Chen v Chief Commissioner of State Revenue [2025] NSWCATAD 189;

1. Where land tax has been assessed, s 86 of the Taxation Administration Act 1996 (NSW) ("Administration Act"), allows rights of objection to a taxpayer dissatisfied with an assessment. This is an internal review process under which the Chief Commissioner of State Revenue, the Respondent in these proceedings, must consider and determine the objection (s 91 of the Administration Act).
2. A taxpayer who is dissatisfied with the decision made upon the Respondent's determination of an objection, may apply to the Tribunal for an administrative review under the Adm_inistrative Decisions Review Act 1997_ ("NSW") ("ADR Act") of the decision of the Chief Commissioner of State Revenue.
3. These circumstances have arisen in the present matter as set out in the background above, so bringing the matter within the jurisdiction of the Tribunal.
4. The onus of proving her case lies with the Applicant (s 100(3) of the Administration Act).
5. The Tribunal, dealing with the taxpayer's application, may do one or more of the following under s 101 of the Administration Act:

(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.

1. Surcharge land tax is charged on certain properties owned by "foreign persons" pursuant to s 5A of the Land Tax Act 1956 (NSW) ("LTA"). At the time of the assessment, s 5A relevantly provided as follows:

"5A Levy of surcharge land tax on residential land owned by foreign persons - 2017 and subsequent land tax years".

(1) Land tax is payable under this section in respect of residential land owned by a foreign person (surcharge land tax).

(2) In respect of the taxable value of all the residential land owned by the foreign person at midnight on 31 December in any year (commencing with 2016), surcharge land tax is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act for the period of 12 months commencing on 1 January in the next succeeding year at the rate of -

(a) in the case of all residential land owned by the foreign person at midnight on 31 December 2016 - 0.75% of that taxable value as assessed under the Principal Act, and

(b) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2017-2021 - 2% of that taxable value as assessed under the Principal Act, and

(c) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2022 and 2023 - 4% of that taxable value as assessed under the Principal Act, and

(d) in the case of all residential land owned by the foreign person at midnight on 31 December in any other year, commencing with 2024 - 5% of that taxable value as assessed under the Principal Act.

(3) "Surcharge land tax is payable in addition to any land tax payable in respect of the residential land under the other provisions of this Act, and is so payable even if no land tax is payable under those other provisions".

1. Section 5B of the LTA provides an exemption from surcharge land tax for a principal place of residence. Section 5B as in force for the 2024 land tax year provided as follows:

"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.

(2A) A person does not use and occupy land as the person's principal place of residence during a period of the person's physical absence from Australia.

(2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person's brief physical absence from Australia.

(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".

1. The first question is whether a liability for surcharge land tax arises. If such a liability arises, the second question is whether exemption applies under s 5B.
2. That the property was "residential land" was not in dispute. Therefore, for a liability for surcharge land tax to arise, the taxpayer relevantly must be a "foreign person". The applicable definition of "foreign person" is contained in s 2A of the LTA and applies the same meaning as in Chapter 2A of the Duties Act 1997 (NSW) ("Duties Act").
3. Section 104J of the Duties Act provides that a "foreign person" means a person who is a "foreign person_"_ within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth ("FATA"), as modified by s 104J of the Duties Act. Section 4 of the FATA relevantly defines a "foreign person" as an individual not "ordinarily resident" in Australia. Section 5 of the FATA goes on to provide as follows:

"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.

1. The Applicant was not an Australian citizen at the relevant time. Section 5 of the FATA sets out two requirements that a person who is not an Australian citizen needs to satisfy in order to be "ordinarily resident" in Australia. The individual in question must have "actually been in Australia" during 200 or more days in the period of 12 months immediately preceding the time at which ordinary residency is tested. Secondly, the individual must relevantly be in Australia and their continued presence in Australia must not be subject to any limitation as to time imposed by law. Both of these requirements must be satisfied for the Applicant to prove that he was "ordinarily resident" in Australia (Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216).
2. The words "has actually been in Australia" requires physical presence in Australia (Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238, at [29]). Where the Applicant was not physically present, no regard is to be had to the circumstances and the reasons the Applicant was not in Australia (Barsoum v Chief Commissioner of State Revenue [2020] NSWCATAD 282, at [78]; Chu, at [29]-[30]; Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266, at [38]; Song v Chief Commissioner of State Revenue [2023] NSWCATAD 30, at [80]).
3. The evidence was that the Applicant was in Australia for 122 days as at the required date (31 December 2023). She had therefore not "actually been in Australia" for 200 days in the 12 months preceding the taxing date for the 2024 land tax year, that is, 31 December 2023. Neither the LTA nor FATA contain provisions allowing relief where the taxpayer falls short of the 200 days.
4. During the actual 2024 year, the Applicant was in Australia for 278 days. However, the test for presence in Australia for the requisite number of days is required to be satisfied as at the taxing date, namely 31 December 2023, having regard to the preceding 12 months and not the succeeding 12 months.
5. There is no relief allowed under the LTA for cases where the relevant requirement is actually satisfied during the particular land tax year (2024 in the present case), where it was not satisfied as at the taxing date. The Applicant had not satisfied the requirement for 200 days presence in Australia as at 31 December 2023. As a consequence, she was not "ordinarily resident" in Australia as at that date, and as a result, liable for surcharge land tax under s 5A. This was not in dispute.
6. Once a liability has been established, the next question is whether exemption can be claimed under s 5B of the LTA. Exemption, among other things, requires satisfaction of the "residence requirement", that is, the requirement that the land must be used and occupied by the taxpayer as their principal place of residence for a "continuous period of 200 days" in the land tax year, in the present instance, the 2024 calendar year.
7. The requirement for use and occupation for a "continuous" period of 200 days is not satisfied on the facts of the matter. This is because during that year, namely 2024, the Applicant had two discontinuous periods in Australia of 191 days (24 June 2024 to 31 December 2024) and 86 days (6 January to 1 April 2024).
8. The requirement in s 5B(2) for 200 days residence is expressed in language that is clear and unqualified. Such language does not allow for notions of materiality or "near enough is good enough". A continuous 200 days of physical presence is required, subject to the discretion considered below.
9. The requirement for a continuous 200 days of physical presence is subject to a discretion allowed under s 5B(2B) to waive the requirement. The discretion under s 5B(2B) allows the Respondent in "exceptional circumstances", to waive the requirement in subsection (2A) "in relation to a person's brief physical absence from Australia". This is unlike the requirement for 200 days presence in Australia stipulated in s 5 of FATA applied to determining whether or not a taxpayer is "ordinarily resident" in Australia, where no such discretion is allowed.
10. The question is whether "exceptional circumstances" of the kind referred to in s 5B(2B) have arisen in relation to a "brief" physical absence from Australia. In these circumstances, relief from surcharge land tax may be available.
11. The explanatory notes accompanying the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW), introducing this provision, stated as follows:

"For a person to be eligible for an exemption from surcharge land tax for land on the basis that the land is the person's principal place of residence, the person must use and occupy the land for a continuous period of 200 days in a land tax year. Schedule 5[1] clarifies that a period during which a person is physically absent from Australia does not count towards the 200 day period. The amendment also permits the Chief Commissioner of State Revenue to waive this requirement in exceptional circumstances".

1. The relevant Second Reading Speech in the Legislative Council said:

The final surcharge amendment concerns the principal place of residence exemption from surcharge land tax for permanent residents. The exemption applies to permanent residents in respect of residential land that they "use and occupy" as their principal place of residence for a continuous period of 200 days in the land tax year. This is called the "residence requirement".

The meaning of the words "use and occupy" has become subject to dispute in recent years, with some taxpayers arguing that it does not require a close physical connection to the property for the 200 days. In one case, a permanent resident was only in Australia for less than half a year due to work yet maintained that the property was their principal place of residence. This uncertainty poses a revenue risk.

The amendments clarify the exemption so as to require that the permanent resident be physically in Australia for the 200‑day period, except in limited circumstances where a brief period of absence may be permitted at the discretion of the Chief Commissioner, such as attending a funeral overseas. The Chief Commissioner will issue guidelines outlining the types of limited circumstances where an absence may be allowed.

These amendments will ensure that the exemption applies as originally intended, whilst allowing the Chief Commissioner to deal with exceptional circumstances as they arise.

1. Section 5B(2A) applies where there are "exceptional circumstances" of the kind referred to in s 5B(2B). Secondly, the relevant absence must be a "brief" physical absence from Australia. The requirements are not expressed in the alternative, such that satisfaction of one of the requirements alone is sufficient to bring a taxpayer within s 5B(2B). Both requirements must be satisfied. In other words, the taxpayer must show that there were exceptional circumstances. The taxpayer must also show that their absence was a "brief" physical absence from Australia.
2. The Respondent accepted that the Applicant had established "exceptional circumstances". These were the terminal illness of the Applicant's brother-in-law and his subsequent death and the Applicant's departure from Australia to assist her sister with matters arising from the illness and death of her brother-in-law, including funeral arrangements. I agree that the Applicant has proved on the balance of probabilities that there were "exceptional circumstances".
3. The Applicant gave evidence of a customary mourning period that ran for over 40 days. I accept this evidence as forming part of the circumstances explaining the Applicant's period of absence from Australia.
4. Exceptional circumstances, however, are not of themselves sufficient. These must be circumstances relating to a "brief" physical absence. The Respondent submits that the Applicant's absence from Australia was not "brief". The Respondent refers to the ordinary meaning of "brief", being "of little duration" (The Macquarie Dictionary, online) (Fleuren v Chief Commissioner of State Revenue [2024] NSWCATAD 177, at [39]). The relevant period of absence in the present case was a total period of 87 days (1 April 2024 to 24 June 2024). This was a significant period of absence that cannot, in the Respondent's submission, be characterised as "brief".
5. What is "brief", first of all, needs to be determined having regard to the particular benchmark required by the legislation. In the context of the scheme of s 5B, the question, in my opinion, is whether a period is "brief" when measured against the benchmark of the 200-day period set out in "the residence requirement" set out in s 5B(2). This is a requirement for use and occupation of land as a taxpayer's principal place of residence for the stipulated continuous 200-day period. If satisfied, the benefit of the exemption under s 5B may apply. No such use and occupation, however, can occur during a period of physical absence from Australia but the Respondent can waive this requirement under s 5B(2B). In these circumstances, whether a physical absence from Australia is brief or not, is to be determined against the benchmark of 200 days set out in s 5B and not some different benchmark.
6. There are two alternative measures of time against which a determination may arguably be made of whether a period of physical absence is "brief" or not. The first alternative is to determine whether a period is "brief" when measured against the full calendar year, being the period for the assessment of surcharge land tax. The other is to measure whether absence is brief, against the entire period of residence by the Applicant at the property. What may be a "brief" physical absence measured against the entire period of occupancy running over several years, may not be counted as "brief" when measured against the 200-day benchmark in s 5B. However, for the reasons set out above, the measure of time against which a determination is to be made as to whether a period of physical absence is brief or not should not be the entire period of residence of the Applicant or the land tax year. It is the 200-day period referred to in s 5B.
7. The Applicant's longest period of continuous occupation and use and physical presence in Australia for 2024 was 191 days, from 26 June 2024 to 31 December 2024. As such, she falls short of the 200-day residence requirement by 9 days.
8. What remains to be determined is whether or not her period of physical absence from Australia was "brief" within the meaning of s 5B(2B). The total period of absence before 26 June 2024 was for 87 days. Measured against a benchmark of 200 days, this cannot be said to be a "brief" period, making up as it does, more than 40% of the benchmark period. Even if measured against the calendar year for 2024, 87 days cannot be said to be "brief", making up nearly 3 months of the year.
9. The remaining question is whether the concept of "brief physical absence from Australia" can capture the discrete 9-day period that preceded the 191 days during which the Applicant was physically present in Australia, or whether the period of physical absence can only be taken to be the whole 87 days of physical absence.
10. I do not think that the words "brief physical absence from Australia" lend themselves to allow for a severance of an actual period of physical absence into different parts. The words in my opinion mean what they say, namely a "brief physical absence from Australia". They do not allow the Tribunal to carve out of the period of actual physical absence a shorter period, such as the 9 day period preceding the 191-day period when the Applicant was physically present in Australia, even if that 9-day period taken in isolation can answer the description of "a brief physical absence from Australia". What is a brief physical absence from Australia must be determined having regard to the actual period of physical absence.
11. The Applicant submitted that the customary mourning period should be taken into account in determining whether or not she could claim exemption. However, there is nothing in s 5B that allows for circumstances such as this to be brought to bear in the determination of whether or not waiver should apply. The question is whether or not the physical absence from Australia was brief or not. I have found that it was not.
12. For the reasons set out above, the assessment of the Respondent should be confirmed.

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.