Rayek v Chief Commissioner of State Revenue

The legislation

1. First home owners are entitled to a grant of $7,000 under the FHOG Act when they buy their first home. One of the eligibility criteria is the "residence requirement" in s 12 of the Act, which provides relevantly as follows: 1. An applicant for a first home owner grant must: a. commence occupation of 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 the period approved by the Chief Commissioner under this section, and b. occupy the home as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner under this section. 2. This requirement is referred to in this Act as the residence requirement. 3. The Chief Commissioner may, if satisfied there are good reasons to do so, do either or both of the following: a. approve the commencement of occupation by the applicant of the home to which the application relates as a principal place of residence more than 12 months after completion of the eligible transaction, b. approve the occupation of the home as a principal place of residence for a period of less than 6 months. 4. The Chief Commissioner may, if satisfied there are good reasons to do so, exempt an applicant from the residence requirement.
2. Under s 20(1)(b) of the FHOG Act the Chief Commissioner may authorise the payment of a grant in anticipation of compliance with the residence requirement if he is satisfied that the applicant intends to occupy the home as his principal place of residence within 12 months after the completion of the eligible transaction, or within a longer period allowed by the Chief Commissioner. If the grant is paid in anticipation of compliance, it is done on condition that if the residence requirement is not met the applicant must, within 14 days after the end of the period allowed for compliance, give written notice to the Chief Commissioner of that fact and repay the grant: s 20(3).
3. Section 45 of the FHOG Act authorises the Chief Commissioner to require the repayment of the grant and impose a 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.
4. The other legislation that is relevant to this case is the Duties Act 1997. Section 69 of that Act provided at the relevant time that a person purchasing his or her first home was eligible for a concession or exemption from duty. Section 76 set out the residence requirement: 1. The home must be occupied by the first home owner or one of the first home owners who is acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as "the residence requirement". 2. The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case: a. modify the residence requirement by approving a shorter period of occupation by a first home owner, or b. exempt a first home owner from the requirement to comply with the residence requirement.

What the applicant told the Chief Commissioner during the investigation

1. When the Chief Commissioner resumed the compliance investigation in February 2014, the applicant was asked to provide a completed "Residency Confirmation - Statutory Declaration" dealing with the period and circumstances of his occupation of the property, and at least three types of documentary evidence showing that he met the residence requirement. The Chief Commissioner said that the applicant could provide documents such as electricity bills, gas bills, telephone bills, bank account statements, car registration or insurance notices.
2. Departmental notes on file (s 58 docs ("D"), pages 29, 30 and 99) indicate that the Chief Commissioner's officers had had some trouble contacting the applicant in relation to the investigation. They found that the applicant had sold the property in November 2013 (D page 99). Enquiries of utility provider AGL indicated that it had been supplying electricity to the property since June 2008 but it had never had the applicant recorded as its customer (D page 99).
3. When contact was finally established the applicant provided a completed Statutory Declaration dated 19 March 2014, in which he said that he had occupied the property between January 2012 and October 2013. In answer to the question "Did you reside in the property with a third party under a lease, licence or arrangement at any given time?" he answered "No" (D page 36). Of the documents suggested by the Chief Commissioner to help establish his occupation of the property, he provided a car registration notice showing an expiry date of 23 March 2013 and addressed to him at the subject property (D page 32). Apart from that there was a form from the State Debt Recovery Office dated 29 March 2013 recording a speeding fine but not showing any address (D page 33), an invoice dated 7 February 2013 from a supplier for the supply of windows to the subject property (D page 34) and an invoice dated 15 September 2012 for the purchase of some items of furniture, but again not showing an address (D page 35).

What the applicant said in his notice of objection

1. The Chief Commissioner was not satisfied with the material provided by the applicant and so, on 17 April 2014, the Chief Commissioner issued notices to the applicant, reassessing the stamp duty payable and requiring a repayment of the first home owner grant.
2. In his notice of objection against those assessments the applicant said the following: Suncorp bank placed caveat on the settlement and took my bank, ANZ, to court. ANZ advised settlement is on hold until court proceedings finish. ANZ refused to accept mortgage repayments and advised I can only live in the [house] after settlement is complete. OSR staff member contacted me in early 2012 and asked if I was living in the house. I sent her caveat details. In June 2012 ANZ told me court case finished, settlement finalised, added $40,000 and advised I could live in the house. I paid my bills, changed my address, did renovation work, bought furniture and thought my troubles were over. The electricity was not cut off so I simply paid the bill without bothering to establish new account. I thought settlement is finalised so I don't need to worry about a thing. The OSR staffer did not indicate that I have nothing to worry about (sic) once the caveat was lifted. Later in 2012 separation issues added heavy financial burden with court cost, child support and starting new life meant I could no longer service the mortgage and I had to put the house up for sale. It sold in November 2013. This transaction was my first ever in real estate and it was a massive learning curve. I knew nothing about the process or the pitfalls. The process of buying was hard enough and the caveat made the task very challenging indeed. It was the OSR agent who gave me a lot of help and support in understanding the process. For example it was her who told me that court proceedings finished and I chased ANZ for confirmation. I accept that I did not live in the house but not by choice and I had no idea of how long the caveat is going to be. None of this was my choice or within my control and I find it very unfair that now you not only want me to pay back the grant but also added a massive penalty on top. (Emphasis added)
3. It is significant that when the applicant was asked in "early 2012" whether he was living in the house, he does not say that he answered either yes or no, but rather "I sent her caveat details". There is also a file note at D page 100 that records a conversation on 19 June 2012 between the applicant and one of the Chief Commissioner's officers - "he explained his situation why he has not met the residency requirement" - but no indication from him at that stage that he was actually then living in the home (despite the claim in his later statutory declaration that he occupied the property from January 2012 onwards - see [18] above).
4. As for the claim that he "changed [his] address", that is not borne out by bank statements, Australia Post records, Australian Taxation Office records or the electoral roll. It appears from documents in the bundle of Respondent's Evidence ("E"), at pages 177 and 179, that around July or August 2013 the applicant notified the ANZ Bank that he had changed address, but not to the residential address in Greenacre. He was now having his bank statements sent to a Post Office box in Lakemba.
5. A Roads and Maritime Services (RMS) document (D page 76) records the applicant as a licence holder at the subject property from 8 August 2012 (according to his statutory declaration dated 19 March 2014, that is seven months after he started living there). Significantly, it is also only a matter of weeks after first contact from the Chief Commissioner's office. The RMS document shows that it was still the applicant's recorded address on 28 April 2014, when the enquiry was made, and five months after he sold the property. Apart from that document, and the car registration renewal mentioned at [18] above, there are no other documents showing that the applicant was declaring the subject property as his residential address.

What the applicant said in his written submissions to the Tribunal

1. The applicant's written submissions to the Tribunal included a brief outline of the settlement delay caused by the registration of the caveat, and continued: Hopeful the matter could be resolved quickly I looked for short term rent here and there, opened a letter box and diverted all my incoming mail to the letter box. … While the matter was still in court, staff from OSR contacted me and asked if I was living at the [Greenacre] address. I explained what was going on including the fact that the house is mine but settlement was on hold and at the mean time I was not collecting rent. The lady called me later and said she verified what I told her and told me that I need to live in the house once the court case is finalised. In June 2012 OSR staff member and the ANZ bank told me the court case was finalised and settlement was completed. … I started repairs on the house, bought furniture, paid incoming bills and thought I could start enjoying my first home. [I encountered] financial pressures and instead of defaulting on the mortgage I sold the house in November 2013. Actions of the previous owner and the two banks involved were outside my control and it cost me a lot of money and stress. I continued renting, never collected rent, spent money on additional repairs … … As soon as I was allowed to live in the house I lived there till the day I sold it more than a year later.

What the applicant told the Tribunal

1. The applicant's oral evidence to the Tribunal is markedly different from any version he has given before.
2. He told me that a few weeks before the purchase of the property was meant to settle, he notified his estate agent that he would be vacating his previous address in Roselands. He said he vacated that property in February or March 2011. He was asked where he lived once he found out the settlement was delayed. He said he lived with someone in Lakemba for a couple of weeks. Then in about April 2011 he moved into the Greenacre property. He said some friends lived with him there.
3. How was he able to live in the Greenacre property when he had not yet become the registered owner? He said that he went to the property and found it vacant. He changed the locks and moved in.
4. He did not identify the "friends" who were living with him. They were "refugees", he said, who needed somewhere to live once they were released from immigration detention. He said he did not charge them for staying in the house. From about August 2011 onwards he lived in the property alone.
5. He was asked about an electricity bill issued on 6 July 2012 and covering the supply period 6 April 2012 to 6 July 2012 (E pages 43-45). On the applicant's oral evidence, he would have been living in the property by himself by then. The electricity bill shows electricity consumption of 4804 kWh which, according to the supplier AGL, significantly exceeds the average consumption for a six-member household in that area (2668 kWh). The applicant could provide no explanation for such heavy electricity consumption.
6. That electricity bill and all others at E pages 33-64, covering the period April 2011 to October 2013, were issued to a customer other than the applicant. The surname of the customer shown on the bills is Mougari. The RMS report at D page 76 shows there were two licence holders with the surname Mougari recorded at the subject property, one of them from September 2008 and the other from July 2009. The applicant said he did not know the Mougari family. He repeated his claim that he simply kept paying the electricity bills in Mr Mougari's name. Sometimes, he said, he paid cash, and sometimes he gave money to his friends and they went to the Post Office and paid for him. He had no receipts for these payments; he said he had thrown out all his records.

Consideration

1. The version of events that the applicant gave the Tribunal is quite implausible. If it is true, it is difficult to understand why he did not volunteer it to the Chief Commissioner's officers when they started making enquiries in June 2012. It is also impossible to reconcile with the statement he made in his statutory declaration in March 2014 that he had taken up occupation of the Greenacre property in January 2012.
2. In addition to that, there is precious little objective evidence to support any of the versions that he has given about his occupation of the property. There are the RMS records I have referred to, but beyond that the only document supporting his claim that he lived in the Greenacre property is an Incoming Passenger Movement Card, dated 8 May 2013 (D page 54) where he declared the property as his "intended address in Australia". There are no statements from other people to support his claim that he occupied the property as his principal place of residence during any of the periods that he said he did.
3. Whether the applicant occupied the home as his principal place of residence within the specified time frame, and for the specified period, is to be assessed objectively: Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 at [42]. The applicant has the onus of proving his case: FHOG Act, s 28(3) and Taxation Administration Act 1996 (TA Act), s 100(3).
4. The applicant's differing versions have had him living at the property for either a little over a year (written submissions - [24] of these reasons), 22 months (statutory declaration dated 19 March 2014 - [18]) or two and a half years (oral evidence - [26]). Even with respect to the shortest of those periods, the applicant should have been able to produce objective evidence in support of his claim. He knew from the time he applied for the grant and the stamp duty concession that he had to meet a residence requirement. He knew that he might need to prove it. He has failed to do so.
5. Both the FHOG Act (s 12(4)) and the Duties Act (s 76(2)) provide that the Chief Commissioner may exempt a person from the requirement to comply with the residence requirement if satisfied there are "good reasons to do so". The applicant has put forward no good reasons why he should be exempt from the requirement and I find that there are none.

Penalty

1. In relation to the first home owner grant, the Chief Commissioner imposed a penalty under s 45(3) of the FHOG Act. The penalty that is capable of being imposed is one "not exceeding the amount the applicant is required to repay" - in other words, 100 per cent of the grant amount. The penalty imposed in the applicant's case was 60 per cent of the grant amount, or $4,200. The reason cited was that the applicant provided false or misleading information during the compliance investigation (D page 81).
2. Although the FHOG Act provides no guidance on the level of penalty to be imposed in particular circumstances (other than specifying a maximum amount of 100 per cent of the grant), the Chief Commissioner has published an information sheet (D pages 70-71) indicating that the 60 per cent rate is the standard rate of penalty imposed in a case where an applicant provides false or misleading information during an investigation.
3. In Philpot v Chief Commissioner of State Revenue (RD) [2008] NSWADTAP 18, the Appeal Panel of the Administrative Decisions Tribunal (ADT) considered earlier decisions of the ADT in relation to the imposition of penalty. The Appeal Panel observed that "a proper approach" to the imposition of penalty is to apply the principles set out by the ADT in Knight v Chief Commissioner of State Revenue [2008] NSWADT 83 in the following terms at [33]: Factors that need to be taken into account to determine the level of culpability would include: (1) the truthfulness of the original statements made by the applicant in his or her application for the grant; (2) the surrounding circumstance including the intention of the applicant in relation to the occupation and use of the property as his or her principal place of residence at the time when seeking the grant; (3) the reasons for failure to comply with conditions of the grant; (4) whether the applicant has occupied the property as his or her principal place of residence; (5) the candour of the applicant in his or her responses to compliance inquiries; and (6) whether the grant [has] been refunded.
4. Against those factors, the Chief Commissioner submits the following: 1. the applicant has maintained (inconsistently) that he has complied with the residence requirement, when the objective evidence demonstrates otherwise; 2. the applicant has not been candid in his response to compliance investigations; 3. the surrounding circumstances do not disclose any reasons that ameliorate or reduce the applicant's culpability; 4. the applicant has not demonstrated that his was an exceptional circumstance such that penalty ought not to be imposed or should be reduced; 5. the applicant has not repaid the grant or any part of the grant; and 6. the applicant has had the use and benefit of the grant money for well over three years (noting that the FHOG Act makes no provision for the payment of interest).
5. I agree with the Chief Commissioner's submissions. The penalty of $4,200 imposed under s 45(3) of the FHOG Act is upheld.
6. In relation to the stamp duty concessions, penalty was imposed under the TA Act on the basis that there had been a "tax default" - 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: s 3(1).
7. The liability to pay penalty tax if a tax default occurs is created by s 26(1). The amount is specified in s 27(1) as 25 per cent of the amount of tax unpaid. That rate can be increased by 20 per cent, under s 30, if, after the Chief Commissioner notifies 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 in part".
8. The applicant's case in relation to penalty rises no higher than the points he made in his written submissions to the Tribunal, relevantly as follows:

• Suncorp placed caveat and took the matter to the Supreme Court,
• I had no contribution or involvement in what led to the caveat being placed,
• Settlement was placed on hold pending lifting of caveat,
• I had no control over what was going on,
• I gained no financial benefits as a result of what was going on.

1. The issue with the caveat was acknowledged by the Chief Commissioner when he delayed the start of the residence qualifying period accordingly. It is not the caveat that caused the problem; it is the applicant's provision of conflicting information and his failure to provide worthwhile information to support his claim that he actually met the residence requirement.
2. There is nothing in the applicant's submissions, or in the material before the Tribunal, to indicate that the 20 per cent uplift in penalty should not be upheld.

Interest

1. Interest was imposed under s 21(1) of the TA Act in respect of the stamp duty concession. By s 22, interest is made up of a market rate component and a premium component, but either or both of them can be remitted under s 25 "in such circumstances as the Chief Commissioner [or the Tribunal on review] considers appropriate".
2. In Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 the Appeal Panel of the ADT said in relation to the imposition and remission of interest, at [60]-[63]: [60] In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation. [61] On the other hand, the premium rate is a form of penalty. Its purpose, as we see it, is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. The 'market rate' component approximates ordinary lending interest rates. Taxpayers may withhold tax simply to invest the money in schemes and projects that have a higher potential earnings; and may be content to carry the late payment surcharge were it only at the market rate. The 'premium rate' is intended as we see it to operate as the key disincentive to delaying tax payments. For that reason, the TA Act imposes both the market rate component and the premium rate component in respect of late payment. The Commissioner is then given a discretion to remit the market rate component or the premium rate component or both by any amount (s 25). [62] The Tribunal did not have the benefit of a detailed statement of the considerations relevant to the s 25 discretion as seen by the Commissioner. Moreover, the Commissioner has not developed any public guidelines going to the exercise of this discretion, in contrast to the position that applies in Victoria. Before the Appeal Panel, the Commissioner nominated four cumulative criteria for the circumstances where the premium component of interest should be remitted, namely: (1) all principal tax that is owing and not in dispute has been fully paid; (2) there has been co-operation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; (3) such co-operation by the taxpayer has occurred prior to any investigation being commenced by the Commissioner (voluntary disclosure) or, at the very least, within reasonable time after requests for information have been made by the Commissioner - i.e. the taxpayer has taken reasonable care; and (4) there has been no wilful default by the taxpayer in not paying tax on time. [63] The first of these criteria could be clarified to 'all principal tax that has been assessed and is not in dispute has been fully paid at the time of the request for remission of interest'. With this change, we agree that these four cumulative criteria are relevant and appropriate to the question of the circumstances in which the Commissioner should remit the premium component of interest. There may also be other circumstances where it could be appropriate to remit the premium component such as, as previously noted, where the Commissioner has in some way contributed to the tax default.
3. In the circumstances of this case, there is no reason why either the market rate component or the premium component of interest should be remitted.

Decision

1. The Chief Commissioner's assessments of first home owner grant repayment, duties (as amended by the notice of amended reassessment on 14 November 2014) and consequent penalty and interest are confirmed. 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: 13 March 2015