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[2014] NSWCATAD 26
NCAT Administrative and Equal Opportunity
2013-11-04
Original judgment source is linked above.
Background 1This matter commenced and the proceedings were heard by me in the Administrative Decisions Tribunal (ADT) in 2013 in accordance with the then Administrative Decisions Tribunal Act 1997. This decision is made by me in the Civil and Administrative Tribunal (this "Tribunal") in accordance with the Civil and Administrative Tribunal Act 2013 following the merger of the ADT into this Tribunal. 2At all relevant times the Applicant owned several properties and claimed a principal place of residence ("PPR") exemption from land tax in relation to a residential property she owned at Birchgrove ("the Birchgrove property") and a residential property of which she was a joint owner with a person referred to in this decision as Mr BB, at Huntley's Point ("the Huntley's Point property"). 3On 1 May 2012 the Respondent ("the Chief Commissioner") issued land tax assessment notices ("the Assessments") to the Applicant reversing the PPR exemption previously allowed to her in relation to both the above properties. The Assessment for the Huntley's Point property was for the tax years 2001 to 2009. The Assessment for the Birchgrove property was for the tax years 2000 to 2012. Both Assessments included 75% penalty tax and interest. 4On 3 July 2012 the Applicant objected to several aspects of the Assessments including the PPR exemption disallowance for the Birchgrove property for tax years 2000 to 2006 and the imposition of 75% penalty tax for the Birchgrove property for tax years 2000 to 2012 ("the Objections"). On 4 October 2012 the Commissioner disallowed the Objections. On 3 December 2012 the Applicant lodged with the ADT an application for review of the 4 October 2012 decision. On 17 July 2013 the Applicant lodged with the ADT an amended application seeking a review of "the imposition and amount of penalty tax imposed for land tax years 2000 to 2006" in respect of the Birchgrove property (and abandoning all other issues the subject of the 3 December 2012 application). In her amended application the Applicant relied on the grounds set out in the Objections. During the course of these proceedings the Applicant abandoned many of the grounds set out in the Objections.
Powers of Tribunal on review 5On a review the Tribunal may confirm, vary or reverse the decisions of the Chief Commissioner and make orders as to costs or otherwise as it thinks fit, s101(1) of the Taxation Administration Act 1996 ("the TA Act"). Issues 6The decisions in issue are the decision of the Commissioner to impose penalty tax for the land tax years 2000 to 2006 ("the Relevant Period") and that the rate of penalty tax be 75%.
Onus of proof 7The Applicant has the onus of proving her case in a review by the Tribunal, s100(3) of the TA Act
The law 8The TA Act defines tax default in section 3 as "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay." At s4 the Land Tax Management Act 1956 (the LTM Act") is defined as a "taxation law for the purposes of the TA Act. 9Penalties are dealt with in Division 2 of Part 5 of the TA Act. Relevant sections are: "26 Penalty tax in respect of certain tax defaults 1.If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid. 2.Penalty tax imposed under this Division is in addition to interest. 3. ..." "27 Amount of penalty tax 1.The amount of penalty tax payable in respect of a tax default is 25% of the amount of tax unpaid, subject to this Division. 2.The Chief Commissioner may increase the amount of penalty tax payable in respect of a tax default to 75% of the amount of tax unpaid if the Chief Commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law. 3.The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that: a)the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or b)the tax default occurred solely because of circumstances beyond the taxpayer's control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person's or the taxpayer's control) but not amounting to financial incapacity." "30 Increase in penalty tax for concealment 1.The amount of penalty tax determined under section 27 is to be increased by 20% if, after the Chief Commissioner has informed the taxpayer that an investigation is to be carried out and before the investigation is completed, the taxpayer took steps to prevent or hinder the Chief Commissioner from becoming aware of the nature and extent of the tax default in whole or part. 2.For the purposes of this section, a taxpayer takes steps to prevent or hinder the Chief Commissioner if the taxpayer: a) b) or c)hinders or obstructs an authorised officer exercising functions under that Division for that purpose." "33 Remission of penalty tax The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount." 10Part 3 of the LTM Act provides that land tax is payable by the owner of all land in New South Wales other than land which is exempt from taxation under that Act. The tax year is each period of 12 months commencing on the first day of January and land tax is charged on land owned as at midnight on 31 December immediately preceding the tax year. (Sections 7-9). 11The PPR exemption from land tax is in Schedule 1A of the LTM Act. In summary, clause 2 of the Schedule exempts from taxation "land used and occupied by the owner as the principal place of residence of the owner of the land" provided that "the land, and no other land, has been continuously used and occupied by the person for residential purposes" for a relevant period in respect of each land tax year. The Schedule provides for certain concessions which enable the exemption to be applied notwithstanding a failure to comply with the strict wording of the above extracts from clause 2.
The Applicant's Case 12The Applicant submitted at [1.3] in her Outline of Submissions dated 15 October 2013 ("the Applicant's Submissions") that "the respondent wrongly determined that she was liable to pay 75% Penalty Tax on the basis that, at no time during the Relevant Period did she intentionally disregard the law". 13The evidence relied on by the Applicant consisted of her statement sworn 26 August 2013; an unsigned statement by Mr Koletti sent to the ADT on 14 October 2013, and a statement headed Psychologist Report by Mr Koletti signed 28 October 2013. 14In summary the Applicant's evidence is that the reason she claimed the Birchgrove property as her PPR and therefore exempt was that she held the mistaken belief that she was entitled to one property from all the properties she owned, as her principal place of residence and was entitled to rent out part of that property and still retain the benefit of the PPR exemption. Her belief was based on advice she sought and received. At all relevant times she was adversely affected by her medical condition which impaired her cognitive capacity, reasoning and judgment. 15In the Applicant's statement at [13]-[15] she asserts that throughout the Relevant Period she: (1)Spent a large amount of her time at a property at Marks Point ("the Marks Point property"). (2)Kept most of her personal belongings, furniture and furnishings at the Birchgrove property. (3)Lived at the Birchgrove property during all periods of holidays. (4)Lived in a domestic relationship with Mr BB at the Birchgrove property until 2003. That relationship ended in 2003 and Mr BB continued to live at Birchgrove. 16The Applicant asserts that her belief that she was entitled to claim the PPR exemption is based on advice she received about land tax generally. Advice was sought and received from Peter Finn, her accountant; the Office of State Revenue (OSR) in three telephone discussions in 2000 and 2002 the last discussion being with a named officer from the OSR Newcastle office. The Applicant's statement included: "21. I also spoke with Solicitor Tony Hogno, MRM Solicitors and Accountant, Peter Evans & Associates, about land tax generally and based on the discussions with them I was of the view that I could claim Birchgrove as my principal place of residence.22. On several occasions I made attempts to find out the correct position of the Land Tax laws as they affected my situation and I received some advice but that advice was either not fully correct or if it was correct, was due to the fact that I did not ask whether you needed to live at the property. 23. I did not recognise at the time, but I recognise now, that I failed to ask the question whether I needed to live at the property the whole time. I was under the mistaken belief at the time, and up until the time that I took legal advice in 2012 that I was permitted to claim one property that I owned as the principal place of residence, irrespective of whether I actually lived there. I now know this to be incorrect, however, it was not the belief that I had at any relevant point in time, prior to 2012." 17The Applicant submitted that there is no evidence from the Respondent to contradict her evidence in relation to her enquiries of the OSR, and that the advice she sought from accountants and solicitors was not specifically in relation to the land tax affairs but was in the nature of general discussions. 18The Applicant asserted that from 1998 to 2004 and in 2007 she suffered from certain medical conditions and stress; she took leave from work because of medical issues in 2003 and early in 2004; and for part of the Relevant Period suffered from acute anxiety episodes and "major depression". The Applicant provided certificates from some, but not all, of the medical practitioners referred to in her statement. 19The Applicant provided an expert report dated 28 October 2013 by Mr Koletti, a psychologist, who was first consulted by the Applicant in May 2012. The report states that the Applicant informed him that she was under investigation by the OSR for alleged evasion in relation to land tax. "This investigation appeared to be the point at which she began to suffer" from an Adjustment Disorder. Mr Koletti reports that while the Applicant was staying at the Marks Point property she encountered certain problems. He continues: "Although I was not treating her at the time of this incident, I cannot rule out that Monica may have been suffering from a mental health issue at this time in her life as well, which may have significantly impacted on her cognitive capacity, reasoning and decision making at this time." "Tax evasion is a course of action that can arise from a criminally deceptive thinking pattern, or ignorance of the law, or it can occur from being lax in exercising proper judgements and reasoning if an individual's cognitive processes are impaired. It is my clinical opinion that Monica's judgement may have been impaired for longer than the current Adjustment Disorder episode of 2012-2013. Monica has recalled to me and produced some evidence of significant health and psychosocial stressors in her life between1998-2004 and again in 2006-2007... She received diagnoses of anxiety and depression in the past and was in treatment. Given the medical evidence presented, and Monica's general presentation, I cannot rule out the possibility that the tax evasion was a result of impaired judgement and reasoning that triggered by a variety of mental health disorders affecting her periodically between 1998 and 2007." "While her current AD episode is not likely the clinical reason why Ms Neal made an impaired judgement to overlook her tax payments in the past, it is likely that her previous period of poor mental and physical health (between 1998 to 2007) may have impacted on her cognitive capacity and decision making and led to the avoidance or error in her tax calculation. It is possible that past psychosocial stress may have led to Monica periodically suffering from A/D or indeed Depression and/or Anxiety and that it may have impaired her judgement." 20The Applicant submitted at [3.4] to [ 4.4] of her written Submissions: (1)in order for the Applicant to have deliberately disregarded the law she "must have a specific awareness, at the time of making the decision to disregard the law, that what she was doing was wrong and she does so intentionally. The time to make that assessment is midnight on 31 December each calendar year before the commencement of the next land tax year." (2)The basis for the Respondent's assessments and reassessments in relation to the Relevant Period was that the Applicant was not entitled to claim the PPR exemption for the Birchgrove property. (3)The basis for the Respondent's imposition of 75% Penalty Tax in relation to s27(1) of the TA Act is that the Applicant lodged a land tax variation return on 4 February 2009 claiming the Birchgrove property was her PPR and a statutory declaration dated 31 May 2009 stating that she resides at the Birchgrove property. The Respondent considered that the Applicant provided misleading statements as at the time of both the return and the statutory declaration both levels of the Birchgrove property were leased and the Applicant was aware that that property was not her PPR. (4)The alleged intentional disregard for the law in 2009 cannot "be instructive" of the Applicant's "intention for the land tax years" 2000-2006 inclusive. (5)The investigations of the Respondent do not show that the downstairs level of the Birchgrove property was leased until February/March 2006. 21The Applicant submitted at [4.23] that it is open for the Tribunal to find that: (1)the Applicant had a subjective belief that she was entitled to claim an exemption in respect of one of the properties owned by her as her PPR; (2)the Applicant would not lose the entitlement to the exemption if the upstairs part of the Birchgrove property was rented out; (3)the Applicant had been affected by medical issues particularly serious anxiety and depression over the last 10 years; and (4)"Due to the various matters exercising her mind during the Relevant Period that she did exercise reasonable care, in all of the circumstances that were affecting her at the relevant time". 22The Applicant also submitted at [4.24] "the Tribunal ought not have regard to matters occurring after the Relevant Period in determining Ms Neal's mindset at midnight on 31 December for each of the years". 23The Applicant made wide ranging oral submissions to the following effect: (1)Her evidence in relation to the advice she sought and received was no higher than that it was general property advice, not specific advice in relation to her land tax affairs. The general advice was that she could have one PPR. It was not asserted that Mr Finn's advice was such that she could rely upon it to exculpate her from liability. "It is simply in the matrix of considering whether there is an intention to disregard tax law" - "it is one of the things that was occurring at the relevant time that she did in relation to land tax." It is "conceded that the advice she sought or advice she was given or the questions that she asked was not complete" because she did not ask about any requirement "to continually use and occupy property at the relevant time" to found a basis to claim PPR exemption. (2)Paragraph 21 of the Applicant's statement refers to other communications she had around the time she was seeking advice which, she submits, show she was exercising reasonable care in relation to her land tax obligations. (3)The Applicant does not submit that Mr Hogno would or did provide land tax advice. The Applicant saw him in relation to a worker's compensation matter and had a discussion with him. She submits that following that discussion she remained of the view that she held following the earlier discussions with other persons in relation to her land tax obligation. (4)The medical issues referred to at [24]-[54] of the Applicant's statement would have affected her ability to deal with her land tax obligation and should be taken into account in assessing whether there was an intentional disregard of the law. (5)In order for a penalty to be imposed under s27 of the TA Act, the Applicant had to have an awareness that she was not entitled to claim a PPR exemption during the Relevant Period and she made the claim notwithstanding that awareness. All material should be weighed up to determine the Applicant's level of awareness of her land tax obligations. In the Relevant Period there is evidence that flat 1 was rented out. The Respondent relies on evidence from the period after 2006 but provided no evidence to demonstrate a relevant awareness during the Relevant Period. The Respondent's Case 24The Respondent submits that he is satisfied that the Applicant's tax default in failing to pay land tax for the Relevant Period in respect of the Birchgrove property was caused wholly or partly by her intentional disregard of her obligations under the land tax legislation. Accordingly she is liable to pay penalty tax of 75% of the amount of tax unpaid. 25The evidence relied on by the Respondent consisted of the section 58 documents and an affidavit by Monica Stanley sworn 14 October 2013. In summary the evidence is as follows. 26Throughout the Relevant Period the Applicant resided at the Marks Point property. 27The Applicant used the Marks Point property address as her address in: (1)a property management agreement for other premises owned by the Applicant on 18 December 2007 (tab 50 of the section 58 documents). All references below to tabs are to tabs to the s58 documents; (2)correspondence with her employer from 1999, although her official contact details were at the Birchgrove property and payroll records were changed by the Applicant from the Marks Point property to the Birchgrove property in July 2005 (tab 81); and (3)leave applications in 2003 and 2004 (Tab 85). 28The Marks Point property is shown as the Applicant's address: (1)in workers compensation records in 2003 (tab 85); (2)for the whole of the Relevant Period in records held by the Commonwealth Bank of Australia (tab 79); (3)during the period 3 November 1999 to 30 June 2000 in the records of Bupa (tab 69); (4)in correspondence from Schofield Muir, solicitors and barristers, to the Office of State Revenue ("OSR") on 23 March 2011 (tab 67(b)); (5)from 1 July 2004 to 1 March 2007 in the records of NIB Health Funds Ltd (tab 71); and (6)in the records of the Rental Bond Board ("the Board") for the period 18 March 2004 to 26 May 2005 in respect of flat 2 at the Birchgrove property (tab 38). 29The Respondent submitted at paragraph 26 of his Outline of Submissions "The applicant new (sic) from at least 24 February 2011 that the OSR was investigating her landholdings for the purpose of land tax assessment" and relied on a Notice of Investigation sent to the Applicant on 24 February 2011 (tab13). 30After becoming aware of an investigation by the Office of State Revenue ("OSR") the Applicant changed her address from the Marks Point property to the Birchgrove property: (1)on 3 March 2011 in records held by the Commonwealth Bank of Australia (tab 79); (2)on 17 March 2011 in records held by the Greater Building Society (tab 89); and (3)on 25 September 2011 in records held by St George Bank (tab 98). 31The Applicant used the land line telephone at the Marks Point property as a contact telephone number from 3 November 1999 to 30 June 2000 in the records of Bupa (tab 69) and from 1 July 2004 to 1 March 2007 in the records of NIB Health Funds Ltd (tab 71). 32The Applicant completed a Land Tax-Variation Return dated 29 January 2009 and sent it to the OSR where it was received on 4 February 2009. Question 4 in the Return is "Application for exemption or concession If you wish to make a new claim or change any exemption or concession on any land holdings please complete this section." The Applicant wrote "Not Sure of Question! I live at". Immediately under her handwriting is printed "a Principal place of residence (your own home) and a schedule stating "Property address, occupied from, ceased occupation". Under "Property address" the Applicant wrote "108 Louisa Rd Birchgrove" and under the sections marked "occupied from, ceased occupation" the Applicant wrote "my place of residence hasn't changed". 33The next question in the Return is: "Is your principal place of residence used for any other purpose?" There are two answer boxes, one marked "Yes - Give details below" the second marked "No". The Applicant ticked the box marked "No". 34The Respondent's evidence is that the Birchgrove property comprises two flats, downstairs known as flat 1 and upstairs known as flat 2. The Respondent submits that flat 1 "was rented continuously from February 2006 to March 2012" (tabs 73, 75, 120 136 and 148) and flat 2 "was rented continuously from 23 June 2000 to 1 March 2012" (tabs 73, 102 and 128). 35On 31 May 2009 the Applicant made a statutory declaration (tab 11) which included the words "I Monica Neal, Do solemnly and sincerely declare that I am residing at 1/108 Louisa Road". 36On 22 May 2009 the Applicant requested a letter from Schofield Muir to the effect that she and Mr BB do not and never have lived together. The reason given by the Applicant for requesting the letter was that the Land Tax Commission (sic) wanted to charge the Applicant and Mr BB land tax on the grounds that they lived together. (Tab 67(c)). The Respondent contrasts this stated reason by the Applicant with paragraphs 1.15 and 1.16 of the reasons set out in the Applicant's Objections in which she claims that she and Mr BB resided together at the Birchgrove property "on the basis of a domestic relationship" between them "for at least the period 1999 to 2003", that she resided at the Birchgrove property "as her principal place of residence between 1996 to 2006", and that Mr BB resided at the Birchgrove property "from 2003 to 2006 on the basis of friendship". 37The Respondent produced evidence that the rental bond money for flat 1 for several tenants occupying the flat from February 2006 to June 2007 and from July 2007 to June 2010 was not deposited with the Board (tabs 136 and 148). Evidence was also produced that the bond for flat 2 for periods March 2004 to May 2005, June 2005 to January 2006, January 2006 to August 2006 and from August 2006 was lodged with the Board (tab 38). 38It was put to the Applicant in cross examination, and not denied, that the bonds she received from tenants in flat 1 were not deposited with the Board but that at the same time bonds received from tenants in flat 2 were deposited with the Board. 39The Applicant stated that she did not know that she was supposed to lodge the bonds with the Board. She also stated that the tenants would receive more interest on the bond if it was banked in an interest-bearing account rather than lodged with the Board. In cross examination the Applicant said she did not know why she did not lodge the bonds for flat 1 with the Board and did not know why she treated the bonds for flat 1 differently to the bonds for flat 2. She denied that the reason she did not lodge the flat 1 bonds with the Board was that she did not want the Department of Fair Trading to know that flat 1 was rented. 40The Respondent submitted that the Applicant requested a tenant to mislead a tax officer as to the tenancy of flat 1 (paragraph 50 of the Respondent's written submissions). The evidence of the then tenant of flat 1 (tab 121) is that in March 2012 he informed the Applicant that he had been asked questions by the OSR about the property and who lived there. The Applicant asked him to "help her out" as she thought she was "in a bit of trouble with her land tax" and offered to give him "6 months free rent". The tenant informed the Applicant that he could not lie for her. Shortly thereafter the Applicant informed the tenant, who had been renting the property without a signed lease, that he would have to move out. The Applicant removed a recently installed letterbox, leaving the property without a letterbox; removed the leads and cables from the washing machine on the property so that the tenant could no longer wash his clothes; and moved into the property items of furniture which had not previously been there. 41The Respondent submitted that the primary contention of the Applicant is that for the Relevant Period there is an absence of evidence from which it can be said for the purposes of s26 and s27(1) of the TA Act that the default was intentional. The Applicant disputes, for the purpose of s27(2) of the TA Act, that the tax default was caused wholly or partly by the intentional disregard by the Applicant of a taxation law. 42The Respondent submits the evidence against the Applicant's "primary contention" is in several parts. First the Applicant says that she took advice from one or a number of persons about her land tax obligations and she acted in response to that general land tax advice. The Respondent says: (1)The Applicant seeks to discharge the evidentiary burden on this issue of fact by her own say so. No attempt was made to adduce evidence from any of the persons cited in the Applicant's statement as having given her land tax advice. (2)There is evidence to the contrary, or at least not supportive, of what the Applicant says, about the general oral land tax advice she received during the Relevant Period. Attached to the affidavit by Monica Stanley are emails from Mr Finn at page 39 and Mr Hogno at page 45. (a)Mr Finn states he advised the Applicant in the 1990s that her "property holding was more than the land tax threshold and that she should do something about it with State Revenue". No reference is made to questions or advice concerning the PPR exemption. (b)At page 45 Mr Hogno states "I recall acting for Ms Neale (sic) in respect of a litigated matter. I do not recall acting for or providing Ms Neale with advice in respect the issue the subject of these proceedings. I do not believe I did so." This eliminates Mr Hogno as a source of relevant advice. 43The Respondent suggests that there is a Jones v Dunkel (1959) 101 CLR 298 type inference to be drawn and that the Applicant's evidence does not reliably advance her position. 44The Respondent points to conduct by the Applicant after the Relevant Period and submits it is appropriate for the Tribunal to draw the conclusion that the Applicant acted furtively and deliberately to avoid detection of what she knew to be evidence of her intentional disregard of her land tax obligations. 45The Respondent submitted that there are two relevant time periods. First before the Applicant knew of the OSR investigation and second, after she knew of the investigation. After she became aware of the investigation the Applicant tried to hide the evidence against her by changing her address at banks, the Board and in a land tax return. That she made representations of fact knowing them to be incorrect is evidenced by her inability to explain why she wrote in a tax variation return in 2009 that she then lived at the Birchgrove property and that her place of residence had not changed when she was aware that both flats at the Birchgrove property had been rented for several years and were still rented. 46The Respondent submits that the Applicant's conduct was designed to avoid detection by the Chief Commissioner of her disregard of a tax law. That conduct allows the inference to be drawn that she deliberately disregarded the law during the Relevant Period. The Applicant's action after she became aware of the investigation adversely effects the credibility of her claim that her disregard of the law was unintentional. 47The Applicant relies on an expert opinion opinion from Mr Koletti. This is that the Applicant was suffering sequelae arising from an adjustment disorder and as consequence there is an expectation that her cognitive processes were impaired. Mr Koletti's opinion was that it is more likely that the conduct of tax evasion is a response to poor cognitive processing (a result of the adjustment disorder) rather than deliberate decision making. 48The Respondent submits the following in relation to Mr Koletti's report and his expert opinion: (1)When Mr Koletti wrote his report and stated at page 3 that in his opinion the Applicant's tax evasion is a consequence of impaired judgment rather than criminally deceptive behaviour, Mr Koletti was not in possession of all relevant facts. (2)When in possession of at least 3 relevant facts which were not reported to him by the Applicant, namely: (a)she did not deposit the bonds she received for flat 1 but did deposit the bonds for flat 2 and could not provide an explanation for this discrepancy; (b)after she became aware of the investigation she changed her address with 3 banks to the address of the property the subject of the investigation and could not provide a reason for so doing; and (c)she asked the tenant then in flat 1 to lie for her in relation to the OSR investigation, Mr Koletti conceded that each fact individually (and the Respondent submits collectively) may demonstrate the tax evasion behaviour was deliberate rather than the result of poor cognitive processing. (3)The medical reports and certificates annexed to the Applicant's statement and relied upon by Mr Koletti in forming his opinion are nothing more than evidence that in the period 1998 - 2007 the Applicant was self reporting to members of the medical profession, who prepared the reports and certificates, that she was depressed. (4)Mr Koletti gave evidence that testing would normally be required for a formal diagnosis of depression. There is no evidence in the reports or certificates that any relevant testing was carried out. The Respondent submits that the said members of the medical profession were using the term "depression" generically rather than diagnostically. (5)If the Tribunal finds the Applicant is not a "witness of truth" then Mr Koletti's reliance on the Applicant being a reliable self reporter in formulating his opinion means his opinion is "a house built on sand". 49Accordingly the Respondent submits that Mr Koletti's opinion in his report, that the conduct of the Applicant amounting to tax evasion does not show an intentional disregard for the purposes of s27(2) carries little weight. 50In response to the Applicant's claim that the events after 2006 should not be taken into consideration, the Respondent submits that the only relevant difference in relation to events after 2006 is that the Applicant became aware that the Respondent had evidence of a tenant in flat 1 from 2006 to 2012. Once the Applicant knew the Respondent had that evidence, she no longer maintained her PPR claim for the post 2006 period but continued to maintain her claim for the period in which OSR had not adduced evidence of tenancy. The Respondent submits that this change in awareness of available evidence does not explain any change in the Applicant's knowledge of land tax law after the Relevant Period, merely that she believed there was a lack of evidence to counter her claim for exemption for the earlier period. 51The Applicant's response was to the effect that the Applicant did not receive legal advice until after the proceedings commenced. She then reduced the ambit of her original Objections and paid all interest and penalty tax without any express admission concerning the 2007 - 2012 period. Consideration 52There is no dispute that a tax default occurred in relation to the Applicant's failure to pay land tax in respect of the Birchgrove property for the 2000 to 2006 land tax years inclusive. Under Part 5, Division 2, of the TA Act the Applicant is liable to pay penalty tax. 53The Applicant has submitted that no penalty should apply. In the alternative the Applicant submitted that the penalty in s27(2) of TA Act is too harsh and should not apply because there is no evidence of any intentional disregard by the Applicant, or any person acting on her behalf, of a taxation law during the Relevant Period. In particular, the Applicant asserts there is no evidence of any relevant intent as at midnight on 31 December in each year during the Relevant Period. 54However, the onus of proof does not require the Respondent to produce evidence of intentional disregard of a taxation law in review proceedings relating to the imposition of a s27(2) penalty by the Chief Commissioner. This issue was dealt with in the ADT by Judicial Member Frost, with whom I respectfully agree, in Touma v Chief Commissioner of State Revenue [2012] NSWADT 2. In his decision Frost JM stated: "54 ...But s 100(3) of the TA Act represents a significant departure from that general position. (That the onus of proof lies on the Commissioner) Plainly, it is not the case that the Tribunal must be positively satisfied of the existence of the "state of mind" circumstance set out in s 27(2) for the decision to be affirmed; otherwise, a taxpayer could simply sidestep s 100(3) by the unsophisticated strategy of declining to offer any evidence of its state of mind at the relevant time. Rather, the position is this. Upon the Commissioner's becoming satisfied as to the existence of that circumstance, and upon the inclusion of the penalty tax amount in the notice of assessment of the taxpayer's tax liability (as required by s 15 of the TA Act), and because of s 100(3), the taxpayer must positively satisfy the Tribunal that the "state of mind" circumstance did not exist. Otherwise the decision under review must be affirmed. That is because, unless the burden of proof is discharged, a decision consistent with the Chief Commissioner's original decision is the only possible decision the Tribunal can make, and is therefore the "correct and preferable" decision." 55Accordingly it is necessary for the Tribunal to consider the evidence and submissions of the Applicant to determine whether or not the onus which lies on the Applicant has been satisfied. 56In her Objections the Applicant submitted "she has always held the honest belief, whether erroneously or not, that she is entitled to have one property in her portfolio of properties as her principal place of residence. This belief is based on enquiries she has made with accountants over the years as well as telephone enquiries made with the" OSR. "Whilst Ms Neal has received general accounting advice over the years she has never received specific legal advice regarding the impact of the Act on her land-holdings." [2 (b) and (c)]. 57In the Applicant's written submissions at [4.15] the Applicant states: "[4.15] Ms Neal made enquiries of the Respondent's officers in 2000 and 2002 regarding her entitlement to claim the principal place of residence exemption in relation to the Birchgrove property." The Applicant recounted at [18] and [19] in her sworn statement, details of 2 of her 3 conversations with OSR officers and each recounting contained express references to the PPR exemption and certain of the Applicant's circumstances. She then stated: " [21] I also spoke with Solicitor Tony Hogg, MRM solicitors and Accountant, Peter Evans & associates about land tax generally and based on the discussions with them I was of the view that I could claim Birchgrove as my principal place of residence. [22] on several occasions I made attempts to find out the correct position of the Land Tax laws as they affected my situation and I received some advice but that advice was either not fully correct or if it was correct, was due to the fact that I did not ask whether you needed to live at the property.[23] I did not recognise it at the time, but I recognise now, that I failed to ask the question whether I needed to live at the property the whole time. I was under the mistaken belief at the time, and up until the time that I took legal advice in 2012 that I was permitted to claim one property that I owned as the principal place of residence, irrespective of whether I actually lived there." 58The Applicant's oral evidence before this Tribunal was that none of the several persons from whom she sought advice in respect of either her land tax obligations or land tax generally, including officers of the OSR, accountants and solicitors, informed her that in order to gain the PPR exemption it is necessary to occupy the residence concerned. I find it highly unlikely that several professionals would all advise any person that a PPR exemption would apply without informing that person that it was necessary to occupy the residence. 59Conversely if the advice only related to land tax generally and did not touch upon the PPR exemption I find it unlikely that the Applicant could have formed a reasonable view that she was entitled to a PPR exemption in relation to the Birchgrove property. 60I also note the written evidence in emails from Mr Finn and Mr Hogno. There is nothing in that evidence which supports the Applicant's submissions that she relied on their advice in relation to her land tax obligations and the claimed PPR exemption. Indeed Mr Hogno's evidence is to the effect that he does not believe he gave any such advice. 61If the Applicant is to prove that she did exercise reasonable care in forming a view that she could properly claim tax exempt status for the Birchgrove property as a result of having sought and received advice it is necessary for her to convince this Tribunal that she actually sought and received relevant advice. However notwithstanding the wording in her statement and her Objections referred to immediately above the Applicant also submits that she sought and received no specific advice in relation to her land tax affairs until she took legal advice in 2012. The earlier advice she said she received was no higher than general property advice. This submission is contrary to paragraphs [18] and [20] of her statement. 62I find that the Applicant has not satisfied me that she held an honest belief, based on advice she sought and received, that she was entitled to claim the PPR exemption for the Birchgrove property for any tax year in the Relevant Period. 63The Applicant submitted that the medical evidence showed that throughout the Relevant Period she was adversely affected by her medical condition. 64The evidence in the Applicant's statement and the annexed medical certificates indicates that the Applicant was suffering between 1998 and April 2004 from anxiety for various reasons and reference is made to "major depressive illness". In 2003, she had regular treatment from a psychiatrist for a period. An expert report was produced by the Applicant, after this hearing commenced, from Mr Koletti, who first saw the Applicant in May 2012 (page 2 of his report) to support a submission that during the Relevant Period the Applicant's cognitive capacity, reasoning and judgment were impaired. Detailed excerpts from the report are set out at [19] above. 65The Applicant's statement refers to several medical professionals having been consulted by her during the Relevant Period. Dr Doug Wade was the only psychiatrist mentioned in the reports who treated the Applicant during the Relevant Period. None of the medical reports or certificates annexed to the Applicant's statement which related to the period 1998 to 2004 referred to any diagnostic testing of the Applicant to support her self-reporting symptoms. No report was provided from Dr Wade. 66The Respondent led evidence from Mr Koletti to the effect that he was not informed by the Applicant of certain facts which, if true, may demonstrate that the tax evasion behaviour was deliberate rather that the result of poor cognitive reasoning. Mr Koletti acknowledged: (1)part of his opinion was based on self reporting by the Applicant; (2)for corroboration he looked at the earlier medical reports annexed to the Applicant's statement; (3)those earlier reports were not psychiatric assessments; (4)there was no diagnosis in the earlier reports of adjustment disorder and testing would normally be required in order to diagnose adjustment disorder; (5)the earlier reports may misuse the adjective "depression" which can be used both generically and clinically; (6)although the WorkCover certificates were to the effect that the Applicant was unfit for work, they relied on self reporting; and (7)if the Applicant was not a reliable self reporter, the effect would be to weaken the validity of the diagnosis that during the Relevant Period the Applicant suffered from an adjustment disorder or clinical depression. 67I have had regard to the medical evidence presented including Mr Koletti's report and the evidence he gave before the Tribunal. I am satisfied that during the Relevant Period the Applicant was adversely affected by stressors which caused anxiety. However I am not satisfied, on the basis of the medical evidence, that it is more likely than not that the tax default occurred solely because of circumstances beyond the control of the Applicant with respect to her medical condition. 68The Applicant submitted that the Respondent did not produce evidence that the Applicant knew at midnight on 31 December in each calendar year before the commencement of the next land tax year for the whole of the Relevant Period that what she was doing in relation to land tax was wrong. 69This submission misconceives the onus on the Applicant to show that it is more likely than not that the tax default in each year throughout the Relevant Period was not caused by the Applicant's intentional disregard of the law. The time and date of midnight on 31 December each year is relevant to ascertaining the ownership of the relevant property for the succeeding land tax year. It is not the point in time at which any relevant intent need be shown or disproved. 70The Applicant submitted that the Tribunal ought not to have regard to matters occurring after the Relevant Period in determining the Applicant's mindset in respect of the Relevant Period. To the extent that evidence of actions by the Applicant after the Relevant Period may be instructive of her relevant intention or mindset in relation to the tax defaults, this submission is rejected. 71I refer to the Respondent's evidence at [34] above in relation to renting flat 1 from February 2006 to March 2012 and flat 2 from June 2000 to March 2012. The evidence does not support the submission that either flat was rented continuously throughout the two periods submitted by the Respondent. However I accept that the evidence shows that both flats were rented for substantial parts of the two periods including, in relation to flat 1, from February 2006 to October 2009 other than the period 5 June 2007 to 27 July 2007. In relation to flat 2, I accept that the evidence shows that the flat was continuously rented from June 2000 to July 2006 other than for short periods from 2004 to 27 July 2007 and then continuously rented until at least February 2012. 72Accordingly I find that the whole of the Birchgrove property was rented from the Applicant throughout the period July 2007 to October 2009. I note that my finding is contrary to the statement by the Applicant in the land tax variation return she signed in January 2009 to the effect that her residence was the Birchgrove property and contrary to the statutory declaration made by the Applicant in May 2009 stating that she then resided at the Birchgrove property. 73The Applicant chose not to call witnesses who may have been in a position to corroborate her evidence nor has she provided any reason for not calling those witnesses. Accordingly she is relying substantially on her own evidence and credibility. The Respondent referred to inferences arising from Jones v Dunkel. I have regard to that decision and also to the decision in Manly Council v Byrne [2004] NSWCA 123 at [51]-[52] where Campbell J, when considering the inferences recognised by Jones v Dunkel. said: "if a witness is not called two different types of result might follow. The first is that the tribunal of fact might infer that the evidence of the absent witness, if called, would not have assisted the party who failed to call that witness. The second is that the tribunal of fact might draw with greater confidence any inference unfavourable to the party who failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should properly be drawn." 74In Gaskell v Denkas Building Services Pty Limited [2008] NSWCA 35 Bryson AJA, with whom Hodgson and Basten JAs agreed, referred favourably to Campbell J's reasoning and said at [48]: "..the second type of result to which Campbell J. referred in which an unfavourable inference is drawn is available only if evidence otherwise provides a basis on which that unfavourable inference can be drawn; an unfavourable inference cannot be drawn solely on the basis that the witness was not called. There must be a basis elsewhere in evidence to support the inference." 75The Respondent has raised several matters testing the credibility of the Applicant. Those matters include: (1)her acknowledgement that her statutory declaration, made 31 May 2009 in support of Mr BB who was seeking to vary his land tax obligation, was false, in that it stated her then residential address was at the Birchgrove property when this was not true. (2)her acknowledgement that the land tax variation return dated 29 January 2009 provided by the Applicant to the OSR included a statement that she then lived at the Birchgrove property which she knew to be false. (3)The Applicant's inability to explain to this Tribunal the reason she: (a) changed her residential address to the Birchgrove property in the records of 3 financial institutions after she became aware of an investigation by the OSR in relation to her residential address; (b)lodged bonds in relation to flat 2 at the Birchgrove property with the Board but did not lodge bonds she held for flat 1; and (c)gave instructions to her former solicitors in January 2007 requesting a letter from them stating that she has never lived with Mr BB. This letter apparently related to action being taken by the Land Tax Commission (sic) seeking to impose land tax on Mr BB and the Applicant. The Applicant's instructions are directly contradictory to paragraph 14 of her sworn statement in these proceedings which said "I was in a domestic relationship with Mr BB and he and I lived in the downstairs part of Birchgrove up until 2003. Mr BB occupied the downstairs area with me, or by himself, in the period between 1999 and 2003." These instructions also contradict paragraphs 1.15 and 1.16 in the Applicant's Objections referred to at [36] above. 76Having regard to the matters adversely affecting the credibility of the Applicant in the immediately preceding paragraph; the failure, without explanation, by the Applicant to call any witness who either provided medical treatment during or within a reasonable period after the Relevant Period or who provided the advice she says she relied on to satisfy herself as to her land tax obligations; or to provide a report by Dr Wade, the only psychiatrist who treated her during the Relevant Period, and the principles enunciated in Manly Council v Byrne and Gaskell v Denkas Building Services Pty Limited I find I am unable to rely on the Applicant's uncorroborated evidence in support of her application in these proceedings. 77The Applicant submitted at [4.23(f)] that she "did exercise reasonable care, in all the circumstances that were affecting her at the relevant time." Section 27(3) of TA Act states the Chief Commissioner may determine that no penalty tax is payable by a taxpayer if he is satisfied that the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law. Having regard to the above findings and bearing in mind that the onus in these proceedings is on the taxpayer / Applicant, not the Respondent, I am not satisfied that it is more likely than not that the Applicant took reasonable care to comply with the taxation law. 78The Respondent has chosen not to seek an increase in the penalty by an additional 20% in accordance with s30 of TA Act. Accordingly I will not make an order under that section. 79Having regard to the above findings on the material before me, the Applicant has not satisfied me that it is more likely than not that the relevant tax defaults were not caused wholly or partly by her intentional disregard of a taxation law. Decision 80The correct and preferable decision of this Tribunal is that the decisions of the Chief Commissioner under review are affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar
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: 14 March 2014
Neal
Chief Commissioner of State Revenue