Song v Chief Commissioner of State Revenue

Land Tax for the 2020 to 2022 land tax years

1. Land tax is payable in respect of land owned at midnight on 31 December in the year immediately preceding a land tax year unless an exemption applies.
2. The Applicant claims the principal place of residence exemption applies for the 2020 to 2022 land tax years in respect of the Property.
3. As noted above, the principal place of residence exemption is contained in clause 2 of Schedule 1A of the LTMA. Under that clause land, which is residential land, which is used and occupied by the owner as the principal place of residence of the owner, and for no other purpose, as at the relevant taxing date is exempt from taxation. The relevant taxing date is 31 December of the year preceding the relevant land tax year.
4. Clause 2(2) of Schedule 1A of the LTMA provides: (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.
5. It is not in dispute that the Property was residential land.
6. It is clear from the movement records that the Property was not continually used and occupied by the Applicant for a period of six months in the year preceding any of the relevant tax years.
7. The question, therefore, is whether I can be otherwise satisfied that the Property, although not actually occupied by the Applicant on 31 December in the year preceding any of the relevant tax years, was, nonetheless, used and occupied by him as his principal place of residence in any of the years preceding the relevant tax years, that is in the calendar years 2019, 2020 or 2021.
8. Section 3 of the LTMA defines "principal place of residence" as being the one residence that is, among the one or more places of residence of the person within and outside of Australia, the principal place of residence of the person. "Principal place of residence" is not otherwise defined in the LTMA.
9. It is not for the Respondent to establish that the Applicant's China residence was his principal place of residence. It is for the Applicant to establish that the Property was his principal place of residence.
10. The Applicant submitted that his wife and daughter had used and occupied the Property during all relevant years as their principal place of residence. However, for the exemption to apply, the owner of the property must use and occupy it as his principal place of residence, so the Applicant's family's use of the Property is not relevant.
11. In Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 at [19] - [23] the Administrative Decisions Tribunal summarised the general principles to be applied in determining a person's principal place of residence as follows: 19 The Act does not provide any technical or legal meaning for the expression "principal place of residence" and accordingly, the expression has its ordinary meaning. A person's place of residence is usually understood as "the place where he eats, drinks and sleeps" (per Ridley J in Stoke-On-Trent Borough Council v Cheshire County Council [1915] 3 KB 699 at 706). The use of the term "principal" in the expression suggests that a person may use and occupy more than one residence but that the exemption is only available for the principal place of residence of the person. 20 In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of the residence in each case (per Fryberg J in Dean v Commissioner of Stamp Duties (Qld)(No 2) [1996] 2 Qd R 557 in considering the meaning of the expression "principal place of residence" found in the Stamps Act 1894 (Qld)). 21 The onus to establish one's principal place of residence is usually discharged on the basis of various matters. It is important to note, as observed by the Victorian Civil and Administrative Tribunal in Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 that: "… while sleeping by itself in a place can be an indication of a principal place of residence, it is not the sole matter to be taken into account. One needs to look at a whole indicia of matters …One needs to look as well at where the applicant ate; his use of electricity and the furniture and fittings and other matters such as entertainment of friends in the house… Sleeping in a place does not make a residence. It has got to be the whole indicia of things that are done in a home which are described in the cases…" 22 Other indicia of matters would include evidence of an applicant's use of the address of the property as the residential address for purposes of his or her mail, driving licence, on the electoral roll, in immigration records, income tax returns and telephone bills. 23 In Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 the Appeal Panel of the Tribunal agreed that "to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor occupation for any other reason". The Appeal Panel also held that "the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue". (Also see Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26).
12. In Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 the Appeal Panel also stated: Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue. This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible."
13. The Respondent accepts, and I find, that when the Applicant was in Australia he stayed at the Property with his family.
14. There is limited evidence as to the quality or nature of the Applicant's use of the Property when he did stay there. We do not know, for example, if the Property was listed as his residential address for licence purposes or for tax purposes. There is no evidence as to how the Applicant spent his time at the Property.
15. However, we do know how long each year the Applicant spent at the Property. In the 2019 calendar year the Applicant spent at most 53 days in total at the Property, in the 2020 calendar year at most 45 days in total and in the 2021 calendar year the Applicant did not spend any time at the Property at all. In each of these years the Applicant spent the rest of his time in China in a property he had leased for a period of almost three years.
16. The length of the Applicant's individual stays at the Property over this period were also brief. In 2019, the longest period the Applicant spent at the Property was a period of 18 days, whereas he stayed for lengthy periods, including one period of almost six months, in China.
17. While the short length of a person's residence is not necessarily determinative, common sense suggests a prima facie incongruity between a person's occupation of a property for a maximum period of approximately six or seven weeks per year and a characterisation of that property as the person's principal place of residence: Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 at [39].
18. It is relevant to note also that after the Applicant was permitted to return to Australia on 7 June 2022 and after he received his permanent residency visa, the Applicant again departed Australia on 29 July 2022 and remained in China for a period of approximately six months.
19. I do not consider on the evidence before me that the Applicant has demonstrated a sufficient degree of permanence to the Applicant's occupation of the Property in the sense required by Ferrington. On the evidence before me the Applicant has not demonstrated that his use and occupation of the Property was anything other than transient or temporary.
20. The Applicant has not satisfied his onus of proof that he is entitled to the principal place of residence exemption as there is insufficient evidence to demonstrate that his use or occupation of the Property for the relevant land tax years was of a sufficient length, nature or degree to constitute the Property as his principal place of residence.
21. The Applicant argues that during the pandemic, if the borders had not been closed or if he had been permitted to return to Australia, he "undoubtedly would have chosen" to live at the Property with his family.
22. However, an intention to use and occupy the Property as a principal place of residence is not sufficient. There must be actual use and occupation: Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26 at [14].
23. The Applicant further submits that he has been unable to avoid land tax by reason of the border closures and it is unfair to penalise him for a situation which is entirely beyond his control.
24. However, there is no legislative provision or authority which gives the Chief Commissioner or the Tribunal any discretionary power to exempt a taxpayer from land tax if the statutory criteria are not met. 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; Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [47].
25. Accordingly, I find that the Applicant was liable for land tax in respect of the Property for the 2020 to 2022 land tax years.

Surcharge Land Tax 2022 land tax year

1. For the 2017 and following land tax years, surcharge land tax is charged on residential land owned by "foreign persons" as at midnight on 31 December in the preceding land tax year.
2. Section 4 of the FATA defines "foreign person" as a person who is not "ordinarily resident".
3. Section 5 of the FATA provides that an individual who is not an Australian citizen is "ordinarily resident" at a particular time if and only if the person has been in Australia during 200 or more days in the period of 12 months preceding that time and, in respect of individuals not in Australia, immediately before the individual's most recent departure from Australia their continued presence in Australia was not subject to any limitation as to time imposed by law.
4. Accordingly, as the Applicant was not an Australian citizen, he will be liable for surcharge land tax for the 2022 land tax year unless, as at 31 December 2021: 1. He had been in Australia for 200 or more days in 2021 (first limb); and 2. As at 17 March 2020, the date of his most recent departure from Australia, his continued presence in Australia was not subject to any time limitation imposed by law (second limb).
5. During the 2021 calendar year, the Applicant was not in Australia at any time. Accordingly, the Applicant did not satisfy the first limb of the definition of "ordinarily resident".
6. Again, the Tribunal has no discretion in this regard. While the Applicant may have been able to satisfy the 200 day requirement had the borders not been closed, that is not relevant. The legislation does not provide any relief for any person who fails that test: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30], Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38].
7. Further, as at 17 March 2020, the Applicant held a bridging visa which was a temporary visa that permitted the Applicant to stay in Australia until his substantive visa application was determined or judicial review proceedings in relation to it were completed. A person who holds a temporary visa is a person whose presence in Australia is subject to a limitation as to time imposed by law, the Migration Act 1958 (Cth): Shah v Chief Commissioner of State Revenue [2022] NSWCATAD 311. The Applicant was not granted a permanent visa until 7 June 2022.
8. Accordingly, the Applicant also did not satisfy the second limb of the definition of "ordinarily resident".
9. The Applicant was, as at 31 December 2021, a foreign person for the purposes of the LTA and liable to surcharge land tax for the 2022 land tax year unless an exemption applied.
10. The exemption in s 5B of the LTA did not apply as it only applies where a person is a permanent resident as at midnight on 31 December of the relevant year. As noted above, the Applicant was not issued a permanent visa until 7 June 2022. Accordingly, the s5B exemption could not apply for the 2022 land tax year.

Remission of Interest

1. The Applicant has not challenged his liability to surcharge land tax for the 2018 to 2021 land tax years and I have found above that he was liable to surcharge land tax for the 2022 land tax year.
2. As surcharge land tax was not paid by the Applicant in respect of those years, there has been a tax default. It is not necessary that an assessment be issued to create liability to the tax: De Tarle v Chief Commissioner of State Revenue [2021] NSWCATAD 270 at [46].
3. Interest was, accordingly, correctly imposed in the Assessment under s 21 of the TAA in respect of the unpaid surcharge land tax amounts for the 2018 to 2022 land tax years.
4. However, s 25 of the TAA 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.
5. In E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190 at [242], Ward CJ in Eq (as Ward P then was) commented that the power in s 25 of the TAA to remit interest is "unconstrained and discretionary". This Tribunal is able to exercise that same power under s 101 of the TAA.
6. The Applicant submits that all interest should be remitted because, he says, he has taken reasonable care to comply with his obligations.
7. The Applicant submits that when he purchased the Property there was no surcharge land tax and he was not aware of the introduction of surcharge land tax in 2016. He submits that because he spent significant time overseas establishing and maintaining his business it was difficult for him to be aware of the introduction of the surcharge land tax. He says that, if he had been aware of it, he would have adjusted his plans for the 2018 year and following so that he satisfied the criteria of being ordinarily resident.
8. He submits that as soon as he became aware of the issue he instructed an accountant to advise him and responded to the Respondent promptly.

Market Rate component

1. 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 the 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].
2. The Applicant's ignorance of his liabilities is not an exceptional circumstance which would justify remission of the market rate of interest.
3. I did not understand the Applicant to submit that the border closures, circumstances beyond his control, would justify remission of the market rate of interest. However, if I am wrong about that given that, even if the Applicant had satisfied the requirement to be in Australia for 200 days or more in the relevant land tax years, as set out above the Applicant would still have been a foreign person for the purposes of the LTA as he was not a permanent resident, so that there is no causal link between the border closures and the liability to surcharge land tax.
4. The Applicant has put forward no other circumstances which would justify remission of the market rate component of the interest.

Premium component

1. The premium component of the interest 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].
2. The Respondent points to guidelines he has issued as to when he will remit the premium component of interest. Those guidelines state that, when the tax default was within the control of the taxpayer, the Chief Commissioner will usually remit the premium component of interest where there is evidence that the taxpayer has taken reasonable care to comply with his obligations.
3. The Tribunal is not bound by the Respondent's guidelines: Laviva Nominees Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 84. However, courts have held that the matters set out in the Respondent's guidelines are relevant to the exercise of the discretion to remit: Harbourlights - Strata Plan 32515 v Chief Commissioner of State Revenue [2023] NSWCATAD 172 at [79] and the cases referred to therein.
4. 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.
5. 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.
6. Here, on the state of the evidence, I cannot be satisfied that that the Applicant took reasonable care to comply with his tax obligations. I accept that he was unaware of the introduction of the surcharge land tax, and I accept that his being overseas for significant periods of time would have made it more difficult for him to become aware of its introduction, however there is no evidence as to what steps he took to ensure he was complying with his tax obligations including any advice he sought over the relevant years as to his obligations.
7. On the other hand, in terms of the criteria referred to in Incise Technologies it is relevant to take into account the fact that the Applicant had paid land tax assessments previously issued in respect of the Property for each of the 2018 to 2022 years. Further, even though he disputed his liability to land tax for the 2020 to 2022 years and surcharge land tax, nonetheless once the Assessment issued the Applicant did immediately seek advice as to his obligations and entered into an instalment payment plan for all amounts assessed (including the disputed amounts). All instalments save the last instalment (which has not yet fallen due for payment) have been paid in accordance with that plan. Further, while the Applicant did not disclose his potential liability to the Respondent before the investigation commenced, I accept that occurred because the Applicant was unaware of his potential liability and considered that he was complying with his obligations. Since the Respondent's investigation commenced the materials before the Tribunal show, and the Respondent accepts, that the Applicant has co-operated fully with the Respondent. Further his failure to pay the surcharge land tax amount was not a result of any wilful default.
8. In the circumstances, while this is not a case where it would be appropriate to remit the premium component in full particularly where the Applicant cannot demonstrate that he took reasonable care, s 25 of the TAA provides that the Chief Commissioner, and therefore the Tribunal, may remit either the market or premium component of interest "by any amount". In light of the fact that the Applicant generally satisfies the criteria referred to in Incise Technologies, I consider it is appropriate to remit the penalty component of the interest which has been imposed in part. In my view, it would be appropriate to remit the premium component of the interest imposed by 30%.

Conclusion

1. It follows that I find that the Applicant has not satisfied his onus of proof that he was entitled to the principal place of residence exemption for the 2020 to 2022 land tax years and that he is liable to land tax in respect of the Property for those land tax years.
2. I further find that the Applicant is liable to surcharge land tax for the 2022 land tax year.
3. I do not consider that it is appropriate to remit the market component of the interest which has been imposed. However, I do consider that it is appropriate to remit the premium component of the interest by 30%. I will, accordingly, remit the Assessment to the Respondent for determination in accordance with these reasons for decision.

Orders 1. The Assessment is remitted to the Respondent for determination in accordance with these Reasons for Decision.

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: 17 November 2023