Weir v Chief Commissioner of State Revenue

[2006] NSWADT 38

CITATION:	Weir v Chief Commissioner of State Revenue [2006] NSWADT 38
DIVISION:	Revenue Division
PARTIES:	APPLICANT Kathryn Irene Weir RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	056078
HEARING DATES:	5/12/05
SUBMISSIONS CLOSED:	12/05/2005
DATE OF DECISION:	02/08/2006
BEFORE:	Verick A - Judicial Member
CATCHWORDS:	First Home Owners grant - reversal of original decision
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	First Home Owner Grant Act 2000 Taxation Administration Act 1996
CASES CITED:	Snow v. Chief Commissioner of State Revenue (No.1) [2005] NSWADT 244
REPRESENTATION:	APPLICANT J Maspero, solicitor RESPONDENT B Baker, solicitor
ORDERS:	Decision under review affirmed.

1 This is an application by Ms Kathryn Irene Weir (“the applicant”) seeking a review of a decision by the Chief Commissioner of State Revenue (“the Chief Commissioner”) under the First Home Owner Grant Act 2000 (‘the Act”). The Chief Commissioner’s decision was that the applicant repay the $7,000 first home grant that she had been paid in relation to a property at 1 Campbell Street, Wooloweyah (“the property”). The Chief Commissioner also imposed a 20% penalty of $1,400, which meant that the applicant was required to pay a total sum of $8,400.

2 The basis of the Chief Commissioner’s decision was the applicant’s failure to occupy the property as her principal place of residence within twelve months of having purchased the property as required by section 12 of the Act.

3 The applicant has conceded both in her own statement submitted to the Tribunal and through her solicitor at the hearing that the property was not occupied as required by section 12 of the Act. The residence requirement set out in section 12(1) requires an applicant “to 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”. The only issue for determination is whether the Chief Commissioner properly imposed the 20% penalty.

4 The applicant purchased the property under a contract dated 6 January 2003 with the purchase completed on or about 6 February 2003. The property when purchased was subject to a residential tenancy agreement, which expired on 14 February 2003. But the property continued to be leased on a short-term basis for a period and for longer terms thereafter. It remains leased and the applicant has not occupied the property.

5 The applicant against the background of a marriage breakdown purchased the property. She had intended to move from Sydney to the property with her son from the marriage but, among the orders made by the Family Court in relation to her separation with her husband, required her to remain in Sydney as she was restrained from relocating her son outside a 40 km radius of the Sydney GPO for a period of 3 years. The relevant order was made on 11 July 2003.

6 The Chief Commissioner received the applicant’s application dated 29 March 2003 for a grant on 5 August 2003. The grant was paid to the applicant on 27 August 2003. In a combined client services and compliance project undertaken by the Chief Commissioner, a letter was sent to the applicant for confirmation that the property was occupied by her within the period allowed. In response a letter was received by the respondent from the applicant’s conveyancing solicitor confirming that the applicant had not been able to occupy the property as the Family Court judgment handed down on 11 July 2003 prevented her from relocating her child’s residence outside the Sydney metropolitan area for a period of three years. In the circumstances, the Chief Commissioner determined on 19 April 2005 that the applicant was not entitled to the grant and proceeded to issue an assessment under section 45 of the Act to recover the grant and imposed a penalty of 20%. Under the assessment the applicant was required to repay the $7,000 grant and a pay an additional amount of $1,400 being the 20% penalty imposed by the respondent.

7 The applicant lodged and objection against the assessment on 23 May 2005.

8 The applicant claims in her objection and at the hearing that she was acting on advice given by her conveyancing solicitor in making the application for the first home grant. She also relies on the restraining order made by the Family Court, which prevented her from occupying the property. The respondent disallowed the objection on the grounds that the applicant had failed to occupy the property within 12 months and that the penalty of 20% was correctly reduced from 100% that the law allowed to be imposed in the circumstances surrounding the restraining order made by the Family Court.

9 The Act was amended by the State Revenue Legislation Further Amendment Act 2003 with the amendments coming into operation on 27 November 2003 but they do not apply to this matter. The relevant legislation for consideration is the provisions of the Act as it stood prior to the amendments made in 2003. The scheme of the Act is quite simple. Section 12 sets out the residence requirement. Section 20(1)(b) of the Act provides that the respondent may authorise the payment of a grant in anticipation of compliance with the residence requirement. Section 20(3) of the Act provided at the relevant time that where a grant was paid prior to an applicant occupying the property as his or her permanent place of residence, the payment was made on condition that, if the residence requirement was not complied with, the applicant was required to within 14 days after the end of the period allowed for compliance: (a) give notice of that fact to the Chief Commissioner; and (b) repay the amount of the grant.

10 If an applicant fails to repay the grant, section 45 gives the Commissioner the power to request the repayment of the grant and to impose a penalty. Section 45 provides, inter alia, that the Chief Commissioner may, by written notice, require an applicant for a first home owner grant to repay an amount paid if the amount was paid in error or the Chief Commissioner reverses the decision under which the amount was paid for any other reason. In addition the section allows the Chief Commissioner to impose a penalty not exceeding the amount the applicant is required to repay if the amount was either paid as a result of the applicant’s dishonesty or if the applicant required to make the repayment fails to make the repayment as required by this section. In the present matter the amount of penalty imposed was 20% of the amount of the grant.

11 As at the date of hearing, the applicant had not repaid the grant, although the Chief Commissioner had offered to waive the penalty if it had been paid soon after the assessment was issued. The question for consideration is whether the penalty was correctly imposed. In short whether there are circumstances here to justify the imposition of the penalty.

12 Section 45 does not provide any guidance as to the quantum of the penalty that should be imposed in individual cases other than limiting the maximum penalty to the amount of the repayment. The respondent has not issued any guidelines or rulings to suggest how the Chief Commissioner imposes penalty in individual cases. The operation of the penalty provision found in section 45 has, however, been considered by this Tribunal in a number of cases, which were cited by the Chief Commissioner.

13 Essentially, as observed by the President of the Tribunal in Snow v. Chief Commissioner of State Revenue (No.1) [2005] NSWADT 244 “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 in the TAA”. The President went on to observe that it would “be rare when the market rate could be 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)” but “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” and that “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)”.

14 In Snow the President was of course referring to the interest and penalty tax scheme found in Part 5 of the Taxation Administration Act 1996. Part 5 provides for the imposition of penalties comprising of a market rate of interest and a fixed premium rate of interest. The amount of penalty to be imposed depends on the level of culpability in each individual case. These provisions have been considered in several cases by the Tribunal including the following: Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, Olah v Chief Commissioner of State Revenue [2002] NSWADT 22, Moore v Chief Commissioner of State Revenue [2002] 44 and Monaro Invests Pty Ltd v Chief Commissioner of State Revenue [2003] NSWADT 234.

15 In this case the Tribunal accepts that the applicant had the intention of occupying the property in January 2003 when she signed the contract to purchase the property. But there is undisputed evidence that when the application for First Home Owner Grant was lodged on 5 August 2003 the applicant was aware that she was not in a position to occupy the property for a fairly lengthy period of time. She was in fact not qualified to make the application. The applicant’s explanation for backdating the application to 28 March 2003 and lodging it in August 2003 when she was not entitled to the grant was on the basis of advice she received from her conveyancing solicitor. That is a matter between the applicant and her solicitor and the Tribunal is in no position in the present proceedings to adjudicate on that issue.

16 The applicant clearly made an application on 5 August 2003 after the Family Court order for the grant in circumstances when she was not entitled to the grant. In the application signed by the applicant, the applicant acknowledged that, ”under the First Home Owner Grant Act 2000, penalties will apply for making a false or misleading statement in or in connection with an application for a first home grant”. The declarations made by the applicant in the application included a statement that she would occupy the property as her principal place of residence within 12 months of the date of settlement. The applicant accordingly made an incorrect and misleading declaration in relation to occupation of the property. The statement was made without any reasonable care.

17 The applicant has also failed to repay the grant as required by the Act. When all the circumstances of this case are taken into account there are no grounds for the Tribunal to interfere with the Chief Commissioner’s judgment to impose the 20% penalty. The decision to impose the 20% penalty was also in accordance with principles that have been fairly settled by this Tribunal as explained in Snow. The decision under review is accordingly affirmed.