CITATION: Spresian v Chief Commissioner of State Revenue [2006] NSWADT 239 DIVISION: General Division APPLICANTS PARTIES: Virna Spresian and Dean Aaron Spresian RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 053223 HEARING DATES: 7/12/2005 SUBMISSIONS CLOSED: 12/07/2005 EXTEMPORE DECISION DATE: 12/07/2005 DATE OF DECISION: 08/09/2006 BEFORE: Greenwood J - Judicial Member CATCHWORDS: first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision MATTER FOR DECISION: Principal matter LEGISLATION CITED : First Home Owners Grant Act 2000 Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT158 Gharakhan v Chief Commissioner of State Revenue, NSWADT unreported, 6 April 2005 CASES CITED: Rauf v Chief Commissioner of State Revenue [2005] NSWADT 176 Tarak Adasi v Chief Commissioner of State Revenue, unreported, 27 September 2004 Yucel v Chief Commissioner of State Revenue [2004] NSWADT 53 Zhang and Zhou v Chief Commissioner of State Revenue [2005] NSWADT 178 APPLICANTS In person REPRESENTATION: RESPONDENT S Benjamin, solicitor ORDERS: The decision of the Chief Commissioner of State Revenue is affirmed Reasons for Decision Facts of the Matter 1 The applicants are a sister and brother, who jointly purchased a Unit known as Unit 3 /7 Bortfield Drive, Chiswick, the subject property, pursuant to a contract for sale dated 4 April 2003, for the sum of $403,000.00. 2 The contract of sale was completed on the 30 May 2003. 3 The female applicant completed the application forms on behalf of both applicants for the initial grant. 4 On the 12 June 2003, the applicants signed a lease management agreement with Ray White Annandale, to make the subject property available for rental at the rate of $305.00 per week. 5 On or about June 2003 the applicants engaged Buildtec Pty Ltd to carry out painting, installation of new lights and taps for the sum of 3,355.00 for which the tradesman issued an invoice dated 17 June 2003. 6 By the 18 June 2003, the agent procured a Tenant and lodged a rental bond with the Department of Fair Trading for the sum of $1,220.00. 7 The matter came to the attention of the Chief Commissioner as a result of a random audit. The female applicant lodged with the Commissioner's office a statutory declaration dated 22 December 2004 disclosing that the unit had not been occupied by the female applicant within 12 months. 8 The applicant's Grandmother received treatment for a type of lung cancer on or about May 2003. 9 Both applicants were in full time employment and had borrowed loan funds by way of a mortgage to fund the purchase of the subject property. 10 On 1 February 2005 the Chief Commissioner of State Revenue issued a S. 45 Notice seeking repayment of the FHOG in the sum of $7700.00. 11 The applicant lodged an application for review of the Commissioner's decision with the Administrative Decisions Tribunal on the 29 June 2005. The Legislation 12 The Applicant must meet the criteria and conditions specified in First Home Owners Grant Act 2000, in order to be entitled to receive and retain the grant pursuant to S. 7, which states: 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. (2) Despite subsection (1)(a), an applicant need not comply with the eligibility criteria to the extent the applicant is exempted from compliance by section 9(2) or 12(2). (3) Despite subsection (1)(b), a first home owner grant is payable before completion of the relevant eligible transaction, as authorised by section 20. (4) Only one first home owner grant is payable for the same eligible transaction. 13 The eligible transaction was the contract to purchase a home in New South Wales pursuant to S 13 (1)(a). 14 The Applicants must also comply with the 5 eligibility criteria as set out in S12 (1) of the FHOG Act: 12 Criterion 5 – Residence requirement (effective from 1 January 2004) (1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant's principal place of residence for a continuous period of at least 6 months (1A) However, if the Chief Commissioner is satisfied there are good reasons to do so , the Chief Commissioner may: (a) approve a shorter period, or (b) exempt the applicant from the requirement to comply with subsection (1). (1B) The period of occupation required under subsection (1), or the shorter period approved under subsection (1A) (a), must start within 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner. (2) If an application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement. 15 The legislation applicable for S. 12 as at 31 December 2003 was as follows: 12 Criterion 5 – Residence requirement (1) An applicant for a first home owner grant must occupy 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 a longer period approved by the Chief Commissioner. (2) An application is made by joint applicants and at least one (but not all) of the applicants complies with the residence requirement, the non-complying applicant or applicants are exempted from compliance with the residence requirement. 16 The grant was paid in advance pursuant to S. 20 and subject to S. 20(2): If a first home owner grant is paid before completion the relevant eligible transaction, the payment is made on condition that, if the transaction is not completed within 12 months of the commencement of the transaction or longer period allowed by the Chief Commissioner, the applicant must within 14 days after the end of the period concerned: (a) give written notice of that fact to the Chief Commissioner (b) repay the amount of the grant. 17 The completion date is significant, as the 12 month period runs from the date the contract of sale completes or "settles" and the 6 month period of occupation had to occur as between the final settlement date, in this case between 30 May 2003 and 30 May 2004. The "Residence requirement" is defined in S. 3 and the drafting and reference to it in the various sections throughout the First Home Owners Grant Act 2000 signify it as a mandatory requirement and a timely one. 18 The Applicant is entitled to receive payment of the grant pursuant to S. 20(1)(b), prior to the occupation taking place, but subject to actual residence taking place within specified period as approved by the Commissioner. 19 In addition the Applicants have the responsibility to notify the Commissioner within 14 days if residence is not taken up and to repay the grant pursuant to S 20(3): S 20(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. A failure to comply, constitutes an offence, punishable by a maximum penalty of 50 penalty units (S. 20(4)). 20 Section 45 of the Act allows the Chief Commissioner to seek repayment of the grant and S 46 provides the power to enforce repayment and the penalty. The Evidence 21 Both of the applicants were present in the Tribunal on the day of the hearing and both gave verbal evidence to the effect that they had moved a sofa into the property, some food and continued to use the electricity service, which the former occupant or vendor had forgotten to cancel on settlement, for the tradesman. 22 The applicants gave corroborated verbal evidence that the female applicant (the sister) had attended to most of the arrangements to purchase the property and she had also corresponded in reply to the Chief Commissioner's questions during the initial investigation. 23 The absence of the usual documentation, such as changes in the address for water and Council rate notices, telephone and electricity services and address for mail to the subject property, was one of the most obvious indications, together with the timing of the booking of a tenant within 12 days of settlement, that the property was not intended to be occupied by the applicants, within the requisite time or at all. In fact no bills were presented, other than the renovation bill from Buildtec and the applicants freely admitted that they had not registered any change in their voting particulars on the Electoral Roll. 24 The applicant then proposed as her grounds and primary reason for failure to occupy the subject property, the failing health of her grandmother, who was suffering from lung cancer and who required care. Evidence was given verbally and in two exhibits "B" and "C" which were letters in writing, in which it as acknowledged by the female applicant that her mother was the primary care giver to the grandmother. It was also further conceded by both applicants that they both continued to work full time, other than the two weeks leave after completion of sale. 25 It was further conceded by the applicants that they continued to reside at their mother's residence and the Grandmother's condition was already advanced at the time of the purchase of the subject property, a situation made clear by the tender of Exhibit "B" what was a letter from the grandmother's treating specialist. 26 In February 2005,the Applicants repaid the sum of $2,000.00 of the total $7,700.00 to the Commissioner's office. Application of the case law to the evidence and facts and legislation 27 In order for the applicants to meet the eligibility criterion under the current legislation as it applies to their circumstances, the following cases set out the basis of eligibility below: The recipient of the grant has had the enjoyment of the funds as has been recognised in the decision delivered by the Tribunal Judicial Member, J Needham, in the matter of Tarak Adasi v Chief Commissioner of State Revenue, unreported, 27 September 2004. 28 The imposition of penalty of 20% for the failure to use and occupy the property has been also supported in the decision of the Tribunal in Yucel v Chief Commissioner of State Revenue [2004] NSWADT 53 [para 1 & 24-28]. However, in this case the Chief Commissioner has informed the Tribunal that it has already reduced the penalty rate from 20% to 10%, a position which may be seen as generous, in these circumstances. 29 Further, the issue of penalty has been also considered and supported under paragraph 62 in the decision delivered in the matter of Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT158. 62 The question that then arises is one of the amount of the penalty. Applying the criteria discussed above, the factors relevant to the determination of penalty in Mr Calcaro's case are: (a) the need to deter others from not complying with the conditions of grant; (b) the fact that Mr Calcaro provided incorrect information as to when he would be occupying the premises in his application to grant; (c) the fact that (as I have found) Mr Calcaro's initial intention was to live in the premises as his own home at the end of the tenancy; (d) the fact that Mr Calcaro's original intention was frustrated by his own financial circumstances; (e) the opportunity cost factor; (f) the fact that Mr Calcaro showed little respect for matters of propriety and less attention to detail in his dealings with the Administrator; (g) Mr Calcaro's failure to be candid with the Administrator and the Tribunal; (h) Mr Calcaro's straitened financial circumstances. 30 In addition to the above, in the following cases the Tribunal has upheld the penalty, although at various rates: Gharakhan v Chief Commissioner of State Revenue , NSWADT unreported, 6 April 2005, wherein the penalty rate was reduced from 20% to 17%. This matter involved $7,000 in grant. Zhang and Zhou v Chief Commissioner of State Revenue [2005] NSWADT 178, wherein the penalty rate was reduced from 20% to 15%. The matter involved $14,000 in grant and $2,800 in penalty. Rauf v Chief Commissioner of State Revenue [2005] NSWADT 176, wherein the penalty was reduced from 20% to 15%. This matter involved $7,000 in grant. 31 The facts and evidence of this case, indicate that the applicants did not meet the key criteria under the Scheme, which is, taking up occupation of the grant property and using it as the applicants' principal place of residence within the required period as from the date of settlement, which is a statutory requirement. In deed they have not used it as a residence at all, preferring to install a tenant within twelve days of completion of the contract. 32 The intention of the grant is to assist first home buyers to purchaser a home to be used as the recipients to be used as that person's principal place of residence. It is not intended to help applicants to purchase a property to be used as an investment property, even if this were to be an unintentional outcome. In this case it is on the material before the Tribunal an intentional outcome. 33 In Bates v Chief Commissioner of State Revenue [2004] NSWADT 13, Judicial Member Higgins has said (para 45): "… policy and purpose is to provide first home owners with assistance in purchasing their first hone and the eligibility for such assistance is expressly stated to include a requirement that the applicant occupies the property the subject of the grant as his or her principal place of residence within twelve months of a grant. That is, the Act does not provide assistance where an applicant fails to occupy the premises within the requisite period and rents out that property notwithstanding the applicant's intention to ultimately make the property his or her permanent place of residence". 34 It is the opinion of the Tribunal that the applicants proposed circumstances relating to their grandmother's condition on the evidence submitted is that this is not an exceptional circumstance in this particular case warranting the exercise of the discretionary power. This power should be exercised only where there is a compelling reason to do so. This case as proposed by the applicants, is not one of them. 35 Consequently, the Chief Commissioner's decision to recall the grant with a 10% penalty is affirmed and the Commissioner's decision is affirmed. 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.