This case is about surcharge land tax. As its name suggests, surcharge land tax is a surcharge imposed in respect of land owned in New South Wales. It is only imposed on certain people who are not Australian citizens. The question for determination is whether the applicant in this matter, Manuel Lawrence, who is not an Australian citizen, is liable to surcharge land tax for the land tax years 2017 to 2021 (the relevant years).
Mr Lawrence and his wife Satinder own two residential properties in New South Wales. They live in one of them (the Carnes Hill property) and they rent the other one out (the Edmondson Park property).
The respondent Chief Commissioner has accepted Mr Lawrence doesn't have to pay surcharge land tax for the Carnes Hill property for any of the land tax years 2018 to 2021. But he says the surcharge is payable for that property for 2017, and for the Edmondson Park property for each of the land tax years from 2018 to 2021.
The Tribunal is asked to examine Mr Lawrence's circumstances and decide whether the Chief Commissioner's position is correct.
[2]
What does the law say?
I will start with land tax generally, and then move on to the surcharge.
Land tax is charged, under s 8 of the Land Tax Management Act 1956 (NSW) (the LTM Act), on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. Accordingly, the thirty-first of December is often referred to as the 'taxing date' for land tax purposes - 31 December 2016 is the taxing date for the 2017 land tax year, 31 December 2017 for the 2018 land tax year, and so on.
Those are the general rules, but there are some exemptions from the land tax. For example, a person's principal place of residence is exempt from land tax under s 10(1)(r) of the LTM Act. This exemption applies to the Carnes Hill property because, for each of the relevant years, it was Mr and Mrs Lawrence's principal place of residence.
On the other hand, investment properties such as the Edmondson Park property are not exempt from land tax. In this case there is no dispute that the Chief Commissioner's assessments of land tax for the Edmondson Park property are correct.
Now, when it comes to surcharge land tax, which is payable under the Land Tax Act 1956 (NSW) (the LTA) on residential land, it is important to understand precisely who the surcharge applies to. Section 5A of the LTA says the surcharge is payable by anyone who is a 'foreign person'. The LTA explains (originally in subsection 5A(6), but now in s 2A) that the expression 'foreign person' has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW).
Chapter 2A of the Duties Act contains s 104J(1), which says the expression 'foreign person' means 'a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section'. I will refer to the Commonwealth Act as the FAT Act, and I note that the modifications referred to (which only deal with Australian citizens and certain New Zealand citizens) do not apply to Mr Lawrence's circumstances because he has never been an Australian citizen or a New Zealand citizen.
In the FAT Act, a 'foreign person' is an individual who is not 'ordinarily resident' in Australia (s 4). Section 5 says an individual who is not an Australian citizen is 'ordinarily resident' in Australia at a particular time (and is therefore not a 'foreign person') if and only if both of the following paragraphs (a) and (b) apply:
1. the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and
2. at that time -
1. the individual is in Australia and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law; or
2. the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law.
In light of Mr Lawrence's status as a permanent resident of Australia, the Chief Commissioner has accepted, correctly, that one of the limbs of paragraph (b) applied on each of the relevant 31 December dates. (It doesn't matter which one of the limbs of paragraph (b) applied on any of those dates, as long as one of them did.) But that is only part of the requirement. As well as satisfying either paragraph (b)(i) or (b)(ii), a person must also satisfy paragraph (a) - and the Chief Commissioner says Mr Lawrence didn't satisfy paragraph (a) on any of the relevant dates.
Now, focusing on the Carnes Hill property, which has been Mr and Mrs Lawrence's principal place of residence throughout the relevant years, the surcharge land tax provisions differ between the 2017 land tax year and the later land tax years.
For the 2017 land tax year, the surcharge was payable even in respect of a property that was a person's principal place of residence: s 5A(4)(g) of the LTA.
But that position changed from the 2018 land tax year onwards, with the introduction of s 5B of the LTA. After considering Mr Lawrence's objection against the original assessments, the Chief Commissioner has accepted Mr Lawrence doesn't have to pay surcharge land tax on the Carnes Hill property for the land tax years 2018 to 2021 because he intended to, and did in fact, 'use and occupy' that property as his principal place of residence for a continuous period of 200 days in the land tax year.
The Edmondson Park property is in a different category because it has never been Mr Lawrence's principal place of residence and there is no other exemption that could apply to it. In relation to that property, the question boils down to whether Mr Lawrence, not being an Australian resident, was 'ordinarily resident' in Australia at each of the taxing dates. If he was 'ordinarily resident' in Australia then he won't have been a 'foreign person' - and in that case the surcharge land tax won't apply.
That outline of the law shows there are two quite different questions that need to be addressed to establish the overall position of Mr Lawrence as far as the surcharge land tax is concerned.
First of all, was he 'ordinarily resident' in Australia as at 31 December 2016, 2017, 2018, 2019 and 2020? By following the definitions through the Duties Act and the FAT Act (see [9]-[11] above), that question can be re-expressed in the following way:
(1) Is it the case that Mr Lawrence had actually been in Australia during at least 200 days in the 2016, 2017, 2018, 2019 and 2020 calendar years?
If the answer to that question for any of those years is Yes, then there can't be any surcharge land tax for the corresponding land tax year. This is because Mr Lawrence would not be a 'foreign person' for that land tax year. But if the answer for any of those years is No, then he would have been a 'foreign person' and he would have to pay surcharge land tax unless there was an exemption.
As already discussed, there is no exemption for the Edmondson Park property, but there is an exemption for the Carnes Hill property for the 2018 to 2021 land tax years. This is because the relevant question for the Carnes Hill property, but only for the 2018 to 2021 land tax years, is this:
(2) Is it the case that Mr Lawrence intended to, and did in fact, 'use and occupy' the property as his principal place of residence for a continuous period of 200 days in the 2018, 2019, 2020 and 2021 calendar years?
It is important to emphasise that the Tribunal is not being asked to review the surcharge land tax position for the Carnes Hill property for the 2018 to 2021 land tax years. The Chief Commissioner accepts there is no liability for those years in relation to that property. The only reason I have set out question (2) above is to emphasise that the question relating to the exemption for the Carnes Hill property is quite different from the question about Mr Lawrence's overall status - as to whether he was, or was not, a 'foreign person' as defined. There is no inconsistency if the answer to question (1) is 'No' but the answer to question (2) is 'Yes'. They are very different questions.
[3]
Mr Lawrence's circumstances
Mr Lawrence has been a permanent resident of Australia since 2015.
For many years up until August 2020, Mr Lawrence was an international airline captain, flying for airlines based in India. He spent a lot of time outside Australia, but when he had long breaks from his flying roster he would return to Australia and live with the rest of his family in the Carnes Hill property.
Since 2015 Mr Lawrence has lodged income tax returns, and has apparently been assessed by the Australian Taxation Office, as a tax resident of Australia.
A printout from the Commonwealth Department of Home Affairs shows Mr Lawrence was in Australia for the following number of days in each relevant calendar year:
1. 2016 calendar year - 81 days;
2. 2017 calendar year - 79 days;
3. 2018 calendar year - 85 days;
4. 2019 calendar year - 86 days;
5. 2020 calendar year - 118 days.
During the hearing Mr Lawrence accepted the accuracy of those figures, and I find them to be correct.
When the Australian government closed our international borders in 2020 as a result of the COVID-19 pandemic, Mr Lawrence was overseas and unable to return to Australia. He says that, but for the closure of the borders, he would have been in Australia for more than 200 days in the 2020 calendar year.
In August 2020 he was retrenched from his position as an international airline captain and he eventually returned to Australia in 2021.
Mr Lawrence brought to my attention a legislative instrument made by the then Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs on 11 October 2021. The instrument is known as the Australian Citizenship (special residence requirement) Instrument (LIN 21/069) 2021, and it was made under s 22C of the Australian Citizenship Act 2007 (Cth) (the Citizenship Act). I will refer to the instrument as LIN 21/069.
Among other things, LIN 21/069 specifies certain 'kinds of work' for the purposes of paragraph 22B(1)(a) of the Citizenship Act. One of the 'kinds of work' specified is '[w]ork that is done on duty by a crew member of a ship or aircraft'. The practical effect of specifying a 'kind of work' in LIN 21/069 is to provide a concession to people performing that work, so they are not unduly disadvantaged by their absences from Australia when it comes to calculating whether they have spent enough time in the country to meet the 'residence requirement' - a necessary precondition to becoming an Australian citizen.
[4]
Mr Lawrence's submissions
There are essentially three limbs to Mr Lawrence's submissions:
1. It is inconsistent to treat him as a foreign person in relation to the Edmondson Park property but as an Australian resident in relation to the Carnes Hill property;
2. He is classified as an Australian resident for income tax purposes and is exempt from residence requirements by the Department of Home Affairs; the Commonwealth position should take precedence over the State position;
3. In any event, if the borders hadn't been closed during 2020 he would have been in Australia for at least 200 days during that year.
[5]
The Chief Commissioner's submissions
The Chief Commissioner submits the only relevant question is whether Mr Lawrence was in Australia during at least 200 days in each of the relevant calendar years. If Mr Lawrence fails to satisfy that requirement, neither the Chief Commissioner nor the Tribunal has any discretion to waive the surcharge.
[6]
Consideration
The Chief Commissioner's submissions are undoubtedly correct and must be accepted.
The important question in this case is whether Mr Lawrence was a 'foreign person' at the relevant times. That, in turn, depended on whether he was 'ordinarily resident' in Australia at each of the taxing dates.
The concept of being 'ordinarily resident' is solely governed by the words of s 5 of the FAT Act, as adopted by s 104J of the Duties Act: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [50]. Meeting the 200 day requirement is the only way a person like Mr Lawrence can be classed as 'ordinarily resident' in Australia for the purposes of surcharge land tax.
There is no inconsistency in the Chief Commissioner's administration of the law. Whether Mr Lawrence was 'ordinarily resident' in Australia is a completely different question from whether he 'used and occupied' the Carnes Hill property during the relevant years. Under the statutory definition, Mr Lawrence was not 'ordinarily resident' in Australia because he was not actually in Australia during at least 200 days in any of the relevant calendar years. That means he is liable to the surcharge unless there was an exemption. An exemption applied for the Carnes Hill property for 2018 to 2021, but not otherwise.
Mr Lawrence's status as a tax resident of Australia, and the concession in LIN 21/069, are irrelevant to the question of surcharge land tax. There is no scope for the Commonwealth position to take precedence over the State position since there is no intersection, and no possibility of inconsistency, between the two positions. They deal with entirely different subject matters.
Furthermore, the fact that Mr Lawrence may have been able to satisfy the 200 day requirement in 2020 if the borders had remained open is irrelevant. He did not satisfy the requirement, and the legislation does not provide any relief for any person who fails that test: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].
[7]
Orders
1. The Chief Commissioner's original assessment in respect of the land tax year 2017 is confirmed.
2. The Chief Commissioner's revised assessments in respect of the land tax years 2018 to 2021 are confirmed.
[8]
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: 12 August 2022