Feng v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2024-08-20

Introduction

The Applicant, Bo Feng, is a permanent resident of Australia. She owns two properties in New South Wales, one in Parramatta and one in Kellyville.
Ms Feng has been assessed to surcharge land tax for the land tax years 2019 to 2023 but she has disputed the assessment. She claims the Kellyville property has been her principal place of residence since she purchased it in 2014. For that reason she says the surcharge land tax should not be payable, at least for the 2019 to 2022 land tax years. (She accepts the surcharge applies for the 2023 land tax year as a result of changes to the law that apply for that and subsequent years.)
Ms Feng's objection to the assessment was disallowed. She has applied to the Tribunal for an administrative review of the assessment.
I have concluded that the surcharge land tax liability for the 2019 to 2023 land tax years has been properly assessed and the assessment should be confirmed. I will explain why I have come to that conclusion.

Jurisdiction

This is an application under s 96 of the Taxation Administration Act 1996 (NSW) (TA Act) for an administrative review of assessments of surcharge land tax. The administrative review is conducted under the Administrative Decisions Review Act 1997 (NSW) (ADR Act).

The issue for determination

The question for the Tribunal is whether Ms Feng is liable to surcharge land tax in respect of the Kellyville property for any of the 2019 to 2022 land tax years (the liability for the 2023 land tax year having been conceded).
As will become clear, the question requires the consideration of various provisions in State and Commonwealth legislation. Ultimately the answer will depend, for each of the land tax years in question, on: 1. Whether Ms Feng was in Australia during 200 or more days in the preceding calendar year; and 2. Whether Ms Feng used and occupied the Kellyville property as her principal place of residence for a continuous period of 200 days during the land tax year.

Relevant legislation

From the 2017 land tax year onwards, surcharge land tax is payable in respect of residential land owned by a foreign person: Land Tax Act 1956 (NSW) (LTA), s 5A(1). It is payable in addition to any land tax payable on the land, and is payable even if no land tax is payable on the land: LTA, s 5A(3). The 'taxing date' for surcharge land tax for a land tax year is 31 December in the previous year.
The expression 'foreign person' for the purposes of the LTA has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW): LTA, s 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'. (The modifications referred to in the Commonwealth Act - which only deal with Australian citizens and certain New Zealand citizens - do not apply to Ms Feng's circumstances because she has never been an Australian citizen or a New Zealand citizen.)
In the Commonwealth Act, a 'foreign person' is an individual who is not ordinarily resident in Australia: s 4.
As far as relevant to this case, s 5 of the Commonwealth Act provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if:

the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and
the individual's continued presence in Australia was not subject to any limitation as to time imposed by law.

An individual who is not an Australian citizen has to satisfy both of those requirements to be classed as ordinarily resident in Australia at the relevant time. If they fail either one of them then they will not be ordinarily resident and that will make them a foreign person potentially liable to surcharge land tax.
But there are some exemptions from the surcharge, and one of them is the principal place of residence exemption in s 5B of the LTA. That exemption applies to a person for a land tax year only if (s 5B(1)):

the person is a permanent resident at midnight on 31 December of the previous year; and
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
the person lodges a declaration to that effect.

The person must also actually comply with the residence requirement - which requires the person to use and occupy the land as their principal place of residence for a continuous period of 200 days in the land tax year: LTA, s 5B(2). (A person's principal place of residence is 'the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person'. That definition comes from s 3(1) of the Land Tax Management Act 1956 (NSW) (LTM Act), with which the LTA is to be read and construed: LTA, s 1.)
If the person doesn't comply with the residence requirement, the surcharge land tax liability is to be assessed or reassessed as if the exemption for the land tax year had never applied: LTA, s 5B(3).

Amendment to the LTA for the 2023 land tax year

Section 5B of the LTA was amended for the 2023 and subsequent land tax years by the addition of subsections (2A) and (2B) after s 5B(2). Those provisions read as follows: (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.
Ms Feng seems to accept the addition of these provisions puts the question of her surcharge land tax liability for the 2023 land tax year beyond argument.

What are the facts?

Ms Feng is a citizen of China. She does not have Australian citizenship but she has been a permanent resident since 2006.
Ms Feng bought the Kellyville property in 2014 and moved into it from the Parramatta property. There seems to be no dispute that she has lived in the Kellyville property whenever she has been in Australia since the time she bought it, and I find that to have been the case. She says she has 'taken it as my principal residential place for me and my family and never leased it out. I didn't own any other properties in any other country' (Ex A1, Statement, page 5).
Ms Feng's international movement records provided by the Immigration Department (Ex R2, Tab 3, page 9) indicate her travel from 2015 to 2024:

Departed 18/02/2015;
Arrived 03/02/2019, departed 08/02/2019;
Arrived 17/07/2019, departed 27/07/2019;
Arrived 05/01/2023, departed 05/02/2023;
Arrived 10/01/2024.

Accordingly, Ms Feng spent the following number of days in Australia during the 2018 to 2023 calendar years:

2018 - 0 days;
2019 - 17 days;
2020 - 0 days;
2021 - 0 days;
2022 - 0 days;
2023 - 32 days.

During the relevant period, when Ms Feng was outside Australia she was in China. She and her husband stayed in three different properties in Beijing that were rented by her husband, two of them owned by his employer. They were all furnished by the landlord; Ms Feng describes them as 'only my temporary residential places … I had no intention to settle in Beijing for long-term': Applicant's Submissions [11] and [13].
Meanwhile Ms Feng paid all internet, council rates, water bills, electricity and gas bills for the Kellyville property. Evidently she still regarded the Kellyville property as her home, even while she was in China. It is listed as her residential address on her driver licence and her registered nurse and midwife licences.
In support of her objection against the assessment, Ms Feng provided the following information to the Chief Commissioner about the maintenance of the Kellyville property during the relevant years (Ex R1, page 80): 2018-2022: I didn't lease this property out. My brother Qingyang Feng and my father Zimin Feng helped me maintaining the property. I also lived in my house at Kellyville when I returned [to] Australia with the kids in Feb 2019 and July 2019 to prepare for school enrollment and moving back [to] Australia. However, due to COVID-19 pandemic outbreak and lockdown of China border, we postponed our plan of moving back to Australia.

Liability to surcharge land tax

Because Ms Feng is not an Australian citizen, she will be liable to the surcharge unless she can establish she was 'ordinarily resident' (as defined) in Australia: see [13] above.
The question whether a person is 'ordinarily resident' in Australia at a particular time is solely governed by the words of s 5 of the Commonwealth Act: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [50]. Those words, adopted by the LTA, s 2A, specify the only way a person can establish they were 'ordinarily resident' (and therefore not a 'foreign person') at a particular time.

The 2019 land tax year

In practical terms, for Ms Feng to have been 'ordinarily resident' in Australia at midnight on 31 December 2018 (and hence not subject to surcharge land tax for the 2019 land tax year), she would have to satisfy both of the following two tests:

She would have to have 'actually been in Australia' during at least 200 days in the 2018 calendar year; and
She would have to have been an individual whose continued presence in Australia, as at midnight on 31 December 2018, was not subject to any limitation as to time imposed by law.

As a permanent resident, she satisfied the second test.
But an examination of her international movement records ([22Error! Reference source not found.] above) shows she was not in Australia at all during calendar year 2018. As a result she failed to satisfy the first test. That means she was not 'ordinarily resident' in Australia at midnight on 31 December 2018, and so she was a 'foreign person' potentially liable to surcharge land tax for the 2019 land tax year.

The remaining land tax years

The same general questions apply for the remaining land tax years. For the 2020 land tax year, she needs to have been in Australia during at least 200 days in the 2019 calendar year. But she had only 17 days (3-8 February and 17-27 July) in Australia during that period.
For each of the 2021 and 2022 land tax years, Ms Feng was not in Australia at all during the immediately preceding calendar year.

Surcharge land tax liability - the overall outcome

So, while she satisfied the second test for each of the relevant land tax years, Ms Feng failed to satisfy the first test. By not having actually been in Australia during at least 200 days in each of the 2018 to 2021 calendar years, Ms Feng was a 'foreign person' at midnight on the 'taxing date' for each of the 2019 to 2022 land tax years. She is therefore liable to surcharge land tax in each of those land tax years unless an exemption applies.

Is the exemption under LTA s 5B available?

The exemption under s 5B is available only if the taxpayer actually satisfies the residence requirement in s 5B(2). That requires the owner to use and occupy the land as the owner's principal place of residence for a continuous period of 200 days in the land tax year.
In a case similar to this one, I said in Feng v Chief Commissioner of State Revenue [2024] NSWCATAD 56 at [37]: The use and occupation referred to in s 5B(2) is physical use and occupation: Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340 at [45]. But it is more than that: it is physical use and occupation of the land as the owner's principal place of residence. Of course, it may be possible for a person to be using and occupying land, such as a house or apartment, by doing nothing more than filling it up with furniture and household effects. But that doesn't mean it is being used and occupied as the person's place of residence. To answer that description the person must also live there: the house or apartment must be their place of residence. And it can't be their place of residence if they don't live there.
Ms Feng wasn't living in the Kellyville property during any of the 2020 to 2022 land tax years; she was living in Beijing throughout that period. It follows that she did not use and occupy the Kellyville property as her principal place of residence for a continuous period of 200 days in any of those land tax years.
The 2019 land tax year is somewhat different. There were two short periods in that year when Ms Feng did, in fact, live in the Kellyville property: one period in February totalling 6 days, and one in July totalling 11 days. Does that amount to two short but discrete periods of residence, or one long period of residence interrupted by Ms Feng's travel to China?
In the earlier case of Feng, I discussed the question whether temporary absences from a place of residence might cause a taxpayer to fail the 'continuous period of 200 days' test in the residence requirement. I said at [42]-[43]: [42] That is not to say that every absence from a person's principal place of residence negates or diminishes the status of that location as the person's principal place of residence. As a general proposition, a person may continue to use and occupy land as their principal place of residence despite being away from it for a period, or even multiple periods, of time. But the length and frequency of the absences have a bearing on the extent to which that status may be jeopardised. Likewise the identification of an alternative property as a potential candidate to fill the role of a person's principal place of residence. It is a question of fact and degree. [43] That general proposition also applies to cases like this one. Short, infrequent, temporary absences from a person's principal place of residence (such as those imposed on an itinerant worker, or when an owner goes away on holidays or spends time in hospital) would not necessarily preclude satisfaction of the residence requirement in the version of s 5B(2) under consideration here. Repeated, indefinite absences, on the other hand, are in a different category.
As it happens, in the current case, the answer to the question posed in [38] above has no bearing on the outcome. This is because the entire period from 3 February to 27 July, even if viewed as a continuous period, only makes up 175 days in any event. Nevertheless, for completeness, I should record my view that Ms Feng resided in the Kellyville property during two discrete periods in 2019, not one long but interrupted period. The 158-day absence in China wasn't just an interruption to a continuing state of affairs; it ended one period of residence in Kellyville and commenced another one in Beijing.
And so, the outcome for the 2019 land tax year is the same as for the 2020-2022 land tax years. Ms Feng did not use and occupy the Kellyville property as her principal place of residence for a continuous period of 200 days.
The exemption under LTA s 5B is not available for any of the relevant land tax years.

Other matters

Ms Feng referred to two earlier Tribunal decisions - Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 and Du v Chief Commissioner of State Revenue [2022] NSWCATAD 329 - in which the taxpayer owned two properties and obtained exemption for one of them. She thinks she is being treated differently from the taxpayers in those cases, and she should be granted the exemption for one of her properties, just as they were.
It is not clear from the Tribunal's published reasons in those cases precisely why the Chief Commissioner considered the principal place of residence exemption was available. But whatever the Chief Commissioner's reasoning in those cases, the position here is clear: the exemption for the Kellyville property is not available.
Ms Feng also raised concerns about the accuracy of some of the information she was given in writing and orally by the Chief Commissioner's officers, and which she claims has caused her financial detriment. Unfortunately for Ms Feng, that is not a matter that the Tribunal can help her with. The Tribunal's role is to determine whether the assessment is correct. It does not extend to a consideration of the quality of the Chief Commissioner's administration of his office, the adequacy or timing of the information disseminated to the taxpaying public, or the payment of compensation to aggrieved persons.

Order 1. The assessment of surcharge land tax is 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. 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: 11 September 2024

At a glance

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Judgment (14 paragraphs)

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