Chu v Chief Commissioner of State Revenue

Background facts and the Agreed Statement of Facts

1. The facts outlined at [1] to [4] above are uncontested and additionally, the parties agreed as to certain facts by way of a document signed by both of them dated 15 June 2021 ("the Agreed Statement of Facts"), under which it was agreed that: 1. Ms Chu is a permanent resident of Australia; 2. Ms Chu is a citizen of Hong Kong and is not an Australian citizen; 3. Ms Chu is the owner of the Properties; 4. during the 2016 calendar year Ms Chu was in Australia between 13 August and 29 August, a period of 17 days; 5. during the 2017 calendar year Ms Chu was not in Australia for any period; 6. during the 2018 calendar year Ms Chu was in Australia between three August and 20 August a period of 18 days; 7. during the 2019 the calendar year Ms Chu was not in Australia for any period; 8. during the 2020 the calendar year Ms Chu was not in Australia for any period; 9. Ms Chu did not reside at either of the Properties during any of the 2017, 2018, 2019 or 2020 calendar years; 10. both the Properties were rented out during the 2017, 2018, 2019 and 2020 calendar years; and 11. Ms Chu resided in a property in Hong Kong during the 2017, 2018, 2019 and 2020 calendar years.

Facts relating to the assessment and objection process

1. The following facts relating to the assessment and objection process were usefully summarised in the Chief Commissioner's written submissions and were apparently uncontested. 1. On 20 March 2018 Chief Commissioner issued a nil land tax assessment notice to Ms Chu for the 2018 land tax year. That assessment did not assess her as liable for any surcharge land tax and no land tax was payable in respect of Properties as they were below the land tax threshold. 2. On 24 July 2020 the Chief Commissioner advised Ms Chu an audit was being conducted into her surcharge land tax liability. 3. On 28 July 2020 Ms Chu lodged a land tax registration return in which she declared she was a permanent resident of Australia and a citizen of Hong Kong. That return also included details of the Properties, but claimed no exemptions. 4. Following conclusion of that audit, on 29 July 2020 the Chief Commissioner issued a Land Tax Assessment Notice to Ms Chu for a total of $36,831.75, which included a discount of $552.60 for payment on or before 7 September 2020. 5. On 5 September 2020 Ms Chu lodged an objection to the assessments in that Assessment Notice. The objection was made on the following grounds: 1. that there was a genuine need for Ms Chu to be away from Australia more than 200 days do frequent travelling to China conduct trading business her capacity as a director of an Australian company which sells Australia opals in various cities in China; 2. the need a surcharge and tax was a financial burden and was unfair in circumstances where Ms Chu was absent in order to carry out export business which was beneficial to Australia; and 3. she had not been assessed as liable for surcharge land tax in the 2018 assessment (as described at (1) above. 1. On 14 December 2020 the Chief Commissioner determined the objection by disallowing it as a whole, on the grounds that: 1. Ms Chu was not ordinarily resident in Australia the 2016, 2017, 2018 2019 calendar years; and 2. she did not occupy either of the Properties as her principal place of residence for a continuous period of 200 days in any of the relevant calendar years.

Tribunal's jurisdiction

1. By operation of section 96 of the Taxation Administration Act 1996 ("the Administration Act"), Ms Chu is entitled to apply to this Tribunal for administrative review of a decision of the Chief Commissioner which has been subject to objection if she is dissatisfied with Chief Commissioner's determination of the objection. The decision under review here is the Chief Commissioner's decision on 29 July 2020 to assess Ms Chu as liable for surcharge land tax for the relevant tax years and not his decision to disallow her objection: see Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184 at [28], per Basten JA.
2. The Tribunal has jurisdiction to review the Chief Commissioner's decision by operation of section 96 of the Administration Act, section 9 of the ADR Act and section 28 of the Civil and Administrative Tribunal Act 2013 ("the NCAT Act").
3. In conducting this review I am required by operation of section 63 of the ADR Act to determine the correct and preferable decision, having regard to the materials before me and the applicable law.
4. Under section 36 of the NCAT Act, a "guiding principle" is established. That requires me, in determining the matter, to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Each party to the proceedings and any Australian legal practitioner representing a party has a duty to cooperate with the Tribunal to give effect to that guiding principle and to comply with the Tribunal's directions and orders.

Taxpayer's onus of proof

1. It is of fundamental importance that under s100 (3) of the Administration Act, in a review of this nature the applicant taxpayer has the onus of proving their case and that requires them to prove all matters necessary to enable the Tribunal to answer the statutory question in their favour and the requisite standard of proof is the balance of probabilities: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 ("Cornish") at [31]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; ("B&L Linings"), per Allsop P at [87] and [104]; Gauci Federal Commissioner of Taxation(1975) 135 CLR 181; (1975) 8 ALR 155 ("Gauci").
2. In Levich Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215 at [27], the Tribunal, whilst acknowledging that the taxpayer's evidence must not be regarded as prima facie unacceptable and must be considered on its merits without any predisposition, re- emphasised the nature of applicant's onus and the standard of proof, as recorded in Cornish, B & L Linings and Gauci. The Tribunal was of the view that s 100 (3): "… requires the applicant to prove or establish on the balance (preponderance) of probabilities all matters necessary to enable tribunal to answer the statutory question in the applicant's favour, and all the facts on which the applicant relies claim the exemption. The legislation does not place any onus on the Chief Commissioner to show that the assessments were correctly made."

Liability

1. The substantive legislative provisions which impose liability for surcharge land tax are found in the Land Tax Act 1956 (NSW) ("LT Act") in section 5A and what is now section 5B, that section having had a commencement date of 1 July 2017; that is, with effect from the 2018 tax year onwards.
2. The Chief Commissioner's written submissions contained a lengthy compendium of the relevant provisions of the LT Act as amended from time to time and as applicable to each of the land tax years relevant to this case. Ms Chu made no objection to that compendium. I have confirmed the legislative provisions and I am satisfied as to the accuracy of their presentation in the Chief Commissioner's compendium.

"Foreign person"

1. The definition which is key to liability for surcharge land tax is that of "foreign person". Over the course of the tax years relevant to this matter there have been changes to the way in which the definition has applied. In summary they are as follows: 1. The LT Act as in force during the 2017 tax year, by s 5A(1) imposed surcharge land tax on land owned by a "foreign person" and, by s 5A(6) defined "foreign person" to have the same meaning as in Chapter 2A of the Duties Act. In turn, s 104J(1) of that Act, which is within Division 2A, provided that "foreign person": " means a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section." (Emphasis added) 1. The Commonwealth Foreign Acquisitions and Takeovers Act 1975 ("FA&T Act") by section 4 defines a foreign person as an individual not "ordinarily resident" in Australia and by section 5 provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and so is not foreign person at that time) if and only if: 1. they had "actually been in Australia" during 200 or more days in the period of 12 months immediately preceding that time (which I have referred to as "the 200 days Test"); and 2. at that time either: 1. they are in Australia and their continued presence here is not subject to any time limitation imposed by law, or 2. they are not in Australia, but immediately before their most recent departure from Australia, their continued presence here was not subject to any such time limitation. 1. As contemplated in s104J(1) of the Duties Act as cited in (1) above, s104J (2) of that Act added that the definition of foreign person in the FA&T Act was modified for Australian citizens: they would be taken to be ordinarily resident in Australia whether or not they were "ordinarily resident" here under the definition. 2. With effect for the 2018 tax year there was a minor change introduced by a new subsection 5A(6) of the Duties Act which provided that in sections 5A, 5B and 5C references to "foreign person" had the same meaning as in Chapter 2A of the Duties Act. 3. With effect for the 2019 and 2020 tax years a new sub-section (5) was added to section 5A of the LT Act but it merely confirmed that in that sections 5B and 5C "foreign person" had the same meaning as in Chapter 2A (that is, s 104J) of the Duties Act which in turn, as explained above, picked up the definition in the FA&T Act and so applied the 200 days Test to determine whether a particular person was a "foreign person".

"Principal Place of Residence" exemption

1. The legislative amendments to the LT Act which were introduced on 1 July 2017 and which therefore applied from the 2018 tax year onwards, included, through a new section 5B, a limited "principal place of residence" exemption. Essentially, the taxpayer became eligible for an exemption from liability to pay surcharge land tax if the land is the principal place of residence of the taxpayer. But the exemption was only available if the taxpayer used and occupied land as his or her principal place of residence for a continuous period of 200 days in the land tax year:s5B (1) and (2).

Documentary material considered

1. With the parties' consent, I determined this matter without a hearing; that is, "on the papers".
2. I considered all the documentary material provided by each of the parties. In the case of the Applicant, Ms Chu, that comprised her application lodged on 11 March 2021, separate sets of written submissions which were received by the Registry on 30 April 2021, 3, 7 and 10 May 2021 and 27 and 30 June 2021 and related correspondence. Some of these submissions attached supporting documentary evidence such as the statement Wai Hong Ng, Ms Chu's husband and other materials relating to Resident Return Visas.
3. In the case of the Chief Commissioner, the documentation produced comprised a Notice of Representation, bundle of documents produced pursuant to section 58 of the ADR Act ("the Section 58 bundle") , the Respondent's tender bundle received on 21 June 2021, the Agreed Statement of Facts and written submissions dated 21 June 2021.

The Chief Commissioner's case

1. The Chief Commissioner's case can be readily stated. It was that on a proper construction of the relevant legislation Ms Chu was liable to pay surcharge land tax, because: 1. she could not satisfy the Tribunal that she was "ordinarily resident" in Australia within the meaning of section 5 of the FA&T Act for 200 days or more for any of the 2016, 2017, 2018 or 2019 calendar years (which correspond respectively to the 2017, 2018, 2019 and 2020 tax years) and was therefore a foreign person for the purpose of levy of surcharge land tax under section 5A of the LT Act in each of those tax years; and 2. at all relevant times she was a foreign person under the relevant legislation because she had not established that she intended to use and occupy either of Properties as her principal place of residence (either for the minimum continuous period of 200 days in any calendar year or indeed at all) during the 2018 to 2020 land tax years and was therefore not eligible for the principal place of residence exemption from surcharge land tax available under sub-sections 5B (1) and (2) of the of the LT Act.
2. In particular the Chief Commissioner contended that Ms Chu had failed to satisfy the onus of proving her case on each of those matters on the balance of probabilities, as required by s 100(3) of the Administration Act 9 and the relevant authorities (which are summarised at [13]- [14] above)

Ms Chu's case

1. Ms Chu's case was that she is entitled to exemption from surcharge land tax for each of the 2017 to 2020 tax years. As I understood it from my reading of all her documentary material, she asserted that that was so on the following 5 grounds (the titles to the grounds being mine): 1. "Deemed presence in Australia" ground. 1. Ms Chu asserted that she was ordinarily resident in Australia without having been physically present in Australia during the relevant periods, with particular reference to the 200 days Test. She based that on her assertions that she needs to travel to and from China to pursue her business, the core activities of which need to be undertaken in China; that she only leaves Australia for business reasons; that her children are enrolled in and study at Australian universities; that her business is an Australian business and that her personal and business bank accounts are in Australia. 1. "Benefit to Australia" ground 1. Ms Chu asserted that the very nature of her business is international and is focused on Australia- China trade and is therefore of considerable benefit to Australia and that she should not be penalised for being outside Australia for a genuine need to conduct that business. In this regard, Ms Chu also relied on the Department of Home Affairs' approval of her applications for a Resident Return Visa ("RRV") and, I take it that she contended that that demonstrates some form of recognition, binding on the Governments of the Commonwealth and of New South Wales, of her status as ordinarily resident in Australia. 1. "Covid pandemic" ground 1. Ms Chu asserted that at relevant times she was unable to return to Australia due to flight restrictions imposed as a result of the Covid pandemic and that meant she was unable to return to Australia and stay for a minimum of 200 days in the 2019 and 2020 calendar years. 1. "Financial hardship" ground. 1. Ms Chu asserted that any liability for surcharge land tax would impose a considerable financial burden on her that if she is forced to return to resume residence in Australia her business can only operate at a loss and that accordingly she has suffered and will continue to suffer financial hardship as a result of the imposition of the surcharge land tax. 1. "Unfairness/retrospectivity" ground. 1. Ms Chu asserted what I understood to be a general "unfairness" ground, to the effect that surcharge land tax has been imposed only since 2017 which was after the date on which she purchased the Properties and established her business and it is therefore unfair to impose liability for surcharge land tax on her, because in those circumstances it would be a retrospective imposition of taxation.

The real issues

1. As discussed in more detail above at [5], the general issue for determination is whether the Chief Commissioner's decision to issue the surcharge land tax assessment was the correct and preferable decision, in which case it should be affirmed or whether it should be varied or set aside and which if any other orders of those available under ss 63 and 65 of the Administrative Decisions Review Act 1997 ("the ADR Act") should be made.
2. However it is apparent that the "real issues" are these: 1. should any of the 5 grounds raised by Ms Chu be upheld, so as to result in a finding that the Chief Commissioner's decision was not the correct and preferable one; 2. if none of those 5 grounds is upheld, is there any other basis on which I could conclude the Chief Commissioner's decision was not the correct and preferable one; and 3. which of the orders available to me, as discussed at [6] above, should be made

The facts agreed by Ms Chu

1. Many of the facts pertinent to determination of the issues have, quite properly, been admitted by Ms Chu, as reflected in the Agreed Statement of Facts. They form the starting point for consideration of her liability for duty. They relevant facts admitted are these: 1. that she is the owner of the Properties, but did not reside in either of them during the calendar years 2017-2020 2. that she is not an Australian citizen, although she is a permanent resident; 3. that, as confirmed by movement records produced to the Chief Commissioner by the Department of Home Affairs, during each relevant calendar year and its corresponding tax year, she was resident in Australia for the number of days as indicated below: 1. calendar 2016 (2017 tax year): 17 days 2. calendar 2017 (2018 tax year): 0 days 3. calendar 2018 (2019 tax year): 18 days 4. calendar 2019 (2020 tax year): 0 days 5. calendar 2020 (2021 tax year): 0 days; and 1. that she did not reside in either of the Properties during the tax years 2017, 2018, 2019 or 2020, but resided in Hong Kong in that period.

1."Deemed presence in Australia" ground.

1. Ms Chu says that, for the reasons outlined above at [24] (1), she should be regarded as having been "ordinarily resident" in Australia at the relevant times, without being physically present in Australia. She appeared to rely upon guidelines published by the State Revenue Office of Victoria in support but, as contended by the Chief Commissioner, those guidelines are not binding in New South Wales and I give them no weight because they concern a different legislative provision with different statutory requirements and possibly different outcomes.
2. The position in this State is quite clear: in order to be "ordinarily resident" in Australia the taxpayer must have been physically present in Australia and the reasons for a person not actually being in Australia for the 200-day period are not relevant in assessing liability for duty under section 5A. Those principles have been confirmed recently by the decisions of this Division of the Tribunal in Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [59] and Barsoum v Chief Commissioner of State Revenue [2020] NSWCATAD 282 at [78],("Barsoum").
3. As noted in the Chief Commissioner's submissions, there is no provision of the LTM Act which grants or allows the Chief Commissioner a discretion to exempt the taxpayer from surcharge land tax if the statutory criteria are not met.

2. "Benefit to Australia" ground
3. The legal position is quite clear. There is no discretion in the Chief Commissioner to exempt the imposition of surcharge land tax where the statutory criteria are not met, including by taking into account the taxpayer's business and any benefits to Australia which may be seen to arise from the international nature of that business. The grant of RRV status has no impact the correctness of the Chief Commissioner's decision under review and for the reasons explained above does not attract any discretion to allow the strict provisions of section 5A to be departed from. The grant of a RRV most certainly does not confer or imply recognition of the visa holder as ordinarily resident in Australia and in particular it does not bind the Governments of the Commonwealth or New South Wales in that regard.

3."Covid pandemic" ground

1. This ground must fail for the reasons above and those in the next paragraph below, but also because: 1. there was no relevant travel restriction arising from the Covid-19 pandemic in place during the 2019 calendar year; and 2. in any case the Tribunal has previously rejected claims of financial hardship in relation to surcharge land tax liability which are based on the economic impact of the Covid-19 pandemic, at least where (as here) there is no detailed evidence of the financial loss or of the nexus between it and the Covid-19 restrictions: Barsoum at [90]-[97].

4. "Financial hardship" ground.
5. I am satisfied that grounds based on financial hardship alone must fail. I was not made aware of any authority to the effect that in these circumstances the Chief Commissioner is empowered to provide financial assistance (including by not issuing an assessment for surcharge land tax which is otherwise appropriate) and so far as I can understand it there is no such authority. I note that in the same result obtained in Barsoum.

5."Unfairness/retrospectivity" ground.

1. As noted in the Chief Commissioner's submissions there is adequate authority, including that of the High Court of Australia in Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 123, for the proposition that appeals to general notions of "fairness" or "justice" cannot succeed in the absence of any foundation for them on express and clear provisions in legislation which is being reviewed. There is no such foundation here. If the apparent claim of retrospectivity is viewed as a separate ground to that of general unfairness, I find that there was no retrospectivity which would ground a finding favourable to Ms Chu.

The decision the correct and preferable one

1. It must follow that the Chief Commissioner's decision was the correct one. There was nothing in the submissions or other material put to me to support a contention that his decision was not correct or that it was not also the preferable decision. On the basis of my findings of fact and the clear terms of the relevant operative legislation, it must also have been the preferable decision.
2. I therefore found that the Chief Commissioner's decision to issue the assessment of surcharge land tax was the correct and preferable one.
3. It must follow that the order should be as set out below and I ordered accordingly.

Order

1. The Chief Commissioner's decision under review is affirmed.

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: 13 August 2021