1. In her 14 September 2011 statement the applicant said that the unit when acquired was "old and run down" and in need of "fairly extensive renovations". At the hearing the applicant said that in its original condition the unit "was not really livable".

1. In her 4 September 2012 statement the applicant repeated that "[T]he property was old and run-down and it was clear during the inspection that works would need to be undertaken." She described the works and their effect upon her in the following words.

During the 60 day settlement period I started preparing a plan on what needed to be done and making inquiries with various trades people and obtaining quotes.

I engaged Patrick Cusak of Hamilton Views Construction on or about October 2009 to undertake the following renovations.

d. removal of old heater and installation of new airconditioner;

A few days after settlement I moved into my home. As I was planning to undertake substantial renovations I did not relocate all my belongings nor did I purchase any new appliances as I did not want them to be ruined whilst the works were being undertaken.

I relocated basic and minimal living utilities (sic) and necessity items such as clothing, bedding and other essentials.

I have explained that there were times especially during the renovations that is was safer for me to spend nights away from home at either my patents' house or my sister's house due to the level of fues and dust as I am asthmatic as well as the overall safety as it became a work site.

1. In her 13 August 2011 letter to the Commissioner the applicant said that she "effectively" resided in the unit as her PPR during the period 18 November 2009 to 16 July 2010 ("the alleged occupancy period"). After leaving the unit in 2010, the applicant said that she returned to live with her parents.

1. Patrick Cusak, the applicant's builder, made a statement on 17 July 2012 declaring:

THAT I am the registered proprietor of the construction business that carried out renovation works for and on behalf of Ms Angela Baklis at premises known as unit 3 207 Auburn Road Hawthorn in the State of Victoria.

THAT at the time that I viewed the premises in late April early may 2010 Ms Angela Baklis was residing at the premises.

THAT the contractual arrangement between us was that I would have some flexibility in time to conclude the works and that our contractual arrangement was not subject to a specific completion date.

THAT it was agreed between us that the premises would be vacated whilst the primary facility works relating to the kitchen and the bathrooms were completed to enable occupation to be resumed.

THAT attempts to occupy the premises proved to be inappropriate due to the fact that I needed to isolate the water and the sewerage leaving the client with no running water and sewerage facility.

1. Mr Horan showed the applicant some Hocking Stewart advertising materials for letting of the Hawthorn unit once it was completed.[1] The eighth of ten photographs of the unit contains the logo "11/05/2010 11:29 AM". This was a time within the first six months of applicant's alleged occupancy period. Most rooms of the unit are depicted, including the kitchen and the bathroom. There is no sign of habitation in any room. On the first page appear the words:

Be the first to move into this freshly renovated two bedroom unit. . . .

1. The applicant could not explain the implication of her agent's words that the unit had not been occupied after its renovation. Nor could the applicant account for the fact that at the time that the photos were taken, the unit was clearly unfurnished without sign of habitation. Instead, she disputed that all the photos were taken at the time of the attached logo.

1. Mr Horan also showed the applicant an undated Westpac "Rocket Statement", which she accepted was a record of a loan she arranged in October 2009 to provide the funds for her purchase of the unit. In two places the statement described the transaction as an "investment loan." The applicant could not explain this fact. She said "I clearly stated to the bank that I was moving in", adding that the bank assisted her in applying for the first home owner grant.

1. Sub-section 7(1) of the Act provides that a first home owner grant is payable on an application under the Act if the applicant complies with certain eligibility criteria and completes an eligible transaction.

1. The respondent concedes that the applicant completed an eligible transaction on 19 November 2009 and has satisfied all the Act's eligibility criteria except for the residence requirement.

(1) An applicant for a first home owner's grant must occupy the home to which the application relates as the applicant's principal place of residence for a continuous period of at least 6 months (or lesser period approved by the Commissioner) commencing within the 12 month period immediately after completion of the eligible transaction or a longer period approved by the Commissioner.

1. Section 12 of the Act co-ordinates with the Act's purpose expressed in s1. This is "to encourage and assist home ownership, and to offset the effects of the GST on home ownership" through a scheme of grants made to first home buyers. All first home buyers are not eligible for grants. The "Residence requirement" limits the first home owner grant scheme to persons intending to occupy their first homes as their PPR within certain temporal minima.

1. Specifically, the Act excludes from the class of persons who are eligible to receive grants for purchasing first homes persons who do not occupy these homes as their principal places of residence for a continuous period of 6 months commencing within the 12 month period after completion of an eligible transaction.

1. Words requiring a "continuous period of 6 months commencing within the 12 month period after completion of the eligible transaction" in subsection 12(1) of the Act are followed by the phrase "or within a longer period approved by the Commissioner." It is common ground in this appeal that the applicant did not apply for any longer period in which to satisfy the residence requirement.

1. Subject to conditions, the Act provides that grants may be paid to first home owners before the residence requirement is satisfied.

1. Payment in anticipation of compliance with the residence requirement

(1) The Commissioner may authorise the payment of a first home owner grant in anticipation of compliance with the residence requirement if the Commissioner is satisfied that each applicant who is required to comply but has not yet complied with the residence requirement, intended to occupy the home as his or her principal place of residence commencing with the 12 month period immediately after completion of the eligible transaction or within a longer period allowed by the Commissioner.

(2) If a first home owner grant is paid in anticipation of compliance with the residence requirement, the payment is made on the condition that, if the residence requirement is not complied with, the applicant must within 14 days after the end of the period allowed for compliance -

• (a) give written notice of the fact to the Commissioner; and

• (b) repay the amount of the grant.

(3) A person must comply with the condition imposed by subsection (2).

1. Section 23 of the Act empowers the Commissioner to correct earlier incorrect decisions. Decisions to pay first home owner grants in anticipation of applicants' compliance with residence requirements can be varied or reversed pursuant to this provision. Section 32 of the Act provides that on the present appeal the applicant bears the burden of proving her case.

1. Repayment of grants and penalties are dealt with as follows.

48 Power to require repayment and impose penalty

(1) The Commissioner may, by written notice, require the applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if -

(a) the amount was paid in error; or

(b) the Commissioner reverses the decision under which the amount was paid for any other reason.

(2) If, as a result of an applicant's dishonesty, an amount is paid by way of a first home owner grant, the Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay.

(3) If an applicant (or former applicant) for a first home owner grant fails to make a repayment required by this section or the conditions of the grant, the Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay.

1. The timing and scale of the unit's renovation are directly inconsistent with the applicant's claimed residence there as her PPR for a 6-month period.

1. The applicant said that "[A] few days after settlement I moved into my home."[2] Settlement occurred on 19 November 2009. It is clear from the Hocking Stewart photographs that the renovation had been completed by 11 May 2010 and the applicant was not living in the unit at that time. The applicant also conceded that her earlier occupation (if any) was interrupted to avoid water/sewerage cut-offs, dust and other renovation hazards. The applicant's residence in the unit for a "continuous period of at least 6 months" required by s-s12(1) of the Act has not been shown on the balance of probabilities. This conclusion is independent of the nature of the applicant's residence in the unit as her PPR, or otherwise.

1. Headings provided by the principles referred to in paragraph [42] of the decision in Re Chief Commissioner of State Revenue and Ferrington [2004] NSWADTAP 41; 57 ATR 170 are a convenient way of marshalling additional legal and factual matters in this appeal which bear on the nature of the applicant's residence.

1. The New South Wales Administrative Decisions Tribunal Appeal Panel in Ferrington's case set out the principles as applicable for the determination of "a principal place of residence" under NSW legislation broadly corresponding to the Act. The six "Ferrington principles" have been accepted as relevant to construing the Act by Senior Member Davis in Boots v CSR [2004] VCAT 2549, Deputy President Macnamara in Kyriakou v CSR [2011] VCAT 640 and in Mauro v CSR [2010] VCAT 1207, Rutko v CSR [2011] VCAT 2239 and D'Amelio v CSR [2012] VCAT 265.

1. First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear."

No technical sense should be given to the term "principal place of residence" is when construing s12 of the Act. Reasoning from other statutory contexts where the same words appear is not permitted.

1. "Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively in the light of circumstances relating to the actual occupation of the dwelling."

Objective facts relating to "actual occupation" are considered under this heading. A "reasonable man" standard should be applied when weighing relevant occupancy indicators. Utilities usage indicia advanced by the respondent are contrary to the applicant's assertion that she resided in the unit as her PPR.

1. Water usage at the Auburn Road property was very low. Quarterly Yarra Valley Water tax invoices for the unit during the applicant's occupancy period measured 65 litres per day during the first two months of that period, falling to 22 litres per day between January and April 2010. This is to be compared with 118 litres per day, a datum for "efficient use" by a single person with no garden provided in the "How do you compare?" table in exhibit 3 South East Water statement. Mr Horan also took the applicant to records which disclosed much higher water usage by her tenant after 16 July 2010.

1. The applicant said in reply that very low water usage was consistent with her then lifestyle - which included showering at work, washing clothes at her parents' house in Templestowe and eating take-away food. She said that it was not surprising that the tenant's water use was considerably higher - given that three people and not one came into occupation. In response to Mr Horan's question, the applicant agreed that in fact most of the water used at the unit was used by tradesmen.

1. Electricity usage at the unit was also very low during the applicant's occupancy period. It appeared from an Origin Electricity usage table shown to the applicant that during the entirety of her occupation only 160 kilowatt-hours of electricity were used.[3] This usage was compared to benchmarks three or four times higher in the AGL Victorian Electricity statement exhibit 4 in these proceedings.

1. The applicant accepted that the electricity usage was very low and that some of her electricity usage was attributable to the activities of tradesmen at the premises. She explained low usage by her "daily routine" - being, as she said, at work most of the time and performing most personal offices elsewhere.

1. Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue."

The applicant placed some emphasis on her intention to treat the unit as her PPR during the time when she said that she occupied it.

However, the applicant's evidence about her intention did not support the claim.

The Westpac "investment loan" documentation discussed above was inconsistent with the applicant having an intention to make the unit her PPR. Further, the date-stamped photo in the Hocking Stewart advertising brochure showed that the applicant made plans for her departure from the unit during her alleged occupation which were inconsistent with her having a PPR intention during the relevant period. See Bailey v Chief Commissioner of State Revenue [2007] NSWADT 19 at [29].

1. "Fourthly, to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose."

The "degree of permanence" with which the applicant lived in the unit as her PPR should also be assessed in the light of her continuing association with her parents' home in Templestowe.

There is some evidence that the applicant did not abandon her parents' home as her PPR during the whole of the relevant time: see Nakhoul v Chief Commissioner of State Revenue [2009] NSWADT 103 at [32]. Order confirmations and delivery invoices for Miele whitegoods were addressed to the applicant at 26 McDonald Avenue Templestowe. Mr Horan indicated that the applicant used a distant Clive Peeters store in Ringwood for whitegood purchases - proximately to her parents' house - when a branch of Clive Peeters much closer to the unit existed in Richmond.[4]

In Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 at [41] the NSW Administrative Appeals Tribunal, construing a comparable residency criterion, thought it appropriate to weigh the fact that the applicant's PPR immediately before and after the period when she said that she resided at the subject property was her parents' address, before confirming that the corresponding criterion was not met.

1. "Fifthly, the short length of a person's residence while relevant, is not determinative of the issue."

Temporal minima for an applicant's PPR were not present in the legislation interpreted in the Ferrington case. As noted, the applicant in this case does not appear to have satisfied the "continuous period of 6 months" occupation criterion 5 of s12 of the Act. I note that the length of the applicant's alleged residence at the unit could, at the most, only have slightly exceeded a "continuous period of 6 months". The significance of this fact will be considered together with the next Ferrington principle.

1. "Sixthly, the reasons for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances."

The applicant formally maintained that she remained in occupation of the unit from the day when the purchase transaction was settled on 19 November 2009 until 12 July 2010, which is four days prior to the commencement of her tenant's occupation. She explained the termination of her occupation of the unit to the Tribunal in the following terms.

I had a chance to expand my business after I had been there for 8 months.

Later, in answer to a question in cross-examination, the applicant said:

The only reason I put the property up for rent is that I believe I had fulfilled my obligations regarding the first home owner's grant.

When the Tribunal asked her to repeat that statement she hesitated, before altering it with the observation that fulfillment of her first home owner grant obligations was "one" of the reasons for her moving out of the unit when she did.

1. The applicant's departure from the property, I find, was not the result of intervening circumstances beyond the applicant's control in the sense discussed in Re Chief Commissioner of State Revenue and Ferrington [2004] NSWADTAP 41; 57 ATR 170 at [43] - [44]. Her planned departure from unit occurred at a time, if not before, then very nearly coinciding with when the PPR minima in s12 of the Act would be satisfied.

1. Altogether, I find that the applicant did not reside in the unit as her PPR for any period.

1. The grant and bonus were paid to the applicant in anticipation of satisfaction of the residence requirement explicitly on the conditions set out in s-s20(2) of the Act. Namely, that she (a) notify the Commissioner in writing that the requirement has not been satisfied; and (b) repay the amount of the grant.

1. Where the Act's s-s20(2) conditions are not satisfied, s-s48(4) provides that the Commissioner "may" impose a penalty not exceeding the amount the applicant is required to repay." In the present case, the total of the repayable grant, bonus and boost is $16,000.

1. As to the circumstances in which the Commissioner's discretion to impose a penalty might be exercised, Mr Horan submitted that most (but not all) of the relevant factors were set out by Judicial Member Verick in Knight v Chief Commissioner of State Revenue [2008] NSWADT 83 at [33]. Namely,

(1) truthfulness of the original statements made by the applicant in his or her application for grant;

(2) the surrounding circumstances including the intention of the applicant in relation to the occupation and use of the property as his or her principal place of residence at the time when seeking the grant;

(3) the reasons for failure to comply with the conditions of the grant;

(4) whether the applicant has occupied the property as his or her principal place of residence;

(5) the candour of the applicant in his or her responses to inquiries; and

(6) whether the grant has been refunded.

1. The respondent argued that the following two additional factors bore on the exercise of the Commissioner's discretion under s-s48(3) of the Act:[5]

(h) penalty decisions in previous cases involving similar circumstances. For example, previous s48(3) penalty decisions made by the Commissioner in the first instance, those made on an objection, and on review by the Victorian Civil and Administrative tribunal and tribunals in other jurisdictions.

1. The Tribunal questioned Knight's case and whether it was appropriate for a penalty factor to be imposed on an applicant by factor (4) - in effect, for not accurately predicting the outcome of the appeal. Should the applicants in all unsuccessful first home grant PPR appeals be penalized for the fact that they did not succeed?

1. I am satisfied that the penalty in this case was justified on the basis of the weakness of the applicant's case and the tenor of applicant's responses to inquiries made before the determination of her objection.

1. The Tribunal also questioned whether "the deterrent effect of the penalty" as a consideration relating to tax policy and/or administration was an appropriate basis on which to penalize taxpayers?

1. Mr Horan found more authorities during the luncheon adjournment. I am now satisfied that, as the Court stated in Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20; (2010) 182 FCR 115 at [41]

a decision-maker is entitled, in the absence of specifically defined criteria for the exercise of the discretion, to take into account "government policy". Thus, where the Tribunal is not under a statutory duty to regards itself as bound by the policy, it is entitled to treat the policy as a relevant consideration.[6]

1. VCAT should therefore apply government policy unless a "cogent" reason to the contrary is shown.[7]

1. The Tribunal notes that the penalty of $1,000 in this case is equal to only 6.25% of the amount of the repayable grant, bonus and boost. Decided case comparators from Victoria were not cited to the Tribunal. New South Wales cases have imposed significantly higher penalties in similar situations.[8]

[2] 4 September 2012 statement extracted at [17] above.

[3] On the assumption, confirmed in answer to the Tribunal's question, that the unit has a gas hot water service. No details about gas consumption were led in evidence.

[4] Making reference to respondent's exhibit 1: the "Google map".

[5] In SRO Revenue Ruling FHOG.002 "Section 48 - The Commissioner's power to require repayment and impose a penalty"

[6] Following the "seminal authority" of Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 46 FLR 409 at 420-421, Bowen CJ and Deane J

[7] See Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20; (2010) 182 FCR 115 at [48].

[8] See Tassone v Chief Commissioner of State Revenue [2004] NSWADT 21 (penalty of 20% of grant); Coulpasis v Chief Commissioner of State Revenue [2006] NSWADT 27 (penalty of 10% of rant); Medanic v Chief Commissioner of State Revenue [2006] NSWADT 241 (penalty of 20% of grant).