Wang v Chief Commissioner of State Revenue

Factual background

1. The relevant facts are established by the Section 58 Documents, the appendices to Respondent's written submissions dated 20 September 2023, and the Applicants' own documents and submissions. There appears to be no disagreement as to the factual matters summarised below: 1. At all material times, the Applicant was a citizen of the Peoples' Republic of China and was entitled to permanent residence in Australia as the holder of a Resident Return sub-class 155 visa. The Applicant is not (and at no relevant time was) a New Zealand citizen. 2. On 29 June 2017, the Applicant entered into a contract to purchase. the Property, which was unimproved land. She was registered as the registered proprietor of the Property in December 2018, and subsequently undertook the construction of a residence on the Property. 3. These building works were completed in March 2023, and the Property has been tenanted since April 2023. 4. The Applicant does not live (and has never lived) at the Property. 5. According to her immigration records, the Applicant has been present in Australia during the following periods during the years 2019, 2020, 2021, 2022 and 2023: Year Period in Australia Number of days 27 February 2019 to 4 April 2019 37 5 May 2019 to 18 May 2019 13 27 May 2019 to 18 June 2019 23 2019 9 July 2019 to 27 August 2019 49 11 October 2019 to 26 October 2019 15 31 October 2019 to 24 November 2019 25 27 November 2019 to 31 December 2019 34 Total 196 2020 11 February 2020 to 20 May 2020 98 2021 No time spent in Australia 0 2022 No time spent in Australia 0 6 February 2023 to 13 February 2023 7 2023 18 May 2023 to 23 May 2023 5 30 June 2023 until at least the date of the hearing 136 Total 148

1. At the time of the hearing, the Applicant was living in Australia. 2. In none of the years 2019 to 2022 did she spend 200 days or more in Australia.

Legislative provisions

1. Legislation imposing surcharge land tax was passed in 2016 in the form of the State Revenue Legislation Amendment (Budget Measures) Act 2016, which inserted section 5A into the LTA.
2. Section 5A has been amended on several occasions since then, but the essential elements of the section have remained constant: 1. Section 5A(1) provides as follows: Land tax is payable under this section in respect of residential land owned by a foreign person (surcharge land tax). 1. Section 5A(2) currently provides as follows: In respect of the taxable value of all the residential land owned by the foreign person at midnight on 31 December in any year (commencing with 2016), surcharge land tax is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act for the period of 12 months commencing on 1 January in the next succeeding year at the rate of - (a) in the case of all residential land owned by the foreign person at midnight on 31 December 2016 - 0.75% of that taxable value as assessed under the Principal Act, and (b) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2017-2021 - 2% of that taxable value as assessed under the Principal Act, and (c) in the case of all residential land owned by the foreign person at midnight on 31 December in any other year, commencing with 2022 - 4% of that taxable value as assessed under the Principal Act. 1. When it commenced in 2016, section 5A(2) imposed tax only at the rate of 0.75%. It was subsequently amended on two occasions, to impose tax at the rate of 2% for the 2018 and following land tax years, and at the rate of 4% for the 2023 and following land tax years. Apart from the changes in rates made by the inclusion of paragraphs (a), (b) and (c), the provisions of section 5A(2) concerning the calculation, charging, levying, collection and payment of tax have remained unchanged. 2. The expressions residential land and foreign person are and at all times have been defined by incorporating the definitions of those terms found in Chapter 2A of the Duties Act 1997, to which these reasons return in more detail below. These definitions were originally set out in sub-section 5A(6). In 2017, this sub-section was deleted, and the defined terms incorporated (as they continue to be) from the Duties Act by section 2A of the LTA. 3. Section 5A(3) of the LTA provides as follows: Surcharge land tax is payable in addition to any land tax payable in respect of the residential land under the other provisions of this Act, and is so payable even if no land tax is payable under those other provisions.
3. Section 5B of the LTA provides as follows: 5B Surcharge land tax - residence requirement applying to principal place of residence exemption (1) A person is eligible for an exemption from liability to pay surcharge land tax in respect of residential land for a land tax year because the land is the principal place of residence of the person only if - (a) the person is a permanent resident at midnight on 31 December of the previous year, and (b) the Chief Commissioner is satisfied that, during the land tax year, the person intends to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement, and (c) the person lodges a declaration with a land tax return required to be furnished under section 12 of the Principal Act for the land tax year to the effect that the person has that intention. (2) The person must use and occupy the land as the person's principal place of residence for a continuous period of 200 days in the land tax year. This requirement is referred to as the residence requirement. (2A) A person does not use and occupy land as the person's principal place of residence during a period of the person's physical absence from Australia. (2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person's brief physical absence from Australia. (3) If the residence requirement is not complied with by the person, surcharge land tax liability is to be assessed or reassessed as if the person's exemption from liability to pay surcharge land tax for the land tax year had never applied. (4) The failure of the person to comply with the residence requirement is taken to be a tax default for the purposes of Part 5 of the Taxation Administration Act 1996. (5) Any interest that is payable on the tax default in accordance with Part 5 of the Taxation Administration Act 1996 accrues on the amount of surcharge land tax assessable to the person for the period commencing on the last day allowed for furnishing the land tax return for the land tax year and ending on the day when the assessment or reassessment referred to in subsection (3) is made.
4. Section 5B was introduced into the LTA in 2017 by the State Revenue and Other Legislation Amendment (Budget Measures) Act 2017 with effect from 1 July 2017. It thus applied to the 2018 and subsequent land tax years. Sub-sections (2A) and (2B) were inserted into Section 5B in 2022, by the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022, with effect from 19 May 2022.
5. Section 104I of the Duties Act 1997 relevantly defines residential land as follows: residential land means any of the following and does not include any land used for primary production - 1. a parcel of land on which there are one or more dwellings, or a parcel of land on which there is a building or buildings under construction that, when completed, will constitute one or more dwellings, 2. ..... 3. ...... 4. ...... 5. a parcel of vacant land (including any land that the Chief Commissioner is satisfied is substantially vacant) that is zoned or otherwise designated for use under an environmental planning instrument (within the meaning of the Environmental Planning and Assessment Act 1979) for residential purposes or principally for residential purposes. The Property was thus at all material times residential land as so defined, whether by reason of paragraph (a) or (e).
6. Section 104J of the Duties Act 1997 defines a foreign person as meaning: a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth subject to certain modifications: 1. to the effect that Australian citizens are always to be taken as ordinarily resident in Australia; or 2. relevant solely to certain categories of New Zealand citizen. Neither of these modifications are of any relevance in the present case, however, because the Applicant is and remains a citizen of the Peoples' Republic of China only.
7. Section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) defines a foreign person relevantly as follows: "foreign person" means: (a) an individual not ordinarily resident in Australia ..., and section 5 of that Act provides as follows: Meaning of ordinarily resident (1) An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if: (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and (b) at that time: (i) the individual is in Australia and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law; or (ii) the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law. (2) Without limiting paragraph (1)(b), an individual's continued presence in Australia is subject to a limitation as to time imposed by law if the individual is an unlawful non-citizen within the meaning of the Migration Act 1958 .

The parties' arguments

1. The Applicant says that any liability to surcharge land tax should be waived by the Respondent on compassionate grounds since: 1. The Applicant's absence from Australia during the relevant years was primarily because of travel restrictions imposed in response to Covid 19. 2. Moreover, her absence was also partially caused by family care responsibilities, namely her children's desire to complete their schooling in China. 3. The Applicant's personal and economic circumstances are such that she should be relieved from liability to surcharge land tax in respect of the Property.
2. The Respondent says that: 1. The evidence indicates that the Applicant was not ordinarily resident in Australia during any of the relevant land tax years. Since she is not an Australian citizen, she was thus a foreign person in all relevant land tax years for purposes of section 5A of the LTA, so that the Property was subject to surcharge land tax. 2. Section 5B of the LTA does not provide the Applicant with any relief since: 1. That the Property did not contain a habitable residence until early 2023 and has been leased since April 2023 means that the Respondent could not be satisfied as required by section 5B(1)(b) of the LTA that it was the Applicant's intention to use or occupy the Property as her principal place of residence during the relevant land tax years; and 2. It is clear from the evidence that during the relevant land tax years she was not in Australia for, and therefore did not use or occupy the Property as her principal place of residence, for the continuous period of 200 days required under section 5B(2) of the LTA. 1. The Respondent has no discretion to waive surcharge land tax that is payable or to exempt the Applicant or the Property from it in the absence of statutory authority to do so. There is no such authority.

The nature of the review

1. The provisions of section 100 of the TAA apply to this review. Notably: 1. sub-section 100(2) of that Act provides that neither the Applicant nor the Respondent is limited in the present application to the grounds of the Objection; and 2. sub-section 100(3) of that Act provides that the Applicant has "… the onus of proving the applicant's case in an application for review", an onus which is discharged by reference to the ordinary civil standard: B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481.
2. Under section 63(1) of the ADRA, in conducting a review the Tribunal ".. is to decide what the correct and preferable decision is having regard to the material then before it, including the following: 1. any relevant factual material, 2. any applicable written or unwritten law".
3. Moreover, under section 63(2) of that Act 1997, in doing so the Tribunal "… may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision".

Reasoning

1. The evidence shows (and there is no dispute) that: 1. The Property was residential property for purposes of section 5A of the LTA at all material times. 2. The Applicant: 1. was resident in China and not in Australia from 21 May 2020 until at the earliest 6 February 2023; and 2. was at all material times a citizen of the Peoples Republic of China only. She was thus in relation to all relevant land tax years a foreign person for purposes of section 5A of the LTA.
2. It follows that subject to any exemption the Applicant was liable to surcharge land tax under section 5A of the LTA in respect of each of the 2021, 2022 and 2023 land tax years.
3. The exemption provided for in section 5B of the LTA does not apply, since the Respondent could not be satisfied that the Applicant in relation to any of the 2021, 2022 or 2023 land tax years had the intention specified in section 5B(1)(b) of the LTA "to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement", since: 1. There was no evidence as at 31 December in any of 2020, 2021 or 2022 to suggest that the Property was at that time capable of (or intended by the Applicant for) use or occupation as her principal place of residence; and 2. As noted above, the Applicant was physically in China and not in Australia from at the latest 21 May 2020 until 6 February 2023; she could not therefore have satisfied the residence requirement imposed by section 5B(2) of the LTA, of occupying the Property for a continuous period of 200 days in the immediately preceding the 2021, 2022 or 2023 land tax years, and as at the date of the Assessment there was no evidence to suggest that she had an intention of using and occupying the Property as her principal place of residence.
4. The reasons for the Applicant's absence from Australia are irrelevant: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [59], Barsoun v Chief Commissioner of State Revenue [2020] NSWCATAD 282 at [78]. The Respondent has no statutory basis on which to exempt a taxpayer from that statutory requirement: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].
5. Neither the Respondent nor this Tribunal has any discretion to waive, or to grant a "one off" exemption from, surcharge land tax for which a taxpayer is liable. This is the case even though the imposition of the tax may impose hardship or a perceived unfairness on the taxpayer or result from circumstances (such as parental responsibilities or travel restrictions) that deprived the taxpayer of effective moral or legal choice in relation to her absence from Australia. The position is set out clearly in the Tribunal's reasons for decisions in Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [45] to [48], Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [32] to [34], Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38] and Du v Chief Commissioner of State Revenue [2022] NSWCATAD 329, at [39] to [47]. These decisions in turn rely, at least in dismissing the proposition that general notions or fairness or justice should allow the adjustment of tax liabilities, on the High Court of Australia's unambiguous rejection of such a proposition in Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109, at 123.
6. The Tribunal was concerned to investigate the evolution in the Property's circumstances during the 2023 land tax year. The Applicant stated during the hearing that: 1. The residence on the Property was only completed in March 2023. 2. The Property was leased to tenants in April 2023, shortly after completion of the residence; the Respondent provided to the Tribunal a copy of a Residential Tenancy Agreement dated 26 April 2023 between the Applicant, as landlord, and a Mr and Mrs M Jeffrey, as tenants, providing for their lease of the Property for a 26-week period at a rental of $680 per week; and 3. She was living in Melbourne.
7. Accordingly, even having regard to the changes in the Property's circumstances as at the hearing date, the Tribunal could not be satisfied that: 1. the Applicant used or occupied the Property as her principal place of residence for 200 continuous days during the period of 12 months preceding the hearing date; 2. the Applicant at any time had the intention to make the Property her principal place of residence; and 3. by the time of the hearing, 319 days of the 2023 land tax year had passed, and there was no evidence to suggest that on any of those days the Property was occupied by the Applicant as her principal place of residence. The correct and preferable decision, therefore, for the 2023 land tax year is that the Assessment be confirmed.

Orders

1. The Tribunal confirms under section 101(a) of the Taxation Administration Act 1996 the Respondent's assessment dated 8 February 2022 of surcharge land tax in the amount of $31,886.65.

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: 30 November 2023