In these proceedings, the respondent, the Chief Commissioner of State Review, assessed the applicant, Mr Matiushenko, as being liable for surcharge land tax over a property he owns in Sydney, New South Wales (NSW Property).
For the reasons set out below, the Tribunal has determined that the correct and preferable decision is to affirm the Chief Commissioner's assessments that are the subject of this application.
[2]
Background
On 17 February 2021, the Chief Commissioner issued a Land Tax Assessment Notice to Mr Matiushenko in respect of land tax years 2018, 2019, 2020 and 2021 (the relevant years). Those assessments were based on Mr Matiushenko's ownership of the NSW Property in each prior year.
The assessments for surcharge land tax were made, and the single notice of assessment was given, pursuant to the Land Tax Act 1956 (NSW), s 5A and the Land Tax Management Act 1956 (NSW), s 14. The Land Tax Act refers to the Land Tax Management Act as the "Principal Act".
The Chief Commissioner determined that Mr Matiushenko was liable for the surcharge land tax on the basis that he was a foreign person, not ordinarily resident in Australia, in each of the relevant tax years.
On 17 April 2021, Mr Matiushenko objected to the Chief Commissioner's assessments of his liability to surcharge land tax. He was entitled to object pursuant to the Taxation Administration Act 1996 (NSW), s 86.
On 22 July 2021, the Chief Commissioner disallowed Mr Matiushenko's objection on the basis that he was not ordinarily resident in any of the relevant years. The objection was determined in accordance with the Taxation Administration Act, s 91.
Mr Matiushenko, being dissatisfied with the Chief Commissioner's decision on objection, has applied for administrative review of that decision pursuant to the Taxation Administration Act, s 96.
[3]
Issues
The issues to be determined in these proceedings are whether, in each relevant year:
1. Mr Matiushenko was a 'foreign person' as defined in the Land Tax Act, s 2A (a provision which takes its definition from other legislation as discussed below); and
2. whether the NSW Property should be exempted from surcharge land tax on the basis that, in each relevant year, it was his primary place of residence.
[4]
Uncontested Facts
The following facts were not in dispute, and accordingly, I find that:
1. Mr Matiushenko owns the NSW Property, having purchased it "off-the-plan" in 2015 and having settled his purchase in early 2017.
2. Mr Matiushenko is a citizen of the Russian Federation. He and his wife applied for and were granted a parent visa giving them permanent residency in Australia on 21 March 2017.
3. His wife, Irina Matiushenko, works as a notary and owns a residence in Vladivostok, Russia. Mr Matiushenko resides with his wife in the residence in Vladivostok when they are in Russia. This property is his registered address in Russia.
4. Mr Matiushenko and his wife have family here in Australia, principally his daughter and grandchildren. They also have family in Russia, in particular Mr Matiushenko's elderly mother-in-law who lives in Vladivostok.
5. In the relevant years, Mr Matiushenko and his wife arrived in Australia and departed from it on the following dates, meaning that he was present in Australia in each tax year for less than 200 days:
1. 2017 tax year; arrived on 11 November 2017, his first arrival in Australia after he was granted permanent residency. Present in Australia for 51 days;
2. 2018 tax year; departed Australia on 11 March 2018 and returned on 7 October 2018. Present in Australia for 156 days;
3. 2019 tax year; departed Australia on 4 April 2019 and returned on 8 November 2019. Present in Australia for 148 days;
4. 2020 tax year; departed Australia on 6 March 2020 and did not return that year in part due to COVID-19 restrictions. Therefore, present in Australia in the 2020 tax year for 66 days; and
5. 2021 tax year; not present in Australia at any time, again largely due to COVID-19 restrictions.
[5]
The Applicant's Evidence
Mr Matiushenko was represented by his daughter, Ms Matushenko, who informed the Tribunal that, though she is a solicitor and migration agent, she appeared in the capacity as agent only for her father.
In support of the application, Ms Matushenko read an affidavit by Mr Matiushenko that was accompanied by a large exhibit of documentation. She also read a short affidavit from her husband, Mr Matiushenko's son-in-law, which addressed the connection between family members and Mr Matiushenko's importance in the lives of his grandchildren. Lastly, Ms Matushenko relied on an affidavit made by her that also exhibited a large number of documents in support of her father's application. Included in the exhibited materials were;
1. A death certificate of Mr Matiushenko's mother in support of the contention that the only remaining family he has in Russia are "non-blood" relatives. In particular, his wife and mother-in-law.
2. Documents concerning the purchase of the NSW Property by Mr Matiushenko in 2015, that sale being completed in 2017.
3. Bank statements evidencing payment by Mr Matiushenko of all utilities and a television streaming service subscription. The bank statements were necessary because the various utility accounts were in the name of Mr Matiushenko's daughter for various reasons, which she explained in her affidavit. A further invoice from an internet service provider was also provided to demonstrate an intention to occupy and use the property though not for a period within the relevant years.
4. A record of public transport use by Mr Matiushenko to show that, though he did not have a NSW driver's licence, he was a regular user of public transport in Sydney.
5. Bank statements showing Mr Matiushenko used his Australian address in business transactions of this kind.
6. Bills for the property owned by Mr Matiushenko's wife, showing demand for payment, were addressed to her alone. On this point, I note in passing that ownership of a property is not determinative firstly, of whether the property is a person's residence nor secondly, whether the property is a person's principal place of residence; Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 at [46]; Lo v Chief Commissioner of State Revenue [2011] NSWADT 224 at [29]
7. A map showing how proximate the property is to Ms Matushenko - evincing Mr Matiushenko's intention to reside close to family in Australia.
8. Various information concerning the Australian government's acceptance in 2022 of the COVID-19 vaccine commonly available in Russia and travel documentation associated with Mr Matiushenko's return to Australia booked for 1 July 2022.
[6]
The Applicant's Submissions
Ms Matushenko and on behalf of her father, made submissions to the effect that;
1. the legislation intends to provide an exemption for foreign persons in certain circumstances;
2. the assessment of whether a property is a principal place of residence is a qualitative one;
3. he had furnished and kept the NSW Property exclusively as his residence, his belongings and family items were all kept there;
4. The NSW Property was never rented out or offered for rent while Mr Matiushenko was out of Australia, tending to show that this property was considered by him as his home at all times;
5. Mr Matiushenko's principal place of residence is not the property in Russia, he is staying there at the mercy of two factors; his wife's employment and his wife's family. Those factors necessitate his residing there, he keeps only some clothing and items at the Russian property as a matter of practicality;
6. The family association with Australia is strong - his only daughter, son-in-law and grandchildren reside close to the NSW Property,
7. COVID-19 travel restrictions aside, his occupation in the 2018 and 2019 land tax years only fell short by six to eight weeks and there should be some discretion exercised with respect, at least, to those years if not the entirety of the relevant years.
[7]
The Chief Commissioner's Evidence
The Chief Commissioner relied upon some documents contained in the bundle of materials filed in the Tribunal pursuant to the Administrative Decisions Review Act 1997 (NSW), s 58, as well as other material contained in a tender bundle. Each document specifically tendered by the Chief Commissioner was marked separately as an exhibit and comprised;
1. Movement Records from the Department of Human Services for both Mr Matiushenko and his wife - as noted above, Mr Matiushenko's movement in and out of Australia in the relevant years is undisputed; and
2. Correspondence from the Chief Commissioner seeking information from the Applicant; and
3. A property title search for the NSW Property.
4. The grounds of objection filed on behalf of Mr Matiushenko on 17 April 2021 in which it was stated that:
1. For the year ended 30 June 2018 and 2019, (noting that the land tax years, in fact, coincide with calendar years), his absence from Australia was due to compelling reasons, being that his wife is employed on a full-time basis in the Russian Federation and he was unable to re-locate to Australia for a longer period due to her work commitments.
2. For the year ended 30 June 2020 (noting again that this is not the same period as the land tax years), Mr Matiushenko stated he specifically decided to leave Australia because of the on-set of the COVID-19 pandemic and the advice he received from his airline that all flights between Australian/Korea/Russia might cease. Mr Matiushenko stated in his objection that he felt it was his duty to return to Russia in order to look after his mother-in-law given her age and potential to be vulnerable to virus.
3. Finally, in the objection, Mr Matiushenko stated that, with respect to the 2020 and 2021 years:
Ever since my last departure from Australia on 6 Mach 2020, I have not be able to return to Australia due to reasons beyond my control. Prior to COVID-19, it had always been my intention that 2021 would be the year when I relocate to Australia on a more permanent basis. Had it not been for the pandemic, and the flight cancellations, travel restrictions etc., I would have returned to Australia in late 2020 and would have remained in Australia indefinitely.
[8]
The Chief Commissioner's Submissions
The Chief Commissioner submitted that;
1. The payment by Mr Matiushenko of utilities and other expenses associated with the NSW property reflects the ownership of the property but says nothing about whether the property should be considered his primary place of residence;
2. Mr Matiushenko lives and travels with his wife as a family unit, which is a significant matter which suggests that his principal place of residence is determined, to some extent, by the work and family needs of his wife, which are manifestly contained in Russia;
3. While Mr Matiushenko argues that his connection to the NSW property remains even while he is overseas, there is no evidence that the Russian property is disconnected when he is present in Australia.
4. Mr Matiushenko's family ties in Russia were significant. It did not matter that he was related to his mother-in-law by marriage and not blood, he stated that he had felt it his duty to look after her and that, together with his wife's work, were the principal matters determining where he resided.
5. Mr Matiushenko had stated an intention to relocate more permanently in Australia from late 2020 - that statement suggests that prior to this date, his intention was not to reside in Australia permanently.
[9]
Legal Context
Firstly, concerning land tax generally, the Land Tax Management Act. s 7 provides that:
Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act).
Land tax is charged on land owned by a taxpayer on 31 December in the year immediately preceding the year for which land tax is levied; Land Tax Management Act, s 8.
As may be seen from that provision, land tax is levied on all land in New South Wales unless a relevant exemption applies.
The liability to land tax, including surcharge land tax, arises by the direct operation of the Land Tax Management Act; it is not a tax imposed by the Chief Commissioner, rather the Chief Commissioner is obliged due to his general administration of the taxation laws to assess liability to land tax; Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218 at [24] - [34].
There is also no general discretion in the Land Tax Management Act allowing the Chief Commissioner to take account of circumstances that are not the subject of a specific exemption; Volpatti v Chief Commissioner of State Revenue (2007) 67 ATR 312; [2007] NSWADT 222 at [27].
In this case, Mr Matiushenko has been assessed as being liable to the surcharge land tax under the Land Tax Act. He was not assessed as being liable to land tax under provisions in the Land Tax Management Act because the value of the property owned by Mr Matiushenko falls under the threshold of $755,000; Land Tax Management Act, s 62TBA. Surcharge land tax is not subject to this threshold and payable even if land tax is not payable under other provisions; Land Tax Management Act, ss 5A(4)(h) and 5A(3).
The Land Tax Act, s 5A provides that surcharge land tax is payable by anyone who is a "foreign person". The definition of "foreign person" for the purposes of the Land Tax Act has the same means as in the Duties Act 1997 (NSW), Chapter 2A - and in particular, the Duties Act, s 104J(1).
The definition in the Duties Act, s 104J(1) says the term '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.'
The Foreign Acquisitions and Takeovers Act 1975 (Cth), s 4 provides that a 'foreign person' is an individual who is not 'ordinarily resident' in Australia at a particular time.
The Foreign Acquisitions and Takeovers Act, s 5 provides that a person who is not an Australian citizen is 'ordinarily resident' in Australia at a particular time (and therefore is not a 'foreign person') if both of the following conditions apply;
1. The individual has actually been in Australia for 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, their continued presence in Australia was not the subject of any limitation as to time imposed by law.
As a permanent resident of Australia, Mr Matiushenko fulfils the second condition. However, as he was not actually in Australia for 200 or more days in any of the relevant years, he is considered not ordinarily resident in Australia. The term 'actually in Australia' has been considered by this Tribunal previously to mean being physically present in Australia; Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [58] - [59] and cited with approval in Barsoum v Chief Commissioner of State Revenue [2021] NSWCATAP 266 at [14]
Consequently, Mr Matiushenko comes within the definition of a 'foreign person' for the purposes of the Land Tax Act, s 5A and is liable to pay surcharge land tax unless a relevant exemption applies.
It is his contention that the exemption provided under the Land Tax Act, s 5A(4)(g) applies because, in each relevant year, the property was his principal place of residence.
In order to obtain an exemption under the Land Tax Act, s 5A(4)g), Mr Matuishekno must show he is eligible under the Land Tax Act, s 5B, which provides:
5B Surcharge land tax - residence requirement applying to principal place of residence exemption
(1) A person is eligible for an exemption from liability to pay surcharge land tax in respect of residential land for a land tax year because the land is the principal place of residence of the person only if -
(a) the person is a permanent resident at midnight on 31 December of the previous year, and
(b) the Chief Commissioner is satisfied that, during the land tax year, the person intends to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement, and
(c) the person lodges a declaration with a land tax return required to be furnished under section 12 of the Principal Act for the land tax year to the effect that the person has that intention.
(2) The person must use and occupy the land as the person's principal place of residence for a continuous period of 200 days in the land tax year. This requirement is referred to as the residence requirement.
(2A) A person does not use and occupy land as the person's principal place of residence during a period of the person's physical absence from Australia.
(2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person's brief physical absence from Australia.
(3) If the residence requirement is not complied with by the person, surcharge land tax liability is to be assessed or reassessed as if the person's exemption from liability to pay surcharge land tax for the land tax year had never applied.
…
The Land Tax Management Act, s 3, provides:
principal place of residence of a person means the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person.
In Yen-Chen Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 at [19]-[22] (cited recently in Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [31]), the predecessor to this Tribunal said:
The Act does not provide any technical or legal meaning for the expression "principal place of residence" and accordingly, the expression has its ordinary meaning. A person's place of residence is usually understood as "the place where he eats, drinks and sleeps" (per Ridley J in Stoke-On-Trent Borough Council v Cheshire County Council [1915] 3 KB 699 at 706). …The use of the term "principal" in the expression suggests that a person may use and occupy more than one residence but that the exemption is only available for the principal place of residence of the person.
In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of the residence in each case (per Fryberg J in Dean v Commissioner of Stamp Duties (Qld)(No 2) [1996] 2 Qd R 557 in considering the meaning of the expression "principal place of residence" found in the Stamps Act 1894 (Qld)).
The onus to establish one's principal place of residence is usually discharged on the basis of various matters. It is important to note, as observed by the Victorian Civil and Administrative Tribunal in Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 that:
"… while sleeping by itself in a place can be an indication of a principal place of residence, it is not the sole matter to be taken into account. One needs to look at a whole indicia of matters …One needs to look as well at where the applicant ate; his use of electricity and the furniture and fittings and other matters such as entertainment of friends in the house… Sleeping in a place does not make a residence. It has got to be the whole indicia of things that are done in a home which are described in the cases…"
Other indicia of matters would include evidence of an applicant's use of the address of the property as the residential address for purposes of his or her mail, driving licence, on the electoral roll, in immigration records, income tax returns and telephone bills.
Whether a property is 'used and occupied' by a person as their principal place of residence is a matter of fact; Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1; [1959] UKPCHCA 1 at 4; Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378 at 386; [2013] NSWCA 340. The Tribunal is therefore required to apply the statutory language to the facts of each case.
As the Tribunal noted in Deans v Chief Commissioner of State Revenue [2022] NSWCATAD 14 at [18];
… the phrase "use and occupation" which was suggested by Basten JA to be a hendiadys - a term of single meaning using two nouns joined by a conjunctive - and therefore the meaning of "use" and "occupation", while not synonymous terms, need not be considered separately from each other; De Marco v Chief Commissioner of State Revenue (2013) 83 NSWLR 44; [2013] NSWCA 86 at [71].
On the matters to be considered in determining whether a property is a person's principal place of residence, the Appeal Panel in Chief Commissioner of State Revenue v McIlroy (RD) [2009] NSWADTAP 21 (referring to the decision in Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41; 57 ATR 170) said:
The factors referred to in Ferrington have been widely adopted in decisions under the First Home Owner Grant 2001. They may be summarised as follows (at [42], with dot points added for clarity and case references removed for ease of reading):-
· First, the words "principal place of residence" should be given their ordinary meaning in the context in which they appear ... Thus the Commissioner's reference to the provisions of the Land Tax Management Act 1956 is of no assistance.
· Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling.
· Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue.
· Fourthly, to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose.
· Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue. ... This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible.
· Sixthly, the reasons for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances ... In Bates the Tribunal said that "whether the reasons for not residing at the property were as a result of matters entirely out of the control of the applicant" was a factor to be considered. While that is undoubtedly correct, it should not be read as stipulating a requirement that the reasons for departure must be entirely out of that person's control. The facts in Gaines illustrate that there are circumstances, peculiar to the individual concerned, which may, objectively viewed, adequately and reasonably explain a person's decision to move out of a property, but which are not entirely out of the person's control.
[10]
Consideration
There can be no doubt, having regard to the movement records from the Department of Home Affairs, that in each of the relevant years, Mr Matiushenko, though a permanent resident of Australia, spent less than 200 days in Australia in each of the relevant years and was by definition a 'foreign person' for the purposes of the Land Tax Act. As noted above, the consequence is that he was liable to pay the surcharge land tax in each of the relevant years unless there was an applicable exemption.
As has been shown from the outline of the statutory regime for land tax, including surcharge land tax, there is no scope for discretion or remission of the tax unless a specific exemption applies. The only relevant exemption promoted in this case was the principal place of residence exemption.
The Applicant clearly has a connection to Australia; he owns the NSW property where he has lived, and his only child and her family are here. I accept that he intended to move permanently to Australia at some point after gaining permanent residency in about February 2017. However, it is also apparent that the Applicant has significant responsibilities and connections in Russia. Accordingly, I find that, in the relevant years, he had two residences -the NSW Property and the residence in Vladivostok.
I accept the Chief Commissioner's submission that, in each of the relevant years, Mr Matiushenko spent the majority of his time living at the residence in Vladivostok.
Both parties made submissions concerning Mr Matiushenko's intention as an element in determining his principal place of residence. I accept that intention is an important, though not determinative, consideration. However, Mr Matiushenko's intention, as expressed in his written objection, was to relocate more permanently to Australia in 2020. That suggests his purchase of the NSW Property, his application for permanent residency and his visits to Australia in each of the relevant years were more likely preparatory to his final migration to Australia and, thus, his intention that the NSW Property becomes his principal place of residence once he had permanently settled in Australia which was to occur, on his own account in 2020.
Given his stated intention, his decision always to accompany his wife and that his continued residence in Russia was determined by her work commitments as well as his (and his wife's) decision to take care of his elderly mother-in-law, I am satisfied that Mr Matiushenko's principal place of residence, in the relevant years, was the residence in Vladivostok, Russia.
Surcharge land tax is determined on a year-by-year basis, and as such, if Mr Matiushenko can demonstrate that his principal place of residence has changed to the NSW Property in later years, then that will be a matter to be separately considered by the Chief Commissioner.
[11]
Order
Accordingly, I make the following order:
1. The assessments to which the application relates are confirmed.
[12]
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: 01 February 2023