Hojlund v Chief Commissioner of State Revenue [2021] NSWCATAD 143
Background
On 7 December 2005, the Applicants became owners of land in Bigga NSW 2583 (“Transferred Land”).
On 25 October 2013, the Applicants moved the Transferred Land from the Applicant’s personal names to their self-managed superannuation fund. At that time, the Applicants paid $4,615 in stamp duty (“Transfer Duty”). A licensed conveyancer acted on behalf of the Applicants in relation to the transfer.
In June 2020, the Applicants became aware that pursuant to s. 62A(1) of the Duties Act 1997 (“Duties Act”), duty may have been payable at a concessional rate rather than an ad valorem rate.
The Applicants wrote to the Chief Commissioner on 6 July 2020 requesting a refund of the ad valorem duty and a concession from duty under s. 62A(1) of the Duties Act.
The Respondent wrote to the Applicants on 15 July 2020 (“July 2020 Letter”) stating the Chief Commissioner was prohibited from reassessing the Transfer Duty at a concessional rate because more than 5 years had passed since the original assessment. The Respondent concluded that the Applicants did not meet any of the exceptions under s. 9(3) of the TAA to enable a duty reassessment more than 5 years after the initial assessment.
On 10 August 2020, the Applicants lodged an objection to the decision in the July 2020 Letter.
On 19 August 2020, the Chief Commissioner refused to grant an extension to lodge an objection (“Extension Refusal Decision”).
On 1 September 2020, the Applicants lodged another objection, but this objection was also disallowed by the Chief Commissioner on 27 October 2020.
Procedural Issues
The Extension Refusal Decision was the subject of the objection by the Applicants and therefore the Tribunal’s jurisdiction was limited to determining whether or not the Applicants should be given the opportunity to lodge their objection more than five years after the initial assessment.
Legislative Framework
Pursuant to s. 89 of the TAA, a taxpayer has a right to object if dissatisfied with a notice of assessment and has 60 days to do so (s. 90 of the TAA).
The Chief Commissioner is precluded from issuing a reassessment more than 5 years after an initial assessment by s. 9 of the TAA unless one of the exceptions in s. 9(3) of the TAA applies. The exceptions relevant to this case are:
- a reassessment to adjust tax to give effect to a decision on an objection or review as to the initial assessment (s. 9(3)(a)), and
- a reassessment as a consequence of an application by a taxpayer, being an application made within 5 years after the initial assessment of the liability, and the reassessment reduces the tax liability (s. 9(3)(d)).
Submissions
In Brown v Federal Commissioner of Taxation [1999] FCA 563 (”Brown”) , Hill J described the criteria which need to be considered in determining whether a taxpayer should be allowed an extension of time in which to lodge and objection. The criteria are as follows:
- "The taxpayer's explanation for the delay in lodging an objection....
- The circumstances attendant upon that delay
- Whether the objection is one which, on its face, is frivolous or which in law must fail, or, ... is one in which the taxpayer has no arguable case, ...
- Such other matters as the circumstances...make relevant, including, if prejudice to the Commissioner be asserted, such prejudice as is shown to arise."
Delay and Circumstances
The Applicant’s stated that its delay in lodging the objection was due to the Applicant’s lack of awareness of an entitlement to a concession as the Applicants were advised by a licensed conveyancer rather than a legal practitioner.
The Respondent pointed out that the delay of greater than 6 years was significant; ;and being unaware of the concession is an insufficient explanation because the onus is on taxpayers to assess their liability for duty and ignorance of a limitation period is a frail excuse.
Frivolous Objection
The Applicant’s argued that the Respondent was able to reassess duty outside the 5 Year Time Limit because the exception under s. 9(3)(a) of the TAA operates in the present case.
The Respondent argued that even if the objection was allowed, the objection was doomed to fail because the Respondent does not have the power to make a reassessment because none of the exceptions under s. 9(3) of the TAA apply. Specifically, s. 9(3)(a) does not apply because the objection was made out of time and is therefore not an objection made pursuant to s. 86 of the TAA.
Prejudice
The Applicants asserted the Respondent was not prejudiced. While the Respondent did not assert any prejudice, the Respondent stated significance of the delay impacted the need for finality with respect to the Respondent’s duties under taxation laws.
Decision
The Tribunal agreed with the Respondent that the reviewable decision before the Tribunal was whether to permit the out of time objection. Further the Tribunal agreed that the relevant criteria for such a determination was set out in Brown.
Ultimately, however, the Tribunal agreed that the Applicants should be granted permission to lodge their objection out of time after weighing all the circumstances and taking a broad view of s. 90 of the TAA which the Tribunal described as an “ameliorating provision designed to avoid injustice.”
While not required to decide on whether the Chief Commissioner could reassess the Applicant’s duty, the Tribunal did not accept the submission that the Chief Commissioner would lack such power.
The specific reasons for the Tribunal decisions are as follows:
- Despite the Applicant’s delay in lodging its objection, the Applicants had a “cogent explanation for the delay”;
- The Applicants case was arguable and thereby not frivolous;
- The exception under s. 9(3)(a) “relevantly allows the Respondent to make a reassessment notwithstanding that more than five years has passed…”; and
- The Applicants would be prejudiced if an extension of time to lodge an objection were not granted; whereas the Respondent would not be prejudiced by this extension of time.
Orders
- The decision of the respondent made on or about 19 August 2020 to refuse the applicants permission to lodge their objection dated 10 August 2020 is revoked.
- Pursuant to s 90 of the Taxation Administration Act, the applicants have permission to lodge their objection dated 10 August 2020.
- The respondent is to deal with the objection dated 10 August 2020 as if it had been lodged within 60 days of 2 December 2013.
https://www.caselaw.nsw.gov.au/decision/179b10e413537b621dd71652