Samani v Commissioner for Act Revenue (Administrative Review)

[2017] ACAT 93

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

SAMANI & ANOR v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2017] ACAT 93

AT 31/2017

Catchwords:              ADMINISTRATIVE REVIEW – land tax – penalty tax – nonpayment of penalty tax – remission of penalty

Legislation cited:      Land Tax Act 2004, ss 9, 14, 19

Taxation Administration Act 1999 ss 4, 31, 32,33, 37, 107A, 108A, Sch ss 1.1, 1.2

Cases cited:Dowling v Fairfax Media Publications Pty Ltd [2009] FCA 339

Jokhan and Jokhan v Commissioner of ACT Revenue [2012] ACAT 15
RVO Enterprises Pty Ltd v Commissioner of State Revenue [2004] NSWADT 64
Tarrant v Statewide Investments Pty Ltd [2012] FCA 582
Theron v Commissioner of ACT Revenue [2013] ACAT 33

Tribunal:                   Senior Member Prof T Foley

Date of Orders:  7 November 2017

Date of Reasons for Decision:         7 November 2017

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          AT 31/2017

BETWEEN:

DARYOUSH ZARGARI SAMANI &

SOLALEH MAHMOODIAN

Applicants

AND:

COMMISSIONER FOR ACT REVENUE

Respondent

TRIBUNAL:   Senior Member Prof T Foley

DATE:7 November 2017

ORDER

The Tribunal orders that:

1.The decision under review is confirmed.

………………………………..

Senior Member Prof T Foley

REASONS FOR DECISION

1.Daryoush Zargari and Solaleh Mahmoodian (the applicants) have sought review pursuant to section 108A of the Taxation Administration Act 1999 (the Tax Act) of a decision of 31 March 2017 of the Commissioner for ACT Revenue (the respondent) to disallow their objection to penalty tax imposed on land tax assessed on their Bonner property on 29 August 2016.

2.Jurisdiction to review the respondent’s decision is conferred on the Tribunal by section 107A, and Schedule 1 sections 1.1, 1.2(d) of the Tax Act which is an authorising law for the purposes of section 9 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act). The review is an application for review by the ACT Civil and Administrative Tribunal pursuant to section 68 of the ACAT Act.

3.In the reasons below, a reference to ‘ACAT’ or ‘tribunal’ refers to the ACT Civil and Administrative Tribunal generally, whereas ‘Tribunal’ refers to the member who heard the application.

The hearing

4.The matter was heard on 26 July 2017. The Tribunal had before it the documents provided by the respondent on which its decision was based (the T Documents), the submissions and statements of facts and contentions of the parties. The applicants were self-represented by Ms Mahmoodian. The respondent was represented by Ms P Bindon of counsel instructed by Ms K Olesen of the ACT Government Solicitor.

5.The applicants and respondent called evidence, made submissions and responded to questions of the Tribunal.

6.At the conclusion of the hearing the Tribunal reserved its decision and indicated it would provide written reasons. These are those reasons.

Background

7.The applicants are a married couple. Mr Samani is a 39 year old man. Ms Mahmoodian is a 33 year old woman. Ms Mahmoodian is currently employed in Centre Management. Mr Samani is currently in custody on unrelated matters and did not make himself available to give evidence.

8.The applicants were the owners of the property Section 116 Block 2 Bonner (the Bonner property) from October 2011 until it was sold in September 2016. As from 10 October 2013 the property was rented giving rise to a land tax obligation.

9.The applicants say they gave the respondent notice of the rental land status of the Bonner property by posting to the respondent a direct debit request dated 30 January 2014.[1] Accompanying the request was a letter also dated 30 January 2014.[2]

[1] T 63

[2] Exhibit A3

10.The respondent did not receive either the direct debit request or the letter and deny they were sent.

11.The applicants are also the owners of a property Section 126 Block 18 Macgregor in which they reside. On 28 August 2014 the applicants completed a separate direct debit request for that property under the ‘Deferred Duty Scheme’. The request form was posted to the respondent and receipt and acceptance was confirmed by letter dated 1 September 2014.[3]

[3] Statement of Jukka Siiteri dated 17 July 2017 at [8], annexure A and B

12.In August 2016 the purchaser of the Bonner property requested from the respondent a ‘Certificate of Rates, Land Tax and Other Charges’. This caused the respondent to inquire into the rental status of the property. An investigation notice was forwarded to the applicants’ solicitor on 25 August 2016.[4]

[4] T34

13.On 29 August 2016 the respondent issued an assessment of land tax for the Bonner property for $8,072.20.[5] This amount was made up of the assessed land tax, interest and penalty tax of $2,459.43. The penalty tax was calculated at the rate of 50% of the amount of the unpaid tax.

[5] T57

14.On 26 October 2016 the applicant lodged an objection to the respondent’s assessment.[6] This objection appeared to relate only to the assessment of interest. The applicants submitted as they had lodged a direct debit request together with a letter notifying the respondent of the rental status of the Bonner property they should not be subject to penalty tax. On 24 March 2017 the applicants clarified their objection to the assessment related primarily to penalty tax imposed.[7] The respondent accepted an objection in this form on 30 March 2017.[8]

[6] T62

[7] T78

[8] T80

15.On 31 March 2017 the respondent disallowed the applicants’ objection to the imposition of penalty tax.[9]

[9] T9

16.On 27 April 2017 the applicants filed an application for review of a decision.[10]

The relevant law

[10] T4

17.Section 9 of the Land Tax Act 2004 (the Land Tax Act) imposes land tax on owners of land that is ‘rented residential land’.

18.The Land Tax Act is a ‘tax law’ for the purposes of the Tax Act.[11]

[11] Taxation Administration Act 1999 section 4(h)

19.Section 14 of the Land Tax Act requires the land owner of a residential property to notify the respondent in writing within 30 days that the land has been rented and the date when the land became rented.

20.Where a land owner fails to disclose as required by section 14 that the land is rented, the failure is treated as a tax default and the owner is liable to be assessed for penalty tax under Division 5.2 of the Tax Act.[12] The default rate of penalty tax is 25%.[13] However a rate of 50% can be imposed if the Commissioner is satisfied that the tax default was caused wholly or partly by a failure of the taxpayer to take reasonable care to fulfil the taxpayer’s obligations.[14] The respondent has discretion to reduce the penalty tax in certain circumstances.[15]

[12] Land Tax Act 2004 section 19(5)(a)

[13] Taxation Administration Act 1999 section 31(1)

[14] Taxation Administration Act 1999 section 31(2)

[15] Taxation Administration Act 1999 sections 32, 33

21.The respondent also has discretion under section 31(6) to not impose penalty tax in certain circumstances:

31     Amount of penalty tax

(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.

22.The respondent has a discretion under section 37 to remit all or part of any penalty tax if it is satisfied as to certain requirements:

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.

23.A decision to impose penalty tax is internally reviewable and may be reviewed by ACAT.

The applicant’s evidence

24.The applicant Solaleh Mahmoodian provided a written statement and gave evidence.[16] She said she initially advised the respondent on 26 August 2016 and confirmed by letter on 29 August 2016 that she was unaware of her land tax obligation for the Bonner property.[17] She said due to the stress she was under as a result of her husband’s custody she had not recalled the submission of the direct debit request on 30 January 2014.[18] She further gave evidence that a copy of the letter which accompanied the request notifying the respondent of the rental status of the Bonner property had only just come to light.[19]

[16] Statement of Solaleh Mahmoodian dated 26 June 2017, Exhibit A1

[17] Statement of Solaleh Mahmoodian dated 26 June 2017, at [4]

[18] Statement of Solaleh Mahmoodian dated 26 June 2017, at [5]

[19] Exhibit A3

25.Ms Mahmoodian gave evidence that she was suffering from extreme stress and anxiety because of her husband’s situation and she had sought professional assistance in January 2016. She provided a copy of a report from Nomchong Psychology dated 29 January 2016 written to her then solicitors to that effect.[20] The report did not extend to the period of August 2016 when the incorrect reasons for the applicants’ failure to notify the respondent were given.

[20] Exhibit A4

26.Ms Mahmoodian’s evidence was when she was shown the direct debit request dated 30 January 2014 in or about October 2016 she then had a clear recollection of having signed it at that time.

27.Armin Zargari gave evidence on behalf of the applicants. Mr Zargari gave his evidence by telephone and with the assistance of an interpreter from the Telephone Interpreting Service in the Farsi language. Mr Zargari said he was present in his uncle’s (Mr Samani) house on 30 January 2014. His evidence was that he saw both the applicants sign a form on that day and he was told by his uncle that the form related to tax on their Bonner property. He says after he saw them signing it, the form was put with other documents to be sent. He did not see the form going into the envelope. He said he then drove his uncle to the post office to send it off. He did not go into the post office with his uncle as he was parking his car. In cross examination Mr Zargari conceded that his knowledge of the form was from what his uncle told him. He conceded it was possible that the form he saw signed was a separate form at a separate time sometime in August 2014. However he had a recollection that it was the January 2014 date as this was a significant family birthday with which he connected it in time.

28.Mr Samani advised the Tribunal in a written statement dated 21 June 2017 that he did not wish to be present at the hearing to give evidence because of the stress he was suffering in custody. This was in spite of virtual access being available to him via video link. The respondent made submissions as to the regard the Tribunal should have to his evidence in those circumstances.

The respondent’s evidence

29.The respondent’s assistant manager in the operations unit Mr Jukka Siiteri gave oral evidence and provided a written statement.[21] Mr Siiteri gave evidence as to the respondent’s usual practice now and as at January 2014 for recording the receipt and actioning of a direct debit request form.[22] Such procedure includes entering the form into the respondent’s database called ‘Community’. His evidence was that on 11 July 2017 in preparation for the hearing he searched the database for evidence of the entry of the form which the applicants say they forwarded on 30 January 2014. He also searched the database for evidence of any correspondence prepared by the respondent confirming receipt of the application. No such documents were found.[23] Mr Siiteri gave further evidence that accompanying annual rate notices sent to landowners is a pamphlet advising owners of possible land tax liability. Notices in similar form have been sent since approximately 1991 and such a notice would have accompanied the rate notice sent to the applicants for the Bonner property in July 2013.

[21] Statement of Jukka Siiteri dated 17 July 2017, Exhibit R1

[22] Statement of Jukka Siiteri dated 17 July 2017 at [3]

[23] Statement of Jukka Siiteri dated 17 July 2017 at [5]

30.Mr Siiteri’s evidence was that the lodgement of a direct debit request on its own does not meet the requirements of the landowner’s obligation of liability for land tax as it does not notify the date any liable property became rented.[24] His evidence was that if he had received the request form dated 30 January 2014 it would have been his practice to contact the applicants and he would have kept a file note of any such conversation.

The applicant’s contentions

[24] Statement of Jukka Siiteri dated 17 July 2017 at [6]

31.The applicants say they did not fail to notify the respondent about the rental status of the Bonner property. They say they did provide the required notification by posting a signed direct debit request form and an accompanying letter to the respondent’s office on 30 January 2014. They concede that notice was delayed as the property had first been rented in October 2013 but say they were not aware of their obligation with respect to land tax till then.[25]

[25] Applicants’ submissions dated 22 June 2017 page 1

32.As a consequence the applicants submit they should not be liable for land tax from 30 January 2014 until the property was sold in September 2016. They rely on the provisions of section 31(6) of the Tax Act, specifically that they “took reasonable care to comply with the tax law” (section 31(6)(a)) in sending the form, and that the “default happened solely because of circumstances beyond the taxpayer’s control” (section 31(6)(b)) in that the respondent did not take reasonable care with the form on its receipt and lost it.

33.The applicants say that the early account given for their failure to notify the respondent of the rental status of the Bonner property, namely that they were simply unaware of their obligations, was due to the stress and anxiety caused by Mr Samani’s personal circumstances due to his custody and the resultant psychological distress to Ms Mahmoodian.

The respondent’s contentions

34.The respondent’s contention is that the direct debit request and accompanying letter were not sent to its office by the applicants on 30 January 2014 as claimed. The respondent says it maintains a robust document management system and that a comprehensive search of that system since this excuse was proffered by the applicants has failed to identify any evidence of the form or letter ever having been received.[26]

[26] Respondent’s statement of facts and contentions dated 17 July 2017 at [42]

35.The respondent contends the applicants’ evidence in this regard should not be accepted and that on the best construction of Mr Zargari’s evidence he either did not know what he saw being signed or he is mistaken as to the date on which that occurred.[27]

[27] Respondent’s statement of facts and contentions dated 17 July 2017 at [43]

36.The respondent contends that the evidence of Mr Samani in his statement of 21 June 2017 should be excluded. It contends that his evidence goes to crucial matters of fact and his failure to make himself available for cross examination means neither his evidence nor his credit could not be tested.

37.The respondent contends that there is no evidence on which the Tribunal could be satisfied that any of the exculpatory factors in section 31(6) exist nor could it be satisfied that the grounds for remission under section 37 of the Tax Act are made out.[28]

[28] Respondent’s statement of facts and contentions dated 17 July 2017 at [44]

38.For completeness the respondent says though the applicants have abandoned their reliance on the contention that they were unaware of their obligations to notify the respondent of the rental status of the Bonner property, this in itself is not a reasonable excuse. The respondent has taken reasonable steps to bring obligations as to land tax to their attention by enclosing the relevant pamphlet with their annual rates notice.[29] Further the applicants’ ignorance of the law cannot satisfy the requirements of section 31(6) or section 37.[30]

The matter at issue

[29] Citing Theron v Commissioner of ACT Revenue [2013] ACAT 73

[30] Respondent’s statement of facts and contentions dated 17 July 2017 at [37]-[38] citing Jokhan and Jokhan v Commissioner of ACT Revenue [2012] ACAT 15

39.The evidentiary matter at issue is whether there is evidence the direct debit request was posted to the respondent on 30 January 2014 such as would give rise to the application of the provisions of section 31(6) or section 37.

40.The Tribunal accepts that the evidence of Mr Samani with respect to the events of the 30 January 2014 cannot be accepted. He chose not to make himself available for cross examination and so neither his recollections nor his credit could be tested. The importance of the right to cross-examine when the proceedings are conducted on witness statements especially where the witness is a party was reiterated by the Federal Court of Australia in Tarrant v Statewide Investments Pty Ltd.[31] The effect of this failure is that his evidence where it relates to the contested matter of whether the direct debit request of 30 January 2014 was sent must be given no weight Dowling v Fairfax Media Publications Pty Ltd.[32]

[31] [2012] FCA 582 at [35]

[32] [2009] FCA 339 at [13]

41.The Tribunal accepts the submissions of the respondent with respect to the evidence of Ms Mahmoodian that her recollections were all based on what her husband had told her. These recollections were also affected by her difficulties with memory as a result of the anxiety and stress she was experiencing at the relevant times due to her husband’s situation. There is no suggestion of dishonesty by Ms Mahmoodian. The Tribunal accepts that her evidence may be constructed by the recollection of events she gained from Mr Samani. It cannot be satisfied that she has a reliable independent recollection of the events in question.

42.The evidence of Mr Zargari likewise rests on what he was told he was witnessing. He has no direct knowledge that he saw a direct debit request form being signed on 30 January 2014. Additionally there is some doubt that the event he says he witnessed may not have occurred on the relevant date.

43.Accordingly on the balance of probabilities the Tribunal cannot be satisfied that the direct debit request form said to constitute the required notice was sent. Similarly it cannot be satisfied that the letter of 30 January 2014 said to accompany it was sent.

44.This finding as to fact affects the Tribunal’s consideration of whether the applicants should have the benefit of section 31(6) to remove the obligation of the assessed penalty tax or whether the respondent should remit under section 37 all or some of the penalty tax payable.

45.Section 31(6) provides that the amount of penalty tax payable can be reduced to nil if it can be established that the taxpayer (i) took reasonable care to comply with the tax law or (ii) the default with respect to that compliance happened because of circumstances beyond their control. The tax law compliance in this case is the requirement under section 14 of the Land Tax Act for owners of residential priority to notify the respondent within 30 days that residential property has become rented.

46.The first question is whether the applicants took reasonable care in meeting this requirement. As to taking reasonable care RVO Enterprises Pty Ltd v Commissioner of State Revenue[33] makes clear this is essentially a question of fact in each case. It says that factors such as forgetfulness, failure to maintain records or failure to have in place systems preventing errors from occurring do not excuse non-compliance. The Tribunal has found it cannot be satisfied that the direct debit request of 30 January 2014 nor the accompanying letter were sent to the respondent. Reasonable care for receipt was crucial to the applicants’ meeting their obligations. There was a failure to confirm that it had been received. There was a failure to check that land tax was being deducted from the applicants’ nominated account to meet their obligation. The Tribunal cannot be satisfied in these circumstances that reasonable care was taken.

[33] [2004] NSWADT 64 at [23]

47.The second question is whether there were circumstances beyond the applicants’ control that caused the default in their obligations. Implicitly their suggestion is the circumstances arose because of default or lack of reasonable care by the respondent. The applicants’ contention is that the respondent lost what was sent to it and these are circumstances beyond their control. The respondent’s contention is that it could not take reasonable care for what was not received. There is evidence that the respondent has practices and procedures that satisfy the requirement noted in Theron v Commissioner of ACT Revenue[34] that it take reasonable steps to make landowners aware of their tax obligations. On the applicants’ submissions it is only they who have knowledge that the direct debit request was sent. In these circumstances it was not sufficient to merely send it and do nothing further by way of follow up. The Tribunal finds the default did not happen because of circumstances beyond the applicants’ control.

[34] [2013] ACAT 73 at [59]

48.The provisions of section 37 allow the respondent to remit (where it would be fair and reasonable to do so) penalty tax property payable where (i) the taxpayer took reasonable steps to mitigate the circumstances that resulted in the liability for penalty tax, or (ii) that the circumstances that resulted in the liability for penalty tax were exceptional. It is important to look at those circumstances which gave rise to the respondent’s decision to impose penalty tax.

49.The obligation to pay land tax on the Bonner property came to light because of its sale and the subsequent investigation by the respondent. It did not come to light because of a disclosure by the applicants. As such it was treated as a tax default and this gave rise to a liability to pay penalty tax in addition to the land tax and interest.[35] In the applicants’ case penalty tax at the rate of 50% was imposed based on the respondent’s assessment that the default was caused by the taxpayers’ failure to take reasonable care to fulfil their obligation.[36]

[35] Land Tax Act 2004 section 19A(5)(a)

[36] Taxation Administration Act 1999 section 31(2)

50.Remission of penalty tax must be an exceptional event in any circumstances. It is designed to impose automatic penalties as general deterrence for tax default.[37] It must be similarly exceptional here give the circumstances that led to its imposition. As indicated there is nothing to support the applicants’ contention that they took reasonable steps to mitigate its imposition. On the second leg of section 37 they must establish that there is something special or exceptional about their circumstances that take them outside the position of an ordinary taxpayer in default such that they should be treated differently. An ordinary taxpayer may be tardy, may be disorganised, or may be reluctant but he or she is still ordinary. There is nothing in the evidence before the Tribunal that sets the applicants out as other than ordinary in this regard.

Tribunal’s Conclusions on the matter at issue

[37] Jokhan and Jokhan v Commissioner of ACT Revenue [2012] ACAT 15 at [28]

51.The Tribunal finds it cannot be satisfied on the evidence that the direct debit request and accompanying letter were sent by the applicants to the respondent on 30 January 2014.

52.It finds that there is no basis under section 31(6) of the Tax Act that penalty tax should not be paid. It finds that there is no basis under section 37 for the penalty tax assessed to be remitted in whole or in part. Accordingly the decision under reviews should be confirmed.

Decision

53.The Tribunal confirms the decision under review to disallow the applicants’ objection to the penalty tax imposed on land tax assessed on their Bonner priority on 29 August 2016.

………………………………..

Senior Member Prof T Foley

HEARING DETAILS

FILE NUMBER:

AT 31/2017

PARTIES, APPLICANT:

Daryoush Zargari Samani

Solaleh Mahmoodian

PARTIES, RESPONDENT:

Commissioner for ACT Revenue

COUNSEL APPEARING, APPLICANT

N/A

COUNSEL APPEARING, RESPONDENT

Ms P Bindon

SOLICITORS FOR APPLICANT

N/A

SOLICITORS FOR RESPONDENT

ACT Government Solicitor

TRIBUNAL MEMBERS:

Senior Member Prof T Foley

DATES OF HEARING:

26 July 2017