Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Niu v Chief Commissioner of State Revenue [2023] NSWCATAP 123 Hearing dates: 28 April 2023 Date of orders: 8 May 2023 Decision date: 08 May 2023 Jurisdiction: Appeal Panel Before: Dr R Dubler SC, Senior Member E Bishop SC, Senior Member Decision: 1. Appeal is dismissed. Catchwords: REVENUE LAW — state taxes — proper construction of sections 104ZF and 104ZKA of the Duties Act 1997 (NSW) — whether the Appellant is liable for surcharge purchaser duty in respect of the purchase of land in New South Wales Legislation Cited: Duties Act 1997 (NSW), ss 12, 104J, 104N, 104Q, 104ZF, 104ZKA Foreign Acquisitions and Takeovers Act 1975, s 5 State Revenue and Other Legislation Amendment (Budget Measures) Act 2017 (NSW) Cases Cited: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 Maxwell v Murphy (1957) 96 CLR 261 Texts Cited: Nil Category: Principal judgment Parties: Jianlei Niu (Appellant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: Appellant (self-represented) E Kovacs (Respondent) Solicitors: Crown Solicitor (Respondent Solicitors: Crown Solicitor (Respondent) File Number(s): 2023/00035597 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Administrative and Equal Opportunity Division Citation: [2022] NSWCATAD 269 Date of Decision: 15 August 2022 Before: J S Currie, Senior Member File Number(s): 2021/00348379 REASONS FOR DECISION Introduction 1. This is an appeal from the decision of the Tribunal of 15 August 2022 (the Decision). 2. The appeal concerns the liability of the Appellant to pay surcharge purchaser duty in the amount of $74,000 under Part 2A of the Duties Act 1997 (NSW) (Duties Act) in respect of an agreement dated 3 May 2017 (Agreement) for the purchase of land at 195 Flood Street, Leichhardt 2040 (NSW) (Flood Street). 3. The Appellant had sought review in the Tribunal of the decision by the Respondent to disallow the objection against the assessment of surcharge purchaser duty dated 13 April 2021. 4. The application to the Tribunal was unsuccessful as the Tribunal affirmed the decision of the Respondent. 5. The issues on appeal are as follows: 1. Whether the Tribunal properly construed and applied s 104ZF of the Duties Act? 2. Whether the Tribunal properly construed and applied s 104ZKA of the Duties Act? 3. Whether or not liability for the surcharge purchaser duty in respect of the Agreement rests with the Appellant? 1. For the reasons set out below we have decided to dismiss the appeal. Facts found by the Tribunal 1. The relevant facts as found by the Tribunal are not in dispute between the parties. It is worthwhile to summarise them (see (8) of the Respondent's submissions): 1. At all relevant times, the Appellant was not an Australian citizen: [18(2)]; 2. On 19 January 2017, the Appellant was granted an employment visa: [4] and [18(2)]; 3. On 11 February 2017, the Appellant came to Australia: [4]; 4. On 3 May 2017, the Appellant entered into the Agreement: [4]. As at that date, the Appellant had been in Australia for approximately 81 days in the preceding 12 months: [18(3)]; 5. On 14 June 2017, completion of the Appellant's purchase of Flood Street occurred: [18(4)]; 6. On 16 June 2017, the transfer in respect of the Appellant's purchase of Flood Street was registered at Land and Property Information NSW: [18(5)]; 7. The Appellant was the sole purchaser under the Agreement and sole transferee under the transfer: [18(6)]; 8. On 13 April 2021, the Respondent issued the Assessment to the Appellant in respect of surcharge purchaser duty in the amount of $74,000 with zero penalty. In addition, market interest of $25,330.67 was noted as having accrued but this was remitted to $3,451.00; the Respondent indicating that he considered that reduction to be appropriate in the circumstances of the case: [5]; and 9. On or about 6 August 2021, the Appellant paid the surcharge purchaser duty of $74,000 on the basis that payment was without prejudice to his objection to the Assessment: [7]. Did the Tribunal properly construe and apply s 104ZF of the Duties Act 1. Section 104ZF is headed "Refund if property is transferred to persons who are no longer foreign on transfer". It is in the following terms: If surcharge purchaser duty has been paid on an agreement for the sale or transfer of residential-related property and the Chief Commissioner is satisfied that none of the transferees in respect of a transfer made in conformity or partial conformity with the agreement are foreign persons, the Chief Commissioner must reassess and refund that duty if an application is made within 5 years of the initial assessment. 1. The phrase "foreign person" is defined in s 104J of the Duties Act. Section 104J(1) provides that "foreign persons" 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". There are no relevant modifications within the provision in respect of the present case. 2. Section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) relevantly provides that "foreign person' means "an individual not ordinarily resident in Australia'. Section 5 of the FATA relevantly provides that: 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. 1. At the core of the Appellant's submissions is that the Tribunal should have applied "a literal meaning of s 104ZF". As the Appellant "within five years of the initial assessment"' was no longer a foreign person, even though he was a foreign person at the date of the Agreement for the sale of residential related property, the Respondent must re-assess and refund him the surcharge purchaser duty pay in full. 2. The Tribunal did not agree with this contention and its reasons are set out at [51] as follows: "For the reasons which follow, I have concluded that Dr Niu's construction is incorrect and section 104ZF does not assist his challenge to the Assessment. 1. The central issue emerging from Dr Niu's submissions and the one which needs to be resolved in order to appreciate the true scope of section 104ZF is the proper meaning of the phrase 'are foreign persons' and in particular the temporal effect of the word 'are'. On a cursory reading it may be thought that use of 'are' in that phrase and in the context of the section is an imprecise and unhelpful one, which adds an unnecessary element of temporal uncertainty to the proper construction of the provision. An expectation might be ignited that the section is so broad (and indeed generous) as to allow an application for reassessment to succeed if the Chief Commissioner is satisfied that each transferee has, at any time prior to the reassessment application itself, ceased to be a foreign person; so long as that application is made within 5 years of the initial assessment of duty. That indeed is the construction on which Dr Niu relies. 2. However, as noted by Counsel for the Chief Commissioner, the Tribunal's decision in Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 218 (Gao) is clear authority for the proposition the question of whether the taxpayer is or is not a foreign person is to be asked and answered as at the date of the transfer. That case turned on the true meaning and application of section 104ZF itself and the section has not been amended since the Gao decision. In his reasons for that decision at [12], Senior Member Frost of the Tribunal concluded in these terms: 'It is tolerably clear, from the language and the context, that the question whether Mr Gao is or is not a "foreign person" is to be asked and answered at the time of the transfer. Put simply, if Mr Gao was a foreign person when he made the agreement, but I am satisfied that he was not a foreign person when the transfer was affected, he will be entitled to a refund of the SPD originally paid. 3. Counsel for Chief Commissioner, in contending for the construction approved in Gao, relied in part on the use of the words 'on transfer' in the heading of the section (as emphasised in the citation above). She submitted that such a construction is correct '… as the heading of section 104ZF makes pellucidly clear.' 4. But reliance solely on any words in a statutory heading is perilous, given that headings do not form part of a New South Wales Act of Parliament, even though the position is different in some other States and Territories; as discussed by Prof Dennis Pearce in Statutory Interpretation in Australia, 9th edition (2019) (Pearce) at [4.71], citing Bradley v Commonwealth [1973] HCA 34; (1973) 128 CLR 557 at 577 and Wacando v Commonwealth [1981] HCA 60; (1981) 148 CLR 1 at 15-16. Professor Pearce observes at [4.71] that: 'Because of the limited parliamentary role in determining the content of marginal notes and headings it is not surprising to find authority denying the right of courts to take them into account for interpretation purposes.' 5. Further doubt is thrown on the validity of the construction relied upon by Dr Niu by its inconsistency with the context of Chapter 2A (the operative provisions for imposition surcharge purchaser duty) read as a whole and in particular with Part 3 of that Chapter which provides for refunds from that form of duty. The significance of the date of the transfer to the imposition of the duty and hence to the refund provisions is suggested by the Chapter's focus on the transfer date, for example, in the following provisions: (a) the Chapter's opening section, section 104G (1) which speaks of the Chapter's purpose being to charge duty on dutiable transactions which 'are or are taken to be, transfers to foreign persons' and (b) by provisions in Part 3 of the Chapter; in particular section 104ZE (3), which uses the phrase 'any transfer instrument in respect of which the application for a refund is made'; (c) section 104ZG and the Table set out under section 104N (2), column 4 (also within Part 3 of the Chapter) which consists of a set of deemed times as to when a transfer will be deemed to have occurred. 6. In my view, a construction of the provisions which would bestow such a substantial concession from duty otherwise payable upon a taxpayer who has taken up to 5 years from the initial assessment of duty to change status from that of a foreign person is untenable because it constitutes what McHugh J characterised in Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85 at 113 as a 'tortured or unrealistic' construction of statutory provisions. See further, Pearce at [2.24] page 54." 1. The Appellant complains that the Tribunal should not have relied upon the decision in Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216. 2. Further in respect of the Tribunal's reasoning at [51(6)] the Appellant submits this amounts to: "NSW … admitting 'unrealistic' number of permanent residents, which turned out to be an 'untenable' argument and does not comply with the intention of the SPD introduction, which was intended to deter foreign investment in speculative housing purchasing and selling while still protecting the interests of genuine legal immigrants. In summary there would be nothing that could be associated with 'tortured or unrealistic' with the right construction and application of 104 ZF." 1. The Appellant contends that there is nothing "tortured or unrealistic" about permitting those who become a permanent resident in being able to claim a refund subsequent to the date of transfer even if they were foreign persons at that time. 2. In this regard the Appellant points to the "intention" of the Duties Act including the intention to deter foreign investment in speculative housing purchases and otherwise the interest of "genuine legal immigrants" should be supported upon their becoming permanent residents by permitting them to access a refund of the previously properly levied surcharge purchaser duty. 3. As found by the Tribunal and not in dispute is the fact that: 1. The transfer was made in conformity with the Agreement as the Appellant was nominated as both the purchaser in the Agreement and the transferee on the memorandum of transfer; and 2. As at the time of transfer of Flood Street, being 16 June 2017, the Appellant was still a foreign person. That is, he had not yet been in Australia for 200 days in the preceding 12 months. 1. Hence, the Appellant was a foreign person, both at the date of Agreement on or about 3 May 2017 and as at the time of transfer, being 16 June 2017. 2. In our view, the Tribunal correctly construed and applied s 104ZF of the Duties Act and we agree with the reasons given by the Tribunal below. There was no error on the part of the Tribunal in referring to and applying Gao. Further, we agree with the reasons given by the Tribunal in Gao at [12]. 3. In particular, we agree with the Tribunal's statement of reasons at [51(5)] that construing the statute as a whole, leads to the conclusion that no longer being a foreign person after the date of transfer of the property does not enliven a refund under s 104ZF. 4. In our view, there is a sufficiently clear statutory intent revealed by the statute as a whole and in particular Part 1 of Chapter 2A of the Duties Act, to charge surcharge purchaser duty by reference to the status of the purchaser or transferee of dutiable property at the date of the transfer. This is particularly so if one combines Part 1 of Chapter 2A with Part 2 which provides for refunds for certain forms of duty in particular circumstances, including those set out in s 104ZF. 5. Accordingly, we reject this ground of appeal. Whether the Tribunal properly construed and applied s 104ZKA of the Duties Act 1. Section 104ZKA of the Duties Act is headed "exemption for certain permanent residents in respect of principal place of residence". 2. The section relevantly provides as follows: 104ZKA Exemption for certain permanent residents in respect of principal place of residence (1) No surcharge purchaser duty is chargeable on a transfer, or an agreement for the sale or transfer, of residential-related property if each transferee under the transfer or agreement who would otherwise be liable to pay that duty is an exempt permanent resident. (2) A transferee under a transfer or agreement is an exempt permanent resident if— (a) the transferee is a permanent resident when a liability for duty charged by Chapter 2 on the transfer or agreement arises (or would arise but for a concession or exemption from duty under that Chapter), and (b) the Chief Commissioner is satisfied that the transferee intends to use and occupy the residential land to which the residential-related property relates as a principal place of residence in accordance with the residence requirement. 1. The Appellant accepts that the above provision was inserted into the Duties Act by State Revenue and Other Legislation Amendment (Budget Measures) Act 2017 (NSW) ("Act No 33 of 2017") with effect from 20 June 2017, which is after the date of transfer, being 16 June 2017. 2. The Appellant contends however that it applies retrospectively to exempt him from liability to pay the surcharge purchaser duty. The Appellant in this regard relied upon the Second Reading Speech by the Hon. Don Harwin MP on 22 June 2017 in respect of Act No 33 of 2017. In particular, reference was made to the statement that surcharge purchaser duty is a "foreign investor charge" and that "holders of permanent resident visas" would be exempt from the duty. 3. According to the Appellant the Tribunal erred in failing to have proper regard to this speech in failing to apply the relevant amendment retrospectively. 4. The Tribunal rejected this contention at [41] – [46] as follows: "[41] Having considered the parties' submissions on the issue, I conclude that section 104ZKA does not have retrospective effect. [42] I accept the uncontested analysis of the relevant legislative provisions provided by Counsel for the Chief Commissioner, which, in summary, is to the following effect. (1) By operation of section 12 (1) of the Duties Act, which is within Chapter 2 of that Act, as modified by section 104Q (2), liability for surcharge purchaser duty arises when a transfer of residential-related property occurs. (I am satisfied, and it appears to be uncontested that the Property is residential-related property for that purpose.) (2) It is clear from column 4 of the table in section 104N (2) that for a 'surcharge duty transaction' that is an agreement for sale or transfer, the time at which the transfer occurs is when the agreement is entered into. (3) It is uncontested that the agreement for sale in this case, being what I have referred to in these Reasons as "the Contract for Sale", was entered into on 3 May 2017. (4) The result is that Dr Niu became liable for surcharge purchaser duty on 3 May 2017. (5) As at 3 May 2017, Act No. 33 had not commenced. [43] I accept the analysis provided by Counsel for the Chief Commissioner to the effect that by 3 May 2017, the surcharge purchaser duty for which Dr Niu was liable had already been 'charged' within the meaning of Chapter 2A, notwithstanding that it may not have been 'assessed'. [44] Dr Niu has not provided any submissions in response to my Directions of 6 June 2022 as to any retrospective effect of Section 104ZKA and there is nothing before me which constitutes any proper basis for a conclusion that the section had such effect retrospective to 3 May 2017. [45] It follows that, as Section 104ZKA, which commenced on 20 June 2017 is not available to Dr Niu and that Dr Niu has failed to discharge the onus he bears to establish that that is not the case. [46] Accordingly, this ground also fails. 1. The central contention of the Appellant is that s 104ZKA applies in his case to exempt him from the surcharge purchaser duty because it was in place before the assessment was raised on 13 April 2021. 2. We are unable to accept this contention and agree with the Tribunal's Decision and its reasons: see, for example, Maxwell v Murphy (1957) 96 CLR 261 with respect to the applicable principles on the retrospective effect of legislation. 3. Fundamentally, the surcharge purchaser duty was "charged" as at 3 May 2017 when the liability to pay the duty was created, which was before the introduction of s 104ZKA. 4. Pursuant to Chapter 2A of the Duties Act, the Appellant's liability for surcharge purchaser duty first arose on 3 May 2017. This is because s 104Q of the Duties Act provides that s 12 "applies in respect of surcharge purchaser duty in the same way as it applies in respect of duty charged by Chapter 2", subject to the modifications in s 104Q(2). 5. In turn, s 12(1) of the Duties Act provides that a "liability for duty charged by this Chapter arises when a transfer of the dutiable property occurs" and when the modifications in s 104Q(2) are made. 6. Thereby a liability for surcharge purchaser duty charged by Chapter 2 arises "when a transfer of residential–related property occurs". 7. Further, item 1 of the Table in s 104N(2) of the Duties Act provides that a "transfer" occurs in relation to a "surcharge duty transaction" that is an "agreement for sale or transfer" when the "agreement is entered into". 8. Section 104ZKA(1), which commenced on 20 June 2017, relevantly provides that no "surcharge purchaser duty is chargeable on a transfer or an agreement for the sale of land on residential-related property if each transferee under the transfer agreement who would otherwise be liable to pay their duty, is an exempt permanent resident". 9. As of 3 May 2017, when the Appellant's liability to the surcharge purchaser duty first arose, Act No 33 of 2017 had not yet received Royal Assent and the surcharge purchaser duty had already been "charged" under Chapter 2A. This is the case notwithstanding that the Respondent had not yet "assessed" the duty in question. 10. The result is that s 104ZKA of the Duties Act has no application so as to exempt the Appellant from his liability to surcharge purchaser duty in the manner contended for by the Appellant. Such duty first arose on 3 May 2017 before s 104ZKA commenced on 20 June 2017. 11. Nothing in the Second Reading Speech relied upon by the Appellant causes us to come to a different conclusion. 12. Accordingly, we reject this ground of appeal. Does the liability for surcharge purchaser duty in respect of the Agreement rest with the Appellant? 1. The Appellant firstly contends that because his advisors were negligent in failing to warn him as to his liability for surcharge purchaser duty the liability for such duty should not properly rest with the Appellant. 2. The reasoning of the Tribunal in rejecting this argument is at [32] – [35] as follows: "[32] However, his reliance on the advice of others does not assist him in these proceedings, the purpose of which is to conduct an administrative review in order to determine whether the Chief Commissioner's assessment and relevant decisions should be upheld, revoked or varied. [33] I am required by law to undertake that review on the basis of the applicable legislation. As Counsel for the Chief Commissioner submitted, the relevant legislation, being section 104R (1) of the Duties Act, is quite clear as to who is liable for payment of the duty. The sub-section is in these unequivocal terms: (1) The person liable to pay the surcharge purchaser duty is the transferee. [34] As noted by Counsel for the Chief Commissioner, Dr Niu is of course at liberty to take further legal advice as to the potential liability of others for their actions or omissions in relation to the purchase of the Property and to pursue any As noted by Counsel for the Chief Commissioner, Dr Niu is of course at liberty to take further legal advice as to the potential liability of others for their actions or omissions in relation to the purchase of the Property and to pursue any private rights of redress that he may have in respect of that. But any such private rights of redress cannot affect the outcome in administrative review proceedings such as these, in which the revenue legislation must be applied on its terms. [35] It is not in dispute that the transferee under the Transfer was Dr Niu. Under the Act, in that capacity he was personally liable for the duty. He cannot avoid or mitigate that personal liability on the basis of any potential private rights of redress which he may have against others." 1. On appeal, the Appellant contends that "NCAT made a mistake in saying that the evidence of negligence of the conveyancer is an issue of 'private rights of redress' that 'cannot affect the outcome in administrative proceedings'''. 2. In this regard, we agree with the conclusion of the Tribunal that the alleged "negligence of the conveyancer" cannot affect the Appellant's liability to pay surcharge purchaser duty. 3. Further, the Appellant contended that his conveyancer was in effect the Respondent's agent and that therefore the negligence of the conveyancer is the Respondent's responsibility. 4. This contention is misconceived. There is no evidence to support the proposition that the Appellant's conveyancer was the Respondent's agent. 5. In the result, we reject this ground of appeal. Disposition 1. The orders of the Appeal Panel will be: 1. The Appeal is dismissed. ********** 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: 08 May 2023