These proceedings concern an application for review of the Chief Commissioner of State Revenue (the Respondent's) assessment of surcharge duty in respect of Mr Galle and Ms D'Ippolito (the Applicants) purchase of property in Bathurst (the Property) in 2018.
For the reasons set out below I have decided that the correct and preferable decision is to affirm the Respondent's decision.
[2]
Background
On 22 January 2018, the Applicants executed a contract to purchase the Property (the Contract). They completed a purchaser/transferee declaration which was lodged with the Respondent in which they declared they were citizens of Italy; in Australia on Temporary Work (Skilled) visas, sub-class 457 (Temporary Visas) which expired on 10 February 2021; and they were ordinarily resident in Australia. No surcharge duty was paid at that time.
The notes to the declaration form explained that "ordinarily resident" for the purposes of the Duties Act 1997 (NSW) meant someone who had been in Australia during 200 or more days in the period 12 months immediately preceding the date of the contract and who were not subject to any limitation as to time for their continued presence in Australia.
In March 2021, the Respondent issued a notice of investigation regarding potential surcharge duty liability. Following the investigation, the Respondent determined the Applicants were liable for surcharge duty as well as penalty and interest totalling $47,197.51.
The Applicants objected to the assessment. On 27 August 2021, the Respondent varied the assessment by remitting the penalty in full and substantially reducing the interest, but disallowed the Applicant's objection to the surcharge duty. This was on the basis that at the time the dutiable transaction was entered into (22 January 2018), the Applicants were not ordinarily resident for the reason that their Skilled Visas were temporary entry visas which imposed a time limit on their presence in Australia. Consequently, they were foreign persons and liable to pay surcharge duty on the Contract under the Duties Act.
On 5 June 2021, the Applicants were granted Employer Nomination subclass 186 visas (186 Visas).
[3]
Legislation
Surcharge duty is chargeable on dutiable transactions listed in the Duties Act, s 104L(1) (surcharge duty transaction). This includes a transfer or an agreement for sale or transfer of residential-related property to a foreign person.
There is no dispute in these proceedings that the property is residential-related property (Duties Act, s104K).
Section 104J of the Duties Act provides:
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 a person who is a foreign person because of the person's capacity as the trustee of a trust.
(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) a New Zealand citizen who holds a special category visa, within the meaning of section 32 of the Migration Act 1958 of the Commonwealth, at any particular time is taken at that time to be an individual whose continued presence in Australia is not subject to any limitation as to time imposed by law.
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.
Section 104N provides that, in respect of a surcharge duty transaction that is an agreement for sale or transfer, the transfer occurs at the time the agreement is entered into.
Section 104Q provides that s 12 of the Duties Act applies in respect of surcharge duty in the same way as it applies in respect of duty charged under Chapter 2 of the Duties Act. Section 12 provides that a liability for duty arises when a transfer of dutiable property occurs, and that where such a transfer is affected by an instrument, liability arises when that instrument is first executed.
Payment of surcharge duty is to be paid within three months after the liability arises: Duties Act, s 104W.
It is important to note that under s 100(3) of the Taxation Administration Act 1996 (NSW) (TAA), in a review proceeding such as this, the Applicants have the onus of proving their case which requires them to prove, on the balance of probabilities, all matters necessary to enable the Tribunal to answer the statutory question in their favour absent which, the assessment prevails: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25; 94 ATR 348 at [31]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 per Allsop P at [87] and [104]; Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89 per Mason J.
[4]
Materials relied on
The Applicants relied on :
1. Joint statutory declaration dated 5 July 2021;
2. Joint statutory declaration dated 4 May 2022;
3. Copies of their Italian passports;
4. Oral submissions by Mr Pham during the hearing.
The Respondent relied on the following:
1. Documents filed under s 58 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act);
2. Documents produced in response to a summons issued to the Department of Home Affairs which included the Applicants:
1. incoming and outgoing passenger cards;
2. movement details;
3. visa details;
1. Submissions dated 25 May 2022.
2. Oral submissions from Ms Morgan at the hearing.
[5]
Consideration
The assessment of surcharge duty in this case depends upon whether the Applicants are foreign persons, a question which is answered as at the time of the transfer.
There is no dispute in these proceedings that the Applicants were present in Australia in 200 or more days immediately preceding 22 January 2018. The only question for determination is whether their continued presence in Australia, as at 22 January 2018, was subject to any limitation as to time imposed by law (by reference to the Foreign Acquisitions and Takeovers Act 1975 (Cth), s 5(b)(i) (FATA)).
There is also no dispute that the Temporary Visas under which the Applicants were present in Australia expired on 21 February 2021.
The Applicants argued they were not subject to a time limit imposed by law because they could have applied to have the Temporary Visas renewed and they did in fact obtain new visas - being 186 Visas. I note the 186 Visas expire on 5 June 2026. The Applicants also said that as long as they were in Australia when their visa expired they could remain in Australia and nothing barred them from doing so. The Applicants did not provide any evidence to support this assertion and I note both the Temporary Visas and the 186 Visas explicitly state the date each expire.
The Applicants also referred to the Respondent's Revenue Ruling G 009 which states that a person who is entitled to residency in Australia under a permanent entry visa (a permanent resident) is not subject to a time limit; nor is a person who holds a Partner (Provisional) visa if they also satisfy the 200 day requirement. As I understood the submission, the Applicants contended the same should apply for Temporary Visa holders as these provided permanent residency to the Applicants. The Applicants relied on the case of Harding v Commissioner of Taxation [2018] FCA 837 in support of their proposition.
I did not find this authority of any assistance as it concerned the residency tests under s 6(1) of the Income Tax Assessment Act 1936 (Cth) which contains its own unique "Ordinary Concepts Test" and "Domicile Test". The concept of "ordinarily resident" for the purposes of the FATA and by extension the Duties Act, is "marked out solely be the words in s 5 FATA" (Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [50]) and the test in s 6(1) is not determinative of the question in these proceedings.
In Li v So [2019] VSC 515, Croft J considered the expression "subject to a time limit imposed by law" within FATA, s 5. Croft J stated:
"[95] The plaintiff argues that s 30(2) of the Migration Act 1958 (Cth) provides three possible bases by which a temporary visa may be limited: the holder may remain during a specified period; or until a specified event happens; or while the holder has a specified status. Whilst the first of these three conditions may be said to impose a time limit, the second and third do not: the 'specified event' may not happen, and the 'specified status' may never change. Consequently, the plaintiff submits that it does not necessarily follow that her presence in Australia was 'subject to a time limit imposed by law' simply by virtue of holding a temporary resident visa. Consequently, in the absence of further evidence, the Defendant has failed to discharge his onus of establishing his allegation of illegality.
[96] … However, I do not accept the plaintiff's submission regarding the appropriate characterization of s 30(2)(a) of the Migration Act 1958 (Cth). I consider all three conditions contemplated by s 30(2)(a) render the holder of a temporary resident visa 'a person whose presence in Australia is subject to a time limit imposed by law'. Irrespective of the precise event which terminates the holder's right to remain in Australia, all three conditions render the holder subject to a temporal limitation. Such is inherent in the very nature of a 'temporary resident visa'."
Having regard to all of the evidence, and in particular the Applicants' Temporary Visas which they held at 22 January 2018, I am satisfied that the Applicants' Temporary Visas imposed a limitation as to time for their lawful presence in Australia, namely they were only lawfully permitted to remain in Australia until 10 February 2021.
As a result, the Applicants were not "ordinarily resident" within the meaning of FATA, s 5 and were foreign persons at the time the Contract was entered into. Consequently, the Contract is liable to surcharge duty.
[6]
Discretion of the Chief Commissioner - unfairness
I reject the Applicants' submissions that I should exercise a discretion to exempt them from surcharge duty on the basis that it would be unfair to them.
There is no legislative provision or authority which gives the Chief Commissioner or the Tribunal a discretionary power to exempt a taxpayer from surcharge duty if the statutory criteria are not met: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].
Arguments based on notions of "fairness" and "justice" cannot succeed in the absence of any foundation in the legislation: Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 123. Consequently, questions of unfairness including on the bases that the Applicants did not know about the surcharge duty and intended to stay in Australia and have done so, are not relevant. The Respondent is required to administer the law in accordance with its terms.
Further, noting the Applicants' request for ex gratia relief, I note the Tribunal has no jurisdiction under TAA, s 101 or s 63 of the ADR Act to grant such relief.
As I have already determined that the statutory criteria for surcharge duty have been met in this case and as there is no statutory power to exempt the Applicants from surcharge duty on the basis of unfairness, the correct and preferable decision is that the Contract is liable to surcharge duty.
[7]
Orders
The Respondent's assessment of surcharge duty 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
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Decision last updated: 24 August 2022