The applicants were former de facto partners who entered into a contract to purchase a home unit in Maitland, New South Wales off the plan (the contract)
The contract was dated 14 May 2013. The consideration was $285,000.
The contract was stamped on 25 July 2013 and duty was paid.
The applicants later agreed with the vendors to an increase in the purchase price to $295,700.00 and to an extension of the completion date. This agreement was contained in a deed of variation dated 21 September 2015 (the deed).
The deed and the contract were submitted to the Chief Commissioner for further stamping.
On 7 December 2015 the Chief Commissioner placed a stamp stating "Duty Cancelled" over the original stamp on the contract. The contract was then stamped again with higher duty reflecting the increased consideration.
The deed was stamped with fixed duty of $50 at the same time.
There were more delays in completion of the development and the vendor rescinded the contract on 22 February 2017 and returned the deposit plus interest earned.
On 14 August 2018 the applicant lodged an application for a refund of the stamp duty that they had paid.
This was 5 years and 20 days after the first stamping of the contract.
The refund was refused by the Chief Commissioner as being out of time in reliance on section 50 of the Duties Act 1997 (NSW). Importantly the whole of the duty paid was refused to be refunded even though part of it had been paid less than 5 years before the application for the refund was lodged.
The applicants have sought review and the parties have agreed that the matter should be heard 'on the papers'. I consider that the matter is suitable to be determined without a hearing as the issues to be decided can be adequately dealt with by reference to the documents and submissions (s50(2) Civil and Administrative Tribunal Act 2013 (NSW)
The Tribunal gets its jurisdiction to hear this matter from section 96(1) of the Taxation Administration Act 1996 (NSW) (TAA), and section 9 of the Administrative Decisions Review Act 1997 (NSW).
Section 50 of the Duties Act provides as follows:
50 CANCELLED AGREEMENTS
(1) An agreement for the sale or transfer of dutiable property that is cancelled is not liable to duty under this Chapter if the Chief Commissioner is satisfied:
(a) that the agreement was not cancelled to give effect to a subsale, or
(b) that the purchaser or transferee under the agreement is a promoter of a named company proposed to be incorporated and that the company is the purchaser or transferee of the dutiable property under a subsequent agreement, or
(c) that the purchaser or transferee under the agreement and the purchaser or transferee under a subsequent agreement relating to the same dutiable property were related persons when the agreement that is cancelled was entered into.
(2) If duty has been paid on an agreement that is not liable to duty under this Chapter because of this section, the Chief Commissioner must reassess and refund the duty if an application for a refund is made within:
(a) 5 years of the initial assessment, or
(b) 12 months after the agreement is cancelled,
whichever is the later.
(3) In this section,
"cancelled" means rescinded, annulled or otherwise terminated without completion.
There is no issue regarding the operation of section 50(1). The application was lodged more than 12 months after the agreement was cancelled.
The issue to be decided is when the "initial assessment" was made. If it was on 25 July 2013 then the applicants are 20 days too late for a refund.
The applicants submit that when the first stamp on the contract was over stamped with the words "Duty Cancelled" that this rendered the first stamping "void", and that the second stamping became the initial assessment.
The applicants further submit that there is no definition of 'initial assessment' in the Duties Act.
The applicants further rely on a statement in the Chief Commissioner's objection decision dated 6 November 2018 where it is said "we note that the initial assessment was cancelled and the contract was reassessed due to an increase in the purchase price of the property".
The applicants pointed the tribunal to the provisions of s31 of the Duties Act which relevantly provides:
31 EFFECT OF ALTERATION IN PURCHASE PRICE
(1) If after an agreement for the sale or transfer of dutiable property is entered into and before the property is transferred:
(a) …, or
(b) …, or
(c) the consideration under the agreement is increased and the dutiable value when the consideration was increased is greater than the dutiable value when the agreement was entered into,
the Chief Commissioner must assess or reassess the liability to duty of the agreement in accordance with the change in the consideration.
(2) The liability to pay additional duty arising from an increase in the consideration occurs on the date the consideration is agreed to be increased.
They emphasise the Chief Commissioner's ability to "assess or "reassess", and submit that they do not prevent the second stamping being an assessment rather than a reassessment.
The respondent submits that although an initial assessment is not defined that it should be interpreted by reference to the text, context and purpose of the Duties Act.
He points to s297(1) of the Duties Act which provides that stamping is taken to be an assessment and to s291(2) of the Duties Act which provides that if there is no notice of assessment the stamped instrument is taken to be a notice of assessment.
The respondent says the stamping on 7 December 2015 is to be treated as a reassessment (or amendment of the initial assessment) under s31(1) Duties Act. To support this proposition he relies on the case of Delmege V Chief Commissioner of State Revenue [2014] NSWSC 1865 at [87] per White J. The respondent says that the second assessment in 2015 was not a new and separate initial assessment.
In Delmege land was first assessed to land tax for the 2004 land tax year on 2 April 2004. The land was reassessed on 22 November 2006 (the second [re]assessment). A new assessment (the third) was issued for the land for the 2004 land tax year on 1 October 2009 (i.e. more than 5 years after what was termed the initial assessment). It was for the same amount as set out in the second [re]assessment of November 2006.
The Court treated the October 2009 assessment as a withdrawal of the November 2006 [re]assessment, and its replacement by the October 2009 assessment. This was not a 'reassessment', with His Honour saying that a reassessment of an initial assessment is not an independent and additional assessment.
The October 2009 assessment was just a reissue of the November 2006 [re]assessment because the November 2006 [re]assessment was not amended, and so it was not a "reassessment" of the land tax liability for the 2004 land tax year which had not changed.
I accept that Delmege (and the authorities cited therein) is authority for the proposition that a reassessment is not a separate, stand alone, additional assessment, but it was not concerned with a refund claim under s50 Duties Act. There are further matters to be taken into account when a refund is in question.
The respondent claims that the definition of assessment in s3 of the Taxation Administration Act (NSW) 1996 (TAA) supports its submission since the definition covers both reassessments and compromise assessments.
That definition reads:
"assessment" means an assessment made by the Chief Commissioner under Part 3 of the tax liability of a person under a taxation law, and includes:
(a) a reassessment and a compromise assessment under Part 3, and
(b) an assessment by the Supreme Court or the Civil and Administrative Tribunal on an application for a review.
I note that the definition refers to a 'tax liability'.
The respondent's position is that an initial assessment is a different concept from an assessment, which includes a reassessment.
I am not particularly attracted to this submission as it seems to me that an initial assessment falls within the concept of assessment and really is something which relates to timing.
The respondent submits that s31(2) of the Duties Act refers to "additional duty" and assumes that there is an initial assessment which is later amended.
This submission goes too far and does not bear the weight contended for. It would also cover a situation where the consideration is increased before the instrument is first submitted for stamping
As to the overstamping of the first duty stamped with the words "Duty Cancelled", the respondent says that this did not have the effect of cancelling the first assessment of 2013 as the Duties Act (and presumably the TAA) makes no provision for the cancellation of an assessment in this way, and, the respondent says, a reassessment does not mean that the first assessment is cancelled.
The respondent further says that the words "Duty Cancelled" suggests only that the duty amount was cancelled and not the assessment of the liability. As noted above it is an element of the s 3 TAA definition of 'assessment' that there be a 'tax liability'
In addition the respondent further relies on s9(4) of the TAA which provides:
(4) The initial assessment of a tax liability remains the initial assessment of the liability for the purposes of this Act even if it is withdrawn under section 13.
Section 13 of the Taxation Administration Act provides:
The Chief Commissioner may withdraw an assessment (being an assessment for which a notice of assessment has been issued) at any time within 5 years after the date of issue of the notice, whether or not the amount of tax specified in the assessment has been paid.
In this case there was no withdrawal of the first assessment under s13 TAA. The "Duty Cancelled" overstamp did not, in my view, constitute a "withdrawal' of the assessment. This requires explicit action to this effect by the Chief Commissioner such as occurred in Delmege.
Finally on this point the Chief Commissioner submits that there is no inconsistency as a matter of ordinary language between the words "cancelled" and "reassessment" (Delmege).
[2]
Consideration
In my view the solution in this matter is to look to the meaning of "initial assessment" by reference to the text, context and purpose of s50 of the Duties Act as submitted by the respondent.
The context is one in which we look at the assessment of duty (where the definition of 'assessment' includes a 'reassessment') which is the subject of the claim for refund. The purpose of the provision is to establish certain time limits on the making of the claim.
The assessment the subject of the claim for refund is that made in 2015. The Chief Commissioner accepted in submissions and correspondence that duty as first assessed was 'cancelled'. Credit was given in the second assessment for the amount of that duty.
This accords with a sensible reading of the provision. There is an important principle involved. In another case the first assessment may be for a very modest amount and the second assessment for a very large amount due to a sharp escalation in consideration, say due to an agreed new valuation. On the Chief Commissioner's approach, if the agreement is later cancelled, the limitation period for a refund starts from the date of the first assessment but sweeps up the second assessment. This can lead, potentially, to an absurd result.
Under the Chief Commissioner's approach, the extra duty paid here less than 3 years before the refund claim was made is non-refundable.
Accordingly the refund application was lodged within the 5 year limitation period from the date of the second stamping which in this context and on these facts is treated as the initial stamping.
This disposes of the case and strictly it is unnecessary to deal with the other submissions of the parties, but I do so briefly for completeness.
The applicant argued that the Chief Commissioner was estopped from relying on the argument that the second assessment was not the initial assessment.
Ordinarily there is no estoppel against the operation of the statute. The respondent rejected the argument and relied on the case of BBLT Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1003 at [111] per Gzell J. There it was held that estoppel cannot prevent an authority from carrying out public duties cast upon it. Further the respondent argued that the applicants had not discharged their burden of proof. Merely asserting an estoppel is not enough. It must be established by evidence. I agree with the respondent's arguments.
Next, the applicant says that the refund claim was within time as one of the applicants signed a statutory declaration on 27 April 2018 stating that the contract been rescinded. The respondent had no knowledge of this until the refund claim was lodged.
The respondent argued against this saying it is insufficient that preparatory matters were done ahead of the lodgement time. I agree with this argument. The claim must come to the attention of the Chief Commissioner.
The applicant also sought relief on the grounds of leniency.
The respondent submitted that there is no discretion in s50 Duties Act. It also pointed to s9(3) TAA which provides that the Chief Commissioner must not make a reassessment of tax liability more than 5 years after the initial assessment.
Section 9(3) is not directly relevant here as the initial assessment is, for present purposes, the 2015 assessment in respect of which a refund was claimed.
If there is no discretion than the Chief Commissioner is required to administer the law in accordance with its terms. See Valencia v Chief Commissioner of State Revenue [2017] NSWCATAD 261 at [84].
[3]
ORDER
1. The Chief Commissioner's decision is set aside and the matter is remitted to him for reassessment in accordance with these reasons.
[4]
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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Decision last updated: 04 July 2019