Feng v Chief Commissioner of State Revenue

Relevant legislation

1. I will first deal with land tax generally, and then move on to the surcharge.
2. Land tax is charged, under s 8 of the Land Tax Management Act 1956 (NSW) (the LTM Act), on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. Accordingly, the thirty-first of December is often referred to as the 'taxing date' for land tax purposes - 31 December 2018 is the taxing date for the 2019 land tax year, 31 December 2019 for the 2020 land tax year, and so on.
3. That is the general rule, but there are some exemptions from the land tax. For example, a person's principal place of residence is exempt from land tax under s 10(1)(r) of the LTM Act. For the exemption to apply, the land must be 'used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose': LTM Act, Schedule 1A, cl 2.
4. If you use and occupy land as your principal place of residence for at least 6 months, but then cease to do so, then in specified circumstances the exemption continues for up to 6 years, provided you don't own any other land that you use and occupy as a principal place of residence: Schedule 1A, cl 8. I will refer to this as the 'clause 8 concession'.
5. Now, from the 2017 land tax year onwards, surcharge land tax (SLT) 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). Again, the 'taxing date' for SLT for a land tax year is 31 December in the previous year.
6. 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.
7. 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.)
8. In the Commonwealth Act, a 'foreign person' is an individual who is not ordinarily resident in Australia: s 4.
9. 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.

1. 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 SLT.
2. But there are some exemptions from the SLT, 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:

• 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: s 5B(1).

1. 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': LTM Act, s 3(1)). If they don't comply with the residence requirement, the SLT liability is to be assessed or reassessed as if the exemption for the land tax year had never applied: LTA, s 5B(3).

What are the facts?

1. Ms Feng is a citizen of China. She does not have Australian citizenship but she has been a permanent resident since 2007.
2. Ms Feng bought the Allawah property in 2014. Upon settlement in July 2014 she lived there until 9 March 2015. She then moved to a property owned by some of her relatives in Campsie.
3. Ms Feng travelled to China and back several times from January 2018 onwards to care for her sick grandparents there. Her international movement records during the 2018 to 2022 calendar years, which I accept as accurate, show the following:

• Departed Australia 20 January 2018, returned 27 September 2018;
• Departed Australia 12 October 2018, returned 9 November 2019;
• Departed Australia 26 November 2019, did not return by 31 December 2022.

1. Ms Feng says, and I accept, that she returned to Australia in May 2023. She says she couldn't return any earlier because, after she flew to China in November 2019, COVID-19 border closures prevented her from returning to Australia for over 2 years. Australia's borders were reopened in February 2022, but China's remained closed until December 2022. Ms Feng couldn't leave China until that restriction was lifted.
2. On the earlier occasions in 2018 and 2019 when she returned to Australia, Ms Feng usually nominated the Campsie address as her 'intended address in Australia' on her incoming passenger cards. During the hearing she explained this was her 'administrative habit' but she said she had moved back to the Allawah property before the first of those trips to China, and she lived in the Allawah property whenever she came back from China. Ultimately, for reasons that will become clear, it doesn't matter where she lived during her short stays in Australia. Nevertheless, I find she did move back to Allawah some time before 20 January 2018, and also that she lived in the Allawah property whenever she came back to Australia in 2018 and 2019.
3. Other people also lived in the Allawah property. Ms Feng's parents have lived there 'most of the time' since Ms Feng bought the home, and from time to time one spare bedroom has been made available to people known to the family. Those friends' stays during various periods in the 2018 to 2021 calendar years have ranged from 3 weeks to 9 months. There were three of these people who stayed in the house but never more than one of them at any one time. They would either pay money or provide gifts for staying there.
4. At all times Ms Feng's bedroom and her parents' bedroom were out of bounds for anyone else staying in the house, but communal areas such as living areas, kitchen and bathroom were available for use.
5. Ms Feng says she always intended to use and occupy the Allawah property as her principal place of residence. In fact, she says she did so, at least from July 2014 until March 2015. She says it was her principal place of residence again when she moved back from Campsie before she went to China in early 2018, although it is not clear precisely when she left the Campsie address.

Ms Feng's principal place of residence exemption from land tax

1. The Chief Commissioner accepts that Ms Feng was entitled to the clause 8 concession (see [9] above) for the 2019 to 2022 land tax years inclusive. That means she doesn't have to pay land tax for those land tax years, but it has no bearing on whether she is liable to the SLT. This is made plain by LTA s 5A(3), which says SLT may be payable even if no land tax is payable on the land.

Liability to the SLT

1. Because Ms Feng is not an Australian citizen, she will be liable to SLT unless she can establish she was 'ordinarily resident' (as defined) in Australia: see [14] above.
2. 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

1. In practical terms, for Ms Feng to have been 'ordinarily resident' in Australia at midnight on 31 December 2018 (and hence not subject to SLT 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.

1. As a permanent resident, she satisfied the second test.
2. But an examination of her international movement records ([20] above) shows she was only in Australia during 36 days in calendar year 2018 (1-20 January and 27 September-12 October). 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 the SLT for the 2019 land tax year.

The remaining land tax years

1. 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 18 days (9-26 November) in Australia during that period.
2. For each of the 2021 and 2022 land tax years, Ms Feng was not in Australia at all during the immediately preceding calendar year.

SLT liability - the overall outcome

1. 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 SLT in each of those land tax years unless an exemption applies.

Is the exemption under LTA s 5B available?

1. The exemption under s 5B is available prospectively if the taxpayer is a permanent resident and the Chief Commissioner is satisfied the taxpayer intends to use and occupy the land as the taxpayer's principal place of residence in accordance with the residence requirement: s 5B(1)(a) and (b).
2. But the taxpayer must also actually satisfy 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.
3. 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.
4. How long they have to live there will depend on the statutory language. Sometimes the statute doesn't specify how long a person has to live in a property before they can be regarded as occupying it as their principal place of residence. An example of this is the First Home Owners Grant Act 2000 (NSW), considered in Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41.
5. But the relevant statute in this case, the LTA, does specify a time requirement. That requirement is that the land must be used and occupied as the owner's principal place of residence for a continuous period of 200 days in the land tax year. There is no ambiguity in that requirement, and there is no room for an outcome reflecting the notion that 'near enough is good enough'. In a broadly similar context, the applicant in Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 needed to spend 200 days in Australia in a specified period. He only spent 199 days in Australia in the period, so he was one day short, but that was enough for his application to fail.
6. In Ms Feng's case, it is clear that she did not use and occupy the Allawah property as her principal place of residence for a continuous period of 200 days in any of the land tax years in question. In the 2019 land tax year she stayed in the Allawah property for only 18 consecutive days, and in each of the 2020 to 2022 land tax years she was in China for the entire year, so she did not use and occupy the property as her principal place of residence at all during those years.
7. Precisely how it could be said that she did use and occupy the property as her place of residence, indeed her principal place of residence, and for 200 consecutive days, during her long stays in China, is difficult to fathom. When she stayed in China for extended periods, she was living in China - in her grandparents' home, which had become her place of residence. The Allawah property was no longer her place of residence, for she had relocated to China for an indefinite period, and she was now living, or residing, there.
8. 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.
9. 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.
10. One possible way of characterising Ms Feng's relationship with the Allawah property during the relevant years is to say that she had previously used and occupied it as her principal place of residence (from July 2014 to March 2015 and then in short bursts in 2018 and 2019) and intended to do so again in the future.
11. It is probably also accurate to say that she used the property by making it available to her parents, and also from time to time to friends of the family, for them to use it as their principal place of residence.
12. But for the entire time that she was in China, helping to look after her elderly grandparents, she was not using and occupying the Allawah property as her principal place of residence, let alone for 200 consecutive days in any calendar year. To accept that she was, when for all but a handful of days during a period of 5 years she was living in China, would be to strip any rational meaning from the words used in the residence requirement.
13. In reality, Ms Feng's place of residence had become her grandparents' home in China. It doesn't matter that she didn't own that property; it was still her place of residence, and for the periods that she lived there, it was her sole place of residence.
14. Finally, I must address Ms Feng's contention that the reasons for her extended absences from Australia should be taken into account in determining whether she should be liable to the SLT. Those reasons are, initially, her desire to care for her elderly grandparents, and, later, the closure of the borders as a result of the COVID-19 pandemic.
15. The Tribunal has repeatedly emphasised that the factors contributing to an applicant's failure to satisfy a statutory requirement are irrelevant (unless, of course, the statute itself says otherwise): Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38]; Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [80]. Also, the Tribunal has no overriding discretion to waive tax that is otherwise payable: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].

Conclusion

1. Ms Feng has failed to establish that she complied with the residence requirement for any of the land tax years in question. The correct and preferable decision is to confirm the surcharge land tax assessments.

Order 1. The assessments of surcharge land tax for the 2019 to 2022 land tax years are 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: 29 February 2024