Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266
Background
The Applicant and his wife owned two residential properties in Carnes Hill and Edmondson Park. They lived in the Carnes Hill Property and leased out the Edmondson Park Property. The Applicant has been an Australian permanent resident since 2015. As an international airline pilot working out of India, the Applicant spent a lot of time outside Australia but would return to live in the Carnes Hill Property when he had long breaks from his flying roster. As per his ATO Income Tax Returns, the ATO has accepted the Applicant as a tax resident of Australia.
As a result of international border closures in 2020, the Applicant was stranded overseas and could not return to Australia. In August 2020, the Applicant was retrenched from his job and eventually returned to Australia in 2021.
The Applicant did not contest that, as per the Department of Home Affairs’ evidence obtained by the Chief Commissioner, he was in Australia for less than 200 days in the 2016 to 2020 calendar years (inclusive).
The Chief Commissioner issued land tax assessments to the Applicant to the following effect:
- For the Carnes Hill Property – surcharge land tax was assessed for the 2017 tax year. This was because, even though the Applicant and his wife used the Property as their Principal Place of Residence (”PPR”), meaning it was exempt from land tax, it was nonetheless subject to surcharge land tax in the 2017 land tax year because the exemption from surcharge land tax for a PPR was only introduced for the 2018 tax year.
- For the Edmondson Park Property – surcharge land tax was assessed for the 2018 to 2021 land tax years.
The Applicant sought a review of the Chief Commissioner’s decision to issue land tax assessments on the basis he was not a “foreign person” within the meaning of the Land Tax Act 1956 (NSW) (“LTA”) and was therefore not liable to pay surcharge land tax.
The statutory framework
From the 2017 land tax year surcharge land tax is payable by a “foreign person” within the meaning of the LTA. The definition of “foreign person” in the Duties Act applies, and relevantly requires that a person satisfy both of the following limbs:
The person has been in Australia for 200 or more days in the 12 months preceding the time (“200-day requirement”); and
As at the taxing date, the person is either:
- In Australia and the person’s continued presence in Australia is not subject to any limitations as to time imposed by law; or
- Not in Australia, but immediately before the person’s most recent departure from Australia, the person’s continued presence was not subject to any limitation in time imposed by law.
For the 2017 land tax year, surcharge land tax was payable in respect of a person’s PPR, but from the 2018 land tax year onwards, surcharge land tax is not payable on a foreign person’s PPR if the circumstances specified in s.5B of the LTA are satisfied, which included a requirement to be in Australia for at least 200 days in each tax year.
Submissions
The Applicant submitted that it was inconsistent to treat him as a “foreign person” in relation to the Edmondson Park Property on the one hand, but as an Australian resident in relation to the Carnes Hill Property on the other. The Applicant also submitted that as the ATO treated him as an Australian resident during the relevant periods, the Commonwealth position should take precedence over the State position. The Applicant further contended that he was exempt from the residence requirements by the Department of Home Affairs. Thirdly, the Applicant contended that, but for the international border closures in 2020, he would have been in Australia for more than 200 days in the 2020 calendar year.
The Applicant also referred to Australian Citizenship (special residence requirement) Instrument (LIN 21/069) 2021 (“LIN 21/069”) in support of his position. LIN 21/069 provides for a concession, for the purposes of calculating whether that person meets the residence requirement for citizenship under the Citizenship Act 2007 (Cth), for persons performing certain “kinds of work”, including “work that is done on duty by a crew member of a ship or aircraft”.
The Chief Commissioner submitted that the only relevant question was whether the Applicant was in Australia for at least 200 days in each of the relevant tax years. Failing satisfaction of that requirement, the Applicant was a “foreign person” within the meaning of the LTA and would therefore be liable to pay surcharge land tax for the relevant land tax years.
Decision
The Tribunal accepted the Chief Commissioner’s submissions and found that the Applicant was a “foreign person” at the relevant times. The Tribunal noted that the definition of “ordinarily resident” (on which the definition of “foreign person” relies) was solely governed by s. 5 of the Foreign Acquisitions and Takeovers Act 1975 (Cth), which meant that it would only be satisfied if a person met the 200-day requirement. On the facts, the Tribunal accepted that the Applicant did not meet this requirement for the 2016 to 2020 calendar years (inclusive).
As to the argument advanced by the Applicant in relation to the inconsistent treatment between the Edmondson Park Property and the Carnes Hill Property, the Tribunal noted that the Applicant was required to show that he was not a “foreign resident” within the meaning of the LTA; this was a different question to whether he “used and occupied” the properties as a PPR during the relevant years which was required to qualify for exemption from land tax. As the Applicant was not “ordinarily resident” and therefore was a “foreign person” within the meaning of the LTA, he was liable to pay surcharge land tax unless the s.5B exemption applied. Although the Applicant was exempt from surcharge land tax in respect of the Carnes Hill Property for the 2018 and 2021 tax years (inclusive), that exemption was not available in the 2017 tax year.
The Tribunal considered that the Applicant’s tax residency for the purposes of Commonwealth taxation was not relevant to the question of whether he was a “foreign person” within the meaning of the LTA. Similarly, the Tribunal noted that LIN 21/069 had no relevance to this question. Thus, the question of inconsistency between Commonwealth and State Positions did not arise as the respective legislation dealt with entirely different subject matter.
Lastly, the Tribunal considered it irrelevant that the Applicant may have been able to satisfy the 200-day requirement but for Australian international border closure in 2020. The relevant question was whether or not he did in fact meet that 200-day requirement, and the legislation did not provide any relief for any person who did not meet this requirement.
For the above reasons, the Tribunal confirmed the Chief Commissioner’s assessments with respect to the imposition of surcharge land tax on the Carnes Hill Property for the 2017 tax year and on the Edmondson Park Property for the 2018 to 2021 land tax years.
Orders
The Chief Commissioner’s surcharge land tax assessment in respect of the Carnes Hill Property for the 2017 land tax year was confirmed.
The Chief Commissioner’s surcharge land tax assessments in respect of the Edmondson Park Property for the land tax years 2018 to 2021 were confirmed.
Link to decision