Sar v Chief Commissioner of State Revenue

[2024] NSWCATAD 246

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Sar v Chief Commissioner of State Revenue [2024] NSWCATAD 246

Hearing dates:

20 December 2023

Date of orders:

22 August 2024

Decision date:

22 August 2024

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

S Higgins, Senior Member

Decision:

(1) The imposition of surcharge purchaser duty is confirmed.

(2) Subject to any agreement reached by the parties regarding remittal of interest, the following orders are made:

   (a) on or before 6 September 2024, the applicant to provide written submissions as to why interest should be remitted. In his submissions the applicant is to indicate, whether in his opinion the issue of remittal of interest is suitable for determination on the papers; and

   (b) on or before 20 September 2024, the respondent to file and serve any written submissions in reply. In his submissions the respondent is to indicate, whether in his opinion the issue of remittal of interest is suitable for determination on the papers.

Catchwords:

TAXES AND DUTIES – surcharge purchaser duty – Duties Act 1997 (NSW), Chapter 2A - foreign person – principal place of residence exemption Duties Act 1997 (NSW), Chapter 2A Part 4, s 104ZKA (4) – whether the applicant’s ‘use and occupation’ of the residential land as his principal place of residence commenced from the time his wife and family took possession of the residential land

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW)

Duties Act 1997 (NSW)

Foreign Acquisitions and Takeovers Act 1975 (CTH)

Land Tax management Act 1956 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Black v Chief Commissioner of State Revenue [2011] NSWADT 66

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86

Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68

Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340

Golden Age & Hannas the Rocks v Chief Commissioner of State Revenue [2024] NSWSC 249

Griglio v Chief Commissioner of State Revenue [2024] NSWCATAD 212

Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301

Zhu v Chief Commissioner of State Revenue [2004] NSWCATAD 231

Texts Cited:

None cited

Category:

Principal judgment

Parties:

Eng Huat Sar (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Solicitors:
Applicant self-represented
Crown Solicitor for the Respondent

File Number(s):

2023/00237403

Publication restriction:

N/A

Reasons for decision

1. The applicant, Eng Huat Sar, seeks administrative review of the 29 March 2023 Notice of Assessment (the Assessment) issued by the respondent, the Chief Commissioner of State Revenue, for surcharge purchaser duty in respect of the applicant’s purchase, on 30 June 2018, of a residential property at St Marys in NSW (the Property): Duties Act 1996 (NSW) (Duties Act) Chapter 2A Part 1. Included in the Assessment was interest: Taxation Administration Act 1996 (NSW) (TA Act) section 15 and Division 1 of Part 5.

2. Part 1 of Chapter 2A of the Duties Act makes provision for the charging of surcharge purchaser duty on dutiable transactions to a ‘foreign person’. Dutiable transactions include an agreement for the sale or transfer of residential-related property to a foreign person: Duties Act section 104L(1)(b)(i).

3. A ‘foreign person’ is defined in section 104J(1) of the Duties Act to mean a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Foreign Acquisition and Takeovers Act) of the Commonwealth, as modified by that section. The modifications are of no relevance to this application.

4. Section 4 of the Foreign Acquisition and Takeovers Act defines the term ‘foreign person’ as an individual who is not ‘ordinarily resident’ in Australia. Section 5 of the Foreign Acquisition and Takeovers Act provides that an individual who is not an Australian citizen is ‘ordinarily resident’ in Australia at a particular time if and only if:

(a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time, and

(b) at that time—

(i) the individual is in Australia and the individual’s continued presence in Australia is not subject to any limitation as to time imposed by law, or

(ii) individual is not in Australia but, immediately before the individual’s most recent departure from Australia, the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law.

5. Part 4 of Chapter 2A of the Duties Act make provision for specified exemptions or concessions from surcharge purchaser duty, including section 104ZKA which contains an exemption for certain permanent residents in respect of principal places of residence

6. In this application, there is no dispute that:

1. the Property that is the subject of this application is a residential-related property; and

2. at the time the applicant purchased the Property he was a ‘foreign person’ and liable for surcharge purchaser duty under Part 1 of Chapter 2A of the Duties Act as he had not actually been in Australia for 200 or more days in the 12 months immediately before his purchase of the Property on 30 June 2018.

7. What is in dispute is whether the principal place of residence exemption in section 104ZKA of the Duties Act applies to the applicant’s purchase of the Property. As I have explained below, the dispute is centred on whether the applicant satisfied the ‘residence requirement’ in s 104ZKA(4) of the Duties Act by having ‘used and occupied’ the Property as his or her principal place of residence for a continuous period of at least 200 days within the first 12 months after the ‘liability date’. The respondent found that the applicant had failed to meet the 200 day ‘residence requirement’ by 11 days. The applicant contends that he does satisfy the ‘residence requirement’ as his use and occupation of the Property commenced on 2 December 2018 and not 24 December 2018.

8. In the event it is found that the applicant does not satisfy the ‘residence requirement’ the applicant also seeks review of the interest component of the respondent’s Assessment. It is his contention that it should be remitted in whole or part.

9. For the reasons set out below, I have decided:

1. that the principal place of residence exemption in section 104ZKA of the Duties Act does not apply to the applicant’s purchase of the Property and that the applicant is liable for surcharge purchaser duty on his purchase of the property the subject of this application; and

2. that the parties should be given an opportunity to provide further submission on the issue of remittal of interest in the event they ar not able to informally settle the issue.

The jurisdiction and role of the Tribunal

10. There is no dispute that the Tribunal has jurisdiction to hear and determine the applicant’s application for administrative review of the respondent’s 29 March 2023 Assessment: Administrative Decisions Review Act 1997 (NSW) ADR Act sections 7 and 9 and TA Act section 96.

11. The role of the Tribunal on administrative review is to decide the correct and preferable decision, having regard to any relevant factual material before it and any applicable law: ADR Act section 63(1).

12. Section 100(3) of the TA Act provides that the applicant has the onus of proving, his case, which requires him to prove, on the balance of probabilities, all matters necessary for the Tribunal to answer the statutory question in his favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [30] to [36]. In the absence of the applicant discharging his onus, the respondent’s Assessment prevails.

13. Section 101(1) of the TA Act sets out the powers of the Tribunal in determining an application for review made under section 96 of that Act, which includes:

1. to confirm or revoke the assessment or other decision to which the application relates; and

2. to remit the matter to the respondent for determination in accordance with the Tribunal’s findings or decision.

14. Section 101(2) of the Duties Act provides that nothing in section 101(1) limits the powers of the Tribunal in Division 3 of Part 3 of Chapter 3 of the ADR Act and section 60 of that Act.

Material before the Tribunal

15. In support of his application the applicant relied on:

1. An affidavit he affirmed on 23 September 2023; and

2. An affidavit he affirmed on 7 November 2023.

16. The respondent did not object to these affidavits being admitted into evidence but noted that to some extent they consisted of submissions and not evidence. The respondent did not otherwise object to that which was evidence, and the applicant was not required for cross-examination.

17. In support of his case the respondent relied on a large bundle of documents that were provided to the Tribunal and the applicant pursuant to s 58 of the ADR Act. The documents in that bundle were, indexed, paginated and tabulated.

18. In addition to the s 58 documents, the respondent provided detailed written submissions.

Surcharge purchaser duty, principal place of residence exemption and interest

Surcharge purchaser duty – when it is charged, when it arises and when it is to be paid

19. As noted above:

1. section 104L(1) of the Duties Act makes provision for surcharge duty to be chargeable on the dutiable transactions, which includes a transfer or an agreement for sale or transfer of residential-related property to a ‘foreign person’;

2. the term ‘foreign person’ is defined in s 104J(1) and (2) of the Duties Act to be a person within the meaning of the Foreign Acquisitions and Take Overs Act as modified by that section; and

3. section 104J(3) of the Duties Act provides that for the purposes of charging surcharge purchaser duty on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises (or would arise but for section 53A or a concession or exemption from duty under that Chapter);

20. Section 104N provides that, in respect of a surcharge duty transaction that is an agreement for sale or transfer, the transfer of the residential-related property is taken to have occurred when the agreement is entered.

21. Section 104Q provides that section 12 of the Duties Act applies in respect of surcharge duty in the same way as it applies in respect of duty charged under Chapter 2 of the Duties Act. Section 12 provides that a liability for duty arises when a transfer of dutiable property occurs, and that where such a transfer is affected by an instrument, liability arises when that instrument is first executed.

22. Surcharge duty is to be paid within three months after the liability arises: Duties Act section 104W.

Principal place of residence exemption

23. Section 104ZKA of the Duties Act relevantly provides as follows:

104ZKA   Exemption for certain permanent residents in respect of principal place of residence

(1)  No surcharge purchaser duty is chargeable on a transfer, or an agreement for the sale or transfer, of residential-related property if each transferee under the transfer or agreement who would otherwise be liable to pay that duty is an exempt permanent resident.

(2)  A transferee under a transfer or agreement is an exempt permanent resident if:

(a) the transferee is a permanent resident when a liability for duty charged by Chapter 2 on the transfer or agreement arises (or would arise but for a concession or exemption from duty under that Chapter), and

(b)  the Chief Commissioner is satisfied that the transferee intends to use and occupy the residential land to which the residential-related property relates as a principal place of residence in accordance with the residence requirement.

(3)  …

(4)  The residential land must be used and occupied by the exempt permanent resident as his or her principal place of residence for a continuous period of at least 200 days within the first 12 months after the liability date. This requirement is referred to as the residence requirement.

(5)  The liability date is the date on which liability to surcharge purchaser duty first arose in respect of the share in the residential-related property transferred, or agreed to be transferred, to the exempt permanent resident.

(6)  If the residence requirement is not complied with in relation to the residential land, the Chief Commissioner must assess or reassess the surcharge purchaser duty chargeable on the transfer or agreement as if the exemption under this section had never applied.

(7)  A reference in this section to the use and occupation of residential land as a principal place of residence in accordance with the residence requirement includes:

(a)  in the case of a land use entitlement, a reference to the use and occupation of the building or part of the building to which the entitlement relates, as a principal place of residence in accordance with the residence requirement, and

(b)  in the case of a utility lot (within the meaning of the Strata Schemes Management Act 2015), a reference to the use of the utility lot in conjunction with a strata lot used and occupied as a principal place of residence in accordance with the residence requirement.

Interest

24. Section 21 of the TA Act provides that, if a ‘tax default’ occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid.

25. Section 3 of the TA Act defines ‘tax default’ as a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay. The term ‘taxation laws’ is defined in section 4 of the TA Act to include the Duties Act.

26. Section 22 of the TA Act makes provision for the applicable rate of interest as follows:

22 Interest rate

(1) The interest rate is the sum of:

(a) the market rate component, and

(b) the premium component.

(2) The market rate component is:

(a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or

(b) the rate specified for the time being by order of the Minister published in the Gazette.

(3) The premium component is 8% per annum.

27. Section 25(1) of the TA Act provides that the Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount. Section 25(2) and (3) provide that the respondent may issue guidelines setting out how interest must be remitted and where such guidelines are issued, interest must be remitted only in accordance with the guidelines.

Undisputed facts

28. The applicant was born in Malaysia. I understand the applicant is a citizen of both Malaysia and Singapore.

29. The applicant initially obtained an Australian permanent resident visa in 1999 when he migrated to Australia with his first wife.

30. Around this time, the applicant was employed as an IT Systems Engineer with Singapore Airlines. During this time the applicant worked in Singapore and Australia.

31. In 2004 Singapore Airlines outsources its IT work to IBM Singapore. The applicant’s employment was transferred to IBM Singapore. While the applicant’s work became Singapore based, his then wife and family remained in Australia. The applicant came back to Australia as often as he could, but mainly resided in a government-built public housing apartment in Singapore.

32. The applicant divorced in 2013. He remarried in 2016. The applicant remained employed with IBM Singapore and he and his wife resided in his Singapore apartment.

33. In January 2017, the applicant was granted a further Australian permanent resident visa. In April 2017, the applicant’s then wife (wife) and stepson obtained a Partner (Provisional) (subclass 309) Visa.

34. In December 2017, the applicant and his wife decided to migrate to Australia. However, the applicant retained his job with IBM Singapore. It is his evidence that he retained this job as he could not find a job in Australia. However, his wife and the applicant’s stepson migrated to Australia on 8 December 2017.

35. On 9 December 2017, the applicant and his wife, rented a residential property at Parramatta in NSW. The applicant returned to Australia on this day and he, his wife and stepson took possession of the rented property. Prior to 9 December 2017, the applicant and his wife moved most of their possessions from the Singapore apartment and the applicant’s mother-in-law, sister-in-law and her family took possession of the apartment. However, the applicant continued to stay in the Singapore apartment as he continued being employed by IBM Singapore.

36. On 30 June 2018 the applicant entered into the contract to purchase the Property the subject of this application. The applicant and his wife were initially recorded as the purchasers of the Property. This was subsequently amended and the applicant became the sole purchaser of the Property. A condition of the contract was as follows:

The parties agree that there will be a Lease Agreement entered into between the Vendors and Purchases, to be executed and provided at settlement to which the vendors will rent the Property back from the Purchasers for a period of up to five months from the date of settlement, at a weekly rental amount of $290.

This contract is conditional upon the Lease Agreement in the usual form and containing the usual terms of a residential lease in NSW being agreed to by both parties and this clause shall not be deleted or amended.

37. On 17 August 2018, the applicant completed a ‘Purchaser/Transferee Declaration’ form in which he indicated that he indicated that he was not a foreign person and that he was a person ordinarily resident in Australia. The applicant also indicated that he was ‘an exempt permanent resident who will occupy the property as their principal place of residence for a continuous period of 200 days within the first 12 months after the liability date (date of agreement)’.

38. In accordance with the 30 June 2018 contact (agreement), on 20 August 2018, the applicant and the vendor of the Property entered into a residential tenancy agreement for the period 24 August 2018 to 23 January 2019.

39. Settlement of the Property occurred on 24 August 2018.

40. On 2 December 2018, the vendor/tenant vacated the Property and the applicant’s wife took possession of the Property on this day. The applicant was not in Australia on this day – he was in Singapore working for IBM Singapore.

41. On 7 December 2018, the applicant gave notice of his resignation to IBM Singapore.

42. The applicant returned to Australia on 24 December 2018 and has resided in the Property since his return.

Time spent out of Australia by the applicant

43. As noted above, on 9 December 2017, the applicant is recorded as having arrived in Australia from Singapore.

44. Seven days later, on 16 December 2017, the applicant departed Australia for Singapore. He did not return until 14 February 2018. Five days later, on 19 February 2018, the applicant again departed Australia for Singapore. `

45. The applicant did not return to Australia until 30 March 2018. He departed again on 8 April 2018 and did not return to Australia for two months, on 14 June 2018. He was in Australia for 10 days and returned to Singapore on 24 June 2018.

46. It is not disputed that, in the 12 months prior to 30 June 2018 (the agreement date and the taxing date), the applicant had been in Australia for 40 days, making him a ‘foreign person’ for the purpose of s 104J of the Duties Act.

47. After having departed Australia on 24 June 2018, the applicant did not return to Australia for almost two months, on 17 August 2018. The applicant then departed Australia nine days later, on 26 August 2018, which was two days after the settlement of the Property.

48. As noted above, the applicant did not return to Australia until 24 December 2018 and he has remained in Australia since that time, having resigned from his IBM position.

The respondent’s investigation

49. On 6 October 2022, the respondent issued a Notice of Investigation to the applicant concerning a potential liability for surcharge purchaser duty for his purchase of the Property and requested the production of documents.

50. On 22 October 2022, the applicant provided the respondent with a completed ‘Principal Place of Residence Questionnaire’ in which he declared that he had occupied the Property as his principal place of residence from 2 December 2018.

51. The applicant provided further documents to the respondent on 28 October 2022, 15 November 2022 and between 15 and 19 March 2023.

52. As noted above, on 29 March 2023, the respondent issued its Assessment that is the subject of this application. That Assessment was based on the respondent having found that the applicant was a foreign person at the time of the dutiable transaction (the date on which the contract was entered for the purchase of the Property) and the applicant having failed to reside in the Property as his principal place of residence in compliance with the residency requirement in s 104ZKA(4) of the Duties Act.

53. In April 2023, the applicant paid the amount assessed (including interest) in the respondent’s Assessment.

The applicant’s case

54. It is the applicant’s case that he does meet the residence requirement in the s 104ZKA(4) exemption, as the Property became his principal place of residence on 2 December 2018. This was the day on which he ‘possessed the Property’ through his wife and family having moved all their and his personal belongings into the Property and began residing there.

55. In reliance on the decision of the Supreme Court in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 (Flaracos), the applicant contended that the term ‘use and occupy’ in s 104ZKA(4) of the Duties Act does not require the physical presence of the taxpayer for the entire period of the prescribed 200 days. In support of his case the applicant also relied on the decisions of the former Administrative Decisions Tribunal in Black v Chief Commissioner of State Revenue [2011] NSWADT 66 and the decision cited therein.

56. In his submissions of 7 November 2023, the applicant submitted that:

1. he should not be unreasonably penalised as the Property is and always has been his and his family’s main and sole principal place of residence since 2 December 2018 until 30 June 2019; and

2. he has fully co-operated with the respondent’s investigation, and while there had been some delay, this delay was due to the initial notice of the investigation having been sent to the wrong address. This caused, the interest component to increase, but once the notice was forwarded to him, he co-operated fully.

The respondent’s case

57. As noted by the respondent, there are two aspects to the application of the principal place of residence exemption in section 104ZKA of the Duties Act. The first aspect is found in section 104ZKA(2) and the second aspect is found in section104ZLA(4).

58. In this application the respondent accepts that the first aspect of section 104ZKA is satisfied in that the respondent is satisfied that, as at the taxing date (30 June 2018), the applicant intended to use and occupy the residential land as his/her principal place of residence.

59. However, the respondent contends that the applicant has failed to establish that the second aspect of section 104ZKA has not been satisfied. That is, the applicant has failed to establish that he used and occupied the Property as his principal place of residence for a continuous period of 200 days by 30 June 2019.

60. In this regard the respondent identified the matter in issue as being whether the applicant could commence use and occupation of the Property as his principal place of residence for a continuous period of 22 days prior to physically taking up residence in the Property on 24 December 2018. It is the contention of the respondent that he could not do so. In support of his contention the respondent relied on the decision of the Court of appeal in De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86.

61. The respondent’s submissions did not specifically address the issue of interest. However, it was raised during the hearing.

Consideration

Does the applicant satisfy the residence requirement in s 104ZKA(4)?

62. The words ‘use’ and ‘occupy’ are not defined in the Duties Act and should be given their ordinary meaning in the context in which they appear in the Duties Act. These words, as noted above, are used in s 104ZKA(4) of the Duties Act in the context of an exemption to surcharge purchaser duty, where the foreign purchaser of the residential land the subject of that duty is an exempt permanent resident and has ‘used’ and ‘occupied’ the residential land as his or her principal place of residence for a continuous period of at least 200 days within the first 12 months after the liability date (for example the contact date).

63. Whether a person has ‘used’ and ‘occupied’ the residential land as his or her principal place of residence within the meaning of s 104ZKA(4) is ultimately a question of fact: De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86 (De Marco) at [72] and Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340 (Ghali) at [30].

64. In my view, the decision of Gzell J in Flaracos is of no assistance to the applicant, as it turned on its own facts. It was a case that related to the plaintiff’s claim that his land was exempt from land tax because he had used and occupied the land as his principal place of residence: Land Tax Management Act 1956 (NSW) Sch 1A, Part 2, cl 2(2)(b). It was accepted that the land had been the plaintiff’s principal place of residence. However, for the land tax year(s) in issue, the evidence was that the plaintiff had rented his residence for short periods of time during that year(s) and the issue was whether the land was nevertheless exempt from land tax because it remained the plaintiff’s principal place of residence. At [29] and [30] Gzell J found that it was the plaintiff’s principal place of residence:

29 In my opinion continuous physical presence on the land is not required to constitute continuous occupation. If a person leaves his or her premises for a holiday, it would defeat the purpose of the Act to conclude that occupation had ceased to be continuous. So long as the person retains the right to possession and controls possession, that person remains in occupation, in my view. The observation of Sir Nigel Bowen in Christie that physical presence over all the land is not necessary to establish occupation is equally apposite when there is some hiatus in physical presence over time.

30 In the instant circumstances, there were extended periods of two to three months during which the plaintiff was absent from his Peakhurst home and during which various tenants were in possession. That does not seem to me to have contravened the requirement in s 3(3)(a) of the Act for continuous occupation. The plaintiff was in occupation of the premises when he and a tenant were physically present in it. Like the tenant he was in possession but unlike the tenant he had the right of control. When he left on his extended trips he intended to and did return to live in the premises. During his physical absence he retained the right to possession and he maintained his rights of control over the land.

65. In this case, it is not disputed that the applicant used and occupied the Property from 24 December 2018. But what is in issue is whether the applicant’s ‘use’ and ‘occupation’ of the Property commenced at the same time as his wife took possession of the Property on 2 December 2018.

66. In my opinion, having regard to the express terms of section 104ZKA(4), the applicant’s use and occupation did not commence at the time his wife took possession of the Property. As noted above, section 104ZKA(4) specifically requires the taxpayer, and no other person, to have ‘used and occupied’ the Property ‘as his or her principal place of residence’. In this case, the evidence is that, at the time the applicant’s wife took possession of the Property, the applicant had been and was continuing to reside in Singapore as this is where he worked. And while I fully understand why the applicant had continued to reside in Singapore, this on the evidence, is where he lived and resided until 24 December 2018.

67. In this regard I note the remarks of Basten JA in Ghali at [34]:

34 The reasoning of the Tribunal was erroneous for one or both of two reasons. Either it took the view that the intention of the appellant to return to Beecroft Road, once he had completed renovations at Harold Avenue (a process which took six years and was not completed within the relevant period), demonstrated "use and occupation" of Beecroft Road, or it took the view that the use of the property by his wife, with his permission, constituted use for residential purposes. So far as the first view is concerned, an intention to use and occupy land in the future does not by itself demonstrate present physical use and occupation. So far as the second view is concerned, the statutory reference to use and occupation of the land as a residence is to use and occupation by the owner as his or her residence, not use and occupation by another person with his or her consent. Were it otherwise, an owner would always use and occupy residential premises as a residence, but that would not conform to the statutory purpose.

68. While the decision in Ghali also related to a claim for exemption from land tax under cl 2 of Part 2 of Schedule 1A of the Land Tax Management Act, the facts in that case differed substantially from those in Flaracos where it was accepted that Mr Flaracos had used and occupied the land as his principal place of residence. In Ghali the evidence was that Mr Ghali had at no time used or occupied the land as his principal place of residence.

69. In this case, it is accepted that the applicant used and occupied the Property from 24 December 2018. However, his use and occupation from that dated failed to meet the required 200 days within the 12 months after the liability date (30 June 2018). Hence, I find that the applicant has failed to establish that the exemption in s 104ZKA of the Duties Act applies to his purchase of the Property.

70. Based on my finding above, I find that the applicant is liable for surcharge purchaser duty on his purchase of the Property and to this extent the Assessment of the respondent regarding the imposition of surcharge purchaser duty should be confirmed.

Interest

71. Based on my findings above, the applicant’s failure to pay the purchaser surcharge duty on the date it was due, constitutes a tax default for which the applicant is liable to pay interest (TA Act section 21), unless remitted by the respondent under s 25 of the TA Act.

72. While I am not critical of either party, there is insufficient material before the Tribunal to consider the issue of the remittal of interest under s 25 of the TA Act.

73. I accept that other than having raised the issue in his affidavits the applicant did not specifically address this issue in the context of the respondent’s Practice Note CPN 024 that sets out how the respondent will exercise his powers on remission.

74. The question is whether he should be given that opportunity, as the onus remains on him to prove that the circumstances of his case warrant a remission of interest. In my opinion, he should be given that opportunity.

75. In this regard, I note that the issue of remittal of interest has recently been considered by the Tribunal in Zhu v Chief Commissioner of State Revenue [2004] NSWCATAD 231 at [83] – [90], Griglio v Chief Commissioner of State Revenue [2024] NSWCATAD 212 at [43] – [62] and Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [85] – [96].

76. What these decisions make clear is that:

1. the market rate component of interest approximates the ordinary lending interest rates and is intended to compensate the respondent for not having the benefit of the tax payment from the time it was due and payable. And it is a component that could rarely, if ever, be waived; and

2. the premium rate component of interest ‘is penal in nature and serves the purpose of both imposing a penalty and deterring taxpayers from delaying payment of duty in what is essentially a self-assessment’: Golden Age & Hannas the Rocks v Chief Commissioner of State Revenue [2024] NSWSC 249 at [102].

77. In my opinion, this is an issue that could be quickly resolved informally between the parties. However, in the event it cannot resolved quickly, orders should be made for the applicant to file and serve short written submissions on this issue, having regard to the undisputed facts in this case and the abovementioned decisions and the respondent filing and serving any written submissions in reply. In my opinion, subject to any views the parties may have, a determination of this issue would be suitable for determination on the papers, pursuant to section 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

Conclusion and orders

78. For the reasons set out above I have decided:

1. that the applicant is liable for surcharge purchaser duty on his purchase of the Property and to this extent the Assessment of the respondent regarding the imposition of surcharge purchaser duty is confirmed; and

2. further submissions are required from the parties regarding the issue of the remittal of interest and to this extent the Assessment of the respondent is reserved pending any agreement between the parties or in the absence of any agreement, a determination of this issue on the papers before the Tribunal.

79. Hence, I make the following orders:

1. The imposition of surcharge purchaser duty is confirmed.

2. Subject to any agreement reached by the parties regarding remittal of interest, the following orders are made:

1. on or before 6 September 2024, the applicant to provide written submissions as to why interest should be remitted. In his submissions the applicant is to indicate, whether in his opinion the issue of remittal of interest is suitable for determination on the papers; and

2. on or before 20 September 2024, the respondent to file and serve any written submissions in reply. In his submissions the respondent is to indicate, whether in his opinion the issue of remittal of interest is suitable for determination on the papers.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 22 August 2024