Solfon Investments Pty Ltd atf Solfon Family Trust v Chief Commissioner of State Revenue

NCAT Occupational|2018-10-22

Introduction

The applicant, Solfon Investments Pty Ltd aft Solfon Family Trust (the applicant), seeks review of the Land Tax Assessment Notices of the respondent, the Chief Commissioner of State Revenue, for the 2015 to 2018 land tax years in regard to the property of which it is the registered legal owner (the Property). The Property is located in Cecil Hills in the State of New South Wales (NSW).
The directors and shareholders of the applicant are Enrico Neubert and Sari Apriani and the Property is their home and that of their children.
The issues for determination in this application are: 1. does the principal place of residence exemption in Sch 1A of the Land Tax Management Act 1956 (NSW) (LTM Act) apply to the Property (i.e. the land); 2. the significance, if any, of the fact that the respondent's Land Tax Assessment Notices for 2015, 2016 and 2017 were sent to the wrong address and the applicant was not made aware of the Notices until October 2017; and 3. whether the Tribunal has jurisdiction to review the instalment plan (or plans) offered by the respondent.
For the reasons that follow, I find that: 1. the principal place of residence exemption does not apply to the Property (i.e. the land); 2. notwithstanding the fact that the Land Tax Assessment Notices for 2015, 2016 and 2017 were sent to the wrong address and the applicant was unaware of them having been issued until October 2017, the Assessments were nevertheless validly issued and payable; and 3. the Tribunal has no jurisdiction to review instalment plan offered by the respondent.

Material before the Tribunal

Mr Neubert, on behalf of the applicant, filed a bundle of documents. Included in that bundle was a chronology of events, a current and historical ASIC extract for the applicant and copies of correspondence between himself and his partner and the office of the respondent.
The respondent also filed and served a bundle of s 58 documents and an affidavit of Kimberley Lorna Kea, solicitor employed in the office of the Crown Solicitor of NSW, sworn on 20 September 2018.
Included in the respondent's s 58 documents were copies of the relevant Land Tax Assessment Notices, correspondence between Mr Neubert and Ms Apriani and officers of the office of the respondent and the Solfon Family Trust Deed.
The respondent also filed and served written submissions. Mr Neubert and Ms Apriani made oral submissions, on behalf of the applicant, during the course of the hearing.

Background

The applicant was incorporated on 6 December 2012.
The Solfon Family Trust (the Trust) was established, under a trust deed of the same name, on the same day the applicant was incorporated (i.e. 6 December 2012). The Trustee of the Trust is the applicant and the beneficiaries of the Trust are the applicant, Mr Neubert and Ms Apriani.
The applicant purchased the Property in September 2014.
At the hearing, Mr Neubert explained that the Property was purchased in the name of the applicant following advice he and his partner, Ms Apriani, received from their accountant in Victoria. He said that the accountant had informed them that land within New South Wales was not subject to land tax. I understand that at around the same time, Mr Neubert and Ms Apriani's accountant also made arrangements for them to acquire the applicant.
On 21 September 2015, the respondent issued a Land Tax Assessment Notice to the applicant for the 2015 land tax year. The Notice was sent to an address at 61 Marco Avenue, Revesby in NSW
The ASIC search filed in these proceedings, record the applicant's registered address and principal place of business at the time of incorporation as being in Chelsea in the State of Victoria. In early December 2013, the applicant's registered address and principal place of business was changed to 1-61 Marco Avenue Revesby in NSW. Mr Neubert explained where he and Ms Apriani were living at the time. It was a rented property.
The ASIC search records a further change to the registered address and principal place of business of the applicant on 14 November 2014. The change was from the Revesby address to the Cecil Hills address of the Property. Mr Neubert explained that he had lodged the relevant documents to give effect to this change at this time because it was around the same time he and Ms Apriani and their family moved into the Property.
The respondent issued further Land Tax Assessment Notices for the 2016 and 2017 land tax years on 14 January 2016 and 12 January 2017 respectively. Again, the Notices were sent to the Revesby address.
Mr Nuebert and Ms Aprini were unaware of the Notices issued by the respondent in 2015, 2016 or 2017.
On 3 July 2017, the respondent issued a Land Tax Legal Notice to the applicant seeking payment of the outstanding land tax for the 2015 to 2017 land tax years. That Notice was addressed to the applicant at the Cecil Hills address.
On 5 February 2018, the respondent issued a Land Tax Assessment Notice for the 2018 land tax year. This Notice was also sent to the Cecil Hills address. On 11 February 2018, Mr Neubert, on behalf of the applicant, lodged an objection to that Notice and the Notices that had been issued for the 2015, 2016, 2017 and 2018 land tax years.
On 23 March 2018, the respondent disallowed the applicant's objection and found that the Land Tax Assessments were correct. Being dissatisfied with this determination, the applicant lodged this application for review on 12 April 2018.
Prior to the hearing of the applicant's application there were a number of discussions between Mr Neubert and Ms Apriani and the respondent in an endeavour to settle the matter. However, Mr Neubert and Ms Apriani sought to press their application because they did not consider it to be fair that the applicant be liable for land tax when the Notices for 2015, 2016 and 2017 were sent to the wrong address. As a consequence, the applicant had a substantial debt which they could not afford to pay. However, had the initial 2015 Notice been sent to the correct address they could have paid that amount and avoided incurring any further land tax debt by transferring the Property into their own names.
During their discussions, the respondent agreed to waive interest on the amounts outstanding and put forward a payment plan, which Mr Neubert contends the respondent has now resiled from.

Relevant legislation

Land tax is levied under s 7 of the LTM Act. That section provides: "7 Land tax on taxable value of land Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act)." (italics added)
Section 8 provides that land tax is to be charged on land owned at midnight on 31 December immediately preceding the year for which it is levied. A "year" is defined in that section to mean the period of 12 months commencing on 1 January.
As noted by the respondent, in regard to liability for land tax, the applicable law is the LTM Act as it applied on the date on which that liability arises, being the 31st of December of the year immediately preceding the year on which the tax is levied. In this case, the applicable provisions of the LTM Act have remained unchanged during the relevant land tax years. This includes the principal place of residence exemption provisions in Sch 1A of the LTM Act. Part 2 of that Sch makes provision for that exemption. However, Part 4 of that Sch contains a number of restrictions to that exemption.
Clause 2 in Part 2 of Sch 1A relevantly provides: Part 2 Principal place of residence exemption 2 Principal place of residence exemption (1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is: (a) a parcel of residential land, or (b) a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots. (2) Land is not used and occupied as the principal place of residence of a person unless: (a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or (b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence. (3) If the owner of land is entitled to the exemption conferred by this Schedule, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption. (4) The exemption conferred by this Schedule is referred to as the principal place of residence exemption. (5) The principal place of residence exemption is subject to the restrictions set out in Part 4.
However, cl 11 in Part 4 of Sch 1A restricts the operation of the abovementioned exemption as follows: Part 4 Restrictions 11 Exemption does not apply to land owned by companies and trustees (1) Land is not exempt from taxation under the principal place of residence exemption if: (a) the land is owned, or jointly owned, by a company, unless the land is owned or jointly owned by a trustee company acting in its representative capacity or a company acting in its capacity as trustee of a concessional trust, or (b) the owner of the land, or each of the joint owners, who use and occupy the land as a principal place of residence is an owner only by reason of being a trustee, or (c) the land is owned, or jointly owned, by a person who is a trustee acting in the person's capacity as trustee of a special trust. Note. The expression trustee company (as referred to in subclause (1) (a)) is defined in section 3 (1). (2) For the purposes of the principal place of residence exemption, land that is owned by a company acting in its capacity as trustee of a concessional trust is taken to be used and occupied as the principal place of residence of the owner of the land only if the person, or one of the persons, who so uses and occupies the land is a person who is a beneficiary of the trust.
I have dealt with these provisions below in so far as they apply to this application.

Does the principal place of residence apply?

It is accepted that, during the relevant land tax years, the Property was and continues to be the principal place of residence of Mr Neubert and Ms Apriani and their family.
It is also accepted that, during this time, the Property (i.e. the land) was and continued to be 'owned' by the applicant who is a 'company' as these terms are defined in s 3(1) of the LTM Act. Accordingly, the restriction in cl 11(1)(a) of Sch 1A of the LTM Act applies to the Property. That is, the principal place of residence exemption in cl 2 of Sch 1A does not apply to the Property (i.e. the land) by reason of the cl 11(1)(a) restriction.
As pointed out by the respondent, the restriction in cl 11(1)(c) of Sch 1A also applies to the Property (i.e. the land), because it is owned by the applicant, a trustee acting in its capacity as trustee of a 'special trust' as defined in s 3A of the LTM Act. That section relevantly provides as follows: 3A Special trust - meaning (1) For the purposes of this Act, a trust is a special trust if: (a) the trust property includes land, and (b) the trustee of the trust is the owner of the legal estate in the land, and (c) the trust is not a fixed trust. (2) For the purposes of this section, a trust is a fixed trust if the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes (disregarding section 25 (3)). (3) For the purpose of determining whether a trust is a fixed trust under this section, any equitable interest of the trustee as trustee of the trust is to be disregarded. (3A) If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is the subject of the trust and, accordingly, the trust is taken to be a fixed trust. Note. Under section 25, owners of an equitable estate or interest in land are liable in respect of land tax as if they were legal owners of the land. Owners of an equitable estate in land are treated as secondary taxpayers. (3B) For the purposes of this section, the relevant criteria are as follows: (a) the trust deed specifically provides that the beneficiaries of the trust: (i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and (ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property, (b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed, (c) if the trust is a unit trust: (i) there must be only one class of units issued, and (ii) the proportion of trust capital to which a unit holder is entitled on a winding up or surrender of units must be fixed and must be the same as the proportion of income of the trust to which the unit holder is entitled. (4) A trust is not a special trust: (a) if the trust is solely a charitable trust, or (b) if clause 9 of Schedule 1A applies in respect of the land that is the subject of the trust, or (c) if the trust is a concessional trust, or (d) in relation to any land tax year in which it is a superannuation trust, or (e) if the trust is established by will, but only during the period ending on the expiration of 2 years after the date of death of the testator, or (f) in relation to any land tax year in which it is a family unit trust, as provided by Schedule 1AA. (5) For the purposes of this section, a trust is a superannuation trust in relation to a land tax year if: (a) the trust was established on or before 30 June in the year before that land tax year and, in relation to the year of income ending in that year, the trust is: (i) a complying superannuation fund (within the meaning of section 42 or 42A of the Commonwealth Act), or (ii) a complying approved deposit fund (within the meaning of section 43 of the Commonwealth Act), or (iii) a pooled superannuation trust (within the meaning of section 44 of the Commonwealth Act), or (b) the trust was established after 30 June in the year before that land tax year and, as at midnight on 31 December in that year, the trust is: (i) a regulated superannuation fund (within the meaning of the Commonwealth Act) or is taken to be a regulated superannuation fund under that Act, or (ii) an approved deposit fund (within the meaning of the Commonwealth Act), or (iii) a pooled superannuation trust (within the meaning of the Commonwealth Act).
In this case, under the terms of the Solfon Family Trust, the trust property includes the Property and the applicant, the trustee of the Trust is the owner of the legal estate (i.e. the registered owner) in the Property. Nor is the Trust a fixed trust, a charitable trust, a concessional trust (see cl 3B of the LTM Act), a superannuation trust, a trust established by will or a family unit trust.
Instead it is a discretionary trust, as cl 3.3 and 3.4(a) of the Solfon Family Trust Deed vests the applicant, as trustee, with a discretion as to whether to distribute income or capital of the Trust. That is, the Trust Deed makes no provision for a fixed entitlement to beneficiaries of income or capital of the Trust.
As the beneficiaries do not have a fixed entitlement to all rents and profits from the Property (i.e. the land), the subject of the Trust, the equitable estate in the Property (i.e. the land) is not owned by a person or persons who are the owners of the land for land tax purposes: LTM Act, s 3A(2). For the same reasons, s 3A(3B) of the LTM Act does not apply.
Accordingly, I find that the principal place of residence exemption does not apply in this case. As pointed out to Mr Neubert and Ms Apriani a number of times during the course of these proceedings, if the Property were to be transferred in to their own names, the exemption would apply.

Significance, if any, of the respondent having sent the Land Tax Assessment Notices to the wrong address?

The Taxation Administration Act 1996 (NSW) (TA Act), contains general provisions with respect to the administration and enforcement of a number of prescribed taxation laws, including the LTM Act: see TA Act ss 4 and 7.
For example, s 8 of the TA Act makes provision for the respondent to make an assessment of tax liability of a taxpayer. That section is in the following terms: 8 General power to make assessment (1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer. (2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability. (3) For the avoidance of doubt, an assessment of tax liability is taken to have been made when the Chief Commissioner calculates the tax liability of a taxpayer based on a return under the Payroll Tax Act 2007 or any other Act prescribed by the regulations for the purposes of this subsection (whether or not the Chief Commissioner issues a notice of assessment as a result of that calculation or otherwise notifies the taxpayer of the calculation)
As I have noted above, under s 8 of the LTM Act, subject to the land being exempt, land tax is automatically levied each year on land owned at midnight on the thirty first day of December of the year immediately preceding the year for which it was levied. The person liable for the amount levied is the owner of the land.
Section 11 of the TA Act makes provision for the information on which the respondent is to make an assessment as follows: 11 Information on which assessment is made (1) The Chief Commissioner may make an assessment on the information that the Chief Commissioner has from any source at the time the assessment is made. (2) If the Chief Commissioner has insufficient information to make an exact assessment of a tax liability, the Chief Commissioner may make an assessment by way of estimate.
Section 14 of the TA Act deals with Notices of Assessment as follows: 14 Notice of assessment, reassessment or withdrawal of assessment (1) The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment). (2) If the Chief Commissioner has not issued a notice of assessment of the tax liability of a taxpayer, the Chief Commissioner must issue the notice if a request to do so is made by the taxpayer within 5 years after the liability arose. (3) If the Chief Commissioner makes a reassessment, the Chief Commissioner must issue a notice of assessment (showing the amount of the reassessment). (4) If the Chief Commissioner withdraws an assessment, the Chief Commissioner must issue a notice of withdrawal of assessment. (5) The notice is to be in a form approved by the Chief Commissioner
Section 116 of that Act makes provision for the service of documents by the respondent as follows: 116 Service of documents by Chief Commissioner (1) A document authorised or required to be served on or given to a person by the Chief Commissioner for the purposes of a taxation law may be served on or given to the person: (a) personally, or (b) by leaving it at the last address of the person known to the Chief Commissioner (including, in the case of a corporation, the registered address or a business address of the corporation), or (c) by post addressed to the person at the last address of the person known to the Chief Commissioner (including, in the case of a corporation, the registered address or a business address of the corporation), or (d) by delivering the document, addressed to the person, to the facilities of a document exchange specified by the person for the service of documents of that kind, or (d1) by email to an email address specified by the person for the service of documents of that kind, or (d2) by any other method authorised by the regulations for the service of documents of that kind, or (e) by any means provided for the service of the document by another Act or law. (2) If a person (the agent) has actual or apparent authority to accept service of a document on behalf of another, the Chief Commissioner may, for the purposes of a taxation law, serve the document on the agent as if the agent were that other person. (3) Service of a document on a member of a partnership, or on a member of the committee of management of an unincorporated association or other body of persons, is taken, for the purposes of a taxation law, to constitute service of the document on each member of the partnership, or on each member of the association or other body of persons.
While the respondent is given the power to make an assessment of land tax, the liability for such arises without the need for an assessment. When it is assessed by the respondent, the amount that is payable is that which is prescribed in Part 3 of the LTM Act. That is, LTM Act does not vest the respondent with any discretion as to the liability for land tax or what amount is payable by the owner of the land.
It is my understanding that in issuing the 2015 Land Tax Assessment Notice the respondent relied on the documentation that was lodged with the NSW Lands Title Office when the Property was transferred to the applicant in September 2014. As I have noted above, the Revesby address, in part, appears to have been correct at that time.
As the Notice was not issued until one year after the purchase of the Property and many months after he had notified ASIC of the change in address, Mr Neubert contended that it was the responsibility of the respondent to undertake an ASIC search to check for the correct address. Had the respondent done so, Mr Neubert said it would have been evident that there was a change of address and the Notice would have been sent to the correct address at Cecil Hills. Mr Neubert went on to say that had he and his partner received that Notice they would have been able to pay the amount outstanding and taken action to transfer the Property into their own names and avoid any future land tax liability.
While I can understand Mr Neubert and his partner are frustrated at what has occurred, in my opinion, given the nature of the transfer of the Property to the applicant, there was no basis for the respondent to question the registered address and principal place of business of the applicant as disclosed in the transfer papers lodged in 2014. It was for Mr Neubert and his partner to inform the respondent of the change of address. However, I can understand why they may not have done so if, as they contended, their accountant had advised them that no land tax was payable on the Property. Nevertheless, it was ultimately a matter for which they as officers of the applicant were responsible. Hence, I find no error on behalf of the respondent in addressing the 2015, 2016 and 2017 Land Tax Assessment Notices to the Revesby address. This would appear to have been, from the information provided to the respondent, the last known address of the applicant.
Even if I am wrong, s 16 of the TA Act preserves the validity of the Land Tax Assessments for the 2015, 2016 and 2017 land tax years. That section provides as follows: 16 Validity of assessment The validity of an assessment is not affected because a provision of a taxation law has not been complied with.
Accordingly, I find nothing turns on the Land Tax Assessment Notices for 2015, 2016 and 2017 having been sent to the Revesby address. Nor, does anything turn on the applicant being unaware of its land tax liability for these years until October 2017. As noted in the recent decision of the Tribunal in Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200, at [22] and [23]: 22 It is clear from the Gunasti case, following the High Court decision in Commissioner of Taxation v Ryan (2000) 201 CLR 109; 43 ATR 694; 74 ALJR 471, that the fact that an assessment is not issued punctually by the Chief Commissioner cannot of itself provide an exemption from liability. It is also clear from those cases that concepts such as fairness and justice cannot intrude into the legislative taxation scheme, notwithstanding the fact that such a scheme might in certain circumstances operate harshly. I accept that to a taxpayer in the position of Strathavon that may be a bitter pill to swallow. But that is the law. 23 It must follow that the facts that the relevant assessments were not issued until about March 2016 and not made available to Strathavon until then do not alter the validity of each of those assessments. (emphasis added)
While the issue in Strathavon differed to this case, the concepts of fairness and injustice equally do not intrude into the legislative scheme of land tax liability where an assessment notice is sent to a former address of the taxpayer.

Does the Tribunal have jurisdiction to review the respondent's instalment plan?

Section 47 of the TA Act gives the respondent the power to extend time for the payment of tax by a taxpayer and to also accept the payment of tax by instalments. The applicant and the respondent had numerous discussions about an instalment plan in late 2017 and into 2018. It is unnecessary to deal with the details of these discussions other than to note that on 13 April 2018, the respondent agreed to an instalment plan. It is my understanding that Mr Neubert and Ms Apriani understood that the agreement had been that if they paid the first 12 instalments on time they would not be required to pay the last instalment. For the reasons, I have already given, there is no discretion vested in the respondent to relieve a taxpayer of any amount of land tax that is due and payable. Where there is a discretion, is in respect to interest and penalties, which the respondent has agreed to forego in this case.
In any event, the Tribunal's review jurisdiction is set out in s 96 of the TA Act. That section relevantly provides as follows: 96 Review by Civil and Administrative Tribunal (1) A taxpayer may apply to the Civil and Administrative Tribunal for an administrative review under the Administrative Decisions Review Act 1997 of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if: (a) the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, …
Section 86 of the TA Act makes provision for those decisions of the respondent that may be the subject of an objection by a taxpayer. That section relevantly provides as follows: 86 Objections (1) A taxpayer who is dissatisfied with: (a) an assessment that is shown in a notice of assessment served on the taxpayer, or (b) any other decision (within the meaning of the Administrative Decisions Review Act 1997) of the Chief Commissioner under a taxation law, may lodge a written objection with the Chief Commissioner.
It is not disputed that a decision of the respondent to accept an instalment plan under s 47 is a decision for which a taxpayer may lodge an assessment.
In this case, as I have noted above, Mr Neubert, on behalf of the applicant, lodged an objection with the respondent on 11 February 2018. That objection only related to the Land Tax Assessments for the relevant years (i.e. 2015 to 2018). It made no reference to the instalment plan. Accordingly, the Tribunal has no jurisdiction to review this aspect of the respondent's decision.

Conclusions

For the reasons set out above I have found: 1. the principal place of residence exemption does not apply to the Property (i.e. the land); 2. notwithstanding the fact that the Land Tax Assessment Notices for 2015, 2016 and 2017 were sent to the Revesby address and not the Cecil Hills address and the applicant was unaware of them having been issued until October 2017, the Assessments were nevertheless validly issued and payable; and 3. the Tribunal has no jurisdiction to review instalment plan offered by the respondent.
On the basis of my findings the decision of the respondent in regard to the 2015 to 2018 Land Tax Assessments for the Property owned by the applicant are the correct and preferred decisions and should be confirmed. Accordingly, I make the following orders: 1. The 2015, 2016, 2017 and 2018 land tax assessments of the respondent in regard to the land owned by the applicant are confirmed. 2. The Tribunal has no jurisdiction to review the respondent's instalment plan.

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: 10 January 2019

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