Stamp duty - Penalty tax - Late lodgement for stamping - Remission - Application of Commissioner's Practice TAA 1.2 - Sound policy underlying practice - Whether exceptional circumstances

Stamp Act 1921 (WA), s 17AA, s 17BA

Taxation Administration Act 2003 (WA), s 26, s 26(1), s 29

1 The applicants sought a revision of penalty tax that had been imposed by reason of late lodgement of a contract for stamping. The Commissioner of State Taxation had already remitted 95% of the penalty tax in accordance with his published practice in relation to the remission of penalty tax. The practice provided that further remission would only be made in exceptional circumstances.

2 The Tribunal concluded that there were sound policy reasons to follow the published practice and that no exceptional circumstances existed in this case.

3 Accordingly, it upheld the Commissioner's assessment.

4 The applicants seek to review a decision of the Commissioner of State Revenue (the Commissioner) to disallow an objection to the imposition of a late lodgement penalty for failure to lodge an instrument for assessment of stamp duty. The applicants' liability arises pursuant to s 26(1) of the Taxation Administration Act 2003 (WA)(the TA Act).

5 There is very little in issue between the parties, other than the question as to whether, in the circumstances, the Commissioner should remit the whole of the penalty tax, rather than 95% of the penalty tax which he has remitted in accordance with the Commissioner's Practice TAA 1.2.

6 The dispute concerns an agreement dated 14 November 2005 in relation to the sale and purchase of land located in East Wickepin (the sale agreement). The sale agreement was conditional upon the applicants obtaining finance on or before 15 December 2005, with settlement to be affected no later than 15 March 2006. Finance was obtained on 8 December 2005.

7 On 28 February 2006, Documentary Services Pty Ltd (Documentary Services), as agent for the applicants, lodged the sale agreement with the Commissioner for assessment of stamp duty. The lodgement form was completed and signed by Mr Stewart Ledwith, a Director of Documentary Services.

8 On 8 March 2006, the respondent issued an assessment notice for stamp duty of $35 010 and penalty tax of $1750. The due date for payment of the assessed duty and penalty tax was shown in the assessment notice as 8 April 2006. The assessed duty and penalty tax were paid on 29 March 2006.

9 On 19 March 2006, Documentary Services requested the respondent to reconsider the decision to impose penalty tax. In that letter, Mr Ledwith wrote:

"To date I have not received the assessment dated 8/3/2006.

Upon enquiry I was faxed a copy of the assessment.

I was surprised to see penalty duty of $1,750.00.

As the property is a farm I thought the time for lodgement was 12 months and payment within 1 month of issue of assessment.

I have since been advised by your Office of the correct lodgement procedure.

Even if the documents were lodged within the correct time frame the stamp duty would not have been payable earlier than the due date of the current assessment. Therefore I do not understand why a penalty has been applied.

As I will have to pay the penalty personally I ask you to review the penalty payable."

10 By letter dated 27 March 2006, the respondent advised that regardless of whether the contract was a general conditional contract or a farming land contract, it should have been lodged no later than 14 January 2006. The letter advised that, in accordance with the Commissioner's Practice TAA 1.2, remission of penalty tax would only be considered where there are exceptional circumstances but the circumstances detailed in the letter of 19 March 2006 were not considered exceptional. Accordingly, the request for remission of the late lodgement penalty was disallowed.

11 Following settlement of the sale of the land, Mr Ledwith, as a Director of Documentary Services, again wrote to the Commissioner objecting to the assessment. He advised that the reason the contract of sale had not been lodged within two months of execution was that he was on holidays when the contract became unconditional. He noted that the late lodgement did not affect the timeframe for payment of the stamp duty and that the duty had been paid within time.

12 The Commissioner disallowed the objection. He noted that s 26 of the TA Act obliges the Commissioner to assess penalty tax at the rate of 100% of the primary tax liability, and that s 29 provides the Commissioner with a discretionary power to remit penalty tax wholly or in part. Clause 2 of TAA 1.2 identifies the Commissioner's practice in relation to the late lodgement of instruments, where the instrument is lodged voluntarily. That provides that penalty tax will be remitted in full if lodgement is within seven days of the required lodgement date, to 2.5% of the amount of duty if lodged between seven days and one calendar month of the required lodgement date, to 5% of the amount of duty if lodged between one and four calendar months after the required lodgement date, and to various other percentages for subsequent lodgement. TAA 1.2 also provides that further remission of penalty tax beyond the amounts specified in cl 2 will be considered only in exceptional circumstances.

13 In dismissing the objection, the Commissioner stated that the remission of 95% of the penalty tax already accounted for the factors which had been explained by Mr Ledwith in his objection.

Should there be full remission of penalty tax?

14 Mr Ledwith identifies three factors which he asserts should result in a full remission of penalty tax. The first, identified in his letter of 19 March 2006, was that he believed the time for lodgement was 12 months because the property conveyed was a farm. He now accepts that that belief was an error.

15 The second contention is that the late lodgement did not affect the timeframe for payment of the duty. The third is that Mr Ledwith was on holidays when the contract became unconditional.

16 It is clear that, in remitting 95% of the penalty tax, the Commissioner has applied TAA 1.2. In his written contentions, the Commissioner describes the practice on remission of penalty tax as:

(a) providing for a fair and transparent policy that seeks to provide equity and consistency amongst all taxpayers;

(b) being founded on a long standing policy well known to the conveyancing industry; and

(c) not being inflexible that is, providing for ordinary typical cases for administrative expediency, and further providing for exceptional cases to be considered on the merits of a particular case.

17 The applicants accept that the practice has those attributes. The sole question is, therefore, whether the matters raised by Mr Ledwith on behalf of the applicants, amount to exceptional circumstances.

18 In my view they do not. Documentary Services, whose responsibility it was to lodge the document for stamping, is a licensed real estate settlement agent. It is obviously not in the position of a person who may not be aware of the obligations imposed by the Stamp Act 1921 (WA) (the Stamp Act) in relation to the lodgement of documents for assessment. The failure to lodge documents on time will very frequently result from some form of inadvertence of the nature of that which occurred in this case. The applicants accept that the respondent makes a substantial effort to educate taxpayers including settlement agents, by releasing numerous publications, conducting many presentations and workshops, and making available on its website a comprehensive information database covering a variety of topics, including a publication relating to conditional contracts. There are sound policy reasons why full remission of penalty tax should only occur in exceptional circumstances.

19 The applicants, through Mr Ledwith, accept that the lodgement requirement under s 17BA of the Stamp Act is a separate and distinct obligation to that of the payment requirement under s 17AA. The provisions in relation to lodgement and payment operate independently of each other. The question of an appropriate remission of penalty tax for late lodgement is a matter to be assessed independently of the effect of that lodgement of the time for payment of duty.

20 For the foregoing reasons, in my view the decision by the Commissioner to assess penalty tax at $1750, being 5% of the penalty tax which would otherwise be payable under s 26 of the TA Act should be affirmed.

1. The decision by the respondent to disallow the applicants' objection dated 3 April 2006 is affirmed.

2. The application for review of the respondent's decision dated 27 April 2006 is dismissed.

I certify that this and the preceding [20] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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JUDGE J CHANEY, DEPUTY PRESIDENT