Zhu v Chief Commissioner of State Revenue

Materials before the Tribunal

1. The Applicant filed: 1. Application for Administrative Review filed 28 February 2024 (A1); 2. Affidavit of the Applicant affirmed 19 April 2024 (A2); 3. Affidavit of Ms Maifang Hu affirmed 19 April 2024 (A3); 4. Affidavit of Ms Yilin Zhu affirmed 22 April 2024 (A4); 5. Affidavit of Mr Bing Han (interpreter and translator) affirmed 19 April 2024 (A5); and 6. Submissions filed 22 April 2024 (A6).
2. The Respondent filed: 1. Documents filed on 12 March 2024 pursuant to s 58 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act) (R1); and 2. Submissions filed 17 May 2024 (R2).
3. The Tribunal was also given: 1. a Trial Book filed 7 June 2024 (A7); and 2. A Joint Bundle of Authorities filed 7 June 2024 (R3); and 3. Title Search dated 13 June 2024 (as handed up) (A8).

Facts

1. Comprehensive affidavits with supporting documents were filed by the Applicant. Each was admitted into evidence. No witnesses were required to attend or be cross-examined. I set out below my findings of fact which are directly relevant to the issues before me.
2. The Applicant is 76 years old. He and his wife, Maifang Hu (Ms Hu) were married in 1979 and have both been retired for many years. Their daughter is Yilin Zhu (Yulin). Yulin's son, Leon, is their only grandchild.
3. The Applicant, Ms Hu and Yilin jointly own an apartment in Shanghai (Shanghai Apartment). The family lived there together until Yilin and Leon moved to Australia, received permanent residence in 2013, and became Australian citizens in 2015. The Applicant and Ms Hu received permanent residence in 2016 and moved to Australia, where they lived in a house in Glen Waverley (in Victoria) owned by their family trust (Victorian House). Yilin separated from her partner in 2014, and her and Leon lived with them at the Victorian House.
4. Because the Applicant and Ms Hu spoke no English, they were very reliant on each other, and also on Yilin who spoke fluent English. Yilin helped them with things that involved dealing with paperwork or doing things online, including banking, bills and corresponding with people. She had assisted them with their application for their permanent residence visas.
5. At the end of 2016, when Leon was 11 years old, Yilin moved to England so he could study at Eton College, although she returned regularly to Australia; she was worried about her parents and encouraged them to move to Sydney where there was a bigger Chinese community (where they could live comfortably speaking and reading only Chinese) and to avoid harassment from her ex- partner, who lived a few streets away from their Victorian House and had a habit of coming by their house. The acrimony with her ex-partner continued through family court proceedings that dragged on for several years until 2017.
6. In around 2017, with Yilin's help, the Applicant bought an apartment in Chatswood (Chatswood Apartment). He and his wife lived there and enjoyed the Chinese community. They were happy with the area but wanted to find a large house to live in - in the same area/suburb but with more space and a big garden. They had done lots of gardening at their Victorian House, which they missed. Ms Hu also did not like living up high in the apartment.
7. The search for their "forever home" continued through 2017 and 2018, with Yilin searching online to find homes in the Chatswood area for her parents to inspect. Yilin communicated with the real estate agents about the houses. She discussed and negotiated prices. She organised building and pest reports if her parents were interested in a particular house.
8. Ultimately, in around January 2019, Yilin found a large 5 bedroom house online. In Chatswood. With a nice garden. The Applicant inspected it in early January and liked it, but the price seemed too high. Ms Hu was overseas at the time, and inspected the property following her return. However, by that time, the Applicant had left for China, flying out on 11 February 2019.
9. They all liked the property and so Yilin liaised with the real estate agent and managed to get the purchase price down. They were all happy and decided to buy it.
10. It was decided that the property would be bought by Ms Hu as the sole purchaser and that the Applicant would be added later as an owner because: 1. They wanted to exchange contracts quickly to make sure they did not lose the sale; and 2. The Applicant was in China at the time, and he did not have his wife or Yilin there to help him with organising legal and administrative documents; and 3. Yilin had spoken with their solicitor handling the sale who advised before contracts were exchanged that it would be a straightforward process to transfer half the title from Ms Hu to the Applicant at any time after settlement and there would be no (further) stamp duty for married couples.
11. And so the Chatswood House was purchased solely in the name of Ms Hu; the contract was dated 8 March 2019 and settlement occurred in May 2019. She was assessed to duty in the amount of $224,710. That assessment was fully paid and is not in dispute.
12. On 30 March 2019, Ms Hu had flown overseas to join her husband in China. They then travelled to England on 16 April 2019 and stayed in Yilin's townhouse and looked after Leon. During May and early June 2019, Yilin was in Sydney. In late June and during July 2019, the Applicant and Ms Hu took Leon with them to China for his school holidays.
13. However, their time in China was not happy. Ms Hu's brother was very ill; he lived in Beijing, so she travelled there to see him several times, was there when he died, and attended his funeral. The Applicant unfortunately was quite ill, and couldn't go with her. The evidence shows he had numerous medical conditions and visits to doctors and the hospital in Shanghai.
14. During her time back in Australia, Yilin arranged for the Chatswood House to be set up as her parents' home. She had their blessing (and the keys) to arrange for things to be cleared out from the Chatswood Apartment and the Victorian House, and moved to the Chatswood Property. The evidence in her affidavit and documents before the Tribunal are not in dispute. She booked and paid for removalists. She arranged for everything to be moved in to the Chatswood Property - furniture, all of their clothes, a lawn mower, gardening equipment, beds, kitchen implements, pots and pans, crockery, cutlery, bedlinen, towels, electronic items, soft furnishings and toiletries (including brushes, combs, toothbrush, toothpaste, razors, aftershave etc.). She helped the removalists unpack and set up the Chatswood House for her parents. Their mail address was changed to the new house. She also set up the utilities connections and home insurance for the Chatswood House for her parents. The house was insured from around 31 May 2019 (in the Applicant's name). The water and utilities were connected and operative. Their other properties were no longer furnished.

The keys are handed over

1. Yilin then returned to England. Her parents had brought Leon back to England from China. She handed them their keys to their new home.

The Transfer of 50% to the Applicant

1. Yilin had spoken with the solicitor "around July 2019" and asked her about adding her father's name to the title for the Chatswood House and she said that was no problem and that no stamp duty was payable. Also in evidence before the Tribunal was: 1. an email from Elaine (which I accept was Yilin, being an English version of her name she used) to the solicitor on 3 July 2019, which asked the following: Hi Annie, My parents was wondering if any stamp duty or other fees will occur if they would like to add my father's name on the title of [Chatswood Property]? 1. a reply from the solicitor to Elaine on 4 July 2019, which relevantly responded as follows (my emphasis): Hi Elaine, If your parents plan to use the property as your primary place of residence, and transfers the property to 50/50 or as joint tenants, there will be no stamp duty… I will need to certified copies of their passport and their marriage certificate. I will check with our stamping agent to see if there are any other documents your parents will need. They may be a requirement for a statutory declaration for each to state that they are married and they intend to use the property as their primary place of residence. … Are you still interested in us going ahead with the transfer?
2. Yilin then instructed the lawyer to prepare the necessary documents for the transfer of the 50% interest in the property to the Applicant from Ms Hu.
3. On 30 July 2019, The Applicant and his wife attended the Australian consulate in Shanghai to execute the transfer documents: 1. Ms Hu transferred 50% of her interest in the Chatswood Property to the Applicant; 2. Ms Hu lodged an Application for Exemption from Duty - transfers between married couples with the Respondent; 3. Ms Hu signed a Purchaser/Transferee Declaration; 4. The Applicant signed a Purchaser/Transferee Declaration; and 5. On each form, they put the address of the Chatswood Property as their current residential address and declared that the information provided was true and correct.
4. Ms Hu flew back into Sydney on 11 September 2019.
5. The Applicant flew back into Sydney on 7 November 2019, after being medically cleared by the doctor in Shanghai as fit to travel.
6. Each of them went immediately and directly to the Chatswood Property upon their return. They have lived there ever since. Ms Hu did not leave Australia again in the period from 11 September 2019 to 28 June 2023 (the date of the movement records before the Tribunal). The Applicant did not leave Australia again in the period from 7 November 2019 to 28 June 2023 (the date of the movement records before the Tribunal).

The Assessment and Objection

1. On 29 June 2023, the Respondent issued a Notice of Investigation to the Applicant in respect of a potential liability for duty on his acquisition of his 50% in the Chatswood Property.
2. Following various communications between the Applicant's tax agent and the Respondent, a Duties Notice of Assessment was issued to the Applicant on 17 November 2023. He was assessed to transfer duty ($92,552.00), penalty ($18,610.40) and interest ($34,345.72). The total payable was $145,408.52. The penalty was reduced to 20%.
3. The Applicant lodged an objection on 20 December 2023, claiming that the Chatswood Property was used as their principal place of residence and was therefore exempt under s 104B of the Duties Act. He also objected to the liability for interest and penalty tax payable on the Notice of Assessment.
4. The Objection Decision issued on 9 January 2024. The Objection was disallowed in full.

Relevant statutory provisions

1. Dutiable property is defined in s 11 of the Duties Act and relevantly includes land in NSW: s 11(1)(a).
2. A liability for duty arises when a transfer of dutiable property occurs: s 12 of the Duties Act. For the purposes of an agreement for sale or transfer that is when the agreement was entered into: Column 4 of the Table in s 9(2) of the Duties Act. Duty is payable by the transferee: s 13 of the Duties Act.
3. Section 104B of the Duties Act provides the relevant exemption: 104B Exemption - transfer of residential land (1) No duty is chargeable under this Chapter on a transfer, or an agreement for the sale or transfer, of residential land if - (a) as a result of the transfer or agreement, the property is or will be held by a married couple or de facto partners as joint tenants or as tenants in common in equal shares, and (b) the residential land - (i) is land on which there is a dwelling that, when the transfer of dutiable property occurs, is used as the principal place of residence of the married couple or de facto partners, or (ii) is a parcel of vacant land, or land on which there is a building under construction, and the married couple or de facto partners intend to use the residential land as the site of a dwelling to be used as their principal place of residence, and (c) the residential land is used solely for residential purposes and not for any other purpose (such as a commercial, industrial or professional purpose), and (d) both the transferor and the transferee are the married couple or one of them or the de facto partners or one of them and no other person is a party to the transfer, and (e) in the case of de facto partners, the parties to the relationship have lived in the relationship for at least 2 years before the date of the transfer. (2) For the purposes of subsection (1) (c), the use of not more than one room on the land for a non-residential purpose is to be disregarded, if the use relates to a business or undertaking that is primarily conducted elsewhere. (3) Land may be the subject of an exemption under this section even if it is partly held by another person who is not a part of the married couple or one of the de facto partners.
4. "Residential land" is relevantly defined in s 104A as follows: 104A Meaning of "residential land" (1) In this Division, residential land means - (a) a parcel of land on which there is - (i) one single dwelling or one flat, or …

Applicant's submissions

1. In written submissions and at the hearing, the Applicant made (inter alia) the following points: 1. "Used as a principal place of residence" when assessed at a particular time does not require the actual physical presence of the person prior to the test time. There is no requirement to "occupy". 2. The language of s 104B is unusual. It is the only provision in the NSW revenue legislation with the specific wording "use" rather than "use and occupy" in the context of a principal place of residence. Other cases are usually discussing "use and occupy" in the context of the relevant provisions. 3. By way of distinction, in s 49A (1A) of the Duties Act the relevant element applicable to that stipulation is to "use and occupy the residence to which the agreement relates as a principal place of residence", and in s 104ZKA(2) of the Duties Act the relevant element there is "the transferee intends to use and occupy the residential land… as a principal place of residence". 4. Similarly, various concessions in Schedule 1A of the Land Tax Management Act 1956 (NSW) (LTMA) use the element of "use and occupy" and "use and occupation", not merely "use": see clause 6, 8, 9, 10, 11 and 15 of Schedule A of the LTMA. 5. Whilst ss 49A and 104ZKA of the Act relate to matters unrelated to s 104B of the Act, there is a distinction in wording within the Duties Act itself between the words of wide import "used as" (on the one hand) and "use and occupy as" (on the other hand). 6. The expression "used as" is to be contrasted with the expression "used for". "Used as" is an expression that contemplates that land is presently being used in that fashion and not land which simply may or even will be used in that fashion at some time in the future: citing The Council of the Town of Gladstone v The Gladstone Harbour Board [1964] Qd. R 505 at 525 (Gibbs J) (Council of the Town of Gladstone) and Applewood Residential Development Pty Ltd v Commissioner of State Revenue [2006] VSCA 207; (2006) 64 ATR 291 (Applewood). 7. The Chatswood House, by the acts undertaken by Yilin at that property in May and June 2019 (described above in these reasons) constituted the requisite "use of the property as the principal place of residence of the married couple". It was not rented out and others were not allowed to occupy it. 8. Section 104B(1)(b)(i) does not also require that the Chatswood House be "occupied by the married couple". The other preconditions for the exemption are also met. Accordingly the assessment to duty is wrong.

Respondent's submissions

1. In respect of the exemption in s 104B of the Duties Act, the Respondent says the Chatswood Property was not used as the principal place of residence of the Applicant and his wife when the 50% transfer to the Applicant occurred on 30 July 2019, as was required by s 104B(1)(b): 1. The Respondent accepts that s 104B only requires the Applicant to use, not use and occupy, the property as his principal place of residence, as submitted by the Applicant. 2. However, that distinction does not assist, as the Applicant and his wife did not use the Chatswood Property as a residence, let alone their principal place of residence, at the time of the transfer. They only commenced using the Chatswood Property as their principal place of residence when they actually moved in to reside there, after returning from overseas: in September 2019 (for Ms Hu), and in November 2019 (for the Applicant). Their submissions say (at [52]) (my emphasis): Maifang Hu and the Applicant did not use the Property as a residence until September and November 2019, respectively, when they physically commenced living there. 1. The relevant authorities make clear that "use" requires actual utilisation of the property for the required purpose. Critically, s 104B requires that the property be used as a residence, being also their principal place of residence. 2. None of the matters relied on by the Applicant constitute use of the Chatswood House by the Applicant and his wife as a principal place of residence as at 30 July 2019. 1. Firstly, the Applicant's intention that the Chatswood House be the principal place of residence of he and his wife is not sufficient as intended future use does not constitute actual use. 2. Secondly, the fact that the Applicant's daughter (Yilin) took steps to connect the Chatswood House to utilities and move her parents' furniture and belongings as a prelude to the Applicant and his wife moving into the Chatswood House does not constitute use of the property as a principal place of residence. 3. Thirdly, the fact that, from June 2019, the Applicant and his wife had the right to control possession of the property, does not constitute use of the property as a principal place of residence.

Jurisdiction and Role of the Tribunal

1. The Tribunal has jurisdiction to conduct this administrative review, because the relevant "reviewable decision" by the Respondent (the Duties Notice of Assessment) was the subject of an objection by the Applicant: see s 9 of the ADR Act, s 30 of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act), s 96 of the Taxation Administration Act 1997 (NSW) (TAA Act).
2. The application to the Tribunal was filed, within time, on 28 February 2024.

Onus of Proof

1. The Applicant has the onus of proving his case on the balance of probabilities: s 100(3) of the TA Act.
2. The TA Act places no onus on the Respondent to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The Applicant must establish that he is entitled to an exemption from duty, and must prove the matters required to answer the statutory question(s) in his favour. Unless the Applicant shows by evidence that the assessment is incorrect, it will prevail: see Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 (Dalco) at 624; Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89 per Mason J; Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36].

There was a transfer of dutiable property on 30 July 2019

1. It was not in dispute that the transfer of the 50% interest was a transfer of dutiable property which occurred on 30 July 2019, and therefore a dutiable transaction for the purposes of the Duties Act unless the exemption in s 104B applied.

The requirements for the exemption

1. I find on the evidence that the following requirements in s 104B were satisfied: 1. The chapeau to s 104B(1) was satisfied because the Chatswood House was "residential land", being a parcel of land on which there was one single dwelling: s 104A(1)(a)(i); 2. Section 104B(1)(a) was satisfied because, as a result of the transfer, the Chatswood House was held by the Applicant and his wife (a married couple) as joint tenants in equal shares; 3. Section 104B(1)(c) was satisfied because the Chatswood House was used solely for residential purposes and not for any other purpose (such as a commercial, industrial or professional purpose); and 4. s 104B(1)(d) was satisfied because both the transferor and the transferee are the married couple and no other person was a party to the transfer.

Section 104B(1)(b)(i)

1. The sole issue is therefore whether the Chatswood House was exempt because it was land on which there is a dwelling that, when the transfer of dutiable property occurs [30 July 2019], is used as the principal place of residence of the married couple…
2. Section 6 of the Duties Act says that: words and expressions used in this Act (or in any particular provision of this Act) that are defined in the Dictionary at the end of this Act have the meanings set out in the Dictionary.
3. The Dictionary does not define "used", "principal place of residence", "used as the principal place of residence" or "used as the principal place of residence of the married couple".

The History of s 104B

1. The State Revenue Legislation Amendment Act 2012 (NSW) inserted Chapter 2, Part 8, Division 4 titled "Transfers between married couples and de facto partners" into the Duties Act. This included section 104A titled "Meaning of residential land" and s 104B titled "Exemption - transfer of residential land".
2. The Explanatory Note to the State Revenue Legislation Amendment Bill 2012 (NSW) stated (at p 3): Schedule 1 [15] remakes and extends an existing duty exemption that applies to certain transfers of dutiable property used or intended to be used as the principal place of residence of a married couple or de facto partners. The existing exemption applies to a transfer of property between a married couple or de facto partners of property used or intended to be used solely as their principal place of residence. The new provision will also allow a partial exemption to be claimed where the land is used partially as a principal place of residence, and partially for other purposes. The provisions are similar to the rules that apply to the charging of land tax in respect of a principal place of residence Schedule 1 [12] and [14] are consequential amendments.
3. The Second Reading Speech to that Bill stated: The bill extends the duties exemption for a transfer of the family home between a husband and wife or de facto partners. Again, the provision currently operates on an all-or-nothing basis where the exemption might not apply if the land is used for purposes other than as the couple's principal place of residence….
4. The insertion of the new Division 4 was accompanied by the repeal of s 67. That contained the previous exemption which was in the following terms: 67 Exemptions - transfers to married couples and de facto partners (1) No duty is chargeable under this Chapter on a transfer, or an agreement for the sale or transfer, of dutiable property if it is proved to the satisfaction of the Chief Commissioner that: (a) as a result of the transfer or agreement, the property is or will be held by a married couple or de facto partners as joint tenants or as tenants in common in equal shares, and (b) the dutiable property: (i) is land that has erected on it a private dwelling house and was solely or principally used, as at the date of transfer, as the principal place of residence of the married couple or de facto partners, or (ii) is vacant land and the married couple or de facto partners intend to use it as the site of a private dwelling house to be solely or principally used as their principal place of residence, or …

Start with the text

1. Although the Explanatory Note above at paragraph 47 above suggests that the mere "intention" to use a property as a principal place of residence is sufficient, regard must be had primarily to the text. This is because the starting point and end point is with the text of the provision: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41. As the High Court stated in that case, at [47]: … that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
2. It is clear from the text that the only provision that refers to an "intention" to use the property as a principal place of residence of the married couple is in s 104B(1)(b)(ii).
3. Section 104B(1)(b)(i), in contrast, requires that the residential land is land on which there is a dwelling that, when the transfer of dutiable property occurs, is used as the principal place of residence of the married couple.

How was it used?

1. To determine how land is "used", it is first necessary to view the acts done on the land. 1. The commonly understood meaning of "used" in ordinarily parlance is that it requires an "examination of activities undertaken upon the land in question": New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50 per French CJ, Kiefel, Bell and Keane JJ (at [34]). 2. Whether land is being used for [a purpose] is a question of characterisation of the use or uses to which the land is put. And in all cases one should not ignore the conclusion reached by an objective observer who is viewing the land as a whole. Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2024] HCA 20 (Godolphin), Gordon, Edelman and Steward JJ at [34]; Chief Commissioner of State Revenue v Metricon Qld Ltd (2017) 105 ATR 11 (Metricon) at [52] 3. Close attention to the precise terms of the exempting provision is required. The question is one of "identifying the physical acts conducted on the land": Godolphin at [67] 4. Use of land requires actual use and not contemplated or intended use. The meaning of "use" must also be informed by the statutory context: 1. See Thomason v Chief Executive, Department of Lands [1995] QLAC 4; (1995) 15 QLCR 286 at 293 (my emphasis): The land must be 'used', that is, it must be applied to, employed for some purpose, put into service, turned to account (see Macquarie Dictionary). The word 'use' has been held to be 'a word of wide signification' (British Motor Syndicate Ltd v. Taylor & Son [1900] 1 Ch 577 at 583 per Stirling J) and 'a word of wide import' (Shell-Mex & BP Ltd v. Clayton [1955] 3 All ER 102 at 106 per Court of Appeal) the meaning of which in any particular case depends to a great extent on the context in which it is employed (Ryde Municipal Council v. Macquarie University (1978) 139 CLR 633 at 637 per Gibbs ACJ, 651 per Stephen J, 658 per Aikin J). For land to be 'used' it must be actually used, not be contemplated or intended to be used nor be suitable for use (London & South Western Ry Co v Blackmore (1870) LR 4 HL 610 at 617 per Lord Hatherley LC.). That does not mean that there must be activity on all the land. An owner can use land by keeping land in its unimproved state where retaining it in that state is relevant to a particular purpose (Newcastle City Council v. Royal Newcastle Hospital [1959] AC 248 at 255, 1 All ER 734 at 735, 100 CLR 1 at 4, Privy Council). 1. See The Council of the Town of Gladstone v The Gladstone Harbour Board [1964] Qi R 505 at 526 per Gibbs J: In ordinary speech, there is a difference between using land and intending to use it, and in my opinion nothing said in the Judicial Committee or the High Court in Newcastle City Council v Royal Newcastle Hospital (supra) compels me to decide that the hold land with the intention to use it must be regarded as equivalent to using it. It is in my opinion correct to say, as Lowe J. said in Franciscan Order v Kew ((1994) V.L.R. 19999, at p. 210): "What is exempted from rateability is land which is used for the excepted purpose and neither dedication therefor nor intention to use it for such a purpose is in itself sufficient." 1. See Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 per Taylor J at 515 (my emphasis): The word 'used' is, of course, a word of wide import and its meaning in any particular case will depend to a great extent upon the context in which it is employed. The uses to which property of any description may be put are manifold and what will constitute 'use' will depend to a great extent upon the purpose for which it has been acquired or created. Land, it may be said, is no exception and s. 132 itself shows plainly enough that the 'use' of land will vary with the purpose for which it has been acquired and to which it has been devoted. It may be for a public cemetery, for a common, for a public reserve, in connexion with a church or school and so on. Each of the forms of user referred to in the section relate to use by the owner and some of them, no doubt, contemplate a use which is synonymous with actual physical occupation and enjoyment. Others contemplate a use in a less direct form. But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land.
2. Accordingly, the question is to examine those acts, and then determine if they were sufficient to (a) constitute "use" of the land; and (b) characterise the land as "land on which there was a dwelling that was used as the principal place of residence of the married couple".

The activities undertaken on the land

1. Here, the facts establishing the "use" of the land comprise the activities undertaken by Yilin at the Chatswood House, as set out in paragraph 19 above.
2. These acts occurred at a time sufficiently proximate to the transfer date. In any event, the "use" of the land demonstrates that everything had been done that was required to make it ready for the Applicant and his wife (the married couple) to walk in the door and start actually living there; "residing" in the sense described by Ridley J in Stoke-On-Trent Borough Council v Cheshire County Council [1915] 3 KBB 699 at 706.
3. The Chatswood House was "ready to go". And the Applicant and his wife, at that time, held the keys.
4. The Chatswood House was, at the transfer date, "wholly devoted to" becoming their principal place of residence. It was dedicated to this end. There was no other use of the Chatswood House; it was neither rented out, nor available for rent.
5. That was also the clear intention, demonstrated by the other actions which occurred away from the land: 1. the Applicant and his wife regarded it, from the date of its acquisition, as their "forever home"; 2. they completed the relevant forms declaring that the Chatswood House was their current residential address; and 3. they did not regard any other property as their "home" or "principal place of residence".
6. However, the Chatswood House wasn't, at the transfer date, used as their principal place of residence. The Chatswood House could not be their principal place of residence, because they had never actually lived there. That was, on any objective view, the critical element required, at the minimum, to ascribe to the land the character of "the principal place of residence of the married couple", i.e. their principal place of residence.
7. There is, as the Applicant says, no requirement in the words of s104B(1)(b)(i) that the Applicant or his wife "occupy" the Chatswood House as their principal place of residence at the relevant date.
8. That is correct, but the facts must prove that (a) it was their principal place of residence, and (b) it was used as their principal place of residence. And the requirement to first "reside" in (occupy) the dwelling is the critical element toward establishing your principal place of residence.
9. It is useful to contrast the position under s 104(1)(b)(ii) which provides: the residential land… is a parcel of vacant land, or land on which there is a building under construction, and the married couple or de facto partners intend to use the residential land as the site of a dwelling to be used as their principal place of residence, and
10. It is not possible to use vacant land as your principal place of residence because there is no dwelling to live in. The same applies for an incomplete home still under construction. Accordingly, the element of intention is required. It will become a principal place of residence only after completion, also requiring the married couple move in to "reside" there. This is not the case for s 104B(1)(b)(i)

"Used for" vs "used as"

1. The Applicant raised the point that "used for" a purpose (as considered in Leda Manor stead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366, Metricon and, more recently, in Godolphin) is different to the "used as" language in s 104B. My view is that "used as" simply requires that the land is being applied to use as the principal place of residence of the married couple. It remains the case that what happens on "the concrete physical mass" (per Isaacs J in New South Wales v The Commonwealth [1923] HCA 34; (1923) 33 CLR 1 (at 33)), should be wholly devoted to the purpose. Accordingly, it is a question of characterising the land to meet the description. In those cases, it was use for a purpose. Here, it requires use as the principal place of residence of the Applicant and his wife.

Holding of the keys

1. The Applicant referred to the act of "taking the keys" from Yilin when in London, submitting that this taking possession of the keys to the Chatswood House constituted the return to them of "actual possession" at the time of the transfer, amounting to both legal and physical "use": citing NSW Land and Housing Corporation v Quinn (No 2) [2018] NSWDC 161 at [254]-[258] referring to Thomas v Metropolitan Housing Corporation Ltd [1936] 1 All ER 210 at 216 per Scott LJ and 214 per Slusser LJ. I agree, however, with the submissions of the Respondent that it may be an element of "occupation" but it is not sufficient: see comments of Gel J in Flaracos v Commissioner of State Revenue [2003] NSWSC 68 at [23]-[25], there citing Commissioner of Land Tax v Christie (1973) 2 NSWLR 526. It does not assist the task required here.

Looking forward and looking back -

1. A period of inactivity on the "testing date" may be explainable. It is permissible to look backwards and forwards for a reasonable period, because the task requires examination not of a single event but of a state of affairs that "exists as a continuum". Further, past activity may be indicative of present "use" even if the activity is for the time being not continuing: see White J in Metricon Qld Pty Limited v Chief Commissioner of State Revenue (No. 2) [2016] NSWSC 332 at [132]-[133] and in the Court of Appeal in Metricon per Barrett AJA at [46].
2. Intention alone, where the habitable dwelling exists, is insufficient, although intention may assist to explain the activities. Under s 104B(1)(b)(i), intention as to future plans is not determinative of anything where the test is not met at a point in time. Accordingly, "looking forward" to when actual they commenced to "reside" there (in September and/or November 2019) does not assist. It simply evidences that the earliest time that the land was "used as the principal place of residence of the married couple" was a time after the relevant taxing date. The test could not have been met as at 31 July 2019, and this is not cured by viewing any "continuum of events".

Conclusion on the exemption in s104B

1. In this case, there were activities on the land that were recently concluded prior to the transfer. They comprised the things noted above. They were acts of Yilin and not of the "married couple", being her parents. Nonetheless, it is clear that she did them on their instructions, and with their authority. Those acts were, relevantly, a "use" of the land. That "use" was done so the married couple could live there.
2. But the use was not "use as" the principal place of residence of the married couple. They had not already lived there together and established it as their principal place of residence, with the degree of permanence and indicia noted in cases such as Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41, Re Zino Commissioner of State Revenue [2004] VCAT 1707 - being sleeping there, and more). That fact cannot be cured by establishing it as their principal place of residence at a later time. By contrast, if they had already so established it as their principal place of residence, their absence from the property on the taxing date was not relevant. Because they didn't have to "occupy" the Chatswood House as their principal place of residence at the transfer date. That element is noticeably absent. It is not required.
3. The conclusion above does not strain the language of the section. The "occupation" element is not required in s 104B, and its omission explained. Nonetheless, the married couple must have lived there if the exemption in s104(1)(b)(i) is sought. It also makes sense that there are differences in wording with the provisions in the LTMA which imposes an annual land tax charge and prescribes "continuously used and occupied" requirements for the principal place of residence exemption (see LTMA s 10(1)(r) and Schedule 1A). The omission of an "intention to use" in s 104B(1)(b)(i) is also explained. Despite the clumsy wording of the Explanatory Note, the outcome I have found accords with the wider context of s 104B.
4. Having regard to all these matters, the exemption in s 104B of the Duties Act does not apply. The assessment to duty by the Respondent on the transfer of the 50% interest in the Chatswood House to the Applicant is correct. There is no legislative provision that provides a discretion to remit it.

Penalty and Interest

1. The question of penalty and interest is the final matter to consider.
2. The central matter involves the advice requested by, and received from, the lawyer which is extracted at paragraph 21 above.

Penalty

1. A penalty of 25% of the unpaid tax is imposed for a tax default under s 27(1) of the TA Act. The Respondent has remitted this by 20% (to 20%) under s 29(1) for disclosure during the course of the investigation.
2. Under s 27(3), the Commissioner (and here, the Tribunal) may determine that no penalty tax is payable if the person (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law.
3. The Respondent contended that there was no evidence of "reliance" on the advice received, and that it was not established that the transfer would not have proceeded if the advice was that duty was payable. I find, on the balance of probabilities, that the transfer was made relying on the lawyer's advice that no further duty was payable. The question was put directly, and a response provided. That was clearly in the minds of the Applicant, his wife and Yilin in deciding to proceed with the transaction.
4. On this basis, I find that reasonable care is established. Yilin requested specific advice, received incorrect advice, and was a person acting on behalf of the Applicant in seeking that advice. On that basis, I find that "the taxpayer or a person acting on their behalf (Yilin)" exercised reasonable care.
5. I therefore find that s 27(3)(a) of the TA Act is engaged.
6. The Commissioner raised the case of Nhem v Chief Commissioner of State Revenue [2024] NSWCATAD 9 (Nhem), and I acknowledge that the Tribunal may be justified in refusing to interfere with the Respondent's decision not to exercise the discretion under s 27(3)(a) when one of the parties did not take reasonable care (relevantly, here the lawyer). I have also had regard to the comments of SM Frost in Touma v Chief Commissioner of State Revenue [2012] NSWADT 2 at [49]-[50]. Nonetheless I am satisfied that in the circumstances of this case, there is nothing in the "combined result of the behaviour" that causes me disquiet or otherwise inclines me not to exercise the discretion.
7. The correct and preferable decision is to exercise the discretion under s 27(3)(a) of the TA Act to reduce the penalty to nil.
8. There is no need to consider the general discretion under s 33 of the TA Act.

Interest - Market rate component

1. The market rate component is intended to compensate the Commissioner for not having the benefit of the tax payment from the time it was due, and so approximates the ordinary lending interest rates. It is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. See Golden Age & Hannas the Rocks v Chief Commissioner of State Revenue [2024] NSWSC 249 (Golden Age) at [101], Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 (Incise Technologies) and the Commissioner's Practice note CPN 024.
2. Having regard to the facts set out above, there are no exceptional circumstances that would justify remission of the market rate component.

Interest - Premium component

1. Remission of the "premium component" of interest was considered by Richmond J in Golden Age who said at [102]: 102 In my view it is necessary to approach the remission question by recognising that the premium component is penal in nature and serves the purpose of both imposing a penalty and deterring taxpayers from delaying payment of duty in what is essentially a self-assessment regime. Consequently, 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. I do not accept the Commissioner's submission that it is a penalty at the 'low end' of the scale. Depending upon the period of the delay in payment, the penalty arising from the premium component can be very significant as it was in the present case (being 24% of the duty assessed on the premium).
2. In Incise Technologies, the Appeal Panel identified four cumulative criteria which are relevant to the exercise of the discretion to remit under s 25: 1. All principal tax that is owing and not in dispute has been fully paid; 2. There has been cooperation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; 3. Such cooperation has occurred prior to any investigation being commenced by the Commissioner or, at the very least, within a reasonable time after the request for information had been made by the Commissioner; and 4. There has been no wilful default by the taxpayer in not paying tax on time.
3. That the four criteria are not exhaustive has been confirmed in subsequent cases, e.g. Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 at [179] and Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 at [105]-[106]. 105 The Court was referred to the Commissioner's guidelines on interest and penalty tax appearing on the Revenue NSW website, which state: The premium rate of interest may be reduced if there is evidence you took reasonable care, or made a voluntary disclosure before the commencement of an investigation. However, for the purpose of payroll tax, the premium rate of interest is not reduced. … When determining whether reasonable care was taken we'll consider whether you: ● Kept complete and accurate records ● Made a diligent effort to understand and comply with the law; ● Sought expert advice on uncertain or complex matters; ● Were honest in your dealings with us. We'll also consider your: ● Understanding of the law; ● Commercial experience; ● Access to expert advice; Meeting one or more of these criteria does not necessarily mean that reasonable care has been taken. All factors leading to the tax default are taken into consideration. 106 It was accepted in Adams Bidco at [158]-[162] that whether the taxpayer has taken reasonable care to comply with the taxation law is a relevant consideration for the exercise of the discretion under s 25; see also Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 at [86]; Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 at [301]. I agree that whether the taxpayer took reasonable care is relevant to the remission of the premium component under s 25. In particular, it is necessary to consider whether there are factors which mitigate the taxpayer's behaviour in failing to pay its tax liability on time and, in this regard, it is necessary to consider the steps (if any) taken by the taxpayer to comply with the taxation law, whether those steps were reasonable and the explanation for why, despite those reasonable steps, the tax default occurred.
4. I am satisfied that the four criteria in Incise Technologies are met: the principal tax amount was still in dispute before me; the materials show that relevant information was provided to the Commissioner; such cooperation occurred within a reasonable time after the request for information had been made by the Commissioner; and there has been no "wilful" default by the Applicant in not paying tax on time (per Golden Age at [108]).
5. Further, I have found above, and repeat, that a person acting on the Applicant's behalf (Yilin) did take reasonable care. The Applicant's reliance, in turn, on his daughter was understandable, and acceptable. He spoke no English.
6. Accordingly, I exercise the discretion to remit the premium rate of interest to nil under s 25 of the TA Act. That is the correct and preferable decision. The fact that it may be found that the lawyer did not exercise reasonable care does not, in this case, point to me to a contrary conclusion. Nor was there any element of artifice in any of the matters before me.

Orders

1. I make the following orders: 1. The imposition of transfer duty is confirmed. 2. The assessment under review is varied to: 1. remit the premium component of interest to nil under s 25 of the TA Act; and 2. remit the penalty to nil under s 27(3)(a) of the TA Act; and 1. The matter is remitted to the Respondent to issue a new assessment that gives effect to these orders.

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: 12 August 2024