REASONS FOR DECISION
1 This is a revised version of reasons delivered orally at the conclusion of the hearing on 22 July 2005.
Background
2 Following application made 27 January 2003, the applicant received under the First Home Owner Grant Act 2000 a first home owner grant (FHOG) of $7000 on 10 February 2003 in respect of the purchase of a residential property situated at Wauchope. The purchase was completed on 14 February 2003. The property was let at about that time, with a 12 month term due to expire on 14 February 2004. The tenants asked for a one-month extension, which was granted. The applicant occupied the property somewhere between 19 and 23 March 2004.
3 By letter dated 13 August 2004, the Commissioner sought confirmation that the applicant had resided in the premises in accordance with the grant. The applicant replied by letter dated 31 August 2004, explaining that he had moved in in March and that he had moved in at the first available opportunity. The Commissioner issued a notice of assessment requiring repayment of the principal amounts, and imposed interest.
4 The applicant applied to the Tribunal for review of the decision.
5 The solicitor for the Commissioner, Ms Baker, informed the Tribunal that interest was no longer an issue. Accordingly this decision only deals with the issue of liability to repay the principal amount.
6 In his affidavit for the Tribunal, the applicant stated that during November, December 2003 and January and February 2004, he was fearful he was going to be made redundant. So he continued to rent in the town near his work, Urunga.
7 (There was a second negative decision, to require repayment of the amount of the First Home Plus concession from transfer stamp duty granted under the Duties Act 1997. This was also the subject of a separate application for review. In light of the provisions in force at the relevant time (an intention to occupy within 12 months was sufficient, not actual occupation within 12 months) the Commissioner advised the applicant shortly before the hearing that he had reversed that decision.)
Relevant Legislation
8 Section 7 provided:
' 7 Entitlement to grant
(1) A first home owner grant is payable on an application under this Act if:
(a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and
(b) the transaction for which the grant is sought:
(i) is an eligible transaction, and
(ii) has been completed.
(2) Despite subsection (1) (a), an applicant need not comply with the eligibility criteria to the extent the applicant is exempted from compliance by section 8A (2), 9 (2) or 12 (2).
(3) Despite subsection (1) (b), a first home owner grant is payable before completion of the relevant eligible transaction, as authorised by section 20.
(4) Only one first home owner grant is payable for the same eligible transaction.'
9 Section 12 provided:
' 12 Criterion 5 - Residence requirement
(1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant's principal place of residence within 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner.
(2) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement.'
10 Section 20 provided:
' 20 Payment in advance, subject to statutory conditions
(1) The Chief Commissioner may authorise payment of a first home owner grant:
(a) before completion of the relevant eligible transaction, if the Chief Commissioner is satisfied that it is appropriate to do so in particular circumstances, or
(b) in anticipation of compliance with the residence requirement, if the Chief Commissioner is satisfied that each applicant who is required to comply, but has not yet complied, with the residence requirement, intends to occupy the home as his or her principal place of residence within 12 months after completion of the eligible transaction or a longer period allowed by the Chief Commissioner,
or both.
(2) If a first home owner grant is paid before completion of the relevant eligible transaction, the payment is made on condition that, if the transaction is not completed within 12 months of the commencement of the transaction or a longer period allowed by the Chief Commissioner, the applicant must within 14 days after the end of the period concerned:
(a) give written notice of that fact to the Chief Commissioner, and
(b) repay the amount of the grant.
(3) 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.
(4) A person who fails to comply with the condition prescribed by this section is guilty of an offence.
Maximum penalty (subsection (4)): 50 penalty units
The Commissioner decided to disallow an objection by the applicant to the Commissioner's decision to issue a notice of assessment requiring repayment of the first home owner grant (FHOG) made to him under the First Home Owner Grant Act 2000. The reason was that the applicant had not resided in the subject property within 12 months.'
11 Section 45 deals with recovery of the grant. It provides:
' 45 Power to require repayment and impose penalty
(1) The Chief Commissioner may, by written notice, require an applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if:
(a) the amount was paid in error, or
(b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason.
(2) If, as a result of an applicant's dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay.
(3) 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.
(4) If an amount is paid in error on an application for a first home owner grant to a third party, the Chief Commissioner may, by written notice, require the third party to repay the amount to the Chief Commissioner.'
Oral Reasons (revised)
12 The Tribunal has before it an application for review of a decision made by the Chief Commissioner not to allow the applicant to retain the first home owner's grant of $7,000. The Commissioner took steps to recover the grant when he became aware that the applicant had not occupied the property the subject of the grant within the twelve month period which is the normal period required by the Act.
13 There is a long line of cases in the Tribunal which have held that in those circumstances there is no discretionary relief that can be afforded to the applicant to take account of any special circumstances that may have meant that the person could not occupy within the twelve month period. There is no doubt that in this case there are special circumstances of a kind that, were there a discretion in favour of the applicant, it might well have been exercised.
14 The applicant explained that he bought the property subject to a twelve month lease. His understanding was that that lease was due to expire approximately ten months into the twelve months period. In his application to the Commissioner for the grant to be paid ahead of occupation, as is permitted by the scheme of the legislation, he notified November 2003 being the month ten months later as the date of intended occupation. The applicant felt that he had dealt with the Commissioner in a candid way on the matter.
15 The applicant has explained to the Commissioner and to the Tribunal that work circumstances arose where it was prudent, because of the possibility of job losses, for him to stay on in his rented accommodation at Urunga a little longer. As I understand it, he wanted to wait and see how things turned out for him. So he allowed the tenants to remain in occupation of the property on a month-to-month basis and eventually moved in four to five months after the date given to the Commissioner, just one month beyond the twelve month period. As I understand it, he is now occupying the place as his residence. The case is one of those cases where there has been, in terms of the twelve month requirement, a relatively marginal default.
16 It has been explained today that had the applicant made known his change of circumstances to the Commissioner within the twelve month period (or possibly within the extended period of twelve months and fourteen days: see s 20(2)) he may have received some benefit of the exercise of discretion and have avoided the situation in which he now finds himself. But the scheme of the Act does not appear to permit any possibility of achieving that result now. So it is a case which is unfortunate and highlights the difficulty that schemes with strict rules sometimes produce.
17 There is a decision in the Tribunal, Gregoriou v Chief Commissioner of State Revenue [2003] NSWADT 145, where it was thought that the reference to "may" in s 45 is one that should be construed as giving the Commissioner a general discretion as to whether to take recovery action in the event that a person is otherwise ineligible to retain the grant.
18 This is sometimes a difficult area of the law (see generally Samad v District Court of New South Wales [2002] HCA 24; (2002) 76 ALJR 871; Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 at 134 per Windeyer J). The use of the term 'may' may, to use words found in the cases, be merely 'facultative' or it may be 'obligatory' in effect, having regard to the statutory context in which it appears.
19 The use of the word 'may' in s 45 is, I think, for the reasons given by Ms Baker in her submission and the reasons canvassed in other decisions of the Tribunal, in particular those of Judicial Member Needham, one that has to be construed as involving a strict requirement: see Taylor v Chief Commissioner of State Revenue [2004] NSWADT 36; Tarak Adasi v Chief Commissioner of State Revenue, unreported, 27 September 2004. I agree with Needham JM that Gregoriou was wrongly decided. Nor does the subjective intentions of the applicant ultimately to occupy the property bring him within the eligibility criteria: Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26 at [14].
20 The Parliament intended to set strict boundaries. The usual strict boundary is provided by the twelve months rule, that is people can have the grant in advance but they must move in within twelve months. This view is borne out by the following provisions - s 7(1)(b)(ii); s 7(2); s 12(1); and s 20(2) .
21 The scheme of the Act contemplates certainty as to the period within which a person must move in. Any change must be made known ahead of the expiry of what might be called the usual period. The period of permitted delay is either twelve months or such extended period as has been permitted ahead of the expiry of that period (plus fourteen days).
22 I acknowledge what the applicant said today and I have got no doubt is correct that had he been aware of the desirability of him letting the Commissioner know once November came and he was not moving in that there might be a delay of three or so months, he would have acted to protect his interests and make an application. I was impressed by the applicant, and accept that he would, had he known, have taken that step. The application for extension may well have been granted.
23 There is nothing here to suggest that the applicant was at any time trying to escape the notice of the Commissioner. At the outset he said he will not be moving in for ten months. As it has happened he has moved in at the thirteen month point. It is an unfortunate case but I think the submissions that have been made and the case law of the Tribunal is irresistible. At this point, the Commissioner is obliged to apply the rules and, as I see it, does not have any power to extend time. Once the taxpayer falls into default the position is irrecoverable and the only hope that one then has is that the Commissioner might not issue the notice; but the notice has issued in this case.
24 Therefore the Tribunal has no other course than to decide that the application for review is dismissed and the decision under review is affirmed.