Legislation cited: Land Tax Act 2004 ss 12, 14, 19, 19A, 38

Taxation Administration Act 1999 ss 29AA, 30, 31, 37, 82, 107A, Schedule 1.2, Dictionary

Revenue Legislation Amendment Act 2019

Cases cited: Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation [2018] FCAFC 54

BHP Billiton Direct Reduced Iron Pty Ltd (ACN 058 025 960) v Duffus, Deputy Federal Commissioner of Taxation [2007] FCA 1528

Hay v Commissioner for ACT Revenue [2014] ACAT 23

Jokhan v Commissioner for ACT Revenue [2012] ACAT 15

Scott & Anor v Commissioner for ACT Revenue [2013] ACAT 73

Theron v Commissioner for ACT Revenue [2013] ACAT 33

Date of Reasons for Decision: 11 September 2019

1. In relation to the decision to impose penalty tax for Q3 of 2010-11, the decision under review is set aside, and the Tribunal substitutes a decision to impose no penalty tax.

2. Otherwise, the decision under review is confirmed.

1. The applicant, Mr Brett Kessey, is the owner of residential property in Theodore in the ACT. He purchased the property in 2007.[1]

2. The respondent is the Commissioner for ACT Revenue, who administers the land tax and related legislation in the ACT.

3. On 16 November 2017, the Commissioner issued a notice pursuant to section 82 of the Taxation Administration Act 1999 (the TAA). The notice formed part of an authorised investigation. The notice required the applicant, as a property owner, to provide information relevant to establishing whether the property owner is liable for land tax.[2]

4. From the notice it appears that the Commissioner, in the course of routine tax compliance inquiries with the Australian Taxation Office, became aware that the applicant had reported, in his income tax returns, rental income for the Theodore property, with a rental commencement date of 23 May 2008.

5. In response to the notice, the applicant confirmed that the property had been rented "at times", in the relevant period from 23 May 2008 to 30 June 2010, summarised as follows:[3]

I can confirm that [the property] was not rented continuously [in the relevant period 23 May 2008 to 30 June 2010]. There were times of vacancy, times that I moved back into the property, times when tenants stopped paying rent for prolonged periods and times when the property was extensively damaged by tenants and in need of repair.

7. The Commissioner requested further information regarding the period 25 March 2008 to 1 May 2011.

8. As requested, the applicant provided further information, including summarising the rental history of the property as follows:[5]

10/10/10 to 5/5/11 Loree R and Joseph B[6]

9. On 12 February 2018, the Commissioner issued a notice of assessment, advising of the following charges:[7]

10. On 20 February 2018, the applicant sent an email to the Commissioner, requesting that the above assessment be reconsidered.[8] On 16 July 2018, the Commissioner reconsidered and confirmed the above assessment.[9]

11. In about August 2018, the applicant referred the matter to the ACT Ombudsman.[10]

12. On 26 August 2018, the applicant applied to the Tribunal for an order that the Commissioner's reconsideration decision be set aside. Importantly, the applicant accepted that he was liable to pay the primary land tax ($769.69).

13. The issue is whether the assessed penalty tax, and the assessed interest, is appropriate, or should be reduced and/or remitted in the circumstances.

14. The application was out of time, and the Tribunal granted an extension of time.

The applicant's correspondence with the Commissioner

15. Before the commencement of these proceedings, in correspondence between the Revenue Office and the applicant, the applicant described the relevant events and circumstances, including the following statements:

[7/12/17] ... I was not aware that I needed to inform the ACT Revenue Office. I assumed that advising my tax agent was the correct way to approach any tax implications relating to rental issues. ... But aside from the fact that I pay my rates, body corporate and informed my tax accountant of all rentals, I'm not quite sure why I need to pay more taxes.[11]

[23/11/17] ... I had provided details of all renting of my property to my then Tax Professional Salter and Associates. I'm not sure how all this works, but maybe you can acquire your information from them. Also, I managed all renting out of my property personally. I do have paperwork if needed. I was unaware that I needed to inform the ATO whenever I rented my property out. I was of the opinion that my Tax Professional would take care of that.[12]

[14/2/2018] ... I'm happy to pay the original $796.69 for the Land Tax component of the assessment. But considering I am on a tight budget and never ever accounted for Land Tax on top of the many other expenses that accompany the renting out of a property, I have to decline your request to pay the extra $384.86 penalty and $1076.09 of interest. These are large amounts of money that I cannot afford to "pay back" to the government on top of the land tax bill which I never (knew) about in the first place. As you mentioned previously, the Revenue Office keeps in touch with ACTEWAGL and the Bonds Office. Had I been sent an assessment in the previous ten years it would have been much easier to deal with?[13]

[19/2/18] ... Surely you can empathise with the fact that I acknowledge that I have obviously unknowingly overlooked this extra cost to the renting out (of) a property. With all the rising costs of living and extra taxes that we all pay these days, I just ask that you please show some compassion and overlook the $1076.09 interest and $384.86 penalty imposed on my assessment. I also think it's clear from my history that I do not avoid my bills and had I known about Land Tax I would've certainly paid. Therefore I hope you can see that it is extremely harsh to penalise me, especially to the extent shown on the current assessment.[14]

[20/2/2018] ... Why was the "data Matching" process not initiated 30 days or even at least one or two years, as apposed [sic] to the ten years it has taken, after I unknowingly failed to notify the Revenue Office about the renting? Thus saving me a lot of money in unfair interest and penalties...

Am I correct in saying that there will be no compassion or empathy on your part towards me, a law abiding citizen who never intended to deceive or shirk his responsibilities and jeopardise his very important investment/nest egg?[15]

[27/2/18] ... I do not accept ... the previous imposed [sic] interest and penalty should still apply. As stated earlier, I am happy to pay the initial Land Tax bill of $769.60 only, as I see no fair reason for extra interest or penalty to be imposed.[16]

• I was unaware that Land Tax existed and had never received a bill or notification from the Revenue Office, Bond Office or ACTEW until Feb 2018, nearly ten years after I first rented out my unit
• You previously stated that all three offices collude with each other, with this in mind why was the "data Matching" process not initiated 30 days or even at least one or two years, as apposed [sic] to the ten years it has taken, after I unknowingly failed to notify the Revenue Office about the renting? Thus saving me a lot of money in unfair interest and penalties.[17]

[23/07/2018] ... I feel the interest could've been drastically reduced/avoided had your department initiated your investigation earlier than you did by say eight or nine years.[18]

[21 August 2018] ... As previously stated, I am happy to pay the initial Land Tax bill of $769.69, but not the interest or fines imposed. Adding to my argument; I feel the interest could've been drastically reduced/avoided had your department initiated your investigation earlier than you did by say eight or nine years.[19]

16. The liability for land tax arises under the Land Tax Act 2004 (the LTA).

17. For present purposes, in very general terms, land tax is imposed on land that is "rented residential land". More specifically, land tax is payable if the property is rented on the first day of the quarter, and was rented at any time in the previous quarter.[20] The applicant accepts that he was liable to pay land tax as a result of the renting of the property from time to time.

18. The LTA establishes a self-reporting system for land tax. The LTA requires a property owner to notify the Commissioner, within 30 days, in writing, if the land becomes rented by a tenant.[21] The onus is on the landowner to disclose the rental of a residential property to the Commissioner, and when the rental commenced.

19. The applicant failed to notify the Commissioner that the property was rented. Because of the failure to notify, the Commissioner did not know the property was rented, and did not raise a land tax assessment.

Overview of the penalty and interest provisions

20. The liability for penalties and interest arises under the LTA and the TAA. The penalty tax provisions were amended by the Revenue Legislation Amendment Act 2019. The relevant amendments are discussed below.

21. The imposition of penalty tax and interest is intended to promote compliance with the self-reporting scheme for land tax, and to provide general deterrence of tax default. A land owner who promptly reports that a property is rented, and who pays the applicable land tax, will be better off than a taxpayer who defaults and is subjected to penalties and interest.

22. A tax default means a failure by a taxpayer to pay, in accordance with tax law, the whole or part of tax that the taxpayer is liable to pay.[22] A tax default also means a failure to comply with a notification obligation under section 14 of the LTA.

23. In the event of a tax default, the property owner is liable for penalty tax under section 30 of the TAA.

24. The rate of penalty tax is determined under section 31 of the TAA. With effect up to and including 30 June 2019, the rate of penalty tax was 25%, unless another provision applied to increase or decrease the penalty tax. Relevantly, subsection 31(2) provided that the rate of penalty tax is 50% where the Commissioner was satisfied that the default was caused wholly or partly by a failure to take reasonable care to fulfil the taxpayer's obligations under the tax law. Subsection 31(3) provided that the increased rate of 50% did not apply if the taxpayer satisfied the Commissioner that there was a reasonable excuse. These were the provisions at the time that the Commissioner imposed penalty tax, and at the time that the Commissioner reconsidered and confirmed the penalty tax, which is the subject of the present application.

25. Section 31 of the TAA has been amended, with effect from 1 July 2019.

26. In the Overview of the Revised Explanatory Statement of the Revenue Legislation Amendment Bill 2019, the amendment is discussed as follows:

The Bill amends the penalty tax provisions to re-align the 25 per cent rate as the "base default" penalty rate. Previously the 50 per cent rate was an additional rate for tax defaults where the Commissioner is satisfied that the default was caused wholly or partly by a failure to take reasonable care.

This amendment clarifies that the 25 per cent penalty tax rate will be applied for tax defaults. Under existing provisions where the Commissioner is satisfied that a taxpayer took reasonable care to comply with tax laws, no penalty is payable.

The Commissioner may apply the 50 per cent rate if satisfied that the tax default was caused by the taxpayer delaying the payment of tax, delaying the provision of information required to the assessment of tax, or providing information required under a tax law that is incorrect, incomplete or misleading. This rate is also applicable in instances of repeat tax defaults.

These amended penalty tax arrangements will apply to tax defaults occurring before or after 1 July 2019.

This is expected to result in fewer taxpayers being subject to the 50 per cent penalty tax rate from 1 July 2019. However, this is not expected to result in a change of outcome for those taxpayers currently subject to the application of the 50 per cent penalty tax rate as the circumstances specified in these amendments are consistent with the circumstances for a failure to take reasonable care described in Revenue Circular GEN006 of 6 July 2018.[23]

27. Later in the Revised Explanatory Statement, the amendment of subsection 31(2) is discussed as follows:

These clauses amend the penalty tax provisions of the TAA to ensure that in the event of a default by a taxpayer the base penalty tax payable is at 25%.

Under subsection 31(2) the 50 per cent penalty tax rate remains but applies at the discretion of the Commissioner for specified circumstances. Those circumstances involve the conduct of the taxpayer such as delays relating to payment or provision of information ... The amended penalty tax arrangements apply from 1 July 2019 to tax defaults occurring before or after the commencement of the subsection.[24]

28. Subsection 31(5) of the TAA provides that penalty tax is not payable in relation to a tax default if the Commissioner is satisfied:

(a) that the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or

(b) that the tax default happened solely because of circumstances beyond the taxpayer's control (or if a person acted on behalf of the tax payer, because of circumstances beyond either the person's or the taxpayer's control) but not amounting to financial incapacity.[25]

29. The TAA provides for the remission of penalty in certain circumstances.

30. With effect up to and including 27 March 2019, section 37 provided that penalty tax may be remitted if the Commissioner is satisfied that "reasonable steps to mitigate" or "exceptional circumstances" are present, and further if the Commissioner is satisfied that it would be "fair and reasonable" to remit all or part of the penalty tax. This was the provision at the time that the Commissioner imposed penalty tax, and at the time that the Commissioner reconsidered and confirmed the penalty tax, which is the subject of the present application.

31. With effect from 28 March 2019, section 37 was replaced. Section 37 now provides that "the Commissioner may, if the Commissioner considers it appropriate in the circumstances, remit penalty tax by any amount".[26] The purpose of this legislative amendment was to bring consistency to the various act administered by the Commissioner for ACT Revenue.

32. The Revised Explanatory Statement discusses the amendment as follows:

The remission of interest and penalty tax provisions are not consistent across the TAA and other tax legislation, and could lead to inconsistencies in application. A general remission power for interest and penalty tax is inserted for consistent application for all tax lines. Consequential amendments to the LTA and Rates Act that contain interest remission provisions are made to align with these TAA changes.[27]

33. The tribunal may review "reviewable decisions". Reviewable decisions include decisions impose penalty tax under section 31 of the TAA, and decisions not to remit penalty tax under section 37 of the TAA. However, not all decisions by the Commissioner are reviewable decisions. Notably, decisions by the Commissioner to impose interest, or declining to remit interest, are not reviewable by this tribunal (discussed below).

Selected authorities involving comparable facts and circumstances under the old provisions

34. The applicant relied on the decision of this tribunal in Hay v Commissioner for ACT Revenue [2014] ACAT 23. In that decision, the tribunal received evidence regarding the circumstances of Mr Hay, including his ignorance of his land tax liabilities for many years, the severe mental illness of a relative for whom he cared, his family and work responsibilities, the impact on him of these circumstances and the totality of these circumstances. The tribunal found that Mr Hay's circumstances justified a reduction or remission in penalty tax. Notably, the tribunal did not reduce or remit the penalty tax in full. For certain specified periods, penalty tax was reduced to 25% or 30%. For other periods, penalty tax was not reduced, and remained at 50% as was imposed by the Commissioner.

35. Importantly, Mr Hay's facts and circumstances may be distinguished from the present applicant. The Tribunal accepts that the applicant was not aware of his land tax liabilities. The Tribunal accepts that the applicant had work and family responsibilities. However, the Tribunal has no evidence that the applicant was caring for a relative with severe mental or other illness. On this basis, the Hay matter can be distinguished from the facts of the present matter.

36. In many respects, the applicant's case is similar to Theron v Commissioner for ACT Revenue [2013] ACAT 33, where the tribunal found that the applicants were not aware of the liability to pay land tax, and that their lifestyle made them busy and stressed. In that case, the tribunal found that the applicant did not taken reasonable care and did not have a reasonable excuse. The tribunal found that the circumstances were not exceptional.

37. In many respects, the applicant's case is similar to Scott & Anor v Commissioner for ACT Revenue [2013] ACAT 73 (Scott). In Scott, the tribunal accepted that the tax default occurred due to a number of factors, including that the taxpayers were not aware of the liability to pay land tax, their conveyancing solicitors provided incorrect advice, and their lifestyle made them busy and stressed. In that matter, the tribunal found that the applicants did not taken reasonable care and did not have a reasonable excuse. The tribunal found that the circumstances were not exceptional.

38. Before the commencement of these proceedings, in correspondence between the Commissioner's Office and the applicant, the applicant described the facts and circumstances relevant to the renting of the property from time to time.

39. For the purpose of these proceedings, the parties lodged and exchanged a number of documents containing their facts and contentions. The Commissioner prepared a bundle of documents held by the Commissioner and relevant to the decision under review (known as the T-Documents).

40. The Commissioner requested that the matter proceed without hearing. The applicant did not oppose this course. The Tribunal determined to proceed without hearing. Accordingly, the matter is to be determined on the papers, with no oral evidence, and no cross-examination.

41. On 27 July 2019, the Tribunal invited the parties to file further submissions in relation to the effect of the amendments to sections 31 and 37 of the TAA (discussed above). On 13 August 2019, the Commissioner filed further submissions.

42. In the Tribunal proceedings, the Commissioner did not seek to cross-examine the applicant regarding his description of events and circumstances, as contained in his various emails to the Commissioner, and in his submissions to the tribunal. The Commissioner did not adduce any evidence to the contrary.

43. The Tribunal notes that, in response to the section 82 notice requesting information for the period 23 May 2008 to 30 June 2010, the applicant volunteered that the property was rented to 5 May 2011. The Tribunal finds that the applicant honestly described the relevant events and circumstances in his various emails to the Commissioner, and in his submissions to the Tribunal.

44. In his submissions to the Tribunal, the applicant raised a number of issues and contentions. The Tribunal will consider these issues and contentions below.

The applicant's contention that he was not aware of land tax

45. From time to time, the applicant rented the property. He managed the rental personally. He did not engage any real estate professionals. However, he did engage tax professionals.

46. For the year ending 30 June 2008, and the subsequent eight years, an officer on behalf of the Commissioner sent a rates assessment notice to the applicant. The rates assessment notice was accompanied by an information sheet regarding land tax.

47. The applicant states that he was not aware of the land tax system. He contends that this lack of awareness was reasonable in all the circumstances, and did not indicate a failure to take reasonable care. He contends the following:

I was mistakenly and reasonably, as someone not qualified in taxes or accounts, under the belief that the tax on my rental income and Council rates were the only taxes I was required to pay in relation to my rental property. I believed that I was abiding by all tax laws by paying the rates and relevant tax on my rental income.

... I had a registered tax accountant representing me during all relevant time periods, who was aware of my rental property, who I sought professional advice from. I reasonably relied on their expert advice in relation to ensuring I was paying all my appropriate taxes. I was not advised at any time of the need to pay land tax in addition to tax on my rental income (which I believed was all that was required to be paid).

... I was under the reasonable belief that if I had other tax liabilities, it was the duty of my tax agent to bring such a debt to my attention and I relied upon this.[28]

48. The tribunal accepts that that the applicant was not aware of his land tax obligations in regard to the property.

The applicant's contention that the Commissioner has the capacity for data matching. The failure to carry out data matching earlier has caused prejudice to the applicant

49. About nine years after the property was first rented, the Commissioner for ACT Revenue and the Commissioner of the Australian Taxation Office (ATO) conducted a data matching exercise, and identified that the applicant had declared rent for the purposes of the Commonwealth income tax laws to the ATO, but that he had not declared that the property was rented for the purpose of ACT land tax to the Commissioner for ACT Revenue.

50. The applicant contends the failure to carry out data matching earlier has caused prejudice to the applicant:

... The ACT Revenue Office ... initiated an investigation into my property's land tax liability on 16 November 2017. This occurred more than nine years after I first rented the property in May 2008. This has caused me prejudice in that:

(a) I would have paid the lands tax willingly (and indeed already have) had I been aware of it at the time and therefore avoided the need to pay any interest or penalty

(b) I have not maintained all documents in relation to the earlier tenanted periods because it's outside the retention period of how long I am required to keep documents. Further to this, I ceased using my then tax accountant so I am unable to access their documents.[29]

... why was the data matching process not used to detected my circumstances earlier in order to send me a land tax bill, just as all the other organisations send bills without request: I never needed to inform the Revenue Office and ask them to send me Property Rates or Water Rates Bills.[30]

51. The Tribunal accepts that the applicant instructed his tax advisor to declare the rental income in his relevant tax returns to the ATO. The Tribunal accepts that the applicant relied on his tax advisors, who did not alert the applicant to his obligation to report to the Commissioner for ACT Revenue that the property was rented. Further, the tribunal accepts that, if he was aware of this obligation, the applicant would have reported that the property was rented, and the applicant would have paid land tax as assessed.

Consideration of the applicant's contention that the Commissioner has the capacity for data matching, and that the failure to carry out data matching earlier has caused prejudice to the applicant

52. As discussed above, land tax is a self-assessment regime, and the onus is on the property owner.

53. The Commissioner is responsible to administer the land tax regime. This includes data matching with various organisations, including the ATO. The Commissioner has no responsibility to assist the land owner. Nevertheless, the Commissioner attempts to assist land owners by the inclusion of the information sheet with the annual rates notices.

54. The conduct of data matching exercises is a matter for the Commissioner for ACT Revenue, the ATO, and other organisations. It would not be appropriate for this Tribunal to comment on the allocation of resources by the Commissioner for ACT Revenue or other organisations.

The applicant's contention that penalty tax should be imposed at a lesser rate, or remitted, on the grounds of empathy or leniency

55. In the present circumstances, the Commissioner considered that the tax default was caused wholly or partly by the failure of the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer's obligations under a tax law. The Commissioner was not satisfied that the taxpayer (or a person acting on behalf the taxpayer) took reasonable care, or that the tax default happened solely because of circumstances beyond the taxpayer's control (or circumstances beyond the other person's control). On this basis, the Commissioner determined that the applicable rate was 50%.

56. The applicant contends that the penalty tax should be imposed at a lesser rate, or remitted.

57. The applicant relies on the following circumstances:

(a) He relied on the advice of various tax professionals, who prepared his income tax returns for the relevant years.

(b) He was not aware of his responsibilities in relation to land tax, in particular he was not aware of his obligation to notify the Commissioner that the property was rented, and ensure that his land tax liability was discharged.

(c) He is an honest man, who is willing and able to pay his debts and taxes.

(d) He had no intention to avoid the operation of the land tax law.

58. In these tribunal proceedings, the Commissioner did not seek to cross-examine the applicant regarding the above facts and circumstances. The Commissioner did not adduce any evidence to the contrary.

59. The tribunal accepts the above circumstances as described by the applicant.

Consideration of the applicant's contention that penalty tax should be imposed at a lesser rate, or remitted, on the grounds of empathy or leniency

60. The respondent contended that the imposition of penalty tax at 50% was the correct and preferable decision. The respondent contended that the applicant failed to take reasonable care, he failed to make inquiries, he failed to read the information sheets enclosed with his rates notices, and failed to make a voluntary disclosure. Having regard to these circumstances, the respondent contended that a reduction or remission in penalty tax was not justified. The respondent contended that general deterrence is a relevant consideration.

61. The issue for determination is whether the circumstances relied upon by the applicant support the Tribunal determining that another decision in relation to penalty tax should be made. When conducting a review, the Tribunal has all the powers of the original decision maker. The Tribunal will have regard to the state of the law applicable at the time the tribunal makes its decision, unless otherwise appropriate. Section 31(2) of the TAA was amended with effect retrospectively. Section 31(5) as amended is in identical terms as the now repealed section 31(6). It follows that, in determining this matter, the tribunal must apply section 31(2) and section 31(5) as amended.

62. Relevantly, section 31(2) as amended provides that "the commissioner may increase the amount of penalty tax in relation to a tax default to 50% ... if the Commissioner is satisfied that the tax default ... was caused wholly or partly by the taxpayer (or a person acting on behalf of the taxpayer) ... delaying the provision of information required for the assessment of land tax".

63. The applicant was required to report that the premises were rented, within 30 days of the premises becoming rented, that is, before 24 June 2008, 29 September 2009, 16 February 2010 and 9 January 2011. The tax professionals engaged by the applicant did not report to the Commissioner that the premises were rented. The applicant did not report that the premises were rented until he received a notice from the Commissioner in 2017. The Tribunal is satisfied that the applicant (and/or various persons acting on behalf of the applicant) delayed the provision of information within the meaning of subsection 31(2).

64. Relevantly, section 31(5) provides that no penalty tax is payable in relation to a tax default if the Commissioner is satisfied:

(a) that the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or

(b) that the tax default happened solely because of circumstances beyond the taxpayer's control (or if a person acted on behalf of the tax payer, because of circumstances beyond either the person's or the taxpayer's control) but not amounting to financial incapacity.

65. The applicant bears the onus of making appropriate inquiries regarding his duties as a lessor, including his responsibilities under the LTA. The Commissioner provided information regarding land tax to property owners, by way of inclusion with quarterly rates notifications. The applicant does not deny that he received various information sheets over the years. He considered the information sheets to be "junk mail" which he discarded without reading.

66. Ignorance of the law is not an excuse for failure to meet legal obligations.[31]

67. Discarding information without reading is not sufficient to basis for remission or reduction of penalty tax.[32]

68. The applicant contends that, over the years, he engaged various "tax professionals", who did not advise him regarding land tax. Importantly, any failure by these tax professionals is attributable to the taxpayer.

69. In the present circumstances, the Tribunal is not satisfied that the applicant (or his tax professional/s) took reasonable care to fulfil his obligations under a tax law.

70. In the present circumstances, the Tribunal is not satisfied that the tax default happened solely because of circumstances beyond the taxpayer's control, or because of circumstances beyond either the taxpayer's or the taxpayer's tax professional's control.

71. Under section 37 of the TAA, the Commissioner may, if the Commissioner considers it appropriate in the circumstances, remit penalty tax by any amount. The conditions or factors to be considered in exercising this discretion are not expressly stated. The discretion must be exercised within the boundaries created by the subject matter, scope and purpose of the statute and of the particular provision by which the discretion is conferred.[33]

72. In considering whether it is appropriate to remit penalty tax by any amount, the Tribunal must take into account subject matter, scope and purpose of the LTA, the TAA, and in particular section 37 of the TAA. The Tribunal must keep in mind the purpose for which land tax is imposed and paid. The Tribunal must keep in mind that the imposition of penalty tax and interest is intended to promote compliance with the self-reporting scheme for land tax, and to provide general deterrence of tax default. The Tribunal must keep in mind the legislative intention that the taxpayer is liable for any default by the taxpayer's agent. The Tribunal must keep in mind that section 37 does not require special or exceptional circumstances for the remission of penalty tax. Keeping all these matters in mind, the Tribunal must consider whether the penalty (as imposed by the Commissioner) is harsh, having regard to the particular circumstances of the taxpayer.[34]

73. The circumstances of the taxpayer in Q3 in 2010-2011 are discussed below.

74. In all the circumstances (with the exception of Q3 in 2010-2011) the Tribunal finds that the penalty tax, as imposed by the Commissioner, was appropriate. The Tribunal confirms the imposition of penalty at 50%.

The applicant's contention that penalty tax should be remitted in circumstances where the tenants left owing rent, and the premises were damaged

75. The applicant contends that, for the period 10 October 2010 to 5 May 2011, the property was rented to Loree R and Joseph B. These tenants were evicted on 5 May 2011. At the time of eviction, the tenants owed arrears of rent (about three months' rent or $3,080). Further, the tenants had caused damage exceeding $7,000. It appears that the applicant has not recovered the rent arrears or compensation for the damage.

76. The property was rented to Loree R and Joseph B in the following quarters:

Q4 2010-11 (ending 30 June 2011) (tenants evicted on 5/5/11)

Consideration of the applicant's contention that penalties should be remitted in circumstances where the tenants left owing rent, and the premises were damaged

77. The Commissioner has assessed the property for land tax in Q2 and Q3, but not in Q4, of 2010-2011.

78. The respondent contended that the imposition of penalty tax at 50% in Q2 and Q3 was the correct and preferable decision. The respondent contended that a reduction or remission in penalty tax was not justified.

79. Land tax is calculated based on the average unimproved value of the parcel of land. Importantly, land tax is not calculated on the surplus (if any) between the rent received and the costs of renting the premises.

80. The Tribunal finds that, at the time that the tenants Loree R and Joseph B were evicted (being 5 May 2011 in Q4), the tenants were three months in arrears of rent, and had caused damage of about $7,000. The Tribunal finds that these circumstances existed to some extent in both Q3 and Q4. The Tribunal finds that these circumstances were exceptional.

81. The Tribunal finds that the imposition of penalty tax in Q3 of 2010-11 would be harsh, having regard to the particular circumstances of the taxpayer in Q3 and Q4.

82. The Tribunal finds that it would be appropriate to remit the penalty tax for Q3 of 2010-11.

Consideration of the applicant's contention that interest should be remitted on the grounds of empathy or leniency

83. The applicant contends that interest should be remitted on the grounds of empathy or leniency.

84. The respondent contended that the imposition of interest at the statutory rate was the correct and preferable decision. The respondent contended that the tribunal did not have jurisdiction to review the imposition or remission of interest.

85. The Tribunal has considered the relevant provisions of the LTA and TAA.

86. A decision to impose interest under section 19 or 19A of the LTA cannot be reviewed by the Tribunal because it is not prescribed by section 38 of the LTA nor is it otherwise reviewable pursuant to the provisions of section 107A or schedule 1.2 of the TAA.

87. A decision declining to remit interest pursuant to section 29AA of the TAA is not a decision under the TAA which may be internally reviewed and then reviewed by ACAT.

88. The Tribunal is satisfied that neither the imposition of interest, nor the remission of interest, can be reviewed by the Tribunal. This is well established by authorities, including Theron v Commissioner for ACT Revenue [2013] ACAT 33 at [22]- [24], Hay v Commissioner for ACT Revenue [2014] ACAT 23 at [18], [23] and Scott & Anor v Commissioner for ACT Revenue (2013) ACAT 73 at [11], [32].

Consideration of the applicant's contention that the pamphlets should not be admitted into evidence

89. The T-documents include the rates assessment notice for the relevant property for the eleven financial years (being the financial years ended 30/6/08, 30/6/09, 30/6/10, 30/6/11, 30/6/12, 30/6/13, 30/6/14, 30/6/15, 30/6/16, 30/6/17 and 30/6/1). The T-Documents also include an information pamphlet in relation to the land tax for those same eleven financial years (that is, financial years ending 30/6/08 to 30/6/18)

I pay my rates notice and all my other bills and therefore feared nothing and hence don't read pamphlets from any organisation be it rates, electricity, phone, etc. I throw all junk mail straight in the recycle bin. If I'm worried about a bill I will write or call the relevant organisation. Furthermore - in the final decision sent on 16/7/18, Revenue Office stated they agree that I did not realise I needed to pay Land Tax, so I'm not sure why you would mention the pamphlets (in fact I'd like them stricken/removed from the evidence). I also don't see why it should be assumed that everyone reads junk mail.

91. The Tribunal accepts that it is the business practice of the Commissioner to send a land tax information sheet to every rate payer every year with the rates assessment notice. The applicant does not confirm or deny that he received the rates assessment notice, and accompanying information sheet, in every relevant year.

92. The Tribunal finds that the applicant received the relevant rates assessment notices, and the accompanying information sheets, in each relevant year. The information sheets are admissible and relevant. The Tribunal declines to exclude the information sheets from the evidence.

93. The applicant relies upon a "whirlpool forum", comprising 11 pages of comments and opinions regarding collection action by the Australian Taxation Office. This "whirlpool forum" is not relevant to the present decision under review.

94. The applicant relies upon a report by Erik Jensen and John Huxley, published in the Sydney Morning Herald on 16 December 2008, in relation to proceedings in the NSW Local Court at Moss Vale. The authors report that Dr John Hewson pleaded guilty to failing to lodge his income tax return for 2006-07, and the charge was dismissed without conviction. The proceedings regarding Dr Hewson arose under the Commonwealth income tax legislation, and are not relevant to the present decision under review.

1. In relation to the decision to impose penalty tax for Q3 of 2010-11, the decision under review is set aside, and the Tribunal substitutes a decision to impose no penalty tax.

2. Otherwise, the decision under review is confirmed.

[6] Note, these tenants were evicted by ACAT. At the time of eviction, the tenants were about three months ($3,080) in arrears of rent, and had caused damage to the premises exceeding $7,000.

[20] See Land Tax Act 2004, section 12

[21] See Land Tax Act 2004, section 14

[22] Dictionary to the Taxation Administration Act 1999

[23] Revenue Legislation Amendment Bill 2019 Revised Explanatory Statement at pages 4 and 5

[24] Revenue Legislation Amendment Bill 2019 Revised Explanatory Statement at page 18

[25] See Taxation Administration Act 1999 s 31(5) effective from 1 July 2019. Note, the former section 31(6), effective up to and including 30 June 2019, was in identical terms.

[26] See Taxation Administration Act 1999 section 37, as amended

[27] Revenue Legislation Amendment Bill 2019 Revised Explanatory Statement at pages 5 and 18

[28] Orders sought by applicant emailed to the Tribunal on 4 November 2018 at [1]

[29] Orders sought by applicant emailed to the Tribunal on 4 November 2018 at [2]

[30] Orders sought by applicant emailed to the Tribunal on 4 November 2018 at page 3

[31] Jokhan v Commissioner for ACT Revenue [2012] ACAT 15 at [21]; Theron v Commissioner for ACT Revenue [2013] ACAT 54

[32] Theron v Commissioner for ACT Revenue [2013] ACAT 33

[33] BHP Billiton Direct Reduced Iron Pty Ltd (ACN 058 025 960) v Duffus, Deputy Federal Commissioner of Taxation [2007] FCA 1528, per French J at [111]

[34] Archibald Dixon as Trustee for the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation [2018] FCAFC 54 at [15]- [20]