Bo v Chief Commissioner of State Revenue [2024] NSWCATAD 219 | Case summary

NCAT Administrative and Equal Opportunity|2024-07-09

The Applicant's alternative arguments

Given the conclusion I have reached it is not necessary for me to address the Applicant's alternative submissions however, I note that, as already indicated, I reject the submission that it is sufficient that the Property was Ms Bo's principal place of residence and I reject the submission that it is sufficient for s 104B(1)(b)to be satisfied that the parties to the transfer were married and the Property was the transferee's principal place of residence.
Further, to the extent that the Applicant sought to rely on notions of "fairness" (either because Ms Bo could have purchased the Property in her name alone from the outset or because she herself complies with the principal place of residence exemption requirement) 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. Questions of unfairness are not relevant. The Respondent is required to administer the law in accordance with its terms: Galle v Chief Commissioner of State Revenue [2022] NSWCATAD 285 at [26]-[28].

Conclusion

It follows that I find that the transfer of the Property was exempt under s 104B of the Duties Act and the Assessment should be revoked. As such, there is no need for me to consider the issues of interest or penalty.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 06 August 2024

Introduction

This is an application to the Tribunal under s 55 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act) for a review of an assessment of transfer duty, penalty tax and interest issued on 16 August 2023 (Assessment) in respect of the transfer on 11 June 2021 of residential property at Killara (Property) from the Applicant's husband, Mr Faxiang Ying, to himself and the Applicant, Yujuan Bo, as joint tenants, for no monetary consideration.
It is not in dispute that the transfer of the Property was a transfer of dutiable property in respect of which duty is charged under s 8(1)(a) of the Duties Act 1997 (NSW) (Duties Act). However, the Applicant claims that the transfer is exempt from duty under s 104B of the Duties Act which relates to transfers between married couples.
The Respondent's case is that the transfer is not exempt from duty under s 104B of the Duties Act because when the transfer occurred the Property was not used as the principal place of residence of the married couple because at that time only Ms Bo was residing at the Property. Mr Ying was living in China and had been living in China for over twelve months.
The Applicant objected to the Assessment and the Respondent disallowed that objection by notice dated 21 September 2023.
The Assessment is administratively reviewable by the Tribunal by virtue of s 96 of the Taxation Administration Act 1996 (NSW) (TAA).
In conducting the review, the Tribunal is required to determine the correct and preferable decision having regard to the material before it and the applicable law: s 63 of the ADR Act.
The Applicant has the onus of proving her case: s 100 (3) TAA. That means she must prove on the balance of probabilities all matters necessary for the Tribunal to answer the statutory questions in her favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36].
For the reasons which follow I have concluded that the transfer is exempt from duty under s 104B of the Duties Act so that the Assessment should be revoked. As a result, it is not necessary for me to deal with the issues of penalty tax or interest.

Principal place of residence

The Duties Act does not provide any definition of the expression "principal place of residence" and accordingly, the expression has its ordinary meaning. Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 at [19].
It is necessary to use an objective test and the conclusion is to determined by considering the extent and quality of the use of the residence: Yen-Cheng Chuang at [20].
In Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 at [42] the Appeal Panel of the Administrative Decisions Tribunal identified the following general principles to be applied in considering what is a person's principal place of residence (internal citations omitted): First, the words "principal place of residence" should be given their ordinary meaning in the context in which they appear. … 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 the circumstances relating to the actual occupation of the dwelling: … Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue: … 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: … Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue: ... This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible … 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… that there are circumstances, peculiar to the individual concerned, which may, objectively viewed, adequately and reasonably explain a person's decision to move out of a property, but which are not entirely out of the person's control.

used

Section 104B(1)(b) of the Duties Act requires that the dwelling on the Property was being "used" as the principal place of residence of the married couple at the time of the dutiable transfer. That does not, in my view, impose a requirement that the Property was actually being physically occupied by both (or indeed either) of them at that time, as long as, at that time, the Property was being "used" as their principal place of residence. It is to be noted that the principal place of residence exemption contained in other unrelated provisions of the Duties Act (for example s 49A(1A) in respect of off the plan purchases and s 104ZKA(2) in respect of exemptions for certain permanent residents) requires use and occupation of the relevant land. So too the Land Tax Management Act 1956 (NSW) requires land to be "used and occupied" as a principal place of residence for certain exemptions to apply. In some contexts, there is a requirement that a property be used and occupied for a continuous period of a certain number of days for a relevant exemption to apply. There is no such requirement in s 104B(1)(b) of the Duties Act.
As Taylor J observed in Council of the City of Newcastle v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493 at 515: The word "used" is, of course, a word of wide import and its meaning in any particular case will depend to a great extent upon the context in which it is employed. The uses to which property of any description may be put are manifold and what will constitute "use" will depend to a great extent upon the purpose for which it has been acquired or created. Land, it may be said, is no exception and S. 132 itself shows plainly enough that the "use" of land will vary with the purpose for which it has been acquired and to which it has been devoted.

When the transfer of dutiable property occurs

The dwelling must be used by the married couple as their principal place of residence at the time the transfer of dutiable property occurs. However, in my view, it is both appropriate and necessary to look not solely at the date of the transfer, but back for a period of time and forward for a period of time to determine the use of the Property at that date.
I see the position as being similar to determining the use of a property for land tax purposes, which is to be determined as at midnight on 31 December in the year preceding the relevant land tax year.
White J (as his Honour then was) said in Metricon Qld Pty Limited v Chief Commissioner of State Revenue (No. 2) [2016] NSWSC 332 at [132]-[133]: [132] Liability for land tax arises as at midnight on 31 December immediately preceding a calendar land tax year. In Longford Investments Pty Ltd v Chief Commissioner of Land Tax [(1978) 8 ATR 656)], Sheppard J said (at 660-661) that although the liability for land tax arises as at midnight on 31 December, the question of whether land was used primarily for primary production was to be considered having regard to the facts spanning "some few months" before and after that date. In Leda Manorstead [v Chief Commissioner [2010] NSWSC 867], Gzell J applied this reasoning and said that in the circumstances of that case a reasonable period for inquiry was six months before and after the relevant date (at [4]). … [133] This approach recognises that the question of the dominance of a particular use, or whether a primary production use has a significant and substantial commercial purpose or character, requires examination not of a single event but of a state of affairs that exists as a continuum. Experience before and after 31 December that is part of that continuum can throw light on the position as it existed at that date. … (emphasis added)
Similarly, in the Court of Appeal in Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 Barrett AJA (with whom Macfarlan and Ward JJA agreed) said at [46]: Furthermore, past activity may be indicative of present use even if the activity is for the time being not continuing.
In my view the use of the dwelling on the Property as at the date of the transfer also requires an examination of the state of affairs that existed before and after the date of transfer as a continuum.
The Respondent accepted in submissions that events prior to the transfer date could have a bearing on the position at the date of transfer, but submitted, in effect, that to look back a period of 12 months was "too long".
In my view, in the circumstances of this case, including where Mr Ying returned to live at the Property approximately two months after the date of the transfer, Mr Ying's absence from the Property at the time of the transfer even for a period of twelve months, does not necessarily negate or diminish the status of the Property as the principal place of residence of the married couple.

Bo v Chief Commissioner of State Revenue

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