Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 Hearing dates: 18 October 2021 Date of orders: 18 November 2021 Decision date: 18 November 2021 Jurisdiction: Administrative and Equal Opportunity Division Before: E Bishop, Senior Member Decision: The surcharge land tax assessments for the 2017, 2018, 2019 and 2020 land tax years are confirmed. Catchwords: TAXES AND DUTIES — Land tax — surcharge land tax — foreign person — residency tests — ordinarily resident in Australia — exemptions - principal place of residence — Review — application — onus — Administration — discretion — financial hardship — unfairness Legislation Cited: Duties Act 1997 (NSW), ss 104I, 104J Foreign Acquisitions and Takeovers Act 1975 (Cth), ss 4, 5 Land Tax Act 1956 (NSW), ss 5A, 5B Land Tax Management Act 1956 (NSW) Taxation Administration Act 1996 (NSW), s 100(3) Cases Cited: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue [2003] NSWSC 1003; 54 ATR 323 Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 Commissioner of Taxation v Ryan (2000) 201 CLR 109 Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25; 94 ATR 348 Gupta v Chief Commissioner of State Revenue [2006] NSWADT 187 Re Chief Commissioner of State Revenue and Ferrington [2004] NSWADTAP 41; 57 ATR 170 Single v Chief Commissioner of State Revenue [2006] NSWADT 334 Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 Category: Principal judgment Parties: Husen Sjarifudin and Tjen Fong Phan (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Solicitors: I Sjarifudin as agent (Applicants) H Morgan (Solicitor Advocate, Crown Solicitor's Office) (Respondent) File Number(s): 2021/00221261 REASONS FOR DECISION Background 1. Mr Husen Sjarifudin and Ms Tjen Fong Phan ("the Applicants") are citizens of Indonesia. They also have Australian permanent residency visas. 2. Since 1992, the Applicants have been the registered proprietors of residential land located at Maroubra NSW ("the Property"). During the calendar years 2016, 2017, 2018, 2019 and 2020, the Applicants had two residences available to them: a residence at the Property; and another residence in Jakarta which is owned by Mr Sjarifudin's brother ("Jakarta residence"). 3. Between the period 14 February 2020 and August 2020, the Chief Commissioner sent correspondence to each of the Applicants separately, requesting lodgement of land tax returns as they may be liable for surcharge land tax which is payable by "foreign persons" on residential land owned by them at midnight on 31 December in each year. 4. On 5 February 2021, the Chief Commissioner of State Revenue ("the Chief Commissioner") issued surcharge land tax assessments for each of the 2017, 2018, 2019, 2020 and 2021 land tax years in respect of the Property on the basis that the Applicants were foreign persons and not otherwise exempt from surcharge land tax because the Property was not their principal place of residence. The Applicants objected to those assessments and on 26 July 2021, the Chief Commissioner disallowed the objection for 2017 to 2020 land tax years and allowed the objection to the assessment for 2021 land tax year. The Applicants now seek a review in the Tribunal. The issues for determination 1. The issues for determination may be summarised as follows: 1. Whether, for the 2017 to 2020 land tax years, the Applicants were "foreign persons" for the purposes of the Land Tax Act 1956 (NSW) ("LTA"). 2. Whether, for the 2018 to 2020 land tax years, the Applicants were entitled to the exemption from surcharge land tax as the Property was their principal place of residence or on the basis of "unfairness". 1. I have decided that each of the Applicants were foreign persons and not entitled to the principal place of residence exemption ("PPR exemption") from surcharge land tax. Consequently, the assessments should be confirmed. My reasons are as follows. Surcharge land tax 1. The substantive legislative provisions which impose liability for surcharge land tax are contained in s 5A and s 5B of the LTA. 2. Section 5A of the LTA as in force for the 2017 land tax year imposed surcharge land tax on "residential land" owned by a "foreign person". 3. Section 5A(6) of the LTA provided that "residential land" and "foreign person" are to have the same meaning as in Chapter 2A of the Duties Act 1997 (NSW). 4. Section 104I of the Duties Act defined "residential land" as including "a parcel of land on which there are one or more dwellings…". 5. Section 104J(1) of the Duties Act defined "foreign person" as "… a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975…". Section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) ("FATA") defines a "foreign person" as an individual not "ordinarily resident" in Australia. 6. Section 5 of the FATA provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and is therefore not a foreign person) 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. 1. Section 104J(2) of the Duties Act added that the definition of foreign person in the FATA was modified for Australian citizens so that they would be taken to be ordinarily resident in Australia whether or not they were "ordinarily resident" under the definition. 2. Where there are joint owners of land, each owner is individually assessed and liable in respect of the value of their proportionate interest as though an owner of part of the land: s 5A(4)(c) LTA. 3. Section 5B commenced on 1 July 2017 and introduced the PPR exemption from surcharge land tax for the 2018 land tax year onwards where: the owner intends to use and occupy the land as his or her principal place of residence; lodges a declaration with a land tax return to that effect; and does in fact 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 ("residence requirement"). This is relevant in the present matter for the 2018-2020 assessments. 4. Some consequential amendments were made to s 5A for the years 2018 and onwards to reflect the introduction of s5B including the PPR exemption and to confirm that the reference to "foreign person" in ss 5B and 5C had the same meaning as in s 104J of the Duties Act, which in turn picks up the definition in the FATA – that is, the 200 days test applies to determine whether a person is a "foreign person". Taxpayer's onus of proof 1. It is important to note that under s 100(3) of the Taxation Administration Act 1996 (NSW), in a review proceeding such as this, the Applicants have the onus of proving their case which requires them to prove, on the balance of probabilities, all matters necessary to enable the Tribunal to answer the statutory question in their favour: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25; 94 ATR 348 at [31]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 per Allsop P at [87] and [104]. Facts Uncontested facts 1. The facts outlined at [1] to [3] and the following facts, were not in dispute between the parties: 1. Each of the Applicants spent less than 200 days in Australia in each of the calendar years 2016, 2017, 2018 and 2019 ("relevant years"). The total number of days spent in Australia by Ms Phan in each of the relevant years ranged from 10 days to 100 days. The total number of days spent in Australia by Mr Sjarifudin in each of the relevant years ranged from 10 days to 71 days. 2. The Applicants ordinarily came to Australia in December of each relevant year and stayed until sometime in January of the following year. They would also come again to Australia mid-year for anywhere between four and eight weeks. 3. Shortly before the hearing, the Chief Commissioner became aware that there were two residences at the Property in a duplex. One of the residences in the duplex contains 5 bedrooms, 3 bathrooms, kitchen and living areas. During each of the relevant years, at least one of the Applicants' adult daughters resided in this residence permanently. The other residence in the duplex comprises 4 bedrooms, 2 bathrooms, a kitchen and living area. During each of the relevant years this residence was tenanted and rental income was received by the Applicants. 4. The Jakarta residence is owned by Mr Sjarifudin's brother, Halim Sjarifudin. Except for the Applicants, no other persons resided in the Jakarta residence during the relevant years. 5. Both the Property and the Jakarta residence contain furniture, clothing and other personal possessions of the Applicants. 6. The Applicants have one daughter, two grandchildren and numerous siblings living in Jakarta. At least two of the Applicants' daughters live in Australia. 7. During the relevant years, Mr Sjarifudin had various medical issues. In December 2017, December 2018 and June 2019, Mr Sjarifudin attended medical appointments and undertook procedures in Australia. He also travelled to Singapore for brain and spinal assessments and procedures in April 2019, December 2019 and February 2020. The Applicants' case 1. The Applicants did not file any statements or affidavits and instead relied solely on the submissions made both in writing and orally by their daughter Ivana Sjarifudin; medical reports supporting the existence of Mr Sjarifudin's medical conditions and treatments; and a letter from the Applicants' solicitors. 2. Ms Sjarifudin submitted that the Applicants understood that as they were not in Australia for at least 200 days in each calendar year, they were liable for surcharge land tax. However, they did not challenge the assessments on this basis. Instead the Applicant's primary argument was that the following should be taken into account in determining whether an exemption applies: 1. the reason Mr Sjarifudin was not in Australia for at least 200 days in each year was that his medical conditions prevented him from returning to Australia and he was advised not to travel; and 2. at least one of the daughters of the Applicants has lived at the Property during the relevant years and so on that basis it is the principal place of residence for the "family"; 1. The Applicants also argued that it would be unfair to make them liable to and not exempt them from the surcharge land tax in circumstances where: 1. the Applicants were not aware of the existence of the surcharge land tax until (so it was submitted) they received the assessments in February 2021. The Applicants denied that they had received the correspondence referred to in [3] above from the Chief Commissioner; 2. the Applicants do not have the capacity to pay the surcharge tax and to be required to pay the surcharge tax would create financial hardship. The Respondent's case 1. The Chief Commissioner argued that on a proper construction of the relevant legislation, as the Applicants were not Australian citizens, they were liable to pay surcharge land tax as they had failed to satisfy their onus of proving that: 1. they were "ordinarily resident" in Australia within the meaning of s 5 of the FATA – that is, for 200 days or more in each of the relevant years – and therefore a "foreign person" for the purposes of s 5A LTA; and 2. they used and occupied the Property as their principal place of residence – that is, for a continuous period of 200 days in each of the 2018-2020 years and so not eligible for the exemption in s 5B LTA. 1. The Chief Commissioner also submitted that there is no discretion under s 5A or s 5B of the LTA to grant an exemption from the surcharge land tax if the statutory criteria are not met, including on the basis of arguments about unfairness: Commissioner of Taxation v Ryan (2000) 201 CLR 109. 2. In this regard, the Chief Commissioner argued that: 1. land tax is a self-assessing regime and it is for the taxpayers to make themselves aware of changes to the law. In any event, the Chief Commissioner contended that the rules concerning the surcharge land tax were published in October 2016 in Revenue Ruling G008, were publicly available on the NSW Revenue website from this time and further, that at least by early 2020 when correspondence was sent to the Applicants, they should have been aware of the existence of the surcharge land tax; 2. no conduct on the part of the Chief Commissioner can operate as an estoppel from duty to administer a taxation law: BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue [2003] NSWSC 1003; 54 ATR 323 at [111]. 3. sections 5A and 5B of the LTA are directed to owners of residential land, not the family members of the owners. As the daughters of the Applicants were not "owners" they could not satisfy the residence requirement. Consideration Whether the applicants are foreign persons 1. As noted above, the Applicants did not contest the fact that in each of the relevant years, they were not in Australia for at least 200 days. 2. I find that each of the Applicants were "foreign persons" for the purposes of the LTA for the reason that the Applicants were: 1. not Australian citizens; and 2. not in Australia for at least 200 days in each of the relevant years. 1. Consequently, the Applicants are liable to surcharge land tax for 2017 to 2020 land tax years unless an exemption applies. Whether the PPR exemption applies 1. As the PPR exemption was introduced on 1 July 2017, the question of whether it applies in this case is only relevant for the 2018 to 2020 land tax years. 2. The term "principal place of residence" is not defined in the LTA or the Land Tax Management Act 1956 (NSW) ("LTMA") and therefore has its ordinary meaning. The word "principal" can mean "main" as well as "only, and does not exclude having another, subsidiary, place of residence": Single v Chief Commissioner of State Revenue [2006] NSWADT 334 at [16]. 3. In Re Chief Commissioner of State Revenue and Ferrington [2004] NSWADTAP 41; 57 ATR 170 the Appeal Panel set out at [42] the criteria required to establish the PPR exemption for the purposes of the First Home Owner Grant 2000. These factors have since been adopted by the Appeal Panel in determining whether an owner of land is entitled to the PPR exemption from land tax: Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 ("McIlroy"). The factors were summarised in McIlroy at [44] as follows: "· First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear ... Thus the Commissioner's reference to the provisions of the Land Tax Management Act 1956 is of no assistance. · Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling ... · Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue ... · Fourthly, to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose ... · Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue. ... This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible .... · Sixthly, the reasons for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances ... In Bates the Tribunal said that 'whether the reasons for not residing at the property were as a result of matters entirely out of the control of the applicant" was a factor to be considered. While that is undoubtedly correct, it should not be read as stipulating a requirement that the reasons for departure must be entirely out of that person's control. The facts in Gaines illustrate that there are circumstances, peculiar to the individual concerned, which may, objectively viewed, adequately and reasonably explain a person's decision to move out of a property, but which are not entirely out of the person's control." 1. The principles for determining whether property is used and occupied as a principal place of residence were summarised in Yen-Cheng Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 at [19-22]: "19 … A person's place of residence is usually understood as 'the place where he eats, drinks and sleeps' (per Ridley J in Stoke-On-Trent Borough Council v Cheshire County Council [1915] 3 KB 699 at 706). The use of the term 'principal' in the expression suggests that a person may use and occupy more than one residence but that the exemption is only available for the principal place of residence of the person. 20 In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of the residence in each case (per Fryberg J in Dean v Commissioner of Stamp Duties (Qld) (No 2) [1996] 2 Qd R 557 in considering the meaning of the expression 'principal place of residence' found in the Stamps Act 1894 (Qld)). 21 The onus to establish one's principal place of residence is usually discharged on the basis of various matters. It is important to note, as observed by the Victorian Civil and Administrative Tribunal in Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 that: '… while sleeping by itself in a place can be an indication of a principal place of residence, it is not the sole matter to be taken into account. One needs to look at a whole indicia of matters … One needs to look as well at where the applicant ate; his use of electricity and the furniture and fittings and other matters such as entertainment of friends in the house… Sleeping in a place does not make a residence. It has got to be the whole indicia of things that are done in a home which are described in the cases…'" 1. The PPR exemption test is to be applied to each Applicant (as an owner) in respect of their use and occupation of the residential land the subject of the assessment. There was a complete absence of evidence from the Applicants about the tenanted part of the Property but it was conceded by the Applicants at the hearing that tenants used and occupied the four bedroom residence at all times during the relevant years. I find that only the untenanted part of the Property was available to be used and occupied by the Applicants as a residence in the relevant years. 2. Even though the untenanted part of the Property was used as the primary residence for the Applicants' adult daughter at all times throughout the relevant years, she is not an owner of the Property and so her use and occupation is not determinative of the issue: s 5A(4)(g) LTA. 3. The Applicants had furniture and other personal possessions at both the Property and the Jakarta residence. They also had close family connections at both locations. 4. The local council rates and home insurance for the Property and motor vehicle insurance are all issued in the name of one or both of the Applicants at the Property. The bills for electricity and gas for the untenanted residence are also issued in the name of the one or both of the Applicants at the Property. 5. While I accept that the bills for insurances, utilities and rates were issued to the Applicants at the Property, there is no evidence who paid these bills. 6. Further, it was submitted that bills for the Jakarta residence were sent to and paid by Halim Sjarifudin (who does not reside at the Jakarta residence) but those documents were not provided as, it was submitted by the Applicants, they were filed in Indonesia. There was no evidence that the Applicants paid rent or any other costs associated with residing in the Jakarta residence. 7. Overall, there were two places of residence available to be used and occupied the Applicants in the relevant years: the untenanted part of the Property and the Jakarta residence. 8. The time each of the Applicants used and occupied the untenanted part of the Property was less than 100 days in each year and usually coincided with Mr Sjarifudin's medical appointments and treatment in Australia. This amount of time is far less than the amount of time the Applicants resided in the Jakarta residence in each year. 9. Based on the medical certificates, I accept Mr Sjarifudin had medical conditions. However, I do not accept the Applicants' submission that the reason they could not stay in Australia or reside at the untenanted part of the Property for longer periods was because Mr Sjarifudin was advised not to travel for health reasons: there is no evidence to that effect but also, he did in fact travel to Australia in each year. There is also a complete absence of evidence about Ms Phan's ability to travel or explanation for why she did not use and occupy the Property for at least 200 days per year. 10. There is also no evidence that the Applicants intended to use and occupy the Property as their principal place of residence in the relevant years. 11. I find that in the relevant years the untenanted part the Property was used as a temporary residence by the Applicants for when they travelled to Australia for Mr Sjarifudin's medical appointments or to visit their family. The other part of the Property was occupied by tenants and used by the Applicants to derive rental income. 12. On weighing these facts and having regard to the lack of evidence from the Applicants, I am not satisfied that the Applicants have discharged their onus of demonstrating that there is a sufficient degree of use and occupation of the Property by the Applicants for it be characterised as their principal place of residence and to meet the residence requirement in s 5B(2) LTA. 13. Accordingly, the PPR exemption does not apply for the 2018 to 2020 land tax years. Discretion of the Chief Commissioner – unfairness – hardship 1. I reject the Applicants' submissions that I should exercise a discretion to exempt them from surcharge land tax on the basis that it would be unfair to them. 2. There is no legislative provision or authority which gives the Chief Commissioner or the Tribunal a discretionary power to exempt a taxpayer from surcharge land tax if the statutory criteria are not met. 3. 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 tax and do not have the financial resources to pay the tax (a matter about which there was no evidence) are not relevant. I otherwise accept the Chief Commissioner's submissions at [24] above. 4. As I have already determined that the statutory criteria for the PPR exemption have not been met in this case and as there is no statutory power to exempt the Applicants from surcharge land tax on the basis of unfairness, the Applicants are not entitled to an exemption from surcharge land tax. Order 1. The surcharge land tax assessments for the 2017, 2018, 2019 and 2020 land tax years are confirmed. ********** 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: 18 November 2021