Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue

Which decision is the proper subject of this review?

1. The application is framed as a request to review of the Commissioner's decision on 3 August 2016 to disallow Strathavon's objection to the assessments for the 2015 and 2016 tax years. Section 96 of the Taxation Administration Act 1996 ("the Administration Act") allows a taxpayer to apply to this Tribunal for administrative review under the Administrative Decisions Review Act 1997 ("the ADR Act") of "a decision of the Chief Commissioner that has been the subject of an objection". In his written submissions, Mr Kanagaratnam, Counsel for the Chief Commissioner, correctly pointed out that the Chief Commissioner's decision which had been the subject of Strathavon's objection was the decision on 4 March 2016 to issue the land tax assessment notices. It must follow that the decision which I must review is that decision of 4 March 2016. I explained this conclusion to Ms White and Mr Smith, the representatives of Strathavon and they raised no objection to the matter proceeding as a review of that decision.

The powers of the Tribunal on review and the onus of proof

1. Under section 96 of the Administration Act a taxpayer may apply to this Tribunal for administrative review of an assessment or other decision to which the taxpayer has objected, where the taxpayer is dissatisfied with the Chief Commissioner's determination of the objection. Under s101 (1) of the Act, on review the Tribunal may confirm or revoke the assessment, make an assessment or other decision in place of the Chief Commissioner's decision, make an order for payment to the Chief Commissioner, remit the matter to the Chief Commissioner for determination or make any further order as to costs or otherwise as it thinks fit. However, nothing in section 101 of the Act limits the operation of section 60 of the Civil and Administrative Tribunal Act 2013, which makes substantive provisions for the award of costs in proceedings in this Tribunal.
2. Under section 63 of the Administrative Decisions Review Act 1997 ("the ADR Act"), in determining the application for review the Tribunal must decide what the correct and preferable decision is, having regard to the material then before it, including any relevant factual material and any applicable written or unwritten law. For that purpose, the Tribunal may exercise all of the functions which are conferred or imposed by any relevant legislation on the administrator who made the decision: in this case, the Chief Commissioner.
3. In the Supreme Court case of Metricon Qld Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 982 Justice White at [26] confirmed that in proceedings under section 96 of the Taxation Administration Act the tribunal reviewing the original decision conducts a de novo hearing. That is a hearing under which the tribunal is not limited to the materials before the Chief Commissioner, the parties are not bound by the grounds put by them in relation to the objection or the reasons of decision relating to the objection. The taxpayer does not have to show that the Chief Commissioner had erred on the materials before him or her or that the exercise of discretion by the Chief Commissioner was vitiated by a mistake of law or failure to have regard to a consideration of which regard should be had or by having regard to extraneous considerations. The tribunal is not confined to confirming or revoking the assessment and can make an assessment in place of the Chief Commissioner's assessment and can make an order for the payment of any amount of tax which is the subject of an assessment but has not been paid.
4. Under s 100 (3) of the Administration Act the Applicant in proceedings has the onus of proving its case in a review by this Tribunal. The requisite standard of proof in such a review is the "balance of probabilities": Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187.

Uncontested facts and applicable statutory provisions

1. The facts of the matter as asserted by the Chief Commissioner are set out in substantial detail in the written submissions of his Counsel received on 13 December 2016. As I understand it, the following facts are uncontested. They provide the necessary background for an understanding of the issues in dispute. It is also uncontested that the principal statutory provisions relevant to this matter are as set out or described below. 1. On 5 February 2011 Strathavon applied for exemption from land tax for the 2010 tax year on the basis that the Land was used for a boarding house. I understand that the Chief Commissioner concedes the accuracy of Strathavon's assertion that it was granted an exemption from land tax for the 2011 and 2012 years on the basis that the Land was used for a boarding house. 2. It can be assumed that the Guidelines make it clear that a boarding house will be treated as "low cost accommodation" within the exemption in s10Q of the LTM Act, provided the conditions in the Guidelines are met. 3. A Revenue Ruling known as "LT 093" was applicable to the 2014 tax year. The Guidelines for that tax year commenced at paragraph 3 of LT 093. Significantly, those Guidelines introduced a requirement, set out in paragraph 4, that in order to be exempt from land tax, a boarding house had to be registered under the Boarding Houses Act 2012. The new requirement was achieved by introducing into the Guideline a new definition of "boarding house" to mean premises "which are registered under the Boarding Houses Act as either a general boarding house or an assisted boarding house" and which satisfied other specified conditions. 4. Paragraph 6 of LT 093 contained transitional provisions to allow for the introduction of this new definition, in the following terms: "Transitional provisions-Owners who were exempt from land tax in the 2013 land tax year have until 30 June 2014, or such later date as approved by the Chief Commissioner, to register as a boarding house or assisted boarding house under the Boarding House (sic) Act 2012 to be eligible for the exemption in the 2014 land tax year. The transitional provision will only apply for the 2014 land tax year." 1. Most significantly for the taxpayer in this case, these transitional provisions were not included in LT 095 or LT 098 which contained, respectively, the Guidelines for the 2015 and 2016 tax years. 2. Strathavon did not become a registered boarding house until 11 February 2016. I understand that Strathavon concedes that it was not in fact registered as a boarding house under the Boarding Houses Act within the time limit specified in paragraph 6 of LT 093; that is, by 30 June 2014 or such later date as approved by the Chief Commissioner. In fact so such later date has been approved. 3. I understand that it is uncontested that Strathavon did not receive a Land Tax Assessment for the 2013, 2014, 2015 or 2016 tax years until 4 March 2016. 4. I understand that Strathavon concedes that if land tax were payable as asserted by the Chief Commissioner, the amount of land tax payable for the 2015 and 2016 tax years would be $11,768.50. That is, there is no dispute as to the actual calculation of the quantum of tax, only as to liability for it. 5. Section 10 Q of the LTM Act effectively exempts land from land tax "leviable or payable in respect of the year commencing on 1 January 1995 or any succeeding year" but only if 3 conditions are all satisfied. The conditions are set out in the paragraphs of s10 Q (1) as follows: 1. "The land is used and occupied primarily for low cost accommodation; and 2. application for the exemption is made in accordance with this section; and 3. the Chief Commissioner is satisfied that the land is so used and occupied in accordance with guidelines approved by the Treasurer for the purposes of this section."

Strathavon's Case

1. As Strathavon was the objector to the land tax assessment it is convenient to consider its case first and then to consider the Chief Commissioner's case in response. Strathavon made a number of written submissions. These included submissions which comprised part of its application document, a 3-page document headed Points of Claim received by the Tribunal on 23 November 2016 which was accompanied by numerous supporting documents and a document described in a covering letter as the "final submission" which was received by the Tribunal on 3 January 2017. Mr Darcy Smith, the principal and a director of Strathavon, gave evidence at the hearing and Ms Kathleen White, who was identified as the Office Manager of Strathavon, made oral submissions. I accepted Ms White as the representative of Strathavon at the hearing.

Assertions of fact

1. It is important to understand Strathavon's main assertions of fact, particularly in so far as they help to explain how the alleged liability for land tax for 2015 2016 arose. The assertions can be summarised as follows. 1. Strathavon was granted an exemption for land tax for the tax years 2011 and 2012 on the basis that the Land was used for a boarding house. 2. No changes were made to the use of the Land. It continued to be used as a boarding house and Mr Darcy Smith asserted that he was not aware and was not made aware (as he contends he should have been) of the new requirement introduced for the 2014 tax year; that is the requirement set out in LT 093 paragraph 4, to the effect that the Guideline and the exemption only applied to premises which were registered under the Boarding Houses Act either as a general boarding house or an assisted boarding house. 3. Mr Smith and Ms White contend that Strathavon had received no communication from the Office of State Revenue from the time that the exemptions for 2011 and 2012 were granted (which we can assume was about 10 October 2012 when a "nil" assessment notice was issued) until January 2016. On an unspecified date in January 2016 Mr Smith was telephoned by an officer of the Office of State Revenue and was informed that Strathavon owed land tax for each of the 2013, 2014, 2015 and 2016 years. Mr Smith concedes that the officer told him in that conversation that Strathavon had an obligation to apply for the boarding house exemption each year. 4. Strathavon lodged an application for registration of the Land as a boarding house promptly after that telephone call, apparently on 1 February 2016. It received confirmation of its boarding house registration on 11 February 2016.
2. Strathavon asserts that: 1. the Land continued to be used as a boarding house between the time of the granting of exemptions for the 2011 and 2012 tax years (that is in October 2012) and the present; that is, there was no change to the usage of the Land during that period; 2. there was a delay in the issuing of land tax assessments, such that it was not until 4 March 2016 that Strathavon received land tax assessments for 2013, 2014, 2015 and 2016 (although it was notified that it had land tax liability for those years in the telephone call from the State Revenue officer in January 2016); 3. because of those matters and facts, Strathavon was unaware of any liability for the 2015 and 2016 tax years and that Strathavon was entitled to assume during that period that it had no such liability, at least until Mr Smith received the January 2016 call from the State Revenue officer,.
3. Mr Smith states that if he had known of the requirement to register as a boarding house in order to take advantage of the exemption in 2013 (or, in fact, I surmise, by 30 June 2014 which was the deadline for registering as a boarding house required under LT 093), he would have applied immediately for that registration.
4. Moreover he asserts that if he had known those matters within that period he would have known that the new requirement to register as a Boarding House had been introduced in the Guideline pertaining to the 2014 tax year. He points out that boarding house registration costs $100 whereas Strathavon's liability for land tax for the 2015 and 2016 years is $11,672. As he put it in his own words, in those circumstances: "Why wouldn't I register for a boarding house with the difference in amounts of money I could save?"
5. The contention which is central to Strathavon's case is that the delay by the Chief Commissioner in issuing assessments for the 2013 to 2016 tax years was the cause of Strathavon's inability to take advantage of the boarding house exemption and so Strathavon should not have been assessed for land tax for the 2015 2016 tax years.
6. The legal basis for that central contention has been framed in various ways by Strathavon in its documentation and submissions, including those at the hearing. In essence, Strathavon's case appears to rely on the following areas and principles of law. 1. The law of estoppel. Strathavon's case is that the Chief Commissioner was estopped by his delay from assessing land tax for the relevant years on the Land, or is now estopped from denying the applicability of the boarding house exemption to the Land for those years. 2. Misleading statements and actions. I understand Strathavon to assert that the actions of the Chief Commissioner and the documentation issued under his authority (including but not limited to website material headed "Frequently-asked Questions" or "FAQs") misled Strathavon as to what it needed to do in order to take advantage of an otherwise available exemption. 3. Negligence. It appears to be asserted that the Chief Commissioner's failure to issue assessments until mid-2016 for the tax years from 2013 to 2016 inclusive constituted a negligent omission. 4. Breach of statutory duty/obstruction of the due operation of the land tax regime. It is asserted that the Chief Commissioner's actions obstructed the due and proper operation of the Land Tax Management Act by reason of the delay in issuing assessments for the 2013 three 2016 tax years 5. Entrapment. The assertion, at least as expressed in the Grounds accompanying the Application and the Points of Claim document was the failure of the Chief Commissioner to alert Strathavon to the need to register as a boarding house (and presumably, the need to do so annually) or to notify the changes brought about by LT 093 "entrapped" Strathavon ; 6. "Social and community benefit". It is asserted that there is a social and community benefit in the provision of "truly affordable housing to the needy in our community" (last bullet point of the Points of Claim document) and I surmise that that is put forward as a ground upon which Strathavon should be excused from any land tax liability as assessed.
7. Strathavon submits that its case is substantiated by the following specific items of evidence. 1. A letter dated 14 December 2010 which relates to the 2011 tax year, from the Chief Commissioner addressed to Mr Darcy Peter Smith and showing a particular client identification or "Client ID" number. For convenience of reference I have referred to that letter as "the December 2010 letter to Mr Smith". Mr Smith is of course the principal and a director of Strathavon. As might be expected, the Client ID number indicated on the December 2010 letter to Mr Smith is not that of Strathavon, but rather of Mr Smith personally. The letter would therefore appear to relate to property other than the Land and it seems accepted that it did. However the December 2010 letter to Mr Smith is relied upon by Strathavon because underneath the heading: "If you have not received your assessment by 4 February 2011" it states, in part: "you must complete and lodge a variation by 28 February 2011 if your land holdings or land usage on 31 December 2010 have changed." (Emphasis added). I understand Strathavon's contention to be that that letter and the quoted words in particular were understood by Mr Smith to indicate that there was no need to lodge a variation return or to notify the Chief Commissioner of anything else or indeed to take any other action in order to retain any current exemption, unless there had been a change in land use, which, in respect of the Land, there had not. That, of course, is not the correct meaning of those words. I also assume it is contended that this understanding was reasonable in the circumstances. I understand Strathavon to say that it was reasonable for Mr Smith to assume that this was a general statement which would apply equally to the properties owned by Strathavon including, of course, the Land. 2. An email from Mr Paul Parsons to Mr Smith dated 21 November 2016 (which for convenience of reference I will refer to as "the Parsons email"). Mr Parsons was at that time a Technical Specialist in the Returns, Exclusions and Exemptions Team of the Office of State Revenue. The parts of the email which I understand Strathavon to rely upon are as follows: "The process when I was managing the area was that we would process all the applications by the middle of the year and then inform the clients who hadn't lodged a claim by way of assessment which would then give the clients an opportunity to then apply. I do not understand why it took four years to issue you assessments and believe you are entitled to be concerned as to why you were not informed earlier."

The Chief Commissioner's Case

1. Detailed written and oral submissions were made by Counsel for the Chief Commissioner, but it is adequate for current purposes to summarise his case as follows. 1. On a correct application of the relevant law, Strathavon has a land tax liability for the tax years 2015 and 2016 in respect of the Land in the amount assessed and that liability has been properly assessed by the Chief Commissioner. 2. In particular, Strathavon has not satisfied the requirements of s 10 Q of the LTM Act and so is not entitled to an exemption from land tax in respect of the Land for the 2015 and 2016 tax years. 3. The matters submitted by Strathavon do not give rise to an exemption from land tax liability for those tax years on the basis that the Land was used and occupy primarily for low cost accommodation, namely as a boarding house. 4. Even if it is established to the Tribunal's satisfaction that there was a delay on behalf of the Chief Commissioner in issuing the assessments for the 2013 to 2016 tax years until 4 March 2016, firstly, neither the Chief Commissioner nor the Tribunal has any general discretion to exempt Strathavon from compliance with section 10 Q or compliance with the requirements of LT 095 or LT 098; and secondly any such delay cannot operate as a fetter on the Chief Commissioner's right and indeed duty to make an assessment of land tax in the amount in which he has made it. Put at its highest, any such delay would go to available discretions under the relevant legislation, for example the discretion to impose a penalty or interest charge. In fact, no penalty or interest charge has been imposed on Strathavon for the 2015 and 2016 tax years and Strathavon is merely being required to meet its land tax obligations for those years. Additionally, an appropriate credit has been applied to Strathavon's liability for the 2014 tax year.

Does the fact that the assessments were not issued until March 2016 alter the validity of each of those assessments?

1. Although I did not understand Mr Kanagaratnam on behalf of the Chief Commissioner to concede that the Chief Commissioner delayed the issue of the land tax assessments for the 2013 to 2016 tax years, it seems indisputable that those assessments were not in fact issued made available to Strathavon until early March 2016.
2. In his closing submissions Mr Kanagaratnam referred to the Parsons email and contended that even if that document were accepted as true and accurate, it could not be concluded that the assessments in question were invalid but, at most, that there had been some form of omission to raise these assessments annually. I did not understand Mr Kanagaratnam to formally admit that there had been such an omission.
3. I am satisfied that the law is clear on this point. Once a liability for land tax arises the Chief Commissioner has an obligation to give effect to the LTM Act by issuing an assessment (Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218; 90 ATR 906 at [29] to [34] and Joukhador v Chief Commissioner of State Revenue [2015] NSWSCATAD 43 at [12]-[13]) , but neither s 8 (1) of the Administration Act nor any other relevant statutory provision imposes any time limit on the issue of an assessment, so it must follow that there was in this case no legal impediment to the issue of the land tax assessment notices for the 2013 2016 tax years in or about March 2016.
4. 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.
5. 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..

Estoppel

1. Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218; 90 ATR 906 and in particular the authorities cited at [19] in that case are clear authority that estoppel does not lie against the Chief Commissioner in the discharge of his duty to administer the taxation law. I note that, as in Gunasti, no loss has been demonstrated to have been suffered by Strathavon as a result of the issue of the relevant land tax assessments in March 2016. As stated in Gunasti at [21], in order to establish an estoppel it must be shown that the applicant has suffered loss. Strathavon has not demonstrated any loss and there were no contentions on behalf of Strathavon that it had done so or that there was any other proper basis for the application of the estoppel doctrine.

Was Strathavon in fact misled?

1. I cannot accept that the actions of the Chief Commissioner or any documentation issued under his authority, including the Frequently-asked Questions or FAQs available on the relevant website from the Office of State Revenue misled Strathavon as to what it needed to do in order to take advantage of the boarding house exemption. In reaching that conclusion I find that Strathavon was properly put on notice of the fact that the boarding house exemption needed to be applied for annually. In cross-examination on this point Mr Smith on behalf of Strathavon indicated that he was under the impression that once an exemption was granted "it carried on" from year to year. That was in the course of his cross-examination concerning the application for exemption made by Strathavon in respect of the 2010 tax year which was signed by Mr Smith on behalf of Strathavon and dated 5 February 2011. It is of significance that, in that document: 1. the words preceding paragraph 1 are: "I do hereby solemnly and sincerely declare that for the year ended as at 31 December 2010…:"; 2. paragraph 4 commences with the words: "During the whole of the calendar year in which you are applying for (sic.) …" ; and 3. paragraph 5 states, in part: "I have read and understood OSR's "Exemption-Land Used and Occupied Primarily for a Boarding House" for the year I am applying for… (Emphasis added).
2. The words are a perfectly clear indication that the application relates only to a particular year. I am not satisfied that Strathavon was misled. Even if Strathavon, through Mr Smith, had formed the genuine impression that once an exemption was granted it continued until further notice or action by the Chief Commissioner (and I make no specific finding as to whether that was the case), that does not ground an allegation of some form of misleading conduct by the Chief Commissioner and there is nothing else before me which substantiates such an allegation.

Has there been any negligence, breach of statutory duty or entrapment by the Chief Commissioner as alleged, so as to give Strathavon a remedy?

1. There is nothing before me which substantiates any proper claim of negligence, breach of statutory duty or entrapment. I can see no relevant statutory duty to issue assessments promptly or to keep taxpayers advised of their taxation obligations. Strathavon provided no particulars of any substance for either of the allegations of negligence or entrapment. In any case there is no allegation, and no support for any inference, that Strathavon has suffered a loss. These grounds must fail.

Social and community benefit

1. I accept that there is a social and community benefit to the system under which certain land tax concessions and exemptions are made available to land owners who provide appropriate low cost accommodation. I cannot see how that validates Strathavon's claim that it should be excused from its legal obligation to pay the land tax as assessed.
2. For completeness I add that I am not aware of any other basis upon which the relevant assessment could properly be challenged.
3. Finally, I note that the Chief Commissioner has not imposed interest or penalty duty and has credited the tax for the 2014 tax year.

Conclusions

1. It must follow that: 1. Strathavon did not meet the requirements of section 10 Q of the LTM Act for the 2015 and 2016 tax years and is not entitled to an exemption from land tax on that basis for those tax years; 2. Strathavon is by proper operation of the relevant law, liable for the amounts assessed; 3. the Chief Commissioner's decision dated 4 March 2016 to issue land tax assessments for 2015 and 2016 was valid.

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: 21 June 2017