This is an application for review of a decision of the Chief Commissioner of State Revenue ("the Respondent") to assess surcharge land tax. The Respondent's submission is that the applicant, Mr Andreas Fleuren, ("the Applicant") is liable for surcharge land tax for the 2023 land tax year. The Respondent considers that the liability for surcharge land tax arises because the Applicant was not ordinarily resident in Australia and did not use and occupy the property in question, as his principal place of residence. The Applicant considers that he should be relieved of that liability.
[2]
Background
The Applicant is a citizen of the Netherlands. He is 76 years old and is the youngest of eleven children. His siblings reside in Europe.
The Applicant migrated to Australia in 1970. He has held a Return (Residence) (class BB Subclass 155) visa, which is a permanent visa.
The Applicant's evidence was that he had not obtained Australian citizenship because this would result in the loss of his Dutch citizenship. He has applied for Australian citizenship in circumstances where he understands that the Netherlands now allows dual citizenship.
The Applicant acquired property at Hardy's Bay, New South Wales on 21 July 2015 (the "Property").
He travelled overseas in 2022 and 2023 to spend time with his family. His evidence was that he had spent little time with them during his 54 years of permanent residency in Australia. His evidence also was that he needed to be with them at this time, before aged family members passed away and before he was himself no longer able to visit them on account of his own ill health.
The Applicant believed, on the basis of correspondence with the Respondent, that 200 non-consecutive days of residency in Australia during a calendar year, would satisfy the "residence requirement" he needed to satisfy, to obtain exemption from surcharge land tax.
The Applicant spent the following number of days in Australia in the 2022 and 2023 calendar years;
1. 2022 - 195 days
2. 2033 - 207 days.
On 20 February 2023, the Respondent issued a land tax assessment notice to the Applicant for the 2019, 2020 and 2023 land tax years.
On 13 March 2023, the Respondent sent an email to the Applicant to advise that he had been granted a land tax surcharge exemption for the 2023 land tax year but was ineligible for exemption for the 2019 land tax year.
On 22 March 2023, the Applicant's spouse spoke with an officer of the Respondent by telephone, requesting an instalment plan to be set up for payment of the assessment. An extended payment plan was sent to the Applicant on 2 April 2023.
On 22 February 2024, the Respondent advised the Applicant's spouse, on behalf of the Applicant, that the surcharge land tax exemption applied to the Property had been revoked for the 2023 land tax year, as the Applicant did not satisfy the "residence requirement". On that day, the Respondent issued a land tax assessment notice reassessing the Applicant as liable for surcharge land tax for the 2023 land tax year (the "Assessment"). No interest or penalties were assessed. It is the Assessment, for the sum of $35,200, which is in dispute.
On 28 February 2024, an objection to the Assessment was made and lodged on behalf of the Applicant.
On 21 March 2024, the Respondent disallowed the Applicant's objection.
The Applicant, by application dated 1 April 2024, sought review by the Civil and Administrative Tribunal ("Tribunal") of the Respondent's disallowance of his objection.
The Applicant has given evidence that he is a pensioner who is in "ill health with very limited financial resources". Evidence of the Applicant's ill health is provided by letter from a medical practitioner. Some evidence of his financial resources was also provided. He believes that the only way he could find $35,200 to pay the Assessment is to sell the Property. He asks for relief from this amount of surcharge land tax.
By application dated 1 April 2024, the Applicant sought a stay on payment of the Assessment pursuant to s 60 of the Administrative Decisions Review Act 1997 (NSW) ("ADR Act"). The Respondent told the Applicant that he will not commence recovery action until determination of these proceedings, without providing prior notice of 21 days. The Applicant on 19 April 2024 withdrew his application for a stay.
[3]
Applicant's rights of review
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, including a reassessment of the kind made in this matter. 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).
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 ADR Act of the decision of the Chief Commissioner of State Revenue.
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.
The onus of proving his case lies with the Applicant (s 100(3) of the Administration Act).
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."
[4]
Consideration
Surcharge land tax is charged on certain properties owned by "foreign persons" pursuant to s 5A of the Land Tax Act 1954 (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 any other year, commencing with 2022 - 4% 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".
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 2023 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".
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.
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").
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 section 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".
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 ("Gao")).
The words "has actually been in Australia" requires physical presence in Australia (Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238, at [29] ("Chu")). 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]).
The evidence was that the Applicant was in Australia for 195 days as at the required date. He had therefore not "actually been in Australia" for 200 days in the 12 months preceding the taxing date for the 2023 land tax year, that is, 31 December 2022. Neither the LTA nor FATA contain provisions allowing relief where the taxpayer falls a few days short of the 200 days.
During the actual 2023 year, the Applicant was in Australia for 200 days or more. 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 2022, having regard to the preceding 12 months and not the succeeding 12 months.
There is no relief allowed under the LTA for cases where the relevant requirement is actually satisfied during the particular land tax year (2023 in the present case), where it was not satisfied as at the taxing date.
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 2023 calendar year.
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 2023, the Applicant had two discontinuous periods in Australia of 118 and 88 days each.
However, this notwithstanding, 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.
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".
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".
The Respondent's submission is that the Applicant has not established any "exceptional circumstances" that would allow discretion to be exercised. The Applicant on the other hand, is of the view that his long absence from his family overseas, the need to see them during the limited time available, his age, his ill health and the age and situation of his siblings, gave rise to circumstances of the kind contemplated by s 5B(2B).
Even if the Tribunal were to accept the Applicant's submissions, exceptional circumstances are not of themselves sufficient. These must be circumstances in relation 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). The period of absence in the present case was 158 days. This was a significant period of absence that cannot, in the Respondent's submission, be characterised as "brief".
What is "brief" needs to be measured against the relevant period of time contemplated by the legislation. If what is a "brief" physical absence is measured against the land tax year, it does not appear that the Applicant's absence from Australia has been "brief", being 158 days out of 365 days. Section 5B refers to use and occupation of the land as the person's principal place of residence "for a continuous period of 200 days in the land tax year". Measured against the shorter 200 day period also, 158 days cannot be said to be brief. If, on the other hand, there was a continuous period of use and occupation falling short of the continuous period of 200 days referred to in s 5B(2), for example, a period of a few days, that period may well be counted as "brief", even if the entire period of actual absence of the taxpayer was longer than a few days.
However, in the absence of a continuous period of use and occupancy that falls short of the required 200 days by a few days, it could not be said that there has been a brief physical absence within the meaning of s 5B(2B). The Applicant's periods of continuous occupation and use in 2023 were periods of 118 days and 88 days. He was outside Australia in between these periods. In other words, this is not a situation where the Applicant fell short by a few days of the requirement for 200 days continuous presence in Australia. The circumstances for exercise of discretion under s 5B(2B) therefore do not arise.
The Applicant submitted that the surcharge land tax legislative framework and assessment process is difficult to comprehend and inconsistent, and ought to be rejected. The Respondent's submission was that even if the Applicant found the statutory scheme difficult to comprehend, that was not a basis to challenge the Assessment.
Difficulty in comprehension of provisions of a statute is not a basis for non-compliance. There is no discretion, in such circumstances, to allow relief from taxation, including in cases where the conditions for exemption are not satisfied.
The Applicant believes that he had been misled by the Respondent into thinking that 200 days of non-continuous presence in Australia during the land tax year, would allow for exemption to be claimed. The Respondent, on the other hand, referred to the principle that no conduct or representation on the part of the Respondent can operate as an estoppel against the Respondent issuing an assessment, in the discharge of his duty to administer a taxation law. This is a well accepted principle (BBLT Pty Ltd v Commissioner of State Revenue [2003] NSWSC 1003; Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27, at [33]). Regardless of what communications from the Respondent say, the taxpayer bears the responsibility for working out their tax liabilities and compliance (EK Anderson Investments Pty Ltd ATF Cacs Property Trust v Chief Commissioner of State Revenue [2012] NSWADT 13; Laviva Nominees Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 84, at [56]). In any event, the Respondent submits that the correspondence with the Applicant included a link to the information in question setting out the relevant residence requirement.
The Applicant claims that the revocation of the exemption from surcharge land tax for 2023 is "grossly unfair and should be set aside". As regards questions of fairness of the outcomes under a taxation law, the High Court in Commissioner of Taxation v Ryan (2001) 201 CLR 109 said:
"But the question for decision is what are the circumstances in which an amended assessment may lawfully be issued? That question is not answered by asserting the existence of any "policy" or "general intention" unless that policy or intention is to be found reflected in the provisions of the Act. Appeals to general notions of "fairness" or "justice" do no more than attempt to mask the absence of any foundation in the legislation for the conclusion which is asserted."
The Tribunal has applied this principle in numerous cases, confirming that there is no discretion to relieve a taxpayer of a tax liability on grounds of unfairness (Findlay v Chief Commissioner of State Revenue [2023] NSWCATAD 80, at [31] and the cases referred to there; Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222; Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218; Valencia v Chief Commissioner of State Revenue [2017] NSWCATAD 261; Faytrouni v Chief Commissioner of State Revenue [2023] NSWCATAD 26, at [48]-[50]).
There is evidence the Applicant placed before the Tribunal of hardship that payment of the Assessment would produce. The Tribunal does not have jurisdiction to determine the matter on the basis of hardship (Loomes v Chief Commissioner of State Revenue [2014] NSWCATAD 133). Division 5 of Part 10 of the Administration Act establishes and empowers a Hardship Review Board to deal with cases in which the exaction of the full amount of tax would result in serious hardship for the person or the person's dependants. The remaining avenue available to the Applicant would therefore be an application to the Hardship Review Board.
[5]
Orders
1. The assessment under review is confirmed.
[6]
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: 28 June 2024
Parties
Applicant/Plaintiff:
Fleuren
Respondent/Defendant:
Chief Commissioner of State Revenue
Legislation Cited (7)
Land Tax Act 1954(NSW)
State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022(NSW)