Niu v Chief Commissioner of State Revenue

Jurisdiction, applicable law and decision under review

1. Section 96 of the Administration Act permits a taxpayer to apply to this Tribunal for administrative review of a decision by the Chief Commissioner where (amongst other circumstances) the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection. The Tribunal has jurisdiction to review the Chief Commissioner's decision by operation of section 96 of the Administration Act, section 9 of the Administrative Decisions Review Act 1997 (NSW) and section 28 of the NCAT Act.
2. The decision under review here is the Chief Commissioner's decision on the Assessment and not his decision to disallow Dr Niu's objection: see Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184 at [28].

Taxpayer's onus of proof

1. It is of fundamental importance that under section 100 (3) of the Administration Act, in a review of this nature the applicant taxpayer has the onus of proving their case. So Dr Niu is required to prove all matters necessary to enable me to answer the issues his favour. The requisite standard of proof is the balance of probabilities: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSW LR 481 ("B&L Linings"), per Allsop P at [87], [104]; Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 ("Cornish") at [31]; Gauci Federal Commissioner of Taxation (1975) 135 CLR 181; (1975) 8 ALR 155 ("Gauci").
2. In Levich Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215 at [27], the Tribunal acknowledged that the taxpayer's evidence must not be regarded as prima facie (at first appearance) unacceptable and must be considered on its merits without any predisposition, but the Tribunal confirmed the nature of applicant's onus and the standard of proof as enunciated in Cornish, B & L Linings and Gauci. The Tribunal was of the view that s 100 (3) of the Administration Act: … requires the applicant to prove or establish on the balance (preponderance) of probabilities all matters necessary to enable the tribunal to answer the statutory question in the applicant's favour, and all the facts on which the applicant relies to claim the exemption.
3. As was emphasised in Levich, that onus rests firmly and only on the Applicant. There is no onus or obligation on the Chief Commissioner to demonstrate that the assessments were correctly made.

Uncontested facts

1. Many cases in the Tribunal's Revenue List, particularly where the taxpayer's residence in Australia in a particular period is in question, turn on the Tribunal's determination of the facts. But here, most of the pertinent facts are uncontested and the result of Dr Niu's application turns on issues of law and statutory interpretation.
2. The pertinent facts which appear to be uncontested are as follows. 1. Each of the facts set out at [4] to [7] above. 2. At all relevant times Dr Niu was not an Australian citizen but held an Employer Nomination visa. 3. As at the date of the Contract for Sale Dr Niu had been resident in Australia for approximately 81 days in the preceding 12 months 4. Dr Niu's purchase of the Property was completed on 14 June 2017 (the Completion Date); 5. the Transfer was registered at Land and Property Information NSW (LPI) on 16 June 2017; 6. Dr Niu was the sole purchaser under the Contract for Sale and sole transferee under the Transfer.

Relevant statutory provisions: the meaning of "foreign person"

1. Most of the statutory provisions relevant to the issues in this case are contained in Chapter 2A of the Duties Act, which is headed "Duty charged on certain residential land transactions involving foreign persons". It is under that Chapter that surcharge purchaser duty is primarily imposed. As the title suggests, the purpose of the Chapter is to charge duty on certain dutiable transactions in respect of residential land that are or must be taken to be transfers to foreign persons. So the meaning of "foreign person" is critical to the issues before me.
2. Section 104J which is within that Chapter defines "foreign person" as follows (with relevant Note to the legislation included): 104J Meanings of "foreign person" and "foreign trustee" (1) In this Chapter -

"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……. (2) The definition of "foreign person" in the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth is modified as follows - (a) an Australian citizen is taken to be ordinarily resident in Australia, whether or not the person is ordinarily resident in Australia under that definition, (b) ……….

[Note: Section 5 of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and is therefore not a foreign person) if and only if - (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time, and (b) at that time - (i) 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 (ii) the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law. (3) For the purposes of charging surcharge purchaser duty on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises (or would arise but for section 53A or a concession or exemption from duty under that Chapter)]. (Emphasis added)

1. The effect of the section is that if a person is not an Australian citizen at a particular time he or she will be a "foreign person" for the purposes of Chapter 2A if he or she: 1. has not been in Australia for a minimum of 200 days in the 12-month period prior to that particular time; or 2. either of the criteria in section 5 (b) (i) and (ii) of the Foreign Acquisitions and Takeovers Act, as set out above, is not satisfied.
2. Dr Niu did not satisfy criterion referred to in (1) above (as underlined in the extract of Section 5 which I have cited.) That is, he had not been resident in Australia for a minimum of 200 days in the 12-month period prior to the "particular time". That is because of the following elements of statutory analysis, which were explained by Counsel for the Chief Commissioner, not contested by Dr Nui and which I accept as correct: 1. the "particular time" referred to in the citation of section 5 of the Foreign Acquisitions and Takeovers Act is, for the purposes of this case, the time when liability for the purchaser surcharge duty arose; 2. by operation of section 104Q of the Duties Act read with section 12 (2), liability for surcharge purchaser duty arises when a transfer of residential-related property occurs, but if the transfer is made effective by an instrument, liability for that duty arises when that instrument is first executed; 3. the "instrument" in this case was the Contract for Sale. It gave effect to the Transfer. That is the Transfer was made effective by the Contract for Sale; and 4. as at the date of execution of the Contract for Sale, which in the absence of any contrary indication must have been the date which it bears, namely 3 May 2017, Dr Niu had only been resident in Australia for approximately 81 days in the preceding 12 months : see 17 and 20 above.
3. Other statutory provisions are relevant to the contested application of sections 104ZF and 104ZKA of the Duties Act. Those provisions are set out in the relevant text below.

The parties' documentary material

1. The following documentary material, omitting material of an interlocutory or incidental nature and documentation on the file relating to mediation of the matter, was before me. 1. In support of Dr Nui's case: the Application: material relating to his earlier application for a stay, written submissions received 22 February, 4 May and 8 June 2022 (including copies of earlier submissions to the Chief Commissioner), hard copy of his PowerPoint presentation concerning the issue of the application of s104 ZF. I allowed that presentation to be viewed at the hearing. 2. In support of the Chief Commissioner's case: outline submissions received 19 May 2022 , further submissions received 26 May 2022 , a bundle of documents as required by section 58 of the ADR Act (the section 58 documents) received 13 January 2022 and a Tribunal Book which comprised the Application, the section 58 documents, Dr Niu's written submissions noted above, his PowerPoint presentation and the Chief Commissioner's submissions in reply dated 4 May 2022.

The real issues

1. The issues for determination emerge from Dr Nui's central contention that he is exempt from the assessed surcharge purchaser duty. In summary Dr Niu says that the Assessment should be revoked or varied because: 1. it was issued in circumstances where Dr Niu's advisers had failed to draw to his attention his potential liability for surcharge purchaser duty if the conveyance proceeded to completion in the manner and at the time it did and accordingly any assessment for the duty should be directed to the relevant adviser or advisers and not to him; 2. he is exempt from such an assessment on the proper application of section 104KZA of the Duties Act, which has retrospective effect such that it applies to the Purchase and the Transfer. I add for completeness that it was not certain that Dr Niu would indeed rely on this ground until he made his oral submissions at the hearing, Counsel for the Chief Commissioner having previously been under the impression that Dr Niu had accepted that the section had no application in the circumstances, but no objection was raised as to Dr Niu's ultimate reliance on the "retrospectivity" ground; and 3. the assessment is not valid on the proper application of section 104ZF of the Duties Act, given that Dr Niu had ceased to be a "foreign person" for the purpose of the pertinent statutory provisions within 5 years of entering into the Contract for Sale.

The parties' respective cases

1. Dr Niu's case is based on the 3 grounds set out above. I have analysed his contentions on each ground in more detail under "Consideration", below.
2. The Chief Commissioner's case, in summary, is that each of the 3 grounds raised by Dr Niu must fail. Again, I have analysed his contentions on each ground in more detail in the "Consideration" below, but in summary they are: 1. the Assessment cannot be invalid and the liability of Dr Niu as purchaser of the Property for the duty cannot be removed or reduced by reason of any action or omission of one or more of his advisers; 2. on a proper application of the statute, section 104KZA cannot apply retrospectively and so cannot assist Dr Niu; 3. the construction of section 104ZF contended for by Dr Niu is not valid and the section cannot assist him; and 4. there is no other basis upon which the assessment could be found to be incorrect.

Asserted failure by Dr Niu's advisers to warn as to liability for duty

1. In his Application Dr Niu stated this ground briefly as: ..the solicitor should be held accountable for the mistake.
2. In subsequent submissions he elaborated on the ground and broadened the identity persons asserted to be responsible. For example, in his submissions of 21 February 2022, he said: 3….The 2nd question is whether the Surcharge purchaser duty should still be paid at the point of time of the investigation…I think the investigation came out with the valid conclusion that there has been a tax default at that point of time, which was caused by the negligence of other parties concerned, especially my conveyancer.
3. In his written submissions in reply dated 4 May 2022 he further broadened the range of persons he held responsible, in these terms: 1.b….this SPD is avoidable should I have been informed dutifully by any of the parties involved, including the agent, the mortgage broker, the NAB bank, and the conveyancer, I would have easily delayed my purchase.
4. At the hearing, I understood Dr Niu to maintain that he had relied on each of these people for advice about the transaction and that as a result of such advice as he had entered into and completed the purchase on the Property under the impression that he was not liable for any additional duty because he was a permanent resident of Australia.
5. However, his reliance on the advice of others does not assist him in these proceedings, the purpose of which is to conduct an administrative review in order to determine whether the Chief Commissioner's assessment and relevant decisions should be upheld, revoked or varied.
6. I am required by law to undertake that review on the basis of the applicable legislation. As Counsel for the Chief Commissioner submitted, the relevant legislation, being section 104R (1) of the Duties Act, is quite clear as to who is liable for payment of the duty. The sub-section is in these unequivocal terms: (1)The person liable to pay the surcharge purchaser duty is the transferee.
7. As noted by Counsel for the Chief Commissioner, Dr Niu is of course at liberty to take further legal advice as to the potential liability of others for their actions or omissions in relation to the purchase of the Property and to pursue any private rights of redress that he may have in respect of that. But any such private rights of redress cannot affect the outcome in administrative review proceedings such as these, in which the revenue legislation must be applied on its terms.
8. It is not in dispute that the transferee under the Transfer was Dr Niu. Under the Act, in that capacity he was personally liable for the duty. He cannot avoid or mitigate that personal liability on the basis of any potential private rights of redress which he may have against others.
9. This ground fails.

Application of section 104ZKA: the issue of retrospective operation

1. Subsections (1) and (2) of section 104ZKA are relevant to these proceedings and they are in the following terms: 104ZKA Exemption for certain permanent residents in respect of principal place of residence (1) No surcharge purchaser duty is chargeable on a transfer, or an agreement for the sale or transfer, of residential-related property if each transferee under the transfer or agreement who would otherwise be liable to pay that duty is an exempt permanent resident. (2) A transferee under a transfer or agreement is an "exempt permanent resident" if - (a) the transferee is a permanent resident when a liability for duty charged by Chapter 2 on the transfer or agreement arises (or would arise but for a concession or exemption from duty under that Chapter), and (b) the Chief Commissioner is satisfied that the transferee intends to use and occupy the residential land to which the residential-related property relates as a principal place of residence in accordance with the residence requirement. (Emphasis added)
2. The following events are relevant to this issue and appear to be uncontested: 1. the Contract for Sale of the Property to Dr Niu was dated 3 May 2017; 2. on 14 June 2017 (the Completion Date), Dr Niu's purchase of the Property was completed (that is, settled); 3. on 16 June 2017 the Transfer was registered at LPI; and 4. Section 104ZKA was inserted into the Duties Act by Act No 33 of 2017 (Act No 33) with effect from 20 June 2017.
3. The issue is whether the section applies with retrospective effect. Dr Niu's case is that it does so and accordingly he should be given the benefit of the exemption. His contention, in his written submissions of 4 May 2022, is that Act No 33 commenced on 20 June 2017 but had retrospective effect of at least 4 days, to the date of registration of the Transfer (16 June 2017). Dr Niu concluded as follows: It is clear that section 104ZKA was supposed to cover all SPD liability cases that are covered by the Duties Act, not limited to those after the commencement date of section 104ZKA.
4. During the hearing, it was somewhat unclear whether Dr Niu pressed this issue, but it became clear from his closing submissions that he did. So, having reserved my decision generally, I made procedural directions allowing each party to provide further written submissions as to the retrospectivity of section 104ZKA. The Chief Commissioner filed such submissions on 26 May 2022. Dr Niu made no submissions in reply.
5. Having considered the parties' submissions on the issue, I conclude that section 104ZKA does not have retrospective effect.
6. I accept the uncontested analysis of the relevant legislative provisions provided by Counsel for the Chief Commissioner, which, in summary, is to the following effect. 1. By operation of section 12 (1) of the Duties Act, which is within Chapter 2 of that Act, as modified by section 104Q (2), liability for surcharge purchaser duty arises when a transfer of residential-related property occurs. (I am satisfied, and it appears to be uncontested that the Property is residential-related property for that purpose.) 2. It is clear from column 4 of the table in section 104N (2) that for a 'surcharge duty transaction' that is an agreement for sale or transfer, the time at which the transfer occurs is when the agreement is entered into. 3. It is uncontested that the agreement for sale in this case, being what I have referred to in these Reasons as "the Contract for Sale", was entered into on 3 May 2017. 4. The result is that Dr Niu became liable for surcharge purchaser duty on 3 May 2017. 5. As at 3 May 2017, Act No. 33 had not commenced.
7. I accept the analysis provided by Counsel for the Chief Commissioner to the effect that by 3 May 2017, the surcharge purchaser duty for which Dr Niu was liable had already been "charged" within the meaning of Chapter 2A, notwithstanding that it may not have been "assessed".
8. Dr Niu has not provided any submissions in response to my Directions of 6 June 2022 as to any retrospective effect of Section 104ZKA and there is nothing before me which constitutes any proper basis for a conclusion that the section had such effect retrospective to 3 May 2017.
9. It follows that, as Section 104ZKA, which commenced on 20 June 2017 is not available to Dr Niu and that Dr Niu has failed to discharge the onus he bears to establish that that is not the case.
10. Accordingly, this ground also fails.

Application of section 104ZF

1. For convenience of reference, I repeat the provisions of section 104ZF. 104ZF Refund if property transferred to persons who are no longer foreign on transfer If surcharge purchaser duty has been paid on an agreement for the sale or transfer of residential-related property and the Chief Commissioner is satisfied that none of the transferees in respect of a transfer made in conformity or partial conformity with the agreement are foreign persons, the Chief Commissioner must reassess and refund that duty if an application is made within 5 years of the initial assessment. (Emphasis added)
2. Dr Niu's case is that he should not be held liable to pay surcharge purchaser duty as assessed because even if he was initially liable for such duty, he retains the right to a reassessment by operation of this section because he has now ceased to be a foreign person for the purposes of the section. That being so and the assessed duty, but as I understand it not the interest, having been paid (without prejudice Dr Niu's rights to pursue the present application) his contention is that any application for reassessment which he makes at any time within 5 years of the Assessment must succeed and that reassessment must absolve him from liability for the surcharge purchaser duty, so he will be entitled to a refund of what he has paid.
3. Dr Niu contends that at the time he raised his objection to the Chief Commissioner's first assessment the objection should have been considered as a de facto application within the meaning of section 104ZF which had been made within 5 years of the initial assessment. He says that prior to the date of that objection he had ceased to be a foreign person for the purposes of the section and on that basis was entitled to a reassessment and refund under the section.
4. The construction of the section and its relevance to the facts of the case which is pressed by Dr Niu is that the section obliges the Chief Commissioner to reassess any surcharge purchaser duty which he has assessed and to refund any duty which has been paid, where an application is made to the Chief Commissioner at any time within 5 years of the initial assessment and where the Chief Commissioner is satisfied that at the time of that application (which on Dr Nui's construction, could be up to 5 years from the date of the initial assessment) the transferee making the application was no longer a foreign person.
5. For the reasons which follow, I have concluded that Dr Niu's construction is incorrect and section 104ZF does not assist his challenge to the Assessment. 1. The central issue emerging from Dr Niu's submissions and the one which needs to be resolved in order to appreciate the true scope of section 104ZF is the proper meaning of the phrase "are foreign persons" and in particular the temporal effect of the word "are'". On a cursory reading it may be thought that use of "are" in that phrase and in the context of the section is an imprecise and unhelpful one, which adds an unnecessary element of temporal uncertainty to the proper construction of the provision. An expectation might be ignited that the section is so broad (and indeed generous) as to allow an application for reassessment to succeed if the Chief Commissioner is satisfied that each transferee has, at any time prior to the reassessment application itself, ceased to be a foreign person; so long as that application is made within 5 years of the initial assessment of duty. That indeed is the construction on which Dr Niu relies. 2. However, as noted by Counsel for the Chief Commissioner, the Tribunal's decision in Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 218 (Gao) is clear authority for the proposition the question of whether the taxpayer is or is not a foreign person is to be asked and answered as at the date of the transfer. That case turned on the true meaning and application of section 104ZF itself and the section has not been amended since the Gao decision. In his reasons for that decision at [12], Senior Member Frost of the Tribunal concluded in these terms: It is tolerably clear, from the language and the context, that the question whether Mr Gao is or is not a 'foreign person' is to be asked and answered at the time of the transfer. Put simply, if Mr Gao was a foreign person when he made the agreement, but I am satisfied that he was not a foreign person when the transfer was affected, he will be entitled to a refund of the SPD originally paid. 1. Counsel for Chief Commissioner, in contending for the construction approved in Gao, relied in part on the use of the words "on transfer" in the heading of the section (as emphasised in the citation above). She submitted that such a construction is correct .. as the heading of section 104ZF makes pellucidly clear. 1. But reliance solely on any words in a statutory heading is perilous, given that headings do not form part of a New South Wales Act of Parliament, even though the position is different in some other States and Territories; as discussed by Prof Dennis Pearce in Statutory Interpretation in Australia, 9th edition (2019) (Pearce) at [4.71], citing Bradley v Commonwealth [1973] HCA 34; (1973) 128 CLR 557 at 577 and Wacando v Commonwealth [1981] HCA 60; (1981) 148 CLR 1 at 15-16. Professor Pearce observes at [4.71] that: Because of the limited parliamentary role in determining the content of marginal notes and headings it is not surprising to find authority denying the right of courts to take them into account for interpretation purposes. 1. Further doubt is thrown on the validity of the construction relied upon by Dr Niu by its inconsistency with the context of Chapter 2A (the operative provisions for imposition surcharge purchaser duty) read as a whole and in particular with Part 3 of that Chapter which provides for refunds from that form of duty. The significance of the date of the transfer to the imposition of the duty and hence to the refund provisions is suggested by the Chapter's focus on the transfer date, for example, in the following provisions: 1. the Chapter's opening section, section 104G (1) which speaks of the Chapter's purpose being to charge duty on dutiable transactions which " are or are taken to be, transfers to foreign persons" and 2. by provisions in Part 3 of the Chapter; in particular section 104ZE (3), which uses the phrase "..any transfer instrument in respect of which the application for a refund is made"; 3. section 104ZG and the Table set out under section 104N (2), column 4 (also within Part 3 of the Chapter) which consists of a set of deemed times as to when a transfer will be deemed to have occurred. 1. In my view, a construction of the provisions which would bestow such a substantial concession from duty otherwise payable upon a taxpayer who has taken up to 5 years from the initial assessment of duty to change status from that of a foreign person is untenable because it constitutes what McHugh J characterised in Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85 at 113 as a "tortured or unrealistic" construction of statutory provisions. See further, Pearce at [2.24] page 54.
6. I also confirm that I reach my conclusion on this issue having considered all Dr Niu's submissions, including his presentation entitled "The Fate of Two Immigrants" in both written form as part of his bundle of submissions and as an oral presentation with slides at the hearing.
7. It must follow that Dr Niu's case as to section 104ZF also fails.

Due assessment and quantum of duty

1. There was no assertion by Dr Niu that the quantum of the duty or interest had been incorrectly calculated and there was nothing before me to indicate that any error in that regard had been made.
2. I find that the quantum of the duty was properly and correctly assessed, in accordance with the relevant legislation.

Conclusion

1. There being no other basis put by Dr Niu upon which his claim for a refund of the assessed duty might succeed, it must follow that the Chief Commissioner's decision to issue the Assessment was the correct and preferable decision and that I should affirm that decision and order as follows.

Order The Chief Commissioner of State Revenue's decision to make an assessment of surcharge purchaser duty of $74,000 and of interest of $3,451 is affirmed. 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: 15 August 2022