Wan v Chief Commissioner of State Revenue

Collaroy Services Beach Club Ltd v Haywood [2007] NSWCA 21

Conway v The Queen (2002) 209 CLR 203; [2002] HCA 2

Department of Education & Training v Sinclair [2005] NSWCA 465

Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478; [2002] HCA 22

Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 249

Griglio v Chief Commissioner of State Revenue [2024] NSWCATAD 212

Hammond v Ozzy's Cheapest Cars Pty Ltd t/as Ozzy Car Sales [2015] NSWCATAP 65

House v The King (1936) 55 CLR 499; [1936] HCA 40

Jackson v Commissioner of Police [2020] NSWCATAD 168

Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HCA 40

Oueik v Chief Commissioner of State Revenue [2022] NSWCATAD 132

Ouiek v Chief Commissioner of State Revenue [2023] NSWCATAP 26

Plaintiff M64/2015 v Minister for Immigration and Border Protection (2015) 258 CLR 173; [2015] HCA 50

R v GAT [2024] NSWCCA 32

Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39

Stead v State Government Insurance Commission (1986) 161 CLR 141

Styles v Rowley [2023] NSWSC 1053

Unique Commercial Group Pty Ltd v Cusumano [2024] NSWCATAP 204

New South Wales Government Gazette, No 134, 7 December 2018

[2024] NSWCATAD 278

1. The appellant is appealing from a decision of the Tribunal which upheld the respondent's decision not to remit interest imposed on a surcharge land tax assessment for the 2019 land tax year.
2. The issue is whether there was an error on a question of law in making the decision not to exercise the discretion in s 25 of the Taxation Administration Act 1996 (NSW) (TA Act).
3. For the reasons below, we have found there was an error on a question of law. The appeal is allowed; and the matter is remitted to the Tribunal for reconsideration.

1. In 2015, the appellant purchased two residential properties in NSW. The notices of sale each recorded an "Address for Service of Notices" which we refer to as the first street address.

1. In 2017 surcharge land tax was introduced. It was imposed on a "foreign owner" of residential land in NSW, commencing from the 2017 land tax year: Land Tax Act 1956 (NSW) (LT Act), s 5A.

1. The respondent sent the following letters to the appellant at the first street address:

(1) on 16 July 2018: a letter which said, inter alia:

"Land Tax - 2018 tax year

This letter is to inform you of your potential land tax liabilities. Our records indicate that you own land which may have a land tax liability. The land details have been listed over the page.

What is land tax?

Land tax is a tax on the land you own in NSW as at midnight on 31 December of the previous year.... The tax is calculated on the combined value of all taxable land or interests in land you own. The general land tax threshold for 2018 is $629,000....

For the 2018 land tax year residential land in NSW owned by a foreign person will be liable for a surcharge of 2%. There is no tax-free threshold for the surcharge.

More information on land tax, surcharge, exemptions that may apply and how your land is valued can be found at www.revenue.nsw.gov.au/taxes/land.

What you need to do?

If all the details in this letter are correct you do not need to do anything. An assessment will issue automatically in 23 days.

If any of the following circumstances apply, go online at www.revenue.nsw.gov.au/taxes/land/online to update your records within 21 days of the date of this letter:

- your contact details are incorrect

...

- you are liable for surcharge as a foreign owner

...

If you need help or if you have any questions contact us on [phone number].

(2) on 9 August 2018: a 2018 Notice of Assessment to Land Tax of $452.30 (2018 Assessment).

(3) on 28 September 2018 and 15 October 2018: two follow-up notices for payment of the amount assessed.

1. The appellant contends these documents were not received.

1. On 13 November 2018, the respondent obtained from Roads and Maritime Services (RMS) (now Service NSW) details of his change of address in February 2016 from the first street address to the address of another property, which we refer to as the second street address.
2. On 14 November 2018, a legal notice for the overdue 2018 Assessment was sent to the second street address.
3. On 19 January 2019, a 2019 "Land Tax Assessment Notice" (2019 Initial Assessment) was sent to the second street address.

(1) The 2019 Initial Assessment was "nil":

(a) showing the "Land Tax Taxable Value" below the land tax general threshold; and

(b) stating "Not Applicable" for each property in the column "Surcharge Taxable Value", which totalled to "nil".

(2) The 2019 Initial Assessment included the outstanding amount of $452.30 due on the 2018 Assessment.

1. There is no evidence (nor any suggestion) that the 2019 Initial Assessment was accompanied by any of the previous correspondence, including the 16 July 2018 letter.
2. Payment by the appellant of the 2018 Assessment was processed by the respondent on 21 January 2019. The 2018 Assessment is not the subject of this dispute.

1. Nothing further of relevance occurred until 16 November 2023, when the following occurred:

(1) The respondent became aware that the appellant was liable to surcharge land tax for the 2019 land tax year. The "client notes" recorded:

"SURCHARGE COMPLIANCE POTENTIAL Duplicate search done - no match found. iFIND search XIAOFENG WAN - client type P, subclass 155 for 2016 to 2022. Number of days onshore is less than 200 only for 2018 - liable for 2019 tax year only. Audit letter issued to SW postal address [PO Box] - last cfmd 07/07/2023. SURCHARGE COMPLIANCE POTENTIAL - case closed SURCHARGE COMPLIANCE - case created."

(2) The respondent reassessed the appellant for surcharge land tax of $13,430.65 for the 2019 land tax year only (2019 Reassessment), together with market rate and premium rate interest totalling $4,356.83.

(3) The respondent issued a "Notice of Investigation - Individual Surcharge Audit" (NOI).

1. Both the NOI and the 2019 Reassessment were sent to the PO Box address that the respondent had located.
2. There is no dispute that this correspondence was received by the appellant.

Engagement by the appellant regarding the 2019 Reassessment

1. The appellant logged on to the respondent's systems from 29 November 2023, and sent emails. He provided copies of his passport, visa documents and other supporting information regarding the second street address being his principal place of residence and said he should not be liable to surcharge land tax.

1. On 30 January 2024, the appellant lodged an objection. It said, inter alia:

"In December 2023, I received the first letter from the NSW government about the surcharge land tax surcharge. After five years of delay due to government reasons, I received the land tax surcharge letter at the end of 2023...."

1. On 20 March 2024, the appellant conceded his liability to surcharge land tax, but queried the interest imposed saying, inter alia:

"Why do I need to pay interest on the total balance of the assessment? I received the letter about the Surcharge Land Tax at the end of November 2023, and I started communicating with your division by mail in December 2023..."

1. On 22 March 2024, the respondent advised (inter alia):

"... as you did not lodge a return when you acquired your properties in 2015 and failed to lodge a return in 2017, your foreign status was not known at the time your initial 2019 Notice of Assessment was issued on the 10 January 2019 (Due date of 19 February 2019), therefore it was not included in your assessment. On the 16 November 2023, when information made available to Revenue NSW confirmed your foreign status, a revised 2019 Land Tax Notice of Assessment, inclusive of Surcharge land tax and interest was issued.

Pursuant to section 21 of the [TA Act], interest is calculated on unpaid liability from the end of the last day for payment on your initial assessment until the day it is paid. In your case, that means interest has been calculated from the 19 February 2019 and will continue to accrue daily on unpaid amounts, until paid."

1. On 26 March 2024, the appellant emailed the respondent saying, inter alia:

"I have filed a tax declaration for 2019. Please see the attachment."

1. The attachment was a copy of his 2019 income tax return.
2. Two things are apparent from this interchange:

(1) The respondent did not 'delay' in sending the 2019 Reassessment but sent it in a timely fashion after becoming aware of the liability.

(2) The appellant misunderstood the reference to 'return' to be a reference to an income tax return and not a land tax return.

1. The respondent disallowed the objection on 28 March 2024 (the objection decision). In respect of the interest imposed, the objection decision said as follows:

"The Chief Commissioner is strictly required to impose interest when a tax default occurs. The interest is applied automatically comprising of an 8% premium rate and a variable market rate.

The market rate component of the interest imposed, has been accepted by authority to represent the loss of revenue by the Government and compensates the Government for investment opportunities lost.

The premium rate on the other hand, is a form of penalty and its purpose is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. In addition to late payment interest, the Chief Commissioner may impose penalty tax under section 26 of the TAA, however, we can confirm in this matter, penalty tax has not been imposed.

Section 25 of the TAA does allow the Chief Commissioner, in such circumstances as he considers appropriate, to remit the market rate component of interest, the premium component of interest or both by any amount.

Remission of the market rate of interest

The market rate component can only be remitted in exceptional circumstances, such as those outlined by Judicial Member Verick A, in the NSW Civil and Administrative Tribunal in the case of Trust Co. of Australia Ltd v Chief Commissioner of State Revenue [2002] NSWADT 21 (Trust Co) at [27]:

"In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the "tax default" is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes)."

None of these circumstances apply to this matter, therefore, the market rate of interest remains payable.

Remission of the premium rate of interest

The premium component of the interest can be remitted if in the opinion of the Chief Commissioner, the taxpayer took reasonable care to comply with the taxation law.

While we are satisfied there was no intentional disregard of the law, we are not satisfied that the default on your Land Tax Assessments was outside of your control, or that 'reasonable care' was taken.

There is no statutory definition of the term 'reasonable care', however various courts have considered the meaning of the term and their decisions can be broadly summarised as meaning, 'care that a reasonable person could reasonably have been expected to take were they in the position of the taxpayer'. The reasonable care standard includes keeping complete and accurate records, making diligent efforts to understand and comply with the law, seeking expert advice on uncertain or complex matters, and being honest in dealing with Revenue NSW.

Failing to lodge a Return or make payment by the due date, does not demonstrate reasonable care was taken. The tax default was not caused by circumstances wholly beyond your control, nor was reasonable care taken to comply with the taxation law. Therefore, remission of any part of the interest would be unfair to other taxpayers who pay their taxes on time or to the other tax defaulters who have paid interest in similar circumstances.

Specifically, regarding your claim that payment was not made on time, due to the length of time it took Revenue NSW to issue a notice of assessment, Senior Member JS Currie in the hearing at the NSW Civil & Administrative Tribunal in Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200, affirmed at [22], that the time taken to issue an assessment does not provide a reason for an exemption from liability:

[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.

Your request to have interest waived has therefore been disallowed."

1. We pause to note several matters that are referred to in the objection decision:

(1) First, the objection decision correctly identifies that there is a difference between market rate and premium rate interest; the former concerned with making up for the Commissioner being kept out of funds and the latter being penal in nature, to act as an economic deterrent from not paying tax on time.

(2) Second, the objection decision acknowledges that there was no intentional disregard of the law.

(3) Next, the potential grounds for remission identified with respect to the remission of premium rate interest refers to:

(i) a taxpayer taking reasonable care;

(ii) circumstances leading to the tax default being outside a taxpayer's control;

(iii) unfairness to taxpayers who pay their tax on time were remission to occur where the first two factors are not present; and

(iv) the length of time for the respondent to identify a tax default not providing a reason for exemption of liability; referring, inter alia, to Commissioner of Taxation v Ryan (2000) 201 CLR 109.

1. We note that the last-mentioned factor concerns primary tax and not interest; and therefore, is not relevant to the remission of interest.

1. In the proceedings below, the appellant filed the following documents:

(1) An Application to the Tribunal for administrative review of the 2019 Reassessment which said (under "Grounds"):

"In November 2023, I first received a payment notice from the government, requesting me to pay the land tax surcharge for 2019 and 2020. With an interest of 4356.83 accumulated from 2019 to 2023, I have filed my tax returns with the Australian government every year since I purchased my property in Sydney. However, I am being charged with land tax surcharge interest which I believe is unfair and is out of my control. Therefore, I am requesting the court to cancel the payment of this interest and only require me to pay the 2019 land tax surcharge."

(2) A "Brief Outline" accompanying the Application, which said (the other matters not being relevant):

(a) That the appellant had "submitted tax return records for 2019, proving that after purchasing Sydney real estate, I filed tax returns with the government through an accountant every year" (a reference to his income tax returns, as previously provided to the respondent).

(b) That the delay was "out of his control" because the respondent could and should have assessed him to surcharge land tax in 2019:

"In April 2024, I received a notice from the government regarding the land tax surcharge for 2020, 2023, and 2024, that I do not need to pay it [i.e. not the 2019 land tax year]. This notice can fully prove that the payment of the annual land tax surcharge in 2019 was delayed due to reasons that are not my own. If the government had sent me the 2019 land tax surcharge payment notice in April 2019, the above 4356.83 interest would not have been incurred. Since I can receive the 2024 land tax surcharge payment notice in April 2024, why can't I receive the 2019 land tax surcharge payment notice in 2019?"

(3) An email dated 16 July 2024, referring to the s 58 documents which said (inter alia):

"According to the evidence shared by your solicitor, the cause of interest in the land tax surcharge was out of my control. I first received a letter from NSW REVENUE regarding whether I should pay the surcharge in November 2023_,_ I did nothing wrong with it, but I shouldn't pay the interest on the Land Tax surcharge.

..."

(4) A further email repeating (in essence) the statement in the email identified at (3) above.

1. The respondent filed s 58 documents, a tender bundle, and written submissions. Those submissions included the following:

(1) That the applicant had not filed any evidence or submissions in the proceedings, relying on the email dated 16 July 2024.

(2) A summary of the parties' positions as follows:

"2. The Applicant's case is that the interest should be remitted as he was not informed of his liability for surcharge land tax or the requirement to lodge a return.

3. The Respondent's case is that the Applicant has not established that he took reasonable care to comply with his tax obligations and there are no exceptional circumstances warranting the remission of interest."

1. The Tribunal's reasons commenced with an introduction and brief outline of the relevant facts. The Tribunal noted the appellant's contention at [1] 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."

"3 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."

1. The Tribunal said (at [9]) that the issues for determination were "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."
2. The Tribunal then referred (at [10]-[17]) to the relevant law: ss 5A and 5B of the Land Tax Act 1956 (NSW), ss 12(1) and 72 of the Land Tax Management Act 1956 (NSW), Government Gazette Number 134 of 7 December 2018 (containing the requirement to lodge a 2019 land tax return) and to ss 3, 9, 21, 22, 25 and 100(3) of the TA Act.
3. The Tribunal's consideration is found at paragraphs [18]-[28] of its Decision.
4. Relevantly, the Tribunal identified the difference between market rate of interest and premium rate of interest and the different factors that have been held to be material to remission of each type of interest, noting that with respect to premium rate interest the factors are not exhaustive:

"21 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].

22 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.

23 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]."

1. As to the Tribunal's consideration of the appellant's contentions, the Tribunal said:

"24 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.

25 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".

26 In this case, the applicant's co-operation commenced after the respondent initiated the investigation. The applicant did not led [sic] any evidence that he took reasonable care to comply with his tax obligations.

27 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."

1. Ultimately, the Tribunal concluded in respect of both market and premium interest as follows:

"28 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]."

The appellant's Grounds of Appeal and submissions

1. The appellant appeared before the Appeal Panel by phone with a Mandarin interpreter. He was also self-represented.
2. The appellant's Notice of Appeal stated the following Grounds:

"We purchased these two properties in 2015 when there was no law in New South Wales to collect land tax surcharges from foreigners. The REVENUE, a powerful organization with extensive resources and powers, can obtain any information they desire. We, on the other hand, are a vulnerable group. We diligently follow the REVENUE's instructions, yet we need guidance when the REVENUE fails to inform us. As per the evidence provided by the REVENUE, each tax is collected by finding the recipient's registered address and then sending the payment notice.

On February 10, 2016, I took the initiative to change my residential address to [the second street address] .... Despite this, REVENUE sent me four payment letters on 16 July 2018, 9 August 2018, 12 October 2018 and 28 October 2018, all to the wrong address. On September 30, 2019, I moved from my original address to a new address: [xx] CHATSWOOD. On October 26, 2019, I made another effort and went to SERVICE to change my residential address to the above address.

The REVENUE did not send me payment letters or search for my registered address for four consecutive years, from November 1, 2020, to October 31, 2023. This inaction led to the accrual of these interests. The arbitrator ignored this obvious evidence in the first appeal. The REVENUE could not prove that the delay in payment of the land tax surcharge was not its responsibility.

Now, I provide the 2019 rental contract and the driver's license address change record from the SERVICE as evidence.

Based on the above facts, the interest involved in the appeal was caused by REVENUE's negligence. I should be refunded the overpaid interest and compensated for the two appeal costs."

1. In addition to the Notice of Appeal, the appellant filed written submissions and an accompanying "Appeal Bundle 1" which included new documents not in evidence before the Tribunal below:

(1) A Confirmation of Address History from Transport for NSW issued on 24 October 2024 showing changes of "residential" address from the second street address to an address in Chatswood in September 2019.

(2) An email he received from a Chatswood real estate agency confirming the acceptance of an application (by the appellant and his wife) to rent a property in Chatswood for the period from 30 September 2019 to 27 September 2020.

1. In his written submissions, the appellant said, inter alia:

"Why was the payment letter for the 2019 land tax surcharge not mailed in 2019? Why was it mailed in November 2023? According to the 2018 land tax collection process, the respondent needs to send me a payment letter as early as 2019 to collect the 2019 land tax surcharge. I have not seen the valid evidence provided by the respondent. At the first hearing, I also stated that I did not receive a payment letter for the 2019 land tax surcharge between 2019 and October 31, 2023. Since the payment letter was not sent out on time, why should I bear the interest during this period?

CONCLUSION

The respondent has a workflow for collecting land tax from taxpayer: the first step is to send a payment letter to the taxpayer, and the second step is: if the letter is sent to the wrong address more than 4 times, an internal investigation of the mailing address is required, and the payment letter is sent again after the latest address is found. The third step: After the letter is sent to the correct address, the tax will be received. My 2018 land tax was carried out according to the above workflow, but my 2019 land tax surcharge was not carried out according to this workflow. Because the respondent did not send a payment letter for the 2019 land tax surcharge to the valid address registered on the applicant's driver's licence from November 1, 2019 to October 31, 2023, and the applicant did not receive such a letter during the above period, and the respondent did not produce evidence to provide that the letter was sent to the applicant's accurate address. The respondent did not handle the applicant's 2019 land tax surcharge according to the workflow. During the above period, the respondent did not send a letter of 2019 land tax surcharge with the applicant's accurate address to the plaintiff. The respondent needs to bear the responsibility for not sending the letter."

1. In effect, the appellant contended that the discretion should have been exercised. He said that the Tribunal "ignored" the fact that the delay in issue of the 2019 Reassessment for 4 years was clearly caused by the respondent because he was unaware of his liability to surcharge land tax. He said the Tribunal had not taken relevant facts into account, including his notification to Service NSW of his change of address, and the fact he had lodged tax returns every year. He said that, contrary to what was said in the Tribunal's decision, he lodged returns every year (i.e., income tax returns) and paid tax (income tax) every year.
2. The appellant reiterated to the Appeal Panel that he did not know about any liability to surcharge land tax before 16 November 2023. He noted that he had received a 2019 assessment, back in 2019, and nothing was payable. He said he bought the properties in 2015, before surcharge land tax was even introduced, and was unaware of his obligations. He couldn't understand why the respondent had not contacted him or sent him anything over the next 4 years, including any payment notices for the intervening years.
3. The appellant also stated that he didn't receive the 16 July 2018 letter, which he read for the first time in the s 58 documents. Fairly read, the appellant's contention to the Tribunal at first instance and in his objection to the 2019 Reassessment has always been that he was not aware of surcharge land tax, consistent with him not receiving this letter.
4. We note that the Tribunal said at first instance at [6]:

"6 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."

1. However, whilst it was an uncontested fact that the respondent "wrote to" the applicant by way of the letter of 16 July 2018 which referred to surcharge land tax, a critical part of the appellant's case was that he was not aware he had any liability for surcharge land tax and therefore he did not accept he had received that letter.

1. The respondent filed written submissions and the Appeal Book which included its submissions, extracted below, and the other materials before the Tribunal.
2. The respondent submitted there was no "question of law" in the circumstances, noting as follows:

(1) The appellant has not articulated any grounds or otherwise made out any errors of law in the Decision said to give rise to a question of law for the purpose of s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act). Rather, the appellant appears to be merely arguing that a different outcome should be reached.

(2) The appeal grounds appeared to be that:

(a) The appellant did not receive notices sent by the respondent regarding his land tax liability in 2019; and

(b) the Tribunal ignored evidence that the respondent did not send notices of his land tax liability between 1 November 2019 and 31 October 2023.

(3) As the appeal involves a challenge to the exercise of a discretion, the appellant must establish a material error, referring to the well-established principle in House v The King (1936) 55 CLR 499 (House v The King) at 504-505:

"[i]t is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed ... It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance."

(4) The Tribunal took all relevant matters into account in deciding not to exercise the discretion under s 25 of the TA Act.

(5) In any event, there are no "mandatory considerations" that the Tribunal must have regard to for the purpose of s 25 of the TA Act, nor did the Tribunal's focus on "reasonable care" and "exceptional circumstances" improperly fetter its wide discretionary power, citing the Appeal Panel's decision in Oueik v Chief Commissioner of State Revenue [2023] NSWCATAP 26 (Oueik (AP)) at [53]-[54]:

"53. The Tribunal considered and placed some emphasis on the question of whether the appellant had taken reasonable care, which was an issue the subject of argument by both parties. Any emphasis placed upon this factor by the Tribunal did not amount to the imposition of an improper or unlawful fetter on its discretion. As the appellant submitted, that discretion has been described by Ward CJ in Eq (as her Honour then was) as 'unconstrained and discretionary.' The discretionary nature of the power means that the Tribunal is entitled to place weight on particular factors if it chooses to do so. There was no error in the exercise of that discretion in the sense described in House v R (1936) 55 CLR 499 at [504]-[505] because, relevantly, the Tribunal did not act on a wrong principle. Nor did it fail to have regard to relevant matters, or have regard to irrelevant matters.

54. For all of these reasons, the appellant has failed to establish that the Tribunal erred as alleged in the second ground of appeal."

1. The respondent contends that if no question of law arises, leave to appeal should not be granted under s 80(2)(b) of the NCAT Act because there is no issue of principle, question of general public importance, or an injustice which is reasonably clear.
2. The respondent submits that - even if the appeal were granted by right or by leave - no fresh evidence should be adduced, as it does not go to any factual matter relevant to the exercise of the discretion.
3. In respect of costs sought by the appellant, the respondent submits they cannot be awarded to a self-represented litigant under s 60 of the NCAT Act in the absence of any evidence regarding "professional legal costs"; and alternatively, the Tribunal could not be satisfied there were "special circumstances" warranting the award of costs (having regard to the factors set out in s 60(3) of the NCAT Act).
4. In respect of the other matters raised by the appellant, the respondent contends as follows:

(1) The liability to surcharge land tax is imposed by operation of the legislation, and not by the actions of the respondent.

(2) The onus was on the appellant to lodge returns (including variation returns) and meet his obligations under the law, including advising he was a "foreign person" for the purpose of the 2019 land tax assessment.

(3) The delay was caused by his failure to do so.

(4) The respondent has no duty or obligation to warn a taxpayer of their liability, nor to search for their current address if not notified to the respondent.

(5) The respondent was entitled to reassess; and to impose interest.

(6) The onus was on the appellant, and not the respondent, to prove all facts relevant to any exercise of the discretion.

1. An appeal to the Appeal Panel does not simply provide a losing party in the Tribunal below with the opportunity to run their case again: Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 at [10].
2. Internal appeals are governed by s 80 of the NCAT Act. Section 80(2) relevantly provides that an appeal is as of right on a question of law; or with leave of the Appeal Panel on any other ground. Accordingly, to succeed in this appeal, the appellant must demonstrate either error on a question of law alone, which may be argued as of right; or that permission (that is, "leave") to appeal should be granted to bring the appeal.
3. There is "a question of law alone" if the question of law can be stated and considered separately from the facts. This and other relevant principles were recently collected in Unique Commercial Group Pty Ltd v Cusumano [2024] NSWCATAP 204 (Unique) at [25]. Further, the answer to the question of law, and the consequential questions that follow from its resolution, must be material to the outcome "in the sense that it could have affected the outcome": Bimson, Roads & Maritime Services v Damorange Pty Ltd [2014] NSWSC 734 at [41]; Styles v Rowley [2023] NSWSC 1053 at [50]- [51] ; R v GAT [2024] NSWCCA 32 at [90]; Stead v State Government Insurance Commission (1986) 161 CLR 141 (Stead) at 145.
4. See further, in relation to this requirement of materiality: Conway v The Queen (2002) 209 CLR 203; [2002] HCA 2 at [28], Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478; [2002] HCA 22 at [7],[10], Collaroy Services Beach Club Ltd v Haywood [2007] NSWCA 21 at [52], Department of Education & Training v Sinclair [2005] NSWCA 465 at [73].

The nature of the discretion in s 25 of the TA Act

1. If a "tax default" has occurred, interest is imposed by ss 21 and 22 of the TA Act at both market and premium rates.
2. The legal question before the Tribunal concerned the discretion to remit interest in s 25 of the TA Act.
3. Section 25 relevantly provides for remission of interest in the following terms (with effect from 1 February 2024):

(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.

1. No Guidelines have been issued by the respondent for the purpose of s 25(2) and (3) of the TA Act.
2. In material respects, the current form of s 25 of the TA Act is as stated by Richmond J in Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 249 (Golden Age) at [99]-[100]:

"99. Section 25 of the TAA, both before and after its re-enactment, confers on the Commissioner (and on the Court standing in the place of the Commissioner under s 101) a broad discretionary power which is not subject to any limit: Chief Commissioner of State Revenue v Downer EDI Engineer Pty Ltd (2020) 103 NSWLR 772; [2020] NSWCA 126 at [151].

100. In the case of an unconfined discretionary power of this nature, the considerations which are relevant to its exercise are determined by reference to the subject matter, scope and purpose of the relevant statute, including the particular provision conferring the discretion: Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483; [2013] FCAFC 50 at [227] per Griffiths J (Edmonds J agreeing); Giris Pty Ltd v Federal Commissioner of Taxation [1969] HCA 5; (1969) 119 CLR 365 at 384 per Windeyer J."

1. His Honour expressly recognised the penal nature of premium rate interest at [102] and said:

"... the culpability of the taxpayer in failing to pay the duty liability by the due date is an important matter in the exercise of the discretion."

1. Further, his Honour accepted as not irrelevant, the factors identified (and extracted at first instance) in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 (Incise) and noted that these factors are not exhaustive (at [103]-[105]). His Honour also considered that whether a taxpayer has taken reasonable care is material to the question of remission (at [106]).
2. The respondent has issued a Practice Note CPN-024 in relation to remission of interest. It makes reference to "special circumstances". However, the emphasis in the respondent's Practice Note on "circumstances outside the taxpayer's control" and "reasonable care" may be unnecessarily constraining. We agree with the following observations of Senior Member Frost in Xin v Chief Commissioner of State Revenue [2024] NSWCATAD 333 (Xin) at [40]-[41]:

"Consideration - interest

40. The current version of s 25 of the TA Act, dealing with the remission of interest, authorises the Chief Commissioner to issue guidelines setting out how interest must be remitted. I was informed the Chief Commissioner has not issued any such guidelines; nevertheless I was encouraged to exercise the remission discretion in accordance with guidelines issued under an earlier version of s 25.

41. Those guidelines are contained in CPN 024: Interest and penalty tax guidelines. While noting the Chief Commissioner will assess 'all facts and circumstances affecting the tax default before deciding to either remit any or all of the interest', the commentary is confined to a discussion of circumstances outside the control of a taxpayer and the concept of reasonable care. That commentary may not provide sufficient guidance for the Chief Commissioner's officers tasked with making remission decisions on a day-to-day basis. For that reason I encourage the Chief Commissioner to consider including in any future guidelines a broader range of circumstances that may warrant remission of interest, whether in whole or in part."

1. Despite the removal of the words "by any amount" in the recent amendments made to s 25, the discretion allows partial remission. It is not an "all or nothing" approach. We agree with the comments of Senior Member MacIntyre in Griglio v Chief Commissioner of State Revenue [2024] NSWCATAD 212 at [76]- [80], in particular at [76] and [80]:

"76. The evidence of the Applicant and the conveyancers, in my opinion, establishes that there was no wilful non-compliance. There was, however, a failure to take reasonable care. These circumstances assist me in reaching the conclusion that a remission of part of the interest assessed at the premium rate is warranted, if s 25 allows partial remission.

...

80. Understood in its ordinary meaning as 'money paid regularly at a particular rate for the use of money lent' (Oxford Dictionary Online), each amount so accruing may be understood to be "interest", as well as the total balance owing at a particular time. So understood, I am of the opinion that the powers of remission of 'interest' may apply to parts of the total accrued, such as interest accrued during a particular period, or to the entire amount of interest accrued."

1. As there are degrees of culpability, the premium component may be reduced in part by an amount even where reasonable care has not been taken, but, for instance, some care has been taken. There may be other factors that justify partial remission.

1. In this case, there was no question of law raised with any specificity by the appellant in his grounds of appeal, nor in his submissions. Nonetheless, we have had regard to the observations of the Appeal Panel in Unique at [26]-[28] and note that when dealing with a self-represented appellant it may be appropriate for the Appeal Panel to consider whether, in substance, a question of law is raised.
2. At the hearing of the appeal, we raised with the parties whether the question of law was whether the Tribunal had erred by asking itself the wrong statutory question. Whether the Tribunal asked itself the wrong question or misconstrued the statute raises a question of law: Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58 at [12]; Unique at [30]. The respondent submitted that if this was the case, the Tribunal had nevertheless not so erred.
3. We are satisfied that the question of law that arises is whether the Tribunal asked itself the wrong question. The question of law is whether the Tribunal erred by failing to ask itself whether there was a basis to exercise the discretion to remit market or premium interest, which discretion is limited only by the subject matter, scope and purpose of the provision; and instead asked itself whether there was:

(1) "reasonable care taken"; or

(2) "exceptional circumstances".

1. We consider that this question arises from the appellant's submissions read in the context of the Tribunal's reasons at [3], [9], [26] and [28] where the Tribunal focusses on a lack of reasonable care or exceptional circumstances.

(1) this case involved the exercise of the discretion under s 25 of the TA Act, such that the principles in House v The King apply; and

(2) the Tribunal's reasons ought not to be inspected with a fine tooth-comb attuned to identifying error and they must be read fairly and as a whole: Plaintiff M64/2015 v Minister for Immigration and Border Protection (2015) 258 CLR 173; [2015] HCA 50 at [59]- [60].

1. The real questions are, first, whether the Tribunal proceeded on a misconstruction of the discretion. The next question is whether, even if we were so satisfied, the error was material: Stead at 145.
2. We note that the Tribunal's approach in considering reasonable care and exceptional circumstances echoed the position taken in the objection decision, and in the respondent's submissions to the Tribunal at first instance. It also echoes the respondent's Practice Note CPN-024. The same two factors were also relied on before the Appeal Panel by the respondent in his submissions.

1. As identified in Oueik v Chief Commissioner of State Revenue [2022] NSWCATAD 132, the market rate interest arises to compensate the Commissioner from being out of pocket. Accordingly, the purpose of the provision has been taken to limit the types of factors that might warrant a remission of market interest. For this reason, factors such as delay caused by the Commissioner or the control of the taxpayer are often used as examples of factors that might warrant the exercise of the discretion to remit market interest. Given the purpose of market rate interest, it is apt to look for "exceptional circumstances" to warrant remission.
2. The Tribunal's reasons, read fairly and as a whole, demonstrate no error in its approach that in the absence of fault by the Commissioner and in the absence of "exceptional circumstances" there was no warrant for any reduction of the market rate component of the interest. As correctly highlighted by the Tribunal at [25] of the Decision; there is no obligation on the Commissioner to make enquiries and to track down taxpayers.

1. Fairly read, with respect to the premium rate of interest, the Tribunal did not undertake the requisite task, which required it to consider whether there was a factor which warranted remission having regard to the subject matter, scope and purpose of the provision. To this end, the fact that the premium interest has been accepted as being in the nature of a penalty is important. The Tribunal asked itself the question as to whether there was reasonable care or exceptional circumstances and did not ask the broader question whether there was a basis for remission on the appellant's circumstances known to the Tribunal.
2. The Tribunal recorded the appellant's submissions that the interest was "unfair and out of my control" but dismissed this as "misconceived". This, of itself, does not disclose any error.
3. The Tribunal correctly identified the following:

(1) The respondent issued a 2019 land tax assessment in January 2019 which did not include surcharge land tax.

(2) There was a tax default, being a failure to lodge a "Return" (variation return) as required by s 12(1) of the Land Tax Management Act 1956 (NSW) read with Government Gazette Number 134, 7 December 2018, in respect of the liability to surcharge land tax.

(3) Had a land tax return been lodged, this would have advised the respondent that the appellant was a foreign person at that time.

(4) The respondent had no statutory obligation to inform the appellant of his obligations under the law.

(5) The respondent issued the 2019 reassessment to include surcharge land tax in November 2023, and was entitled to do so.

(6) There were two interest components (market and premium), and the premium component was a form of penalty.

1. As mentioned earlier there was no "fault" on the part of the Commissioner. There was no "delay" on his part. However, due to the passage of time between the land tax year and the date that the 2019 Reassessment was issued, interest was imposed under ss 21 and 22 of the TA Act; and comprises a significant part of the 2019 Reassessment.
2. In failing to file a land tax return as required, there was a tax default. This, at least, contributed to the length of time that elapsed between when liability to surcharge land tax accrued and when the 2019 Reassessment was issued.
3. However, the tax default is the starting point. The tax default is the reason there is premium interest in the first place. The statutory question for remission of interest is whether there is a basis for remission. The degree of culpability or other circumstances may lead to the remission of interest under the TA Act.
4. There are no relevant "mandatory considerations" in issue; yet, despite references to the discretion being "unfettered", "unconstrained" or "unlimited", the exercise (or non-exercise) of discretion must always have regard to the scope and purpose of the legislation. It is well established (and was accepted by the respondent in these proceedings), that the premium component is penal in nature.
5. Factors such as whether a taxpayer took reasonable care or whether there were exceptional circumstances are not irrelevant and the Tribunal was entitled to place great weight on them. Nevertheless, remission of interest is not an "all or nothing" exercise. Further, the degree of a taxpayer's culpability is material. An assessment of the appellant's culpability is not limited to whether he took reasonable care or whether there were exceptional circumstances.
6. It follows that by asking only whether there was reasonable care or exceptional circumstances and not asking whether there were any personal circumstances of the appellant apparent from the materials before it, relevant to establishing the degree of culpability other than the failure to meet his statutory obligations that may warrant remission, the Tribunal asked the wrong question.
7. The respondent contends that even if the Tribunal focussed on reasonable care and exceptional circumstances, there was no error because the appellant did not, in effect, rely on any other basis to ground remission. The appellant argued (so the respondent contends) that the tax default was out of his control because the respondent did not inform him of his tax liability, where there was no duty on the respondent to do so and the appellant had a responsibility to determine and comply with his tax obligations. However, fairly read, the appellant was not merely saying the tax default was not his fault, he was also identifying the underlying facts relevant to his case (to which we return below).
8. The respondent pointed us to the decision of the Appeal Panel in Oueik-AP. In that case, the Appeal Panel found that an emphasis on reasonable care did not amount to an error of law under the principles established by House v The King. Nonetheless, the Appeal Panel also noted that all relevant circumstances had been taken into account, saying, at [50]-[52]:

"50. Considering the reasons as a whole, we are not satisfied that the Tribunal misconstrued s 25 of the TA Act, failed to construe it as conferring "an unfettered discretion" or improperly constrained the exercise of the discretion by emphasizing the question of whether the appellant took reasonable care.

51.The Tribunal expressly recognised that the four criteria in Insight Technologies were relevant to the exercise of the discretion under s 25 of the TA Act and that other circumstances may be taken into account. It referred to the appellant's submissions on these matters and we are satisfied that it had regard to them. The Tribunal noted, correctly, that it could take into account the statement in the fact sheet saying that the premium rate may be reduced if a person took reasonable care, but also recognised that it was not bound by the fact sheet.

52. The Tribunal gave consideration to the Incise Technologies criteria but took the view that there was a number of issues the appellant had failed to address. It was entitled to do so. The appellant submitted that the "number of issues" the Tribunal identified were inconsistent with Incise Technologies. The appellant submitted that in Incise Technologies the Appeal Panel of the Administrative Decisions Tribunal had said that the Administrative Decisions Tribunal in that case had not considered material which showed that the case was not simply one of mere failure to take reasonable care and had failed to take into account conduct from a specified period. Whilst that is so, in the present case, the Tribunal did not make the same error. It took into account all of the appellant's conduct."

1. True it is that the onus of proof is on the appellant, and not the respondent

(s 100(3) of the TA Act). The onus may be satisfied upon a review of the materials put before the Tribunal, including correspondence and documents filed by the respondent as required by s 58 of the Administrative Decisions Review Act 1997 (NSW). 2. The Tribunal's finding that there was no reasonable care and no exceptional circumstances did not equate to an assessment of whether there was a basis for remission of premium rate interest. It did not amount to an assessment of culpability, nor did it equate to a consideration of the appellant's personal circumstances, understanding, awareness, and other matters that may have set his case apart from the "usual situation" and may be relevant to the remission of interest. 3. It is apparent that there were other factors that warranted consideration by the Tribunal; which may have been considered had the Tribunal had the broad discretion in mind. 4. The personal circumstances of the appellant known to the Tribunal include those referred to above at [76], the first five of which do not favour remission. They also include the following, which may (we stress may, not must), tend to provide a basis to remit some of the premium interest:

(1) When he acquired the properties, the appellant was assisted by a solicitor.

(2) When he acquired the properties, there was no surcharge land tax.

(3) The 2019 assessment which he did receive was nil (albeit it was incorrect as he was indeed liable to surcharge land tax).

(4) Whilst there is no doubt the respondent's letter of 16 July 2019 was sent, it is consistent with the appellant's case that the letter was never received.

(5) The taxpayer notified a change of address to Service NSW (though this is not the way to notify the respondent).

(6) The appellant's case is that he was not aware of his liability to pay surcharge land tax and the respondent does not contend to the contrary.

(7) The appellant's case is that he was not aware of his obligation to lodge a return, and the respondent does not contend to the contrary.

(8) The appellant's case is consistent with there being no wilful default.

(9) The Commissioner did not suggest that there had been intentional disregard of a taxation law.

(10) Where a taxpayer is unaware of a tax liability there could be no expectation for cooperation before the respondent alerts them to that potential liability.

(11) There was evidence that the appellant regularly uses the services of an accountant to file income tax returns (which does not demonstrate reasonable care so far as land tax obligations, but might suggest some attempt to comply with tax obligations more generally).

(12) English is not the appellant's first language.

(13) Irrespective that it was not the respondent's fault, and even if it was the appellant's responsibility to identify and comply with tax laws, there was, in fact, a substantial delay where the respondent appears not to have been aware of the tax liability and this caused interest to build up. The interest is charged at 8% of the primary tax. As Richmond J said in Golden Age, this is not a small penalty.

(14) This list is not meant to be exhaustive.

1. Whilst we do not suggest any of the above factors are mandatory considerations in the sense used in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HC 40 at [15], they are factors one might have expected the Tribunal to consider had the Tribunal had a broad discretion in mind, rather than focussing on reasonable care or exceptional circumstances. In particular, the apparent lack of wilful default and the extent of the delay leading to the relatively high premium interest compared to the primary tax might set this appellant apart from other taxpayers and warrant some remission of premium interest.
2. Remission of interest is not an "all or nothing" exercise. The error in approach that gave rise to the question of law was capable of making a difference for the reasons noted above.
3. In the circumstances of this case, and having regard to the "guiding principle" in the NCAT Act, we have decided the matter should be remitted to the Tribunal similarly constituted, subject to the Tribunal's availability. Whether new or fresh evidence should be adduced, or whether there should be a hearing, is a matter for its consideration.

1. As we have found above that there is a question of law, the appeal arises as of right. Accordingly, we do not need to determine whether we would also grant leave to appeal.

1. The appellant sought costs of the proceedings below and this appeal.
2. The Tribunal's power to award costs is set out in s 60 of the NCAT Act. However, as submitted by the respondent, the costs that the Tribunal can order pursuant to s 60 are for professional legal costs actually incurred in the conduct of litigation. They do not include compensation for time spent by a litigant who (as here) is not a lawyer, in preparing and conducting his case: Hammond v Ozzy's Cheapest Cars Pty Ltd t/as Ozzy Car Sales [2015] NSWCATAP 65 at [110]; Jackson v Commissioner of Police [2020] NSWCATAD 168 at [11], [46].
3. We therefore make no order as to costs.

(1) The appeal is allowed.

(2) The matter is remitted to the Tribunal similarly constituted, subject to the Tribunal's availability, for reconsideration.

(3) No order as to costs.

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.