Valencia v Chief Commissioner of State Revenue

Valencia v Chief Commissioner of State Revenue - [2017] NSWCATAD 261 - NSWCATAD 2017 case summary — Zoe

[5]

Powers of Tribunal on review

Section 101(1) of the Taxation Administration Act 1996 (the TA Act) empowers the Tribunal in some circumstances, to confirm, vary or reverse an administratively reviewable decision and make orders as to costs or otherwise as it thinks fit.
The Tribunal Application sought a review of the disallowance decision, rather than a review of the Assessments. However, the Tribunal's review power relates to a decision which has been the subject of an objection rather than the disallowance of the objection itself.
Section 96 of the TA Act relevantly provides: 96(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 …the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection …
Section 97 of the TA Act, which empowers the Supreme Court to review a decision of the Chief Commissioner, is in similar terms to s 96. In Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184, Basten JA with whom Giles and Campbell JJA agreed said at [28]: It is also important to note that the right of review under s 97 is given by reference to the operative decision of the Chief Commissioner and not to a ruling made on an objection. Although the existence of an objection is a necessary precondition to the power of review by the Court, and it is the taxpayer's dissatisfaction with the determination of the objection which provides standing to seek review, it is the initial decision which is the subject matter of the review.
In Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378, a matter involving a land tax dispute in which the Tribunal's predecessor, the Administrative Decisions Tribunal, had held "the objection decision under review is affirmed", the Court of Appeal said at [10]: The Chief Commissioner's decision that should have been the subject of the application for review by the Tribunal was the decision the subject of the objection, that is, the decision to make the assessment of land tax, not the decision on the objection (Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28] and [53]). Nothing turns on this.
I note that the Chief Commissioner is well aware of ss 96 and 97 of the TA Act and of the Paspaley and Ferella decisions in the Court of Appeal and did not refer to the Tribunal Application seeking a review of the disallowance decision rather than a review of the Assessments. The Respondent described the Tribunal Application at [2] as "the [Assessments] that are the subject of the [the Application]" and at [51] sought an order that "[the Assessments] be confirmed and the proceedings be otherwise dismissed".
The Hargreaves letter described the Application as "an application to [the Tribunal] for relief in respect of [the Assessments] and are requesting a waiver …."
At the directions hearing on 13 June 2017 Mr Valencia was informed, and accepted, that the Tribunal's power is to review the Assessments rather than the disallowance decision.
In the circumstances, and notwithstanding the wording of the Tribunal Application, the matter is dealt with as if it were an application for a review of the Assessments.
In determining the Application, the Tribunal is to 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, s 63 ADR Act.

[6]

Brief factual background

There is no real dispute as to the underlying facts. The Chief Commissioner provided a brief synopsis of events at [5] to [17]. The Applicants were informed that they had the right to respond to RS but provided no response. Accordingly, the synopsis was unchallenged. Relevantly, the synopsis provides: 5. On 19 July 2011, the Applicants purchased [the Land]. The Land was an old warehouse and was uninhabitable. At the time, the Applicants resided at …. ("the Kensington property"). 6. On 12 October 2011, [a development application] was lodged with Botany Council for [the Land]. This was approved on 18 September 2013. 7. In about April 2013, the Kensington property was sold and [the Land] became the Applicants' intended principal place of residence. The Applicants rented a properly at …. Kensington. 8. On 20 March 2014, a further development application was lodged in response to Council requirements arising from the fact that [the Land] required demolition. 9. [In May 2014], the Office of State Revenue ("OSR") advised Mr Valencia …. that [the Land] would be exempt for the 2014 and 2015 land tax years but not the 2012 and 2013 land tax years. [The Land] had only become the Applicants' intended principal place of residence around April 2013. 10. The OSR also advised that the Applicants "must be using and occupying the property prior to 31 December 2015" otherwise the Applicant would be liable to pay land tax for the 2016 land tax year and Schedule 1A, Clause 6 of the LTMA would apply. 11. On 28 April 2016, a [third] development application …. was submitted to Botany Council for [the Land]. 12. On 8 August 2016, the OSR sent a letter to the Applicants advising that the land tax exemption granted in relation to the Mascot properly as an intended principal place of residence for the 2012 to 2015 tax years was required to be verified to ensure the requirements of the exemption had been met. 13. On 14 December 2016, consent for the third development application … was given for the Land, operating from 22 December 2016. 14. On 20 January 2017, the OSR contacted Mr Valencia. Mr Valencia advised that [the third development application] …. had been approved however he was still waiting for the construction certificate. Mr Valencia advised that the building work had not commenced at that stage but that he hoped it would be completed in 2018. 15. On 27 January 2017, Land Tax Assessment Notices were issued to the Applicants for the 2014 to 2017 land tax years. 16. On 7 March 2017, the Applicants lodged an Objection with the OSR regarding [the Assessments] …. 17. On 23 March 2017, the OSR sent [the disallowance decision] to the Applicants … on the basis that the Applicants had failed to use and occupy [the Land] as their principal place of residence by the end of the 4 year period specified in clause 6 of Schedule 1A to the LTMA.
I observe that the disallowance decision informed the Applicants that clause 6 of Schedule 1A of the LTM Act (the Schedule) enabled an owner of unoccupied land to claim the land as his or her principal place of residence if the owner intended to use and occupy the land solely as their principal place of residence. The Applicants were also informed that unless the Land was used and occupied for residential purposes by a person other than the Applicants at any time after they acquired the Land, the clause 6 exemption only applied during the period of four tax years immediately following the year in which they became the owners of the Land. As the Land was not occupied by the Applicants by the end of the relevant four year period, earlier land tax exemptions were revoked.
The disallowance decision also stated that the Chief Commissioner had no discretion to reverse the Assessments based on the circumstances of the Applicants' case.

[8]

The Applicants' case

The Applicants' objection claimed a "Principal Place of Residence Exemption" on the grounds of "Concession for unoccupied land intended to be the owner's principal place of residence".
The Tribunal Application made no reference to the Schedule or any provision in the LTM Act. Rather it referred to the building erected on the Land being structurally unsound and unfit for human habitation, the lack of a development approval for a construction certificate, bad advice from the local council and that the Land was the only place the Applicants had and it was intended to become their principal residence. The Applicants asked for a "fair go".
The Hargreaves letter requested that land tax for the Relevant Period be waived and any penalties in place be abated or remitted on the bases that: 1. at the time of purchase the Land was a former warehouse and was affected by strict heritage requirements; 2. several development applications were lodged which were stalled for a number of reasons relating to compliance with Council's strict requirements; 3. persons to whom the Applicants had sold an adjoining property objected to aspects of at least one development application in relation to the Land; 4. although the Applicants would have preferred to occupy the land within a temporary dwelling such as a caravan or portable residence they were unable to do so under threat of a fine or imprisonment; 5. as a result of delays and costs of compliance the Applicants had been placed at a financial disadvantage; 6. some of the development approvals were delayed due to concerns about structural stability of the warehouse causing building contractors to refuse to undertake building activities while the unsafe building had to be retained as required by Council; and 7. there was no consistency of approval between council officers dealing with the applications and their various recommendations.
In short, the Hargreaves letter submitted that all the matters which prevented the Applicants occupying the building were outside their control and the Applicants believed "they have been unfairly victimised and …. are obliged to meet taxes which in the ordinary course would never have been applicable".
I observe that, as with the Applicants' communications in evidence before the Tribunal, the Hargreaves letter made no reference to any relevant provisions of the LTM Act nor did it make any reference to any judicial decision which might support the Applicants' case.

[23]

Unfair victimisation and the effect of matters outside the Applicants control - exercise of discretion

The Applicants submitted that they had been unfairly victimised and placed in a position outside their control where they were obliged to meet taxes which in the ordinary course would never have been applicable. They seek the exercise of a discretion in their favour to waive land tax and penalties.
Firstly, I observe that the Assessments do not impose any penalties nor do they impose any interest. The Assessments allow for a concession in each tax year throughout the Relevant Period in respect of a heritage restriction on the Land.
Secondly, although there are submissions that the applicants have been "unfairly victimised" there is no evidence before the Tribunal to that effect.
Thirdly, I accept that compliance with Council's requirements and any relevant heritage restrictions may well be outside the control of the Applicants.
However, neither the Applicants nor their solicitors referred to any statutory provision or judicial authority which would enable either the Chief Commissioner or the Tribunal to exercise a discretion in their favour.
The Chief Commissioner submitted: 35. Prior to 2011, clause 6(3) of Schedule 1A to the LTMA provided a concession for unoccupied land intended to be an owner's principal place of residence for a period of 2 tax years. It also included a provision giving the Chief Commissioner a discretion to extend the 2 year period in circumstances where there was a delay in the completion or commencement of building or other works where that delay was primarily due to reasons beyond the control of the owner. 36. In 2010, the LTMA was amended such that the 2 year period in clause 6(3) was increased to a fixed period of 4 years and the provision giving the Chief Commissioner a discretion to extend the period under clause 6(3) was repealed. 37. The effect of these amendments is that in relation to tax years 2012, 2013, 2014 and 2015, the Chief Commissioner has no discretion to extend the period in clause 6(3) beyond the 4 year period prescribed in that clause.
Despite having the opportunity to do so, the Applicants did not challenge these submissions. I accept the submissions.
Regrettably for the Applicants, I find that there is no evidence before me to the effect that the Chief Commissioner retains any relevant discretion to extend the period of non-use and occupation of the Land for the purpose of granting a land tax liability exemption pursuant to clause 6 as sought by the Applicants. In this matter, the Tribunal may exercise the functions of the Chief Commissioner, s 63 ADR Act. However, there is no submission or evidence, nor do I find, that the Tribunal has greater relevant powers than the Chief Commissioner.
Section 110 of the TA Act empowers the Chief Commissioner to write off the whole or any part of any unpaid tax if satisfied that action to recover the tax is impracticable or unwarranted. There is no evidence before me as to the extent, if any, to which the tax liability which arose from the Assessments remains unpaid nor that the Chief Commissioner or the Tribunal should write off the whole or any part of such tax on the basis that action to recover the tax is impracticable or unwarranted. In any event such a write off would not assist the Applicants as s 110 of the TA Act also provides that the writing off of tax does not affect the liability of the taxpayer to pay the tax or the power of the Chief Commissioner to recover it.
The Applicants bear the onus of proving their case and I find that they have not satisfied that onus in relation to their submissions as to alleged victimisation and the exercise of a favourable discretion.

At a glance

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Judgment (28 paragraphs)

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Cases Cited (4)

Cited By (11)