Middleton v Commissioner of State Revenue [2022] NSWCATAD 411
Background
This case concerned an assessment of surcharge land tax for the 2018 land tax year. The applicants arrived in Australia from the United Kingdom in December 2013. In October that year they had each been granted a Temporary Work (Skilled) (subclass 457) visa on the basis of Mr Middleton’s employment. Those visas allowed the Middletons to stay in Australia until 17 October 2017.
The visas were still current when Mr and Mrs Middleton exchanged contracts for the purchase of a residential NSW property in January 2016, prior to the commencement of legislation introducing surcharge duty and surcharge land tax (28 June 2016). New subclass 457 visas were granted in November 2017, allowing them to stay until 3 November 2019.
In December 2017 Mr and Mrs Middleton each applied for a permanent visa, being an Employer Nomination (subclass 186) visa. At the same time they were each granted a ‘Bridging Visa A’, which would come into effect on the expiry of their subclass 457 visas on 3 November 2019, but only if the subclass 186 visas had not been granted by then. The subclass 186 visas were granted on 5 July 2018. The Middleton’s have since become Australian citizens.
The land was vacant at the time of purchase. The applicants built a dwelling on the land and lived there since May 2018. They have been entitled to the principal place of residence exemption under Schedule 1A of the Land Tax Management Act from the time they became the owners of the land, on completion of the purchase.
In June 2021 the applicants were contacted by Revenue NSW as part of its routine auditing process. Ultimately, the Chief Commissioner determined that at midnight on 31 December 2017, the taxing date for the 2018 land tax year, both Mr and Mrs Middleton were in Australia on (temporary) subclass 457 visas, and found each to be liable to pay surcharge land tax for the 2018 land tax year.
The Statutory Framework
Surcharge Land Tax (‘SLT’) was introduced by the State Revenue Legislation Amendment (Budget Measures) Act 2016 (NSW) (the Amendment Act). The provision came into force on 28 June 2016.
Surcharge land tax is payable under the Land Tax Act 1956 (NSW) (the LTA) on residential land owned by a ‘foreign person’. Subsection 5A(6) as in force at 31 December 2017 (the taxing date for the 2018 land tax year) provides that ‘foreign person’ has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW) (DA). Chapter 2A applies s.5 of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, which says an individual who is not an Australian citizen is ‘ordinarily resident’ in Australia at a particular time (and is therefore not a ‘foreign person’) if and only if both of the following paragraphs apply:
- 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; or
- the individual is not in Australia but, immediately before the individual’s most recent departure from Australia, the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law.
Applicant's submissions
The applicant’s contended that as surcharge land tax did not exist when they exchanged contracts on the purchase of the property in January 2016, it could not be applicable to them. They relied upon an article authored by PwC in support of that proposition, that the amendment to the legislation did not have retrospective effect, coming into operation after the date of exchange of contracts, which occurred prior to 28 June 2016.
Chief Commissioner's submissions
The Chief Commissioner acknowledged that the applicants satisfied paragraph (a) of the “ordinarily resident” requirement under the Foreign Acquisitions and Takeovers Act, because they had been present in Australia for 200 days in the period of 12 months immediately preceding the taxing date for the 2018 land tax year (midnight 31 December 2017). The Chief Commissioner’s position was that the applicants also needed to satisfy paragraph (b) and could not, as they remained in Australia on temporary visas, meaning their continued presence was subject to limitations imposed by law.
Decision
The Tribunal found that as at midnight on 31 December 2017, being the taxing date for 2018 land tax year:
- Mr and Mrs Middleton were in Australia on (temporary) subclass 457 visas.
- the applicants were not authorised to stay lawfully in Australia beyond 3 November 2019.
- the Middletons’ continued presence in Australia was subject to a limitation as to time imposed by law.
The Tribunal also noted that the proposition in the PwC article relied on by the applicants, related to surcharge purchaser duty and not surcharge land tax, being an annual tax; the date of the exchange of contract had no bearing on the imposition of surcharge land tax and the PwC article did not state otherwise.
The Tribunal found that the assessments of both Applicants for surcharge land tax were correct and should be confirmed.
Orders
- The surcharge land tax assessments are confirmed.
Link to the decision