Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Zgrivets v Chief Commissioner of State Revenue [2023] NSWCATAD 314 Hearing dates: 16 October 2023 Date of orders: 12 December 2023 Decision date: 12 December 2023 Jurisdiction: Administrative and Equal Opportunity Division Before: S E Frost, Senior Member Decision: The assessment is confirmed. Catchwords: TAXES AND DUTIES – Dutiable transfers – Exemptions – First Home Buyers Assistance Scheme – Principal place of residence – Occupation as a principal place of residence for a continuous period of at least 6 months Legislation Cited: Administrative Decisions Review Act 1997 (NSW) Duties Act 1997 (NSW) First Home Owners Grant Act 2000 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Re Gaines and Secretary, Department of Health, Housing and Community Services [1992] AATA 197 Texts Cited: None cited Category: Principal judgment Parties: Pavel Zgrivets and Maria Alejandra Serrano Diaz (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Applicants – in person Respondent – Crown Solicitor File Number(s): 2023/00191534 Publication restriction: No restriction REASONS FOR DECISION Summary 1. When the Applicants bought their first home in 2017 they got a duty exemption under the First Home Buyers Assistance Scheme (the Scheme). The Scheme requires the purchaser of the home, or at least one of them if there are two or more purchasers, to occupy the home as a principal place of residence for a specified period. Otherwise the exemption is withdrawn and the duty becomes payable. 2. The Chief Commissioner formed the view that neither of the Applicants had occupied the home as required, and made an assessment of the duty, plus penalty and interest. The Applicants dispute the assessment and have applied to the Tribunal to have the assessment reviewed. 3. I have decided the assessment is correct. These are my reasons. Jurisdiction 1. This is an application under s 96 of the Taxation Administration Act 1996 (NSW) (TA Act) for an administrative review of the assessment of duty chargeable under the Duties Act 1997 (NSW). The administrative review is conducted under the Administrative Decisions Review Act 1997 (NSW) (ADR Act). 2. The Tribunal's task is to decide what the correct and preferable decision is having regard to the material before it: ADR Act, s 63(1). The Applicants have the onus of proving their case: TA Act, s 100(3). That means they must prove all matters necessary for the Tribunal to answer the statutory question in their favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36]. The standard of proof is the balance of probabilities. Relevant legislation 1. The Applicants qualified for the duty exemption because they were acquiring their first home, and the dutiable value of the Property they were buying, in Cessnock, was below the statutory limit of $800,000: Duties Act, s 74(1). 2. But the entitlement to the exemption is contingent on the Applicants meeting what is described as the residence requirement, set out in s 76(1). Under that provision, the home had to be occupied by at least one of the Applicants: 1. as a principal place of residence; 2. for a continuous period of at least 6 months, and that occupation had to start within 12 months of the date on which the property was transferred to them. 1. The Chief Commissioner may reassess the duty chargeable if he forms the opinion that the transaction is not eligible under the Scheme (whether for failure to comply with the residence requirement or otherwise): s 79(1). What must the Applicants prove? 1. The Applicants entered into the contract to purchase the Property on 5 October 2017. Settlement occurred on 16 November 2017 and the transfer was registered on 21 November 2017. The latter date, 21 November 2017, is the date on which the transfer was completed: Duties Act, s 76(5). 2. To meet the residence requirement, the Applicants, or at least one of them, had to commence their occupation of the Property as a principal place of residence within 12 months of completion: that is, by 21 November 2018: Duties Act, s 76(1). Then, at least one of them had to occupy the Property as a principal place of residence for a continuous period of at least 6 months. 3. The Applicants claim they moved into the Property on 18 October 2018, immediately upon the expiry of the tenancy that continued after they purchased the Property. That claim is not disputed by the Chief Commissioner and I find the Applicants did move into the Property on that date. They must now demonstrate that at least one of them occupied the Property as a principal place of residence for a continuous period of at least 6 months: that is, until at least 18 April 2019. The Applicants' case in summary 1. Put simply, the Applicants' case is that one of them, Ms Serrano Diaz, occupied the Property as a principal place of residence for a continuous period of at least 6 months, and that this occupation commenced within the timeframe specified in s 76(1). The Applicants' case in detail 1. When the Applicants bought the Property the existing house was in a poor state of repair and required extensive renovations, which the Applicants had always planned to undertake. They also decided to subdivide the land and construct an additional dwelling at the rear of the Property. Development consent was granted in July 2018. There were tenants in the Property but they moved out in October 2018, and the Applicants moved in. 2. Mr Zgrivets, the male Applicant, is the one who has been explaining and advocating the Applicants' case since the Chief Commissioner first queried their satisfaction of the residence requirement. In his initial response to the Chief Commissioner's query Mr Zgrivets claimed to have 'started residing in the Property on 18/10/2018' and 'stopped living in the Property on 27/04/2019' (Ex R1, p. 38). He concedes this latter statement is incorrect. He now claims he lived in the Property until February 2019, when he moved to an apartment in Newcastle, and that his partner, Ms Serrano Diaz, continued to live in the Property until 27 April 2019 while the Property was being renovated. 3. Mr Zgrivets' move to the Newcastle apartment coincided with his obtaining full-time employment in the Newcastle CBD. It was also around this time that the renovations on the Property commenced. 4. Meanwhile, Ms Serrano Diaz had started part-time employment in Islington, a suburb of Newcastle, in November 2018, shortly after moving into the Property in October. But even after her partner took the lease on the Newcastle apartment, the Applicants claim Ms Serrano Diaz stayed on at the Property and continued to commute to her workplace in Islington, often by bus, but sometimes by car if it was available. She ended her employment at Islington in March 2019 and later, at the end of April, she 'transitioned from the Cessnock property to the Newcastle apartment on a more permanent basis' (Ex A1 [7.10]). 5. The Applicants claim their initial plan had been for Mr Zgrivets to take a career break to assist with the renovations, while Ms Serrano Diaz would continue to generate income by securing part-time employment (Ex A1 [8.2]). Things didn't work out as they had planned: the cost of the renovations exceeded their expectations, they had to take out a loan to pay for them, and Mr Zgrivets, with his higher income-earning potential, decided to return to full-time employment. 6. It was to avoid the long commute from Cessnock that Mr Zgrivets leased the apartment in Newcastle. (In fact the tenancy agreement is in the name of both Applicants, but they claim only Mr Zgrivets lived there, with Ms Serrano Diaz visiting and staying overnight from time to time.) 7. From early February to late April 2019, while Mr Zgrivets lived in Newcastle, the Applicants claim Ms Serrano Diaz lived alone in the Property while the renovations were taking place around her. They say the stress of moving to a new location, combined with the increased financial pressure from the cost of the renovations, created significant tensions in their relationship, so it was a good time for them to be apart. 8. While staying at the Property during this period, Ms Serrano Diaz occupied one bedroom. She maintained her privacy and security by having a keyed doorknob installed on the internal door leading from that bedroom to the hallway, making the bedroom inaccessible to any tradesmen who may have been working there. She also 'assisted with the renovations during her time off work, contributing to the progress of the project and reducing labour costs' (Ex A1 [8.5.2]). In cross-examination Ms Serrano Diaz said she was also there to 'monitor that the work was done' by the builders, 'just to keep an eye on what was done and to help [with] whatever I could do'. 9. As far as the condition of the bedroom is concerned, Mr Zgrivets stated in the Applicants' objection to the assessment (Ex R1, p. 322): The bedroom remained intact, was fully equipped, and in a livable condition between February and April 2019. It included Maria's personal belongings, queen-sized mattress, mini fridge, microwave, some basic kitchenware, camping table, chairs and a portable gas stove. It had not undergone structural changes like the rest of the house, but was only painted, built in wardrobe changed, and carpet changed. It was done at the very end, and after Maria moved out from the property at the end of April that year. 1. As for the rest of the house, the kitchen was 'mostly unusable' as a result of the renovations (Ex R1, p. 321) and, I infer, from around February 2019 onwards. The bathroom was undergoing significant work by early March (Ex R4, p. 3) but, it is claimed, it remained usable until 'shortly before Maria moved out' around the end of April (Ex R3, p. 40(d)). 2. In cross-examination Mr Zgrivets said: It wasn't pretty, especially taking a shower, it was quite bad, demolished walls, a little bit of tiling remained where the shower head was, but Maria had to adjust to the situation. She was taking very very brief showers. She also occasionally, just to get a bit better shower, would go to – about 7 minutes walk from there there was like a little pool and a club and she would go and she would swim in the pool and take a shower – it cost about four or five dollars. 1. The bedroom and bathroom were not the only parts of the Property Ms Serrano Diaz used. She also had access to the verandah off the bedroom, and to the yard, but the evidence is not clear on the extent to which she used these areas. 2. Mr Zgrivets also claims to have spent time at the Property during the period February to April 2019. In his email response dated 30 August 2023 to queries posed by the Crown Solicitor's Office, he stated (Ex R3, p. 40(b)-(c)): Pavel has typically resided at the Cessnock property during weekends, focusing on renovation activities alongside Maria. Pavel's usual routine involved arriving on Friday evenings and departing late on Sunday evenings. To the best of our recollection, Maria often accompanied Pavel to Newcastle on Sunday evenings. Her stay would vary between one to two nights, depending on her work schedule at [her job in Islington]. She would usually return to Cessnock either on Monday or Tuesday evenings, remaining there for the rest of the week until Pavel's subsequent arrival on Friday evening. 1. Ms Serrano's evidence in cross-examination revealed that while she was working in Islington she worked mostly – but not always – three days a week: Monday, Tuesday and Wednesday. Typically, if she was working on Monday, she would spend Sunday night in the Newcastle apartment. If she was working on Tuesday as well, she said she would usually also spend Monday night in Newcastle. Similarly, if working on the Wednesday, she would stay in Newcastle on the Tuesday night. She said 'mostly every week [was] the same'. In other words, the typical arrangement was that she would go back to Cessnock after her last shift for the week, and that would mean she may spend up to three nights a week in Newcastle. Of course, having regard to her claim that she travelled to Islington by bus from Cessnock, there must have been exceptions to that 'typical arrangement'. 2. I asked Ms Serrano Diaz about her eating arrangements when she spent time in Cessnock. She said it depended on whether she was spending the whole day in Cessnock or going to work. On a working day she would usually eat at work, and then just have something light when she got back to Cessnock. If she was spending the whole day in Cessnock she would eat one of the pre-packaged microwave meals Mr Zgrivets had brought her. 3. During the February-April 2019 period the house at Cessnock was sparsely furnished. There seems to have been little to no furniture other than in the bedroom Ms Serrano Diaz was using, with the exception of an outdoor setting on the verandah. Third party statements 1. In support of their claim the Applicants were able to secure two Statutory Declarations from third parties – Colin Caban, who owned but did not live in a nearby property in Cessnock; and Bruce Gota, who shared the Newcastle apartment Mr Zgrivets was living in. 2. Mr Caban stated on 27 October 2022 (Attachment D to Ex A1; minor typographical errors have been corrected): I met Pavel and Maria sometime during October 2018, shortly after the couple moved into [the Property]. I owned [a nearby property] that is located almost directly in front of Pavel's and Maria's property. My property was an investment that I self-managed the full renovation of, which followed by subdividing the land and building two units at the back. Being a hands-on developer, so I used to be there almost every day during the project, which took place between 2018 and 2020. I wish to confirm that Pavel and Maria have lived at the property until about mid 2019. As far as I know, Pavel started a new job in the Newcastle area so he stayed in Cessnock overnight only several times a week from February 2019 onwards, mostly on weekends. Maria, however, continued to live at [the Property] on a full time basis despite the extensive renovations that they commenced at around February that year. I know that Maria lived inside one of the bedrooms which did not undergo an extensive renovation like in the rest of the house. I wish to confirm that I have seen Maria in the area on a nearly daily basis until about mid-year of 2019. I used to come to my property early in the mornings to meet and manage the tradies who worked on it, and have regularly seen Maria coming out of [the Property] and going for early morning runs, having meals on the side porch of the house, or greeting the tradies who came to work on renovations at their property. I can confirm that in the evenings I have seen multiple times a light coming from the bedroom that Maria stayed at. As per my knowledge, Maria moved out permanently to Newcastle around April or May that year after the bathroom in their property was demolished as part of the renovations, so it became inconvenient to live there for a period of several months until the new bathroom was installed. Eventually, they never moved back to live at the property, but have continued with frequent visits and overnight stays for the rest of that year. 1. Mr Gota stated on 16 November 2022 (Attachment E to Ex A1; minor typographical errors have been corrected): I moved into a share apartment in The Hill neighbourhood in Newcastle with Pavel Zgrivets in early March 2019 and stayed there until December 2019. I stayed with Pavel while I was looking for a job which I got in September 2019 and moved in on a more permanent basis. During my stay Maria was rarely at the apartment, she would spend the occasional overnight in Newcastle, but lived in Cessnock. Pavel would travel to Cessnock frequently and spend weekends in Cessnock helping out with the renovations on their property. Maria started to stay permanently in Newcastle at the end of April 2019 but would still travel to Cessnock regularly. 1. In further support of the Applicants' case, Mr Zgrivets refers to the following note made by a Revenue NSW officer as part of the Investigation Report into the Applicants' exemption entitlement under the Scheme (Ex R1, p. 300): I spoke with the client's neighbour Brian, at [an adjoining property in Cessnock], regarding his observations of whether Maria remained living at the grant property during Pavel's absence from February 19 onwards. Brian advised that he recalled Maria was living in the grant property whilst renovations were happening. He claims that she was living on-site and sleeping in a tent/sleeping bag at certain points during the renovations. He also noted that the grass was not being maintained during this period, and it had become dry during the drought, so there was less water usage. 1. There had been no attempt to ask Mr Caban, Mr Gota or 'Brian' to attend the Tribunal hearing to be asked about their statements and comments. However, after a brief adjournment at the commencement of the hearing, Mr Caban was contacted by phone and answered some questions about his statement. Unfortunately, Mr Gota was unavailable and there seems to have been no contact made with 'Brian' since his conversation with the Revenue NSW officer some time between May and October 2022. 2. Each statutory declaration, although honestly made, is imprecise and vague. They contain a number of conclusions based on guesswork, and they differ in some respects from the evidence given by the Applicants themselves. Mr Caban's answers to questions put to him were also vague. 3. I have not found the declarations or the statements attributed to 'Brian' to be of any assistance. The residence requirement 1. The residence requirement can be broken down into the following components: 1. The home must be occupied by at least one of the purchasers; 2. As a principal place of residence; 3. For a continuous period of at least 6 months; and 4. The period of occupation must commence within 12 months of the date of transfer. 1. Contrary to the Chief Commissioner's submission, component (1) is occupied, not used and occupied. The expression used and occupied appears in other revenue legislation but not in s 76(1) of the Duties Act. Components (1) and (4) – occupation within 12 months of transfer 1. I do not see there is any controversy with respect to components (1) and (4). 2. The Chief Commissioner accepts, and I have found, that the Applicants moved into the Property on 18 October 2018. That marks the commencement of their occupation of the Property, which was within 12 months of the date of transfer, 21 November 2017. 3. I am satisfied that components (1) and (4) are met. Component (3) – continuous period of occupation 1. I now turn to the question whether there has been a continuous period of occupation of the Property by Ms Serrano Diaz beyond the time when Mr Zgrivets moved to Newcastle in early February 2019. To answer that question, I will first need to make some factual findings about what happened between then and the end of April 2019. 2. Ms Serrano Diaz's oral evidence provided some clarity: see [26] above. I find as follows: 1. She worked part-time in Islington until March 2019. On the evidence I can't make a precise finding as to the date on which her employment ended. 2. During the period when she worked in Islington: 1. she spent most Sunday nights, most Monday nights and many Tuesday nights in Newcastle; 2. she usually returned to Cessnock directly after finishing her last shift for the week; 3. she spent few Sunday or Monday nights, some Tuesday nights and every Wednesday, Thursday, Friday and Saturday night at the Property; 4. she did not work on Thursday or Friday but was based in Cessnock during those days; 5. she spent the weekends in Cessnock and travelled to Newcastle on Sunday afternoon or evening. 1. I find it difficult to make a precise finding as to the date on which Ms Serrano Diaz moved permanently into the Newcastle apartment. On the evidence it is certainly not clear to me that it was on or around 27 April 2019, as the Applicants assert. In reliance on some of the builder's invoices, the Chief Commissioner's representative cast doubt on the likelihood that the bathroom could continue to be used beyond the beginning of April but did not formally submit, as far as I could tell, that Ms Serrano Diaz moved out before 27 April. Accordingly, but not without some reservation, I will accept 27 April 2019 as the date on which Ms Serrano Diaz moved permanently into the Newcastle apartment. 1. The question then is whether the reduced occupation of the Property from February 2019 onwards, as shown in the findings in [42](2) above, amounts to an interruption to a continuous period of occupation by Ms Serrano Diaz. I don't think it does. 2. One can spend time away from a property without ceasing to occupy it. Common examples are periods away on holidays, house-sitting somewhere else for family or friends, forced stays in hospital or in rehabilitation, or even perhaps extreme examples such as periods in custody. The question of continuous occupation is to be determined objectively, based on the circumstances of a particular case. 3. Here, even though there were regular and frequent (albeit reasonably short) periods of time from early February 2019 onwards when Ms Serrano Diaz was not present at the Property, I consider she occupied the Property for a continuous period from 18 October 2018 until she moved to the Newcastle apartment. 4. I am satisfied that component (3) is met. Component (2) – principal place of residence 1. A leading authority on the concept of 'principal place of residence' is Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41. In that case, an Appeal Panel of the former Administrative Decisions Tribunal considered the meaning of the phrase in a similar, but slightly different, statutory context. 2. The statute in question was the First Home Owners Grant Act 2000 (NSW) (FHOG Act), s 12(1) of which required an applicant to 'occupy the home … as the applicant's principal place of residence within twelve months after completion of the eligible transaction …'. Unlike the Duties Act provision under consideration here, the FHOG Act did not also require a 6-month continuous period of occupation. Rather, occupation of the home as the principal place of residence, even for a short period, could be sufficient. 3. The Appeal Panel considered a number of decisions under various pieces of State, Territory and Commonwealth legislation, including the Rates and Land Tax Act 1926 (ACT) and the First Home Owners Act 1983 (Cth), and then said at [41]-[42] (most citations omitted): [41] Care must be taken in applying the principles discussed in these diverse cases to the meaning of 'principal place of residence' under the [FHOG Act] because each of them occurs in the context of differing legislation where that phrase has been used. There are, however, a number of common principles which are apparent from the approach taken in each case. [42] First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear. … 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, as [Re Gaines and Secretary, Department of Health, Housing and Community Services [1992] AATA 197] demonstrates. … 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: Gaines. In [Bates v Chief Commissioner of State Revenue [2004] NSWADT 13] 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. In this case, the Applicants claim their intention, when they moved into the Property in October 2018, was to treat it as their home – not necessarily forever but at least for a reasonable time. Whether that intention holds up objectively in light of the imminent and significant renovation works that would make the home inconvenient, even difficult, to live in, I need not decide. But it must at least be open to argument. Nevertheless, the Chief Commissioner does not cavil with the notion that the Applicants occupied the Property as their principal place of residence from October 2018 until Mr Zgrivets moved out in early February 2019. I will leave the question of intention there – noting, in any event, that it would not provide a determinative answer. 2. Turning then to the period from early February 2019 onwards, it is appropriate to consider the degree of permanence of Ms Serrano Diaz's occupation of the Property, and the purpose of that occupation. 3. By this stage she and Mr Zgrivets had signed a 12‑month residential tenancy agreement for the Newcastle apartment. Mr Zgrivets would move into that apartment immediately, on a full-time basis. Whatever their initial plan was when they took that lease, from the very beginning Ms Serrano Diaz would generally spend two or three nights a week there, and the rest of her time at the Property. 4. It is not difficult to imagine, and indeed I find it to have been the case, that Ms Serrano Diaz would not have intended at that stage to keep up those arrangements indefinitely – and in fact, nor did she. Once the renovations made it practically impossible to stay in the Property (by the end of April at the very latest), she moved into the Newcastle apartment permanently. 5. But even during the February-April period when she would regularly stay in the Property, her occupation of it was objectively 'transient, temporary, contingent or of a passing nature', to borrow the concepts referred to in Ferrington. The Property was not, for her, a place of residence, much less her principal place of residence. It is certainly the case that she stayed there, but with such a light touch that it is difficult to describe her as having lived there, or resided there. The home was sparsely furnished, the kitchen was 'mostly unusable', the bathroom 'quite bad' but somewhat functional, and the water and electricity usage negligible (Ex R1, pp. 56-58 and 284). Rather, her occupation of it was directed towards maintaining a foothold, with a view to establishing a 6-month connection with the Property and consequent satisfaction of the residence requirement. I do not criticise the Applicants for that. More than likely, they genuinely believed that would be enough to secure the duty exemption, but, unfortunately for them, it wasn't. 6. I am not satisfied that component (2) is met. Conclusion 1. The Applicants have not discharged the onus of proving their case. As a result, the transaction was not eligible for exemption under the Scheme. Order 1. The assessment is 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: 12 December 2023