Madikian v Chief Commissioner of State Revenue

The decisions under review

1. In its decisions on 23 March 2016 the Respondent: 1. under a Duties Notice of Assessment (the Duties Assessment) [1] : 1. reassessed the Applicant's liability to stamp duty in connection with the acquisition by him of a residential property (the Property) located at 7 Appletree Road, West Wallsend, NSW, being a transaction which the Respondent had previously treated as exempt from duty under section 74 of the Duties Act 1997 (the Duties Act), relating to the acquisition of residential properties by first home owners; the amount of duty assessed was $9,685; 2. imposed on the Applicant in connection with that reassessment:

• interest of $3,300.21, pursuant to section 21 of the Taxation Administration Act 1997 (the TAA); and
• a penalty of $2,416.25, pursuant to section 26 of the TAA; and 1. under a First Home Owner Grant Assessment Notice (the Grant Assessment) [2] : 1. assessed the Applicant with a liability to repay the sum of $7,000, being the amount of a First Home Owner Grant which had been paid to him in connection with his acquisition of the Property (the Grant) by the Respondent pursuant to section 19 of the First Home Owner Grant (New Homes) Act 2000 (the Grant Act), which was known at that time as the First Home Owner Grant Act; and 2. assessed the Applicant with a liability for penalties under section 45 of the Grant Act, in the amount of $2,100.

1. The Applicant: 1. objected to these decisions on 4 May 2016, within the 60 day period for objections prescribed by, respectively, section 89(1) of the TAA and section 25(3) of the Grant Act; and 2. did so using respectively: 1. OSR Form 027A Objection to an Assessment or Decision - Duties, in relation to the Duties Assessment [3] , and 2. OSR Form 027B Objection to an Assessment or Decision - First Home Benefits, in relation to the Grant Assessment [4] , supplemented by a brief letter dated 4 May 2016 [5] .
2. In that supplementary letter, the Applicant indicated that his objection concerned neither the assessment which imposed liability on him for the stamp duty foregone by the Respondent, nor the requirement that he repay the grant made to him by the Respondent. Rather, it related to the penalties imposed on him. The essential basis of his objection was, in the words of his letter: "due not [sic] being armed with all the available options to me so that I would have been able to make an educated decision on the best course of action to take in the situation".
3. On 5 July 2016, the Respondent wrote to the Applicant, disallowing the Applicant's objection in relation to the imposition of penalties of $2100 under the Grant Act [6] . Nothing in that letter, however, referred to the objection made by the Applicant in relation to the additional interest and penalties imposed consequent on the decision to reverse the exemption from duty of the original transfer of the Property to the Applicant. This is consistent with an internal note of the Respondent dated 6 July 2016 [7] , apparently made by a Mr R Wildsmith, to the effect that "The appt [8] only lodged objection to the FHOG [9] penalty and not the FHP [10] (Duties) interest", but is inconsistent with an earlier internal note of the Respondent dated 29 April 2016, apparently made by a Ms Helena Johnston [11] , stating relevantly that the Applicant had "... advised he will be objecting to the penalties on his assessments" [underlining added]. The plural is consistent with the formal objection notices lodged by the Applicant. I will return to this inconsistency of approach below.
4. On 3 September 2016, which was within the period for requesting review contemplated by: 1. section 99 of the TAA, in the case of the Duties Assessment, and 2. section 28(4) of the Grant Act, in that of the Grant Assessment, the Applicant signed one of the Tribunal's Notices of Internal Appeal, in which he indicated that he was appealing against the Respondent's decision that he pay "… an amount parable [sic] for the "First Home Buyers Grant" plus FHP [12] and 30% ..". This was the incorrect form, since for an initial administrative review application the correct Tribunal form was the Administrative review application form used by this Division of the Tribunal. It was followed on 15 February 2017 (which was, however, well outside the relevant statutory periods) by a supplementary or substitute application in the appropriate form.
5. Despite: 1. the Respondent's apparent failure to determine (or, indeed, consider) the Applicant's objection under the TAA, and 2. the Respondent's failure to initiate a review of the Respondent's decisions in strict accordance with the Tribunal's procedures. Both the Applicant and counsel for the Respondent in their respective oral and written submissions have pragmatically proceeded on the basis that: 1. the Respondent had effectively dismissed both of the Applicant's objections; 2. the decisions under review therefore cover both assessments and objections; and 3. whatever the formal deficiencies in the Applicant's application, it should be treated as a compliant application for review of those decisions.
6. In view of the guiding principle which section 36 of the Civil and Administrative Tribunal Act directs this Tribunal to adopt, namely "… to facilitate the just, quick and cheap resolution of the real issues in the proceedings", I intend to adopt a similarly pragmatic approach. I am conscious that since he is not legally trained I cannot reasonably expect of the Applicant the degree of rigour in identifying and articulating the basis of his objections that I might of a trained lawyer. The real issue in these proceedings for the Applicant, it is clear, is the imposition on him of obligations to pay interest and penalties, whether under the Duties Assessment or the Grant Assessment, and for me in this review not to address that issue because of possible formal deficiencies on the Applicant's part would in my view be clearly contrary to the Tribunal's guiding principle.

Factual background

1. I set out below in some detail what appears from the evidence to have been the course of events concerning: 1. the Applicant's acquisition and renting of the Property; and 2. his responses to (and co-operation with) the Respondent's investigations.
2. On 19 December 2011, the Applicant entered into a contract of sale with Ms L Jennaway (the Vendor), for the purchase by him of the Property, subject to an existing tenancy [13] under which Mr B McIlroy and Ms P Harwood (the Original Tenants) leased the Property.
3. The contract for sale settled on 30 January 2012. Pursuant to a successful application by the Applicant to the Respondent: 1. the instrument of transfer which was delivered on settlement was assessed by the Respondent as being exempt from duty under section 74 of the Duties Act; and 2. the Applicant received under sections 7 and 17 of the Grant Act, a grant of $7000 in connection with his acquisition of the Property. The transfer appears finally to have been registered under the Real Property Act 1900 on or about 3 April 2012 [14] .
4. The Original Tenants' lease was for a term of 12 months, to expire on 20 November 2012 [15] . They appear to have resided in the Property until sometime shortly before 27 August 2013, when their rental bond was returned to them [16] .
5. On 30 August 2013, the Applicant entered into a new residential tenancy agreement, this time with Mr J Armstrong, Mr A R Ray and Ms Dakota Ray (the New Tenants) for a term of 12 months. The New Tenants paid a rental bond on 2 September 2013, which was eventually released to them on 16 October 2014 [17] .
6. Meanwhile, the Applicant; 1. entered into Management Agency Agreements in respect of the Property: 1. with Raine & Horne Newcastle on 1 March 2012 [18] , whose appointment as managing agents came to an end on 9 December 2012 [19] , and 2. subsequently, with Nextview Property on 9 November 2012 [20] ; 1. did not change his address to that of the Property in either; 1. his driver's licence [21] ; or 2. the electoral roll [22] ; and 1. caused notices for water rates for the Property to be sent to the Applicant's managing agents [23] .
7. The managing agents' respective tenancy ledgers indicate that: 1. the Original Tenants paid rent for the Property in respect of the period 14 March 2012 to 18 December 2012 [24] ; 2. they continued doing so following the change of managing agent, from 18 December 2012 until 25 August 2013 [25] ; and 3. the New Tenants paid rent for the Property from 2 September 2013 until 10 October 2014 [26] .
8. According to the Respondent's records, on 19 October 2015 the Respondent sent the Applicant a Notice of Investigation concerning the stamp duty concession and Grant received by him in relation to the Property [27] .
9. On 4 November 2015, the Applicant provided a statutory declaration (the Statutory Declaration) to the Respondent, in which he said that: 1. he lived in the Property from 1 November 2011 until 1 June 2012; and 2. he did not live in the Property with a third party under a lease, licence or arrangement [28] .
10. He supplemented this with a signed covering letter of the same date, in which he stated that: 1. following settlement of the purchase on 20 October 2011 he lived in the Property for 6 months, so as to meet the conditions of eligibility for the relevant duty concession and the Grant; 2. since this was a short term living arrangement only, he did not change his personal details; 3. he had contacted Telstra for telephone records to show that he lived in the Property, but was told that Telstra: 1. were unable to produce records dating back this far, and 2. could not in any case locate the relevant address; 1. he had contacted Energy Australia, but was told that Energy Australia: 1. were unable to produce records dating back this far, and 2. cannot produce records because of the organisation's privatisation "… mixed with the inability to locate the address" [29] .
11. The Respondent's internal records [30] show that on 19 January 2016, Mr T Sheen, the Respondent's investigating officer, contacted the Applicant by mobile telephone, to inform him that the information supplied by the Applicant to date was insufficient to prove his residency of the Property. According to these records, Mr Sheen: 1. informed the Applicant that the information provided to date by the Applicant was insufficient to satisfy the respondent as to his residence at the Property; 2. queried with the Applicant why rates notices for the Property were going to his parents' address rather than to the Property; the Applicant responded that this was because he intended to return to his parents' home after satisfying the residency requirement; 3. raised with the Applicant certain evidence obtained from real estate agents which suggested that during the relevant period tenants occupied the Property; the Applicant ".. was adamant .." that he did reside there alone, and that no third parties occupied the Property at the relevant time; 4. raised with the Applicant the reason why invoices for water charges were sent to a real estate agent; the Applicant provided no explanation; 5. informed the Applicant that disclosures made during investigation may reduce any penalties; and 6. invited the Applicant to provide further evidence.
12. On 28 January 2016, the Applicant emailed Mr Sheen, to the effect that he was awaiting further information from Energy Australia which could take up to 10 business days to arrive [31] . Mr Sheen responded by email that he would suspend his investigation until 15 February 2016, to allow time for Energy Australia to provide the relevant information [32] .
13. On 17 February 2016, the Applicant emailed Mr Sheen: 1. stating that he was still attempting to obtain the relevant information from Energy Australia; 2. requesting information from Mr Sheen as to how the Respondent obtained tenancy information from the real estate agents involved, and expressing concern as to a potential breach of his privacy in the provision of that information; and 3. stating that he " … was living in the property whilst the second bedroom was leased out to help support the mortgage whilst I was starting my own business" [33] .
14. On that same day, Mr Sheen responded by email: 1. stating that he had been unable to obtain any information directly from Energy Australia; 2. explaining the statutory basis on which the real estate agents had provided the information in question to the Respondent; 3. stating that the real estate agents had provided the management agreements, the tenancy agreements and the tenant ledgers; 4. noting the information provided by the Applicant concerning the occupation of the second bedroom of the Property; and 5. inviting the Applicant to provide any further evidence in support of his position [34] .
15. On the same day, the Applicant responded by email assuring Mr Sheen: 1. generally, that he was attempting to gather the relevant documents; and 2. more specifically, that he was working with Energy Australia to obtain information, which he understood would be available within 10 business days [35] .
16. On 4 March 2016, Mr Sheen emailed the Applicant, enquiring as to progress with Energy Australia [36] .
17. On 7 March 2016, the Applicant replied by email to Mr Sheen. He said that he was still persisting with Energy Australia, but that the timeframes provided by the company for responding were incorrect [37] .
18. On 18 March 2016, the Applicant emailed Mr Sheen, stating that: 1. he had been unsuccessful in obtaining further information from Energy Australia or the tenants concerning electricity billing for the Property during the relevant period; and 2. he had been able to obtain evidence from the managing agent at the time of settlement, indicating that the agent was aware of the Applicant's moving into the Property while leasing out a bedroom [38] .
19. On 21 March 2016, Mr Sheen emailed the Applicant, stating that he would review the material in the context of his final decision, and inviting the Applicant to provide any further information [39] .
20. On 23 March 2016, Mr Sheen sent several emails to the Applicant, using his @Gmail address through which they had consistently communicated by email: 1. at 10.51am, an email indicating that: 1. he intended to make assessments requiring repayment of the Grant and payment of the duty from which the Applicant had been exempted; 2. interest and penalties would be applicable; 3. the amount of any penalties will depend on the degree of disclosure made by the Applicant during the investigation; and 4. providing the Applicant with a final opportunity to provide additional information; 1. at 1.13pm, a further email indicating that: 1. the decision to make the relevant assessments, including for interest and penalties, had been made; 2. explaining briefly the basis for doing so, which was that even if it was accepted that the Applicant lived in the Property with the Tenants from settlement of the purchase until, as the Applicant stated in his Statutory Declaration, 1 June 2012, the duration of residency was insufficient to meet the relevant statutory requirements; and 3. foreshadowing a subsequent email containing the relevant assessments, and including information as to avenues for objections and payment plans; and 1. at 4.55pm, the email referred to in the previous one, containing the assessment notices [40] .

Duties Act

1. At the time, the Applicant entered into his contract for the purchase of the Property, the Duties Act provided for a scheme for the exemption of first home purchasers from transfer duty, known as the First Home Plus scheme. This exempted from transfer duty: 1. contracts entered into by first home owners (as defined in section 71(2)) for the purchase of (or of land on which to construct) a first home, and 2. transfers of land made in conformity with such contracts.
2. Although certain amendments to the scheme were made by the Duties Amendment (First Home-New Home) Act 2011 with effect from 1 January 2012, these amendments did not extend to contracts for the purchase of land made, or transfers of land made after that date in conformity with a contract entered into, before that date. The contract of sale and transfer relevant to the Applicant's purchase of the Property fell within these transitional arrangements.
3. The scheme provided for the exemption if: 1. an application was made, and 2. certain eligibility criteria were met.
4. The eligibility criteria included relevantly that: 1. the purchaser was a first home owner; 2. the value of the property was no more than $600,000; and 3. a residence requirement was met. It was common ground that the Applicant's acquisition of the Property satisfied all eligibility conditions other than the residence requirement.
5. This requirement was set out in section 76, and required that the home be occupied by the first home owner as a principal place of residence for a continuous period of at least 6 months, starting within 12 months after registration of the transfer of the relevant interest in land in favour of the home owner.
6. Under section 76A of the Duties Act as it relevantly applied, the home owner was obliged within 14 days after the end of the period for compliance with the residence requirement: 1. to notify the Respondent, and 2. to pay the duty foregone by the Respondent, if the residence requirement was not met within that period.
7. The TAA: 1. provides in section 21 for interest to be paid on unpaid tax, including payroll tax; and 2. in section 26, makes a defaulting taxpayer liable to pay penalty tax in addition to the amount of tax unpaid, in addition to any such interest.

Grant Act

1. The Grant Act at the relevant time provided in section 7 for a grant to be paid to a first home owner in connection with the acquisition of a home in New South Wales, if the acquisition met certain eligibility criteria.
2. Relevantly, one of the eligibility criteria, set out in section 12 of the Grant Act, was a residence requirement which paralleled that outlined above in relation to the stamp duty exemption.
3. The grant was set under section 18 at, subject to certain supplements which are not relevant, $7000.
4. Under section 14, a first home owner who sought the grant was required: 1. to apply for it in the prescribed form; and 2. to supply the information required by the Respondent, ".. if the Chief Commissioner requires, verified by statutory declaration ..".
5. Section 20(3) provided that: "If a first home owner grant is paid in anticipation of compliance with the residence requirement, the payment is made on condition that, if the residence requirement is not complied with, the applicant must within 14 days after the end of the period allowed for compliance: (a) give written notice of that fact to the Chief Commissioner; and (b) repay the amount of the grant". The effect of this provision was to incorporate statutorily into the terms of the grant the condition that the grant recipient must repay the grant within a period of 14 days after the expiry of the period for satisfaction of the residence condition, if that condition was not in fact satisfied.
6. Section 42 provides that: "If an applicant (or former applicant) for a first home owner grant fails to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay".
7. Section 45(3) of the Grant Act allows the Respondent to impose a penalty not exceeding the amount of the grant received by a grant recipient, if the recipient ".. fails to make a repayment required under …. the conditions of the grant .."

The Applicant's argument

1. The Applicant now does not dispute that: 1. he failed to meet the residence requirements in respect of the Property under the Duties Act and the Grant Act, or 2. he is obliged to pay to the Respondent the transfer duty form which he was exempted, and the grant which was paid to him. 3. As he notes in the covering letter which accompanied his supplementary or substitute Administrative review application form, received on 15 February 2017: "I am not disputing the fact that at the age of 22 I made the wrong decision for not living in the house and I understand that I did not comply with the criteria and that there is [sic] monies to be paid".
2. Rather, he argues, he should be relieved from his liability to pay interest and penalties because: 1. he was not fully informed by the Respondent's officers during his discussions with them as to: 1. the likely amount or basis of calculation of interest and penalties in relation to the stamp duty payable or the recoverable grant; or 2. the scope for remission of interest or penalties; 1. the tenor of his discussions with the Respondent's officers was such that he was caused ".. to make a panicked [sic] and in hindsight irresponsible decision about my eligibility for the FOHG .."; and 2. had he been more fully informed by the Respondent as to the interest and penalty regime, the scope for reductions referrable to disclosure and the possibility of payment plans, he would have been more candid with the Respondent.

The Respondent's argument

1. The Respondent says that: 1. So far as interest on the unpaid duty is concerned: 1. the imposition of interest on the unpaid duty, and the method of calculation of it adopted by the Respondent, are both in accordance with the TAA; and 2. none of the circumstances which normally support the remission of interest under section 25 of the TAA apply. 1. As for the imposition of penalty tax: 1. this is the standard amount of penalty tax provided for under section 27(1) of the TAA; 2. it is open to be increased under section 27(2) of that Act to up to 75%, if the Respondent is satisfied that the tax default is the consequence of intentional disregard of the taxation law by the taxpayer; 3. the penalty can be varied by the Respondent, up to certain percentages which depend on the taxpayer's behaviour before or during the investigation, under sections 28 to 30 of the TAA, and can in exceptional circumstances also be remitted by the Respondent under section 33 of the TAA; and 4. having regard to the Applicant's conduct during the investigation, the Respondent can be considered as lenient in having limited the penalty tax to 25%. 1. As for the imposition of a penalty in relation to the grant: 1. the penalty imposed is consistent with the Respondent's published policy; and 2. the Applicant's conduct during the investigation fully justifies the imposition of the penalty, and again the Respondent may be considered as having been reasonable in setting the level of penalty. 1. In paraphrase, the Applicant's argument is that because he was not told in sufficient detail that there would be consequences for lying to or misleading the Respondent during the investigation process: 1. he could not make an informed decision about whether he should tell the truth or not, and 2. therefore should not be faced with the consequences of his failing to do so. 1. This argument is, the Respondent says, unmeritorious, and if accepted the effect would be to subvert the purpose and effect of the penalty regime.

Decision and reasoning

1. This review is conducted: 1. so far as the Duties Assessment is concerned, under the TAA, of which section 100(3) provides that in an application for review such as this "The applicant has the onus of proving the applicant's case …."; and 2. so far as the Grant Assessment is concerned, under section 28 of the Grant Act, of which section 28(3) provides that "The applicant has the onus of proving the applicant's case in an application for review ….".
2. That is to say, the Respondent's decision must stand unless the Applicant can demonstrate, on the balance of probabilities, the deficiencies in it which the Applicant alleges. A differently constituted tribunal's reasons in Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, at [27], outline a method of approach to this exercise, and these reasons respectfully adopt the methodology which they propose.
3. As outlined above, under section 76A of the Duties Act as it relevantly applied, the Applicant was obliged within 14 days after the end of the period of 12 months commencing when he became the registered proprietor of the Property: 1. to notify the Respondent, and 2. to pay the duty foregone by the Respondent, if the residence requirement was not met within that period. It was not met, and this is common ground between the parties. A tax default within the meaning of the TAA therefore occurred by on or about 17 April 2013 (being 14 days after the date on which registration of the transfer of the Property in favour of the Applicant appears to have occurred). This default resulted from the Applicant's failure to pay the duty from which he had been exempted in respect of his purchase of the Property.
4. The legal position in relation to the Respondent charging interest on unpaid stamp duty is set out in the TAA, which: 1. provides in section 21 for interest to be paid on unpaid tax, including payroll tax; 2. sets out in section 22 the method for calculating interest, which is at a rate which is the sum of two rates: the "market rate component" and the "premium rate component"; and 3. in section 25, allows the Respondent to remit in individual cases either or both components, "… in such circumstances as the Chief Commissioner considers appropriate".
5. The Commissioner's discretion to remit interest is a wide one, which is unfettered in its terms.
6. The decision of a predecessor tribunal in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19: 1. explains the function of the market rate component, as being "… 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 …"; 2. draws the conclusion that because of this function, the market rate component "… could rarely, if ever, be waived …"; and 3. observes that in order to justify any remission of the market rate component, "… it would be necessary to show that in some way the Commissioner contributed to the default ..".
7. In that same decision, the predecessor tribunal: 1. explained the function of the premium rate as "… a form of penalty …" whose purpose "….. is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time"; and 2. identified the circumstances in which it might be appropriate for the Respondent to remit the premium component of interest, namely where: 1. all principal tax that has been assessed and is not in dispute has been fully paid at the time of the request for remission of interest; 2. there has been co-operation by the taxpayer in providing relevant information to the Respondent so as to enable the Respondent to issue assessments; 3. such co-operation by the taxpayer has occurred prior to any investigation being commenced by the Respondent (voluntary disclosure) or, at the very least, within a reasonable time after requests for information have been made by the Respondent - i.e. the taxpayer has taken reasonable care; and 4. there has been no wilful default by the taxpayer in not paying tax on time.
8. In his Interest and Penalty Tax Guidelines dated February 2014 [41] , the Respondent indicates the policy which he will generally adopt in relation to the remission of interest, and nothing in that policy is inconsistent with the position outlined in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd.
9. When one considers the course of the investigation outlined above, several things stand out: 1. The Applicant provided to the Respondent at least two different (and mutually inconsistent) accounts of his residential history in relation to the Property, before in his third account he finally recognised that he had failed to satisfy the relevant residential requirements. 2. The Applicant maintained these successive positions for a period of several months, during which he also led the Respondent's officer to believe that he was undertaking enquiries with Telstra to provide evidence from telephone records in support of a position which he ultimately abandoned. 3. The Applicant maintained these positions, too, in the face of evidence (in the form of leases and tenancy records) which suggested that, far from occupying the Property himself, he had in fact conferred exclusive possession of it on third parties during all the relevant qualification period [42] . 4. The initial position which he maintained, that he had lived in the Property from 1 November 2011 until June 2012 was manifestly at odds with the objective evidence, being: 1. the date of settlement of his purchase of the Property, and 2. the rental and tenancy records for the Property. 1. The subsequent position, that he had occupied the Property and made a spare bedroom available to the Original Tenants and the New Tenants is clearly at odds with the relevant leases, both of which provide for the entirety of the Property to be let to the tenants [43] , and the tenancy records, which indicate that the tenants paid a rental for the Property [44] . 2. Moreover, he compounded this pattern of obstructive behaviour by his email of 17 February 2016, raising privacy issues as to the Respondent's enquiries with the real estate agents.
10. All of this, in my view, suggests a pattern of obstructive or misleading behaviour by the Applicant, the purpose and effect of which was to impede the Respondent's investigations. Consistently with the principles outlined above, it is not appropriate in these circumstances for any remission of premium rate interest to be allowed.
11. The legal position concerning the Respondent's charging penalty tax in relation to tax defaults (which include a failure to pay stamp duty when due and payable) is set out in the TAA, which: 1. provides in section 26 for a defaulting taxpayer to be liable to pay penalty tax in addition to the unpaid tax; 2. sets out in section 27(1) the basic position, which is that the penalty tax payable is 25% of the unpaid tax; 3. provides in section 27(2) for the amount of penalty tax payable to be increased up to an amount equal to 75% of the unpaid tax, if the Respondent is satisfied that the tax default was caused wholly or partly by the taxpayer's wilful disregard of the relevant taxation law; 4. allows, in sections 28 to 30, for the relevant percentage to be reduced depending on the taxpayer's behaviour during the Respondent's investigations; and 5. section 33 of the TAA confers on the Respondent a discretion to remit penalty tax, but as a predecessor tribunal noted in RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64, at [29], the exercise of this discretion is warranted only in exceptional and rare circumstances.
12. In the present case, the Applicant was charged only the statutory base amount of penalty tax. The evidence indicates, in the Tribunal's view, that there was nothing in the Applicant's circumstances or history which would justify the Respondent in allowing any remission of this amount. I note (but refrain from commenting on) the suggestion made by counsel for the Respondent, that in view of the Applicant's conduct during the investigation he should in fact consider himself fortunate that the Respondent did not impose a penalty tax at a higher rate.
13. I turn now to the Grant Assessment. Once it was established (as the Applicant now admits) that he failed to satisfy the residency requirement on satisfaction of which the grant was conditioned, then: 1. as outlined above, the Applicant had under section 20(3)(b) of the Grant Act an obligation to repay the grant within 14 days after the expiry of the 12 month period allowed for satisfaction of that requirement; that is to say, by on or about 17 April 2013 (being 14 days after registration of the transfer of the Property in favour of the Applicant); 2. the Applicant failed to do so; and 3. in consequence, under section 45(3) of the Grant Act the Respondent was authorised from that time onwards to impose a penalty on the Applicant of no more than the amount the Applicant was required to pay (that is to say, $7,000). In the event, under the Grant Assessment the Respondent assessed the Applicant with a penalty of $2,100, being 30% of the maximum penalty which the Respondent could impose under the Grant Act.
14. A predecessor tribunal outlined in Knight v Chief Commissioner of State Revenue [2008] NSWADT 83, at [33], certain factors which it considered relevant to the imposition of a penalty under section 45 of the Grant Act. These were: 1. the truthfulness of the original statements made by the applicant in his or her application for the grant; 2. the surrounding circumstances, including the intention of the applicant as to the occupation and use of the property as a principal place of residence at the time of seeking the grant; 3. the reasons for the failure to comply with the conditions of the grant; 4. whether the applicant has in fact occupied the property as his or her principal place of residence; 5. the candour of the applicant in his or her responses to compliance enquiries; and 6. whether the grant has been refunded.
15. In the present case, the Applicant has stated that it was always his intention to make the Property his principal place of residence, but the financial demands of starting his own business (which made themselves felt at about the same time as he acquired the Property) made it economically impossible for him to do anything other than rent the Property out to tenants in order to cover mortgage and other costs. These propositions go to factors (1), (2) and (3) above. Counsel for the Commissioner questioned the sincerity of these claims, on the basis that the Property was acquired with an established tenancy; however, since this tenancy was for an initial 12 month period, it remained open to the Applicant to reoccupy the Property (by agreement with the Original Tenants for them to vacate slightly before the expiry of their initial lease term) in order to meet the residence requirement. Hence I am inclined to accept the Applicant's statements as to his original intentions.
16. No evidence was provided as to whether the Applicant did in fact ever occupy the Property as his principal place of residence, so factor (4) is of little assistance.
17. For all the reasons outlined above, in my view the Applicant failed to show an appropriate degree of candour in his answers to the Respondent's enquiries. Moreover, his conduct was calculated to impede or delay the Respondent's enquiries. This clearly engages factor (5).
18. The grant had not been repaid at the relevant time. This engages factor (6).
19. In all the circumstances, it appears to me to be reasonable, having regard to: 1. the Applicant's lack of candour and co-operation in his dealings with the Respondent during the Respondent's compliance enquiry, and 2. the fact that the grant remained unpaid, that the Respondent chose to impose a penalty under the Grant Assessment. Moreover, the rate at which the penalty was imposed - 30% - is in my view not disproportionate having regard to the circumstances.

Costs

1. I turn now to the issue raised by the Applicant, as to the way in which the Respondent and his officers conducted their enquiries. This has three elements: 1. the Applicant says that if he had been more fully informed as to the incidence and calculation of penalties and interest, he would have been more candid in his approach to the enquiry; 2. the Respondent's investigating officer, Mr Sheen, did not act appropriately by failing to inform the Applicant of the amount of penalties and interest; and 3. the Respondent has acted unreasonably in not reaching agreement with him as to a payment plan for the amounts he owes.
2. Dealing with the first element: 1. Counsel for the Respondent summarised it as follows: "… because he was not told that there would be consequences for lying or misleading the Chief Commissioner during the investigation process, he would not take an informed decision about whether he should tell the truth or not, and therefore should not be faced with the consequences of his failing to do so ..". With commendable frankness, the Applicant agreed in his oral submissions that this was the central proposition of his argument. 1. It is, I think, axiomatic, that taxpayers must conduct their dealings with the Respondent with honesty and candour. To do so is not a tactical choice, to be adopted as and when advantageous and to be eschewed when disadvantageous. The penalty regime, and the statutory ability for the Respondent to remit penalties or premium interest when appropriate, exist as respectively: 1. a stick to discourage dishonest behaviour during the Respondent's investigations, and 2. a carrot to encourage early and frank disclosure. 1. I reject the Applicant's first argument for three reasons: 1. it is disingenuous in the extreme for him to suggest, as he does, that frankness and honesty are optional elements in a taxpayer's dealings with the Chief Commissioner, and that their deployment is a tactical contingency in such dealings; 2. it is clearly inconsistent with the intrinsic logic of the penalty and remission system, and 3. if accepted, it would produce a perverse incentive for taxpayers to mislead the Respondent, by privileging in investigations a delinquent and dishonest taxpayer, who seeks to mislead the Respondent, at the expense of a delinquent but honest taxpayer, who cooperates with the Respondent's investigators.
3. Turning to the second element: 1. The Applicant says that the Respondent's investigating officer, Mr Sheen, did not act appropriately by failing to inform the Applicant of the amount of penalties and interest. 2. I reject this argument, for two reasons: 1. The documentary evidence, which I have set out above in some detail, shows that Mr Sheen on numerous occasions took some pains variously to inform the Applicant of the possibility of interest and penalties, to emphasise that cooperation in the Respondent's investigation was a relevant factor in determining the quantum of those impositions, and to invite the Applicant to make timely disclosure in order to minimise them. 2. These statements by Mr Sheen were, in my view, more than sufficient to alert a reasonable taxpayer to the need to investigate the interest and penalties regime further, whether by seeking professional advice or by making inquiries within the resources made available to the public by the Respondent, including on the Respondent's website [45] . The Applicant seemingly failed to make any effort to investigate such matters, or to take even the most elementary steps which were readily available to him to protect his own interests in relation to them. It is not the business of either the Respondent or this review process to protect the Applicant from the consequences of his own cavalier neglect.
4. Turning to the third element of the Applicant's argument, I reject this too; 1. It is clear that under section 47 of the TAA the Respondent may agree to arrangements for the deferred payment of tax, and may do so "… subject to such conditions (for example, as to the payment of interest) as the Chief Commissioner may determine". 2. It is apparent from the s58 Documents that: 1. The Respondent invited the Applicant on 23 March 2016 to discuss a payment plan for the Grant [46] , 2. The Respondent invited the Applicant on 5 July 2016 to discuss a payment plan, following disallowance of his objections [47] , 3. The Applicant approached the Respondent on 28 July 2016 to establish a payment plan [48] , 4. Such a payment plan was established on an interim basis, allowing 9 fortnightly payments of $50, followed by a lump sum payment of $13,302.14 on 10 December 2016 [49] . 1. According to a letter sent by Mr Madikian to the Respondent's solicitors on 8 March 2017, which accompanied the Respondent's costs submissions, there then followed a series of discussions between the Applicant and the Respondents, with a view to the establishment of payment plans. In that letter, the Applicant states that: 1. ".. all legitimate payment plans that I have proposed have been turned down without any professional consideration ..", 2. for the process of negotiating a payment plan "… to be a fair and equitable process I would need some form of conformation [sic] that my true ability to make repayments based on my financial standing would be taken into consideration rather than dismissed ..", and 3. "At this stage I am being penalised for admitting a wrong doing and wanting to pay an agreed upon portion of the funds back". 1. Leaving aside the Applicant's apparent reluctance to take personal responsibility for his own acts and omissions, two points should be made about this letter: 1. It discloses no insight on the part of the Applicant as to the moral and legal deficiencies in his conduct, or the basis of his liability. He is not being penalised, as he claims, for "...admitting a wrong doing ...". Rather, the penalties are for his failure to disclose promptly and candidly the fact of his ceasing to be entitled to certain benefits which he obtained from the State, and his recurrent and disingenuous attempts to impede the Respondent in pursuing his investigations of these matters. 2. The assumption on which it is predicated is that the Respondent can be expected to forego interest or penalties to which it - and ultimately the New South Wales taxpayer - is entitled, solely in order to spare the Applicant a financial embarrassment of which he is the unique author. 1. The Respondent may agree to payment arrangements, but is not obliged to do so. If he and the Applicant are unable to do so, that is a matter for them, but their failure to reach agreement does not provide any grounds for the Tribunal to reconsider the Respondent's actions in issuing the Duties Assessment and the Grant Assessment which render the Applicant liable to the interest and penalty amounts set forth in them.
5. Accordingly, I affirm the Respondent's two assessments, being the Duties Assessment and the Grant Assessment.
6. That is not the end of matters. There are two other issues to be considered: 1. legal costs, and 2. the Applicant's Statutory Declaration dated 4 November 2015.
7. The Respondent has sought costs, and on 10 April 2017 provided certain written submissions to the Tribunal in support of that request. As outlined above, these submissions do not appear to have been received by the Applicant, because they were sent to an internet address which he did not know he possessed, and therefore did not monitor. Accordingly, I allowed a further opportunity for the Applicant to respond to those submissions after the hearing. The Applicant did so on 5 July 2017.
8. The Respondent's submissions are as follows: 1. The default position in the Tribunal is that parties pay their own costs: Civil and Administrative Tribunal Act 2013 (CAT Act), section 60(1). 2. Section 60(2) of the CAT Act, however, permits (but does not require) the Tribunal to award costs in special circumstances, and section 60(3) identifies certain matters to which the Tribunal may have regard in determining whether special circumstances apply. These include: (a)… (b) … (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d)… (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) … (g) any other matter that the Tribunal considers relevant. 1. The Respondent says that the Applicant's claims in this application are without a tenable basis, are misconceived and lack substance, and therefore amount to special circumstances. Accordingly, the Respondent says, costs should be awarded against the Applicant.
9. The Applicant in his costs submissions says that: 1. it is unfair that costs be awarded against him, since had he known before the hearing of the likely amounts involved he would have withdrawn his application; 2. he has made attempts to resolve the matter, by offering to reach a settlement, but these have been rejected by the Respondent; 3. he reiterates his basic argument, that if he had been told by the Respondent of the amount of penalties and interest he would not have pursued the matter; and 4. he simply does not have the money to pay costs.
10. I would note here that: 1. under section 29(2)(b) of the Grant Act, the Tribunal's power to award costs in connection with reviews of decisions under that Act is not limited to cases where special circumstances apply; 2. in the present case, however, there is no basis on which to dissect costs as between the review under the TAA (where special circumstances are required to support a costs award) and the review under the Grant Act (where they are not); and 3. consequently, in considering the costs application, I have no alternative but to proceed on the more restrictive basis, that special circumstances must be shown in order to enliven the Tribunal's capacity to award costs.
11. It will be apparent from the views which I have expressed on the substantive aspects of this review that I do not consider the Applicant's case to have any significant merits, either legally or factually. In consequence, I consider that special circumstances exist which are sufficient to enliven the Tribunal's authority under section 60(2) to make an award of costs against the Applicant.
12. I am conscious, however, of the evidence which was provided during the hearing, and which appeared to be uncontested by both parties, that: 1. the Respondent's submissions as to costs was sent on 10 April 2017 to an @icloud email address [@iCloud], as was the Respondent's solicitor's letter dated 15 June 2017 offering not to press his application for costs if the proceedings were withdrawn by Friday 16 June 2017; 2. previous email correspondence from the Respondent to the Applicant had been sent to an @Gmail email address, which was noted by the Respondent as the Applicant's designated address for email correspondence as is apparent from the Section 58 Documents [50] ; 3. the Respondent's solicitors used the @iCloud address because that was the sender's address which appeared in an email communication recently received from the Applicant, shortly before the relevant communications concerning costs were sent; 4. the Applicant was unaware that he had, or that some communications sent by him indicated that they were sent from, an @iCloud email address; I was satisfied as to the sincerity and plausibility of the Applicant's evidence on this point; and 5. although it had long been the practice for email communications to the Applicant to be sent to his @Gmail address, neither the Respondent nor his solicitors copied the relevant communications to that customary address as well as to the @iCloud address, or checked by telephone with the Applicant as to whether he had in fact changed his email address.
13. While the Applicant's overall conduct in relation to this matter is in my view not such as to deserve sympathy, this aspect of matters is one - indeed, the only one - where in my view some degree of leniency is appropriate. This unfortunate set of circumstances means that because of the combined effect of: 1. a technological peculiarity of which he had neither control nor knowledge, and 2. the Respondent's solicitors' decision to use the novel @icloud email address, rather than the Applicant's traditional and preferred @Gmail address without taking any steps to verify the change, 3. the Applicant was deprived of a significant opportunity to resolve the matter without risking an award of costs. Whether he would have taken that opportunity is a matter of pointless speculation; he did not have it. Accordingly, even though special circumstances may well exist for purposes of section 60(2) of the TAA, I decline to exercise my discretion to make an award of costs against the Applicant in view of his deprivation of that opportunity.

Applicant's Statutory Declaration

1. The final matter concerns the Applicant's Statutory Declaration of 4 November 2015. Counsel for the Respondent at paragraph 39 of his submissions strongly suggests that the Applicant has made false statements in this declaration, and as I have indicated above certain of the matters stated in the Statutory Declaration appear, at the very least, to be inconsistent with other and uncontested evidence. I have neither investigated nor formed a view as to the circumstances relevant to the making of the declaration, but I direct the Registrar to refer the matter to the Attorney General to take such action as he may determine is appropriate in relation to these discrepancies.

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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

Endnotes

1. S58 Documents, pages 30-31
2. S58 Documents, pages 25-28
3. S58 Documents, pages 36 to 38
4. S58 Documents, pages 33 to 36
5. S58 Documents, page 39
6. S58 Documents, pages 50 to 52
7. S58 Documents, page 65
8. Which I take to be an abbreviation for Applicant.
9. Which clearly refers to First Home Owner Grant.
10. Which presumably is an abbreviation for First Home Owner Plus, the name by which the First Home New Home duty exemption was previously known.
11. S58 Documents, page 65
12. Which again presumably refers to the First Home Owner Plus exemption form transfer duty: see note 3 above.
13. Supplementary s58 Document 1b
14. Supplementary s58 Documents, page 42
15. Supplementary s58 Documents pages 100 to 110
16. Supplementary s58 Documents, page 59
17. Supplementary s58 Documents, page 60
18. Supplementary s58 Documents, pages 94 to 99
19. Supplementary s58 Documents, page 93
20. Supplementary s58 Documents, pages 135 to 142
21. Supplementary s58 Document 2
22. Supplementary s58 Document 4
23. Supplementary s58 Documents, page 79
24. Supplementary s58 Documents pages 111 and 112
25. Supplementary s58 Documents page 158
26. Supplementary s58 Documents pages 156 and 157
27. S58 Documents, page 67
28. Supplementary s58 Documents, pages 62 and 63.
29. Supplementary section 58 Documents, page 61.
30. S58 Documents, pages 66 and 67.
31. s58 Documents, page 7.
32. s58 Documents, pages 6 and 7
33. s58 Documents, page 6
34. s58 Documents, pages 5 and 6
35. s58 Documents, pages 4 and 5.
36. s58 Documents, page 4
37. s58 Documents, page 4
38. Additional documents supplied by the Applicant on 15 February 2017.
39. Additional documents supplied by the Applicant on 15 February 2017.
40. Additional documents supplied by the Applicant on 15 February 2017.
41. Available on the Respondent's website, http://www.revenue.nsw.gov.au.
42. Supplementary s58 Documents 11(b) and 12(b).
43. Supplementary s58 Documents 11(b) and 12(b).
44. Supplementary s58 Documents 11(b) and 12(b).
45. See Note 41 above.
46. S58 Documents, page 28
47. S58 Documents, page 52
48. S58 Documents, page 65
49. S58 Documents, document 13
50. Section 58 Documents, page 65 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: 30 August 2017