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…………Signed…….. Senior Member M Orlov REASONS FOR DECISION 1. The applicants sought merits review of the Commissioner’s decision to disallow their objection to a reassessment of duty and associated penalty tax and interest relating to their purchase of a property on 25 October 2021 for which they claimed a duty concession under the Home Buyer Concession Scheme (HBCS) governed at the relevant time by the Taxation Administration (Amounts Payable – Home Buyer Concession Scheme) Determination 2021 (DI2021-172).

2. For the following reasons, at the conclusion of the hearing I ordered the Commissioner’s decision be varied to provide for penalty tax assessed at 25% to be remitted to the applicants in full.

Background

3. The applicants purchased their first home on 25 October 2021. They applied for duty exemption under the HBCS believing they were eligible based on their reading and understanding of the scheme’s requirements and legal advice they received. On 7 February 2025, the Commissioner issued a reassessment imposing duty in the amount of $17,704, penalty tax of 25% in the amount of $4,426 and interest of $5,700.42. The applicants paid the reassessment amount in full on 26 February 2025. The applicants lodged an objection to the reassessment which the Commissioner disallowed on 16 June 2025.

4. Eligibility to claim a duty concession under the HBCS depended at the relevant time, among other things, on meeting the requirement in section 6(1)(c) of the HBCS that the “total gross income” of all eligible home buyers in the previous financial year is less than or equal to the income threshold listed in column 2 of table 1 – relevantly, $160,000 for a couple with no children – and reflects the 1 usual income of each person.

5. The first and second applicant’s tax returns for 2020-21 show they received income from all sources and before deductions in the amounts of $113,227 and

1 HBCS, section 6(1)(c) $49,465 respectively, giving a total gross income of $162,692. Their combined gross income in 2019-20 and 2018-19 was $134,734 and $133,192.

6. However, notices of amended assessment for the year ended 30 June 2021 issued by the ATO on 20 October 2021 – i.e. shortly before the applicants completed the purchase of the property – show that the first and second applicant’s amended taxable income was $111,397 (reduced from $113,188) and $48,473 (reduced from $49,465) respectively, giving a total taxable income of $159,870. The applicants relied on this figure to claim the exemption.

7. The mistake the applicants made was to equate their taxable income with gross income.

8. The first applicant gave the following oral evidence explaining the circumstances in which they came to believe they were eligible to apply for a duty exemption: So my partner and I had decided to purchase our first property, having never done so before. We had a friend of ours who worked as a property lawyer. So our initial discussions around how this whole process works, having never gone through any of this before – neither of us were legally trained – we got some advice from that individual that, well, you know, ‘You guys are probably eligible for some home buyer concessions.’ So we had a very small amount of money. We only had barely the 5% deposit and so we were struggling to get into the market, and – anyway, we weren’t aware that there was a first home buyers scheme. Our friend notified us of the first home buyer scheme; said, you know, ‘You’re most likely under.’ So we did some googling, had a look around, saw the legislation, had a look at the website, and the website says – it had a table on the website that said your income threshold needed to be, if you have no children, which we didn’t have any children – needed to be below 160 in the previous financial year, and also it needed to obviously represent your usual income. … So an attachment to that website was a legislative instrument. So I opened the legislative instrument, had a read of the legislative instrument, went to the exact same table that was on the website. The table said the same thing: no children, two people, 160, and has to be your usual income. You know, I do our tax affairs, so I knew that our tax for the previous financial year was below that number, and it was below that number for all years previous to that. We’re sort of low-income earners. And so the next step we did was – well, we went and found a house to purchase. There was a lot of missed purchases along the way, as is the market. We finally got to purchase a property. Then we had the property lawyer at the time. I said to them, ‘We understand there’s a Home Buyer Concession Scheme that we’d like to apply for.’ They said, ‘Yes. You need to make sure that your ATO tax statements from the previous year are below the threshold and that it it’s your usual income for the previous couple of years’. I provided those statements to the lawyer at the time. She said, ‘Yep, that’s all great. You just need to fill out this form, 2 and you’ll be fine. Great.’ So we did that.

9. Although the first applicant identified the “property lawyer” they consulted and the firm she worked for at the time, I am satisfied no relevant purpose is served by naming either in these reasons.

10. The first applicant was shown a document which he was asked to assume was a reconstruction of the text displayed on the HBCS website as it existed on 25 3 October 2021. In response to my question, “What did you read and what did you understand?” the applicant gave the following evidence: THE WITNESS: So, I mean, looking at the website, I read through that our income of all of our partners needs to be no greater than the threshold. I go down to the threshold, which is a table down there that says for – number of dependent children is zero, and the threshold is 160. SENIOR MEMBER: What did you understand ‘total gross income’ meant at the time? Did you give it any thought? THE WITNESS: Well, my understanding at the time is that the income would be the income from our Australian Tax Office income statements. 4 That would be what would be – would demonstrate our eligibility.

11. Invited to elaborate, the first applicant explained: THE WITNESS: So the things that made me think I was eligible is reading – so initially starting the journey with reading the website and looking at the income threshold. As someone who has worked in government before, I know not to trust a website and go to the legislation itself. So having read the website and gone, ‘It looks like we are eligible. This is great. We are under the threshold,’ I then moved to the piece of legislation to read any other particulars that might be relevant for our circumstances. That led me to paragraph 6(1)(c), to demonstrate that – it just said ‘income’ in that section. I interpreted income to be our ATO income statements. I mean, that is our actual take-home pay. We do not see any of the money prior to that. My understanding was, having read the website that sits above this website, it explains that the Home Buyer Concession Scheme was for first home buyers trying to break into the market with low incomes, and that was our circumstances. I then – so that was my interpretation as a non-legal person. I then confirmed that information with our property lawyer at the time, confirming that that interpretation was in fact correct, and was assured by our legal representation that, ‘Yes, it’s’– you know, ‘You tick all the boxes. 2 T8.34 – 9.23 3 Witness statement of Simon Parmeter dated 6 November 2025 4 T 12.4-15 You are first home buyers. Your take-home pay was under, you know, the specified threshold at the time. So we just – we went on with it. So that – that’s it. … SENIOR MEMBER: You said that you provided some documents to Ms …[the solicitor]. So what was it that you provided to her? THE WITNESS: I can’t remember if we physically provided the copies of our ATO statements to her. I don’t think we did because I don’t think it was necessary to fill out the paperwork. From memory, the paperwork just said we just need to make a declaration that we were eligible. But we definitely had a discussion about it, and I said that I had read the legislation, and looked at the threshold, checked our previous financial records – because we were purchasing in October, so I had already recently done our tax statements for the previous year. They had come in at 159. They were unusually high because of the pandemic at the time. My partner was working as a front-line work at the public hospital. She had to work overtime in that particular year, so her pay was a little bit more than it normally would be. But anyway, I explained – I mean, E--- is aware, you know, we’re – E--- is aware that we were low-income earners anyway for, you know, however – ever since we have been working. Anyway, back to your point. So I confirmed with her verbally that our ATO income statement for the previous financial year and all financial years before that were 5 below $160,000, and she said, ‘Great’. That’s all. That’s it.

12. Under cross-examination about his understanding of the difference between gross income and net income, the first applicant said that while he understood the 6 difference now, at the time he had not come across the term “gross”.

Assessment of duty

13. The applicants accepted at the hearing that their combined total gross income in the relevant financial year exceeded the income threshold but maintained that duty was incorrectly imposed because it did not reflect the usual income of each person. It was uncontroversial that the usual income of each applicant in earlier financial years was significantly lower than in 2020-21, the atypical spike in income being attributable to temporary additional workloads and COVID-19 pandemic-related factors.

14. The meaning of section 6(1)(c) was considered in Applicant AT 130/2024 v Commissioner for ACT Revenue [2025] ACAT 69 at [49] – [54] where Senior

5 T13.1-45 “E---” refers to the solicitor 6 T 17.23-27 Member Morrison held that section 6(1)(c) imposes two requirements, both of which must be met. That is, the total gross income of all eligible home buyers must be less than or equal to the income threshold and it must reflect the usual income of each person. Respectfully, the decision is clearly correct. In this case, the applicants do not meet the first requirement. That is the end of the matter. The question whether their gross income in the relevant financial year reflects their usual income in earlier years does not arise.

15. The challenge to the Commissioner’s decision to impose duty therefore fails.

Penalty tax

16. Under section 31(1) of the TAA, the amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid subject to the Commissioner having a discretion under subsections (2) and (4) to increase the penalty tax to 50% or 75% in certain circumstances. In this case, the Commissioner assessed penalty tax at 25%.

17. However, under section 31(5)(a), no penalty tax is payable if the Commissioner is satisfied the taxpayer, or a person acting on behalf of the taxpayer, took reasonable care to comply with the tax law. The applicants submitted no penalty tax was payable because they had taken reasonable care to comply with their obligations, including by seeking legal advice from a friend who is a property lawyer and whose firm acted for the applicants on the purchase of the property. Unfortunately, they say the advice they received was incorrect.

18. Whether a taxpayer who relies on the incorrect advice of an accountant or lawyer whom the taxpayer could reasonably expect to provide correct advice on the matter in issue has exercised reasonable care in the circumstances, involves a factual enquiry into all relevant contextual circumstances, including among other things, whether the taxpayer was careless in presenting all of the relevant facts to the advisor and whether the failure to do so materially affected the advice on which the taxpayer acted. Relevantly, a question that must be answered is “whether, on the facts, there are steps that the taxpayer ought to have taken but 7 did not take or steps that it did take that it ought not to have taken”. As McCarthy PM observed in Marks v Commissioner for ACT Revenue [2018] ACAT 84 at [84]: The ATO’s Rulings and the cases demonstrate, in my view, that “reasonable care” does not require perfection or success. Rather, it requires a reasonable and serious (albeit unsuccessful) attempt to comply, having regard to the person’s circumstance including their knowledge, education, experience and skill.

19. The evidence relating to the applicants’ dealings with their solicitor friend – which I have reproduced in full earlier – including evidence about what was said to and by the solicitor, what information was given to the solicitor for the purpose of obtaining their advice, what if any enquiries the solicitor made to verify the applicant’s income eligibility and the precise terms in which oral advice was given lacks the detail, precision and independent corroboration – for example, by calling the solicitor to give evidence – necessary to establish that, considering all relevant circumstances, the applicants exercised reasonable care to ensure they were eligible to claim the duty exemption under the HBCS.

20. My conclusion that the applicants have not discharged the onus of proof on this issue does not mean the applicants necessarily failed to exercise reasonable care. As McCarthy PM observed in Marks, “taking reasonable care is not a mirror of a 8 failure to take reasonable care. Each involves consideration of different facts”.

Remission of penalty tax

21. The only remaining issue is whether there are grounds for remission of the penalty tax under section 37 of the Taxation Administration Act 1999 (TAA). Section 37 provides that the Commissioner may, if the Commissioner considers it appropriate in the circumstances, remit penalty tax in any amount.

22. While the Commissioner accepted that the applicants may have genuinely misinterpreted the instrument regarding their income eligibility, the Commissioner did not consider it appropriate in the circumstances to remit penalty tax in any amount. The Commissioner noted in the reasons statement that

7 Aurora Developments Pty Ltd v Commissioner of Taxation (No 2) [2011] FCA 1090 at [38]-[40] 8 [2018] ACAT 84 at [86] the imposition of penalty tax and interest is not limited to circumstances where there is intentional wrongdoing, referring to Van Duren v Commissioner for ACT Revenue [2016] ACAT 121 where Beacroft SM said at [38] that “(a) lack of intention does not excuse the applicants from liability for penalty tax and interest”. The Commissioner observed: The purpose of penalty tax and interest is to deter non-compliance, promote equity among taxpayers, encourage full and immediate disclosure of tax defaults, encourage the payment of tax liabilities by the due date and compensate the government for being denied the use of funds to which it is entitled. Ultimately, the guiding principle of tax law is that taxpayers who fully comply with their tax obligations should be in a better position than those who do not. In my view, a remission of penalty tax or interest in this instance would place you unfairly in a more favourable position than other property owners in the ACT, who have met their tax obligations on time and avoided 9 penalties.

23. The Commissioner accepted the reassessment had placed a significant financial burden on the applicants and, whilst expressing sympathy for their financial and personal circumstances, noted in the reasons statement that financial incapacity is not a sufficient reason for a remission of penalty tax or interest.

24. The Commissioner’s written and oral submissions placed primary reliance on the following statement in Kessey v Commissioner for ACT Revenue [2019] ACAT 83 at [72]: In considering whether it is appropriate to remit penalty tax by any amount, the Tribunal must take into account subject matter, scope and purpose of the LTA, the TAA, and in particular section 37 of the TAA. The Tribunal must keep in mind the purpose for which land tax is imposed and paid. The Tribunal must keep in mind that the imposition of penalty tax and interest is intended to promote compliance with the self-reporting scheme for land tax, and to provide general deterrence of tax default. The Tribunal must keep in mind the legislative intention that the taxpayer is liable for any default by the taxpayer’s agent. The Tribunal must keep in mind that section 37 does not require special or exceptional circumstances for the remission of penalty tax. Keeping all these matters in mind, the Tribunal must consider whether the penalty (as imposed by the Commissioner) is harsh, having regard to the particular circumstances of the taxpayer.

9 T-docs p 14

25. Particular emphasis was given to the fact that the applicants relied on incorrect advice given by their solicitor in the context of the proposition stated in Kessey that “(t)he Tribunal must keep in mind the legislative intention that the taxpayer is liable for any default by the taxpayer’s agent”. The Commissioner submitted: [T]he remark in Kessey relating to taxpayers being liable for the default of the taxpayer’s agent was made in the context of section 37 specifically. So…it can be inferred from that the tribunal, at least in that case, was of the view that it was relevant to questions of deterrence.

26. Kessey concerned a failure to pay land tax imposed under the Land Tax Act 2004. The abovementioned statement was adopted by the appeal tribunal in Kimberley v Commissioner for ACT Revenue [2021] ACAT 101 at [68]-[69], another land tax case. Whether Kessey should be applied in practice as a comprehensive statement of relevant discretionary considerations and how competing considerations should be weighed in the balance in deciding whether the imposition of penalty tax in land tax cases is “harsh” in all the circumstances does not arise for decision in this case, which concerns a tax default involving a failure to pay the whole of the duty imposed under the Duties Act 1999 as a consequence of the applicants’ failure to correctly self-assess their eligibility to claim a duty exemption under the HBCS – an instrument made under section 139 of the TAA.

27. It is sufficient to observe that the question whether it is appropriate to remit penalty tax under section 37 can arise only where there has been a tax default and a liability to pay penalty tax is imposed under the TAA. In that context, decisions of the tribunal that the onus is on a taxpayer to be aware of and comply with their tax obligations and that the appointment of an agent to do so does not relieve the taxpayer of their primary duty to comply with the law or their liability for penalty tax and interest consequent upon a failure to do so, simply lay the foundation for a section 37 question to arise without addressing the factual circumstances that should be considered in deciding how the question should be answered in the particular circumstances.

28. It is well established that where a statutory discretion is conferred in unconfined terms, the discretion is not at large but must be exercised having regard to the subject matter, scope and purpose of the legislation under which the discretion is 10 conferred. Section 37 falls into that category. The discretion conferred by the section operates on the premise that notwithstanding the TAA has imposed a liability on the taxpayer to pay penalty tax, circumstances may make it “appropriate” for penalty tax to be remitted. As was said in Kessey, correctly in my view, those circumstances need not be special or exceptional. As the Full Federal Court observed in Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation [2008] FCAFC 54 at [20]: To the extent that the Tribunal had regard to the particular circumstances of the Taxpayer in concluding that there was a harsh outcome such that part of the penalty should be remitted, that was a permissible course open to the Tribunal as the decision maker.

29. The fact that a taxpayer may be found to have failed to exercise reasonable care to comply with their tax obligations, or relied on an agent who failed to do so, or acted in good faith on incorrect legal or accounting advice, of itself, does not preclude a favourable exercise of the discretion under section 37. To approach the exercise of the discretion in that way would deprive it of utility. In my view, in considering whether circumstances make it “appropriate” to remit penalty tax under section 37, it is necessary to have regard to the circumstances surrounding the tax default bearing on the extent of the taxpayer’s culpability for the tax default and any circumstances pointing to the imposition of penalty tax on the taxpayer producing a harsh outcome such that all or some of the penalty tax should be remitted.

30. In considering whether the imposition of penalty tax in the circumstances produces a harsh outcome, it must be kept firmly in mind that the purpose served by the penalty provisions of the TAA (as with tax statutes generally, particularly where the tax regime relies on taxpayers to self-assess and self-report) is general deterrence – in the sense of discouraging taxpayers generally from failing to comply with their tax obligations – and specific deterrence – in the sense of discouraging the particular taxpayer from failing to do so in the future.

10 Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40 per Mason J at [15] is one example of statements to that effect by the High Court.

31. Decisions in other cases dealing with the exercise of the discretion are necessarily fact specific and unlikely to be a useful guide unless the facts are closely aligned to the matter under consideration.

32. Thus the task for the Tribunal, standing in the shoes of the Commissioner, is to consider all the circumstances surrounding the applicants’ tax default, balancing the general and specific deterrent value of the penalty imposed on the applicants against the resulting hardship caused to them, to decide whether the outcome is harsh so as to make it appropriate to remit all or part of the penalty tax.

33. The HBCS requires a home-buyer wishing to take advantage of the scheme to self-assess their eligibility. Responsibility to ensure they are eligible to claim a duty exemption rests with the home-buyer alone. Imposing penalty tax where a duty exemption has been claimed by a person who had no entitlement to do so serves as a general deterrent for other persons wishing to take advantage of the scheme to take reasonable care to ensure they meet the income eligibility requirements of the scheme.

34. However, in considering the general deterrent value of imposing a penalty on the applicants in the present circumstances it is necessary to have regard to subsequent amendments to the income eligibility requirements of the scheme. The Taxation Administration (Amounts Payable—Home Buyer Concession Scheme) Determination 2024 (DI2024–175) amended the definition of “income” to mean “taxable income as evidenced by a notice of assessment from the Commissioner of Taxation…or if no notice of assessment from the Commissioner of Taxation was made in the previous financial year, gross income”. “Gross income” was also defined for the first time. The changes have been carried through into the current Taxation Administration (Amounts Payable—Home Buyer Concession Scheme) Determination 2025 (DI2025-68). The reason for the change is not apparent but ultimately does not matter. The point is that the applicants’ honest but erroneous belief that eligibility to claim a duty concession depended on their joint taxable income in the previous financial year as evidenced by notices of assessment issued by the ATO would not be wrong today. That is not to say the imposition of penalty tax in the present circumstances would have no general deterrent value but, in my view, it is much reduced. Potentially, it goes no further than to emphasise to first home-buyers wishing to take advantage of the scheme that responsibility to ensure they are eligible to apply rests on them and the consequences of being wrong may be catastrophic.

35. The HBCS is available to first-time home-buyers only. The applicants will never again be eligible to claim a duty exemption under the scheme so there is no possibility the circumstances that gave rise to the tax default could be repeated. In those circumstances I consider that the imposition of a penalty has no or minimal specific deterrent value.

36. I am satisfied that when the applicants applied for the duty exemption, the first applicant held an honest but mistaken belief that they met the criteria for eligibility because their combined taxable income in the previous financial year was less than the relevant income threshold of $160,000 and their combined income in previous financial years was substantially lower than the income threshold. The belief was based on his own reading and understanding of the HBCS website and the statutory instrument and, in his mind, was confirmed by advice given by a property lawyer in circumstances where, regardless of her friendship with the applicants, the applicants would have expected the lawyer to understand that her advice would be relied upon on a matter of critical importance to the applicants.

37. It is apparent from the first applicant’s evidence that when he read the legislative instrument he did not give any particular weight to the term “gross income” in section 6(1)(c) but focussed instead on “income” and “income threshold”. There was some discussion at the hearing whether the meaning of “gross income” is ambiguous. It is not necessary to decide that question. It is sufficient to point out that the HBCS defines “income” as “income from all sources” other than certain immaterial exceptions. “Gross income” is not defined and it is not immediately apparent what the word “gross” was intended to add to “income”. It is unsurprising that a low income wage or salary earner in the position of the applicants may equate “income” with taxable income, particularly where the most obvious authoritative records to which they may be expected to turn to determine their income eligibility is a notice of assessment issued by the ATO.

38. I am satisfied that there was no intention to defraud or take unconscientious advantage of a benefit made available to low income earners specifically to help them purchase their first home. The applicants actively attempted to assess and confirm their income eligibility before claiming the duty exemption. In the result, they were mistaken but their culpability in that regard, in my view, is very low.

39. I accept the first applicant’s evidence that, having borrowed heavily to fund the purchase of their home – which they were only able to afford because of the duty concession – being forced to secure additional finance at short notice to meet their liability under the reassessment has caused them considerable personal and financial hardship. While some of this may be attributed to the unavoidable consequences of meeting their obligations to pay the full amount of duty owed on the purchase as well as interest, I am satisfied the hardship has been compounded by the imposition of penalty tax.

40. The task of balancing these considerations is not susceptible to precise analysis. I am satisfied that the imposition of 25% penalty tax on the applicants is harsh considering the limited deterrent value of doing so following subsequent amendments to the scheme, the financial hardship the applicants have suffered as a result and critically, that their culpability for the tax default is low.

41. I am satisfied that the circumstances make it appropriate to remit penalty tax in full.

………………………………. Senior Member M Orlov