Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Wei v Chief Commissioner of State Revenue [2023] NSWCATAD 161 Hearing dates: 15 May 2023 Date of orders: 21 June 2023 Decision date: 21 June 2023 Jurisdiction: Administrative and Equal Opportunity Division Before: AR Boxall, Senior Member Decision: The Respondent's decisions are confirmed. Catchwords: TAXES AND DUTIES — surcharge land tax – liability Legislation Cited: Foreign Acquisitions and Takeovers Act 1975 (Cth), ss 4, 5 Administrative Decisions Review Act 1997 ss 58, 63 Duties Act 1997 ss 104I, 104J Land Tax Act 1956 ss 2A, 5A, 5B Land Tax Management Act 1956 Schedule 1A State Revenue Legislation Amendment (Budget Measures) Act 2016 State Revenue and Other Legislation Amendment (Budget Measures) Act 2017 State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 Taxation Administration Act 1996 ss 4, 89, 96, 99, 100, 101 Cases Cited: Barsoun v Chief Commissioner of State Revenue [2020] NSWCATAD 282 B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 Du v Chief Commissioner of State Revenue [2022] NSWCATAD 329 Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109 Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 Texts Cited: Nil Cited Category: Principal judgment Parties: Zhenzhi Wei and Xiumin Wang (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: O Berkmann (Respondent) Solicitors: N Wei (Agent) (First and Second Appellant) Crown Solicitor (Respondent) File Number(s): 2023/00093694 Publication restriction: None REASONS FOR DECISION APPLICATION TO REVIEW DECISIONS OF THE CHIEF COMMISSIONER of STATE REVENUE Introduction 1. This is an application for review by the Tribunal of two decisions made by the Respondent on 11 May 2022 (each, an Assessment) under which the Respondent assessed each of the Applicants with surcharge land tax levied under section 5A of the Land Tax Act 1956 in relation to a residential property owned by them and located at 4 Windsor Lane, Paddington NSW (the Property). 2. In these reasons references to the Section 58 Documents are to the bundle of documents filed by the Respondent with the Tribunal on 14 April 2023 pursuant to section 58 of the Administrative Decisions Review Act 1997 (ADRA). 3. The Land Tax Act 1956 (LTA) and the Land Tax Management Act 1956 (LTMA) are both "taxation laws" as defined in section 4 of the Taxation Administration Act 1996 (TAA), to which the objection and review provisions of that Act apply. 4. Reference to a land tax year is to a year beginning on 1 January, and reference to a particular land tax year is to the year beginning on 1 January of that year. Procedural history 1. On 11 May 2022, the Respondent issued the Assessments to each of Mr Wei and Mdm Zhang, assessing each of them as liable to pay surcharge land tax levied under section 5A of the LTA in respect of the Property for each of the land tax years 2018, 2019, 2020, 2021 and 2022. The total amount assessed as payable by each Applicant is $49,946.55. 2. The Applicants' daughter, Ms Nicole Wei, lodged on their behalf an objection to the Assessments (the Objection) with the Respondent on 2 June 2022. This was within the 60 day period allowed under section 89 of the TAA. 3. The Respondent reviewed the matter and dismissed the Objection by letter dated 15 July 2022. 4. On 22 March 2023, the Applicants lodged with the Tribunal an Administrative Review Application Form, seeking review by the Tribunal of the Assessments under section 96 of the TAA. 5. That section permits a taxpayer to apply to the Tribunal for the review of a decision made by the Respondent if: 1. The decision has itself been the subject of an objection lodged by the taxpayer under Division 1 of the TAA; and 2. The taxpayer is dissatisfied with the Respondent's determination of the objection. Both conditions were clearly satisfied. 1. In November 2022 the Applicants applied to the Hardship Review Board for a waiver of surcharge land tax in relation to the Property. This application was refused on 21 February 2023. 2. Section 99 of the TAA provides that the application for review must be made no later than 60 days after the date of issue of the notice of the Respondent's determination of the objection. The Administrative Review Application Form was filed over 8 months outside the 60-day period for lodging objections provided for under section 89(1) of the TAA. However, at a directions hearing on 28 March 2023 the time for filing the application was extended by the Tribunal to 22 March 2023. Factual background 1. The relevant facts are established by the Section 58 Documents, the Respondent's Tender Bundle filed on 5 May 2023 and the Applicants' own documents and submissions. There appears to be no disagreement as to factual matters, which are summarised below: 1. At all material times, the Applicants were citizens of the Peoples' Republic of China and were entitled to permanent residence in Australia, as holders of a sub-class 155 visa. Their daughter, Ms Nicole Wei, lives in Sydney. 2. In or about April 2015 the Applicants purchased the Property and subsequently undertook significant building work to renovate it. This took much longer than expected and was not completed until mid-2017. 3. The Applicants left Australia for China in April 2017, less than 200 days after the start of that year and did not return to Australia until the first half of 2023. Initially, they departed for what was intended to be a relatively brief absence in order to care for elderly and unwell relatives. However, the care demands that they faced were more intense and longer lasting than they had expected, so that their absence extended into one of several years. Mdm Zhang herself became ill, and the Covid pandemic intervened, bringing with it governmental prohibitions on travel between China and Australia. The result was that the Applicants remained in China, either voluntarily, in order to satisfy their familial duties to care for family members, or involuntarily, as the result of government action, from April 2017 until the first half of 2023. 4. During most of that period, the Property was leased to a succession of tenants. The Property was first placed on the rental market in April 2017, and after what appears to have been several abortive attempts to lease it the first tenancy commenced on 16 November 2017. Since then, the Property has been untenanted for only brief periods. The current lease commenced on 3 December 2022 and is for a term of 14 months, expiring on 2 February 2024. 5. The Property was also assessed to ordinary land tax for the 2018 to 2022 land tax years. The Applicants' liability to this tax is not in dispute, and arrangements for its payment have been made. Legislative provisions 1. Legislation imposing surcharge land tax was passed in 2016 in the form of the State Revenue Legislation Amendment (Budget Measures) Act 2016, which inserted section 5A into the LTA. 2. Section 5A has been amended on several occasions since then, but the essential elements of the section have remained constant: 1. Section 5A(1) provides as follows: Land tax is payable under this section in respect of residential land owned by a foreign person (surcharge land tax). 1. Section 5A(2) currently provides as follows: In respect of the taxable value of all the residential land owned by the foreign person at midnight on 31 December in any year (commencing with 2016), surcharge land tax is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act for the period of 12 months commencing on 1 January in the next succeeding year at the rate of— (a) in the case of all residential land owned by the foreign person at midnight on 31 December 2016—0.75% of that taxable value as assessed under the Principal Act, and (b) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2017–2021—2% of that taxable value as assessed under the Principal Act, and (c) in the case of all residential land owned by the foreign person at midnight on 31 December in any other year, commencing with 2022—4% of that taxable value as assessed under the Principal Act. 1. When it commenced in 2016, section 5A(2) imposed tax only at the rate of 0.75%. It was subsequently amended on two occasions, to impose tax at the rate of 2% for the 2018 and following land tax years, and at the rate of 4% for the 2023 and following land tax years. Apart from the changes in rates made by the inclusion of paragraphs (a), (b) and (c), the provisions of section 5A(2) concerning the calculation, charging, levying, collection and payment of tax have remained unchanged. 2. The expressions residential land and foreign person are and at all times have been defined by incorporating the definitions of those terms found in Chapter 2A of the Duties Act 1997. These definitions were originally incorporated in sub-section 5A(6). In 2017, this sub-section was deleted, and the defined terms incorporated in section 2A of the LTA, where they remain. 3. Section 5A(3) of the LTA provides as follows: Surcharge land tax is payable in addition to any land tax payable in respect of the residential land under the other provisions of this Act, and is so payable even if no land tax is payable under those other provisions. 1. Section 5B of the LTA provides as follows: 5B Surcharge land tax—residence requirement applying to principal place of residence exemption (1) A person is eligible for an exemption from liability to pay surcharge land tax in respect of residential land for a land tax year because the land is the principal place of residence of the person only if— (a) the person is a permanent resident at midnight on 31 December of the previous year, and (b) the Chief Commissioner is satisfied that, during the land tax year, the person intends to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement, and (c) the person lodges a declaration with a land tax return required to be furnished under section 12 of the Principal Act for the land tax year to the effect that the person has that intention. (2) The person must use and occupy the land as the person's principal place of residence for a continuous period of 200 days in the land tax year. This requirement is referred to as the residence requirement. (2A) A person does not use and occupy land as the person's principal place of residence during a period of the person's physical absence from Australia. (2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person's brief physical absence from Australia. (3) If the residence requirement is not complied with by the person, surcharge land tax liability is to be assessed or reassessed as if the person's exemption from liability to pay surcharge land tax for the land tax year had never applied. (4) The failure of the person to comply with the residence requirement is taken to be a tax default for the purposes of Part 5 of the Taxation Administration Act 1996. (5) Any interest that is payable on the tax default in accordance with Part 5 of the Taxation Administration Act 1996 accrues on the amount of surcharge land tax assessable to the person for the period commencing on the last day allowed for furnishing the land tax return for the land tax year and ending on the day when the assessment or reassessment referred to in subsection (3) is made. 1. It was introduced into the LTA in 2017 by the State Revenue and Other Legislation Amendment (Budget Measures) Act 2017 with effect from 1 July 2017. It thus applied to the 2018 and subsequent land tax years. Sub-sections (2A) and (2B) were inserted into Section 5B in 2022, by the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022, with effect from 19 May 2022. 2. Section 104I of the Duties Act 1997 relevantly defines residential land as follows: residential land means any of the following and does not include any land used for primary production— 1. a parcel of land on which there are one or more dwellings ..... . 1. Section 104J of the Duties Act 1997 defines a foreign person as meaning: a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth subject to certain modifications: 1. to the effect that Australian citizens are always to be taken as ordinarily resident in Australia; and 2. relevant to certain categories of New Zealand citizen. None of these modifications are of any relevance in the present case, however, because both Applicants are and remain citizens of the Peoples' Republic of China only. 1. Section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) defines a foreign person relevantly as follows: "foreign person" means: (a) an individual not ordinarily resident in Australia ..., and section 5 of that Act provides as follows: Meaning of ordinarily (1) An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if: (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and (b) at that time: (i) the individual is in Australia and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law; or (ii) the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law. (2) Without limiting paragraph (1)(b), an individual's continued presence in Australia is subject to a limitation as to time imposed by law if the individual is an unlawful non-citizen within the meaning of the Migration Act 1958 . The parties' arguments 1. The Applicants say in summary that: 1. The Property was at all material times the Applicants' principal place of residence for purposes of section 5B of the LTA, and thus exempt from surcharge land tax. 2. The provisions of section 5B(2B)of the LTA allow the Respondent to disregard their absence from Australia during the period 2017 to 2023 in assessing their liability to surcharge land tax, and the Respondent should do so having regard to the circumstances of their absence. 3. An absence of less than 6 years from a principal place of residence is recognised widely, for example by the Australian Taxation Office and by Schedule 1A of the LTMA, as not impairing the availability of relevant favourable tax treatment of the principal place of residence. 4. The Applicants' absence from the Property by reason of family care responsibilities and travel restrictions imposed in response to Covid 19 should not affect the Property's exemption from surcharge land tax. 5. The Property was leased out during the relevant period because of the financial difficulties that their daughter's illness, and consequent inability to service the mortgage on the Property from her employment income, imposed. 6. The Applicants' personal and economic circumstances are such that they should be relieved from liability to surcharge land tax in respect of the Property. 1. The Respondent says that: 1. The evidence indicates that neither Applicant was ordinarily resident in Australia during any of the relevant land tax years. Since neither of them is an Australian citizen, they were thus foreign persons during all relevant land tax years for purposes of section 5A of the LTA, so that the Property was subject to surcharge land tax. 2. Section 5B of the LTA does not provide them with any relief since: 1. That the Property was placed on the rental market from April 2017, and leased to tenants virtually without a break since November 2017, means that the Respondent could not be satisfied as required by section 5B(1)(b) of the LTA that it was their intention to use or occupy the Property as their principal place of residence during the relevant land tax years; 2. It is clear from the evidence that during the relevant land tax years neither of them used or occupied the Property as their principal place of residence for the continuous period of 200 days required under section 5B(2) of the LTA; and 3. Sub-sections 5B(2A) and (2B) are of no relevance since they were only introduced into the LTA in 2022 and can apply (if at all) for the 2023 land tax year at the earliest. 1. Schedule 1A of the LTMA is of no relevance, since surcharge land tax is a distinct tax, liability to which arises without regard to liability to (or exemption from) land tax. This follows from: 1. Section 5B(1) of the LTA, which provides that exemption from surcharge land tax is available "only if" the requirements of that section are met. 2. Section 5A(3) of the LTA, which makes it clear that surcharge land tax is payable "in addition to" any land tax that is payable and is payable "even if no land tax is payable". 1. The Respondent has no discretion to waive surcharge land tax that is payable or to exempt the Applicants or the Property from it in the absence of statutory authority to do so. There is no such authority. The nature of the review 1. The provisions of section 100 of the TAA apply to this review. Notably: 1. sub-section 100(2) of that Act provides that neither the Applicant nor the Respondent is limited in the present application to the grounds of the Objection; and 2. sub-section 100(3) of that Act provides that the Applicant has "… the onus of proving the applicant's case in an application for review", an onus which is discharged by reference to the ordinary civil standard: B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481. 1. Under section 63(1) of the ADRA, in conducting a review the Tribunal ".. is to decide what the correct and preferable decision is having regard to the material then before it, including the following: 1. any relevant factual material, 2. any applicable written or unwritten law". 1. Moreover, under section 63(2) of that Act 1997, in doing so the Tribunal "… may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision". Reasoning 1. The evidence shows (and there is no dispute) that: 1. The Property was residential property for purposes of section 5A of the LTA at all material times. 2. The Applicants: 1. were resident in China and not in Australia from at the latest April 2017 until May 2023; and 2. were at all material times citizens of the Peoples Republic of China only. They were thus in relation to all relevant land tax years foreign persons for purposes of section 5A of the LTA. 1. It follows that subject to any exemption the Applicants were liable to surcharge land tax under section 5A of the LTA in respect of each of the 2018, 2019, 2020, 2021 and 2022 land tax years. 2. The exemption provided for in section 5B of the LTA does not apply, since: 1. The Respondent could not be satisfied that either Applicant in relation to any of the 2018, 2019, 2020, 2021 or 2022 land tax years had the intention specified in section 5B(1)(b) of the LTA "to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement", since the Property was made available for rental from April 2017, and was actually tenanted almost without a break between 16 November 2017 and the hearing date (15 May 2023); and 2. As noted above, the Applicants were physically in China and not in Australia from at the latest April 2017 until May 2023; they could not therefore have satisfied the residence requirement imposed by section 5B(2) of the LTA, of occupying the Property for a continuous period of 200 days in each relevant land tax year. The reasons for their absence are irrelevant: Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216 at [59], Barsoun v Chief Commissioner of State Revenue [2020] NSWCATAD 282 at [78]. The Respondent has no statutory basis on which to exempt a taxpayer from that statutory requirement: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30]. 1. Sub-sections (2A) and (2B) of section 5B of the LTA, the latter of which confers on the Respondent a limited discretion to waive non-occupancy of premises due to absence from Australia as a disentitling factor to exemption under section 5B, were not included in the LTA until 19 May 2022 and were thus inapplicable in determining the Applicants' liability to surcharge land tax for the 2022 (or any earlier) land tax year. It is clear from section 5A(2) of the LTA that surcharge land tax is calculated by reference to landholdings as at 31 December in a year, in respect of the calendar year beginning on the immediately following 1 January which is the relevant land tax year. Amendments made during that calendar year, in the absence of express provision to the contrary, can only operate prospectively since the liability to surcharge land tax in the land tax year which corresponds to that calendar year has already been determined as at the 31 December immediately preceding the start of the relevant land tax year. The State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 confers no such retrospectivity on sub-sections 5B(2A) and (2B). it is not necessary for the Tribunal to express (and accordingly it refrains from expressing) any view as to how those sub-sections might have operated in relation to the Applicants had they been in force in relation to any of the relevant land tax years. 2. The provisions of Schedule 1A of the LTMA are of no relevance to the imposition of, or the availability of exemptions from, surcharge land tax. This is because Section 5B(1) of the LTA provides that exemption from surcharge land tax is available "only if" the requirements of that section are met. There is thus no room for Schedule 1A to operate in relation to surcharge land tax. 3. Neither the Respondent nor this Tribunal has any discretion to waive, or to grant a "one off" exemption from, surcharge land tax for which a taxpayer is liable. This is the case even though the imposition of the tax may visit hardship or unfairness on the taxpayer or result from circumstances (such as family responsibilities or travel restrictions) that deprived the taxpayer of effective moral or legal choice in relation to his or her absence from Australia. The position is set out clearly in the Tribunal's reasons for decisions in Sjarifudin v Chief Commissioner of State Revenue [2021] NSWCATAD 347 at [45] to [48], Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [32] to [34], Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38] and Du v Chief Commissioner of State Revenue [2022] NSWCATAD 329, at [39] to [47]. These decisions in turn rely, at least in dismissing the proposition that general notions or fairness or justice should allow the adjustment of tax liabilities, on the High Court of Australia's unambiguous rejection of such a proposition in Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109, at 123. Orders 1. The Tribunal confirms under section 101(a) of the Taxation Administration Act 1996 the Respondent's assessments dated 11 May 2022 of surcharge land tax in the amount of $49,946.55 each against Zhenzhi Wei and Xiumin Zhang. ********** 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 Amendments 11 July 2023 - Representation amended. 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: 11 July 2023