Shah v Chief Commissioner of State Revenue

Duties Act

1. Section 104L of the Duties Act provides that surcharge purchaser duty is chargeable on a transfer or an agreement for sale or transfer of residential-related property to a foreign person.
2. Section 104K(a) of the Duties Act provides that residential-related property relevantly includes residential land in NSW.
3. Section 104J(1) of the Duties Act provides that a 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 to that section are not relevant in this case.
4. Section 104J(3) provides that 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.
5. Section 104N provides that, in respect of a surcharge duty transaction that is an agreement for sale or transfer, the transfer occurs when the agreement is entered into.
6. Section 104Q provides that Section 12 applies in respect of surcharge purchaser duty in the same way as it applies in respect of duty charged by Chapter 2 of the Duties Act.
7. Section 12 of the Duties Act provides that a liability for duty arises when a transfer of dutiable property occurs, and that where such a transfer is affected by an instrument, liability arises when that instrument is first executed.
8. Section 104W of the Duties Act provides that surcharge purchaser duty is to be paid within three months after the liability to pay the duty arises.

Foreign Acquisitions and Takeovers Act 1975 ("FATA")

1. Section 4 of the FATA defines foreign person as an individual not "ordinarily resident" in Australia.
2. Section 5 of the FATA 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. at that time - 1. 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 2. 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.

Migration Act 1958 (Cth) (Migration Act)

1. Section 30 of the Migration Act provides: (1) A visa to remain in Australia (whether also a visa to travel to and enter Australia) may be a visa, to be known as a permanent visa, to remain indefinitely. (2) A visa to remain in Australia (whether also a visa to travel to and enter Australia) may be a visa, to be known as a temporary visa, to remain: (a) during a specified period; or (b) until a specified event happens; or (c) while the holder has a specified status.
2. Section 35A (3A) of the Migration Act provides: (3A) There is a class of temporary visas to be known as safe haven enterprise visas.

TA Act

1. Section 21 of the TA Act provides that interest accrues on an unpaid amount of tax when there has been a tax default.
2. Section 22 of the TA Act provides that interest accrues at both the premium and market rate.
3. Section 25 of the TA Act provides that interest may be remitted in whole or part in such circumstances as the Chief Commissioner considers appropriate.
4. Section 27(1) of the TA Act imposes a penalty of 25% on a tax default.
5. Pursuant to s.27(3) of the TA Act, an amount of penalty tax will not be imposed if: 1. the taxpayer took reasonable care: s.27(3)(a); or 2. the tax default was beyond the control of the taxpayer: s.27(3)(b).
6. Section 28 of the TA Act provides that the amount of penalty tax will be reduced to 5% if there is pre-investigation disclosure;
7. Section 29 of the TA Act provides that the amount of penalty tax will be reduced to 20% if there is disclosure during investigation.
8. Section 33 of the TA Act provides that the amount can be remitted in whole or part in any other circumstance the Chief Commissioner considers appropriate.

Facts

1. The following facts emerge from the evidence and are not in issue unless otherwise indicated.
2. The Applicant is not an Australian citizen. He is a citizen of Afghanistan. He has limited reading and writing skills in English.
3. On 20 December 2016, the Applicant was granted a Safe Haven Enterprise (subclass 790) visa (SHE Visa). It is not clear on the evidence before the Tribunal when the Applicant first came to Australia but it appears that it was around 2010. A subclass 790 visa is a visa for people who first arrived in Australia without a visa wishing to seek asylum. Prior to the SHE Visa the Applicant had held at least one other visa, the visa put into evidence by the Applicant. The SHE Visa Grant Notice stated the Visa Grant Date as being 20 December 2016 and the Visa Cease Date as being 20 December 2021. It stated the "Stay Period" as being 20 December 2021.
4. On 9 November 2020 the Applicant entered into a contract to purchase a residential property in New South Wales ("the Contract").
5. The Applicant had been in Australia for a period of at least 200 days in the year prior to entering into the Contract.
6. The Applicant engaged a conveyancing lawyer to assist him with the purchase.
7. On 1 December 2020, the Applicant completed a Purchaser/Transferee Declaration to be lodged with the Respondent. In that Declaration the Applicant declared that his country of citizenship was Afghanistan and that he was a person ordinarily resident in Australia. The Applicant did not provide details of the SHE Visa in that Declaration.
8. The Applicant's evidence was that he believed at that time that he was a permanent resident of Australia. He held this belief because: 1. As he was considered a resident for tax purposes, he believed he would also be a resident for stamp duty purposes; 2. At the time his conveyancing lawyer asked him for his visa details, he had lost the visa grant letter, so he asked a friend who had arrived in Australia with him about his visa who told him that he had a permanent visa because his visa did not have an expiry date, he had lived in Australia for almost ten years and had never been told to leave and he was considered a permanent resident in his daily activities and dealings with government agencies and financial institutions.
9. The Applicant's evidence was that he was never advised about "additional stamp duty requirements".
10. On 18 June 2021, the Respondent issued a Notice of Investigation to the Applicant in respect of a potential liability for surcharge purchaser duty for the purchase of the property and requested the production of documents.
11. On 6 July 2021, Pars Lawyers, solicitor for the Applicant, produced copies of the requested documents to the Respondent.
12. On 13 July 2021, the Respondent advised the Applicant that he was liable for surcharge purchaser duty in respect of the purchase of the property as he was a foreign person at the time of the dutiable transaction and issued the Assessment in the amount of $67,119.81, being surcharge purchaser duty of $54,400, penalty (at the rate of 20%) of $10,880 and interest (both market rate component and premium component) of $1,839.81.

Parties' submissions

1. The Applicant submits that he was ordinarily resident at the time of entering into the Contract. In this regard he relies on the VEVO document which he provided to the Tribunal which contains the result of a Visa Entitlement Verification Online (VEVO) Visa Details Check valid as at 29 September 2021 which states that the "Period of Stay" is "Indefinite".
2. The Applicant also submits that as he has been treated as an ordinary resident for other purposes, so he should be treated as an ordinary resident for stamp duty purposes. He says that he engaged a professional conveyancer to assist him with the purchase and was never advised that surcharge purchaser duty would be payable. He has never been aware that he may be considered a foreign person for stamp duty purposes and the Declaration form did not refer to "temporary residents". He noted that a subclass 790 visa is granted to refugees who are not able to return to the country of their citizenship for fear of persecution. He has travelled to and from Australia in the past and has never been told by any authorities, including immigration authorities that he was not ordinarily resident. He says that if he is required to pay the amounts assessed that will cause him financial hardship and he will have to sell the property.
3. The Respondent accepts that the Applicant had actually been in Australia during 200 or more days in the period of 12 months immediately preceding the date of the Contract, but submits that the SHE Visa is a temporary visa and, as such, the Applicant's continued presence in Australia was subject to a limitation as to time imposed by law, such that he was a foreign person for the purposes of s 5 of FATA and, therefore, s 104J(1) of the Duties Act.

Consideration

1. Section 100(3) of the TA Act makes it clear that in reviews of this nature by the Tribunal the Applicant has the onus of proving his case. This requires him to prove all matters necessary for the Tribunal to answer the statutory question in his favour on the balance of probabilities. Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [28] - [31]; Raissis v Chief Commissioner of State Revenue [2021] NSWCATAD 99.
2. It is not in dispute that the property purchased by the Applicant was residential related property for the purposes of s 104L of the Duties Act.
3. Whether surcharge purchaser duty is payable under s 104L of the Duties Act therefore depends upon whether the Applicant was, at the relevant time, a foreign person as defined in s 5 of the FATA.
4. Section 12 and s 104N of the Duties Act make it clear that the time at which liability to surcharge purchaser duty arises is the date of the Contract.
5. Section 5 of the FATA 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 the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time, and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law.
6. The concept of "ordinarily resident", for the purposes of the FATA, and by extension for the purposes of the Duties Act, is marked out solely by the words in s 5 of the FATA. Whatever the ordinary meaning of the expression may be, it has been displaced by the words in s 5: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [50].
7. It is not in dispute that the Applicant was present in Australia for 200 days or more prior to entering into the Contract.
8. Accordingly, the only question is whether, at that time, for the purposes of s 5 of the FATA, the Applicant's continued presence in Australia was subject to "a limitation as to time imposed by law."
9. Section 35A (3A) of the Migration Act makes it clear that a SHE Visa is a "temporary visa". Section 30(2) of the Migration Act provides that temporary visas may be a visa to remain in Australia during a specified period, until a specified event happens or while the holder has a specified status.
10. Information on SHE Visas is available on the Department of Home Affairs website. That website, at least currently (the Tribunal does not have before it the information which was available at the date of entering into the Contract) describes the SHE visa as a visa which enables the visa holder to "stay in Australia temporarily for 5 years". It notes that a visa holder may apply for certain other visas including permanent visas provided the visa holder meets certain requirements.
11. The Applicant's SHE Visa provided that the Visa Cease Date was 20 December 2021 and his "Stay Period" was 20 December 2021.
12. There is no evidence that the Applicant sought a permanent visa and the VEVO document reflects that the Applicant had not been granted any different visa before the date of the Contract.
13. In Li v So [2019] VSC 515, Croft J, in considering the definition of foreign person under s 5 of FATA, stated: [96] … However, I do not accept the plaintiff's submission regarding the appropriate characterization of s 30(2)(a) of the Migration Act 1958 (Cth). I consider all three conditions contemplated by s 30(2)(a) render the holder of a temporary resident visa 'a person whose presence in Australia is subject to a time limit imposed by law'. Irrespective of the precise event which terminates the holder's right to remain in Australia, all three conditions render the holder subject to a temporal limitation. Such is inherent in the very nature of a 'temporary resident visa'."
14. The VEVO document relied upon by the Applicant does not assist him. It is not what is contained in the VEVO document, nor what may be contained on Department of Home Affairs website, but the terms of the relevant visa which are determinative. In any event, I note that the VEVO document is internally inconsistent. While it is true that it notes the "Period of Stay" as "Indefinite" at one point, it also indicates at other points in the document the "Visa Type" as being "Temporary resident", the "Visa description" as being "TEMPORARY" and the "Initial stay date" as being "20 December 2021".
15. There is no evidence that the Applicant relied on a similar VEVO document at the time he entered into the Contract or made the Declaration. However, the Applicant does submit that at that time he did believe he was a permanent resident. However, the fact that the Applicant may have believed this to be the case is not relevant. The visa which he in fact held was a temporary visa. Hashim v Chief Commissioner of State Revenue [2020] NSWCATAD 67 at [47] - [48].
16. As the Applicant's SHE Visa was a temporary visa which enabled the Applicant to remain in Australia for a period of 5 years to 20 December 2021, as at the time of entering into the Contract, the Applicant's continued presence in Australia was subject to a limitation as to time imposed by law. As a result, the Applicant was not "ordinarily resident' in Australia within the meaning of s 5 FATA and was a foreign person at the time the Contract was entered into such that he is liable to surcharge purchaser duty under s104L of the Duties Act.
17. The Tribunal has no discretion in this regard. The fact that the Applicant may have been treated as an ordinary resident for other purposes, was not advised as to the liability to surcharge purchaser duty at the time of entering into the Contract and may suffer financial hardship as a consequence of this decision are not matters that the Tribunal can take into account. The Tribunal must apply the law according to its terms.
18. As the Tribunal stated in Galle v Chief Commissioner of State Revenue [2022] NSWCATAD 285 at [26] - [28]: 26.I reject the Applicants' submissions that I should exercise a discretion to exempt them from surcharge duty on the basis that it would be unfair to them. 27.There is no legislative provision or authority which gives the Chief Commissioner or the Tribunal a discretionary power to exempt a taxpayer from surcharge duty if the statutory criteria are not met: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30]. 28.Arguments based on notions of "fairness" and "justice" cannot succeed in the absence of any foundation in the legislation: Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 123. Consequently, questions of unfairness including on the bases that the Applicants did not know about the surcharge duty and intended to stay in Australia and have done so, are not relevant. The Respondent is required to administer the law in accordance with its terms.

Remission of Interest and Penalty

1. The Applicant made brief submissions at the hearing that, in the event that I were to find that he is liable to surcharge purchaser duty, both penalty and interest should be remitted on the basis that he had taken reasonable care.

Interest

1. It is not in issue that there has been a tax default. Section 104W of the Duties Act provides that surcharge purchaser duty is to be paid within three months of the liability arising. Under ss 21 and 22 of the TA, interest accrues on an unpaid amount of tax when there has been a tax default at both the premium and market rate.
2. However, s 25 of the TA Act provides that the Chief Commissioner may, in such circumstances as he considers appropriate, remit the market rate component or the premium rate component of interest or both by any amount.
3. The authorities are clear that, as the market rate component of the interest imposed by the Respondent is intended to compensate the Respondent for not having the benefit of the tax payment from the time it was due, it is a component that would rarely be waived, otherwise tax would be being paid at a discounted amount which would be unfair to taxpayers who pay their tax on time. Only exceptional circumstances would justify remission, such as where the tax default is entirely due to a fault of the Chief Commissioner or in situations completely out of the control of the taxpayer such as postal strikes, serious illness and natural disasters: Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 at [60]; Lease A Leaf Property Pty Limited v Chief Commissioner of State Revenue [2011] NSWADTAP 41 at [34], Trust Co of Australia Ltd v Chief Commissioner of State Revenue [2002] NSWADT 21, Adams Bidco Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 702 at [163].
4. The premium component of the interest, on the other hand, is a form of penalty. Its purpose is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time: Incise Technologies at [61].
5. On the Respondent's website there is a Revenue NSW Fact Sheet on Interest and Penalty Tax which states: The premium rate of interest may be reduced if there is evidence you took reasonable care, or made a voluntary disclosure before the commencement of an investigation ... When determining whether reasonable care was taken, we'll consider whether you: - kept complete and accurate records - made a diligent effort to understand and comply with the law - sought expert advice on uncertain or complex matters - were honest in your dealings with us. We'll also consider your: - understanding of the law - commercial experience - access to expert advice. Meeting one or more of these criteria does not necessarily mean that reasonable care has been taken. All factors leading to the tax default are taken into consideration.
6. As the Tribunal said in Laviva Nominees Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 84 the Tribunal is not bound by the Chief Commissioner's Guidelines, however there is a benefit in uniformity of application of tax laws.
7. In each case it is essentially a question of fact whether the taxpayer has taken reasonable care in complying with their tax obligations. In RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64, the Tribunal said at [23]: Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law.
8. In Incise Technologies the Appeal Panel considered four criteria as being relevant and appropriate to the consideration of remission of the premium component of the interest (although noting that there may be other circumstances which it may be appropriate also to take into account) and these criteria have been considered in a number of subsequent cases see eg Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 at [81], Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [178], namely: (1) 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; (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.
9. The Applicant did not point the Tribunal to any exceptional circumstances which would justify remission of the market rate of interest.
10. However, here, the Applicant has paid the amount of tax which is not in dispute. I accept that there was no wilful default by the Applicant in not paying tax on time. Further, the Applicant has cooperated within a reasonable time after requests for information were made by the Respondent. While not determinative, I also note that the Applicant's English is limited and he relied on a conveyancing lawyer to assist him with the purchase. While I accept the Respondent's submission that there is little evidence of the communications which took place between the conveyancer and the Applicant, I accept the Applicant's evidence that he was not advised that he may have a liability to surcharge purchaser duty. I accept that he genuinely believed that he was a permanent resident. The Respondent pointed the Tribunal to that part of the Declaration signed by the Applicant which directs him to review the Respondent's website for information about surcharge purchaser duty before completing the Declaration submitting that he could have done so and become aware of his liability to surcharge purchaser duty. However on the face of the Declaration (which the Applicant would have had difficulty reading in any event) there is no explanation of the term "ordinarily resident" or to the fact that temporary visa holders will be considered foreign persons. In all of the circumstances, I consider that the Applicant has demonstrated that he took reasonable care within the meaning of Incise Technologies and that it is appropriate to remit the premium component of the interest in full.

Penalty

1. There are two provisions in the TA Act that provide for the remission of interest: s27(3) provides for the remission of interest if the taxpayer took reasonable care or if the tax default was due to reasons beyond their control. Section 33 is a discretion to remit penalty if the Chief Commissioner considers it appropriate.
2. The relevant principles regarding the reasonable care test in respect of the remission of interest set out above also apply when considering s27(3)(a) of the TA Act.
3. For the same reasons set out above in relation to interest, I consider that the Applicant has established that he took reasonable care to comply with his tax obligations such that it is appropriate to remit penalty in full under s 27(3)(a) of the TA Act. Accordingly, I do not need to consider the discretion under s 33 of the TA Act.

Conclusion

1. It follows that I find the correct and preferable decision is that surcharge purchaser duty should be assessed in respect of the transaction and that the market rate of interest should apply, but that the premium component of interest and penalty should be remitted in full.

Costs

1. In his written submissions the Respondent foreshadowed an application for costs in the event the Respondent was successful. Given I have concluded that interest and penalty should be remitted, the Respondent may no longer intend to make such an application. However, if the Respondent does propose to make an application, I will make orders for the filing and exchange of written submissions as to costs.

Orders 1. The Assessment is remitted to the Respondent for determination in accordance with these Reasons for Decision. 2. If the Respondent wishes to pursue an application for costs in this matter: 1. the Respondent shall give to the Tribunal and to the Applicant, within 7 days after publication of these Reasons for Decision, his written submissions as to costs and as to whether the Tribunal should determine the question of costs without an oral hearing; 2. the Applicant shall give to the Tribunal and to the Respondent, within 14 days after publication of these Reasons for Decision, his written submissions as to costs and as to whether the Tribunal should determine the question of costs without an oral hearing; 3. the Respondent shall, within 21 days after publication of these Reasons for Decision, give the Tribunal and the Applicant any submissions in reply to the Applicant's submissions.

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: 23 September 2022