Reynolds v Chief Commissioner of State Revenue

[2007] NSWADT 166

CITATION:	Reynolds v Chief Commissioner of State Revenue [2007] NSWADT 166
DIVISION:	Revenue Division
PARTIES:	APPLICANT Peter Reynolds RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	076049
HEARING DATES:	24 July 2007
SUBMISSIONS CLOSED:	24 July 2007
DATE OF DECISION:	31 July 2007
BEFORE:	Hole M - Judicial Member
CATCHWORDS:	Land tax exemption - principal place of residence - Taxation Administration Act - liability to pay interest
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50 Chief Commissioner of State Revenue –v- Incise Technologies Pty. Limited [2004] NSWADTAP 19 Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125 Giunta v Chief Commissioner of State Revenue (RD) [2005] NSWADTAP 10 The Ettamogah Mob Australia Pty Limited & Ors –v- Chief Commissioner of State Revenue [2005] NSWADT 22
REPRESENTATION:	APPLICANT In person RESPONDENT B Patterson, solicitor
ORDERS:	1. Reassessment to be made in respect of the Land Tax Year 2002 following all necessary procedure to establish the date when the applicant ceased to occupy the property as his principal place of residence. On the decision being made by the respondent of this issue the applicant to retain all usual rights to appeal that decision.; 2. If the assessment for the Land Tax year 2002 cannot be maintained then a refund of the Land Tax for that year to be made to the applicant and any claim for market rent interest thereon to cease.; 3. If the assessment for the Land Tax Year 2002 can be maintained then order 4 applies subject to the applicant exhausting any rights of appeal.; 4. The imposition of market rate interest is affirmed.

1 The applicant has applied for a review of the decision by the respondent to impose market rate interest on the assessments for land tax for the land tax years 2002, 2003, 2004, 2005 and 2006.

Facts

2 The applicant purchased a property (“the property”) in approximately 1993/1994 and resided therein as his principal place of residence until early 2002 when he relocated to Melbourne for the purposes of his employment.

3 At the time of the applicant’s relocation to Melbourne he employed a real estate agent to manage the property as and from February 2002. Both the applicant and respondent agreed on this date.

4 The respondent became aware that the property was rented out, most probably from a search of the Rental Bond Board records, as part of a general compliance check of a general area of the State.

5 A Land Tax Questionnaire was issued on 26 September 2006 and directed to the applicant care of the agent. This questionnaire was received by the agent on 3 October 2006 and forwarded to the applicant with the monthly statement. A reminder letter from the respondent was forwarded by the respondent on 23 October 2006, received by the agent on 27 October 2006 and also forwarded with the monthly statement to the applicant. The applicant received both the letter enclosing the questionnaire and the reminder letter in the first week of November 2006.

6 The respondent issued a notice of assessment for land tax years 2002 to 2006 inclusive on 14 November 2006 which was forwarded to the agent. The agent faxed a copy of the assessment to the applicant.

7 The applicant sought advice from his accountant. The accountant contacted the Office of State Revenue (“OSR”) and various discussions between the accountant and officers of the OSR then ensued. Ultimately an objection was forwarded to the OSR on 29 December 2006, particularly in relation to the imposition of premium rate of interest and also the market rate of interest.

8 The respondent issued the Land Tax Notice of assessment for 2007 on 22 January 2007. This disclosed an updated total interest rate.

9 The respondent considered the objection by the applicant and on 20 February 2007 advised the applicant that the premium interest rate would be remitted. Thus as at 20 February 2007 the land tax assessed was the land tax for the years 2002 to 2007 inclusive plus market interest on the land tax for the land tax years 2002 to 2006 inclusive.

10 The applicant paid all outstanding land tax for the years 2002 to 2006 inclusive and for the 2007 land tax year as at 19 February 2007.

Applicant’s Submissions

11 The applicant submitted that he was unaware of the land tax requirement to file a return, that if he had known he would have attended to doing so. He had been relocated to Melbourne in February 2002 and from then to late 2006 he had not visited the State.

12 The applicant noted that the information that his accountant had obtained from the OSR officers was to the effect that the OSR places notices in the local newspapers advising property owners of land tax obligations and that seminars are held on a yearly basis to assist property owners to be aware of their land tax obligations.

13 Due to work commitments the applicant submitted that he was prevented from lodging tax returns from July 2001 to June 2005.

14 The primary submission of the applicant was that if he had known of the land tax requirements he would have attended to them and paid any land tax assessed and that accordingly there would not have been any interest due or payable.

Respondent’s Submissions

15 The respondent’s representative submitted that the onus rests on the land owner to file a return once the land value threshold is exceeded (section 12 Land Tax Management Act 1956 (“LTM Act”)). That if a land owner fails to do so then it is a default under section 72 of LTM Act. A consequence of a tax default being that interest is imposed in accordance with section 21 of the Taxation Administration Act 1996 (“TA Act”).

16 Interest may be imposed as a market rate component and as a premium component. The rate of interest for the premium component is set out in section 22(3) of the TA Act and for the market rate component is calculated as set out in section 22(3) of the TA Act.

17 The respondent’s representative submitted that the respondent had taken into account the objections made by the applicant on 29 December 2006 and had remitted the premium component of the interest.

18 Insofar as the applicant’s submissions that the OSR should make allowance for the fact that the applicant had been absent from the State and that he had not seen or heard of the material by which the respondent attempted to inform land owners was not sufficient to satisfy any possibility of remitting the market rate of interest.

19 When consider the general obligation of the taxpayer to pay tax, where the taxpayer was unaware of the land tax obligation, the respondent’s representative drew attention to Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125 at ¶ 14:

“The Applicants are not only parties liable to land tax that have not been aware of the provisions relating to ownership of a further property other than their principal place of residence. As a matter of public policy, the responsibility of the ownership of property including the necessity to be assessed and pay rates and taxes on the property remains with the land owner and those advising the land owner.”

20 Further that the requirements of ss 7 and 2 LTM Act were referred to in Giunta v Chief Commissioner of State Revenue (RD) [2005] NSWADTAP 10 at ¶ 2 (“Giunta”):

“Once the land value crosses the threshold for land tax, the land owner is required to lodge an initial return: LTM Act, 2 12(1A). As the Commissioner has noted, this is a self-assessment approach.”

21 That the appellant in Giunta, as also the applicant in this case, believed that the OSR had an obligation to inform taxpayers if the taxpayer is liable to pay land tax. This is referred to at ¶ 2:

“It is clear in New South Wales that in this area the obligation falls on the taxpayer in the first instance to furnish a return to the Chief Commissioner on or before 31 January in the relevant year. The obligation is found in s 12 of the LTM Act: see further, Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50.”

22 And at ¶ 17:

“The position, … is that this law, like may tax laws, imposes the obligation to pay tax with out making any concession to the argument that there is any duty on the tax collector to inform the taxpayer of the liability in advance. As I said in the course of argument, it would be very rare indeed for a tax law to work on the basis that the onus was on the tax collector to let the taxpayer know first before the liability attaches.”

23 The respondent’s represented submitted that:

“The market rate component is intended to compensate the Chief Commissioner for not having the benefit of the tax payment from the time it was due and the respondent submits that to justify any remission of the market rate component it would be necessary to show that, in some way, the Chief Commissioner contributed to the default: Chief Commissioner of State Revenue –v- Incise Technologies Pty. Limited [2004] NSWADTAP 19. The market rate component is also intended to address the inability of the Chief Commissioner and thus the State to use the assessed tax when it is due and is a recognition that the taxpayer continues to have the use of the tax until it is paid: The Ettamogah Mob Australia Pty Limited & Ors –v- Chief Commissioner of State Revenue [2005] NSWADT 22.”

24 Land tax is generally assessed on property that is not occupied by the owner as the principal place of residence (and assessable) as at midnight of 31 December of the previous year. So that if a property is liable and not occupied by the owner as the principal place of residence on 31 December 2001 then land tax is assessable for the land tax year 2002. This is clearly set out in the Fact Sheet – Land Tax 2006. Both parties agreed that the date that the property was managed on behalf of the applicant as rental property was from February 2002. The objection dated 29 December 2006 forwarded to the OSR and signed by the applicant notes that the “Property was my principal place of residence up until late 2001 or early 2002 …”. No evidence was brought by either party as to when the property ceased to be occupied by the applicant.

25 The intention of applying market rate of interest is to place the respondent in the position that the respondent would have been if the land tax had been assess and paid on time and the respondent would have had the use of the money. The imposition of market rate of interest imposes on the applicant the requirement to pay interest on the money that he has had the use of beyond the date of due payment of the land tax. If there are exceptional circumstances then those would be taken into account by the respondent and the Tribunal. In this case the circumstances are ones that often apply in that a land owner ceases occupation of the property as the principal place of residence and intends to return in a reasonably short period as e.g. 5 years.

26 The onus rests on the applicant to furnish land tax returns to the Chief Commissioner in accordance with section 12 LTM Act. Whilst the respondent seeks to actively inform the public of their obligations by way of media advertisements and seminars, this does not alter the onus on the land owner. This onus remains even where the land owner is absent from the State for a reasonably short period.

27 The applicant is clearly a responsible and reliable person and if he had known of his obligation he would have attended to complying. As a land owner he has obligations to comply with including, in this case, local government taxes, State taxes and Commonwealth taxes. It is clear that he would have paid the local government taxes from the rental earned, the Commonwealth taxes on his income including the rental earned and, if he had known, the State tax of land tax. It is possible the land tax may have been a deduction available in respect of the applicant’s income tax.

ORDER

1. Reassessment to be made in respect of the Land Tax Year 2002 following all necessary procedure to establish the date when the applicant ceased to occupy the property as his principal place of residence. On the decision being made by the respondent of this issue the applicant to retain all usual rights to appeal that decision.

2. If the assessment for the Land Tax year 2002 cannot be maintained then a refund of the Land Tax for that year to be made to the applicant and any claim for market rent interest thereon to cease.

3. If the assessment for the Land Tax Year 2002 can be maintained then order 4 applies subject to the applicant exhausting any rights of appeal.

4. The imposition of market rate interest is affirmed.