54 ATR 323
Commissioner of Taxation v Ryan (2000) 201 CLR 109
Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25
Source
Original judgment source is linked above.
Catchwords
54 ATR 323
Commissioner of Taxation v Ryan (2000) 201 CLR 109
Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25
Judgment (12 paragraphs)
[1]
Judgment
These proceedings concern an application for review of an assessment of surcharge land tax made by the Chief Commissioner (the Respondent) for the 2018 to 2022 land tax years in respect of property in Prestons (the Property). Mr Mohammed and Mrs Azam (the Applicants) are two of the three registered proprietors of the Property.
For the reasons set out below I have decided that the correct and preferable decision is to affirm the Respondent's decision.
[2]
Relevant facts
The following facts do not appear to be in dispute.
1. The Applicants are citizens of Pakistan. Except for Mr Mohammed's short period outside Australia in 2013, they have resided in Australia continuously since 2006.
2. The Applicants each hold a Bridging Visa class WA/010. These were issued on 17 April 2014. A copy of the actual visa is not before the Tribunal. However, a printed version of the Visa Entitlement Verification Online check (VEVO) issued by the Australian Government Department of Home Affairs states that the period of stay for the bridging visa is "indefinite". Under the bridging visa the Applicants have unlimited work entitlements and study entitlements.
3. The Applicants applied to the Foreign Investment Review Board (FIRB) for approval to purchase property in Australia which was approved in March 2016.
4. The Applicants each acquired their respective one third interest in the Property on 12 April 2016. Their son, Asim Azam, who is an Australian citizen, is the registered proprietor of the other one third interest in the Property.
5. The Applicants have resided in the Property as their principal place of residence since it was first acquired.
6. For each of the relevant taxing dates for the 2018 to 2022 land tax years, the Applicants were in Australia for a period of 200 days in the year prior.
7. On 7 March 2022, the Applicants were notified by the Respondent of the requirement to register for land tax. The Applicants completed land tax questionnaires, attaching VEVO checks, and bills from providers as proof of residence. A land tax registration return was also lodged, seeking an exemption from land tax for the Property, being their principal place of residence.
The Tribunal notes that there is no information about the type of substantive visa the Applicants may have applied for or what circumstances led to the issue of bridging visas in 2014.
On 22 March 2022, the Respondent issued each Applicant Notices of Assessment for surcharge land tax for the 2018-22 tax years. The Applicants objected to the assessments in April 2022, which was disallowed by the Respondent in June 2022.
The Applicants have now applied to the Tribunal to review this decision.
[3]
Legislation
Surcharge land tax was introduced by the State Revenue Legislation Amendment (Budget Measures) Act 2016 (NSW) (the Amendment Act). commencing from the date of assent, which was 28 June 2016.
It is an annual tax based on the ownership of property held at the taxing date (being midnight on 31 December in any year) payable under the Land Tax Act 1956 (NSW) (the LTA) on "residential land" owned by a "foreign person": LTA, s 5A.
The definition of residential land is set out in the Duties Act 1997 (NSW), s 104I and includes "a parcel of land on which there are one or more dwellings, or a parcel of land on which there is a building or buildings under construction that, when completed, will constitute one or more dwellings…"
Section 5A(6) (as in force from 31 December 2016 to 4 March 2018) explains that the expression "foreign person" has the same meaning as in Chapter 2A of the Duties Act. Section 5A was amended in 2017 to repeal subsection (6), coming into force in March 2018. The amendments affect this proceeding as it relates to the 2019 to 2022 tax years. As per the amendments, LTA s 2A now contains the definition of foreign person for the purposes of the LTA which adopts the expression as set out in the Duties Act, Ch 2A.
Chapter 2A of the Duties Act contains s 104J(1), which says the expression "foreign person" means "a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975, of the Commonwealth as modified by this section". I will refer to the Commonwealth Act as the FATA; the modifications referred to do not apply to the Applicants' circumstances.
Section 4 of the FATA states that a foreign person means "an individual not ordinarily resident in Australia". In relation to that definition, FATA, s 5 provides:
5 Meaning of ordinarily resident
(1) An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if:
(a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and
(b) at that time:
(i) 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
(ii) 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.
There is an exemption from surcharge land tax for the principal place of residence in certain circumstances set out in LTA, s 5B. During the land tax years 2018-22, s 5B provided as follows:
5B Surcharge land tax - residence requirement applying to principal place of residence exemption
(1) A person is eligible for an exemption from liability to pay surcharge land tax in respect of residential land for a land tax year because the land is the principal place of residence of the person only if -
(a) the person is a permanent resident at midnight on 31 December of the previous year, and
(b) the Chief Commissioner is satisfied that, during the land tax year, the person intends to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement, and
(c) the person lodges a declaration with a land tax return required to be furnished under section 12 of the Principal Act for the land tax year to the effect that the person has that intention.
(2) The person must use and occupy the land as the person's principal place of residence for a continuous period of 200 days in the land tax year. This requirement is referred to as the residence requirement.
(3) If the residence requirement is not complied with by the person, surcharge land tax liability is to be assessed or reassessed as if the person's exemption from liability to pay surcharge land tax for the land tax year had never applied.
(4) The failure of the person to comply with the residence requirement is taken to be a tax default for the purposes of Part 5 of the Taxation Administration Act 1996.
(5) Any interest that is payable on the tax default in accordance with Part 5 of the Taxation Administration Act 1996 accrues on the amount of surcharge land tax assessable to the person for the period commencing on the last day allowed for furnishing the land tax return for the land tax year and ending on the day when the assessment or reassessment referred to in subsection (3) is made.
(emphasis added)
The expression "permanent resident" is not defined in the LTA. However, in the Duties Act, the expression "permanent resident" also appears in the provisions concerning the principal place of residence exemption for surcharge duty: s 104ZKA. The expression "permanent resident" is defined in the Dictionary to the Duties Act which provides that a permanent resident is the holder of a permanent visa within the meaning of s 30 of the Migration Act 1958 (Cth).
Section 30 of the Migration Act provides:
30 Kinds of visas
(1) A visa to remain in Australia (whether also a visa to travel to and enter Australia) may be a visa, to be known as a permanent visa, to remain indefinitely.
(2) A visa to remain in Australia (whether also a visa to travel to and enter Australia) may be a visa, to be known as a temporary visa, to remain:
(a) during a specified period; or
(b) until a specified event happens; or
(c) while the holder has a specified status.
In the Dictionary to the Migration Act, "permanent visa" has the meaning given to it in s 30(1) and "temporary visa" has the meaning given to it in s 30(2).
Section 37 of the Migration Act provides that a "bridging visa" is a class of "temporary visa".
[4]
Onus of proof
Under the Taxation Administration Act 1996 (NSW) (TAA) s 100(3), in a review proceeding like this, the Applicants bear the onus of proving their case. This requires them to prove, on the balance of probabilities, all matters necessary to enable the Tribunal to answer the statutory question in their favour, without which the assessment will prevail: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25; 94 ATR 348 at [31]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 per Allsop P at [87] and [104]; Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89 per Mason J.
In this case, the Applicants need to prove they are not liable for the surcharge land tax by establishing they are ordinarily resident in Australia or, if they are not ordinarily resident, that they qualify for the principal place of residence exemption.
[5]
Materials relied on
At the request of the Applicants and with the Respondent's consent, I determined this matter without a hearing, that is, "on the papers".
I considered all the documentary material provided by each of the parties.
The Applicants relied on a document titled "Statement of Facts issues and contentions" dated 19 September 2022 and a document entitled "Reply/SFIC" dated 28 October 2022 (in which they state they rely on the s 58 documents filed by the Respondent).
The Respondent relied on documents filed under the Administrative Decisions Review Act 1997 (NSW), s 58 (ADR Act); and a tender bundle filed 18 October 2022.
[6]
Applicants' case
The Applicants' case as to why they should not have to pay surcharge land tax is:
1. At the time they purchased the Property in 2016, surcharge land tax had not yet come into effect;
2. They were not informed that they may be required to pay surcharge land tax nor were they aware of the liability for surcharge land tax until they received the retrospective Notices of Assessment in 2022. Had they known about the surcharge land tax, they would have ensured the Property was held 100% by their son and/or if they had been notified in 2018, they would have transferred their interests in the Property to their son immediately in which case they would not have been liable for the entire period which has been assessed;
3. Even if the law was applicable with retrospective effect, the Respondent should have sent them the Notice of Assessment for that first year (2018 land tax year) within a reasonable period of time;
4. The Respondent's failure to do so deprived them of the right to transfer the property to their son at that time to ensure there was no surcharge land tax payable;
5. In these circumstances, the Applicants should only be liable for one year of surcharge land tax (for the 2018 year) or it should be waived given the delay by the Respondent in issuing assessments.
The Applicants accept they are "foreigners". In the s 58 materials there were materials in which the Applicants appeared to accept that they were not permanent residents. However, they took a different approach in their reply submissions. The Applicants contended that as the Property has at all times been their principal place of residence, they were exempt for surcharge land tax under s 5B of the LTA. This is on the basis that they are "permanent residents" at the relevant taxing date for each of the 2018 to 2022 land tax years (31 December in the preceding year), as persons whose visas are for an indefinite period. The Applicants contend that their bridging visas are not temporary visas and notwithstanding s 30 of the Migration Act, their bridging visas provide for an indefinite period of stay and a permanent resident visa has the same status for the purposes of the LTA as both can be cancelled or revoked by the Minister.
They also contend that, in the alternative, a discount or waiver of the surcharge land tax applies in the circumstances. I understood this as a request for the Tribunal to exercise a discretion out of principles of fairness, to allow a discount or waiver of some or all of the surcharge land tax.
[7]
Respondent's case
The Respondent's case is that the Applicants are liable to surcharge land tax as they were not ordinarily resident in Australia for the reason that their presence in Australia was subject to a limitation of time imposed by law for the 2018 to 2022 land tax years as they held temporary visas. Consequently they are "foreign persons" for the purposes of the LTA.
This is consistent with the Chief Commissioner's Revenue Ruling, Definition of a Foreign Person G009 (effective from 21 June 2016) which asserts the following:
"[11] Individuals who are permitted to be in Australia under a visa that is not a permanent entry visa are 'foreign persons', because the visas impose time limits on the person's lawful presence in Australia. Such visas include a work visa, a temporary entry visa, a visitor visa, a bridging visa and a business visa.
…
[15] A person who resides in Australia under a temporary visa is regarded as a 'foreign person'. The conditions applying to such visas mean temporary residents are regarded as being ordinarily resident in Australia, and their presence in Australia is restricted by time and/or may be terminated under the Migration Act."
The Respondent contends the principal place of residence exemption does not apply because the Applicants did not meet the statutory criteria for exemption: they are not "permanent residents".
Further, it is argued that there is no statutory discretion in the LTA for the Respondent or Tribunal to grant an exemption or partial waiver where the statutory criteria are not met.
[8]
Are the Applicants ordinarily resident and therefore not a foreign person?
There is no dispute that the Applicants were both in Australia for 200 days or more during the period 12 months preceding each of the taxing dates (that is, they satisfy s 5(a) of the FATA). The only question is whether their continued presence in Australia for each of the taxing years was subject to any limitation as to time imposed by law.
It is clear from s 37 of the Migration Act that a bridging visa is a "temporary visa" within the meaning in s 30(2).
Schedule 2 of the Migration Regulations 1994 (Cth), as applicable for each of the relevant land tax years, was provided by the Respondent. The regulations identify three categories of non-citizens who may be granted a bridging visa: one who has applied for a substantive visa; or whose decision is under judicial review (including on appeal if any); or who is a member of the family unit of a party to a judicial review proceeding. As noted above, there was no evidence before me about which class of non-citizen the Applicants were or the circumstances around why they have been on these bridging visas for a period of nine years.
Clause 10.5 of the Migration Regulations specifies the period of time that the bridging visa holder is permitted to remain in Australia. I have checked the Regulations and they are accurately summarised in the printout from the Australian Government Department of Home Affairs providing information about Subclass 010 Bridging Visas. That information sheet says (for bridging visas issued before 19 November 2016) the bridging visa will cease 28 days after the date that one of the following happens:
We notify you that your substantive visa application is not valid
We notify you that your substantive visa application has been refused
You withdraw our substantive visa application
A merits review tribunal notifies you that it has upheld our decision to refuse your substantive visa application
A merit review tribunal notifies you that is has no jurisdiction to consider your application for review
You withdraw your application for merits or judicial review from a merits review tribunal or a judicial review body
A judicial review body upholds the decision to refuse your substantive visa application
I note there is a slight difference in the regulations for bridging visas issued after November 2016, that difference being a period of 35 days instead of 28.
In Li v So [2019] VSC 515 at [96], Croft J noted three bases in s 30(2) of the Migration Act on which a temporary visa might be limited being:
1. for a specified period; or
2. until a specified event happens; or
3. while the holder has a specified status.
One of the issues for determination in that case was whether Ms Li's presence in Australia was limited as to time under her temporary resident visa. Croft J considered that each of the three conditions in s 30(2) of the Migration Act contained a temporal limitation and rendered the holder of a temporary resident visa a person whose presence in Australia was subject to a time limit imposed by law (at [96]).
Li v So was followed by the Tribunal in van der Zanden v Chief Commissioner of State Revenue [2022] NSWCATAD 283 at [38]-[40] which also concerned the status of a bridging visa in determining whether the applicant was a "foreign person". In that case, the question was relevant to whether surcharge purchaser duty applied under the Duties Act. A similar conclusion was reached by the Tribunal in Hashim v Chief Commissioner of State Revenue [2020] NSWCATAD 67 at [42]-[45] concerning a temporary visa: a 309 Visa.
I note that the VEVOs for each of the Applicants state that the bridging visas are for an "indefinite" stay period. The actual bridging visas or copies of them are not before the Tribunal (unlike the position in van der Zanden).
The word "indefinite" has more than one meaning. According to the Macquarie Dictionary (2023) "indefinite" means "not definite; without fixed or specified limit; unlimited; not clearly defined or determined". In my view, the use of the word "indefinite" on the VEVO is not to be conflated with the language in 30(1) of the Migration Act for permanent visas.
A reading of the relevant provisions in the Migration Act in their context together with the Migration Regulations differentiates the conditions for permanent resident visas and temporary visas (such as bridging visas).
As the bridging visas are temporary visas under s 30(2), the use of the word "indefinite" on the VEVO simply means that the period of time for which the Applicants are permitted to stay in Australia on their bridging visas is not pre-determined or is unspecified (consistent with a temporary visa under s 30(2)(b)), unlike other types of temporary visas that may specify a precise date on which the visa ends within s 30(2)(a).
The fact that the VEVO does not specify a particular date on which the bridging visa expires does not mean that there is not a limitation of time imposed under the Migration Act. Rather the limitation as to time exists but is unable to be determined when the visa issues for the reason that one of the specified events referred to the Migration Regulations first needs to occur before the bridging visa comes to an end. By their nature, the time at which those events may occur are not able to be predetermined; but once the event occurs, it triggers the 28 day (or 35 day) period.
[9]
Are the Applicants permanent residents and do they qualify for the exemption in s 5B?
There is no dispute that the Applicants have used and occupied the Property since acquisition as their principal place of residence for at least 200 days in each land tax year (the residence requirement). The issue is whether they satisfy the other pre-conditions for exemption in s 5B(1)(a) - that is whether they are permanent residents.
I have already found that bridging visas are temporary visas: Migration Act, s 37. This is relevant to the question of whether the Applicants are permanent residents or temporary residents as the exemption in s 5B of the LTA is only for "permanent residents". The LTA does not define what a permanent resident is. However, as noted above, the expression is defined the Duties Act in the context of the principal place of residence exemptions from surcharge duty for foreign persons.
The definition there directs attention to s 30 of the Migration Act with the effect that a holder of a permanent resident visa is a permanent resident and the holder of a temporary resident visa is a temporary resident.
As noted above, the Applicants say they are permanent residents. The Applicants put evidence before the Tribunal to the effect that the Minister had cancelled a number of permanent residence visas. The Applicants say that the fact that the Minister can cancel a permanent residency visa means those visas have the same status as a temporary visa and that the ability to cancel a visa does not make it limited as to time.
I reject the Applicants' contentions that their visas are not temporary and that they are effectively permanent residents.
As Hunt J observed in Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305 at 309-10:
"In the absence of any context indicating a contrary intention, it is a sound rule of statutory construction to presume that the legislature intended to attach the same meaning to the same words both in different parts of the same statute and in different statutes in pari materia or in statutes dealing with the same general subject matter: Courtauld v Legh (1869) LR 4 Exch 126, at p 130; Lennon v Gibson and Howes Ltd [1919] AC 709, at pp 711, 712; Beaman v ARTW Ltd [1949] 1 KB 550, at p 567 ."
In that case, Hunt J construed the words "parcel of residential land" in s 10(1)(r)(ii) of the Land Tax Management Act 1956 (NSW), in the same way that "land" and "parcel of the land" had previously been construed in earlier versions of that Act.
As noted in Hiley v Chief Commissioner of State Revenue [2009] NSWADT 133
"Definitions provided in one statute may the more readily be applied in construing another, where the two form part of a scheme of legislation: Sweeney v Fitzhardinge (1906) 4 CLR 716; Commissioner of Stamp Duties v Permanent Trustee Co Limited (1987) 9 NSWLR 917.
The Explanatory Note to the State Revenue Legislation Amendment (Budget Measures) Bill 2016 which introduced both the surcharge land tax and surcharge purchaser duty states as follows:
"The object of this Bill is to implement certain revenue-related measures in the 2016-17 State budget. The Bill:
(a) amends the Duties Act 1997 to impose a surcharge duty of 4% in relation to the acquisition of interests in residential land by foreign persons and to remove the off the plan duty concession in the case of foreign persons, and
(b) amends the Land Tax Act 1956 to impose surcharge land tax of 0.75% on residential land owned by foreign persons, and …
The Bill defines a foreign person to have the same meaning as in the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth (which generally includes an individual not ordinarily resident in Australia, a corporation in which such an individual has a substantial interest, a trustee of a trust in which such an individual holds a substantial interest or a foreign government). The definition is modified to ensure that Australian citizens are not foreign persons (wherever they reside) and that New Zealand citizens holding special category visas are not foreign persons if they have been in Australia for at least 200 days in the previous 12 months."
The amendments introduced Chapter 2A of the Duties Act (as referred to above) to be applied for both surcharge purchaser duty and surcharge land tax. As far as the two Acts implement surcharges of NSW taxes to foreign persons, they are part of the same legislative scheme, and deal with the same subject matter. In the absence of clear evidence of any such intention, it is likely that parliament intended like terms to have like meanings.
Therefore the phrase "permanent resident" when used in s 5B of the LTA should be construed as having the same meaning as used in the Duties Act - which cross-references to s 30 of the Migration Act. Consequently, as the Applicants were the holders of bridging visas which are a class of temporary resident visas, they are not "permanent residents".
Consequently, I am not satisfied the Applicants meet the criteria for the principal place of residence exemption in s 5B of the LTA.
[10]
Is there a discretion to waive or exemption the Applicants from surcharge land tax?
I reject the Applicants' submissions that I should exercise a discretion to exempt them from surcharge land tax or waive it in the circumstances where they did not know it existed or on the basis that it would be unfair to them.
As I said in Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [46], there is no legislative provision or authority which gives the Chief Commissioner or the Tribunal a discretionary power to exempt a taxpayer from surcharge land tax if the statutory criteria are not met.
Arguments based on notions of "fairness" and "justice" cannot succeed in the absence of any foundation in the legislation: Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 123. Consequently, while it is unfortunate the Applicants were not aware of the existence of surcharge land tax or their liability which arose at each of relevant tax dates, questions of unfairness including on the basis that the Applicants did not know about the tax are not relevant.
Nor is it relevant that the Respondent did not notify the Applicants as to their liability at an earlier time than when the Notices of Assessments first issued. In any event, until the Respondent wrote to the Applicants in March 2022 and received back the completed the land tax questionnaires from them, there had not been complete disclosure to the Respondent of the relevant facts affecting the liability of the Applicants to surcharge land tax. The Respondent has a statutory obligation to administer the law to the facts which it cannot be prevented from performing (BBLT Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 1003; 54 ATR 323 at [111]) and is also permitted to issue reassessments with retrospective effect up to five years from the time at which the liability first arose (31 December 2017): Taxation Administration Act 1996 s 9;
As I have already determined that the statutory criteria for the principal place of residence exemption have not been met in this case and as there is no other statutory power to exempt the Applicants from surcharge land tax on the basis of unfairness, the Applicants are not entitled to an exemption or waiver from surcharge land tax.
[11]
Orders
The Chief Commissioner's decision under review is confirmed.
[12]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 16 February 2023
Parties
Applicant/Plaintiff:
Azam Mohammed & Sarah Azam
Respondent/Defendant:
Chief Commissioner of State Revenue
Legislation Cited (10)
State Revenue Legislation Amendment (Budget Measures) Act 2016(NSW)
In my view, despite the unfortunate use of the word "indefinite" on the VEVO, bridging visas have a limitation as to time which is triggered by the happening of one of the prescribed events in the Migration Regulations. Consequently, as the Applicants were holders of bridging visas at each of the relevant taxing dates, they were not ordinarily resident and were therefore "foreign persons".