Snow v Chief Commissioner of State Revenue (No 1)

[2005] NSWADT 244

CITATION:	Snow v Chief Commissioner of State Revenue (No 1) [2005] NSWADT 244
DIVISION:	General Division
PARTIES:	APPLICANT Jeffrey Ian Snow RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	043263
HEARING DATES:	19/07/2005
SUBMISSIONS CLOSED:	07/19/2005
DATE OF DECISION:	10/27/2005
BEFORE:	O'Connor K - DCJ (President)
APPLICATION:	first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision
MATTER FOR DECISION:	Principal application
LEGISLATION CITED:	Duties Act 1997 First Home Owners Grant Act 2000 Taxation Administration Act 1996
CASES CITED:	Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41
REPRESENTATION:	APPLICANT In person RESPONDENT B Baker, solicitor, Crown Solicitor's Office
ORDERS:	Decision under review affirmed

1 The applicant has lodged with the Tribunal applications for review of determinations made by the Chief Commissioner of State Revenue (the Commissioner).

2 The applicant completed the purchase of his first home on 23 November 2001. It was located at Banora Point near Tweed Heads. He obtained a First Home Owner Grant (‘FHOG’) ($14,000), following application under the First Home Owner Grant Act 2000 to the Commissioner. He was also given the First Home Plus (‘FHP’) stamp duty concession ($4772) by the Commissioner following application made under the First Home Plus provisions of the Duties Act 1997, Part 8, Division 1.

3 The Commissioner has since issued assessments requiring the repayment of the grant and reimbursement of the concession, plus penalties. In the opinion of the Commissioner, a condition common to both matters was not satisfied by the applicant – the requirement that the applicant occupy the home as his principal place of residence within the time prescribed by the applicable law.

4 The Commissioner accepts that his determination relating to the FHOG is a decision that is reviewable by the Tribunal. The Tribunal agrees. The Commissioner has submitted that the FHP determination is not reviewable, though the practice of his Office had been to notify taxpayers disputing a FHP determination that they had a right of review by the Tribunal (in this case, see the letter from the Office dated 12 May 2005).

5 This decision will deal with the first application for review. A separate decision will be issued dealing with the question of the Tribunal’s jurisdiction as it relates to FHP decisions.

Recovery of First Home Owner Grant

6 The FHOG Act deals with the requirements for eligibility for a grant at ss 7 to 12. The matter in dispute in this case, the residence requirement, is dealt with by s 12. Section 12 was in these terms at the time relevant to the present grant:

‘ 12 Criterion 5—Residence requirement

(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant’s principal place of residence within 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner.

(2) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement.’

7 It is clear that the Act, as expressed at the relevant time, did not necessarily require a long period of occupation in order for a person to be able to show that the home was occupied as the principal place of residence. For example, in one case in the Tribunal the Tribunal was satisfied (affirmed on appeal by the Appeal Panel) that, in the circumstances, a period of only three weeks occupation as a principal place of residence was enough to satisfy the occupation requirement of the Act: Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41. The law now requires a period of 6 months’ occupation.

8 The Commissioner is entitled to make the grant in advance of occupation, and did so in this case. His office moved to recover the grant when it questioned the applicant as to his circumstances, and was not satisfied with his response. The applicant was, at all relevant times, a permanent member of the Royal Australian Navy. His shore posting as at November 2001 was Darwin. Tweed Heads was his home town, and his parents lived there in the family home. He regularly returned to the family home when granted leave.

9 He relies on one brief period of occupancy of his new home to satisfy s 12(1). He had home leave soon after the date of settlement (23 November 2001). At hearing he gave evidence that he moved personal possessions including wardrobe, clothing and bedding and some whitegoods, from the family home to his new home on or about 26 November 2001 and lived there for a short period (a few days). This was the extent of his actual period of occupation of the home. This evidence is not disputed by the Commissioner.

10 The crucial question (s 12(1)) is did this short period of occupation amount to occupation of the home ‘as the applicant’s principal place of residence’.

11 The applicant explained that his inability to make any greater personal use of the property was affected by service requirements. As at September 2001 he had a temporary posting to HMAS Adelaide, a guided missile destroyer, operating out of Darwin but whose home base was Rockingham near Fremantle. He had signed the contract to buy the property in September 2001. His expectation that he would be able to occupy the property on a regular basis when on home leave was dashed by changes in Australian defence arrangements following on from the 11 September attack on New York.

12 As a result, on recall to duty in early December his ship went to sea for several months. He gives this as the explanation for his putting the property on the market for rent. A tenant was found, and a lease executed on 18 December 2001. The tenants moved in on a 6 months’ term on 23 January 2002, by which time the applicant’s personal possessions had been removed from the home.

13 As it transpired, the applicant never again occupied the home.

14 The Tribunal accepts that the applicant did hold for some time a general intention to occupy the property again at some point, but that, ultimately that became impractical (due to the return of HMAS Adelaide to Rockingham, and he now had a permanent posting to that ship). He sold the property in 2003 and has since bought in the Fremantle area.

15 At all times relevant to this application, the applicant’s residential accommodation was provided by the Navy either at sea or, when on shore, in barracks style accommodation made available to persons who are single, in the sense that they have no dependant - spouse, children or otherwise. This is how the applicant lived apart from the times when he returned, essentially on recreation leave, to be with his parents.

16 As noted, he did take the opportunity to reside in his new home when he came home just after the settlement. He remained a serving member of the Defence Force with a posting to an important military vessel.

17 It is not possible, on these facts, to reach any conclusion other than that during the days he lived at his new house, his principal place of residence remained accommodation provided by the Navy (either aboard ship or in the single mens barracks).

18 Moreover the move that he made to the home was an insubstantial one. It afforded him the opportunity to live away from his parents for a few days while on leave. He did not take any of the other steps that one might have expected to accompany such a move, such as making arrangements in relation to utilities bills (gas, electricity, water and the like) and telephone accounts. There was no evidence of rudimentary activities connected with such a move such as purchase of food, cooking at the new home and so on.

19 This is not a case like Ferrington. The Tribunal in that case said (extracted at [15] of Appeal Panel’s decision):

‘The question then is whether Ms Ferrington occupied the premises and, secondly, if she did so, she did so as her principal place of residence. Each of these questions is a question of fact. …

In my view, occupation has been shown by the documentation annexed to the statutory declaration sworn by Ms Ferrington in reply to the first inquiry by the Chief Commissioner. Those documents show that the gas was connected and used, that the electricity was connected in her name between 5 June and 29 June 2001, and that the telephone was connected for the relevant period and that the telephone bill was paid, showing that she used the telephone at the home at that time.

I am satisfied, therefore, that she occupied the premises for the period 5 June to 28 June. Whether the occupation was by way of her principal place of residence is a question to be answered by reference not only to the purpose of the occupation – in this case, it was as her home – but also to the type of occupation. She says, and it was not contested, that she occupied the property in order to live there and, in leaving her parents' premises, she did so with the intention that the Miranda premises were her principal place of residence.

The question of whether an occupation was by way of principal place of residence is not necessarily answered by the length of time of occupation or, in this case, the lack of a lengthy period of time. No minimum time is specified in the Act and if I am satisfied that the applicant occupied the premises as her main or primary home for a period of time, then she must succeed.’

20 The Appeal Panel after an exhaustive survey of many relevant authorities going to the interpretation of the words ‘principal place of residence’ in a variety of legislative contexts, referred to the following principles (references to authorities omitted) at [42] of its reasons:

‘42 First, the words “principal place of residence” should be given their ordinary meaning in the context in which they appear: … . Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling: … Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue: …. Fourthly, to occupy a home as his or her principal place of residence a person’s occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose: …. Fifthly, the short length of a person’s residence, while relevant, is not determinative of the issue: …. This is so since a recipient’s occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible, …. Sixthly, the reasons for a person’s departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances: … .’

21 These factors are far from satisfied in this case. The evidence in this case points more towards an investment motivation. The applicant moved immediately to let the property, and did so for a conventional leasing period. He simply retained the option of occupying it in void periods if he happened to have returned home at such a time. It was a simple matter to move in some personal possessions for that purpose. His parents lived nearby, and they had the vehicle to assist with such a move.

Penalty Tax

22 The matter which remains is that of penalty tax. The form of penalty tax imposed by FHOG Act, s 45, is not to be confused with the form of penalty tax applied under the provisions of the principal legislation administered by the Commissioner, the Taxation Administration Act 1996 (TAA). Section 45 provides:

‘ 45 Power to require repayment and impose penalty

(1) The Chief Commissioner may, by written notice, require an applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if:

(a) the amount was paid in error, or

(b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason.

(2) If, as a result of an applicant’s dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay.’

23 Here the amount imposed was 30%. The FHOG Act’s regime for dealing with default differs from the regime applicable to ordinary tax defaults. Under the TAA, a taxpayer in default may be called on to pay ‘interest’ on the amount due and ‘penalty tax’. ‘Interest’ is assessed at the ‘market’ rate and often has added to it a ‘premium component’. These two items at present add up to about 13%. On top of that the usual rate of ‘penalty tax’ is set at 25% and this may be moved up or down having regard to the conduct of the taxpayer in dealing with the default and with the Commissioner over the matter. The FHOG Act approach does not involve differentiation of this kind.

24 As at the date of hearing, the grant had not been repaid. It was due to be repaid once the twelve months’ period had passed. In my opinion, at the least, the penalty tax for the purposes of this legislation should be administered as though it has market rate and premium components so as to reflect the usual approach found in the TAA. The cases would, the Tribunal thinks, be rare when the market rate could reasonably be waived (this rate reflects, as the Tribunal sees it, the opportunity cost that the revenue suffers by not having had the benefit of the money). One would expect to see more flexibility in dealing with the premium component which, as the Tribunal sees it, is meant to function as a general deterrent to misconduct. Any penalty beyond those levels should address conduct which involves some type of specific misconduct by the taxpayer (for example, lack of full co-operation and candour on the part of the taxpayer).

25 The Tribunal has some concern that the true picture as to the period of the applicant’s actual physical occupation of the property did not emerge until he gave oral evidence at the Tribunal. His previous statements and the submissions (mainly made by his father) appeared to state, and this was certainly how the Tribunal and the Commissioner read them, that his actual period of occupation was close to two months, i.e. 26 November 2001 to 18 January 2002. It emerged at hearing that the applicant regarded himself as ‘in occupation’ because no one else was in occupation during that period, and because he had his personal possessions there. The correspondence that passed between the Commissioner and the applicant was, in the Tribunal’s view, clear enough that what the Commissioner was interested in knowing about was the period of actual occupation of the property.

26 This aspect of the matter should have been clear from the outset. The case has involved the generation of a large amount of material, and the Commissioner undertaking searches with various bodies with a view to obtaining corroboration of the applicant’s claims. There have been copious materials supplied to the Tribunal. The Commissioner has, in the Tribunal’s view, been put to a deal of expense beyond the reasonable in dealing with this case.

27 The Tribunal sees no reason to interfere with the Commissioner’s judgment setting the penalty tax at the capped amount of 30%.

ORDERS

Decision under review affirmed.