FVK v Chief Commissioner of State Revenue

The real issues

1. The following distinct issues arise for decision: 1. whether the Chief Commissioner's decision to make the land tax Assessments is the correct and preferable decision. That clearly turns principally on whether the "principal place of residence" exemption from land tax was available to FVK in any of the land tax years under consideration; and 2. if that decision by the Chief Commissioner is the correct and preferable one, whether his further decision to impose interest comprising both the market rate and premium components and not to remit those interest charges is also the correct and preferable decision.
2. Those issues stand to be determined by assessing FVK's grounds as well as any other available ground on which the Chief Commissioner's decisions might be challenged.

Consideration - The Assessments

1. I commence by considering whether the decision to make the Assessments is the correct and preferable decision. I do so by considering below each of FVK's grounds in the order adopted at [8] above.

Ground 1: Is the Putney property exempt as the principal place of residence?

1. The exemption from land tax liability for a taxpayer's principal place of residence is established by section 10(1)(r) of the LTM Act. The terms of the exemption are set out in clause 2 of Schedule 1A of that Act and are set out above at [15]-[16]. Clause 2 of that Schedule provides that land used and occupied by land owners as their principal place of residence and for no other purpose is exempt from land tax for any year commencing 1 January 2005, provided that the land is a parcel of residential land, a strata lot or (subject to further provisions) land comprised of two or more strata lots.
2. Significantly, subclause (2) confirms that land will not be regarded as being used and occupied as the taxpayer's principal place of residence unless: (a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which the land tax is levied, or (b) in any other case, Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence.
3. However, paragraph (b) does not grant the Chief Commissioner a discretion to treat the subject property as the taxpayer's principal place of residence: Chief Commissioner of State Revenue v Aldridge (RD) [2003] NSWADTAP 50 ("Aldridge"). The result is that the Chief Commissioner does not have an unfettered discretion and he cannot apply the exemption if the factual circumstances of the particular case do not support such a conclusion. In the present case the Chief Commissioner has not indicated any satisfaction as to the matters referred to in paragraph (b).
4. Significantly, the LTM Act does not provide any technical or legal meaning of the expression "principal place of residence", so the expression has its ordinary meaning: Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 at [19]-[23]; Raissis v Chief Commissioner of State Revenue [2021] NSWCATAD 99 ("Raissis") at [47].
5. The central facts relevant to this issue are clear and uncontested. Those facts and the legal consequences which flow from them can be summarised as follows. 1. FVK does not dispute that between January 2018 and early 2022 her place of residence was the SW Rocks property. As noted above at [21], the statutory provisions have the effect that a person cannot have more than one principal place of residence in any given land tax year. 2. FVK did not reside at the Putney property at any time during that period and in particular did not reside at the Putney property as at midnight on 31 December 2018, 31 December 2019, 31 December 2020 or 31 December 2021; those dates being the taxing dates for the 2019, 2020, 2021 and 2022 land tax years, respectively. 3. FVK leased the Putney to various tenants for at least the period January 2018 to November 2021. The relevant law is clear: where an owner of real property leases it to a tenant that constitutes a demise of the property and vests the right of exclusive possession of the property in the tenant, as confirmed in Aldridge at [20]-[21]. That is, in those circumstances the owner has no right of possession of the property for the term of the lease. 4. As noted above, FVK asserts that she and her family members had and continue to have a strong emotional attachment to the Putney property and have regarded it throughout as "the family home". She has lived at the property since 6 December 1990, brought up her three sons there with her husband and continued to live there after his death. Although I accept her unchallenged assertions to that effect and can well understand the emotional and family attachment to the property, this case and my decision on it, being a review of an administrative decision to impose land tax, must be based on the relevant revenue laws of New South Wales. Those laws are clear. They allow an exemption from land tax, relevantly, only in respect of a principal place of residence and the requirement of "residence" is not satisfied by emotional and family ties to a property, albeit that they are long-standing and genuine. Actual possession, use and occupation of the property as a residence is what is required in order for the exemption to be attracted: Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 at [42]; Aldridge at [20]; Raissis; Deans v Chief Commissioner of State Revenue [2022] NSWCATAD 14 at [33]-[34].
6. It must follow that the principal place of residence exemption is not attracted and that this ground fails.

Ground 2: Alleged 'failure to warn' by Chief Commissioner

1. FVK submits that the Chief Commissioner through Revenue NSW failed to keep New South Wales residents adequately informed about land tax requirements, including the operation of the principal place of residence exemption.
2. As was accurately contended on behalf of the Chief Commissioner, whether or not there was an absence of a "warning" of the type alleged, there is nothing at law which imposes upon the Chief Commissioner a legal obligation of any sort to keep citizens, either collectively or individually, advised or 'warned' about their potential liability for any form of taxation or duty, including land tax, or to issue notice of any such liability promptly. Accordingly, as might well be expected, nor is there anything at law which makes any remedy available to an "unwarned" taxpayer in such a situation: Commissioner of Taxation v Ryan (2000) 201 CLR 109; [2000] HCA 4 ("Ryan"); Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218 ("Gunasti"); Hashim v Chief Commissioner of State Revenue [2020] NSWCATAD 67 ("Hashim"); Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200 ("Strathavon"); and, more recently, Monisse v Chief Commissioner of State Revenue [2022] NSWCATAD 276 ("Monisse"). The decision in Monisse was recently upheld on appeal: see Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27.
3. This ground fails.

Ground 3: Unfairness - insufficient time between valuation advice and land tax questionnaire

1. This ground also fails. There is no such duty on the Chief Commissioner. The responsibility for issuing a notice of valuation to land owners in the State lies with the Valuer-General, not the Chief Commissioner, whose responsibilities, far-reaching as they are, do not extend to ensuring that what a taxpayer subjectively considers to be "a reasonable time" has expired between the delivery of a notice of valuation and the issue of a land tax questionnaire.

Ground 4: Inadequate communications

1. This ground is also not made out. I could find nothing in the course of communication between the Chief Commissioner's officers and FVK which revealed any unfair, improper or inadequate approach by the Chief Commissioner. But even if there had been evidence of such an approach, that would not of itself provide a proper basis for intervention by this Tribunal on review where, as here, the Chief Commissioner and his staff have been shown to have made the Assessments properly in accordance with the relevant law.
2. I am mindful of the observation by the plurality of the High Court (led by Chief Justice Gleeson) in Ryan at [19] that appeals to general notions of "fairness" or "justice" often (and I would add, often unintentionally): "… do no more than mask the absence of any foundation in the legislation for the conclusion which is asserted."
3. That general observation has been followed in many relevant revenue cases in this Tribunal and the Administrative Decisions Tribunal, including Gunasti, Strathavon and Hashim.

Ground 5: Unreasonable, inflexible and punitive nature of the legislation

1. This contention lacks legal substance and must fail. There is no legal obligation on the NSW Parliament to enact, nor on the Chief Commissioner or Revenue officers to administer and enforce, only such revenue legislation as can be demonstrated to be reasonable, flexible and non-punitive.

Correct calculation of the duty

1. No issue was raised as to the accuracy of the Chief Commissioner's calculation of the amount of land tax payable by FVK; that is, it was uncontested that each of the assessments is internally correct, in that the calculation in each of them of the quantum of duty which the Chief Commissioner asserts to be payable is correct, although FVK does dispute the imposition of interest at both the market rate and the premium component.

Conclusion: Correct decision

1. The question of whether a decision is both correct and preferable must be made by reference to the relevant statute or other law under which the decision-maker purports to make that decision.
2. I must reach my decision on this issue solely on the basis of the settled law. As explained above at [15]-[16], FVK as taxpayer and the Applicant bears the onus of proof to the appropriate standard and the Chief Commissioner does not bear the legal burden of satisfying me that his decision to issue the Assessment is the correct and preferable one. Rather it is for FVK to demonstrate that that is not the correct and preferable decision.
3. For the reasons set out in the paragraphs under the headings above, FVK has not persuaded me that each decision by the Chief Commissioner to make the Assessments is other than the correct decision, made in accordance with the law; that is, the statutory provisions and the relevant case law pursuant to which it was made.

Conclusion: Preferable decision

1. The question of whether a decision is the preferable one must be made by reference to the relevant statute or other law under which the decision-maker acted. The term "preferable" in relation to an administrative decision was addressed in Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31 at [140] by Kirby J, where he described it as a term which: "… is apt to refer to a decision which involves discretionary considerations."
2. Where the decision under review involves no discretionary considerations, the decision-maker is bound to administer the law in accordance with its terms: Valencia v Chief Commissioner of State Revenue [2017] NSWCATAD 261.
3. Sections 8(1) and (2) of the Administration Act are in these terms: 8 General power to make assessment (1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer. (2) An assessment of tax liability may consist of a determination that there is not a particular tax liability.
4. To the extent that it might be thought that subsection (1) above confers a discretion as to whether or not to make an assessment applicable to duties generally (although such a contention was not raised by FVK), section 14(1) of the LTM Act appears to remove any suggestion of a discretion in respect of land tax, by its use of mandatory language. It is in these terms: 14 Assessments to be made (1) Subject to this Act and the Taxation Administration Act 1996, the Chief Commissioner shall from the returns and from any other information in the Commissioner's possession or from one or both of those sources, and whether any return has been furnished or not, cause an assessment to be made of the taxable value of land owned by any taxpayer and of the land tax payable thereon. (Emphasis added)
5. In short, if, as here, the decision under review is found be the correct one and the Chief Commissioner has no discretion as to whether or not to make it, his decision must also be the preferable one.
6. Even if I have fallen into error in the above analysis and there exists some discretion in the Chief Commissioner as to whether to make an assessment, where the Commissioner does so and that assessment is correct; that is, made in accordance with the statutory provisions and the relevant case law as I have found in respect of the Assessments here, then the decision to make that assessment must also be the preferable one.
7. It follows that each of the decisions to make the Assessments is the correct and preferable decision.

Consideration - imposition of interest with market rate and premium components

1. Part 5 of the Administration Act deals with the imposition of interest and premium tax. In summary, section 21 provides that if a tax default occurs the taxpayer is liable to pay interest on the tax unpaid at an interest rate time to time applying under Division 1 of that Part. By operation of section 22, the interest rate is the sum of the "market rate component" and "the premium component" and sections 22(2) and (3) define those terms, respectively, as follows: 22 Interest rate (2) The "market rate component" is - (a) … the Bank Accepted Bill rate rounded down to the second decimal place …, or (b) the rate specified for the time being by order of the Minister published in the Gazette. (3) The "premium component" is 8% per annum.
2. Section 25 of the Administration Act is of central importance to this case. It is in the following terms: 25 Remission of interest The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.
3. In AES Wiring Pty Limited and AKS Distributions Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 11 ("AES Wiring"), it was confirmed that only exceptional circumstances justify the remission of the market component of interest.
4. However, there appears to be no such "exceptional circumstances" hurdle in relation to the remission of the premium component of interest. In Chief Commissioner of State Revenue v Incise Technologies Pty Ltd (RD) [2004] NSWADTAP 19 ("Incise Technologies"), the Appeal Panel of the NSW Administrative Decisions Tribunal noted at [62] that it had not had the benefit of a detailed statement of the considerations relevant to the exercise of the section 25 discretion to remit interest as understood or accepted by the NSW Chief Commissioner, who had not adopted any public guidelines going to the exercise of this discretion, in contrast to the position which obtains in Victoria. That absence of public guidelines as to this significant discretion apparently continues. Certainly no such NSW guidelines were drawn to my attention.
5. In Incise Technologies at [62], the Appeal Panel observed as follows: "… [T]he [Chief] Commissioner nominated four cumulative criteria for the circumstances where the premium component of interest should be remitted, namely: (1) all principal tax that [has been assessed and] is owing and not in dispute has been fully paid [at the time of the request for remission of interest]; (2) there has been co-operation by the taxpayer in providing relevant information to the [Chief] Commissioner so as to enable the [Chief] Commissioner to issue assessments; (3) such cooperation by the taxpayer has occurred prior to any investigation being commenced by the [Chief] Commissioner (voluntary disclosure) or, at the very least, within reasonable time after requests for information have been made by the [Chief] Commissioner - i.e. the taxpayer has taken reasonable care; and (4) there has been no wilful default by the taxpayer in not paying tax on time."
6. It appears that those criteria were nominated by the Chief Commissioner in that case as an indication of the sort of criteria which might guide the exercise of discretion.
7. I can see no indication that the four criteria were intended to "cover the field"; that is, to reflect the only circumstances in which the Chief Commissioner would exercise the relevant discretion. Rather it seems that they were accepted as a guide to the sort of circumstances in which the Chief Commission at that time (that is, some 19 years ago) might remit the premium component. The Appeal Panel in Incise Technologies recognised, at [63], that: "[t]here may also be other circumstances in which it would be appropriate to remit the premium component, such as ... where the Commissioner has in some way contributed to the tax default."
8. The same four criteria were adopted by the Supreme Court of New South Wales in Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 per Emmett AJA (as His Honour then was) at [81] where he said: "Both the Taxpayer and the Commissioner accept that there are four cumulative criteria as to the circumstances in which the premium component of interest should be remitted."
9. His Honour then set out the four criteria from Incise Technologies in the terms cited above. But there is nothing in His Honour's judgment to indicate that he regarded those four avenues to remission as exclusive, merely that those particular four criteria were accepted by the parties and then applied by him in reaching his decision on the particular facts of the case before him.
10. In the present case, I do not understand the Chief Commissioner to contend that those four criteria are exclusive; that they are the only matters which can or should be considered when deciding to include the premium component to an imposition of interest.
11. In hearing closing submissions, I noted for the parties' benefit that the issue of the charging or alternatively remission of interest at the premium rate had not been addressed specifically at the hearing or in written submissions. I understood the solicitor for the Chief Commissioner to respond that the imposition of the premium component was justified in this case because FVK: 1. had not made out that the land tax which was due had been paid in full, 2. had not taken reasonable care to comply with her tax obligations; and 3. had not made any relevant voluntary disclosures prior to the assessments being issued.
12. I did not understand that response on behalf of the Chief Commissioner to include any contention that the four criteria emerging from Incise Technologies are in fact exclusive.
13. I note that the matters raised at [67(2)] and [67(3)] appear to be additional criteria to those considered in that case.
14. For those reasons, I have concluded that the set of factors which should be applied by of the Chief Commissioner in deciding whether to remit the premium component of interest is not a "closed set" which is limited to the four factors considered in Incise Technologies.
15. In my view: 1. FVK has demonstrated that she co-operated, at least to some extent, in providing relevant information concerning the Assessments to the Chief Commissioner and in most instances that appears to have occurred within a reasonable time after relevant requests for the information by the Chief Commissioner; 2. she has also provided some acknowledgment of her liability to pay the full amount of the land tax as assessed; for example in her email of 11 January 2023 seeking an arrangement for instalment payments and, at least partially, at the hearing; and 3. at relevant times she had a mental health condition, namely depression. I accept the uncontested report of FVK's general practitioner dated 7 December 2022 as reliable evidence of that.
16. The extent to which FVK has failed to pay the assessed land tax on time and in particular in accordance with the appropriate instalment plan needs to be reconsidered on the basis that it might not be regarded as amounting to wilful default, having due regard to her diagnosed mental health condition, her misunderstanding of the availability of the principal place of residence exemption, and her overall financial position at relevant times.

CONCLUSIONS

1. It follows that: 1. the Chief Commissioner's assessments of land tax payable by FVK in respect of the 2019, 2020, 2021 and 2022 land tax years should be confirmed; 2. the Chief Commissioner's decision to impose interest on the land tax charged by reference to the market rate component should be affirmed; and 3. with respect to the Chief Commissioner's decision not to remit interest charged by reference to the premium component, the proper course and the one which is most consistent with my obligation to facilitate the just resolution of the real issues in this case (see NCAT Act, section 36(1)) and to act according to good conscience and the substantial merits of the case (see NCAT Act, section 38(4)), is to set aside that decision and remit it for further consideration by the Chief Commissioner in accordance with the recommendations set out in Order 3 below.
2. I therefore make the Orders and recommendations set out below.

ORDERS 1. Each of the Chief Commissioner of State Revenue's assessments of land tax in respect of the 2019, 2020, 2021 and 2022 land tax years is affirmed. 2. The decision by the Chief Commissioner of State Revenue to impose interest on the land tax payable by the Applicant by reference to the market rate component is affirmed. 3. The decision of the Chief Commissioner of State Revenue to refuse to remit the premium component of interest on the land tax payable by the Applicant ("the premium component decision") is set aside and remitted for reconsideration by the Chief Commissioner for State Revenue in accordance with the following recommendation of the Tribunal. The Tribunal recommends that the premium component decision be re-considered by reference to the following matters in addition to any others the Chief Commissioner thinks applicable: 1. FVK's apparent acceptance, in her email of 11 January 2023 seeking an arrangement for instalment payments and at the hearing, of her liability to pay the full amount of the land tax as assessed; 2. the extent of cooperation demonstrated by FVK in providing relevant information to the Chief Commissioner to enable the assessments to be made; 3. the extent to which such cooperation occurred within a reasonable time after relevant requests for information by the Chief Commissioner; and 4. the extent to which FVK's failure to pay the assessed land tax on time and in particular, in accordance with the approved instalment plan, might not properly be regarded as an instance of wilful default, having due regard to her diagnosed mental health condition and her misunderstanding of the availability of the "principal place of residence" exemption.

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: 23 May 2023