Galle v Chief Commissioner of State Revenue [2022] NSWCATAD 285
Background
These proceedings concerned an application for review of an assessment of surcharge duty by the Chief Commissioner of State Revenue in respect of the acquisition of a property on 22 January 2018 by the Applicants. The Applicants were citizens of Italy, and at the time of the purchase held Temporary Work visas (sub-class 457) which were due to expire on 10 February 2021.
No surcharge duty was paid at the time the property was purchased. An investigation regarding potential surcharge duty liability was commenced in March 2021, following which the Chief Commissioner determined the Applicants were liable for surcharge duty as well as penalty tax and interest totalling $47,197.51. Following an objection to the assessment lodged by the Applicants on 27 August 2021, the Chief Commissioner remitted penalty tax and the premium component of interest, but disallowed the objection to the surcharge duty.
Issue
The issue was whether, as at 22 January 2018, the Applicants were foreign persons within the meaning of s.104J of the Duties Act 1997 (NSW) (“the Duties Act”), which applies s.5 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FAT Act”).
The Statutory Framework
Relevant legislation
S.5 of the FAT Act includes the following provisions:
- An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if:
- the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and
- at that time:
- 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.
Submissions
Applicant's Submissions
The Applicants contended that they were both ‘ordinarily resident’ in Australia by reference to Commonwealth income taxation laws.
The Applicants argued they were not subject to a time limit imposed by law because they could have applied to have their temporary visas renewed and were not barred from remaining in Australia following the expiration of their temporary visas.
The Applicants further argued that as Revenue Ruling G-009 ‘Definition of a Foreign Person’ states that the Chief Commissioner will not treat certain temporary visa holders as foreign persons, that they should not be treated as foreign persons either.
The Applicants also challenged the assessments on arguments of fairness, particularly that they were not aware of surcharge purchaser duty.
Chief Commissioner's Submissions
The Chief Commissioner submitted that the assessment was correct on the basis that, at the date of the transaction, the Applicants were ‘foreign persons’ as defined by the Duties Act and the FAT Act, because their presence in Australia was subject to a limitation as to time. The Chief Commissioner submitted the Applicants were thus liable to surcharge duty under the Duties Act.
Decision
Tribunal consideration
The Tribunal concluded that the Applicants were only lawfully permitted to remain in Australia until 10 February 2021, and their presence in Australia was therefore subject to a time limitation under s.5(1)(b)(i) of the FAT Act. Therefore they were foreign persons for the purposes of s.104J of the Duties Act (see [24]-[25]). In relation to the meaning of ‘subject to a limitation as to time’, the Tribunal cited (at [21]) the analysis by Croft J in Li v So [2019] VSC 515 at [95], who concluded that a temporary visa is limited as to time if the holder may (only) remain during a specified period; or until a specified event happens.
The Tribunal affirmed that whether or not a person is ‘ordinarily resident’ is answered “solely by the words in s.5 of the FAT Act” (at [22]). As such, the Tribunal rejected the Applicants’ arguments based on Commonwealth taxation laws and Revenue Ruling G-009.
The Tribunal was not satisfied that the Applicants had satisfied their onus of proving that they were entitled to have their Temporary Visas renewed when they expired. The Applicants did in fact obtain new 186 Visas, but the Tribunal noted the 186 Visas expire on 5 June 2026 (at [20]).
The Tribunal rejected the Applicants’ arguments in respect of fairness. The Tribunal held that the fact the Applicants were not aware of the surcharge was not relevant to the correctness of the assessment (see [28]). The Tribunal also noted that it has no jurisdiction to grant ex gratia relief that was requested by the Applicants in their written submissions (see [29]).
Link to decision