Sar v Chief Commissioner of State Revenue [2024] NSWCATAD 246 | Case summary

NCAT Administrative and Equal Opportunity|2023-12-20

The applicant's case

It is the applicant's case that he does meet the residence requirement in the s 104ZKA(4) exemption, as the Property became his principal place of residence on 2 December 2018. This was the day on which he 'possessed the Property' through his wife and family having moved all their and his personal belongings into the Property and began residing there.
In reliance on the decision of the Supreme Court in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 (Flaracos), the applicant contended that the term 'use and occupy' in s 104ZKA(4) of the Duties Act does not require the physical presence of the taxpayer for the entire period of the prescribed 200 days. In support of his case the applicant also relied on the decisions of the former Administrative Decisions Tribunal in Black v Chief Commissioner of State Revenue [2011] NSWADT 66 and the decision cited therein.
In his submissions of 7 November 2023, the applicant submitted that: 1. he should not be unreasonably penalised as the Property is and always has been his and his family's main and sole principal place of residence since 2 December 2018 until 30 June 2019; and 2. he has fully co-operated with the respondent's investigation, and while there had been some delay, this delay was due to the initial notice of the investigation having been sent to the wrong address. This caused, the interest component to increase, but once the notice was forwarded to him, he co-operated fully.

Does the applicant satisfy the residence requirement in s 104ZKA(4)?

The words 'use' and 'occupy' are not defined in the Duties Act and should be given their ordinary meaning in the context in which they appear in the Duties Act. These words, as noted above, are used in s 104ZKA(4) of the Duties Act in the context of an exemption to surcharge purchaser duty, where the foreign purchaser of the residential land the subject of that duty is an exempt permanent resident and has 'used' and 'occupied' the residential land as his or her principal place of residence for a continuous period of at least 200 days within the first 12 months after the liability date (for example the contact date).
Whether a person has 'used' and 'occupied' the residential land as his or her principal place of residence within the meaning of s 104ZKA(4) is ultimately a question of fact: De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86 (De Marco) at [72] and Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340 (Ghali) at [30].
In my view, the decision of Gzell J in Flaracos is of no assistance to the applicant, as it turned on its own facts. It was a case that related to the plaintiff's claim that his land was exempt from land tax because he had used and occupied the land as his principal place of residence: Land Tax Management Act 1956 (NSW) Sch 1A, Part 2, cl 2(2)(b). It was accepted that the land had been the plaintiff's principal place of residence. However, for the land tax year(s) in issue, the evidence was that the plaintiff had rented his residence for short periods of time during that year(s) and the issue was whether the land was nevertheless exempt from land tax because it remained the plaintiff's principal place of residence. At [29] and [30] Gzell J found that it was the plaintiff's principal place of residence: 29 In my opinion continuous physical presence on the land is not required to constitute continuous occupation. If a person leaves his or her premises for a holiday, it would defeat the purpose of the Act to conclude that occupation had ceased to be continuous. So long as the person retains the right to possession and controls possession, that person remains in occupation, in my view. The observation of Sir Nigel Bowen in Christie that physical presence over all the land is not necessary to establish occupation is equally apposite when there is some hiatus in physical presence over time. 30 In the instant circumstances, there were extended periods of two to three months during which the plaintiff was absent from his Peakhurst home and during which various tenants were in possession. That does not seem to me to have contravened the requirement in s 3(3)(a) of the Act for continuous occupation. The plaintiff was in occupation of the premises when he and a tenant were physically present in it. Like the tenant he was in possession but unlike the tenant he had the right of control. When he left on his extended trips he intended to and did return to live in the premises. During his physical absence he retained the right to possession and he maintained his rights of control over the land.
In this case, it is not disputed that the applicant used and occupied the Property from 24 December 2018. But what is in issue is whether the applicant's 'use' and 'occupation' of the Property commenced at the same time as his wife took possession of the Property on 2 December 2018.
In my opinion, having regard to the express terms of section 104ZKA(4), the applicant's use and occupation did not commence at the time his wife took possession of the Property. As noted above, section 104ZKA(4) specifically requires the taxpayer, and no other person, to have 'used and occupied' the Property 'as his or her principal place of residence'. In this case, the evidence is that, at the time the applicant's wife took possession of the Property, the applicant had been and was continuing to reside in Singapore as this is where he worked. And while I fully understand why the applicant had continued to reside in Singapore, this on the evidence, is where he lived and resided until 24 December 2018.
In this regard I note the remarks of Basten JA in Ghali at [34]: 34 The reasoning of the Tribunal was erroneous for one or both of two reasons. Either it took the view that the intention of the appellant to return to Beecroft Road, once he had completed renovations at Harold Avenue (a process which took six years and was not completed within the relevant period), demonstrated "use and occupation" of Beecroft Road, or it took the view that the use of the property by his wife, with his permission, constituted use for residential purposes. So far as the first view is concerned, an intention to use and occupy land in the future does not by itself demonstrate present physical use and occupation. So far as the second view is concerned, the statutory reference to use and occupation of the land as a residence is to use and occupation by the owner as his or her residence, not use and occupation by another person with his or her consent. Were it otherwise, an owner would always use and occupy residential premises as a residence, but that would not conform to the statutory purpose.
While the decision in Ghali also related to a claim for exemption from land tax under cl 2 of Part 2 of Schedule 1A of the Land Tax Management Act, the facts in that case differed substantially from those in Flaracos where it was accepted that Mr Flaracos had used and occupied the land as his principal place of residence. In Ghali the evidence was that Mr Ghali had at no time used or occupied the land as his principal place of residence.
In this case, it is accepted that the applicant used and occupied the Property from 24 December 2018. However, his use and occupation from that dated failed to meet the required 200 days within the 12 months after the liability date (30 June 2018). Hence, I find that the applicant has failed to establish that the exemption in s 104ZKA of the Duties Act applies to his purchase of the Property.
Based on my finding above, I find that the applicant is liable for surcharge purchaser duty on his purchase of the Property and to this extent the Assessment of the respondent regarding the imposition of surcharge purchaser duty should be confirmed.

Interest

Based on my findings above, the applicant's failure to pay the purchaser surcharge duty on the date it was due, constitutes a tax default for which the applicant is liable to pay interest (TA Act section 21), unless remitted by the respondent under s 25 of the TA Act.
While I am not critical of either party, there is insufficient material before the Tribunal to consider the issue of the remittal of interest under s 25 of the TA Act.
I accept that other than having raised the issue in his affidavits the applicant did not specifically address this issue in the context of the respondent's Practice Note CPN 024 that sets out how the respondent will exercise his powers on remission.
The question is whether he should be given that opportunity, as the onus remains on him to prove that the circumstances of his case warrant a remission of interest. In my opinion, he should be given that opportunity.
In this regard, I note that the issue of remittal of interest has recently been considered by the Tribunal in Zhu v Chief Commissioner of State Revenue [2004] NSWCATAD 231 at [83] - [90], Griglio v Chief Commissioner of State Revenue [2024] NSWCATAD 212 at [43] - [62] and Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [85] - [96].
What these decisions make clear is that: 1. the market rate component of interest approximates the ordinary lending interest rates and is intended to compensate the respondent for not having the benefit of the tax payment from the time it was due and payable. And it is a component that could rarely, if ever, be waived; and 2. the premium rate component of interest 'is penal in nature and serves the purpose of both imposing a penalty and deterring taxpayers from delaying payment of duty in what is essentially a self-assessment': Golden Age & Hannas the Rocks v Chief Commissioner of State Revenue [2024] NSWSC 249 at [102].
In my opinion, this is an issue that could be quickly resolved informally between the parties. However, in the event it cannot resolved quickly, orders should be made for the applicant to file and serve short written submissions on this issue, having regard to the undisputed facts in this case and the abovementioned decisions and the respondent filing and serving any written submissions in reply. In my opinion, subject to any views the parties may have, a determination of this issue would be suitable for determination on the papers, pursuant to section 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

Conclusion and orders

For the reasons set out above I have decided: 1. that the applicant is liable for surcharge purchaser duty on his purchase of the Property and to this extent the Assessment of the respondent regarding the imposition of surcharge purchaser duty is confirmed; and 2. further submissions are required from the parties regarding the issue of the remittal of interest and to this extent the Assessment of the respondent is reserved pending any agreement between the parties or in the absence of any agreement, a determination of this issue on the papers before the Tribunal.
Hence, I make the following orders: 1. The imposition of surcharge purchaser duty is confirmed. 2. Subject to any agreement reached by the parties regarding remittal of interest, the following orders are made: 1. on or before 6 September 2024, the applicant to provide written submissions as to why interest should be remitted. In his submissions the applicant is to indicate, whether in his opinion the issue of remittal of interest is suitable for determination on the papers; and 2. on or before 20 September 2024, the respondent to file and serve any written submissions in reply. In his submissions the respondent is to indicate, whether in his opinion the issue of remittal of interest is suitable for determination on the papers.

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: 22 August 2024

(the Property): Duties Act 1996(NSW)

The jurisdiction and role of the Tribunal

There is no dispute that the Tribunal has jurisdiction to hear and determine the applicant's application for administrative review of the respondent's 29 March 2023 Assessment: Administrative Decisions Review Act 1997 (NSW) ADR Act sections 7 and 9 and TA Act section 96.
The role of the Tribunal on administrative review is to decide the correct and preferable decision, having regard to any relevant factual material before it and any applicable law: ADR Act section 63(1).
Section 100(3) of the TA Act provides that the applicant has the onus of proving, his case, which requires him to prove, on the balance of probabilities, all matters necessary for the Tribunal to answer the statutory question in his favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [30] to [36]. In the absence of the applicant discharging his onus, the respondent's Assessment prevails.
Section 101(1) of the TA Act sets out the powers of the Tribunal in determining an application for review made under section 96 of that Act, which includes: 1. to confirm or revoke the assessment or other decision to which the application relates; and 2. to remit the matter to the respondent for determination in accordance with the Tribunal's findings or decision.
Section 101(2) of the Duties Act provides that nothing in section 101(1) limits the powers of the Tribunal in Division 3 of Part 3 of Chapter 3 of the ADR Act and section 60 of that Act.

Sar v Chief Commissioner of State Revenue

At a glance

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Judgment (6 paragraphs)

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Legislation Cited (7)

Cases Cited (8)

Cited By (1)