On 28 March 2024 the Chief Commissioner of State Revenue, the respondent disallowed Mr Wan's, the applicant's objection regarding the 2019 land tax year. In this Tribunal, the applicant seeks a review of the respondent's decision imposing market rate interest and premium rate interest for the 2019 land tax year on the basis that he was not informed by the respondent at the time of his liability for surcharge land tax or the requirement to lodge a return.
The parties have been given an opportunity to make submissions as to whether the Tribunal should dispense with a hearing. Having considered the material before the Tribunal I am satisfied that the Tribunal can adequately determine the matter in the absence of the parties. I make an order that the Tribunal dispenses with a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).
For the reasons that follow, I have decided that that the applicant did not establish that he took reasonable care to comply with his tax obligations and there are no exceptional circumstances warranting the remission of the market rate interest or the premium rate interest for the 2019 land tax year.
[2]
Relevant Facts
The applicant relied on his application which attached the notice of determination made by the respondent, dated 28 March 2024 and a brief outline, as well as a reply received on 26 August 2024.
The respondent relied on documents filed pursuant to s 58 of the Administrative Decision Act 1996 (NSW) on 31 May 2024, a tender bundle filed on 31 July 2024 and written submissions.
The undisputed facts are that in 2015 the applicant purchased two properties in New South Wales. On 16 July 2018 the respondent wrote to the applicant, informing him that foreign persons are liable for a surcharge, that there is no tax-free threshold for the surcharge and that if he was a foreign owner he was to update his records within 21 days of the date of the letter.
On 16 November 2023 the respondent issued to the applicant a Notice of Investigation - Individual Surcharge Audit. The letter stated that:
Our records indicate that you are not an Australian citizen or ordinary resident as you were not a permanent resident and or did not meet the annual 200 day residential requirement from 2019… Surcharge land tax applies to foreign owners of residential land in NSW. Surcharge land tax is charged under section 5A of the Land Tax Act 1956.
On the same date, the respondent sent to the applicant a Land Tax Assessment Notice for the 2019 and 2020 land tax years.
[3]
Issues for Determination
The issues for determination are whether the applicant took reasonable care to comply with his tax obligations and whether there are exceptional circumstances warranting the remission of the market rate interest or the premium rate interest for the 2019 land tax year.
[4]
Relevant Legislative Provisions
Section 5A of the Land Tax Act 1956 (NSW) ("LT Act") sets out provisions on surcharge land tax on properties owned by foreign persons. Section 5B of the LT Act provides a residence requirement for a principal place of residence exemption from surcharge land tax.
Section 12(1) of the Land Tax Management Act 1956 (NSW) ("LTM Act") read together with Government Gazette Number 134, 7 December 2018, requires a taxpayer who is a "foreign person" for the purposes of the surcharge land tax and who owns residential land in NSW to furnish a land tax return if they had not been assessed for surcharge land tax. A variation return must be lodged by the due date in the assessment.
Section 72 of the LTM Act deals with a failure of a taxpayer to furnish a land tax return.
Section 3 of the Taxation Administration Act 1996 ("TA Act") defines "tax default" as a failure by a taxpayer to pay taxation in accordance with the taxation law. Section 21 of the TA Act states that if a tax default occurs, the taxpayer is liable to pay interest on the unpaid amount of taxation.
Section 9 of the TA Act provides the circumstances in which the Chief Commissioner may make a reassessment.
Section 22 of the TA Act states:
1. The interest rate is the sum of--
(a) the market rate component, and
(b) the premium component.
1. The "market rate component" is--
(a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or
(b) the rate specified for the time being by order of the Minister published in the Gazette.
1. The "premium component" is 8% per annum.
2. In this section, the Bank Accepted Bill rate in respect of any day within a period specified in Column 1 of the Table to this subsection is the monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank for the month specified in Column 2 of that Table opposite that period.
Table
Column 1 Column 2
Period Monthly average yield
1 January to 31 March the preceding November
1 April to 30 June the preceding February
1 July to 30 September the preceding May
1 October to 31 December the preceding August
[5]
(5) If the monthly average yield of 90-day Bank Accepted Bills for a particular month is not published by the Reserve Bank before the beginning of the relevant period, it is taken to be the same as the last monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank before that month.
Section 25 concerns the remission of interest:
(1) The Chief Commissioner may remit interest.
(2) The Chief Commissioner may issue guidelines setting out how interest must be remitted under this division.
(3) If guidelines are issued, interest must be remitted only in accordance with the guidelines.
(4) The imposition or remission of penalty tax is not relevant to the imposition or remission of interest.
Section 100(3) of the TA Act places the onus of proof of proving their case on the balance of probabilities on the taxpayer.
[6]
Consideration
The respondent imposed interest on the unpaid surcharge land tax because the applicant committed a tax default pursuant to s 72 of the LTM Act, by failing to lodge a land tax return ("the Return"). The Return would have advised the respondent that the applicant was a foreign person. The respondent did not assess the applicant as a foreign person in the initial 2019 land tax year because the applicant failed to lodge the Return and he was not assessed for surcharge land tax.
Interest of $4 356.83 at the market and premium rate was imposed on the reassessment of the land tax in 2023 for the 2019 land tax year.
Section 25 of the TA Act is a discretionary provision, permitting the Chief Commissioner to remit interest to the taxpayer.
The market rate component of the interest can be remitted in exceptional circumstances such as where the fault is entirely due to the respondent or through no fault of the taxpayer. Trust Co. of Australia Ltd v Chief Commissioner of State Revenue [2002] NSWADT 21 at [27].
The four non-cumulative 'criteria' set out in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 ("Incise") are relevant to remission or reduction of the premium component of interest, which is in the nature of a penalty. The four criteria are set out in [62]:
(1) all principal tax that is owing and not in dispute has been fully paid;
(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.
These four criteria are not exhaustive and other relevant matters may be taken into account: Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [178].
The applicant's submission that the interest should be remitted because the "decision is unfair and is out of my control" and that the respondent failed to provide him with adequate information is misguided.
The obligation to disclose information is on the applicant; Oueik v Chief Commissioner of State Revenue [2022] NSWCATAD 132 at [48]. It is the applicant that must make enquiries as to whether they are liable to pay land tax surcharge. The applicant must in appropriate circumstances lodge a land tax return, s 72 of the LTM Act. The applicant must ensure full disclosure. The nature of the statutory scheme is that it is "self-registering". There is no requirement on the respondent to make inquiries with the applicant as to whether he was a "foreign person".
In this case, the applicant's co-operation commenced after the respondent initiated the investigation. The applicant did not led any evidence that he took reasonable care to comply with his tax obligations
The respondent issued a reassessment because it became aware from the Department of Home Affairs that the information it relied on to issue the assessment in 2019 was incorrect. The respondent became aware that the applicant was a permanent visa holder subclass 155 that did not meet their ordinary residence requirements of 200 days on shore in 2018 and therefore a "foreign person" liable for surcharge land tax in accordance with section 5A of the LT Act. The applicant would have been charged surcharge land tax earlier had he lodged the Return.
The Tribunal's role is to determine the correct and preferable decision having regard to the materials before it. I am not satisfied that the applicant has established any bases to remit either the market or premium rate of interest. He has not led any evidence that would ground a finding that he took reasonable care to comply with the tax laws or that there are exceptional circumstances warranting a remission; Incise [60].
[7]
Orders
1. The Tribunal dispenses with a hearing pursuant to s50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).
2. The Applicant's application is refused.
[8]
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
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
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Decision last updated: 18 September 2024