The applicant, Michael Robin Frietman, seeks administrative review of the assessment of the respondent, the Chief Commissioner of State Revenue, made on 30 April 2021, that he is liable for surcharge purchaser duty in respect of the off the plan residential-related property he and his partner contracted to purchase, on 28 February 2017 (the Property).
The respondent calculated surcharge purchaser duty only on the applicant's interest in the Property and not the interest acquired by his partner as she was not relevantly a 'foreign person'. The amount of interest that accrued on the unpaid surcharge purchaser duty was also remitted from $10, 815 to $1,630.02. As the applicant has not sought review of this aspect of the respondent's 30 April 2021 assessment, I have considered it no further.
Section 104L of the Duties Act 1997 (NSW) (Duties Act) provides that surcharge purchaser duty is chargeable on a 'transfer' or an 'agreement for sale or transfer' of residential-related property to a 'foreign person'. A 'foreign person' is defined in s 104J of the Duties Act as follows:
104J Meanings of "foreign person" and "foreign trustee"
(1) In this Chapter -
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.
foreign trustee means …
(2) The definition of foreign person in the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth is modified as follows -
(a) an Australian citizen is taken to be ordinarily resident in Australia, whether or not the person is ordinarily resident in Australia under that definition,
(b) …
(3) For the purposes of charging surcharge purchaser duty on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises (or would arise but for section 53A or a concession or exemption from duty under that Chapter).
Note -
Section 5 of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and is therefore not a foreign person) 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.
(3) For the purposes of charging surcharge purchaser duty on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises (or would arise but for section 53A or a concession or exemption from duty under that Chapter).
Note -
See section 12.
Frietman v Chief Commissioner of State Revenue [2022] NSWCATAD 265 | Case summary | Zoe
The applicant and his partner are not Australian citizens but are permanent residents of Australia. The applicant has been a permanent resident of Australia since November 2012. In November 2016, the applicant decided to relocate his family permanently from overseas to Sydney, Australia. In 2018, the applicant was absent from Australia for a lengthy period as his employer required him to work on projects that were located overseas. The applicant's partner and family remained in Australia during this time and while it was anticipated that the overseas project work would only take three months, it took much longer. Nevertheless, during his absence from Australia the applicant continued to ay income tax, rent, utilities and other living expenses incurred in Australia.
The applicant contends that: (a) the due date for stamp duty on the purchase of the Property was May 2018, which he paid as an ordinary resident when it was due; (b) he was in Australia for 223 days in the 12 months immediately preceding the stamp duty date and hence not a 'foreign person' liable for surcharge purchaser duty. He also contended that, in his failure to meet the 200 day ordinary resident requirement in the 12 months prior to the settlement date, regard should be had to the fact that his absences from Australia were not matters over which he had any control.
The issues for determination in this application are:
1. in the event liability for surcharge purchaser duty does arise, when does that liability arise?;
2. was the applicant a 'foreign person' falling within the terms of s 104J of the Duties Act at the relevant time when liability for surcharge purchaser duty may arise?; and
3. is the applicant liable for surcharge purchaser duty?
There is no dispute that the Tribunal has jurisdiction to hear and determine the applicant's application: Administrative Decisions Review Act 1997 (NSW) (ADR Act) s 9, and Taxation Administration Act 1996 (NSW) (TA Act) s 96(1).
The role of the Tribunal on administrative review is to determine the correct and preferable decision having regard to the material before it, including the relevant factual material and the applicable written and unwritten law: ADR Act, s 63(1). For this purpose, the Tribunal may exercise all the functions conferred or imposed by any relevant legislation on the respondent in making the decision he made: ADR Act, s 63(2).
[2]
Onus
In this application the onus is on the applicant to prove his case on the balance of probabilities: TA Act s 100(3). In other words, the onus is on the applicant to establish that he is not liable to surcharge purchaser duty, having regard to the relevant statutory criteria and in the absence of doing so, the assessment of the respondent will prevail as correct: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue (RD) [2013] NSWCATAP 25 at [30] and [36] and Federal Commissioner of Taxation v Dalco [1990] HCA 3 at [14]; (1990) 168 CLR 614.
[3]
Duties Act Chapter 2
Chapter 2 of the Duties Act contains provisions relating to transactions concerning dutiable property. There is no dispute that the Property is dutiable property under s 11 of the Duties Act.
Section 8 of the Duties Act sets out the transactions concerning dutiable property for which duty is imposed under Chapter of that Act. Included in these transactions is an agreement for the sale or transfer of dutiable property: Duties Act s 8(1)(b)(i).
Section 9(2) of the Duties Act provides that, for the purpose of duty charged by Chapter 2, a dutiable transaction that is an agreement for the sale or transfer of dutiable property (i.e. s 8(1)(b)(i)), the 'property transferred' is the property agreed to be sold or transferred; 'transferee' of the property transferred is the purchaser or transferee and the 'transfer occurs' when the agreement is entered into.
Section 12 of the Duties Act provides that a liability for duty arises when a transfer of dutiable property occurs.
Section 49A of the Duties Act is a special provision relating to an 'off the plan purchase agreement'. That section applies despite section 12, in the following circumstances:
49A Purchases "off the plan"
(1) Liability for duty on an off the plan purchase agreement arises:
(a) on completion of the agreement, or
(b) on the assignment of the whole or any part of the purchaser's interest under the agreement, or
(c) on the expiration of 12 months after the date of the agreement,
whichever first occurs.
(1A) This section applies in relation to an off the plan purchaser agreement only if the Chief Commissioner is satisfied, when assessing liability for duty after the agreement is lodged for stamping, that the purchaser or transferee under the agreement (or, if there is more than one purchaser or transferee, at least one of them) intends to use and occupy the residence to which the agreement relates as a principal place of residence in accordance with the residence requirement.
(1B) The residence must be used and occupied by the purchaser or transferee (or, if there is more than one purchaser or transferee, at least one of them) as the purchaser or transferee's principal place of residence for a continuous period of at least 6 months, with occupation commencing no later than 12 months (or such longer period as the Chief Commissioner may approve) after completion of the sale or transfer. This requirement is referred to as the residence requirement.
(1C) …
(2) This section applies despite section 12.
(3) …
(3A) This section does not apply in relation to an off the plan purchase agreement if any purchaser or transferee under the agreement is a foreign person (within the meaning of Chapter 2A).
(4) In this section:
off the plan purchase agreement means an agreement for the sale or transfer of dutiable property, being land on which a residence is to be erected or developed before completion of the sale or transfer.
[4]
Duties Act Chapter 2A
Chapter 2A of the Duties Act contains provisions, inserted into the Act in 2016 by the provisions in Sch 1 of the State Revenue Legislation Amendment (Budget Measures) Act 2016 (NSW), concerning duty charged on certain residential land transactions involving 'foreign persons'. These provisions came into force on 21 June 2016.
As set out at [2] above, the term 'foreign person' is defined in s 104L of the Duties Act. The terms of ss 4 and 5 of the Foreign Acquisitions and Takeover Act 1975 (Cth) are also included in the note to s 104L. As I have noted above, this definition is modified by s 104J(2) of the NSW Duties Act to provide that an Australian citizen is to be taken as being 'ordinarily resident' in Australia for purpose of Chapter 2A of that Act.
Section 104N of the Duties Act is in similar terms as s 9 in that it provides that, in respect of a surcharge purchaser duty transaction that is an agreement for sale or transfer, the transfer occurs when the agreement is entered into.
Section 104Q provides that s 12 applies in respect of surcharge purchaser duty in the same way as it applies in respect of duty charged by Chapter 2 of the Duties Act.
Section 104W of the Duties Act provides that surcharge purchaser duty is to be paid within three months after the liability to pay the duty arises.
Section 104ZF of the Duties Act provides that, if surcharge purchaser duty has been paid on an agreement for the sale or transfer of residential-related property and the respondent is satisfied that none of the transferees in respect of a transfer made in conformity or partial conformity with the agreement are foreign persons, the respondent must reassess and refund that duty if an application is made within 5 years of the initial assessment.
[5]
The factual background
The factual background to the assessment of the respondent is not disputed. In summary they are as follows:
1. on 28 February 2017, the applicant and his partner signed a Contract for the Sale of Land concerning the sale and their purchase of the off the plan apartment on the land (i.e. the Property);
2. on 27 April 2018, the applicant and his partner completed a Purchaser/Transferee Declaration form. At the top of page 1 of the form is a note, which includes a note in the following terms: 'Before completing this declaration, each purchaser/transferee must read the information about the Surcharge Purchaser Duty and …- Explanatory Notes and Supporting Evidence available at www.osr.nsw.gov.au.'
In his Declaration, in response to the question as to whether he was a 'foreign person', the applicant appears to have initially answered 'yes' but, crossed it out and answered 'no' and indicated that he was 'a person who is ordinarily resident in Australia';
1. on 11 May 2018, having submitted the 28 February 2017 Contract for Sale of Land and the Purchaser/Transferee Declarations completed by the applicant and his partner, the Contract was stamped for duty under the Electronic Duties Return (EDR) system by the solicitor for the applicant and his partner. Duty, as assessed under the EDR system, was paid on this day and the document type was recorded as 'off the plan' (s 49A);
2. settlement occurred on 5 March 2019 and the transfer was stamped as being liable for nominal duty of $10.
There is no dispute that the Property was purchased by the applicant and his partner as their permanent residential address. Nor is there any dispute about the dates, in 2016, 2017 and 2018 during which the applicant was not ordinarily resident in Australia. In this case,
1. in the 12 months prior to the date of contract (28 February 2017), the applicant had been in Australia for 114 days;
2. in the 12 months prior to the date on which duty was paid (11 May 2018), the applicant had been in Australia for about 245 days; and
3. in the 12 months prior to the date on which settlement occurred (5 March 2019), the Applicant had been in Australia for 172 days.
[6]
When does liability for surcharge purchaser duty arise?
As I have noted above, where the dutiable transaction is an agreement for sale of dutiable property, the date on which liability for Chapter 2 duty arises is the date on which the agreement was entered into: Duties Act, ss 9 and 12. The liability for Chapter 2A surcharge purchaser duty arises on the same day, if, as of that day the purchaser is a 'foreign person' falling within the terms of s 104J: Duties Act ss 104N(2), 104Q and 104J(3).
In this case, the relevant date is 28 February 2017, which is the date on which the agreement/Contract for sale of the Property was entered. That is, the applicant's liability for Chapter 2 duty concerning his purchase of the Property arose on this day and not on the day the duty was paid. This liability has been paid and is not in issue in this application. However, the applicant's liability for Chapter 2A surcharge purchaser duty concerning his purchase of the Property is at issue and that liability, as noted above, arose on the same day as his liability for Chapter 2 duty, namely 28 February 2017, if, as on that day he was a 'foreign person' falling within the terms of s 104J.
The fact that the applicant did not need to pay the amount of duty or surcharge purchaser duty that he was liable to pay on this day did not alter the date on which the liability for duty or surcharge purchaser duty (if any) arose.
Nor was the date on which liability for duty or surcharge purchaser duty altered by the fact that the 28 February 2017 agreement was an off the plan purchase. As pointed out by the respondent, the fact that the applicant had been advised that he was not required to pay the duty on the agreement/Contract for 15 months after the agreement/Contract was entered into, did not affect the date on which his liability for duty or surcharge purchaser duty arose. The advice provided to the applicant was presumably provided on reliance of s 49A of the Duties Act and the agreement/Contract appears to have originally been assessed and stamped on that basis, given the Declaration the applicant made. However, as I have noted, s 49 is of no application where, as at the date on which the liability for surcharge purchaser duty, the purchaser is a 'foreign person' for the purposes of Chapter 2A: Duties Act s 49A(3A).
[7]
Was the applicant a 'foreign person' as at the date on which liability for surcharge purchaser duty arose?
The fact that the applicant was a permanent resident was not sufficient on its own to establish that, as at the date of the agreement/Contract, the applicant was not a 'foreign person'. What must be established is that the applicant was a permanent resident and was actually present in Australia during 200 or more days in the period of 12 months prior to the date of the agreement/Contract (i.e. 28 February 2017): Goa v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [59].
The undisputed evidence is that the applicant was not actually present in Australia during 200 or more days in the period of 12 months prior to 28 February 2017. Hence, I am satisfied that, as at the date of the agreement/Contract, the applicant was a 'foreign person' for the purpose of Chapter 2A and liable, under s 104L of the Duties Act, for surcharge purchaser duty on the purchase of his share of the Property.
I also find that the applicant is not entitled to a reassessment or refund of surcharge purchaser duty pursuant to s 104ZF of the Duties Act because, the undisputed evidence is that, at the time of settlement of the property (5 March 2019), he was not actually present in Australia for 200 or more days in the period immediately before the settlement date. As I have noted above, the applicant was only actually present in Australia for 172 days during this period.
I accept the applicant was absent from Australia due to work commitments made at the direction of his employer. However, this is not a factor relevant to the determination as whether the applicant was or was not a 'foreign person' as at the relevant date for the purpose of s 104J of the Duties Act. Nor do the provisions of the Duties Act, as they applied on the date the liability for surcharge duty arose, contain a discretion to waive or grant an exemption from surcharge duty, where the statutory criteria of being ordinarily resident were not met: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30]-[31] and Barsoum v Chief Commissioner of State Revenue [2020] NSWCATAD 282 at [78].
Hence, I find that, as at 28 February 2017, the applicant was a 'foreign person' and liable for surcharge purchaser duty on the agreement/Contract for the sale of the Property.
[8]
Is the applicant liable for surcharge purchaser duty?
Based on my findings above, I find that the applicant is liable for surcharge purchaser duty in respect of the off the plan residential-related property he and his partner agreed/Contracted to purchase, on 28 February 2017.
During the course of the hearing, the applicant raised the principal place of residence exemption in s 104ZKA of the Duties Act. As pointed out by the respondent, this section was inserted into the Duties Act by cl 3 of Sch 2.1 of the State Revenue and Other Legislation Amendment (Budget Measures) Act 2017 (NSW) and came into force after the date on which the applicant's liability for surcharge purchaser duty arose. Furthermore, the savings, transitional provision provided that the section only applied to a transfer, or an agreement for the sale or transfer, of residential related property that occurs on or after the commencement of that section: Duties Act Sch 1 cl 133.
[9]
Conclusion and order
Based on my findings above, I find that the applicant has failed to establish his case. Instead, I find that the assessment of the respondent, made on 30 April 2021, in regard to the applicant's 28 February 2017, agreement to purchase, off the plan, the residential-related Property is the correct and preferable decision and should be confirmed. Hence, I order:
1. The assessment of the respondent, the subject of review, is confirmed.
[10]
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
[11]
Amendments
19 August 2022 - Para 29. 's194ZF' corrected to s104ZF
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: 19 August 2022
Parties
Applicant/Plaintiff:
Frietman
Respondent/Defendant:
Chief Commissioner of State Revenue
Legislation Cited (8)
State Revenue and Other Legislation Amendment (Budget Measures) Act 2017(NSW)
State Revenue Legislation Amendment (Budget Measures) Act 2016(NSW)