Sar v Chief Commissioner of State Revenue

1. Section 44 of the TA Act provides that tax unpaid as required under a notice of assessment is a debt payable to the respondent. That section provides:

44 Unpaid tax is debt payable to Chief Commissioner

(1) If the whole or part of tax payable by a taxpayer is not paid to the Chief Commissioner as required by a notice of assessment, the amount unpaid is a debt payable to the Chief Commissioner by the taxpayer.

(2) A debt payable by a taxpayer to the Chief Commissioner under this Act is a tax debt under this Act.

1. The word 'tax' is defined in section 3(1) of the TA Act to include a duty and interest.
2. Section 21(1) of the TA Act provides for the payment of interest in respect of a tax default as follows:

21 Interest in respect of tax defaults

(1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division.

1. A 'tax default' is defined in section 3(1) of the TA Act to mean: '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'.
2. Section 22(1) of the TA Act provides that interest accrues at both the premium and market rate
3. Section 25 of the TA Act gives the respondent a discretion to remit interest. Up until 1 February 2024 (see Treasury and Revenue Legislation Amendment Act 2023 (NSW) (Amendment Act) Schedule 5 clause 1) that section was in the following terms:

25 Remission of interest

The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.

1. In June 2022 the respondent published a guideline, CPN 024, on how the discretion to remit interest under section 25 would be exercised.
2. Since 1 February 2024 section 25 provides as follows:

25 Remission of interest

(1) The Chief Commissioner may remit interest.

(2) The Chief Commissioner may issue guidelines setting out how interest must be remitted under this division.

(3) If guidelines are issued, interest must be remitted only in accordance with the guidelines.

(4) The imposition or remission of penalty tax is not relevant to the imposition or remission of interest.

1. The respondent has not issued any further guidelines under section 25(2) and the CPN 024 Guideline has continued to apply.

1. The background to the applicant's administrative review application is set out at [28] to [53] of the principal decision. In summary the background is as follows:

(1) the applicant is a citizen of Malaysia and Singapore. He has been the holder of an Australian permanent resident visa since 1999.

(2) in 2004, the applicant's place of employment was transferred from Australia to Singapore, however his family remained in Australia.

(3) on 30 June 2018, the applicant entered into a contract to purchase the residential property at St Marys in NSW (the Property the subject of his application). The contract was conditional upon, at settlement, the vendors of the Property renting the Property from the applicant for a period of up to five months;

(4) in the 12 months prior to entering the contract, the applicant had not been in Australia for 200 days as he was still working and living in Singapore. However, his second wife and her son had already migrated to Australia the previous year;

(5) on 17 August 2018, the applicant completed a 'Purchaser/Transferee Declaration' form in which he indicated he was ordinarily resident in Australia and not a foreign person. He also indicated that he was an exempt permanent resident who will occupy the Property as his principal place of residence for a continuous period of 200 days within the first 12 months after the 30 June 2018 contract date;

(6) settlement of the applicant's purchase of the Property occurred on 24 August 2018 and in accordance with the contract of sale a lease agreement was entered into between the applicant and the vendor for the lease of the Property for a period of five months;

(7) the vendor vacated the Property on 2 December 2018 and the applicant's wife and her son moved into the Property on the same day;

(8) the applicant resigned from his job in Singapore on 7 December 2018 and returned to Australia on 24 December 2018 and has used and occupied the Property as his principal place of residence since that time. However, the applicant's use and occupation of the Property was 22 days short of the required 200 days requirement in the 12 months since the 30 June 2018 contract date;

(9) on 6 October 2022, the respondent issued a Notice of investigation to the applicant. In response to that Notice the applicant declared that he had occupied the Property as his principal place of residence since 2 December 2018. On 29 March 2023, the respondent issued the applicant with the Notice of Assessment the subject of the applicant's administrative review application. That Assessment having been confirmed in the principal decision;

(10) in April 2023, the applicant paid all outstanding tax and interest.

1. In his written submissions the respondent submitted that, as the applicant bears the onus of proof, in the absence of him having put forward any evidence or submissions the market rate and premium rate of interest in the Assessment will prevail as correct.

1. While the applicant has not provided any further evidence or submissions in regard to the remission of interest, I have taken into account the evidence he gave at the hearing in August 2024. He was unrepresented at the hearing but had his neighbour with him as his support person. During the course of the hearing he also requested that consideration be given to the remission of interest.
2. As noted above, the respondent's power to remit interest under section 25 of the TA Act is discretionary. In Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126 at [151], Bathurst CJ, did not think there was a relevant limit on the power of the respondent to remit interest under that section.
3. Nevertheless each of the components of interest assessed require specific consideration.

1. The market rate component of interest is intended to compensate the respondent for not having the benefit of the tax payment from the time it was due, and so approximates the ordinary lending interest rates. It is accepted that this component of interest 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: Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 249 (Golden Age) at [101], where Richmond J noted the observations of the Appeal Panel of the former Administrative Decisions Tribunal in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 (Incise Technologies) at [60] and the respondent's Practice Note CPN 024.
2. The approach of the respondent, as set out in CPN 024, is that remission of interest assessed at the market rate may be justified where the circumstances of non-payment were beyond the control of the taxpayer or reasonable care taken by the taxpayer.
3. In Incise Technologies, at [60], the Appeal Panel agreed with the observation of the Tribunal below 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'.
4. In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, at [27], this was found to have been a factor relevant in that case.
5. In this case, the applicant has at no time asserted that the respondent contributed to his tax default. Instead, his main argument was that from the moment his wife and her son had moved into the Property as their principal place of residence, that this was the time he commenced using and occupying the Property as his principal place of residence. For the reasons set out in the principal decision, at [66], a finding was made that the applicant did not commence using and occupying the Property as his principal place of residence until 24 December 2018.
6. The reason why he did not return to Australia until this date was because, having given notice of his decision to resign from his employment on 7 December 2018, 24 December 2018 was the day he had calculated he could return to Australia and still maximise the entitlements he was due from his employer at the time of his actual departure from his employment. While this approach is understandable, it cannot be said that the applicant's return to Australia was delayed, let alone delayed due to circumstances beyond his control.
7. Accordingly, I agree with the respondent's submissions that the applicant has failed to establish that there are any circumstances, let alone exceptional circumstances, that would justify any remission of the market rate component of the interest assessed by the respondent.

1. In Incise Technologies, at [61], the Appeal Panel observed that the premium component of the interest is a form of penalty and 'an additional economic deterrent against taxpayers failing to meet their obligations on time'.
2. In Golden Age at [102], Richmond J cited with approval the observations made by the Appeal Panel in Incise Technologies and went on to observe as follows:

102 In my view it is necessary to approach the remission question by recognising that the premium component 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 regime. Consequently, the culpability of the taxpayer in failing to pay the duty liability by the due date is an important matter in the exercise of the discretion. I do not accept the Commissioner's submission that it is a penalty at the "low end" of the scale. Depending upon the period of the delay in payment, the penalty arising from the premium component can be very significant as it was in the present case (being 24% of the duty assessed on the premium).

103 In Incise Technologies, the Appeal Panel identified (reflecting a submission made by the Commissioner in that case) four cumulative criteria which are relevant to the exercise of the discretion under s 25:

(1) All principal tax that is owing and not in dispute has been fully paid;

(2) There has been cooperation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments;

(3) Such cooperation has occurred prior to any investigation being commenced by the Commissioner or, at the very least, within a reasonable time after the request for information had been made by the Commissioner; and

(4) There has been no wilful default by the taxpayer in not paying tax on time.

104 The Appeal Panel noted in Incise Technologies at [63] that the first of these criteria could be clarified to be "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" and that while they were all relevant and appropriate matters for consideration, they were not exhaustive. That the four criteria are not exhaustive has been confirmed in subsequent cases, eg. Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [179] and Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [105]- [106].

1. At [105] Richmond J, referred the 'Reasonable carer taken by the taxpayer' in CPN 024, which, in this application, relevantly provided:

Where there is sufficient evidence to prove that the default was within the control of the taxpayer (or their representative), but reasonable care has been taken to ensure the payment of the tax, the Chief Commissioner will usually remit the premium rate component of the interest. Events that may indicate that the taxpayer took reasonable care include (but are not limited to):

a. being honest and forthright when dealing with the Chief Commissioner

b. cooperation with the Chief Commissioner

c. the default is attributable to calculation errors

d. making diligent efforts to understand and comply with the law

e. maintaining appropriate and proper recording systems in accordance with normal practice i.e., systems that minimise the risk of tax default, allow reconciliation of the tax paid or payable with returns required to be lodged and fulfil the taxpayer's obligation under the taxation laws to maintain records for the purposes of Revenue NSW investigations or audits

f. taking reasonable steps to be aware of and comply with his/her taxation obligations and to be familiar with the legislative requirements

g. applying any relevant revenue rulings in good faith

h. seeking professional advice or private rulings for uncertain or complex matters where no revenue ruling applies, or where circumstances differ from those described in a revenue ruling

i. acting promptly to seek advice or provide information once made aware, from any source, that the taxpayer might have a tax liability

j. the taxpayer has used and reasonably relied on data, statements or other information provided by a third party.

Meeting one or more of these examples does not necessarily mean that reasonable care has been taken; all relevant factors leading to the tax default will be taken into consideration.

Note: Remission of the premium rate will only occur in special circumstances".

1. In Golden Age. at [106], Richmond J noted that it is accepted that whether the taxpayer has taken reasonable care to comply with the taxation law is a relevant consideration for the exercise of the discretion in section 25 of the TA Act. His Honour went on to say:

106 ... [I agree] that whether the taxpayer took reasonable care is relevant to the remission of the premium component under s 25. In particular, it is necessary to consider whether there are factors which mitigate the taxpayer's behaviour in failing to pay its tax liability on time and, in this regard, it is necessary to consider the steps (if any) taken by the taxpayer to comply with the taxation law, whether those steps were reasonable and the explanation for why, despite those reasonable steps, the tax default occurred.

1. While I accept that the applicant co-operated with the investigation of the respondent, he has not provided any evidence of the steps he took to ensure that he complied with the taxation law. From my observation of the applicant, he was more than capable of obtaining such advice but I am not critical of him not having done so, if that is correct.
2. Accordingly, I agree with the respondent's submissions that, in the absence of the applicant having provided any evidence or submissions what steps, if any, he took to ensure that he complied with the taxation law, there is no basis on which to exercise the discretion to remit the premium component of interest.

1. For the reasons set out above, I find that the applicant has failed to establish any grounds on which the discretion in section 25 of the TA Act should be exercised in his favour for the interest, as assessed in the Assessment, to be remitted in part or whole. Accordingly, I find that the interest, as assessed in the Assessment, is the correct and preferred decision and should be confirmed.
2. Hence, I make the following orders:

(1) Pursuant to section 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), a hearing of the issue regarding remittal of interest is dispensed with and is determined on the papers.

(2) The Assessment to the extent it relates to interest is also 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.