Rossi v Chief Commissioner of State Revenue

The issue for determination

1. The question for the Tribunal is whether Ms Rossi is liable to surcharge land tax in respect of one of her properties (Unit 22). Although it wasn't clear from the written submissions prepared on her behalf, her representatives accepted during the hearing that she was liable to the surcharge for the other two residential properties.
2. As will become clear, the question requires the consideration of various provisions in State and Commonwealth legislation. Ultimately the answer will depend, for each of the land tax years in question, on: 1. Whether Ms Rossi was in Australia during 200 or more days in the preceding calendar year; and 2. Whether Ms Rossi used and occupied Unit 22 as her principal place of residence for a continuous period of 200 days during the land tax year. If not, is there some overriding discretion available to exempt Ms Rossi from the surcharge?

The facts

1. Several weeks before the hearing the Chief Commissioner provided to the Tribunal, and to Ms Rossi's representatives, a Statement of Relevant Agreed Facts. During the hearing Ms Rossi's representatives confirmed the agreed facts are accurate. The Statement, marked as Exhibit 1, contains the following agreed facts: 1. The Applicant is an Italian citizen. 2. The Applicant is not an Australian citizen. 3. The Applicant arrived in Australia in 1978. 4. The Applicant is a permanent resident of Australia. 5. On 5 December 2019, the Applicant departed from Australia to travel to Italy. 6. On 14 January 2024, the Applicant arrived back in Australia. 7. Throughout the period from the Applicant's departure from Australia on 5 December 2019 until the Applicant's return to Australia on 14 January 2024, the Applicant spent zero days in Australia. 8. For a period that includes the period 31 December 2018 to 31 December 2022 inclusive, the Applicant owned several properties including the following residential properties: 1. [the Regents Park property]; 2. [Unit 22], located in Chiswick; 3. [Unit 5], located in Chiswick.
2. As for points (5), (6) and (7), Ms Rossi's claim is that she didn't intend to be overseas for as long as she was.
3. Initially, she says, she was prevented from returning to Australia because of the closure of Australia's borders during the COVID-19 pandemic. Then, once international flights were resumed, she was not allowed to board her flight (even though she had a ticket) because she hadn't been vaccinated. She says she hadn't wanted to risk taking the vaccine because of her age (she is now 93 years old).
4. Ms Rossi has provided copies of airline tickets which, she says, support her claim that she had not intended to be overseas as long as she was. The first covers a planned return flight from Rome to Sydney on 5/6 November 2020 (ticketed together with the forward journey from Sydney to Rome on 5 December 2019). The second covers a flight from Rome to Sydney on 10/12 February 2023.

Relevant legislation

1. First I will outline the general provisions of the land tax legislation, and then move on to the surcharge land tax provisions.
2. Land tax is imposed by the Land Tax Act 1956 (NSW) (the LT Act), which is to be read and construed with the Land Tax Management Act 1956 (NSW) (the LTM Act).
3. Land tax is charged, under s 8 of the LTM Act, on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. Accordingly, the thirty-first of December is often referred to as the 'taxing date' for land tax purposes - 31 December 2020 is the taxing date for the 2021 land tax year, 31 December 2021 for the 2022 land tax year, and so on.
4. There are some exemptions from the land tax. For example, a person's principal place of residence is exempt from land tax under s 10(1)(r) of the LTM Act. For the exemption to apply, the land must be 'used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose': LTM Act, Schedule 1A, cl 2.
5. Now, from the 2017 land tax year onwards, surcharge land tax is payable in respect of residential land owned by a foreign person: LT Act, s 5A(1). It is payable in addition to any land tax payable on the land, and is payable even if no land tax is payable on the land: LT Act, s 5A(3). Again, the 'taxing date' for surcharge land tax for a land tax year is 31 December in the previous year.
6. The expression 'foreign person' for the purposes of the LT Act has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW): LT Act, s 2A.
7. Chapter 2A of the Duties Act contains s 104J(1), which says the expression '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'. (The modifications referred to in the Commonwealth Act - which only deal with Australian citizens and certain New Zealand citizens - do not apply to Ms Rossi's circumstances because she has never been an Australian citizen or a New Zealand citizen.)
8. In the Commonwealth Act, a 'foreign person' is an individual who is not ordinarily resident in Australia: s 4.
9. As far as relevant to this case, s 5 of the Commonwealth Act provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if: 1. the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and 2. the individual's continued presence in Australia was not subject to any limitation as to time imposed by law.
10. An individual who is not an Australian citizen has to satisfy both of those requirements to be classed as ordinarily resident in Australia at the relevant time. If they fail either one of them then they will not be ordinarily resident and that will make them a foreign person potentially liable to surcharge land tax.
11. But there are some exemptions from the surcharge, and one of them is the PPR exemption in s 5B of the LT Act. That exemption applies to a person for a land tax year only if (s 5B(1)): 1. the person is a permanent resident at midnight on 31 December of the previous year; and 2. the Chief Commissioner is satisfied that, during the land tax year, the person intends to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement; and 3. the person lodges a declaration to that effect.
12. The person must also actually comply with the residence requirement - which requires the person to use and occupy the land as their principal place of residence for a continuous period of 200 days in the land tax year: LT Act, s 5B(2). (A person's principal place of residence is 'the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person': LTM Act, s 3(1)). If they don't comply with the residence requirement, the surcharge land tax liability is to be assessed or reassessed as if the exemption for the land tax year had never applied: LT Act, s 5B(3).
13. Section 5B was amended in May 2022, with effect from the 2023 land tax year onwards, by the addition of subsections (2A) and (2B), in the following terms: (2A) A person does not use and occupy land as the person's principal place of residence during a period of the person's physical absence from Australia. (2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person's brief physical absence from Australia.

Analysis - 2021 land tax year

1. For the 2021 land tax year, the focus is on the position at the 'taxing date' of 31 December 2020 - and specifically, at midnight on that day.

Was Ms Rossi a 'foreign person'?

1. A 'foreign person' is an individual who is not ordinarily resident in Australia: s 4 of the Commonwealth Act (see [18xx] above).
2. Ms Rossi would have been ordinarily resident in Australia only if (see [19xx] above): 1. she had actually been in Australia during 200 or more days in the 2020 calendar year; and 2. her continued presence in Australia was not subject to any limitation as to time imposed by law.
3. As for paragraph (a), she had not been in Australia at all during the 2020 calendar year (Ex 1, (7)).
4. As for paragraph (b), her status as a permanent resident meant her continued presence in Australia was not subject to any time limitation.
5. Therefore, paragraph (b) was satisfied, but paragraph (a) was not. Since both paragraphs have to be satisfied for a person to be regarded as ordinarily resident in Australia, Ms Rossi failed the test. She was not ordinarily resident in Australia at midnight on 31 December 2020, and that means she was a 'foreign person' at that time.
6. As a 'foreign person', she was liable to surcharge land tax (LT Act, s 5A) unless the PPR exemption in s 5B applied.

Did the PPR exemption apply?

1. Eligibility for the PPR exemption is dealt with in s 5B(1) of the LT Act (see [23xx] above). There are three eligibility requirements: 1. Permanent residency as at midnight on 31 December 2020; 2. The Chief Commissioner's satisfaction that Ms Rossi intended to use and occupy Unit 22 as her principal place of residence in accordance with the residence requirement; 3. Lodgment of a declaration to the effect that Ms Rossi had that intention.
2. But meeting the eligibility requirements is only step 1. Step 2 is set out in subsection 5B(2) (see [24xx] above): Ms Rossi must actually use and occupy the land as her principal place of residence for a continuous period of 200 days in the 2021 land tax year. This is referred to as the residence requirement.
3. Subsection (3) confirms the mandatory nature of the residence requirement by providing that, if the requirement is not met, then surcharge land tax is to be assessed or reassessed as if the exemption had never applied.
4. In Ms Rossi's case, even if she satisfied step 1 (which, on the material before the Tribunal, is not clear in any event, except for the 'permanent residency' component), she certainly didn't satisfy step 2. She was not in Australia at all during the 2021 land tax year, and that made it impossible for her to use and occupy Unit 22 for a continuous period of 200 days in that year.

Conclusion

1. Ms Rossi is liable to surcharge land tax on Unit 22 for the 2021 land tax year, and the PPR exemption is not available.

Analysis - 2022 land tax year

1. For the 2022 land tax year, the focus is on the position at midnight on the 'taxing date' of 31 December 2021.
2. Ms Rossi was not ordinarily resident in Australia at that time, because she hadn't been in Australia during 200 or more days in 2021. That means she was a 'foreign person' at that time. Furthermore, by being out of the country for the entire 2022 land tax year, she failed to use and occupy Unit 22 as her principal place of residence for a continuous period of 200 days in that year.
3. Ms Rossi is therefore liable to surcharge land tax on Unit 22 for the 2022 land tax year, and the PPR exemption is not available.

Analysis - 2023 land tax year

1. As in the earlier years, Ms Rossi was not ordinarily resident in Australia at midnight on 31 December 2022, because she was out of the country for the entire 2022 calendar year. That means she was a 'foreign person' at that time. It follows that Ms Rossi is liable to surcharge land tax on Unit 22 for the 2023 land tax year, unless the PPR exemption is available.
2. The legislation relating to the PPR exemption for the 2023 land tax year is different from the prior years. The new subsection (2A) reinforces the fact that Ms Rossi failed to meet the residence requirement, but she asks me to exercise the discretion in subsection (2B) because of her particular circumstances.
3. The discretion in subsection (2B) is not enlivened unless there are 'exceptional circumstances', and then only in respect of a person's 'brief physical absence from Australia'. It is obvious that, even if Ms Rossi's circumstances were considered 'exceptional' (as to which I express no opinion), an absence from Australia that spans the entire 2023 land tax year cannot be regarded as 'brief'. The conditions for the exercise of the discretion have not been established.
4. Ms Rossi is therefore liable to surcharge land tax on Unit 22 for the 2023 land tax year, and the PPR exemption is not available.

Additional observations

1. Ms Rossi's representatives made several submissions seeking to have the assessment overturned.
2. In summary, they asked the Tribunal to exercise a discretion in favour of Ms Rossi, on the basis that the surcharge land tax was arbitrary or unfair, and that the circumstances that prevented Ms Rossi from returning to Australia were beyond her control.
3. But these submissions ask the Tribunal to do something it has now power to do.
4. As explained by the Tribunal in Wang v Chief Commissioner of State Revenue [2023] NSWCATAD 1 at [35]: The legislation does not provide a discretion to the Chief Commissioner, or to the Tribunal on review, to exempt a taxpayer from the payment of surcharge land tax in respect of any tax year, or to reduce the amount of tax payable. That is so, even if the taxpayer is absent from Australia either for reasons beyond his control, or for other good reason. There is likewise no discretion to exempt a person from tax, or to reduce the tax payable, on the grounds of unfairness, or failure by the Chief Commissioner to warn the taxpayer in advance that surcharge land tax is or might become assessable: Du v Chief Commissioner of State Revenue [2022] NSWCATAD 329; Galle v CCSR [2022] NSWCAAD 285, Chu v CCSR [2021] NSWCATAD 238.
5. More recently, the Tribunal stated in Chen v Chief Commissioner of State Revenue [2024] NSWCATAD 164 at [93]: There is also no discretion given to the Chief Commissioner (or, therefore, to this Tribunal) if the surcharge land tax is payable under the statutory provisions: (1) Appeals to leniency or fairness are not relevant when considering the validity of an assessment. The High Court in Commissioner of Taxation v Ryan (2000) 201 CLR 109 said the following (at 123): But the question for decision is what are the circumstances in which an amended assessment may lawfully be issued? That question is not answered by asserting the existence of any "policy" or "general intention" unless that policy or intention is to be found reflected in the provisions of the Act. Appeals to general notions of "fairness" or "justice" do no more than attempt to mask the absence of any foundation in the legislation for the conclusion which is asserted. (2) The Tribunal has also repeatedly emphasised that the factors contributing to an applicant's failure to satisfy a statutory requirement are irrelevant (unless, of course, the statute itself says otherwise): Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38]; Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [80]. Also, the Tribunal has no overriding discretion to waive tax that is otherwise payable: Chu [v Chief Commissioner of State Revenue [2021] NSWCATAD 238] at [30]. In the context of s 5B of the LTA, the Appeal Panel stated the following in Wang v Chief Commissioner of State Revenue [2023] NSWCATAP 331 at [68]-[69]: As we have already noted, the principal place of residence exemption from surcharge land tax is available 'only if' the requirements (eligibility criteria) of s 5B(1) are met. These requirements include the matters prescribed in s 5B(1)(b), which must be read together with s 5B(2) and (3). As can be seen from the terms of these subsections they are very specific in their terms and are limited to an intent to use and occupy the land as the person's principal place of residence in accordance with 'resident requirement' and an actual use and occupancy of the land as the person's principal place of residence in accordance with 'resident requirement'. If these terms are not satisfied, neither the LTM Act, nor the Land Tax Act make provision for a person's personal circumstances to be taken into account. Hence, it is for this reason that the Tribunal has held a number of times that the personal circumstances of the tax-payer are of no relevance in determining whether s 5A or 5B apply: see for example; Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [47], Wei v Chief Commissioner of State Revenue [2023] NSWCATAD 161 at [27(2)], Song at [80], Chu at [30], Lawrence at [38], Du at [47] and Matiushenko [v Chief Commissioner of State Revenue [2023] NSWCATAD 25] at [20].
6. For completeness, the submissions put by Ms Rossi's representatives about the way a discretion should be exercised (Applicant's written submissions in Ex A1, at [6] and following) do not assist the Tribunal in circumstances where there is no discretion available to the Tribunal in the first place.

Order 1. The assessment under review is 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: 27 June 2024