Patterson v Chief Commissioner of State Revenue

[2009] NSWADT 13

CITATION:	Patterson and anor v Chief Commissioner of State Revenue [2009] NSWADT 13
DIVISION:	Revenue Division
PARTIES:	APPLICANTS Keith Patterson and Diana Carter RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086032
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	13 August 2009
DATE OF DECISION:	22 January 2009
BEFORE:	Hirschhorn M - Judicial Member
CATCHWORDS:	Duties - First Home Plus Scheme
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Duties Act 1997 Taxation Administration Act 1996 Administrative Decisions Tribunal Act 1997
CASES CITED:	Wood v Chief Commissioner of State Revenue [2008] NSWADT 77
REPRESENTATION:	APPLICANT In person RESPONDENT S Benjamin
ORDERS:	The decision of the Chief Commissioner under review is affirmed

REASONS FOR DECISION

1 This is an application made by the Applicants for review of a decision of the Chief Commissioner of State Revenue (“the Respondent”) on 12 March 2008 that disallowed an objection lodged by the one of the Applicants (Ms Carter) by letter on 2 January 2008.

2 In her objection, Ms Carter objected to the imposition of stamp duty in relation to a property at 5 Provincial Pl, Orange, NSW arising from the disallowance by the Respondent of the First Home Plus exemption/concession contained in Part 8, Division 1 of the Duties Act 1997.

3 This matter did not proceed to an oral hearing as the relevant facts were not in contest and instead has been determined on the papers (as permitted by Section 76 of the Administrative Decisions Tribunal Act 1997 (“the ADT Act”)). Both the Applicants and Respondent filed written submissions. In addition, the Respondent filed the documents required in accordance with Section 58 of the ADT Act.

Facts

4 The facts are not in contest between the parties.

5 The Applicants, Mr Patterson and Ms Carter, are husband and wife.

6 Up until late 2007, the Applicants resided in New Zealand. They immigrated to Australia in late 2007.

7 On or about 7 December 2007, one of the Applicants, Ms Carter, purchased a residential property at 5 Provincial Place, Orange, NSW: Folio: 177/263430 (“the Provincial Place property”). The Applicants explained that this property was purchased as their first home to live in, in Australia.

8 During the decade up to late 2007 when the Applicants resided in New Zealand, one of the Applicants, Mr Patterson, purchased two properties in Queensland as investments. The first property was at 1 Prescott Place, Cairns and the second property at 27 Burtons Rd Kingaroy. Both properties were rented to tenants and were managed on behalf of the Applicants by Australian based real estate agents. The Section 58 documents included a certificate of title for Lot 4/ 735744 in Cairns which shows Mr Patterson as the registered owner and is dated 21 November 2003.

9 At the same time that the Applicants immigrated to Australia and Ms Carter purchased the Provincial Place property, Mr Patterson also purchased a rental property in Orange at 22 Mitchell Parade (Folio 11/259055). This property is managed by the Applicants.

10 The Applicants have also owned some properties over the years in New Zealand, the first of which was acquired in approximately 1994 (being a property at Micawber Place, Howick, New Zealand) that the Applicants lived in until they immigrated to Australia. The Applicants stated in correspondence with the Office of State Revenue in about March 2008 that they still owned this property and it was rented out. As the ownership of properties in New Zealand is not relevant for the purposes of the present application, there is no need to set out further details in this regard.

11 On or around 2 January 2008, Ms Carter lodged an objection against “the imposition of stamp duty in respect of the Provincial Place property and the refusal of the First Home Plus grant status”. Ms Carter stated in the objection that her understanding was that the Respondent’s decision was based on investment decisions by her husband some years previously when they decided to move money from New Zealand to invest it in Australia. Her husband chose to invest in the form of investment properties instead of other types of investments that might equally have been made such as shares, units in unit trusts or bank deposits.

12 On or about 12 March 2008, the Respondent wrote to the Applicants responding to their objection in respect of the denial of First Home Plus exemption/concession. The objection was denied by the Respondent on the basis that the Applicants had previously held residential property in Australia and accordingly were unable to claim the First Home Plus exemption for the Provincial Place property (pursuant to Sub-sections 71 (1) and 71(2) of the Duties Act 1997).

13 On or about 16 April 2008, the Applicants lodged an application with the Tribunal for review of the Respondent’s decision. The application was made within time.

Relevant legislative provisions

14 Under Division 1 of Part 8 of the Duties Act 1997 (“the Duties Act”), certain purchasers or transferees may be eligible for concessions or exemptions from duty under the “First Home Plus” Scheme. Section 69 of the Duties Act indicates that:

This scheme is intended to help people who are acquiring their first home. Under the Scheme, the acquisition and any mortgage given to assist the financing of the acquisition is subject to a concession or exemption from duty.

15 The Scheme effectively commenced for agreements for sale or transfer (or transfers) entered into on or after 4 April 2004 and accordingly is applicable to the Provincial Place property having been acquired by the Applicants in December 2007.

16 Importantly, Section 71 of the Duties Act sets out certain threshold requirements for eligibility under the Scheme. The complete text of Section 71 (as it applied in December 2007) is as follows:

71 Restrictions on eligibility—previous ownership of residential property or first home concession


(1) A purchaser or transferee under an agreement or transfer may apply under the scheme, but will be eligible only if the purchaser or transferee is a first home owner.

(2) A first home owner is an individual:
(a) who has not at any time owned residential property in Australia (either solely or with someone else) and has not previously been a party to an application under the scheme that was approved by the Chief Commissioner, and

(b) whose spouse (if any) has not at any time owned residential property in Australia (either solely or with someone else) and has not previously been a party to an application under the scheme that was approved by the Chief Commissioner.

(3) (Repealed)

(4) For the purpose of this section, a person is the spouse of another person if:

(a) they are legally married, or

(b) they are living together as a couple in a de facto relationship.

(5) If the Chief Commissioner is satisfied that, at the time of making an application under the scheme, a purchaser or transferee:

(a) is legally married but not cohabiting with the person to whom the applicant is legally married, and

(b) has no intention of resuming cohabitation,
the person to whom the purchaser or transferee is legally married is not to be regarded as the applicant’s spouse.

(6) Despite the other provisions of this section, the ownership at any time of another residential property, or a previous application under the scheme, is to be disregarded if:

(a) the other residential property owned by the purchaser or transferee is or was vested in the purchaser or transferee on trust, or as an executor under a will, or the application was made by the purchaser or transferee in his or her capacity as trustee or executor, or

(b) the ownership share in the property to which the application relates that is being acquired by purchasers or transferees who own or have owned other residential property, or have previously been a party to an application, does not exceed 5%.

17 Jurisdiction to review the Respondent’s decision is conferred on the Tribunal by Section 96 of the Taxation Administration Act 1996 (“TAA”). It is for the Applicants to prove their case (Section 100(3) of the TAA).

Issue

18 The issue for determination by the Tribunal can be stated as follows:

a. Whether the Applicants satisfied the requirements of section 71 of the Duties Act (and in particular subsection 71(2)) such that they were eligible under the “First Home Plus Scheme” for a concession/exemption from duty arising in relation to their purchase of the Provincial Place property in December 2007?

19 As stated, the Tribunal received written submissions from both the Applicant and the Respondent.

Applicant’s submissions

20 The Applicants submitted that Mr Patterson had bought investment properties in Queensland while they lived in New Zealand over the last decade. The Applicants immigrated to Australia from New Zealand at the end of 2007 and at that time purchased their first home to live in (being the Provincial Place property). They applied to the Office of State Revenue (“OSR”) for a refund of duty under the First Home Plus scheme for this home.

21 The Applicants submitted that the relevant legislation was intended to assist Australians to buy their first home and the restriction as to eligible applicants not having owned property in Australia before (i.e. Sub-section 71(2)) was intended to prevent Australian property investors claiming benefits under the Scheme on more than one home. The Applicants stated that the restrictions were not intended to apply to immigrants to Australia (who had purchased investment properties prior to moving to Australia) and were now buying their first home in Australia to live in. The Applicants submitted that this legislative oversight was likely to distort investment decisions made by people overseas (eg. shift investments to the share-market rather than investment properties in Australia) and dissuade potential immigrants to Australia.

22 The Applicants submitted that Section 71 of the Duties Act referred to owning a “residential property” and that the Provincial Place Property was the first place that they had purchased in Australia in which they would live. The other properties purchased previously by Mr Patterson were property investments (not residences) and were ultimately run at a loss (and were likely to continue to do so until the relevant mortgages were repaid).

23 The Applicants submitted that the decision of the Respondent was misapplied and should be reversed and also suggested that a review of Section 71 as it applies to immigrants be undertaken so as to clarify the matter for all Government Departments.

Respondent’s submissions

24 The Respondent submitted that at the relevant time Sub-sections 71(1) and (2) of the Duties Act provided that a purchaser might apply for the First Home Plus concession but would be eligible only if the purchaser (a) had not at any time owned a residential property in Australia (either solely or with someone else) and (b) had not previously been a party to an application under the First Home Plus Concession Scheme approved by the Respondent. Thus, a purchaser was eligible for the First Home Plus Concession only if he or she satisfied both the conditions in ss.71(a) and (b) (Wood v Chief Commissioner of State Revenue [2008] NSWADT 77).

25 The Respondent submitted that it was undisputed that at the time Ms Carter purchased the Provincial Place property, her husband (Mr Patterson) owned two properties and was, simultaneously, in the process of buying a third residential investment property in Australia. Accordingly Ms Carter for the purposes of Section 71(1)(a) (sic) of the Duties Act 1997 previously acquired interests through her husband’s Queensland residential investment properties and the applicants were not eligible for the First Home Plus Concession within section 71(1) of the Duties Act.

26 Finally, the Respondent noted that the Respondent (and hence the Tribunal on review) did not have any discretion to dispense with the requirements in section 71(1) and grant the First Home Plus concession to the Applicants.

Discussion

27 The purpose of the First Home Plus Scheme is clearly stated in Section 69 of the Duties Act as being to “help people who are acquiring their first home”.

28 Sub-section 71(1) sets out the threshold requirements for a purchaser or transferee to be eligible under the Scheme. The purchaser or transferee must be a “first home owner” as defined exhaustively in Sub-section 71(2) of the Duties Act.

29 Sub-section 71(2)(a) defines a first home owner as an individual who has not at any time owned residential property in Australia (either solely or wish someone else) and has not previously been a party to an application under the scheme that was approved by the Chief Commissioner. Sub-section 71(2)(b) is an additional requirement and provides that to be a first home owner, the relevant individual’s spouse must not have at any time owned residential property in Australia (either solely or with someone else) and has not previously been a party to an application under the scheme that was approved by the Chief Commissioner.

30 It is clear from the facts that neither of the Applicants had previously been a party to an application under the First Home Plus Scheme so the “second” requirement as to eligibility was met.

31 However I agree with the Respondent’s submission that the “first requirement” of Sub-section 71(2)(a) and (b) is that the individual (or the individual’s spouse) has not at any time owned residential property in Australia (whether solely or with someone else). Both the “first” and “second” requirements must be met in order for the relevant individual to satisfy the definition of a “first home owner” and therefore be eligible for concessions/exemption from duty under the Scheme.

32 For the purposes of Subdivision 1 of Part 8 of the Duties Act, “residential property” is defined in Section 80A in the following terms:

residential property means:

(a) land on which there is a building that is lawfully occupied as a place of residence or suitable for occupation as a place of residence, or

(b) a company title dwelling.

33 The Section 58 documents contain correspondence from Mr Patterson to the Office of State Revenue that indicate the Queensland investment properties owned by him had been let to tenants and were managed by Australian based real estate agents. There is no indication in the Applicant’s evidence that these properties were not used or suitable for use as a place of residence (i.e. as opposed to say, commercial premises) and there was no dispute raised between the parties regarding this matter. Accordingly on the evidence before the Tribunal, these properties would satisfy the definition of “residential property” for the purposes of Section 80A.

34 Sub-Sections 71(2)(a)&(b) requires that neither an applicant (nor his/her spouse) has at any time owned residential property in Australia. There is no dispute between the parties that Mr Patterson and Ms Carter were spouses (as defined in section 71(4) of the Duties Act). Accordingly on the clear words of the legislation, the applicant under the First Home Plus scheme, being Ms Carter, did not satisfy the definition of a “first home owner” in Sub-section 71(2)(b) due to the fact that her husband had owned two properties in Queensland in the past decade (and indeed continues to do so).

35 As the “first” requirement is failed due to Mr Patterson’s ownership of the Queensland properties it is not necessary for me to determine whether the acquisition of the rental property in Orange by Mr Patterson on the same day as the purchase of the Provincial Place property by Ms Carter also, of itself, caused a failure of the requirements of Sub-section 71(2)(b) of the Duties Act.

36 The Applicants, in their submissions, referred a number of times to the fact that their acquisition of the Provincial Place property was the first property in Australia in which they intended to and do in fact reside. However the “first” requirement in Sub-section 71(2)(a) and (b) of the Duties Act, as it applied at the relevant time, looks only at whether or not an individual (or his/her spouse) has at any time “owned” a residential property in Australia. It does not examine whether or not the applicant or his/her spouse has at any time “resided” in the relevant residential property in Australia or indeed purchased the property with the intention of residing there. The mere fact of ownership of a residential property (as defined in Section 80A) in Australia by an applicant (or his/her spouse) at any time is sufficient on the clear words of Sub-section 71(2)(a) and (b) to preclude the applicant from being eligible for concessions/exemption from duty under the First Home Plus scheme.

37 I have taken account of the submissions of the Applicant in relation to the fact that the Provincial Place Property was purchased with the intention of being their first residential home in Australia following their immigration to the country and that the denial of the concession in their case is contrary to the purpose of the legislation being to assist a purchaser or transferee in respect of the purchase of their first home. In respect of this aspect, however, I am in agreement with the Respondent that the words of the legislation at present are clear- i.e. a requirement of eligibility under the scheme is that an applicant (or the spouse of an applicant) cannot have owned residential property in Australia at any time (even if the residential property was purchased for investment purposes only). This requirement applies to existing Australian citizens/residents as well as immigrants to Australia. It seems to me that to address the particular circumstances of the Applicants in this case (and indeed any other immigrants that are or may find themselves in similar circumstances) would need to be the subject of a legislative amendment.

38 It is noteworthy that Section 73 of the Duties Act 1997, which deals with persons that are not eligible under the First Home Plus Scheme, provides in sub-section 5 that a purchaser or transferee will only be eligible if they are an Australian citizen or a permanent resident. The definition of “permanent resident” in Section 73(7), paragraph (b) refers to “a New Zealand citizen who holds a special category visa within the meaning of section 32 of the Migration Act 1958 of the Commonwealth”. This definition would appear to indicate that the Legislature did at least give some consideration to citizens of New Zealand when the legislation was drafted.

39 At present there is no discretion on the part of the Respondent (and therefore the Tribunal on review) to dispense with and/or vary the clear eligibility criteria in Section 71(2) of the Duties Act for a purchaser/transferee in respect of concessions/exemption in duty under the First Home Plus scheme.

Order made

40 Accordingly for the foregoing reasons, I make the following order:

1) The decision of the Chief Commissioner under review is hereby affirmed.