Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Kirkovski v Chief Commissioner of State Revenue [2024] NSWCATAD 223 Hearing dates: 03 May 2024 Date of orders: 06 August 2024 Decision date: 06 August 2024 Jurisdiction: Administrative and Equal Opportunity Division Before: AR Boxall, Senior Member Decision: (1) The Tribunal confirms under section 101(a) of the Taxation Administration Act 1996 the Respondent's decision on 13 September 2021 in Duties Notice of Assessment Number 10195351-002. (2) The Tribunal confirms under section 29(1)(a) of the First Home Owner Grant and Shared Equity Act 2000 the Respondent's decision on 10 September 2021 in First Home Owner Grant Assessment Notice concerning Application ID UIN2243564. Catchwords: TAXES AND DUTIES — First home buyer scheme – satisfaction of residence requirement TAXES AND DUTIES — Dutiable transactions — Rate — Concessional rates TAXES AND DUTIES — Administration — Interest TAXES AND DUTIES — Administration — Penalty tax Legislation Cited: Administrative Decisions Review Act 1997 ss 58, 63 Duties Act 1997 ss 69, 71, 74, 76, 78 and 79 First Home Owner Grant and Shared Equity Act 2000 ss 7, 8, 9, 10, 11, 12, 13, 13A, 13B, 20, 28 and 45 Taxation Administration Act 1996 ss 4, 18, 21, 22, 25, 26, 27, 28, 29, 30, 33, 89, 99, 100, 101 Cases Cited: B&L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19 Deverich v Chief Commissioner of State Revenue [2009] NSWADT 198 Knight v Chief Commissioner of State Revenue [2008] NSWADT 83 RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64 Sobhani v Chief Commissioner of State Revenue [2009] NSWADT 198 Category: Principal judgment Parties: Daniel Kirkovski and Jasmine Lea Kirkovski (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Self-represented (Applicants) Solicitor: Crown Solicitor (Respondent) File Number(s): 2023/00205358 Publication restriction: None REASONS FOR DECISION APPLICATION TO REVIEW A DECISION 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, respectively, 10 September 2021 and 13 September 2021 (the Decisions). 2. In the earlier Decision (the Grant Decision), the Respondent reversed a decision made by it on 25 October 2017 to pay to the Applicants a grant (the Grant) under the First Home Owner Grant (New Homes) Act 2000 [1] (the Grant Act) in connection with their acquisition of a residential property in Gregory Hills NSW (the Property). 3. In the later Decision (the Duty Decision), the Respondent reversed a decision made by it to allow the Applicants in connection with their acquisition of the Property a transfer duty concession (the Concession) under Division 1 of Part 8 of Chapter 2 of the Duties Act 1997 (the Duties Act). 4. In these reasons references to the Section 58 Documents are to the bundle of documents filed by the Respondent with the Tribunal on 27 July 2023, pursuant to section 58 of the Administrative Decisions Review Act 1997 (ADRA). 5. The Duties Act is a "taxation law" as defined in section 4 of the Taxation Administration Act 1996 (TAA), to which the objection and review provisions of that Act apply. 6. The Grant Act sets out in Division 6 a regime for the making and determination of objections to decisions made by the Respondent under that Act (Subdivision 1) and for the administrative review under the ADRA of those decisions by this Tribunal on the application of a dissatisfied objector (Subdivision 2). Investigative and procedural history 1. The investigative and procedural history of the matter is as follows: 1. On 27 August 2021, the Respondent wrote to the Applicants, informing them that he was investigating as to whether they satisfied the residence requirements for the Concession and the Grant, and requesting the provision of certain evidence; 2. On 9 September 2021, Mr Kirkovski provided a signed residency confirmation concerning the Applicants' occupation of the Property (the Residency Confirmation), together with copies of certain documents which he considered to support the statements made in the Residency Confirmation; 3. On 10 September 2021, the Respondent wrote to the Applicants, informing them of the Grant Decision and enclosing a First Home Owner Grant Assessment Notice requiring that they: 1. Repay the Grant of $15,000; and 2. Pay a penalty of $3,000, being a total of $18,000; 1. On 13 September 2021, the Respondent wrote to the Applicants informing them of the Duty Decision, and enclosing a Duties Notice of Assessment requiring that they pay an additional amount of $1,785.55, representing the duty payable ($24,490), 20% penalty tax of $4,898, and interest of $301.27, less $27,930.72 already paid. 2. On 11 November 2021, the Applicant lodged an objection (the Objection) to the Decisions. The Objection was lodged within the statutory periods respectively provided for by section 89 of the TAA (to the extent it related to the Duty Decision) and section 25(3) of the Grant Act (to the extent it related to the Grant Decision). 3. On 28 April 2023, the Respondent wrote to the Applicants, informing them that it disallowed the Objection. 4. On 27 June 2023, the Applicant lodged with the Tribunal the present application. It was lodged within 60 days after receipt by the Applicant of notice of the Respondent's disallowance of the Objection. It was thus received within the period prescribed under section 99 of the TAA for seeking a review (to the extent it related to the Duty Decision) and within the period prescribed under section 28 of the Grant Act for seeking a review (to the extent it related to the Grant Decision). 1. Those sections permit application 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, as the case may be, Division 1 of the TAA or Subdivision 1 of Division 6 of the Grant Act; and 2. The taxpayer is dissatisfied with the Respondent's determination of the objection. Both conditions are satisfied in the present case. The nature of the review 1. The provisions of section 100 of the TAA apply to the review of the Duty Decision. 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. Section 28 of the Grant Act makes corresponding provision in relation to the review of decisions under that Act: subsection 28(2) corresponds to subsection 100(2) of the TAA, and subsection 28(3) to subsection 100(3). 2. 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: (a) any relevant factual material, (b) any applicable written or unwritten law". 1. Moreover, under section 63(2) of that Act, 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". Legislative provisions: the Concession 1. At the relevant time, the Duties Act provided in Division 1 of Part 8 of Chapter 2 for a scheme under which a concession or exemption from transfer duty (determined in accordance with section 78) on certain acquisitions of land was allowed, in the words of section 69 of that Act, "... to help people who are acquiring a new home that is their first home". 2. Under section 71 of the Duties Act, the concession or exemption was available only to first home owners. 3. Under section 74 its availability was further limited: 1. In subsection 74(1), to agreements or transfers "... for the acquisition of a new home that is a first home or.... a vacant block of residential land..."; and 2. In subsection 74(3), to agreements or transfers where the value of the property (if it has a private dwelling unit on it) is less than $650,000 or, if vacant land, is less than $450,000. 1. Section 76 of the Duties Act still further limited the availability of the exemption or concession: 76 Residence requirement (1) The home must be occupied by the first home owner or one of the first home owners who is acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as the residence requirement. (2) The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case: (a) modify the residence requirement by approving a shorter period of occupation by a first home owner, or (b) exempt a first home owner from the requirement to comply with the residence requirement. (3) In the case of an agreement or transfer for the acquisition of a vacant block of residential land, it is sufficient that the Chief Commissioner is satisfied that the vacant block is intended to be used as the site of a home to be occupied by the first home owner or one of the first home owners who is acquiring it as a principal place of residence. (4) (Repealed) (5) For the purpose of this section, an agreement or transfer is completed when a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered. (6) The residence requirement does not apply to an application under the scheme if, on the date of the agreement or transfer: (a) the applicant or, if there are 2 or more of them, at least one of the applicants is a member of the Permanent Forces of the Australian Defence Force (within the meaning of the Defence Act 1903 of the Commonwealth), and (b) the applicant or, if there are 2 or more of them, each of the applicants is enrolled to vote in State elections (under the Parliamentary Electorates and Elections Act 1912). 1. Under section 79, the Respondent was permitted to: reassess the duty chargeable in respect of an agreement or transfer that is initially approved under the scheme if the Chief Commissioner forms the opinion that the agreement or transfer is not eligible under the scheme (because of failure to comply with the residence requirement or otherwise). Legislative provisions: the Grant 1. At the relevant time, section 7 of the Grant Act provided for a scheme under which grant was available to first home owners in connection with the acquisition of their first home: 7 Entitlement to grant (1) A first home owner grant is payable on an application under this Act if: (a) the applicant or, if there are 2 or more of them, each of the applicants complies with the eligibility criteria, and (b) the transaction for which the grant is sought: (i) is an eligible transaction, and (ii) has been completed. (1A) If the first home owner grant cap applies to the eligible transaction for which the grant is sought, a first home owner grant is payable in respect of the eligible transaction only if the total value of the transaction does not exceed the amount of the first home owner grant cap. 1. The term eligibility criteria was defined in section 3 by reference to the criteria set out in Division 2 of Part 2 of the Grant Act. Relevantly, one of these criteria is set out in section 12, which provides as follows: 12 Criterion 5—Residence requirement (1) An applicant for a first home owner grant must: (a) commence occupation of the home to which the application relates as the applicant's principal place of residence within 12 months after completion of the eligible transaction or the period approved by the Chief Commissioner under this section, and (b) occupy the home as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner under this section. (2) This requirement is referred to in this Act as the residence requirement. (3) The Chief Commissioner may, if satisfied there are good reasons to do so, do either or both of the following: (a) approve the commencement of occupation by the applicant of the home to which the application relates as a principal place of residence more than 12 months after completion of the eligible transaction, (b) approve the occupation of the home as a principal place of residence for a period of less than 6 months. (4) The Chief Commissioner may, if satisfied there are good reasons to do so, exempt an applicant from the residence requirement. 1. Section 13 of the Grant Act provided relevantly as follows: 13 Eligible transactions (1) An eligible transaction is: (a) a contract made on or after 1 October 2012 for the purchase of a new home in New South Wales, or (b) a comprehensive home building contract made on or after 1 October 2012 by the owner of land in New South Wales, or by a person who will on completion of the contract be the owner of land in New South Wales, to have a new home built on the land, or (c) the building of a new home in New South Wales by an owner builder if the building work commences on or after 1 October 2012. (2) A contract is a contract for the purchase of a home if the contract is a contract for the acquisition of a relevant interest in land on which a home is or is to be built under the contract by or on behalf of the vendor. (3) However, a contract made on or after 1 July 2000 is not an eligible transaction if: (a) in the case of a contract to purchase a home—the purchaser had an option to purchase the home granted before that date or the vendor had an option to require the purchaser to purchase the home granted before that date, or (b) in the case of a comprehensive building contract—either party had a right or option granted before that date to require the other party to enter into the contract. (3A) [Not reproduced] .(4) The commencement date of an eligible transaction is: (a) in the case of a contract—the date when the contract is made, or (b) in the case of the building of a home by an owner builder: (i) the date when laying the foundations for the home commences, or (ii) another date the Chief Commissioner considers appropriate in the circumstances of the case. (5) An eligible transaction is completed when: (a) in the case of a contract for the purchase of a home: (i) the purchaser becomes entitled to possession of the home under the contract, and (ii) except in the case of a terms contract, if the purchaser acquires an interest in land under the contract that is registrable under a law of the State—the purchaser's interest is registered under that law, or (b) in the case of a contract to have a home built—the building is ready for occupation as a place of residence, or (c) in the case of the building of a home by an owner builder—the building is ready for occupation as a place of residence. 1. Section 13A provided as follows: 13A First home owner grant cap (1) A first home owner grant cap applies to any eligible transaction with a commencement date on or after 1 July 2014. Note— The first home owner grant cap does not apply to an eligible transaction that qualifies for the first home owner boost for new homes or established homes. The first home owner boost is available for eligible transactions until 31 December 2009. (2) For the purposes of this Act, the amount of the first home owner grant cap is: (a) $750,000, or (b) if another amount is prescribed by the regulations for the purposes of this section—that other amount. (3) The question of whether the total value of a transaction exceeds the amount of the first home owner grant cap is determined by reference to the total value of the transaction as at: (a) in the case of a contract—the commencement date, or (b) in the case of the building of a home by an owner builder—the date the transaction is completed. 1. Section 13B provides relevantly as follows: 13B Calculation of total value of transaction for purposes of first home owner grant cap (1) For the purposes of this Act, the total value of a transaction is: (a) in the case of a contract for the purchase of a home—the greater of the following: (i) the consideration for the eligible transaction, (ii) the unencumbered value, at the commencement date, of the property the subject of the transaction; or (b) ......[Not reproduced] 1. Section 20(1)(b) of the Grant Act authorised the Respondent to pay a grant in anticipation of compliance with the residence requirement, but subject to a statutory condition set out in section 20(3): (3) If a first home owner grant is paid in anticipation of compliance with the residence requirement, the payment is made on condition that, if the residence requirement is not complied with, the applicant must within 14 days after the end of the period allowed for compliance: (a) give written notice of that fact to the Chief Commissioner, and (b) repay the amount of the grant. History 1. There appears from the evidence to be no controversy as to the following: 1. On 23 November 2015, the Applicants entered into a contract (the Contract) with Logue Homes Pty Limited (the Vendor) for the purchase of the Property, being a lot in a freehold strata scheme development undertaken by the Vendor. The consideration for the purchase was $644,000. 2. Under the Contract, the Applicants agreed to purchase the Property subject to certain conditions. These included in Special Condition 5.2 that a strata plan for the development that included the Property (the Strata Plan) be registered by an agreed date (the Sunset Date) or such later date as was agreed. If that did not occur, the Applicants (or in some circumstances the Vendor) could rescind the Contract: Special Condition 5.4. The Vendor undertook in Special Condition 6.1 to complete the strata development in accordance with certain broad specifications set out in the Contract and in Special Condition 5.3 to use its best endeavours to arrange registration of the Strata Plan by the Sunset Date. 3. On 12 December 2016, the Applicants lodged an application for the Concession with the Respondent, and subsequently they paid transfer duty on the Contract on the basis that the Concession was allowed. The value of the Concession was $1,214. 4. On 3 March 2017, Camden Council issued an interim occupation certificate for the Property, and on or about 7 March 2017 the Applicants entered into occupation of the Property under an occupancy agreement with the Vendor. They paid an occupancy fee of $375 per week. 5. On 9 July 2017 Mr Kirkovski's then full-time employment was terminated. 6. On 22 July 2017, the Applicants entered into a selling agency agreement with a real estate agent for the marketing and sale of the Property. 7. On 3 August 2017, the Applicants entered into a contract for the purchase of a vacant residential block in Oran Park NSW (the Oran Park Property). 8. On 15 August 2017, Mr Kirkovski received an offer of employment from a new employer, which he accepted on 16 August 2017. 9. On 18 September 2017, the Strata Plan was registered. 10. On 16 October 2017, the Applicant's purchase of the Property under the Contract settled. 11. On 20 October 2017, the Applicants entered into a contract for the sale of the Property for a price of $712,000. 12. On 24 October 2017, the Applicants were registered as the registered proprietors of the Property. 13. On 25 October 2017, the Applicants lodged with the Respondent an application for the Grant. 14. On 27 October 2017 the Grant was paid to them. Its value was $15,000. 15. On 7 November 2017, the Applicants' purchase of the Oran Park Property settled. 16. On 4 December 2017, the sale by the Applicants of the Property settled. 17. There was no dispute that: 1. the Applicants were first home owners for purposes of section 71 of the Duties Act, and 2. the Property was eligible for the Concession, being "a new home that is a first home" for purposes of section 74(1) and having a value for purposes of section 74(3) of less than $650,000. 1. There was equally no dispute that: 1. the Applicants complied with the eligibility criteria set out in sections 8 to 11 (inclusive) of the Grant Act; 2. the Contract provided for an eligible transaction for purposes of section 13 of the Grant Act, although these reasons consider further below the nature of that transaction; or 3. the commencement date of the transaction for purposes of section 13(4) of the Grant Act was 23 November 2015, being the date of the Contract. Consideration Entitlement to Grant 1. In the Tribunal's view, the Contract was an eligible transaction for purposes of the Grant Act because it was "a contract made on or after 1 October 2012 for the purchase of a new home in New South Wales" and thus came within the definition of eligible transaction by reason of the operation of section 13(1)(a) of that Act. 2. The Tribunal notes the Applicants' submission, that the Contract "... was not for the purchase of a home but for the construction of a home on vacant land", so that the relevant completion date under section 13(5) was the date on which they obtained possession of the Property, rather than that on which they were registered as registered proprietors of the Property. 3. The Tribunal disagrees with this characterisation of the Contract, for several reasons: 1. Section 13(2) of the Grant Act provides that "a contract for the purchase of a home" is "a contract for the acquisition of a relevant interest in land on which a home is or is to be built under the contract by or on behalf of the vendor". Under section 5(2)(a) of the Grant Act, a relevant interest includes "an estate in fee simple in land". 2. The relevant provisions of the Contract summarised in paragraph [24(1) and (2)] above fall squarely within this definition, since the Contract provides for the Applicants to acquire an interest in land on which the Vendor, between the making of the Contract and settlement of the Contract, is to build a home. 3. Paragraphs (b) and (c) of section 13(1) deal with different situations, where the prospective first homeowner either personally [paragraph (c)] or under contractual arrangements with a builder [paragraph (b)] procures the construction of the proposed home. In these cases, the homeowner assumes the primary economic and legal risk of completing construction of the home, subject to any contractual arrangements with the builders or contractors engaged by the homeowner. 4. In the circumstances of paragraph (a), however, it is the vendor of the land, not the purchaser, who bears the economic and legal risk inherent in constructing the home on the land to which the purchase contract relates. The homeowner agrees with the vendor to purchase certain land with a newly completed house built on it and has no contractual relationship with builders or contractors. It is the vendor's responsibility, as developer, to bring the home to completion, and it is the vendor in that capacity who bears the risk of doing so. The risk allocation described in paragraph 13(1)(a) of the Grant Act is entirely congruent with that under the Contract. 1. There is an important consequence of characterising of the Contract as a contract for the purchase of a home: 1. Paragraph 13(5)(a) provides that an eligible transaction which is a contract for the purchase of a home is completed when two conditions are satisfied: 1. The purchaser becomes entitled to possession of the home under the relevant contract; and 2. The purchaser's interest in land acquired under the contract is registered under the applicable real property legislation. 1. Paragraphs 13(5)(b) and (c), however, provide that for eligible transactions to which they apply, the eligible transaction is completed when the building is ready for occupation as a place of residence. 2. This distinction is, in the Tribunal's assessment, a logical reflection of the risk allocation contemplated by section 13. 1. Since: 1. The Contract was one for the purchase of a home within the meaning of section 13, to which the statutory completion test set out in paragraph 13(5)(a) applies; and 2. One of the two elements in that test, that the purchaser's interest in land is registered under the applicable real property law, was not satisfied until 24 October 2017 when the Applicants were registered as registered proprietors of the Property, the eligible transaction provided for under the Contract cannot have completed, for purposes of section 13, until that date. 1. What follows is that any occupation of the Property by the Applicants before 24 October 2017 could not count in determining whether they satisfied the residence requirement under section 12 of the Grant Act, since sub-section 12(1) requires the homeowner's minimum 6-month continuous occupation of the home to commence "... within 12 months after completion of the eligible transaction ...". In the present case, however, although the Applicants appear to have occupied the Property for between 8 and 9 months, at most 1 month, 1 week and 3 days of their occupancy occurred after their registration as registered proprietors of the Property. They cannot therefore be considered to have satisfied the minimum 6 continuous occupation test. 2. The conclusion might well have been different had their acquisition of the Property been characterisable as an eligible transaction under either paragraph (b) or (c) of section 13(1) of the Grants Act, and a different test of completion applied under section 13(5). It was not so characterisable, however. Entitlement to Concession 1. A similar analysis applies in relation to the Concession: 1. The residence requirement under sub-section 76(1) of the Duties Act is that the first home be occupied by the homeowners "as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer"; 2. Sub-section 76(5) defines completion of the relevant agreement or transfer as being when "a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered"; 3. Thus, since the interest in the Property acquired by the Applicants was both registrable under applicable real property legislation and in fact registered only on 24 October 2017, the qualifying period of continuous residence could only have started at the earliest on that date. The consequence is that: 1. The preceding 7 months of occupancy do not count towards satisfaction of the residence test for purposes of subsection 76(1) of the Duties Act; and 2. The 5 weeks and 3 days of occupancy that occurred after their registration as registered proprietors of the Property are insufficient to meet the residence test for the Concession under that section. Is a modification appropriate? 1. There is provision both in relation to the Concession (Duties Act, section 76(2)) and the Grant (Grant Act, section 12(3)(b) for modification, and section 12(4) for exemption) allowing the Respondent, "if satisfied there are good reasons to do so", to modify, or to relieve the Applicants from compliance with, the relevant residence requirement. 2. The Applicants say in paragraph 38 of their written submissions received on 11 October 2023 that they do not request the exercise of a discretion to reduce or waive the residence requirement but rather seek that the residence requirement be considered as satisfied by reason of their occupancy of the Property from 7 March 2017 until early December 2017, a period of more than 6 months but of which only a fraction (1 month, 1 week and 3 days at most) occurred after completion of the purchase transaction on 24 October 2027. 3. This, with every respect, is a distinction without a difference: 1. By seeking to have the period of occupancy before completion "credited", broadly speaking, against the residence requirement, the Applicants in effect seek the waiver of the full 6-month residence requirement on the basis that their occupancy of the property for over 7 months before the completion date affords good reason to do so. 2. Moreover, in their submissions, they refer to the termination of Mr Kirkovski's employment on 5 July 2017, and the effect that it had on their economic circumstances as a relevant consideration. This, in the Tribunal's view, is also a request for waiver of the full residence requirement, on the basis that the adverse change in their economic situation also amounted to good reason to waive the full residence requirement. 1. In Sobhani v Chief Commissioner of State Revenue [2009] NSWADT 198, the late A Verick JM observed at [53], in relation to the proposition that the Respondent should exercise its discretion to modify the application of the full six-month residence requirement, that: "The discretion is intended to allow the grant to be retained under the [Grant Act] and the [Concession] to apply under the Duties Act in circumstances where the applicant had a real bona fide intention to occupy and use the home as his or her principal place of residence but failed to do so due to a change in circumstances after the purchase of the home". 1. In Deverich v Chief Commissioner of State Revenue [2009] NSWADT 198, Verick JM observed similarly as follows: "I think the discretion should be considered in cases where there is a bona fide attempt by the applicant to establish his or her first home and some impediment beyond the control of the applicant prevents the occupation of the property for a continuous period of six months". 1. That the Applicants occupied the Property as their home from 7 March 2017 is, in the Tribunal's view, consistent with a real bona fide intention at that time of the kind referred to in Sobhani v Chief Commissioner of State Revenue. However, as discussed above, the legislation requires occupation of the Property for six months after completion of the underlying eligible transaction and confers on neither the first homeowner nor the Respondent the authority to reallocate at their discretion some portion of the necessary occupancy to a period before completion. Something more than the simple fact that the Property was occupied before completion of the Contract is necessary to provide the "good reason" that enlivens the Respondent's discretion under sub-section 76(2) of the Duties Act and paragraph 12(3)(b) of the Grant Act to shorten the six-month period. The Applicants' occupation of the Property before completion of the Contract cannot of itself be either "a change in circumstances after the purchase of the home" or "an impediment beyond the control of the applicant [that] prevents the occupation of the property for a continuous period of six months" of the kind contemplated by the formulations in Sobhani v Chief Commissioner of State Revenue and Deverich v Chief Commissioner of State Revenue which, with respect, the present Tribunal adopts. 2. The only relevant change in circumstances to which the Applicants refer in their submission is the termination of Mr Kirkovski's employment on 5 July 2017, and the effect that it had on their economic circumstances. 3. On the face of matters, the decisions by the Applicants on 22 July 2017, to place the Property on the market, and on 20 October 2017, to enter into a contract for the sale of the Property, might reasonably be considered as legitimate responses to straitened circumstances. This is because in doing so they: 1. presumably reduced their financial commitments to a more manageable level, even allowing for the rent that they might need to pay; and 2. Realised a tax-free capital gain on the Property that might tide them over their financial difficulties. 1. However, as the Respondent points out in its submissions: 1. On 3 August 2017, some two weeks before Mr Kirkovski secured alternative employment, the Applicants entered into a contract to purchase the Oran Park Property for $521,000; since that property was vacant land, they must have been willing to accept in the short to medium term the significant additional expenditure of constructing a dwelling on it; this does not suggest that the disposal of the Property was a difficult decision made in order to stabilise a difficult financial situation; and 2. On 15 August 2017 Mr Kirkovski received, and on 16 August 2017 he accepted, an offer of new employment. While there is some disagreement between the Applicants and the Respondent as to the sustainable income levels of the Applicants at that time, that Mr Kirkovski was able to secure an acceptable alternative position within five weeks is not consistent with their financial position having become so preoccupying as to necessitate the sale of the Property. 1. Moreover, as the evidence indicates, it was not until 25 October 2017 that the Applicants made application for the Grant. By that stage they had already entered into a contract for the sale of the Property and a contract for the purchase of the Oran Park Property, thus demonstrating that whatever their intention may have been in November 2015, they no longer had any intention for the Property to be their home. 2. The Tribunal is not satisfied, therefore, that there is good reason to allow any modification of the residence requirements for either the Grant or the Concession. Interest and penalties The Concession 1. The Duties Act is a taxation law within the meaning of sections 3 and 4 of the TAA, and "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay" is a tax default within the meaning of section 3 of that Act. 2. Under section 76A of the Duties Act as it relevantly applied, the Respondent was authorised to allow the Concession, in anticipation of the Applicants' compliance with the residence requirement provided for in section 76(1) of the Duties Act. This is what occurred when the Respondent stamped the Contract with transfer duty of $23,255. 3. Under section 76A(2), the advance approval was subject to an express statutory condition. This was that within 14 days after the end of the period of 12 months commencing when they became the registered proprietors of the Property, the Applicants were obliged: 1. to notify the Respondent if they had not satisfied the residence requirement under section 76(1), and 2. to pay the duty foregone by the Respondent. 1. They did not do so. Under sub-section 76A(3), the taxpayers' failure to comply with that condition is a tax default for purposes of the TAA. That in turn engages the interest and penalty tax regime provided for by the TAA in relation to tax defaults. 2. The legal position in relation to the Respondent charging interest on unpaid stamp duty is set out in the TAA, which: 1. provides in section 21 for interest to be paid on unpaid tax, including payroll tax; 2. sets out in section 22 the method for calculating interest, which is at a rate which is the sum of two rates: the "market rate component" and the "premium rate component"; and 3. in section 25, allows the Respondent to remit in individual cases either or both components, "… in such circumstances as the Chief Commissioner considers appropriate". 1. The Commissioner's discretion to remit interest is a wide one, which is unfettered in its terms. 2. The decision of a predecessor tribunal in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19: 1. explains the function of the market rate component, as being "… to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due …"; 2. draws the conclusion that because of this function, the market rate component "… could rarely, if ever, be waived …"; and 3. observes that in order to justify any remission of the market rate component, "… it would be necessary to show that in some way the Commissioner contributed to the default ..". 1. The legal position concerning the Respondent's charging penalty tax in relation to tax defaults is set out in the TAA, which: 1. provides in section 26 for a defaulting taxpayer to be liable to pay penalty tax in addition to the unpaid tax; 2. sets out in section 27(1) the basic position, which is that the penalty tax payable is 25% of the unpaid tax; 3. provides in section 27(2) for the amount of penalty tax payable to be increased up to an amount equal to 75% of the unpaid tax, if the Respondent is satisfied that the tax default was caused wholly or partly by the taxpayer's wilful disregard of the relevant taxation law; 4. allows, in sections 28 to 30, for the relevant percentage to be reduced depending on the taxpayer's behaviour during the Respondent's investigations; 5. relevantly, section 29(1) provides for the amount of penalty tax determined under section 27 "to be reduced by 20% if, after the Chief Commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is completed, the taxpayer discloses to the Chief Commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined"; and 6. section 33 of the TAA confers on the Respondent a discretion to remit penalty tax, but as a predecessor tribunal noted in RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64, at [29], the exercise of this discretion is warranted only in exceptional and rare circumstances. 1. The Respondent's calculation set out at page 54 of the Section 58 Documents is that the transfer duty foregone by allowing the Concession to the Applicants was $1,214.00, The Respondent's First Home Benefits Investigation Report dated 13 September 2021 indicates at page 70 of the Section 58 Documents, that interest of $301.27 and penalty tax of 20% on this amount (being $242.88) were imposed. This is reflected in the Duties Notice of Assessment number 10195351-002 issued by the Respondent to the Applicants on 13 September 2021. 2. There is nothing to suggest that: 1. the imposition or calculation of interest as set out in the First Home Benefits Investigation Report is anything other than a standard and straightforward charge of interest in accordance with sections 21 and 22 of the TAA; or 2. the imposition of penalty tax at the rate of 20% on the duty foregone under the Concession is anything other than a routine application of penalty tax in accordance with section 26 of the TAA, at the reduced rate provided for in section 29 which reflects the Applicants' co-operation with the Respondent's investigation. Their co-operation is recorded in the Respondent's First Home Benefits Investigation Report, at page 69 of the Section 58 Documents. The Grant 1. The Grant Act is not a taxation law for purposes of the TAA, and the interest and penalties regimes under that Act do not apply to it. Rather, the Grant Act contains its own regime for the imposition of penalties. 2. As noted in paragraph [23] above, the Grant Act allows the Respondent to pay the Grant in anticipation of compliance with the residence requirement, but subject to the statutory condition provided for in section 20(3). This condition is that if the residence requirement is not satisfied the recipient of the grant must, within 14 days after the end of the period for compliance with that requirement, notify the Respondent accordingly and repay the amount of the Grant. 3. Section 45(3) of the Grant Act provided relevantly as follows: If an applicant (or former applicant) for a first home owner grant fails to make a repayment required under this section or the conditions of the grant, the Chief Commissioner may, by written notice, impose a penalty not exceeding the amount the applicant is required to repay. 1. As discussed above, the residence requirement was that the Applicants live in the Property for a continuous period of 6 months during the period of 12 months beginning on 24 October 2017. They did not do so. In consequence, they did not satisfy the statutory condition in section 20(3), that they repay the Grant within 14 days after the end of that statutory period. This failure enlivened the Respondent's power under section 45(3) to impose a penalty not exceeding the amount unpaid. 2. It exercised that power by issuing the First Home Owner Grant Assessment Notice dated 10 September 2021, in which it required the repayment of the Grant and a penalty of $3000. The Respondent's First Home Benefits Investigation Report dated 13 September 2021 indicates that the Respondent imposed the penalty authorised under section 45(3) at the rate of 20% of the amount unpaid, being the amount of the Grant. 3. A predecessor tribunal outlined in Knight v Chief Commissioner of State Revenue [2008] NSWADT 83, at [33], certain factors which it considered relevant to the imposition of a penalty under section 45 of the Grant Act. These were: 1. the truthfulness of the original statements made by the applicant in his or her application for the grant; 2. the surrounding circumstances, including the intention of the applicant as to the occupation and use of the property as a principal place of residence at the time of seeking the grant; 3. the reasons for the failure to comply with the conditions of the grant; 4. whether the applicant has in fact occupied the property as his or her principal place of residence; 5. the candour of the applicant in his or her responses to compliance enquiries; and 6. whether the grant has been refunded. 1. At the time of issuing the First Home Owner Grant Assessment Notice on 10 September 2021: 1. The Applicants had been cooperative in the Respondent's investigation (as the Respondent's First Home Benefits Investigation Report records); 2. The Applicants had in fact occupied the Property as their principal place of residence, for approximately 9 months from March 2017 until early December 2017; and 3. The Applicants appeared to have been labouring under a misunderstanding as to the nature of the eligible transaction provided for in the Contract in determining when the eligible transaction was completed for purposes of the Grant Act. These factors tended towards a relatively generous application by the Respondent of its power to impose a penalty under section 45. 1. Against that: 1. On 10 September 2021, the Grant remained unrefunded, as it had been since late October 2018 when it should have been repaid as required by section 20(3) of the Grant Act; and 2. In their Application dated 25 October 2017 for the Grant (at pages 1 to 5 of the Section 58 Documents), the Applicants make at least two statements which they knew (or ought reasonably to have known) were both factually incorrect and which were material to the making of the Grant: 1. In response to Question 6 in the Application, being whether at least one of them will be occupying the Property for at least 6 months after completion of the eligible transaction, they answered yes, at a time at which they knew that they had in fact exchanged contracts for the sale of the Property; and 2. In the description of the Purchase Property, they completed the section specifying the Date of Occupancy as being 10/10/2017, when they knew that they had in fact been occupying the Property since March 2017. 1. The response to Question 6 may have been explicable to a degree by the Applicants' apparent misconception as to when the eligible transaction completed, as discussed above. However, even allowing for this, the answer was manifestly incorrect, since if the 6-month occupancy period ran from early March 2017, as they argue, it could not have accurately been said at the time that they will be occupying the Property. 2. Moreover, the Respondent's own internal documents (at pages 58 to 71, and 153 to 165 of the Section 58 Documents) reveal an active process of internal consideration as to the outcome of the investigation. 3. In imposing the penalty, the Respondent in the Tribunal's assessment: 1. acted within his power under section 45(3) of the Grant Act, and 2. reached a result that is consistent with his having undertaken an assessment and balancing of the factors relevant to the exercise of his discretion. Orders 1. The Tribunal confirms under section 101(a) of the Taxation Administration Act 1996 the Respondent's decision on 13 September 2021 in Duties Notice of Assessment Number 10195351-002. 2. The Tribunal confirms under section 29(1)(a) of the First Home Owner Grant and Shared Equity Act 2000 the Respondent's decision on 10 September 2021 in First Home Owner Grant Assessment Notice concerning Application ID UIN2243564. ********** Endnote 1. As the legislation was then entitled. Now, the First Home Owner Grant and Shared Equity Act 2000 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: 06 August 2024