Is Mrs Grist entitled to the principal place of residence concession?

[6] A property owner is entitled to a concessional rate of transfer duty if the owner occupies the property as their principal place of residence within one year after the transfer of the property.[1] The occupation date is the date the owner starts occupying the property as principal place of residence.[2]

[7] On 17 August 2012, the property was transferred to Mrs Grist. She resided elsewhere while the property was tenanted. She commenced moving her belongings into the property while the tenants were still there. By 11 February 2013, Mrs Grist finished moving her belongings into the house and commenced residing there. This is within one year and therefore the concession applies.

Was there a disposal removing the concession?

[8] However, the Commissioner must reassess transfer duty without the principal place of residence concession if the owner disposes of the land before the occupation date.[3] An owner disposes of the land if the owner leases or otherwise grants exclusive possession of the land.[4]

[9] The property was subject to a fixed term lease expiring on 25 January 2013.[5] A residential tenancy ends by written agreement of the lessor and tenant.[6] This means the fixed term tenancy ended on 25 January 2013.

[10] Mrs Grist contends that the period from 26 January 2013 was a "period of transition" and that "at no stage did the parties agree that the (tenants) were entitled to exclusive possession of the whole or any particular part of the dwelling or the land after 25 January 2013".[7]

[11] A residential tenancy agreement is an agreement under which a person gives to someone else a right to occupy residential premises as a residence.[8] The definition is broad to help encapsulate the rights and obligations of tenants, lessors and agents for residential tenancies in Queensland.[9] Once an agreement falls within the definition, rights and obligations are conferred upon lessors, tenants and agents by operation of law.[10]

[12] On 23 January 2013, Mrs Grist agreed to allow the tenants to stay to 13 February 2013 "to avoid insignificant inconvenience for the (tenants)".[11] Mrs Grist also referred to flooding around this time[12] - however, this does not appear to be the reason for the tenants' additional period of occupancy:

When we bought the property there were tenants in there. Their lease ran out in January. They were a Scottish couple who were moving back overseas. They spoke to us about staying an extra couple of weeks as they couldn't find anywhere else to go. They owned 2 dogs which made it more difficult because they could not go to a hotel temporarily.

I agreed to this arrangement because I am unaware of the law (As I stated above I had received the wrong advice on this). Had I known about the extra tax, I would not have let them stay any longer..."[13]

[13] The evidence is that this was not entirely a goodwill gesture or provided ex gratia. Mrs Grist still required the tenants to pay the same rent and this they did for the period to 14 February 2013.[14]

[14] Mrs Grist thus received the same benefit in rent. The tenants were therefore entitled to receive the same benefits of occupancy - including vacant possession and quiet enjoyment. It would be contrary to commercial reality that tenants would agree to pay the same rent for anything less than the same tenancy rights.

[15] The agreement of 23 January 2013 is therefore a residential tenancy agreement conferring on the tenants a right to vacant possession[15] and a right to quiet enjoyment.[16] This equates to exclusive possession.

[16] Therefore, Mrs Grist had no right to stay or move her belongings onto the property during this further tenancy. Her ability to do so was entirely at the goodwill of the tenants and is not sufficient to negate the tenants' right to exclusive possession or equate to her occupying the property as her principal place of residence. The Tribunal could have and would have enforced the tenants' rights to vacant possession and quiet enjoyment had they sought to exercise those rights.

[17] Nevertheless, an owner does not dispose of the land if the occupier has exclusive possession before the occupation date[17] under a lease granted before the transfer date[18] and the occupier vacates on its termination or within six months after transfer, whichever is earlier.[19]

[18] However, the tenants' exclusive possession was not under a lease granted before the transfer date, but under the new agreement of 23 January 2013.

[19] This is because the initial lease ended on 25 January 2013. Although Mrs Grist instructed her agent to issue a notice to leave, the tenants did not hand over vacant possession on the handover day of 25 January 2013.

[20] Instead, the tenants vacated on 8 February 2013. This is not consistent with the tenants vacating because of a notice to leave with a handover day of 25 January 2013. Rather, it is consistent with the tenants vacating because of their agreement entered into with Mrs Grist on 23 January 2013 to vacate by 13 February 2013 and their rent paid to 14 February 2013. This agreement was subsequent to and superseded the notice to leave.

[21] This means that Mrs Grist and the tenants entered into another agreement with each other for a tenancy of the premises at the end of the fixed term.[20] By doing so, the tenants had a right to exclusive possession by operation of law.

[22] Mrs Grist therefore leased or otherwise granted exclusive possession of the property to the tenants on 23 January 2013 and thereby disposed of the property before occupying it on 11 February 2013 - after the tenants had vacated and when she had moved all her belongings in.

[23] This means that the Commissioner must reassess the transfer duty to impose duty on the transaction as if the concession had never applied to Mrs Grist. There is no discretion to vary this reassessment.[21]

[24] Mrs Grist must therefore pay the full amount of the transfer duty and is not entitled to the principal place of residence concession.

What is the appropriate Penalty Tax and Unpaid Tax Interest?

[25] The Commissioner may remit the whole or part of unpaid tax interest or penalty tax.[22] The Commissioner remitted penalty tax from 75% to 25% of the additional transfer duty. The Commissioner contends that because Mrs Grist failed to ensure that arrangements were made for the tenants to vacate the residence on the termination of the current term of the lease, there is no reason to depart from this.[23]

[26] The Commissioner determined that these circumstances fell within Category 2[24] because the disposal was not due to an unexpected change of circumstances after acquisition, of the type contemplated by Category 1, such as major illness or job transfer.[25]

[27] The Public Ruling provides several examples of an unexpected change of circumstances. Major illness and job transfer are two of these examples. Although helpful, examples are not exhaustive:

The helpful provision of examples in legislative instruments now enjoys statutory recognition. Examples are not exhaustive; they may extend the meaning of a provision, but the example and provision are to be read in the context of each other and the other provisions of the Act.[26]

[28] The major illness example is not confined to illness of the taxpayer. It refers to illness of a family member and a consequential need to dispose of the property to care for that person. The examples therefore contemplate a change of circumstances due an act of goodwill for another person.

[29] The tenants' failure to arrange their affairs earlier is the catalyst for the disposal, rather than any neglect or omission by Mrs Grist to ensure they vacated when they did. Mrs Grist was not privy to the tenants' failure to arrange their affairs earlier. This means the tenants' need to stay was an unexpected change of circumstances, at least for Mrs Grist.

[30] A taxpayer's conduct may affect the Commissioner's decision on the appropriate level of remission and will be taken into account accordingly.[27] This includes the nature and extent of the taxpayer's culpability[28] and the reason for their failure to meet their obligations.[29]

[31] Although not entirely an act of goodwill, it appears that Mrs Grist's primary motivation for the disposal was to benefit the tenants rather than herself. Certainly, there is no evidence of avoidance for pecuniary gain - Mrs Grist received a mere extra two weeks' rent from the disposal.

[32] I therefore accept that Mrs Grist disposed of the property in the honest but mistaken belief that assisting a third party in a time of need would not affect her concessional duty. I accept that this means that Mrs Grist did not "set out to exploit or abuse the concession".[30] There is no evidence that the Commissioner considered this as part of an unexpected change of circumstances when remitting penalty - the Commissioner remitted penalty tax according to Category 2.

[33] I consider this is a failure to consider a relevant consideration when remitting penalty. The Tribunal finds that the correct and preferable decision is to remit penalty tax according to Category 1, Case A - Unexpected change of circumstances.[31] Because Mrs Grist did notify or voluntarily disclose to the Commissioner her change in circumstances, a remission of penalty tax to 15% is appropriate.[32]

[34] I therefore set aside the decision to impose a penalty tax of $1,793.75 and substitute a new decision that the penalty tax imposed is $717.50.

[35] The Commissioner levied unpaid tax interest of $723.90.

[36] The Commissioner will only exercise the discretion to remit all or part of the unpaid tax interest in exceptional circumstances. The reasons Mrs Grist did not pay the tax is her failure to appreciate the impact of her decision:

Professor Glanville Williams said that almost the only knowledge of law that many people possess is the knowledge that ignorance of the law is no excuse when a person is charged with an offence. This does not mean that people are presumed to know the law. Such a presumption would be absurd. Rather, it means that, if a person is alleged to have committed an offence, it is both necessary and sufficient for the prosecution to prove the elements of the offence, and it is irrelevant to the question of guilt that the accused person was not aware that those elements constituted an offence.[33]

[37] Mrs Grist's ignorance of the law delayed revenue to the Commissioner to which the Commissioner was otherwise entitled. I therefore do not consider it is correct or preferable for the Commissioner not to be paid interest for this delay arising from Mrs Grist's lack of knowledge.

[38] The appropriate Orders are:

1. The decision to disallow an objection against the reassessment of transfer duty is set aside;

2. The decision that additional transfer duty of $7,175.00 is payable is confirmed;

3. The decision to impose a penalty tax of $1,793.75 is set aside and substituted with the Tribunal's own decision to impose penalty tax of $1076.25; and

4. The decision that Unpaid Tax Interest of $723.90 is payable is confirmed.

[1] Duties Act 2001 (Qld) ss 86, 91.

[2] Ibid s 88.

[3] Ibid s 154(3).

[4] Ibid s 154(2).

[5] Contract dated 7 July 2012 at page 2.

[6] Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 277(2).

[7] Submissions filed by the Applicant dated 16 May 2014 at paragraph 4.

[8] Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 12.

[9] Ibid s 5(1)(a).

[10] As enshrined in the Residential Tenancies and Rooming Accommodation Act 2008 (Qld).

[11] Submissions filed by the Applicant dated 16 May 2014 at paragraph 3.4.

[12] Submissions filed by the Applicant dated 16 May 2014 at paragraphs 3.6 and 3.7.

[13] Letter Cathy Grist to Office of State Revenue dated 15 May 2013.

[14] Place Market Statement for 60 Murray Street, Wilston for period ending 28/03/13.

[15] Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 182.

[16] Ibid s 183.

[17] Duties Act 2001 (Qld) s 154(2)(a).

[18] Duties Act 2001 (Qld) s 154(2)(b)(ii).

[19] Duties Act 2001 (Qld) s 154(2)(c)(ii).

[20] As specifically contemplated by the Residential Tenancies and Rooming

[21] Ryan v. Commissioner of State Revenue, Office of State Revenue [2012] QCAT 314 at

[22] Taxation Administration Act 2001 (Qld) s 60(1).

[23] Submissions filed by the Commissioner of State Revenue dated 24 April 2014 at

[24] Public Ruling TAA060.3.5 at page 8.

[25] Public Ruling TAA060.3.5 at page 7.

[26] Heaton v. Body Corporate for "Windsong Apartments" CTS 31804 [2012] QCAT 45 at

paragraph [8], citing Acts Interpretation Act 1954, section 14D.

[27] Public Ruling TAA060.3.5 at paragraph 13.

[28] Public Ruling TAA060.3.5 at paragraph 14(a).

[29] Public Ruling TAA060.3.5 at paragraph 14(b).

[30] Ryan v. Commissioner of State Revenue, Office of State Revenue [2012] QCAT 314 at

[31] Public Ruling TAA060.3.5 at page 7.

[32] Public Ruling TAA060.3.5, Home Concession Clawback Penalty Tax Guideline

[33] Ostrwoski v. Palmer [2004] HCA 30; (2004) 218 CLR 493, per Gleeson CJ and Kirby J at paragraph 1.