This is an application to the Tribunal under s 55 of the Administrative Decisions Review Act 1997 (NSW) (the ADR Act) for a review of an assessment of surcharge land tax for the 2019 land tax year issued to the Applicant on 19 January 2022 in respect of property at Clontarf (the Assessment) which was the subject of an unsuccessful objection. Liability for the 2020 land tax year assessed in that Assessment has been reassessed by the Respondent so that only the 2019 land tax year remains in dispute.
The Respondent assessed the Applicant as liable to pay surcharge land tax as a foreign person as she was not in Australia for 200 days or more in the calendar year 2018.
The Applicant acknowledges that she was not in Australia for 200 days or more in the calendar year 2018.
However, the Applicant says that she should not be required to pay surcharge land tax because a number of special circumstances beyond her control "caught her out" for the 200-day residence requirement including that she had applied for Australian citizenship and the approval of that application was significantly delayed, taking over 31 months. She also says that she has lived, worked and resided in Australia as an "ordinary resident" and taxpayer of Australia for over 30 years so to class her as not being ordinarily resident is absurd. She says she is not a "foreign investor", "foreign buyer" or "land speculator" in respect of whom she understands the surcharge land tax provisions were intended to apply. She also says she was not made aware that by leasing out her property and not being present in Australia for at least 200 days she would be considered a "foreign person" for land tax purposes and that the Assessment came as an incredible shock to her. She says that the narrow definition of "foreign person" as it has been applied to her unfairly excludes any consideration of her long-standing contribution to the economy of NSW and fails to consider the mitigating effect that her application for citizenship, had it been dealt with in a timely fashion, would have had on her ability to claim the exemption. She says that the Assessment is arbitrary and extremely punitive. She says that as a matter of equity and fairness she should not be treated as a "foreign person", as that was not the intended operation of the legislation.
The Respondent submits that the application should be dismissed pursuant to s 55(1)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) because the proceedings are misconceived or lacking in substance.
For the reasons I outline below, I agree that the proceedings should be dismissed as they are misconceived or lacking in substance.
In short, in her application the Applicant is asking the Tribunal to exercise a discretion that it is clear, on the basis of the authorities, that it does not have.
[2]
Background facts
The following facts are not in dispute.
The Applicant is the joint owner of property at Clontarf (the Property).
The Property was leased to tenants during the period 22 February 2018 to 21 December 2019.
The Applicant applied for Australian citizenship on 8 January 2018. That application was approved on 24 July 2020.
During the 2018 calendar year the Applicant was in Australia for 137 days.
[3]
Relevant Legislation
Section 5A of the Land Tax Act 1956 (NSW) (the LT Act) provides that surcharge land tax is payable for the 2017 and subsequent land tax years in respect of all residential land owned by foreign persons at midnight on 31 December in the year preceding the relevant land tax year.
The definition of foreign person is contained in s 2A of the LT Act. Section 2A of the LT Act provides that "foreign person" has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW).
Section 104J(1) of the Duties Act provides that a "foreign person" means "a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section." The modifications to that definition are not relevant in this case.
Section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (the FAT Act) defines a "foreign person" as "an individual not ordinarily resident in Australia".
Section 5 of the FAT Act provides:
5 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.
Section 5B of the LT Act provides for an exemption from liability to pay surcharge land tax in respect of residential land which is a person's principal place of residence. It provides:
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.
[4]
Taxation Administration Act 1996 (NSW)
The Taxation Administration Act 1996 (NSW) (the TA Act) applies in respect of "taxation laws" which are defined in s 4 of the TA Act to include the LT Act.
Section 96 of the TA Act provides that a taxpayer may apply to the Tribunal for administrative review of a decision of the Respondent that has been the subject of an objection.
[5]
Consideration
The Tribunal clearly has jurisdiction to review the Assessment under s 96 of the TA Act. However, s 100(3) of the TA Act makes it clear that in reviews of this nature by the Tribunal the Applicant has the onus of proving her case. This requires the Applicant to prove all matters necessary for the Tribunal to answer the statutory question in her favour on the balance of probabilities: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [28]-[31]; Raissis v Chief Commissioner of State Revenue [2021] NSWCATAD 99 at [21].
It is clear from the evidence and submissions that have been filed that the Applicant will not be able to meet this onus and the application is doomed to fail.
Under s 5A of the LT Act, surcharge land tax is payable in respect of residential land owned by foreign persons as at 31 December in the year immediately preceding the relevant tax year.
As at 31 December 2018, the Applicant owned the Property and it is not in dispute that it was residential land.
Accordingly, the question is whether for the 2019 land tax year the Applicant was a "foreign person" for the purposes of s 5A of the LT Act.
The Applicant was not an Australian citizen at that time, albeit she had made an application for citizenship.
"Foreign person" is defined in s 4 of the FAT Act as a person who is not "ordinarily resident" in Australia.
Section 5 of the FAT Act provides that an individual who is not an Australian citizen is "ordinarily resident" in Australia at a particular time if, and only if, the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time and, at that time, their continued presence in Australia is not subject to any limitation as to time imposed by law.
The words "has actually been in Australia" in s 5 of the FAT Act require physical presence in Australia: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [50] ("Gao").
The concept of being "ordinarily resident" is solely governed by the words of s 5 of the FAT Act, as adopted by s 104J of the Duties Act: Gao at [50]. Meeting the 200 day requirement is the only way a person like the Applicant can be classed as "ordinarily resident" in Australia for the purposes of surcharge land tax: Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [35] ("Lawrence").
While at the time she did not understand the consequences of her not being in Australia, it nevertheless remains the case, and the Applicant concedes, as a matter of fact she was not in the 12 months immediately preceding the 2019 tax year in Australia for 200 or more days.
The reasons for her not being in Australia are not relevant.
As Senior Member Currie stated in Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [29] ("Chu"):
"The position in this State is quite clear: in order to be "ordinarily resident" in Australia the taxpayer must have been physically present in Australia and the reasons for a person not actually being in Australia for the 200-day period are not relevant in assessing liability for duty under section 5A. Those principles have been confirmed recently by the decisions of this Division of the Tribunal in Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [59] and Barsoum v Chief Commissioner of State Revenue [2020] NSWCATAD 282 at [78],("Barsoum")."
Accordingly, the Applicant was not "ordinarily resident" as defined and was, therefore, a foreign person for the purposes of s 5A of the LT Act. The fact that the Applicant considers herself to have been an ordinary resident and not a foreign investor or foreign property owner is not relevant.
As such, she is liable to pay surcharge land tax in respect of the Property unless an exemption applies.
Section 5B of the LT Act provides for an exemption from surcharge land tax in respect of residential land if it is used and occupied as the owner's principal place of residence. To qualify for this exemption, the Applicant must prove she intended to use and occupy the Property as her principal place of residence and used and occupied the Property as her principal place of residence for a continuous period of 200 days in the 2019 land tax year.
However, as the Property was leased to tenants from 22 February 2018 to 21 December 2019, the Applicant could not use and occupy it as her principal place of residence for a continuous period of 200 days in the 2019 land tax year.
Accordingly, the exemption in s 5B of the LT Act could not apply to the Property for the 2019 land tax year.
Nor is there any provision in the LT Act which grants or allows the Respondent or, therefore, the Tribunal any discretion to exempt the taxpayer from surcharge land tax if the statutory criteria are not met: Chu at [30]; Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [46] ("Sjarifudin").
As the Tribunal stated in Lawrence at [38]:
"Furthermore, the fact that Mr Lawrence may have been able to satisfy the 200 day requirement in 2020 if the borders had remained open is irrelevant. He did not satisfy the requirement, and the legislation does not provide any relief for any person who fails that test: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30]."
Accordingly, I agree with the Respondent that the fact that the Applicant had applied for Australian citizenship and expected that application to be approved before the relevant taxing date is not relevant to determining her liability for surcharge land tax. She was not an Australian citizen at the relevant taxing date and so was required to satisfy the "ordinarily resident" definition and she did not.
The fact that the Applicant states that she was not notified of her potential liability is not a basis to challenge the Assessment. There is no obligation on the Respondent to make enquiries as to the Applicant's position and notify her of any potential liability. Giunta v Chief Commissioner of State Revenue (RD) [2005] NSWADTAP 19; Sjarifudin at [47].
Nor is there any discretion available to the Respondent or the Tribunal to grant an exemption on the grounds of "unfairness".
As the Tribunal stated in Galle v Chief Commissioner of State Revenue [2022] NSWCATAD 285 at [26]-[28]:
"[26] I reject the Applicants' submissions that I should exercise a discretion to exempt them from surcharge duty on the basis that it would be unfair to them.
[27] There is no legislative provision or authority which gives the Chief Commissioner or the Tribunal a discretionary power to exempt a taxpayer from surcharge duty if the statutory criteria are not met: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].
[28] Arguments based on notions of "fairness" and "justice" cannot succeed in the absence of any foundation in the legislation: Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 123. Consequently, questions of unfairness including on the bases that the Applicants did not know about the surcharge duty and intended to stay in Australia and have done so, are not relevant. The Respondent is required to administer the law in accordance with its terms."
While I accept that the Assessment came as a shock to the Applicant, the fact that the Applicant has suffered distress is also not a matter that the Tribunal can take into account. The Tribunal must apply the law according to its terms: Sjarifudin at [47].
[6]
Summary dismissal
Section 55(1)(b) of the NCAT Act provides that the Tribunal may dismiss at any stage any proceedings before it if the Tribunal considers that the proceedings are frivolous or vexatious or otherwise "misconceived or lacking in substance".
In considering a summary dismissal application the Tribunal must take the Applicant's case at its highest.
Proceedings may be "misconceived" where no legal basis for the allegations can be made out, or "lacking in substance" when they put forward "an untenable proposition of law or fact": Battenburg v The Union Club (No 2) [2003] NSWADT 187 at [15].
Taking everything the Applicant has put before the Tribunal as true, the Tribunal's task on this dismissal application is to determine whether the Applicant could possibly succeed.
In this case, there is no serious question of fact which is required to be determined. It is not in dispute that the Applicant was not an Australian citizen and was not in Australia for 200 days in the calendar year preceding the 2019 land tax year. It is also not in dispute that the Property was leased to tenants from 22 February 2018 to 21 December 2019.
It is well established that the statutory definition of "ordinarily resident" can only be satisfied if the Applicant was in Australia for 200 days in the calendar year preceding the 2019 land tax year. It is also well established that the Tribunal has no discretion to grant an exemption where those statutory criteria are not met.
Accordingly, even taken at its highest, the Applicant's case is untenable and cannot succeed. She was not ordinarily resident for the purposes of the 2019 land tax year and did not qualify for the principal place of residence exemption.
Accordingly, I agree that the proceedings are misconceived or lacking in substance.
The Respondent submits that it would be consistent with the guiding principle of the NCAT Act, being to facilitate the just, quick and cheap resolution of the real issues in proceedings, for the Tribunal to dismiss the proceedings. This, the Respondent submits, would avoid putting the parties and the Tribunal to the time and cost of a hearing when the outcome of that hearing is already known to the Tribunal based on the undisputed facts.
I agree. As the proceedings are misconceived or lacking in substance, it is appropriate, in line with the guiding principle of the NCAT Act, that they should be dismissed under s 55(1)(b) of the NCAT Act and I so order.
[7]
Order
1. The proceedings are dismissed pursuant to s 55(1)(b) of the Civil and Administrative Tribunal Act 2013 (NSW)
[8]
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
[9]
Amendments
09 March 2023 - Par 10 - the word "relevantly" removed and date 31 December 2018 amended to 21 December 2019
Par 36 - the words "calendar year immediately preceding the" removed
Par 37 - 31 December 2018 amended to 21 December 2019 and the words "2018 calendar" replaced with "2019 land tax"
Par 50 - 31 December 2018 amended to 21 December 2019
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Decision last updated: 09 March 2023