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[2014] NSWCATAD 84
NCAT Administrative and Equal Opportunity
2014-04-17
Original judgment source is linked above.
Background 1The Applicant seeks remission of interest imposed on the Applicant by the Chief Commissioner in a land tax assessment notice issued 19 September 2013 ("the Assessment") in respect of the 2009 to 2013 land tax years inclusive ("the Relevant Period"). 2The Applicant objected to the Assessment and on 18 December 2013 the objection was disallowed ("the Decision"). On 3 February 2014 the Applicant sought a review of the Decision by this Tribunal.
Powers of Tribunal on review 3On a review the Tribunal may confirm, vary or reverse the Decision of the Chief Commissioner and make orders as to costs or otherwise as it thinks fit, s101(1) of the Taxation Administration Act 1996 ("the TA Act").
The Applicant's Case 4In its application for review the Applicant stated that its grounds were "the question was never asked by the Office of State Revenue ("OSR") whether the applicant is a Trust nor did the applicant receive a letter requesting this information. Hence the interest penalties that have been applied should be remitted." In its objection to the Assessment the Applicant stated: "We were not aware that: (1) The assessments (the original assessments issued by the OSR were incorrect. (2) There are no tax free thresholds for Trusts. (3) your office did not know that the owner is a Trust even though that was written on the contract." 5The evidence relied on by the Applicant consisted of a statement by Mr Abad Hassan received by this Tribunal on 18 March 2014 and a copy of a letter dated 26 February 2014 on the letterhead of Nick Liew & Co Pty Ltd tendered towards the end of the proceedings. Mr Hassan gave oral evidence during the proceedings.
The Respondent's Case 6The Respondent's case was that the Applicant had committed tax defaults by failing to furnish land tax returns for the 2009 - 2013 land tax years; Part 5 of the Taxation Administration Act 1996 ("TA Act") imposes an interest charge for such tax defaults. The Respondent also submitted that it is appropriate for the Tribunal to find that the Applicant had not taken reasonable care in complying with tax laws and the Chief Commissioner had properly refused to exercise his discretion to remit the interest component on the unpaid land tax liability of the Applicant. 7The evidence relied on by the Respondent consisted of 117 pages of s58 Documents. Miss Sethi, counsel for the Respondent, also sought to rely on three annexures to her written submissions received by the Tribunal on 4 April 2014 ("RS").
Issues 8The issues for determination by this Tribunal are: (1)Whether the Applicant failed to furnish land tax returns for the 2009 - 2013 land tax years as required by law; (2)If so did such failure constitute tax defaults; (3)If so, had the Applicant taken reasonable care to prevent the tax defaults; and (4)Did the Chief Commissioner properly refuse to exercise his discretion to remit the interest components of the Assessment?
The law 9The relevant law in relation to land tax, tax defaults and interest penalties is found in the Land Tax Act 1956, the Land Tax Management Act 1956 ("LTM Act") and the TA Act. 10Part 3 of the LTM Act provides that land tax is payable by the owner of all land in New South Wales other than land which is exempt from taxation under that Act. The tax year is each period of 12 months commencing on the first day of January and land tax is charged on land owned as at midnight on 31 December immediately preceding the tax year. (Sections 7-9). 11Part 2 of Schedule 13 to the Land Tax Act 1956 provides that, in respect of land subject to a special trust, land tax is payable in respect of the taxable value of the land. Accordingly the tax free threshold applicable to land not held by a special trust, does not apply. 12The LTM Act relevantly provides as follows: "3 Definitions (1) In this Act, unless the context or subject-matter otherwise indicates or requires: ..."special trust" has the meaning given by section 3A" "3A Special trust--meaning (1) For the purposes of this Act, a trust is a "special trust" if: (a) the trust property includes land, and (b) the trustee of the trust is the owner of the legal estate in the land, and (c) the trust is not a fixed trust. (2) For the purposes of this section, a trust is a "fixed trust" if the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes (disregarding section 25 (3)). (3) For the purpose of determining whether a trust is a fixed trust under this section, any equitable interest of the trustee as trustee of the trust is to be disregarded." "12 Taxpayer to furnish returns (1) The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year. (1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year. (1B) A land tax return required to be furnished by a person must: (a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and (b) set out, or be accompanied by, such information as to the person's land ownership as may be required to complete the return. (1C) If land is the subject of a trust, the land tax return must also: (a) set out, or be accompanied by, such information in relation to the trust and the beneficiaries of the trust as may be required to complete the return, and (b) state the trustee's opinion as to whether the trust is a special trust." "72 Failure to furnish returns or information (1) A taxpayer who fails or neglects duly to furnish any return or information as and when required by this Act or the Chief Commissioner, or who fails to include in any return any land owned by the taxpayer, is taken to have committed a tax default for the purposes of Part 5 of the Taxation Administration Act 1996. (2) In relation to the tax default: (a) interest is payable in accordance with Part 5 of the Taxation Administration Act 1996 but accrues on the amount of land tax assessable to the taxpayer for the period commencing on the last day allowed for furnishing the return or information, or the correct particulars of land ownership, and ending on: (i) the day on which the return or information is furnished or the correct particulars are furnished, or (ii) the day on which the assessment calculated on the basis of the return or information that is required, or the correct particulars that are required, is made, or (iii) the day on which the whole of the land tax assessable to the person is paid, whichever occurs first, and (b) penalty tax is payable in accordance with Part 5 of the Taxation Administration Act 1996 on the amount of tax unpaid." Penalties are dealt with in Division 2 of Part 5 of the TA Act. Relevantly: "21 Interest in respect of tax defaults (1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division. (2)..." 22 Interest rate (1) The interest rate is the sum of: (a) the market rate component, and (b) the premium component. (2) The "market rate component" is: (a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or (b) the rate specified for the time being by order of the Minister published in the Gazette. (3) The "premium component" is 8% per annum. Table Column 1 Column 2 Period Monthly average yield 1 January to 31 March the preceding November 1 April to 30 June the preceding February 1 July to 30 September the preceding May 1 October to 31 December the preceding August
"25 Remission of interest The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount."
Onus of proof 13The Applicant has submitted that no interest should be payable. The Applicant's grounds are that the OSR did not ask if the Applicant was a trust; the Applicant did not receive any letter asking for such information; the OSR disregarded writing on a contract that stated the owner was a trust; the Applicant was not aware that the original assessments were not correct; and the Applicant was not aware that there were no tax free thresholds for trusts. 14The Applicant has the onus of proving its case in a review by the Tribunal, s100(3) of the TA Act. The requisite standard of proof in such a review is the "balance of probabilities" Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 ("Cornish") at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 ("B & L Linings") at [104]. 15The onus of proof does not require the Respondent to produce evidence of the due making of an assessment. In Cornish the Appeal Panel of the Administrative Decisions Tribunal said at [5] - [6]: "5 The Tribunal focussed upon s 100(3) of the Taxation Administration Act 1996 (NSW) (TAA) which provides that the "applicant has the onus of proving the applicant's case in an application for review". The Tribunal contrasted this with the absence, in s 100, of any onus on the Respondent to show that the assessment was correct: see [24] to [34] of the Decision. The Tribunal drew support from various authorities in the Federal jurisdiction concerned with a similar provision, s 190(b) of the Income Tax Assessment Act 1936 (Cth) (now found in s 14ZZK and s 14ZZO of the Taxation Administration Act 1953 (Cth)). That section provided that an applicant has the burden of proving that the assessment is excessive. Mason J said in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89: "The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor, is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail." 6 This view was approved in Commissioner of Taxation v Dalco (1990) 168 CLR 614" 16Accordingly it is necessary for the Tribunal to consider the evidence and submissions of the Applicant to determine whether or not the onus which lies on the Applicant has been satisfied.
The evidence and some observations 1725 May 2007 the Applicant was registered, ACN 125 595 708, the Laviva Trust ("the Trust") was settled and the Applicant was appointed initial trustee of the Trust. Mr Hassan, who represented the Applicant before the Tribunal has since registration of the Applicant been its sole director, sole company secretary and sole shareholder. 185 September 2008 the Applicant described as "Laviva Nominees Pty Ltd ABN 30 125 595 708" exchanged contracts to buy 159 Merrylands Road, Merrylands ("the Merrylands Property"). Settlement also occurred on 5 September 2008. Mr Hassan said this property was purchased by the Applicant as trustee of the Trust. 1915 April 2009 "Laviva Noms Pty Ltd's" request to access Land Tax Online Services was approved by the Chief Commissioner and given Client ID 112382094. It was informed that registration for land tax was available online. 209 December 2009 the Chief Commissioner sent a letter to the Applicant including the following: (1)The OSR records indicated that the Applicant owned potentially taxable land for the 2009 tax years. "The land details have been listed over the page." (2)"Land tax is calculated on the combined value of all taxable land you own. The land tax threshold for 2009 is $368,000." (3)A guide was enclosed containing information about land tax and some of the exemptions that may apply, if you qualify. (4)If any of certain circumstances applied including "the land is held in trust... you can change your details using our online service at..." (5)"If the property details shown over the page are correct, you do not need to do anything. An assessment will issue automatically in 23 days" (6)Over the page was a listing which included one property address "159 MERRYLANDS ROAD MERRYLANDS 2160". 21The property guide enclosed with the 9 December 2009 letter is entitled "Land Tax 2009" and contains a footer on page 2 stating "Land Tax Guide 2009". Page 2 of the land tax guide provides 3 examples of land tax calculation. The first two are described as "general example" and provide for an untaxed threshold of $368,000 and land tax calculated at 1.6% (plus $100) on the value of land above the threshold up to $2,250,000 and land tax calculated at 2% above that taxable value. The 3rd example is described as "non-concessional companies and special trusts example" and provides a rate of land tax of 1.6% calculated on a land value of $180,000. This example shows that there is no tax free threshold for non-concessional companies or special trusts and tax is calculated on the full taxable value of the land. 22Mr Hassan said the 9 December 2009 letter was sent to the correct address of the Applicant. He said that in his opinion the document was a guide and he did not reply as it was not relevant. 2312 January 2010 the Chief Commissioner issued a Land Tax Assessment Notice to the Applicant for the 2009 and 2010 tax years. The supporting information enclosed with the Assessment Notice described the land taxed as 159 Merrylands Road Merrylands and provided for tax free thresholds of $368,000 for the 2009 tax year and $376,000 for the 2010 tax year. 24Mr Hassan said the Office of State Revenue knew that the Applicant is a trustee because it had stamped the trust deed of the Trust (in 2007). Mr Hassan also said the documents which accompanied the assessment were not a request for information so he did not need to reply. 2525 June 2010 the Applicant notified the OSR by letter of a change of mailing address from Merrylands to Maroubra. Mr Hassan said this letter had been drafted by the Applicant's accountant. 264 February 2011 the Chief Commissioner issued a Land Tax Assessment Notice to the Applicant for the 2011 tax year. The supporting information enclosed with the Assessment Notice described the land taxed as 159 Merrylands Road Merrylands and provided a tax free threshold of $387,000. 279 February 2012 the Chief Commissioner issued a Land Tax Assessment Notice to the Applicant for the 2012 tax year. The supporting information enclosed with the Assessment Notice described the land taxed as 159 Merrylands Road Merrylands and provided a tax free threshold of $396,000. 28An undated contract was signed to purchase 20 Marine Parade Maroubra ("the Maroubra Property"). The purchaser is described in the contract as Laviva Nominees Pty Ltd ACN 125 595 708 atf ..... and Milina Trajilovic". The contract provided for settlement on 1 May 2012. Mr Hassan said this property was purchased by the Applicant as trustee of the Trust. I observe that the trust was not named or otherwise described in the contract. 291 February 2013 the Chief Commissioner issued a Land Tax Assessment Notice to the Applicant for the 2011 tax year. The supporting information enclosed with the Assessment Notice described the land taxed as 159 Merrylands Road Merrylands and provided a tax free threshold of $406,000. 3024 April 2013 the OSR received an initial return for land tax being a land tax 2013 registration form. The form stated that the owners were Milena Trajilovic and Laviva Nominees Pty Ltd, the name of the contact person was "Allan". The form was signed by Mr Hassan using the name "Abad Hassan" in the capacity of "director". 31None of the following sections of the form were completed: (1) Client ID; (2)ABN/ACN of Laviva Nominees Pty Ltd; (3)details of all land owned as at 31 December 2012; (4) the answer to the question "Is the land owned by a Trust?" and "Give details below"; Trust name; "Which of the following best describes the type of trust: (a) A special trust (including a family or testamentary discretionary trust, a non-complying superannuation trust and most unit trusts). (b) A complying superannuation fund. (c)Any other trust claiming the land tax threshold (including an estate trust or a bare trust) *:" (5)The declaration signed by Mr Hassan "that the information given is true, accurate and complete in every particular" was undated. 32Mr Hassan gave evidence that he did not answer questions because he was only using the form to tell the Chief Commissioner that the land is owned and the Chief Commissioner knew that the company is a trustee. 3330 April 2013 the Chief Commissioner issued a Land Tax Assessment Notice to "Laviva Noms Pty Ltd & M Trajilovic" for the 2013 tax year using the Client ID 123642530. The supporting information enclosed with the Assessment Notice described the land taxed as 20 Marine Pde Maroubra and provided a tax free threshold of $406,000. 3415 June 2013 the Applicant described as "Laviva Nominees Pty Ltd ACN 125 595 708 ATF the Laviva Trust" exchanged contracts to buy 30 Allison Road, Guildford ("the Guildford Property"). 3528 August 2013 the Chief Commissioner issued a letter to Laviva Noms Pty Ltd & M Trajilovic headed "Land tax registration - additional information on trust details". The letter requested specific information and enclosed a questionnaire and a 2 page document headed Land Tax 2013 containing generic information regarding land tax and some worked examples showing calculations of land tax in different situations including that relating to special trusts in which the threshold was said not to apply. The questionnaire contained similar questions to those in the land tax 2013 registration form referred to at [32] to [34] above. When issued by the Chief Commissioner the Client ID had been completed by the insertion of the number 123642530 and the landowner details were "Laviva Noms Pty Ltd & M Trajilovic". 3613 September 2013 the OSR received the partly completed questionnaire. Certain of the questions and requests for information are set out in the 2nd column of the table below and the answers / information provided are set out in the 3rd column. My observations regarding the answers or non-answers are in italics . 1 Owner 1 Laviva Nominees Pty Ltd ATF the Laviva Trust Date of birth or ABN/ACN 50% 43 892 443 304 2 Owner 2 Milena Trajilovic Date of birth or ABN/ACN 50% 11/02/1954 3 Contact names Allan 4 Details of land owned, including your home. Provide the details of the land (s) you own (include all land items sold after 31 December 2008). 20 Marine Parade Maroubra Property address % Owned 100 Date land purchased 28/02/12 5 Trusts and related companies A) if the land is owned by a trust: Trust name 50% owned by trust is the trust a special trust? The box marked "Yes" was left blank The box marked "No - please attach details of each beneficiary or unit holder" was ticked. No details of beneficiaries or unit holders were provided.
The declaration at the end of the form "that all information provided is true and correct in every particular" was signed by Mr Hassan using the name "Abad Hassan" and not dated. 37Part of the covering letter dated 28 August 2013 stated: "What do you need to do? If you answer "yes" to question 3a (trust details) in the attached questionnaire, please provide the following information:
Consideration 54There is no dispute between the parties as to the contents of the documents referred to in this decision. 55The Applicant has provided no evidence that it furnished land tax returns to the Chief Commissioner on or before 31 January in any of 2009, 2010, 2011, 2012 or 2013 which complied with s12(1A)(1B) and 1(C) of the LTM Act. Instead, the Applicant has relied on a mixture of evidence and assertions by Mr Hassan to the effect that: (1)The Applicant made payments to the OSR in accordance with land tax assessment notices it received. (2) A company can only act as trustee of a single trust. (3)Because the deed of settlement of the Trust was stamped by the OSR the Chief Commissioner must have been aware that all purchases of property by the Applicant were as trustee for the Trust. (4)It was not necessary for him or the Applicant to consider and respond in full to the written communications received from the OSR. (5)He did not know what a Special Trust was but the Trust was not a Special Trust because the accountant for the Applicant did not call it a Special Trust. (6)There was no need for him to obtain any legal advice in relation to land tax. 56The relevant legislation is set out above. The onus is on the Applicant to prove on the balance of probability that it complied with its obligations to lodge land tax returns in respect of the property it held as trustee of the Trust. 57On the evidence before the Tribunal I find that the Applicant failed to comply with its obligations to furnish land tax returns in accordance with s12(1A)(1B) and 1(C) of the LTM Act in each of 2009, 2010, 2011, 2012 and 2013. 58In accordance with s72 of the LTM Act I find that the Applicant committed a tax default for the purposes of Part 5 of the TA Act in each relevant year and in accordance with s72(2)(a) I find that interest is payable in respect of each such tax default. 59The Applicant has not made any submissions to the effect that the Assessment contains any error in calculation of interest. 60The Applicant has applied for a remission of the interest penalties on the ground that "the question was never asked by the Office of State Revenue (OSR") whether the applicant is a Trust nor did the applicant receive a letter requesting this information". The relevant issue is whether the Applicant had taken reasonable care to prevent the tax defaults. 61Section 25 of the TA Act allows the Chief Commissioner to remit either or both of the market rate component and the premium component of the interest rate charged on the amount of tax unpaid. 62Whether or not and the extent to which the Chief Commissioner should remit either component of the interest rate was considered in detail by the Appeal Panel of the Administrative Decisions Tribunal ("ADT") in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19. 63In relation to the market rate component of interest the Panel said at [60]: "In our view the primary interest (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." 64The Applicant has not satisfied me on the balance of probability that the Chief Commissioner contributed in any way to the default. There is no obligation on the Chief Commissioner to justify the Assessment and I do not regard the fact that the deed settling the Trust was stamped by the OSR to impose any relevant obligation on the Chief Commissioner. Accordingly I do not find that the market rate component of interest should be waived in these proceedings. 65The Appeal Panel considered the premium rate at [61] where it said: "[T]he premium rate is a form of penalty. Its purpose, as we see it, is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. The 'market rate' component approximates ordinary lending rates. Taxpayers may withhold tax simply to invest the money in schemes and projects that have a higher potential earnings; and may be content to carry the late payment surcharges were it only at market rate. The premium rate' is intended as we see it to operate as the key disincentive to delaying tax payments. For that reason, the TA Act imposes both the market rate component and the premium rate component in respect of late payment. The Commissioner is then given a discretion to remit the market rate component or the premium rate component or not by any amount (s 25)." 66At [55] in RS, counsel for the Respondent referred to the decision of Trust Co of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 in which the Tribunal when comparing remission of the market component and premium components of interest said [at 29]: "'On the other hand, a wider range of circumstance would be available to justify a remission of the premium rate interest." 67Annex B to RS comprises the Interest and Penalty Tax Guidelines applied by the Chief Commissioner dated February 2014. At [57] in RS counsel submits "The Guidelines were equally applicable during the Relevant Period and are an attempt to ensure consistency of administrative decision making. The Guidelines make clear [at paragraph 18] that: "Under s.25 of the TAA, the Chief Commissioner has a discretion to remit the premium rate or the market rate, or both, by any amount. A decision on whether or not to remit interest in a particular case depends on all of the circumstances surrounding the tax default, including the taxpayer's degree of culpability." 68Paragraph 21 of the Guidelines states: "Where there is evidence that a taxpayer took reasonable care to comply with the taxation law or where a voluntary disclosure was made before the commencement of an investigation the premium rate of interest may be remitted." 69This Tribunal is not bound by the Chief Commissioner's Guidelines. However there is a benefit in uniformity of application of tax laws. The evidence does not disclose any relevant voluntary disclosure. Rather the evidence shows failures to make disclosure when asked. The Applicant's reasons for its failures are that the Chief Commissioner should have known the company was acting as trustee. The Applicant's evidence is that the sole director of the Applicant either did not read or understand relevant communications from the Chief Commissioner and regarded them as unimportant. The evidence also shows that the Applicant did not seek legal advice as to how land tax law is applied. 70The onus is on the Applicant to prove its case. Having considered all the evidence before the Tribunal I am not satisfied on the balance of probability that the Applicant took reasonable care to comply with relevant taxation law. Accordingly I find that there is no good reason to remit the premium rate component of the interest charged in the Assessment. 71During the Applicant's closing submissions Mr Hassan tendered as evidence, and without objection, a copy of a letter addressed to him on the letterhead of Nick Liew & Co Pty Ltd. The letter, dated 26 February 2014, headed LAVIVA NOMINEES PTY LTD ACN 125 595 708, contained one sentence as follows: "The above company acts solely as Trustee for the Laviva Trust and does not trade on its own." Mr Hassan said that Mr Nick Liew is the accountant for Laviva Nominees Pty Ltd and prepares its tax returns. 72I disregard for the moment that the Applicant's case had closed before the tender was made, no prior notice had been given of the intention of the Applicant to tender the letter, Mr Liew was not made available for cross examination, and no evidence was provided as to how long Mr Liew had been preparing the company's accounts or tax returns or had otherwise been involved in the company's affairs. I find that the letter is not relevant to the issues to be determined by the Tribunal in this matter.
Decision 73Having regard to the above findings on the material before me, the correct and preferable decision of this Tribunal is that the decision of the Chief Commissioner under review is affirmed.
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: 24 June 2014
Laviva Nominees Pty Ltd
Chief Commissioner of State Revenue