Pazios and Commissioner for Act Revenue; (Administrative Review)
[2013] ACAT 48
•24 July 2013
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
PAZIOS & COMMISSIONER FOR ACT REVENUE
(Administrative Review) [2013] ACAT 48
AT 13/16
Catchwords: ADMINISTRATIVE REVIEW – land tax – penalty tax – whether decision to impose interest is reviewable by Tribunal – failure to notify about tenancy: whether there is reasonable excuse for failure – whether it is fair and reasonable to remit penalty tax: whether reasonable steps were taken to mitigate circumstances giving rise to liability or whether there were exceptional circumstances
List of Legislation: Land Tax Act 2004, ss 14 and 19(A)
Taxation Administration Act 1999, ss 30, 31, 32, 33, 34, 37, 100, 107A and 108A, and Schedule 1
List of Cases: Steele v Commissioner for ACT Revenue [2010] ACAT 15
Theron v Commissioner for ACT Revenue [2013] ACAT 33
Tribunal: Mr A. O’Neil – Senior Member
Date of Orders: 24 July 2013
Date of Reasons for Decision: 24 July 2013
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 13/16
BETWEEN:
NINA PAZIOS
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Mr A. O’Neil, Senior Member
DATE: 24 July 2013
ORDER
The Tribunal Orders that:
1. The decision under review is confirmed.
………………………………..
Ms L. Crebbin, General President
For and on behalf of
Mr A. O’Neil, Senior Member
REASONS FOR DECISION
Introduction
Mrs. Nina Pazios (“the Applicant”) is the owner of Block 13 Section 11 Red Hill, located at 62 Mugga Way (“the property”). The property was transferred to her in July 2009. She let the property in October 2009 but did not advise the Commissioner for ACT Revenue (“the Respondent”) of the letting. The Respondent assessed the Applicant for land tax, penalty tax and interest under the Land Tax Act 2004 (“the LTA”) in conjunction with the Taxation Administration Act 1999 (“the TAA”). The Applicant does not dispute that land tax is payable. Following the Respondent’s rejection of Mrs Pazios’ objection to the assessment, she now seeks review by the ACT Civil and Administrative Tribunal (“the Tribunal”) of the decision to impose penalty tax and interest.
The Hearing
The matter was heard on 21 June 2013. The Applicant was represented by her husband and attorney Dr Spiros Pazios who also gave evidence to the Tribunal. The Respondent was represented by Ms. K. Katavic of Counsel. The Respondent did not call any witnesses or cross examine Dr Pazios but relied on the documents produced to the Tribunal as material relevant to the decision under review (“the T- documents”). The Tribunal also had before it the facts and contentions of the Respondent. The Applicant did not file any facts and contentions but did produce a copy of part of a residential tenancy agreement for the property commencing on 23 October 2009 and a copy of the appointment of letting agents.
Dr Pazios confirmed that his correspondence and statements in the T-documents and application to the Tribunal were correct. He reiterated that the Applicant did not object to paying the land tax but believed that the penalty tax and interest was unfair and unreasonable in the circumstances. He said the Applicant had at all times been honest and upright in her dealings with the Commissioner.
Relevant Law
The law relevant to the imposition, remission and rate of penalty tax in this case and other relevant issues is contained in sections 14 and 19A of the LTA, and sections 30, 31, 34, 37 and 100 of the TAA. These provisions are set out at the end of the decision.
The Applicant’s Contentions
Although Mrs Pazios is the owner of the property, all business relating to the property, including its letting, dealings with the Respondent and the ACT Government Solicitor, was conducted by her husband and attorney Dr Pazios. In his correspondence and evidence Dr Pazios often made reference to “I”. The Tribunal accepts that in doing so Dr Pazios was referring to himself in his capacity as the agent of the Applicant.
The Applicant’s objection to the imposition of penalty tax and interest seems to be framed on four grounds. These are set out below.
At the time the property was purchased in mid 2009 the Applicant was living at 30 Beagle Street, Red Hill and this was the address she nominated for notices. When she left Beagle Street in March 2010, a change of address was notified by Dr Pazios but not recorded by the Respondent. As a result, the Applicant did not receive communications about land tax and she had no knowledge of her legal responsibilities regarding the issue.
The Applicant, through her husband, employed a letting agent to let and manage the property from October 2009 and assumed that land tax would be paid by the agent from rent received. Because the rent was substantial and the land tax a relatively small amount if considered as a weekly deduction, the lack of payment was not noticed by the Applicant.
Notices were later directed to the professional rooms of Dr Pazios in Manuka but because of problems with staff these notices were not passed on to the Applicant’s attorney and agent, Dr Pazios.
The Applicant had been honest and upstanding at all times in dealing with this matter once it was brought to her attention.
The Respondent’s Contentions
The Respondent contends that the imposition of interest is not reviewable by the Tribunal.
The Respondent further contends that the circumstances that led to the Applicant’s failure to pay tax were not exceptional and do not support remitting all or part of the penalty tax under s.37 of the TAA.
The Respondent says that sections 32 and 33 of the TAA do not apply in this case because there was no disclosure before receiving the notice under s.82 of the TAA and in any event, these two sections of the TAA are not reviewable by the Tribunal.
The Respondent argues that a penalty tax of 50% is the correct and preferable decision reflecting the Applicant’s failure to take reasonable care to meet her obligations to pay land tax.
Jurisdiction of the Tribunal
The provisions governing the amount of interest payable and its remission are contained in Division 5.1 of the TAA. These are not among those decisions listed in Schedule 1 to the TAA that can be reviewed by the Tribunal. Decisions made under sections 32 and 33 are also not listed in Schedule 1. It follows that the Tribunal has no jurisdiction to review the imposition or remission of interest, or the application of sections 32 or 33. Decisions under sections 31, 34 and 37 are reviewable decisions by virtue of the operation of sections 107A, 108A and Schedule 1 of the TAA.
Penalty tax
The rates of penalty tax and the circumstances in which they are applied are set out in sections 31 and 34 of the TAA. In the Tribunal’s opinion sections 31(5) and 34 have no relevance as there is no suggestion of an intentional disregard of a tax law nor of concealment.
If the circumstances in subsection 31(6)(a) of the TAA are met, then no penalty tax is payable. This subsection requires that a taxpayer take reasonable care to comply with the tax law. In this matter the Applicant did not inform the Respondent of the tenancies even though she or her agents were aware of this obligation. As the Tribunal has stated in Steele v Commissioner for ACT Revenue [2010] ACAT 15 and Theron v Commissioner for ACT Revenue [2013] ACAT 33, even ignorance of a taxpayer’s obligation under land tax legislation is not an acceptable excuse for non-compliance. When the net rent was received neither the Applicant, nor her agents, noticed that no land tax had been paid. Dr Pazios justified this oversight by saying (T50) that the rent received was considerable and land tax would have been a small weekly deduction. It should be noted that the quarterly land tax is some $4,500.00 (T27/8) and if deducted weekly would be $346.00. It is not a pittance and would have been noticed if the list of deductions had been properly checked. In my view the Applicant did not take reasonable care to comply with section 14 of the LTA and the circumstances do not fall within subsection 31(6)(a) of the TAA. It should be noted that section 100 of the TAA places the burden on a taxpayer to show that an objection should be upheld.
Subsection 31(6)(b) provides that no penalty tax is payable if the tax default happened because of circumstances beyond the taxpayer’s control. There is no evidence before the Tribunal to suggest that the tax default was caused by anything except a careless oversight. The circumstances were at all times within the control of the Applicant or her agents. This provision has no relevance to this case.
A basic penalty tax of 25% of the land tax unpaid is imposed by section 31(1) of the TAA. However the rate rises to 50% under section 31(2) if the Commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer to take reasonable care to fulfil the taxpayer’s obligations under a tax law. The penalty tax reverts to 25% if the Commissioner is satisfied that the taxpayer has a reasonable excuse for the failure.
In the present matter Dr Pazios said that no communications were received due to the Respondent’s records incorrectly stating her address as 30 Beagle Street. The Respondent was sending rates notices to the Beagle Street address after March 2010 when Dr and Mrs Pazios left that address. It would seem that the Applicant received these notices because the Respondent received payments for the new rates from June 2010 through to May 2012 (T27/8). Dr Pazios said that he notified the Respondent when they left Beagle Street, but this change of address is not recorded in the Respondent’s records. Until the notice of 15 May 2012 (T25) was returned to the Respondent, no notices had been returned. Moreover, on 8 June 2012 a notice under section 82 of the TAA was sent to the Applicant at Beagle Street (T30). The Applicant received and responded to this noticed on 20 June 2012. Based on this evidence, I conclude that the Applicant or her agent received rates notices for the property after March 2010. However, even if that is not correct the Applicant was aware of her obligation to pay land tax and notify the details of tenancies to the Respondent. As mentioned earlier, this Tribunal has in other cases concluded that even ignorance of the requirement to pay land tax and give notification of letting to the Commissioner is not a reasonable excuse.
I therefore find that the failure to notify the Commissioner of the letting of the property was caused wholly or partly by the failure by the Applicant to take reasonable care to fulfil her obligations under section 14 of the LTA. I further find that the Applicant had no reasonable excuse for that failure. I conclude that the Commissioner correctly imposed penalty tax of 50% of the unpaid land tax.
Remission of Penalty Tax
The Commissioner has discretion to remit penalty tax in whole or in part if the Applicant satisfies the requirements of section 37 of the TAA . The first requirement is in the form of two alternatives. Either the taxpayer has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or the circumstances that resulted in the liability for penalty tax were exceptional.
The circumstance that resulted in the tax liability was the failure through carelessness to inform the Commissioner that the property was rented. The Commissioner has now been informed following service of the section 82 notice of the rental details and the applicant is now aware of the oversight. The time when this discretion is to be exercised is when the question of remission of penalty tax is decided. That was 8 February 2013 in the case of the Commissioner, and the date of this decision in the case of the Tribunal. It seems to the Tribunal that on both dates the taxpayer has actually mitigated the circumstances that resulted in the tax liability and has satisfied section 37(a)(i). Although it is not necessary to decide whether the circumstances that resulted in the tax liability were exceptional it is difficult to characterise such a careless oversight in this way.
The second requirement contained in section 37(b) is that the decision maker must be satisfied that it would be fair and reasonable to remit all or part of the penalty tax. The circumstances of this case are set out in paragraphs 17 and 20 but mention must also be made of the careless way that Dr Pazios answered the section 82 notice on 20 June 2012 (T38) when he did not reveal the earlier tenancy that commenced in October 2009. He later confirmed that tenancy (T40) when he was told that the tenant J.E.C.P. had registered as an electricity consumer on 26 October 2009. Dr Pazios insists that the Applicant was always honest and upright in her dealings with the Commissioner but the evidence is that she was, through her agent, also careless and inaccurate. In these circumstances the Tribunal is not satisfied that it is fair and reasonable to remit all or part of the penalty tax.
Conclusion
Having regard to all of the material before the Tribunal and the findings previously made, the Tribunal confirms the decision under review.
Postscript
Prior to the hearing, Dr Pazios made a written application for an adjournment which he subsequently abandoned. In that application he said that he was not familiar with the legal process but that the Tribunal seemed to have prejudged the matter. He made reference to a “kangaroo court”. Dr Pazios is wrong. The Tribunal did not prejudge this matter and its decision has been made in accordance with the evidence before it, the requirements of the ACT Civil and Administrative Tribunal Act 2008 and of the LTA and the TAA. The Tribunal suggests that Dr Pazios read the decision carefully so that he understands its reasoning. Dr Pazios was also critical of the solicitor for the Commissioner and expressed this in intemperate personal terms. Because he is not familiar with litigation he may have mistaken the solicitor’s advocacy of her client’s position as something personal. There is nothing in the material before the Tribunal to suggest that the solicitor did other than properly represent the interests of her client, which it is her duty to do.
………………………………..
Ms L. Crebbin, General President
For and on behalf of
Mr A. O’Neil – Senior Member
Provisions
Land Tax Act 2004
Commissioner to be told if residential land rented
(1)This section applies in relation to a parcel of land that—
(a)is leased for residential purposes; and
(b)is rented by a tenant.
(2)A relevant person must tell the commissioner, in writing—
(a)that the parcel is rented; and
(b)when the rental began.
Note 1If a form is approved under the Taxation Administration Act 1999, s 139C, the form must be used.
Note 2It is an offence to fail to notify the commissioner under this section (see Taxation Administration Act 1999, s 67 (2)).
Note 3It is also an offence to knowingly avoid paying, or disclosing a liability to pay, part or all of an amount of tax (see Taxation Administration Act 1999, s 65 (1)).
(3)The relevant person must tell the commissioner the information mentioned in subsection (2) not later than 30 days after—
(a)if there is a change of ownership of the parcel—the day the ownership changes; or
(b)in any other case—the day the rental begins.
(4)This section does not apply if the owner of the parcel of land is a corporation.
(5)In this section:
relevant person means—
(a)the owner of the parcel of land; or
(b)if the owner has authorised an agent to act on the owner’s behalf in relation to the rental of the parcel—the agent.
Examples—agent
accountant, real estate agent, solicitor
NoteAn example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
19AInterest and penalty tax payable on land tax if no disclosure
(1)This section applies if—
(a)land tax is imposed on a parcel of rateable land under section 9 (1) (a); and
(b)the owner of the parcel of land fails to comply with section 14 (Commissioner to be told if residential land rented).
(2)The owner is liable to pay interest on the amount of land tax from the end of 30 days after the 1st day of the 1st quarter for which the tax is imposed.
(3)Interest on the amount of land tax is worked out—
(a)for each calendar month that the amount is payable; and
(b)on the 1st day of that month; and
(c)at the interest rate applying to that day; and
(d)on the total amount of land tax that is payable on a day when the interest is worked out.
NoteThe Minister may determine an interest rate for this section under the Taxation Administration Act, s 139.
(4)For subsection (3) (a), if an amount of land tax is payable for part of a calendar month, interest is payable for the whole month.
(5)The Taxation Administration Act, division 5.2 (Penalty tax) applies to the owner of the parcel of land as if—
(a)the owner’s failure to comply with section 14 were a tax default; and
(b)a reference to interest under division 5.1 were a reference to interest under this section; and
(c)a reference to the amount of tax unpaid were a reference to the amount of land tax payable.
(6)This section applies to land tax imposed before or after the commencement of this section.
Taxation and Administration Act 1999
Penalty tax in relation to certain tax defaults
(1)If a tax default happens, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.
NoteA taxpayer may also be liable to pay penalty tax under the Land Tax Act 2004, s 19A (5) (Interest and penalty tax payable on land tax if no disclosure).
(2)Penalty tax imposed under this division is in addition to interest.
(3)Penalty tax is not payable in relation to a tax default that consists of a failure to pay—
(a)interest under division 5.1; or
(b)penalty tax previously imposed under this division.
Amount of penalty tax
(1)The amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid, subject to this division.
(2)The amount of penalty tax payable in relation to a tax default is 50% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer’s obligations under a tax law.
(3)Subsection (2) does not apply if the tax payer satisfies the commissioner that the taxpayer (or a person acting on behalf of the taxpayer) had a reasonable excuse for the failure.
(4)Subsections (2) and (3) apply to a tax default that happened before their commencement in the same way as they apply to a tax default that happened after their commencement.
(5)The amount of penalty tax payable in relation to a tax default is 75% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a tax law.
(6)No penalty tax is 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 taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.
NoteThe commissioner’s decision to impose penalty tax is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the taxpayer (see s 107B).
Increase in penalty tax for concealment
The amount of penalty tax payable in relation to a tax default is 90% of the amount of tax unpaid if the commissioner is satisfied that, after the commissioner has informed the taxpayer that an investigation is to be carried out and before the investigation is completed, the taxpayer (or a person acting on behalf of the taxpayer)—
(a)deliberately damages or destroys records required to be kept under the tax law to which the investigation relates; or
(b)fails, without reasonable excuse, to comply with a requirement made by the commissioner under division 9.2 for the purposes of determining the taxpayer’s tax liability; or
(c)hinders or obstructs an authorised officer exercising functions under that division for that purpose; or
(d)otherwise shows intentional disregard for a tax law.
Note 1The Legislation Act, dict, pt 1 defines fail to include refuse.
Note 2The commissioner’s decision to impose increased penalty tax is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the taxpayer (see s 107B).
Note 3Table 34 contains a summary of the effect of s 31 to s 34.
Table 34 Rates of penalty tax
| column 1 item | column 2 | column 3 | column 4 | column 5 | |
| basic rate | disclosure before investigation begins | intentional disregard for tax law | |||
| before notification | after notification | ||||
| 1 | failure to take reasonable care | 25% | 5% | 20% | 90% |
| 2 | failure to take reasonable care and no reasonable excuse | 50% | 10% | 40% | 90% |
| 3 | intentional disregard of the law | 75% | 15% | 60% | 90% |
Remission of penalty tax
The 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.
NoteThe 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).
Objection
(1)A taxpayer may lodge a written objection with the commissioner if the taxpayer is dissatisfied with—
(a)an assessment, other than a compromise assessment, that is shown in a notice of assessment served on the taxpayer; or
(b)a decision mentioned in schedule 1 or schedule 2; or
(c)a decision under a tax law that is prescribed under the law for this section.
NoteDecisions are prescribed for this section under the following Acts:
·Duties Act 1999, s 252
·Land Rent Act 2008, s 33
·Land Tax Act 2004, s 38
·Rates Act 2004, s 70.
(2)An objection must be accompanied by the fee (if any) determined under section 139A (Determination of fees) for the objection.
(3)The commissioner must refund a fee paid under this section if—
(a)the commissioner allows the objection in whole or in part; or
(b)the taxpayer applies to the ACAT and—
(i)the ACAT, or a court hearing an appeal on the matter, upholds the objection in whole or in part; or
(ii)the period when any further appeal can be made has ended; and
(iii)neither the taxpayer nor the commissioner has applied to the ACAT in relation to a part of the objection that was upheld.
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Tribunal Staff
PART A
FILE NUMBER: | AT 13/16 |
PARTIES, APPLICANT: | Nina Pazios |
PARTIES, RESPONDENT: | Commissioner for ACT Revenue |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | Ms Katavic |
REPRESENTATIVE FOR APPLICANT | Dr S. Pazios |
SOLICITORS FOR RESPONDENT | C. Muthurajah, ACT Government Solicitor |
TRIBUNAL MEMBERS: | Mr A. O’Neil – Senior Member |
DATES OF HEARING: | 21 June 2013 |
PLACE OF HEARING: | ACAT CANBERRA |
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )
COMMENTS:
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