FVK v Chief Commissioner of State Revenue [2023] NSWCATAD 118
Background
The Applicant bought a Putney Property in December 1990. The Applicant had also owned property in South West Rocks (“SW Rocks Property”), which was bought in early 2018. From 29 January 2018 to February or March 2022, the Applicant lived in the SW Rocks Property and tenanted the Putney Property for most of that period. In either in February or March 2022 the Applicant returned to live in the Putney Property.
The Chief Commissioner issued an assessment for the 2019 to 2021 Land Tax years on 1 October 2021 and for the 2022 Land Tax year on 5 January 2022. The Assessments levied land tax on the Putney Property on the basis that it was not subject to the Principal Place of Residence Exemption (“PPR Exemption”), and applied the PPR Exemption to the SW Rocks Property for all tax years.
On 8 August 2022, the Applicant lodged an objection to the Assessments, which was disallowed by the Chief Commissioner on 1 September 2022. The Applicant then applied for administrative review in the Tribunal on 25 October 2022.
The Statutory Framework
Section 10(1)(r) provides that exempt land includes land exempt under the PPR Exemption provided for in Sch 1A of the Act. Relevantly, for present purposes, cl 2(1) of Sch 1A provides that the PPR Exemption applies for residential land that is “used and occupied” by the owner as a principal place of residence. Clause 2(2) of Sch 1A relevantly provides that land is not used and occupied as a principal place of residence unless:
- the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the calendar year preceding the Land Tax year (cl 2(2)(a)); or
- the Chief Commissioner is satisfied that the land is used and occupied by the person as the person’s principal place of residence (cl 2(2)(b)).
Section 3 of the LTMA defines “Principal place of residence” as the one place of residence that is the principal place of residence of the person. Pursuant to s. 8 of the LTMA, Land Tax is charged on land owned by taxpayers as at midnight on the 31st of December of the calendar year immediately preceding the year on which Land Tax is levied.
Section 21 of the TAA imposes liability on the taxpayer to pay interest on unpaid tax in the event of a tax default. Pursuant to s. 22 of the TAA, interest imposed is comprised of the “market rate component” and the “premium component”. Section 25 of the TAA provides that the Chief Commissioner may remit either or both components “in such circumstances as the [Chief Commissioner] considers appropriate”.
Submissions
The Applicant’s primary submission (i.e. Ground 1) was that the PPR Exemption should have applied to the Putney Property during the relevant Land Tax years in dispute. This was because she had maintained it as her Principal Place of Residence, had a connection with the property as a family home (having lived in the property since December 1990 and having raised her sons in the property) and had always regarded it as her “home”. Further, the Applicant submitted that she was prevented, due to restrictions imposed by COVID-19 public health orders, from returning to the Putney Property earlier and was therefore unable to claim the PPR exemption in respect of the property earlier than 2022.
The Applicant also contended that the Assessments should be set aside on other bases, namely:
- the Chief Commissioner had failed to keep her, as a resident of NSW, adequately informed regarding land tax liability and requirements, including in relation to the operation of the PPR Exemption (i.e. Ground 2);
- the Chief Commissioner had acted unfairly by not allowing her sufficient time to complete a land tax questionnaire after notifying her of the assessed value of her land. The Applicant also contended that the completion and lodgement of the questionnaire was further delayed due to her ill-health (i.e. Ground 3);
- the Chief Commissioner had acted unfairly and improperly by communicating inadequately with her(i.e. Ground 4); and
- the relevant legislation was “unreasonable, inflexible and punitive” (i.e. Ground 5).
The Chief Commissioner submitted that the Putney Property was not subject to the PPR Exemption for the 2019 to 2022 Land Tax years as the Applicant did not use or occupy that property, in the relevant sense, as at midnight on the 31st December of each of the calendar years preceding those Land Tax Years (i.e. as at the 31st December of 2018, 2019, 2020 and 2021).
Decision
In relation to Ground 1, SM Currie found that, on the uncontested facts, the Putney Property was not “used and occupied” by the Applicant during the relevant Land Tax years for the purposes of cl 2 of Sch 1A of the LTMA because:
- the Applicant here did not dispute that, between January 2018 and early 2022, her principle place of residence was the SW Property;
- the Applicant had not resided at the Putney Property any time from January 2018 to early 2022 (including at the taxing dates for the relevant Land Tax years);
- the Putney property had been leased to tenants from January 2018 to November 2021 and the Applicant did not have a right of possession to the property during that period (at [36](3));[1]
- although the Applicant had, and continues to have, a strong emotional attachment to the Putney Property, emotional and family ties to the property were not sufficient to satisfy the “residence” requirement. Instead, what was required was actual possession, use and occupation of the property (at [36](4)).[2]
With respect to Ground 2, the Tribunal found that there was no obligation at law on the part of the Chief Commissioner to keep citizens advised or warned about their potential tax liability (at [39]). Correspondingly, there was no remedy available at law for “un-warned” taxpayers.[3]
With respect to Ground 3, SM Currie found that where was no duty for the Chief Commissioner to promptly issue a Land Tax Questionnaire once a notice of valuation is issued and also noted that it was the Valuer-General and not the Chief Commissioner who was responsible for issuing notices of valuation to landowners (at [41]).
With respect to Ground 4, SM Currie did not consider anything in the material before him to establish any unfair, improper or inadequate communication between the Applicant and the Chief Commissioner. Even if communication of that nature was apparent, it would not have provided a sufficient basis for the Assessments to be set aside (at [42]-[44]).[4]
With respect to Ground 5, SM Currie found that there was no legal obligation on the NSW Parliament to enact revenue legislation that was demonstrably reasonable, flexible and non-punitive. Similarly, there was no restriction on the Chief Commissioner to only administer and enforce revenue legislation falling within that description.
The Tribunal concluded that the Chief Commissioner’s decision to issue the Assessments was the correct and preferable decision.
In relation to interest, it was noted that, although “exceptional circumstances” were required to be made out to justify the remission of the market component of interest (at [59]),[5] it was not necessary to show that such circumstances existed for the purposes of remitting the premium component (at [60]). The Tribunal noted that the criteria set out in Incise Technologies[6] could guide the exercise of the discretion to remit the premium component of interest in the absence of any publicly available guidelines, but noted that those criteria were not exhaustive (at [63] and [70]). The Tribunal affirmed the decision to impose the market component of interest, but set aside the decision to impose the premium component for the Chief Commissioner to consider on the basis that the Applicant had been co-operative in providing information, had to some extent acknowledged her liability to pay the full amount of Land Tax and had suffered from health conditions (at [71]).
Orders
- Each of the Chief Commissioner’s assessments of land tax in respect of the 2019, 2020, 2021 and 2022 land tax years is affirmed.
- The decision by the Chief Commissioner to impose interest on the land tax payable by the Applicant by reference to the market rate component is affirmed.
- The decision of the Chief Commissioner to refuse to remit the premium component of interest on the land tax payable by the Applicant (“the premium component decision”) is set aside and remitted for reconsideration by the Chief Commissioner in accordance with the following recommendation of the Tribunal.
The Tribunal recommends that the premium component decision be re-considered by reference to the following matters in addition to any others the Chief Commissioner thinks applicable:
- The Applicant’s apparent acceptance, in her email of 11 January 2023 seeking an arrangement for instalment payments and at the hearing, of her liability to pay the full amount of the land tax as assessed;
- the extent of cooperation demonstrated by the Applicant in providing relevant information to the Chief Commissioner to enable the assessments to be made;
- the extent to which such cooperation occurred within a reasonable time after relevant requests for information by the Chief Commissioner; and
- the extent to which the Applicant’s failure to pay the assessed land tax on time and in particular, in accordance with the approved instalment plan, might not properly be regarded as an instance of wilful default, having due regard to her diagnosed mental health condition and her misunderstanding of the availability of the “principal place of residence” exemption.
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Footnotes
[1] Citing Chief Commissioner of State Revenue v Aldridge (RD) [2003] NSWADTAP 50 (“Aldridge”), [20]-[21].
[2] Citing Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41, [42]; Aldridge, [20]; Deans v Chief Commissioner of State Revenue [2022] NSWCATAD 14, [33]-[34].
[3] Citing Commissioner of Taxation v Ryan (2000) 201 CLR 109; Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218 (“Gunasti”); Hashim v Chief Commissioner of State Revenue [2020] NSWCATAD 67 (“Hashim”); Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200 (“Strathavon”); and Monisse v Chief Commissioner of State Revenue [2022] NSWCATAD 276; Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27.
[4] Quoting Commissioner of Taxation v Ryan (2000) 201 CLR 109, 120[19] (Gleeson CJ, Gummow and Hayne JJ); Strathavon; Gunasti and Hashim.
[5] Citing AES Wiring Pty Limited and AKS Distributions Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 11.
[6] Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, [62]-[63], cited in Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773, [18] (Emmett AJA).