Tanaskovic v Commissioner for Act Revenue
[2018] ACAT 116
•16 November 2018
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
TANASKOVIC v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2018] ACAT 116
AT 51/2018
Catchwords: ADMINISTRATIVE REVIEW – land tax – penalty tax – section 30 of the Taxation Administration Act 1999 – degree of culpability
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 9, 68
Land Tax Act 2004 ss 7
Taxation Administration Act 1999 ss 4, 14, 30, 31, 34, 100, 107A, 108A, 129 and Sch 1 ss 1.1 and 1.2
Cases cited:Steele v Commissioner for ACT Revenue [2010] ACAT 15
Theron v Commissioner for ACT Revenue [2013] ACAT 33
Tribunal: Senior Member Professor T Foley
Date of Orders: 16 November 2018
Date of Reasons for Decision: 16 November 2018
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 51/2018
BETWEEN:
SAMMIE TANASKOVIC
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Senior Member Professor T Foley
DATE: 16 November 2018
ORDER
The tribunal varies the decision under review so that the amount of penalty tax payable is reduced to 50%.
………………………………..
Senior Member Professor T Foley
REASONS FOR DECISION
Sammie Tanaskovic (the applicant) has sought review of a decision of 14 May 2018 of the Commissioner for ACT Revenue (the respondent) to disallow an objection to a land tax assessment issued 12 October 2017 pursuant to the Taxation Administration Act 1999 (the Tax Act).
Jurisdiction to review the respondent’s decision is conferred on the Tribunal by sections 107A, 108A and Schedule 1 sections 1.1, 1.2 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). This is an application for review by the ACT Civil and Administrative Tribunal pursuant to section 68 of the ACAT Act.
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
The matter was heard on 3 October 2018. 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 applicant was self-represented. The respondent was represented by Mr Wayne Sharwood of counsel instructed by the ACT Government Solicitor.
The applicant called evidence, both parties made submissions and responded to questions of the Tribunal.
At the conclusion of the hearing the Tribunal reserved its decision and indicated it would provide written reasons. These are those reasons.
Background
The applicant is a 40 year old man. He acquired a property in Calwell in the ACT (the property) in 2003.
Previously, the applicant had rented the property for various periods in 2005-2007 but did not notify the respondent. He was subsequently assessed for land tax including penalty tax set at a rate of 25% in 2008 which sum was paid.[1] The property continued to be rented until April 2009 at which time the applicant returned to live there and notified the respondent in writing that as from that time “…my property…will no longer be rented out. Instead I will be residing there”.[2]
[1] T documents, pages 29-31
[2] T documents, page 32
Later, in August 2017 the respondent again investigated the rental status of the property on its regular rolling review having accessed data from the Australian Taxation Office and elsewhere.[3]
[3] T documents, page 67-69
On 14 August 2017 the respondent issued a residential land tax notice to the respondent pursuant to section 82 of the Tax Act following such investigation.[4] On 6 September 2017 the applicant returned the completed notice admitting the property has been rented again for certain periods in 2012-2013.[5] He subsequently confirmed it had in fact been rented for the period 15 March 2012 to 30 June 2014.[6]
[4] T documents, page 70-72
[5] T documents, page 73-76
[6] T documents, page 78
On 12 October 2017 the respondent assessed the applicant as liable to pay land tax on the property for that period in the total sum of $11,124.80 including penalty tax at the rate of 75% and interest.[7]
[7] T documents, page 79-82
On 5 December 2017 the applicant lodged an objection to the land tax assessment.[8] On 14 May 2018 the respondent disallowed the objection which is a reviewable decision.
[8] T documents, page 83-85
On 11 June 2018 the applicant applied to the ACAT for review of the reviewable decision.
The relevant law
By virtue of Part 2 of the Land Tax Act 2004 (the Land Tax Act) land tax is payable on rateable land that is ‘rented residential land’. The relevant definitions for ‘rent’ in section 7 provides:
7 Definitions for pt 2
…
rent means valuable consideration for which a tenant is liable under a tenancy agreement in relation to the tenancy or a period of the tenancy.
The Land Tax Act is a ‘tax law’ for the purposes of the Tax Act.[9] The respondent has power under the Tax Act to make an assessment of the land tax liability of a taxpayer.[10]
[9] Section 4(e) of the Tax Act
[10] Section 14 of the Tax Act
A land tax assessment notice may be given to a taxpayer, inter alia:
(a) personally; or
(b) by leaving it at the last address of the person known to the commissioner (including, for a corporation, the registered address or a business address of the corporation); or
(c)by post addressed to the person at the last address of the person known to the commissioner (including, for a corporation, the registered address or a business address of the corporation); or
(d) by a means indicated by the person as being an available means of service (for example, by fax or by delivering it, addressed to the person, to the facilities of a document exchange)
…[11]
[11] Section 129(1) of the Tax Act
There are a number of provisions relating to the imposition of penalty tax.
Where a taxpayer has defaulted, the taxpayer is liable to pay penalty tax in addition to the unpaid tax (and any interest payable).[12] The Tax Act provides with respect to the rate of that penalty:
(a)The default rate is 25%.[13]
(b)If the commissioner is satisfied the default was due wholly or partly by the failure of the taxpayer to take reasonable care the rate is 50%.[14]
(c)If the commissioner is satisfied the default was due wholly or partly by an intentional disregard by the taxpayer of a tax law the rate is 75%.[15]
(d)If the commissioner is satisfied the default was the result of concealment or deliberate interference with records or the investigation by the taxpayer the rate is 90%.[16]
[12] Section 30 of the Tax Act
[13] Section 31(1) of the Tax Act
[14] Section 31(2) of the Tax Act
[15] Section 31(5) of the Tax Act
[16] Section 34 of the Tax Act
A taxpayer may lodge a written objection with the respondent in relation to a land tax assessment.[17]
The applicant’s evidence and contentions
[17] Section 100 of the Tax Act
The applicant's evidence was that for the period 15 March 2012 to 30 June 2014 the property was managed by agents, Peter Blackshaw Real Estate (to 4 June 2013) and McGrath Estate Agents (to 30 June 2014). At no time did either of these agents alert him to his obligation to advise the respondent that the property was rented. The applicant said he advised his accountant of all rental income received during this period and these sums were declared in his income tax returns. At no time did his accountant advise him of his reporting obligation to the respondent.
The applicant said he has no conscious knowledge of the prior investigation and the issue of a notice of liability for land tax in 2008. He said he had travelled extensively in the six year period up to 2009 residing in Europe for up to six months each winter. During that time rate notices for the property went to his mother’s address and she attended to payment of all rates and charges.
The applicant contends there are extenuating circumstances relevant to his failure to notify the respondent that the property was again rented between 2012-2014. His son, born in 2012, has had a longstanding recurrent painful ear infection and this has been both distressing and time consuming for the family.[18] His wife has also had significant health issues in the last 12 months.[19] He himself has been severely depressed for in excess of two years due to the collapse of a business in which he was involved and the suicide of a colleague and friend.[20]
The respondent’s contentions
[18] Exhibit A1, medical certificate from Isabella Plains Medical centre dated 23 June 2018
[19] Exhibit A3, medical certificate from Dr Svitlana Saburova dated 26 July 2018
[20] Applicant’s statement dated 23 August 2018
The respondent contends that the applicant failed to notify the respondent in writing or at all that the property was rented during the relevant period.[21]
[21] Respondent’s statement of facts and contentions, dated 4 September 2018, paragraph 38(b)
The respondent further contends that the penalty tax rate of 75% is appropriately imposed and there is no basis under section 31 that it should be altered.[22] The respondent specifically referred to:
[22] Respondent’s statement of facts and contentions, dated 4 September 2018, paragraph 41
(a)an information brochure regarding land tax was which included in the applicant’s annual rate assessment in each relevant year;[23]
[23] Respondent’s statement of facts and contentions, dated 4 September 2018, paragraph 41(b)
(b)it being the applicant’s responsibility under the legislation to inform himself of his land tax liabilities;[24]
[24] Respondent’s statement of facts and contentions, dated September 2018, paragraph 41(c) citing
Theron v Commissioner for ACT Revenue [2013] ACAT 33
(c)the applicant being previously investigated for not disclosing rental of the property in 2008 which resulted in a penalty tax imposition at the rate of 25% for that failure;[25] and
[25] Respondent’s statement of facts and contentions, dated September 2018, paragraph 41(g)
(d)having regard to that prior investigation and the statement in the applicant’s letter to the respondent of 23 April 2009, this default by the applicant was caused by his intentional disregard of his obligation to pay land tax.[26]
[26] Respondent’s statement of facts and contentions, dated September 2018, paragraph 41(h)
The matter at issue
The sole matter at issue is the rate of penalty tax payable by the applicant. There is no dispute land tax as assessed is payable. There is agreement that the rate and amount of interest imposed by the respondent is not subject to review by the tribunal.
The applicant submitted the amount of penalty tax payable be reduced to 25%. The respondent submitted it remain as assessed at 75%.
As the tribunal made clear in Theron v Commissioner for ACT Revenue[27] it is the taxpayer who “needs to ascertain what tax liabilities may exist”. The applicant cannot rely on the failure of others to advise him of this.
[27] [2013] ACAT 33 at [16]
Similarly the tribunal has considered, in Steele v Commissioner for ACT Revenue,[28] that “the amount of penalty tax clearly depends on culpability”.
[28] [2010] ACAT 15 at [49]
The parties agreed that a convenient shorthand for the penalty tax levels imposed in section 31 of the Tax Act is 25% where the default is innocent; 50% which it is careless; and 75% where it is due to intentional disregard. There was no suggestion that the applicant was intentionally defrauding the ACT Revenue.
Tribunal’s conclusions on the matter at issue
The Tribunal's view is that penalty tax applicable should be set at the level of failure to take reasonable care, rather than at the level of intentional disregard. There is plausible evidence that it was his mother and not he who was aware of the previous investigation in 2008 which led to unearthing a land tax default. This default was assessed by the respondent as innocent. However the applicant’s letter of 23 April 2009 where he advised the respondent “my property will no longer be rented out” can only suggest that he was then aware of any future obligation to report rentals. From early 2012 when the property was again rented, there is plausible evidence that he had less care for his taxation obligations, specifically his reporting duties with respect to land tax. His son’s persistent ill health since birth and the stress that placed on he and his wife would have been a major concern. I accept this as a plausible explanation for why his regard and attention was elsewhere than on his reporting obligations. His reliance on assumed direction from estate agents and his accountant provides no additional excuse.
Given these findings the Tribunal finds that the applicant’s culpability falls below that of intentional disregard. The default arose because the applicant did not exercise due care. The appropriate level of penalty tax payable to reflect this degree of culpability is 50%.
Decision
The Tribunal varies the decision under review, so that the amount of penalty tax payable is reduced to 50%.
………………………………..
Senior Member Professor T Foley
HEARING DETAILS
FILE NUMBER: | AT 51/2018 |
PARTIES, APPLICANT: | Sammie Tanaskovic |
PARTIES, RESPONDENT: | Commissioner for ACT Revenue |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | Mr W Sharwood |
SOLICITORS FOR APPLICANT | N/A |
SOLICITORS FOR RESPONDENT | ACT Government Solicitor |
TRIBUNAL MEMBERS: | Senior Member Professor T Foley |
DATES OF HEARING: | 3 October 2018 |
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