For Respondent Ms Eliza Holt of counsel instructed by the Commissioner of State Revenue

1. On 9 April 2007, Ghassan Haddad agreed to purchase a residential home at 30 The Fairway, Rowville ("the Property"). He was then living with his parents at 23 Chamberlain Drive, Kilsyth South ("Chamberlain Drive") and aged 22 years. Ghassan gave evidence that he moved into the Property with the intention of the Property being his principal residence on 1 June 2007. Six months later less one day, on 30 November 2007, he moved out of the Property and tenants moved in on the following day.

1. Ghassan gave further evidence that on 8 June 2007 he applied to the State Revenue Office for a First Home Owner Grant ("the Grant") pursuant to the First Home Owner Grant Act 2000 ("the Act"). The application was approved by on 27 June 2007 and a grant of $7,000 and bonus of $3,000 were paid to Ghassan on 28 June 2007.

1. Section 1 of the Act describes its purpose as the making of grants to first home buyers in order to "encourage and assist home ownership, and to offset the effects of the GST on home ownership". Not all first home buyers are eligible to receive grants. Division 2 of Part 2 of the Act contains 5 criteria which condition eligibility. Criterion 5 "Residence requirement" in s12 is relevant to this application. As follows, criterion 5 limits the availability of first home owner grants to persons who occupy first homes as their principal place of residence within alternative temporal minima.

(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant's principal place of residence for a continuous period of at least 6 months (or the lesser period approved by the Commissioner) commencing within the 12 month period immediately before completion of the eligible transaction or with a longer period approved by the Commissioner.

1. In this proceeding, the Commissioner contended that Criterion 5 had not been satisfied because the character of Ghassan's occupancy of the Property did not amount to an occupation of the Property as a principal place of residence for six months or any other period.

1. The words "principal place of residence" in s12 are not defined in the Act. Principles to guide the application of these words were stated by the New South Wales Administrative Decisions Appeal Panel in paragraph [42] of the decision in Re Chief Commissioner of State Revenue and Ferrington [2004] NSWADTAP 41; 57 ATR 170. The case was decided under NSW legislation broadly corresponding to the Act and has been accepted as relevant in construing the terms of Act by decisions of the Tribunal including Boots v CSR [2004] VCAT 2549, Mauro v CSR [2010] VCAT 1207 and Taylor v CSR [2012] VCAT 1326 . The Ferrington principles are as follow.

1. "First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear."

"Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively in the light of circumstances relating to the actual occupation of the dwelling."

"Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue."

"Fourthly, to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose."

"Fifthly, the short length of a person's residence while relevant, is not determinative of the issue."

"Sixthly, the reasons for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances."

1. The first Ferrington principle is of a formal nature and is not relevant to the way in which this proceeding was argued. The second Ferrington principle directs the Tribunal's attention to the objective facts concerning Ghassan's occupancy - to utilities usage and comparable data. The third Ferrington principle directs the Tribunal's attention to what Ghassan intended during the period of his occupancy. The fourth Ferrington principle requires the Tribunal to make an assessment of whether Ghassan's occupancy had a temporary or permanent character. The fifth Ferrigton principle is inconsistent with 2004 amendments to the Act and can be ignored. Finally, the sixth Ferrington principle looks to the reason why occupancy of the home terminated.

1. Statements which Ghassan made to the Commissioner and evidence that he gave at the hearing of the proceeding involve most of these considerations.

1. By letter dated 4 March 2011, the Commissioner informed Ghassan that it had commenced an investigation of his eligibility to receive the Grant. Ghassan made a declaration on 22 March 2011, affirming that he had occupied the Property as his "principle place of residency" (sic) from 1 June 2007 to 30th November 2007. Ghassan attached to the declaration utility bills from South East Water addressed to the Property and Chamberlain Drive, a receipt for installation of a water heater and evidence of insurance which identified him both as an occupier and a landlord. "[F]ollowing our discussions today," Ghassan added, the following matters were "confirmed":

1. My every intention when moving into the property was to lease it after 6 months after my move in date. It is for this reason, I am unable to provide bank statements or vehicle registrations addressed to 30 The Fairway, when you requested this.
2. I am unable to provide a home telephone bill because I did not have a home telephone (as providers usually require a minimum commitment of 12-24 months).
3. I chose to insure my building property without the contents insurance, as I could not justify the additional cost to cover the quality of the contents in the house. The majority of the contents was borrowed from my parents' house and were either returned or given to charity at the end of the 6 months.
4. My general eating habits was either take away, frozen meals or pots of cooked meals, which mum usually delivered and I kept in my fridge and re-heated, as necessary. Minimal cooking was undertaken at the property, as this was not something I was used to, nor good at doing.
5. After settlement, it became apparent that the existing hot water unit was faulty and could not deliver hot water. This was looked into further by myself towards the end of my 6-month period for tax deduction purposes. The majority of my showers were taken either at work in the morning, or at gym in the afternoons. If I spent some nights at my girlfriend's house, or at my parents' house, I would also shower there.
6. Laundry was carried out weekly at my parents' house as I did not want to buy a washing machine for a 6-month period.
7. I was mindful that I had now become a homeowner with a lifetime loan commitment (not to mention my low income), so I made a conscious effort to keep my expenditure on utilities to a minimum. The majority of time occupied at the property was either spent with friends and a girlfriend over a few drinks, pizza and a movie; or watching TV or reading books.

The FHOG was only part of the incentive to move into the property for 6 months. The other was to enjoy the single bachelor lifestyle before moving back with my parents for another year (before I got married). I could almost have broken even if I leased the property from day one and utilized the negative gearing benefits; and so, in conclusion, I hope you can understand that my actions were honest and true, and not meant to be malicious or exploit the FHOG in any way.

1. In his 16 May 2011 Objection to the Commissioner's decision to reverse payment of the Grant, Ghassan stated that:

- The FHOG Act does not make reference to utility usage as being a method for ascertaining a principle (sic) place of residence. Further justification as to why utility usage was low has already been provided to you in my letter dated 22nd March 2011 (copy enclosed).

- A tenancy agreement was in place exactly 6 months after the date I moved into the property. Your notice no. 70101339 states that this would have prevented me from complying with the residency requirement. I disagree with this and am under the understanding that I have contractually fulfilled my obligations under the Act.

- I vacated current tenants at settlement, then re-leased the property 6 months after settlement in order for me to move in and qualify for the grant. I fail to understand why you believe that I would have exploited the system to get the grant when instead; I could have tenanted it out for the entire period for approximately the same dollar value in rental income.

In conclusion, I would once again like to take this opportunity to confirm that I occupied 30 The Fairway Rowville as my principle place of residence for the minimum period required under the FHOG Act and truly hope that you can reconsider your position.

1. Evidently, Ghassan misapprehended or overlooked the terms of the "Residency requirement" in s12 of the Act. Grounds of his objection to the Commissioner's determination are dealt with as follow.

1. As to the first ground, it is true that the Act does not "make reference to utility usage as being a method for ascertaining a principle (sic) place of residence". Rather, utility usage is one of the objective considerations to which the second Ferrington principle directs the Tribunal when assessing whether a person has been residing in premises as a principal place of residence. Utility usage is a datum which bears on whether a person does reside in particular premises and whether those premises can be described as that person's "principal place of residence". Relevance of utility use is indirect, to that degree.

1. Electricity usage at the Property during 1 June 2007 - 30 November 2007 when Ghassan claimed to occupy the Property as his principal residence ("the relevant period") was noticeably less than in periods before and after the relevant period. From 6 September 2007 electricity usage diminished significantly. Allowance should be made for the fact that Ghassan's claimed lifestyle involved fairly minimal electricity consumption. TRU energy records in evidence and relied upon by the Commissioner were not supplemented by a table of comparators. This made the evidence of electricity usage somewhat equivocal. Only limited inferences can be drawn differences in consumption between different periods where there is some evidence of usage during the relevant period.

1. Evidence of water usage was a less equivocal. Again, usage was noticeably less than during periods prior and subsequent to the relevant period and, in September 2007, usage diminished significantly. Again there were no usage comparators. The main difference was that the three South East Water invoices during the relevant period recorded usage, respectively, as nil, $3.45 and $1.74. This was inconsistent with almost any use of toilet facilities and residence at the Property during the relevant period. I note that the Postal Address for last water account during the relevant period was that of the applicant's parents at Chamberlain Drive.

1. Gas usage at the property during the alleged residency period was very low at all relevant times and the relevant invoice from TRU energy was directed to the address of the applicant's parents at Chamberlain Drive. Ghassan did not alter his address to the Property during his alleged residence there during the relevant period. ANZ Bank statements were always sent to the applicant at Chamberlain drive during that time.

1. Explanations which Ghassan gave for low utility usage involved his performance at other premises of the daily offices of life such as ablution, clothes washing, cooking. If the explanations are accepted, the implication is that Ghassan was merely sleeping at the Property - performing a "ritual of occupancy" for the purpose of attracting a first home owner's grant. MF Macnamara, Deputy President, in Kyriaco v Commissioner of State Revenue (Taxation) [2011] VCAT 640 expressed similar misgivings in the following words:

I have to say that the record of utility usage produced by the Commissioner renders me quite sceptical that [the applicant]occupied the Narre Warren property even for the sleeping purposes within the period which he claims. If despite those misgivings he did sleep there, I infer that occupancy such as it was was not the occupancy of someone treating the house as a principal place of residence but merely as the completion of some ritual of occupancy for six months which he believed was necessary to qualify for the grant.

1. As to the second ground of objection, the circumstances of Ghassan's occupancy of the Property for "exactly 6 months" do not satisfy the residence requirements in s12 of the Act. The character of a person's occupation of a home as well as the duration of that occupation must be considered in determining whether, for any period, the home can be described as that person's principal place of residence.

1. In his 22 March 2011 letter to the SRO, Ghassan stated that

My every intention when moving into the property was to lease it out after 6 months after my move in date.

This was repeated in evidence which Ghassan gave to the Tribunal on 22 August 2012, at the hearing which reinstated the proceeding after it had been struck out. At the 13 November 2012 hearing Ghassan stated that his intention during the time that he occupied the Property in 2007 was to reside in the Property for a period not exceeding 6 months.

1. Ms Holt, Counsel for the SRO, took the Tribunal to documents which confirmed this intention. On 9 October 2007 Ghassan gave an "Exclusive Leasing and Managing Authority" in respect of the Property to the estate agent Ray White, stating his address as Chamberlain Drive. On October 18 2007, Ghassan entered a residential tenancy agreement with Paul and Rachel Osborne, agreeing as landlord to let the property from 1 December 2007.

1. Having an intention to reside in a home for a fixed period is inconsistent with an intention to make a home one's principal place of residence.[1] The third Ferrington principle has not been satisfied.

1. Ghassan's statements on 22 March 2011 are also inconsistent with the fourth Ferrington principle. Residence for a period not to exceed 6 months must be "transient, temporary, contingent or passing" when compared to the degree of permanence required when one resides in a home as one's principal place of residence.

1. The sixth Ferrington principle also points away from the Property being Ghassan's principle place of residence during the relevant period. In his 22 March 2011 statement, Ghassan made it clear that the reason why he left the premises on 30 November 2007 was that this was the day when his six months residence of the Property expired.

1. It is reasonable in these circumstances to conclude that Ghassan's occupation of the Property was not as his principal place of residence. It would appear (though it is not necessary to find) that Ghassan occupied the premises solely in order to qualify for the Grant.

1. I confirm the Commissioner's decision to reverse the Grant and bonus and require repayment from Ghassan under s-s48(1) of the Act.

1. The Commissioner also assessed Ghassan to a penalty of $1,000 under s-s48(3) of the Act. The penalty was based in Ghassan's non-compliance with a condition of the Grant which applicable in circumstances where the Grant and bonus were paid in anticipation of his compliance with the residence requirement.

1. Sub-section 20(2) of the Act provides that if the residence requirement is not complied with the applicant must give written notice of the fact to the Commissioner within 14 days of the compliance period and repay the amount of the grant. Sub-section 48(3) of the Act confers on the Commissioner a discretion to impose a penalty where the applicant does not make the repayment which s-s20(2) mandates.

1. Considerations which should activate the Commissioner discretion in imposing penalties under s-s48(3) of the Act were discussed in Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158 at [51], Knight v Chief Commissioner of State Revenue [2008] NSWADT 83 at [24]- [43] and Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20. Discretionary considerations affecting penalties under the Act are also the subject of Revenue Ruling FHOG.002 (2012), entitled "Section 48 - The Commissioner's power to require repayment and impose penalty".

1. Appropriateness of the penalty is related to the applicant's degree of culpability in bringing about the circumstances which empowered the Commissioner to impose the penalty. Five relevant principles were outlined in Knight's case at [33].

1. The first Knight principle looks to truthfulness in the grant application. Ghassan had not been dishonest or untruthful in applying for the Grant.

1. The second Knight principle looks, in the present case, to the application's surrounding circumstances and applicant's intention in relation to the principal place of residence claim. I find this consideration to be essentially neutral. Ghassan misapprehended the residence requirement and thereafter acted consistently with his misunderstanding. Adequate culpability on his part for penalty purposes is hard to see.

1. The third Knight principle looks to the reasons why the applicant failed to comply with the conditions for the grant. Ghassan failed to occupy the Property as his principle residence for the relevant period and failed to so notify the Commissioner and repay the amount of the grant. I do not believe that Ghassan's residency requirement misapprehension is a sufficient basis for a penalty. Non-compliance with the Act's s-s20(2) notification/repayment condition is a formal matter, in my view, and not an instance of culpability.

1. The fourth Knight principle asks whether the applicant has occupied the property as his or her principal place of residence. This would appear to be a conclusory consideration. No relation between the principle and culpability is shown.

1. The fifth Knight principle looks to the candour of the applicant in response to compliance inquiries. Contrary to his own interest, Ghassan was perfectly candid about the purpose and duration of his residence. No culpability relevant to this principle has been shown.

1. The sixth, and final, Knight principle looks to whether the grant has been refunded. I am instructed that a refund has been made. In the result I find that none of the Knight principles can serve as the basis for the Act's s-s48(3) penalty discretion.

1. Revenue Ruling FHOG.002 refers to an additional, public policy basis for the Commissioner's penalty discretion, which is unrelated to culpability on the applicant's part. The Commissioner is said to be entitled to take into account "the deterrent effect of the penalty" in deciding whether to impose a penalty and how much that penalty should be. Ms Holt for the Commissioner submitted that it was appropriate that the discretion be exercised so as to further the general policy purpose behind the Act.

1. The penalty imposed on Ghassan, in my view, is sufficiently justified by a policy aimed at deterring applications for first home grants comparable to the application which Ghassan made. The application was made contrary to the Grant's advertised conditions Much administrative time has been spent reversing the Grant and recovering the wrongly disbursed funds.

1. In Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20 the full court of the Federal Court considered a determination of the Administrative Appeals Tribunal re-exercising a discretion to grant citizenship to a permanent resident who was the spouse of an Australian citizen. The matter in question was whether the Tribunal was entitled to take into consideration the terms of the Australian Citizenship Instructions - a policy document prepared by the Federal Department of Immigration and Citizenship.

1. The full Federal Court in Hneidi 's case confirmed at [48] that where a Minister has adopted a policy as a guide to the exercise of a discretionary power, the Tribunal should still consider exercise of the discretion on its own facts, but "cogent reasons" must be shown why the Minister's policy guide should not be followed.[2]

1. In this proceeding, the Tribunal is re-exercising the Commissioner's power to levy a penalty under s-s48(3) of the Act. This is an administrative and not judicial function. Revenue Ruling FHOG.002 explains how the Commissioner will approach the imposition of administrative penalties under s48 of the Act. The "deterrent effect of the penalty" is a matter which the decision-taker should consider.

1. The penalty imposed on Ghassan pursuant to s-s48(3) of the Act should be confirmed.

[1] See Bailey v Chief Commissioner of State Revenue [2007] NSWADT 26 at [29].

[2] Following Drake and the Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 645 per Brennan J affirmed Drake v Minister for Immigration and Ethnic Affairs (1979) 24 AQLR 577 (FCA FC).