Griglio v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2024-07-30

Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222 Category: Principal judgment Parties: Massimo Griglio and Christina Lee Griglio (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Solicitors: Lyubicic and Associates (Applicants) Crown Solicitor (Respondent) File Number(s): 2023/00465798 Publication restriction: None

REASONS FOR DECISION

This is an application for review of a decision of the Chief Commissioner of State Revenue (the "Respondent") to assess surcharge purchaser duty, interest and penalties. The Respondent's submission is that the applicant, Massimo Griglio ("the Applicant") is liable for surcharge purchaser duty, interest and penalties. The Respondent considers that the liability for surcharge purchaser duty arises because the Applicant was a foreign person at the time liability to duty arose. The Applicant considers that he should be relieved of that liability because he relied on professional advice and did not believe that he was liable. The Applicant also relies on the proposition that assessing duty is unfair and there was a long delay in the assessment. He also disagrees with the assessment of interest and penalties.

Background

The Applicant is an Italian citizen. Christina Lee Griglio is an Australian citizen.
The Applicant arrived in Australia in December 2018. On 26 March 2020, he applied for a Partner subclass 820 Visa. On the same date, the Applicant was granted a Bridging A Visa. His Bridging A Visa took effect on 9 November 2020 once the Applicant's previous Temporary Skills Shortage Visa had ended.
The Bridging A Visa allowed the Applicant to remain in Australia lawfully while his application for a Partner subclass 820 Visa was being considered. The Bridging A Visa would end if the Applicant's application for a Partner subclass 820 Visa was granted. The Bridging A Visa would also end after a specified period of time if the Applicant's application for a Partner subclass 820 Visa was invalid, refused, withdrawn or otherwise had an outcome from a merits review decision.
The Applicant and Christina Lee Griglio married on 7 November 2020. They entered into a contract for the purchase of a house in New South Wales ("Property") on 29 December 2020.
They retained the services of licenced conveyancers to act for them on the purchase of the Property. The conveyancing firm they used was run by two brothers. The conveyancers gave evidence that they identified the purchasers by their NSW driver's licences.
The Applicant's evidence was that he explained to the conveyancer that he was not an Australian citizen and supplied to the conveyancer his visa that was current at the time. He also told the conveyancer that he was in the process of applying for a Partner subclass 820 Visa. He understood from his migration agent that it was "granted or was about to issue". The Applicant said that at no time was he informed of surcharge purchaser duty applying to foreign persons.
One of the conveyancers also gave evidence that he had rung up RevenueNSW on at least two occasions and was told that "as long as the visa had the word "indefinite" then this gave it a permanent resident classification". The Respondent, for his part, said that he had no records of such advice. The Respondent also provided evidence of detailed information on his website about how surcharge purchaser duty was levied, including Revenue Ruling G 009.
On 30 January 2021, the Applicant completed a "Purchaser/Transferee Declaration" (Form ODA 070 I) in respect of the purchase of the Property. This is a form that is completed and lodged to obtain assessments of duty. The Applicant declared in the Purchaser/Transferee Declaration that he was the holder of a subclass 820 visa. He also described his rights of residency as "indefinite".
On 30 January 2021, a notice of assessment issued assessing the contract for sale of the Property as being liable for transfer duty of $48,275. No foreign interest in the Property had been declared and no surcharge purchaser duty was assessed.
Settlement of the contract occurred on 9 February 2021 and the Applicant's title to the Property was registered on that date together with that of his wife as joint tenants.
On 23 February 2021, the Applicant was granted a Partner subclass 820 Visa. The length of stay permitted under this visa was for such time until notification that a subclass 801 visa had been decided or the application was withdrawn. On 1 June 2021, the Applicant was granted a Partner subclass 801 Visa. The length of stay allowed under this visa was indefinite from the date of each arrival.
The Applicant said that had he known about surcharge purchaser duty, he would have waited the extra 2 weeks in order to complete the purchase of the Property, at a time when he had a visa allowing him indefinite residency and was no longer a foreign person. Alternatively, he would have looked at the option of just purchasing the property in his wife's name.
Following an investigation by the Respondent, on 30 August 2023, the Respondent issued a duties notice of assessment in the amount of $65,559.70. This amount was made up by surcharge purchaser duty of $46,000, penalty of $9,200 and interest of $10,359.70 ("Assessment").
On 12 October 2023, an objection to the Assessment was lodged on behalf of the Applicant. On 8 November 2023, the Respondent disallowed the objection.
By application made on 22 November 2023, the Applicant seeks review by the Civil and Administrative Tribunal ("Tribunal") of the Respondent's decision disallowing his objection.
Evidence was given by the two brothers running the firm of conveyancers the Applicant and his wife used. The first brother gave evidence by affidavit sworn on 21 March 2024. From 2003, he had practised as a licenced conveyancer. His evidence was that there was an office policy that whenever property was bought by a purchaser who was not an Australian citizen, a procedure was in place for review of the matter by a number of people in the office. However, in the case of the purchase of the Property, his evidence was that the procedure was not implemented. This was because the "cooling off" period under the contract for sale of the Property expired on the day the office reopened in the new year, being 18 January 2021. His evidence also was that his office "failed in every way to explain to Massimo his exposure to surcharge duty". The other brother provided evidence by way of a separate affidavit sworn on 21 March 2024. In that affidavit, he stated that he had "failed my clients", "failed to properly review Massimo's visa" and that "Massimo had no reason to be aware of the surcharge duty".

Applicant's rights of review

Where duty 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. 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). On the facts at hand, that determination happened on 8 November 2023.
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 Administration 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."

Consideration

Three matters arise for consideration. They are whether; 1. surcharge purchaser duty is payable 2. penalties can be assessed; and 3. interest can be assessed.

Surcharge purchaser duty

The Duties Act 1997 ("NSW") ("Duties Act") charges duty on "dutiable transactions" (s 8). The list of "dutiable transactions" that can be charged with duty includes an "agreement for the sale or transfer of dutiable property" (s 8(1)(b)(i)). "Dutiable property" includes "land in New South Wales" (s 11(1)(a)). That the contract for sale of the Property was a dutiable transaction was not in dispute.
Duty is applicable at the general rate set out in Division 2 of Part 3 of the Duties Act. The amount of duty assessed at the general rate was $48,275. That assessment is not in dispute.
However, in addition to duty assessed at the general rate, further duty may apply to a dutiable transaction in certain cases. Further duty is chargeable on an agreement for the sale or transfer of "residential related property" to a "foreign person" (s 104L of the Duties Act). That duty is called "surcharge purchaser duty". What is in dispute is, first of all, whether surcharge purchaser duty is assessable on the contract for the sale of the Property.
"Residential related property" relevantly includes "residential land" in New South Wales (s 104K(a)). That the Property was "residential land" was not in dispute. Therefore, in the matter presently before the Tribunal, a liability for surcharge purchaser duty arises if the Applicant was a "foreign person" at the relevant time.
A preliminary question arises. That question is at what point in time must a person be a "foreign person" for surcharge purchaser duty to apply. Section 104J sets out the basis for determining that question. If the person is a "foreign person" when a liability for duty charged by Chapter 2 on the transaction arises, that person is taken to be a "foreign person". In the case of an agreement for sale or transfer of dutiable property, liability will arise when the agreement is "entered into" (s 104N). The rules set out in s 12 of the Duties Act then must be applied to determine when an agreement is "entered into" (s 104Q). Those rules fix the relevant time as the time when the contract was "first executed". A contract made by acceptance of an offer contained in an instrument is taken to be "first executed" when the offer is accepted (s 295(2)). On the evidence, this occurred on 29 December 2020.
It follows that if as at 29 December 2020, the Applicant was a "foreign person", surcharge purchaser duty applies. A further consequence of first execution on that date is that any surcharge purchaser duty was required to have been paid within three months after that date (s 104W). The question, therefore, is whether the Applicant was a "foreign person" as at 29 December 2020.
The applicable definition of "foreign person" is contained in Chapter 2A of the Duties Act. Section 104J in Chapter 2A 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 on 29 December 2020. 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. Firstly, 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 be in Australia at the time their status is tested 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).
There was no dispute that the Applicant had actually been in Australia during 200 or more days in the period of 12 months immediately preceding the relevant date. The question is whether he relevantly satisfied the second requirement under s 5 of the FATA. There was no question that he was in Australia on 29 December 2020. What remains to be decided is whether his continued presence in Australia was not subject to any limitation as to time imposed by law.
The Respondent's submission was that the Applicant did not satisfy the second requirement under s 5 of the FATA, as at the contract date, namely 29 December 2020. This was because the Applicant's continued presence in Australia was subject to a limitation as to time imposed by law. That limitation was found in the terms of the Bridging A Visa which governed his presence in Australia as at 29 December 2020. It was a temporary visa and did not give the Applicant a right of residence that was indefinite.
The character of a temporary visa fell for consideration in Li v So [2019] VSC 515. Croft J held that the holder of a temporary visa was a person whose presence in Australia was subject to a time limit imposed by law. His Honour, at [95] to [96], said: "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. ….. 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 present 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".
The Tribunal has in a number of cases followed this reasoning, considering rights under certain kinds of temporary visas. In Hashim v Chief Commissioner of State Revenue [2020] NSWCATAD 67, Currie SM said, at [45]-[46]: "The only available proper and reasonable construction of the material … is that: (1) there are two distinct classes of visa, namely the Class 309 visa and the Class 100 visa; (2) only the Class 100 visa is a "permanent visa" within the meaning in section 30 of the Migration Act, because only that type of visa allows a person to remain in Australia indefinitely; and (3) if a person holds a class 309 visa it is only upon conversion of that visa into a class 100 visa that the person becomes entitled to remain in Australia indefinitely and therefore to be holding a visa which is a "permanent visa " within the meaning of section 30. The 309 Visa does allow the holder to remain in Australia, but only while the holder has a specified status (the holding of that visa) or until a specified event happens; namely until the Minister or the Department decides the holder's permanent Partner (migrant) visa (subclass 100) application or the application is withdrawn Mr Hashim held only a 309 Visa. He was not entitled to stay indefinitely in Australia".
In van der Zanden v Chief Commissioner of State Revenue [2022] NSWCATAD 283, Gatland SM said, considering rights under a bridging visa: " … the decisions in Li and Hashim are authorities for the proposition that Mr van der Zanden's presence in Australia was subject to a limitation as to time - that limitation being when a specific event happened, being the determination or withdrawal of his visa application. It is clear from its title and the bridging visa grant notice which was before the Tribunal in these proceedings that the bridging visa was provided to Mr van der Zanden while his application for a different visa was being determined. On a fair reading of the visa and the grant notice the visa was subject to a limitation as to time. The authorities which are set out above are consistent with this finding".
The Tribunal has followed the approach taken in Hashim and van der Zanden in numerous other cases (Azam Mohammed & Sarah Azam v Chief Commissioner of State Revenue [2023] NSWCATAD 38; Shah v Chief Commissioner of State Revenue [2022] NSWCATAD 31; Guimaraes v Chief Commissioner of State Revenue [2024] NSWCATAD 95).
The visa presently in issue is a Bridging A Visa. The Bridging A Visa ends if the Applicant's application for a Partner subclass 820 Visa is granted. The Bridging A Visa would also end after a specified period of time if the Applicant's application for a Partner subclass 820 Visa was invalid, refused, withdrawn or otherwise had an outcome from a merits review decision. In other words, the Applicant's presence in Australia was subject to a limitation as to time. That limitation was the time when a specific event happened, being the grant of a Partner subclass 820 visa or any of the other events described above. His Bridging A Visa, as matters transpired, came to end when he obtained his Partner subclass 820 Visa on 23 February 2021.
It follows that the Applicant was not ordinarily resident in Australia at the time the contract was made (29 December 2020), nor at the time the transfer of the Property occurred on completion of that contract (9 February 2021). In circumstances where between the dates of exchange and completion, a purchaser ceases to be a foreign person, a right to a refund of surcharge purchaser duty may be available under section 104ZF. These circumstances did not arise because as at the date of completion, the Applicant's presence in Australia continued under a Bridging A Visa. He therefore remained a "foreign person" at the time of transfer.
The Applicant asked for a waiver of surcharge purchaser duty. The Applicant however did not make any submissions explaining why, under the Duties Act or the Administration Act, such a waiver should be granted. It is well established that there is no discretion under the Duties Act or the Administration Act for the Respondent or the Tribunal to grant an exemption from surcharge purchaser duty where the statutory criteria for levying that duty are met (Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238, at [30]; van der Zanden, at [43]).
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]; see also Fleuren v Chief Commissioner of State Revenue [2024] NSWCATAD 177).
The consequence of the Applicant remaining a foreign person at the time the contract for the sale of the Property was executed and as at the date of the transfer of the Property at completion of that contract is that the assessment of surcharge purchaser duty stands and is affirmed.

Interest

In circumstances where a tax liability has not been discharged within the required three month period referred to at [28] above, a tax default arises. The Respondent submitted that the tax default in the present matter, allowed him to assess interest on the unpaid surcharge purchaser duty from that date until the surcharge purchaser duty was paid. Interest of $10,359.70 was assessed.
The Respondent can assess interest at both the market rate and the premium rate (s 21 and 22 of the Administration Act). He has done so. The Assessment included interest calculated at both rates.
The Respondent, however, has certain powers to remit interest (s 25 of the Administration Act). That power is discretionary. The Chief Commissioner may issue guidelines setting out how interest must be remitted. If guidelines are issued, interest must be remitted only in accordance with the guidelines.
The Respondent sets out in Practice Note CPN 024 ("CPN 024") how he will exercise his powers of remission. Relevantly, it provides as follows: "When a tax default occurs, interest is calculated on the amount of unpaid tax calculated on a daily basis from the end of the last day for payment until the day it is paid. The Chief Commissioner may remit the market rate component or the premium component of interest, or both, by any amount depending on the circumstances affecting the tax default. Where the remission of interest is warranted, the amount remitted will, generally, be either both the premium and market rate or the premium rate only. …….. Where there is sufficient evidence to prove that the default was within the control of the taxpayer (or their representative), but reasonable care has been taken to ensure the payment of the tax, the Chief Commissioner will usually remit the premium rate component of the interest. Events that may indicate that the taxpayer took reasonable care include (but are not limited to): a. being honest and forthright when dealing with the Chief Commissioner b. cooperation with the Chief Commissioner c. the default is attributable to calculation errors d. making diligent efforts to understand and comply with the law e. maintaining appropriate and proper recording systems in accordance with normal practice i.e., systems that minimise the risk of tax default, allow reconciliation of the tax paid or payable with returns required to be lodged and fulfil the taxpayer's obligation under the taxation laws to maintain records for the purposes of Revenue NSW investigations or audits f. taking reasonable steps to be aware of and comply with his/her taxation obligations and to be familiar with the legislative requirements g. applying any relevant revenue rulings in good faith h. seeking professional advice or private rulings for uncertain or complex matters where no revenue ruling applies, or where circumstances differ from those described in a revenue ruling i. acting promptly to seek advice or provide information once made aware, from any source, that the taxpayer might have a tax liability j. the taxpayer has used and reasonably relied on data, statements or other information provided by a third party. Meeting one or more of these examples does not necessarily mean that reasonable care has been taken; all relevant factors leading to the tax default will be taken into consideration. Note: Remission of the premium rate will only occur in special circumstances".
Bathurst CJ in Chief Commissioner of State Revenue v Downer EDI Engineer Pty Ltd (2020) 103 NSWLR 772; [2020] NSWCA 126 ("Downer EDI") considered the reach of the power in s 25 of the Administration Act to remit interest. His Honour did not think there was a limit on the power of the Chief Commissioner to remit interest in s 25 of the Administration Act. The Applicant relies on what the Court of Appeal said, in submitting that there are no limits on the power to remit interest, to support his claim for remission of interest.
Each of the components of interest assessed requires consideration. Those components are made up of interest assessed at the market rate and interest assessed at the premium rate. The rationale for the market rate of interest is described as follows in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 and why it should be waived only rarely, at [60]: "In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation".
In circumstances where there was no fault on the part of the Respondent including contribution to any default, I find no grounds for remission of the market rate, absent any exceptional circumstances that could change the general position. On the evidence before the Tribunal, I find no such circumstances. It follows that the Respondent's assessment of interest at the market rate should stand and is affirmed.
The purpose of the premium rate of interest differs from that of the market rate of interest. While the market rate compensates the Chief Commissioner for the time value of money that is paid late, the premium rate of interest extracts from the taxpayer something more. It is in the nature of a penalty (Southern Cross Community Health Care Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [443] per Emmett AJA). That difference informs the different approaches to remission of each kind of interest. While remission of interest assessed at the market rate should be rare, the circumstances in which interest assessed at the premium rate can be remitted are not as restrictive, even if they may need to be "special circumstances".
The Respondent submitted that determining whether remission of the premium rate component is justified involved the question of whether or not the taxpayer took reasonable care to comply with his obligations. There is no express requirement in s 25 for considerations of "reasonable care" to be taken into account in determining whether to remit interest (unlike in the case of s 27 applying to the remission of penalties as discussed below). The Respondent's guidelines, however, state that "taking reasonable steps to be aware of and comply with his/her taxation obligations and to be familiar with the legislative requirements" will be a matter that goes to whether remission should be made.
That taking reasonable care is a relevant consideration in determining whether or not interest at the premium rate should be assessed, alongside various other considerations, is well accepted. What "reasonable care" to comply with taxation obligations means has been described as follows in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227, following RVO Enterprises Pty Ltd ATF the R M O'Mara Family Trust v Chief Commissioner of State Revenue 2004 NSWADT 64, at [95]: "In each case, it is essentially a question of fact whether the taxpayer has taken reasonable care in attending to its tax obligations. Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other enquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law."
The relevance of taking and acting on advice was described as follows in Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, at [113]: "Reasonable care" is an objective test, but the particular (and subjective) circumstances relevant to the taxpayer are to be considered in applying the test. It requires that the taxpayer exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer. See FCT v Traviati (2012) 205 FCR 136; [2012] FCA 546 per Middleton J at [36] and [70]. Taking advice on the operation of relevant provisions can amount to reasonable care for the purposes of s 27: The Smith's Snackfood Case at [96-100]. In my view, simply hiring or relying on an accountant to prepare returns or assuming that an adviser would review returns, is not of itself a "taking advice" on the operation of relevant provisions: cf Snowy Hydro Ltd v Commissioner of State Revenue [2010] VSC 221; (2010) 79 ATR 118 at [81-82]; on appeal, Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145 at [170], [171]".
The decision of Richmond J in Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 249 ("Golden Age") is also relevant in considering remission of the premium rate of interest, having regard in particular to its penal character. His Honour held, in accordance with the decision in Downer EDI, that s 25 of the Administration Act, conferred on the Commissioner a broad discretionary power which is not subject to any limit. He sent on to say, at [99]-[104]; "Section 25 of the TAA, both before and after its re-enactment, confers on the Commissioner (and on the Court standing in the place of the Commissioner under s 101) a broad discretionary power which is not subject to any limit: Chief Commissioner of State Revenue v Downer EDI Engineer Pty Ltd (2020) 103 NSWLR 772; [2020] NSWCA 126 at [151]. In the case of an unconfined discretionary power of this nature, the considerations which are relevant to its exercise are determined by reference to the subject matter, scope and purpose of the relevant statute, including the particular provision conferring the discretion: Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483; [2013] FCAFC 50 at [227] per Griffiths J (Edmonds J agreeing); Giris Pty Ltd v Federal Commissioner of Taxation ([1969] HCA 5; 1969) 119 CLR 365 at 384 per Windeyer J. In Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, the Appeal Panel observed at [60]-[61] that the market rate component is intended to compensate the Commissioner for not having the benefit of the tax payment from the time it was due, and so approximates the ordinary lending interest rates, whereas the premium rate is a form of penalty which operates as a disincentive to taxpayers to delay tax payments. The view that the premium component is penal in nature has been accepted in later decisions, see eg. Southern Cross Community Health Care Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [443] per Emmett AJA. In my view it is necessary to approach the remission question by recognising that the premium component is penal in nature and serves the purpose of both imposing a penalty and deterring taxpayers from delaying payment of duty in what is essentially a self-assessment regime. Consequently, the culpability of the taxpayer in failing to pay the duty liability by the due date is an important matter in the exercise of the discretion. ……… In Incise Technologies, the Appeal Panel identified (reflecting a submission made by the Commissioner in that case) four cumulative criteria which are relevant to the exercise of the discretion under s 25: (1) All principal tax that is owing and not in dispute has been fully paid; (2) There has been cooperation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; (3) Such cooperation has occurred prior to any investigation being commenced by the Commissioner or, at the very least, within a reasonable time after the request for information had been made by the Commissioner; and (4) There has been no wilful default by the taxpayer in not paying tax on time". The Appeal Panel noted in Incise Technologies at [63] that the first of these criteria could be clarified to be "all principal tax that has been assessed and is not in dispute has been fully paid at the time of the request for remission of interest" and that while they were all relevant and appropriate matters for consideration, they were not exhaustive. That the four criteria are not exhaustive has been confirmed in subsequent cases, eg. Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [179] and Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [105]- [106]".
The Court in Golden Age affirms the approach to remission set out in the earlier cases and concludes that it was appropriate to remit the premium component in full, in circumstances where all four of the above criteria were satisfied. The taxpayer was found to have taken reasonable care. The taxpayer had sought advice from a firm of solicitors and acted upon that advice. Non-payment of tax had occurred as a result of an oversight by the advisor.
The Respondent's submission is that no remission of premium interest should occur. His submission is that the mere fact that the Applicant engaged a conveyancer to act for him on the purchase of the property is not sufficient to establish that he took reasonable care. In the Respondent's view, the Applicant had to establish that he provided instructions about his residency status, sought advice in respect of surcharge purchaser duty and relied on any such advice that was provided.
The Respondent submitted that on the evidence this had not happened. The evidence establishes that the Applicant stated in the Purchaser/Transferee Declaration, provided to the Respondent that he had a subclass 820 visa. He also described his rights of residency as "indefinite". Factually, this was clearly not the case at the time the Purchaser/Transferee Declaration was made. The evidence also establishes that the Applicant told the conveyancer that he was in the process of applying for a Partner subclass 820 Visa and that he understood from his migration agent that it was "granted or was about to issue".
However, merely believing that a subclass 820 visa had been "granted or was about to issue" is not a sufficient basis for concluding that the visa had actually been issued. That visa did not issue until some 7 weeks after the date of the Purchaser/Transferee Declaration.
Whether the erroneous statement made in the Purchaser/Transferee Declaration was a result of the provision of wrong instructions as to the factual background or some other error is not clear on the face of the evidence. Whatever the circumstances, that statement was wrong. As a result, I am unable to find, on the balance of probabilities, that the Applicant has discharged the onus of proof to show that reasonable care was taken. I do not consider that the Applicant's reliance on professional advice, of itself, amounts to taking reasonable care, in circumstances where a wrong statement was made to the Respondent on a matter that was fundamental to assessment of duty. I am able to distinguish the facts of Golden Age from those of the present case on the basis that in Golden Age, no factually erroneous information was provided to the Respondent.
The conveyancers accepted that there was a failure and assume full responsibility for that failure. To the extent that the lack of reasonable care was attributable to the conveyancers, I do not think that these can be circumstances assisting the Applicant. Parliament could not have intended that simply leaving matters in the hands of advisors could, of itself, be sufficient to establish that reasonable care was taken and allow a taxpayer to escape a liability for interest, especially where there has been a clear failure to make correct disclosure to the Respondent.
Where reasonable care was not exercised, this is sufficient grounds for not remitting in full the interest assessed at the premium rate. In these circumstances, I do not need to consider other relevant grounds for remission (see [54] above).
The Respondent therefore was acting within his powers in assessing premium interest, subject to the matters considered at [77]-[92] below as to quantum.

Penalties

The Respondent's power to assess penalty tax arises under s 26 of the Administration Act. It is imposed in addition to interest. The Administration Act expressly provides that the imposition or remission of interest is not relevant to the imposition or remission of penalty (s 33(2); see also s 25(4)).
The amount of penalty payable for a tax default is relevantly set at a default rate of 25% of the amount of tax unpaid (s 27).
The Respondent has the power to make certain variations to the amount of penalty tax. He may increase the amount of penalty tax in certain circumstances based on the degree of culpability of the taxpayer that are not presently relevant. The Respondent in addition has the power to reduce the amount of penalty tax by 20% if, after the Respondent informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is completed, the taxpayer discloses to the Respondent, in writing, sufficient information to enable the nature and extent of the tax default to be determined (s 29).
A penalty of $9,200 was imposed on the Assessment in addition to interest. The penalty rate applied was 20%. The reduction in penalty from the default rate of 25%, according to the Respondent's submission, reflected the fact that the Applicants cooperated with the Respondent during the investigation.
The Respondent may determine that no penalty tax is payable in respect of a tax default, if satisfied that the taxpayer or a person acting on behalf of the taxpayer, took "reasonable care" to comply with the taxation law (s 27(3)). The Respondent did not use his powers to remit penalty tax in its entirety. The Applicant considers that he should have done so, submitting that the power had no relevant limits. He also relied on the fact that he had sought specialist advice.
The Court of Appeal in Downer EDI considered that the power of remission was not limited either expressly or by necessary implication by the mandatory reductions required by sections 28 and 29 of the Administration Act. Bathurst CJ said: " …. it does not seem to me that the power in s 33 of the TAA to remit penalty tax "in such circumstances as the Chief Commissioner considers appropriate" is limited either expressly or by necessary implication by the mandatory reductions required by ss 28 and 29. These mandatory reductions are a relevant matter for the Commissioner to take into account in considering whether to exercise the power to remit in s 33 but they do not limit that power. As the Chief Commissioner pointed out, in Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue Ward CJ in Eq stated at [301] that except in special circumstances, the general discretion under s 33 should not be exercised beyond the limits in ss 27(3) and 29 when the circumstances giving rise to a remission under s 27(3) of the TAA had not been made out. However that was a matter of discretion not power".
The Respondent decided not to remit the entire penalty because in the Respondent submission, the taxpayer had not taken reasonable care. The Respondent, in particular, noted that he could take into account both whether the taxpayer or an advisor for the taxpayer took reasonable care, by reason of s 27(3).
The Respondent relied on the following statement made in O'Neill Tyres Gateshead Pty Ltd & Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2020] NSWCATAD 314, at [56]-[57]: "Underlying the provisions of section 27 of the TAA is a self-evident policy of promoting compliance with taxation laws by the imposition of penalty tax for failure to comply. That the penalty tax can be increased under section 27(2) for intentional disregard by the taxpayer, or decreased under section 27(3) in order to recognise reasonable care to comply, supports the policy objective by giving the Commissioner the "stick" of penalty tax, to sanction intentional non-compliance, and the "carrot" of remission, to promote sincere and careful (albeit unsuccessful) attempts at compliance. For taxpayers to escape penalty tax by the simple expedient of delegating to professional advisers management of their payroll tax affairs would undermine this policy. It is precisely to exclude such an anomalous outcome that section 27(3)(a) includes the reference to persons ".. acting on behalf of the taxpayer". The purpose is clear: the compliance sins of the delegate are to be visited on the taxpayer. There is obviously an element of judgment to be exercised in individual cases, in deciding whether a particular case is one of wholesale delegation or merely one where the taxpayer professional advice in order to assist in compliance. In the case of Cessnock and Bayrond, the Tribunal is satisfied that it is the former rather than the latter".
The Respondent relied on the evidence of one of the conveyancers who "conceded that he did not take reasonable care", acknowledging that he was aware that the Applicant's residency status is a paramount factor when deciding whether surcharge purchaser duty is applicable. He acknowledged that he failed to properly review the Applicant's visa and adequately advise the Applicant that he would be subject to surcharge purchaser duty. The Respondent further submitted that there were no special circumstances warranting a remission of the penalty tax of the kind contemplated in Downer EDI.
The question of whether or not reasonable care within the meaning of s 27 has or has not been taken is a question of law to be determined by the Tribunal. The Tribunal must do so on the basis of the evidence placed before it and not on an opinion proffered by a witness as to whether or not reasonable care was taken. Any concession by the conveyancer that he did not take reasonable care therefore does not determine the matter.
Nevertheless, on the evidence before the Tribunal, I find that the taxpayer or a person acting on behalf of the taxpayer did not take reasonable care. It has been accepted by the Applicant that the statement made in the Purchaser/Transferee Declaration that the Applicant was not a foreign person was incorrect. That incorrect statement resulted in surcharge purchaser duty not being assessed as it should have been. In light of the matters set out at [60] above regarding that incorrect statement and its consequences, I find that the Applicant has not proved, on the balance of probabilities, that reasonable care was taken. Accordingly, the Respondent's assessment of penalty tax is affirmed.
Whether the failure to take reasonable care was by the taxpayer or the conveyancers acting on his behalf should not in the circumstances of the case, affect the refusal to exercise discretion to remit penalties (Touma v Chief Commissioner of State Revenue [2012] NSWADT 2, at [50]).
The Respondent submitted that he had reduced the penalty from 25% to 20% because the Applicants cooperated with the Respondent during the investigation. I find that the Respondent was correct in his decision to do so.

Delays in investigation and issue of Assessment

The assessment of transfer duty at the general rate was made on 30 January 2021. Following investigation by the Respondent, the Assessment of surcharge purchaser duty, interest and penalty tax did not issue until 30 August 2023. The period between the dates of the two assessments was two and a half years.
The Applicant submitted that delays on the part of the Respondent in issuing the Assessment are grounds for remission of the interest levied at the premium rate and penalty. He relied on the decision in Molyneux and Vermeesch v Chief Commissioner of State Revenue [2011] NSWADT 117. In that case, the premium component and penalty tax were remitted in full. The reasons for the remission included a long delay before the issue of an assessment.
The Respondent, on the facts of that matter, relied on an alleged non-disclosure of facts to justify his assessment. The dispute in that case was over matters of valuation. The position of the Respondent was that the provision by the taxpayer of a particular valuation that he questioned was a failure to fully disclose relevant "facts". The Administrative Decisions Tribunal found that what was in dispute were opinions as to value and not facts. There was therefore no situation of a non-disclosure of "facts".
The circumstances of Molyneaux can be distinguished from the facts of the present case. That was a case where a dispute over matters of opinion, namely valuation, had arisen. Remission was allowed in full where there had been no failure to disclose facts. In the present case, there has been an incorrect statement of fact as to the residency status of the Applicant. This was a matter of fundamental importance that determined whether or not surcharge purchaser duty was assessable. As a result, an assessment of interest at the premium rate and penalty are appropriate, on the basis of there being a failure to disclose relevant facts.
However, this does not end the matter. Interest assessed at the premium rate is levied at the rate of 8% annually. Because it runs annually, the amount of that interest will increase over time. Time taken on the part of the Respondent in an investigation and issuing an assessment could, as a result, increase the amount of interest assessed at the premium rate. This has occurred in the present case.
The Tribunal cannot and should not prescribe timeframes within which the Respondent must investigate a matter and reach an assessment. It is accepted that the time the Respondent needs may vary depending on a great many factors, including the complexity of the matter. However, where an increase in the amount of premium interest is the result of time taken by the Respondent in undertaking an investigation and issuing an assessment, I do not think that the correct outcome is for the Applicant to bear that cost, other than to the extent that he has been responsible for the delays. There is no evidence that the Applicant is responsible for the relevant delay.
The Respondent is already compensated for the time value of money where the relevant surcharge purchaser duty was not paid on time, by assessment of interest at the market rate. If delay in assessing tax will result in increases in the interest calculated at the market rate, that increase merely has the effect of maintaining the time value of the underpaid tax. There appears to be no reason, however, why the Respondent should automatically be able to collect premium interest, to the extent that accrual of interest at the premium rate is the result of delay, where the Applicant is not at fault for the delay. I do not think Parliament intended that interest at the premium rate should necessarily run indefinitely as a result of the time taken by the Respondent to reach an assessment of tax, where the taxpayer neither has control over the time taken nor is at fault for delay. Having regard to the penal nature of interest assessed at the premium rate, I accept that there may be instances where premium interest could be assessed regardless of delay by the Respondent, if the degree of culpability of the taxpayer warrants such an outcome. I do not think that this is such a case.
The evidence of the Applicant and the conveyancers, in my opinion, establishes that there was no wilful non-compliance. There was, however, a failure to take reasonable care. These circumstances assist me in reaching the conclusion that a remission of part of the interest assessed at the premium rate is warranted, if s 25 allows partial remission.
Section 25 of the Administration Act provides that the Respondent "may remit interest". Whether this power of remission allows only remission of the entirety of the interest assessed or may permit part of the interest to be remitted remains to be considered. Section 25 as it currently stands came into force from 1 February 2024 as a result of amendments made by the Treasury and Revenue Legislation Amendment Act 2023 (NSW) ("Amending Act"). The former version of the provision in force before the amendments came into effect, expressly allowed for remission of interest "by any amount". Section 25 in the form it took from 1 February 2024 no longer contains these words.
The explanatory notes accompanying the Amending Act said that the amendment to s 25 "re-enacts a power of the Chief Commissioner to remit interest and includes a new power for the Chief Commissioner to issue guidelines about how interest must be remitted". There is nothing in the explanatory notes to indicate that the scope of s 25 was to be narrowed so that it no longer allowed the remission of interest "by any amount" and only allowed for remission of interest in its entirety. Indeed, if that was the intention, s 25, as it stands from 1 February 2024, would require an "all or nothing" approach, where remission of both interest assessed at the premium rate and at the market rate, is the only way in which the power of remission could be used. It could be expected that if a material change of this nature were intended, some statement to this effect may have been made in the explanatory notes.
The fact that the explanatory notes simply refer to an intention to "re-enact" s 25, in my opinion, indicates that there was no intention to limit the scope of the power to remit interest so that it could only be remitted in its entirety. Richmond J in Golden Age, considering the ambit of s 25 after the amendment, indicated that he "proceeded on the basis that there is no relevant change at the present time in the nature of the discretion conferred by that section", other than in one respect which is not presently relevant, although his Honour did not make his remarks in relation to the matter at issue, namely whether interest may be remitted in part only.
Understood in its ordinary meaning as "money paid regularly at a particular rate for the use of money lent" (Oxford Dictionary Online), each amount so accruing may be understood to be "interest", as well as the total balance owing at a particular time. So understood, I am of the opinion that the powers of remission of "interest" may apply to parts of the total accrued, such as interest accrued during a particular period, or to the entire amount of interest accrued.
CPN 024 says that the Respondent may "remit the market rate component or the premium component of interest, or both, by any amount depending on the circumstances affecting the tax default. Where the remission of interest is warranted, the amount remitted will, generally, be either both the premium and market rate or the premium rate only" (emphasis added). In other words, the Respondent says that he may relevantly remit interest "by any amount", rather only being able to remit all of it. The date of CPN 024 (June 2022) precedes the effective date of the amendments to s 25 made by the Amending Act. However, it is described as being "current" as at the present date. For the reasons set out above, I am in agreement with the Respondent's position as set out in CPN 024.
The Court in Golden Age, says that the factors it and the earlier cases set out going to the powers of remission are not exhaustive. Delays and the circumstances of those delays, that impact on the amount of interest assessed, in my opinion, can be taken into account as a relevant matter. However, "special circumstances" are required to relieve a taxpayer from obligations to pay interest at the premium rate. The Applicant is not relieved of liability in the present case and remains liable to pay interest assessed at the premium rate but should not be liable for the full amount assessed for the reasons given above.
The Assessment does not identify the specific amount of interest assessed at the premium rate. As a result, I am unable to quantify the amount to be remitted. The amount of interest assessed at the premium rate to be remitted should be 75% of the amount assessed at the premium rate. I consider that a remission of this order fairly takes into account the impact of delays for which the Applicant was not responsible.
The Respondent submits that the cause of delay was wrong information being provided by the Applicant. I accept that this was the cause of an assessment of duty that wrongly excluded surcharge purchaser duty. However, delays that subsequently ensued in investigating the matter and reaching an assessment were, in my opinion, within the control of the Respondent and not the Applicant. While the Respondent may need time to carry out his duties to collect tax and may be compensated for the time cost of late payment thought an assessment of interest at the market rate, I do not think that the Applicant should bear the entire costs arising from delays over which it has no control. For the reasons stated at [82]-[83] above, this is not a case where such an outcome can be justified.
Both interest assessed at the premium rate and penalties are penal in nature. However, the amount of penalty, unlike interest at the premium rate, does not vary depending on the time taken to investigate the matter and reach an assessment. Delay therefore should not be a matter, on the facts of the case, that goes to impugning the Respondent's assessment of penalty. That assessment stands for the reasons set out at [73] - [75] above.

Conclusions

For the reasons set out above: 1. the assessment of surcharge purchaser duty is affirmed 2. the assessment of penalty is affirmed 3. the assessment of interest at the market rate is affirmed 4. the decision to assess interest at the premium rate is set aside and remitted to Respondent for determination in accordance with these reasons.

Orders

The Assessment is revoked and remitted to the Respondent for determination in accordance with this decision.

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: 30 July 2024

Treasury and Revenue Legislation Amendment Act 2023(NSW)

(2020) 103 NSWLR 772

At a glance

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Judgment (12 paragraphs)

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Legislation Cited (7)

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Cited By (3)