes, including
(i) making repairs;
(ii) leaving shopping inside the premises to pickup later; and
(iii) waiting for his car to be serviced at a nearby workshop.
(c) The applicant and Ms Andrews were friends, and she invited him to enter the premises for social purposes from time to time.
50. The Tribunal accepts that the applicant genuinely believed that the agreement, as made between himself and Ms Andrews, was not a tenancy agreement, but was an occupancy agreement. The Tribunal accepts that the applicant believed that land tax was not applicable to the relevant agreement, and that for this reason, he did not report the occupancy to the Commissioner.
51. The Tribunal accepts that, if the applicant had believed that land tax was applicable, he would have promptly complied with his reporting obligations, and he would have promptly paid any land tax as assessed.
52. The central issue in these proceedings is the nature of the agreement between the applicant and Ms Andrew. If the agreement is a tenancy agreement within the meaning of the LTA, then land tax is properly assessed and payable. If the agreement is not a tenancy agreement, but is some other form of occupancy agreement, then land tax is not properly assessed and not payable.
Relevant provisions under the LTA
53. The land tax assessments that are the subject of these proceedings cover the period Q2 2007-2008 to Q3 2017-2018 (that is, from 1 October 2007 to 31 March 2018 inclusive).
54. By virtue of Part 2 of the LTA, land tax is payable on rateable land that is “rented residential land.” The relevant definitions for ‘rent’ and ‘tenancy agreement’ and ‘tenant’ are contained in section 7, as follows:
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.
tenancy agreement—
(a) means an agreement under which a person grants to someone else for value a right of occupation of a parcel of land for use as a residence—
(i) whether the right of occupation is exclusive or not; and
(ii) whether the agreement is express or implied; and
(iii) whether the agreement is in writing, is oral, or is partly in writing and partly oral; but
(b) does not include an agreement giving a right of occupation only as a boarder or lodger.
tenant means a person with a right of occupation under a tenancy agreement.
55. The above definitions did not change during in the period of the assessments under dispute.
56. The Land Tax Amendment Bill 2018 (Amendment Act) amended the above definitions in the LTA. The Amendment Act commenced on 1 July 2018. The Amendment Act inserted a new definition of “residential tenancy agreement,” deleted the previous definition of “tenancy agreement,” and substituted a new definition of tenant by reference to the definition in the Residential Tenancies Act1997 (the RTA). These amendments are not relevant to the determination of the present matter.
The meaning of rented residential land
57. At all material times, under the LTA, land tax was payable on rateable land that was “rented residential land.” Rented residential land is not defined.
58. With reference to the above definitions of rent, tenant and tenancy agreement, the Tribunal considers that rented residential land has the following elements:
(a) property that is used as a residence;
(b) by a tenant;
(c) who pays rent; and
(d) under a tenancy agreement.
Common law and classes of occupiers
59. Not all occupants of property are tenants. The common law recognises many and various types of occupancy agreements, for instance:
(a) tenancy – discussed above;
(b) boarder – discussed below;
(c) lodger – discussed below;
(d) family arrangements – dependants of the homeowner, for instance, the children of the homeowner;
(e) short term visitors – for instance, the sister of the homeowner visiting for holidays;
(f) site agreements in short-stay and long-stay caravan parks;
(g) occupier at a dormitory – the space occupied by each occupant is marked out on the floor; and
(h) occupant at a motel or Airbnb – the occupant may be a very short-term tenant, or a licencee, depending on the circumstances and the terms of the agreement.
The meaning of ‘boarder’
60. The term ‘boarder’ is not defined in the LTA. The meaning of ‘boarder’ needs to be considered in light of the ordinary meaning of the word, and relevant case law.
61. The ordinary meaning of ‘boarder’ includes:
(a) a person who receives regular meals when staying somewhere, in return for payment or services.
(b) a person who regularly gets meals, or room and meals, at another person’s home.
62. In Noblett & Mansfield v Manley [1952] SASR 155, Mayo J said:
A “boarder” is one who … has his food, or food and lodging, at the house of another for compensation, one who lives in a boarding-house or with a family as one of its members, at a fixed rate’ one who has food at another’s table, or meals and lodgings in his house, for pay, or compensation of any kind.
63. In Kesteven and Commissioner for ACT Revenue [1999] ACTAAT 36, the Court said:
A boarder is a person who lives in the house of another and receives food and lodging in return for payment of a fixed regular sum of money. A boarder lives in a boarding house or with a family as one of its members at a fixed rate.
The meaning of ‘lodger’
64. The term ‘lodger’ is not defined in the LTA. The meaning of ‘lodger’ needs to be considered in light of the ordinary meaning of the word, and relevant case law.
65. The ordinary meaning of ‘lodger’ includes:
(a) a person who rents accommodation in another person’s house.
(b) a person who pays rent in return for accommodation in someone else’s house.
66. In Thompson v Ward (1871) LR 6 CP 327, 361, the Court described a lodger as follows:
Generally speaking, a lodger is a person whose occupation is of part of a house and subordinate to and in some degree under the control of a landlord or his representative who either resides in or retains the possession of or dominion over the house generally or over the outer door and under such circumstances, that the possession of any particular part of the house held by the lodger does not prevent the house generally being in the possession of the landlord. … It is always important in determining whether a man is a lodger to see whether the owner of the house retains his character of master of the house and whether he occupies a part of it by himself or his servants and at the same time retains the general control and dominion over the whole house and this he may do though he does not personally reside on the premises.
67. In Noblett and Mansfield v Manley and Another [1952] SASR 155, 158, Mayo J said:
The primary and usual meaning of “lodger”, as so defined, is “one who resides as an inmate in another person’s house, paying a certain sum periodically for the accommodation,” or “one who occupies an hired room in another person’s house” … In ordinary circumstances with both lodger and boarder, legal possession remains in the person who provides room or rooms, or meals. He retains possession and control over rooms and means of ingress and egress, but grants licence to guests who pay, or give consideration for the privilege.
68. In Torrissi v Oliver (1951) VLR 380, 385, the Court said:
I doubt whether any guiding principle can be discovered from the cases more specific than this: that a tenancy of a room or rooms in a dwelling-house will be shown to exist where the occupier has not only the sole right to occupy the room or rooms but has the right to exclude the landlord therefrom. This is sometimes expressed by saying that if the landlord retains control of the rooms in question the occupier is a lodger and not a tenant.
69. In Street v Mountford [1985] 2 All ER 289, 293, in the House of Lords, Lord Templeton said:
In the case of residential accommodation there is no difficulty in deciding whether the grant confers exclusive possession. An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises. A lodger is entitled to live in the premises but cannot call the place his own …
If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy; any express reservation to the landlord of limited rights to enter and view the state of the premises and to repair and maintain the premises only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant.
70. In Lewis v Bell [1985] 1 NSWLR 731, 735, Mahoney JA said:
In deciding … whether what has been granted is the right to exclusive possession, the Court, in the process of construction, has in practice looked inter alia to two things: the nature of the rights which, in terms, have been granted; and the intention of the parties.
71. In Radaich v Smith (1959) 101 CLR 209, in the High Court, Windeyer J said:
Whether when one man is allowed to enter upon the land of another pursuant to a contract he does so as licensee or as tenant must, it has been said, “be in the last resort a question of intention” … But intention to do what? – Not to give the transaction one label rather than another. – Not to escape the legal consequences of one relationship by professing that it is another. Whether the transaction creates a lease or a licence depends upon intention, only in the sense that it depends upon the nature of the right which the parties intend the person entering upon the land shall have in relation to the land.
72. In Bruton v London & Quadrant Housing Trust [2000] 1 AC 406 Lord Hoffman said:
Counsel for the trust submitted that there were “special circumstances” in this case which enabled one to construe the agreement as a licence despite the presence of all the characteristics identified in Street v Mountford [1985] AC 809. These circumstances were that the trust was a responsible landlord performing socially valuable functions, [the Trust] had agreed with the Council not to grant tenancies, Mr Bruton had agreed that he was not to have a tenancy and the Trust had no estate out of which it could grant [a tenancy].
In my opinion, none of these circumstances can make an agreement to grant exclusive possession something other than a tenancy…
73. In Aslan v Murphy [1990] 1 WLR 766, 773 Lord Donaldson MR said:
A landlord may well need a key in order that he may be able to enter quickly in the event of emergency: fire, burst pipes or whatever. He may need a key to enable him or those authorised by him to read meters or do repairs which are his responsibility. None of these underlying reasons would of themselves indicate that the true bargain between the parties was such that the occupier was in law a lodger. On the other hand, if the true bargain is that the owner will provide genuine services which can only be provided by having keys such as frequent cleaning, daily bed-making, the provision of fresh linen at regular intervals and the like, there are materials from with it is possible to infer that the occupier is a lodger rather than a tenant. But the inference arises not for the provision of the keys but from the reason why those provisions were provided.
Tenancy at common law
74. At common law, a tenancy constitutes an interest in land, whereas another form of occupancy does not. At common law, the following features might indicate that a person was a tenant:
(a) occupation is not subordinate to any other person;
(b) no other person has the general occupation or control of the house or outer doors; and
(c) no other person has any dominion over the tenant or the rooms which the tenant occupies, or the door to the rooms.
75. At common law, one test to distinguish a tenant from a boarder or lodger, or other occupant, was exclusive possession. In very general terms, at common law, an occupant will be a tenant if the agreement gives a right of exclusive possession or occupation for a determinate period (that is, a fixed term, or a periodic term).
76. Relevantly, under the LTA, the definition of ‘tenancy agreement’ is an agreement granting a right of occupation for use as a residence “whether the right of occupation is exclusive or not.” Importantly, for the purpose of interpreting the LTA, the defined meaning of terms under the LTA supersedes the common law meaning of the terms.
77. In Freeman Wiser v Havelock Housing Association Inc (2014) ACTSC 138, the dispute arose under the Residential Tenancies Act. Under that Act, a “residential tenancy agreement” may exist even although not exclusive. Burns J said:
What is determinative is whether any agreement provides for a right to occupy stated premises for a stated term, whether that be a fixed term or periodic.
Consideration of the applicant’s contention that the agreement was NOT a tenancy agreement
78. The Tribunal finds the following facts and circumstances:
(a) the agreement between the applicant and Ms Andrews gave her the right to occupy stated premises (that is, the Chifley premises);
(b) the agreement did not provide for a fixed term, but could be terminated on reasonable notice by either party;
(c) the agreement provided for weekly rent (that is, the agreement was ‘periodic’);
(d) the agreement included terms that the applicant would “retain control of the premises” in that he may enter “at any time within reason and without notice;”
(e) the applicant would not enter the bedroom of the premises (as stated in the oral evidence);
(f) the agreement did not give a right of occupation only as a boarder or lodger; and
(g) Ms Andrews called the premises “her own.”
79. The Tribunal finds that the oral agreement between the applicant and Ms Andrew was a tenancy agreement within the meaning of the LTA.
80. The Tribunal accepts that, under the agreement, Ms Andrews did not have exclusive occupancy. However, a tenancy agreement may exist “whether the right of occupation is exclusive or not” The Tribunal finds that the agreement was not an agreement for a lodger or boarder.
81. The Tribunal accepts that the applicant and Ms Andrews wished to enter into an agreement that was not a tenancy agreement, in order to avoid the application of land tax. However, the effect of their agreement, given the nature of the rights that have been granted, and the intention of the parties, was to create a tenancy agreement.
82. The Tribunal finds that land tax has been properly assessed, and is payable, for the Chifley property.
The applicant’s request for a ruling
83. The applicant requested that the Tribunal make a ruling on the following issues:
Does the Commissioner’s consideration of the LTA, without any regard to the RTA, on matters such as tenancy and occupancy agreements which are clearly and properly in the realm of the RTA, constitute an unjustifiable curtailment of the applicant’s right to have the matters decided having due regard to appropriate legislation?
Do court decisions on matters (arising) under the RTA … in principle have a bearing on the operation of the ACT Revenue Office, whether or not such decisions are concerned with Land Tax.
84. The Legislation Act2003 provides that, in deciding whether extrinsic material such as the Explanatory Statement should be considered in working out the meaning of an Act, and the weight to be given to the material, the Tribunal must take into account, inter alia, the desirability of being able to rely on the ordinary meaning of the Act, having regard to the purpose of the Act and the provisions of the Act read in the context of the Act as a whole.
85. The Tribunal is satisfied that, having regard to the purpose of the LTA, as reflected by the long title of the Act, and the provisions of the Act that are relevant to this matter, read in the context of the Act as a whole, that the meaning of the Act is clear.
86. The Tribunal finds the words of section 7 that fall to be interpreted are quite clear in their meaning. There is no ambiguity or obscurity that is required to be resolved. Nor is there difficulty in finding their meaning. It follows that the Tribunal is not satisfied that a need to resort to extrinsic material has been established.
The applicant’s contention that penalty tax should be imposed at a lesser rate, or remitted
87. In the present circumstances, the Commissioner considered that the tax default was caused wholly or partly by the failure of the taxpayer to take reasonable care to fulfil the taxpayer’s obligations under a tax law. The Commissioner was not satisfied that the taxpayer took reasonable care, or that the tax default happened solely because of circumstances beyond the taxpayer’s control. On this basis, the Commissioner determined that the applicable rate was 50%.
88. The applicant contends that the penalty tax should be imposed at a lesser rate, or remitted. The applicant’s arguments include:
1. … I believe our arrangement is in the nature of an occupancy agreement rather than a residential tenancy agreement, and that therefore land tax is not payable.
2. If I came to the wrong conclusion as to whether there is an occupancy agreement or a residential tenancy agreement, it is as a result of information provided and/or pointed to by the ACT Revenue Office/ACT Government, or as a result of information which could have easily been provided but wasn’t, and consequently it should bear at least some responsibility.
3. … I believe I did take reasonable care
With regard to ground (3)… Indeed, I would suggest that had I not taken reasonable care, I might instead have simply accepted the bald statements promulgated by the government, such as in the leaflets on land tax included in rates notices, which state that premises which are rented are subject to land tax … this is not necessarily the case … such statements are somewhat misleading …
Consideration of the applicant’s contention that penalty tax should be imposed at a lesser rate, or remitted
89. The Commissioner contended that the imposition of penalty tax at 50% was the correct and preferable decision. The Commissioner contended that the applicant failed to take reasonable care, in that he made limited inquiries on-line, he failed to seek professional advice, he failed to seek information from the Commissioner’s office, he failed to consider the information sheets enclosed with his rates notices, and failed to make a voluntary disclosure. Having regard to these circumstances, the Commissioner contended that a reduction or remission in penalty tax was not justified. The Commissioner contended that general deterrence is a relevant consideration.
90. The issue for determination is whether the circumstances relied upon by the applicant support the Tribunal determining that another decision in relation to penalty tax should be made. When conducting a review, the Tribunal has all the powers of the original decision maker. The Tribunal will have regard to the state of the law applicable at the time the tribunal makes its decision, unless otherwise appropriate. Section 31(2) of the TAA was amended with effect retrospectively. Section 31(5) as amended is in identical terms as the now repealed section 31(6). It follows that, in determining this matter, the tribunal must apply section 31(2) and section 31(5) as amended.
91. Relevantly, section 31(2) as amended provides that:
the commissioner may increase the amount of penalty tax in relation to a tax default to 50% … if the Commissioner is satisfied that the tax default … was caused wholly or partly by the taxpayer (or a person acting on behalf of the taxpayer) … delaying the provision of information required for the assessment of land tax.
92. The applicant was required to report that the premises were rented, within 30 days of the premises becoming rented, that is, 31 August 2008. The applicant did not report that the premises were rented until after he received the section 82 notice from the Commissioner in February 2018. The Tribunal is satisfied that the applicant delayed the provision of information within the meaning of subsection 31(2).
93. Relevantly, section 31(5) provides that no penalty tax is payable in relation to a tax default if the Commissioner is satisfied:
that the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or
that the tax default happened solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the tax payer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.
94. The applicant bears the onus of making appropriate inquiries regarding his duties as a lessor, including his responsibilities under the LTA. The Commissioner provided information regarding land tax to property owners, by way of inclusion with quarterly rates notifications. The applicant does not deny that he received various information sheets over the years. Having received those information sheets over the years, he did not reconsider his responsibilities under the LTA. Further, the applicant asserts that some information contained in the information sheets is “unqualified” and “somewhat misleading.”
95. Ignorance of the law is not an excuse for failure to meet legal obligations.
96. In all the circumstances, the Tribunal is not satisfied that the applicant took reasonable care to fulfil his obligations under a tax law.
97. In all the present circumstances, the Tribunal is not satisfied that the tax default happened solely because of circumstances beyond the taxpayer’s control.
98. Under section 37 of the TAA, the Commissioner may, if the Commissioner considers it appropriate in the circumstances, remit penalty tax by any amount. The conditions or factors to be considered in exercising this discretion are not expressly stated. The discretion must be exercised within the boundaries created by the subject matter, scope and purpose of the statute and of the particular provision by which the discretion is conferred.
99. In considering whether it is appropriate to remit penalty tax by any amount, the Tribunal must take into account subject matter, scope and purpose of the LTA, the TAA, and in particular section 37 of the TAA. The Tribunal must keep in mind the purpose for which land tax is imposed and paid. The Tribunal must keep in mind that the imposition of penalty tax and interest is intended to promote compliance with the self-reporting scheme for land tax, and to provide general deterrence of tax default. The Tribunal must keep in mind the legislative intention that the taxpayer is liable for any default by the taxpayer’s agent. The Tribunal must keep in mind that section 37 does not require special or exceptional circumstances for the remission of penalty tax. Keeping all these matters in mind, the Tribunal must consider whether the penalty (as imposed by the Commissioner) is harsh, having regard to the particular circumstances of the taxpayer.
100. In all the circumstances the Tribunal finds that the penalty tax, as imposed by the Commissioner, was appropriate. The Tribunal confirms the imposition of penalty at 50%.
Consideration of the applicant’s contention that interest should be remitted
101. The applicant contends that interest should be remitted.
102. The respondent contended that the imposition of interest at the statutory rate was the correct and preferable decision. The respondent contended that the Tribunal did not have jurisdiction to review the imposition or remission of interest.
103. The Tribunal has considered the relevant provisions of the LTA and TAA.
104. A decision to impose interest under section 19 or 19A of the LTA cannot be reviewed by the Tribunal because it is not prescribed by section 38 of the LTA nor is it otherwise reviewable pursuant to the provisions of section 107A or schedule 1.2 of the TAA.
105. A decision declining to remit interest pursuant to section 29AA of the TAA is not a decision under the TAA which may be internally reviewed and then reviewed by ACAT.
106. The Tribunal is satisfied that neither the imposition of interest, nor the remission of interest, can be reviewed by the Tribunal. This is well established by authorities, including Theron v Commissioner for ACT Revenue [2013] ACAT 33 at [22]-[24], Hay v Commissioner for ACT Revenue [2014] ACAT 23 at [18], [23] and Scott & Anor v Commissioner for ACT Revenue [2013] ACAT 73 at [11], [32].
………………………………..
Member T Warwick
HEARING DETAILS
FILE NUMBER:
AT 110/2018
PARTIES, APPLICANT:
Robert Olney
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:
Member T Warwick
DATES OF HEARING:
3 April 2019
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