CITATION: Basanovic v Commissioner of State Revenue [2006] NSWADT 238 DIVISION: Revenue Division APPLICANT PARTIES: Mato Basanovic RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 056067 HEARING DATES: 23/09/2005 SUBMISSIONS CLOSED: 09/23/2005 DATE OF DECISION: 08/09/2006 BEFORE: Greenwood J - Judicial Member CATCHWORDS: Duties Act - First Home Plus Scheme - residence requirement MATTER FOR DECISION: Principal matter LEGISLATION CITED : Duties Act 1997 First Home Owner Grant Act 2000 Ansari v Chief Commissioner of State Revenue [2005] NSWADT 98 Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 Calcaro v Chief Commissioner of Revenue [2004] NSW ADT158 Marcus v Chief Commissioner of State Revenue [2005] NSWADT 97 McKenzie v Chief Commissioner of Revenue [2005] NSWADT 214 CASES CITED: Pundir v Chief Commissioner of State Revenue [2005] NSWADT 108 Tarak Adasi v Chief Commissioner of State Revenue, unreported, 27 September 2004 Taylor v The Chief Commissioner of State Revenue [2004] NSWADT 36 Tomasian v Chief Commissioner of State Revenue [2004] NSWADT 37 Zakariya v Chief Commissioner of Revenue [2003] NSWADT 26 Zebedee Clifford Madex v Office of State Revenue, unreported, 21 January 2005 APPLICANT In person REPRESENTATION: RESPONDENT S Free, solicitor ORDERS: The decisions of the Chief Commissioner of State Revenue are affirmed Reasons for Decision FACTS 1 The applicant purchased a property at 56 Railway Avenue Colo Vale (the subject property) in his sole name, by Contract of Sale dated 28 March 2003 and was completed on the 11 April 2003. 2 The applicant leased a separate property at 3 Pimelia Street Tahmoor on or about 11 October 2003 for which he became legally committed to pay lease fees until 12 February 2005. 3 The applicant made application for the First Home Owners Grant ("FHOG") and the first home owner stamp duty concession ("FHP") on the 15 May 2005 which was then allowed to him. 4 The applicant states that his driving licence was suspended for one month for the period of 15 June 2004 to 16 July 2004 as a result of a speeding fine which occurred on the 7 March 2004, some 11 months after the completion of his purchase and which he appealed in the Picton Local Court on the 27 July 2004. 5 The applicant stated that he worked at Bargo and he also stated he was affected by his girlfriend's need to work close to her place of employment at Narellan Mall, north of Camden, primarily because of the lack of other forms of transport from Colo Vale to their respective places of employment, required them to lease the Tahmoor premises and prevented them from residing in the subject property. 6 The subject premises were rented out by the applicant at some time after completion in or about November 2003. 7 The failure to occupy was disclosed to the Chief Commissioner of Revenue as a result of a random audit. The applicant voluntarily disclosed the failure by statutory declaration dated 24 November 2004. 8 The applicant did not lodge a request with the Chief Commissioner's office, for an extension to occupy either verbally or formally or during the hearing. 9 The Chief Commissioner of Revenue determined that the First Home Owners Grant (FHOG) was to be repaid in the sum of $7000.00 and imposed a penalty of 20% and that the First Home Owners Stamp Duty Concession (FHP) be revoked. THE EVIDENCE 10 The applicant lodged copies of documents with his application and he gave verbal evidence in the hearing that at no time did he take up occupation of the subject property between the relevant dates of 11 April 2003 and 11 April 2004 and he lived with his parents until he moved into his rented premises at Tahmoor. 11 The applicant also gave verbal evidence relating to the subject property as follows: "I started renting it a week after I bought it" and "the tenants, they stayed until I moved in February 2005" and "the first lease was for 6 months". On the evidence there was an intention to rent during the required 12 month occupancy period and it was embarked upon by the applicant almost immediately after the completion date and before the intervention of any other circumstance relied upon by the applicant as an impediment to his occupation. 12 The applicant proposed as his principal reason for failing to occupy was his loss of licence; however the suspension period did not commence until 15 June 2004 and no evidence was provided or offered by the applicant as to any other circumstance which prevented him from taking occupation prior to his loss of licence and during the relevant period, other than his own actions to lease the property to tenants shortly after the date of settlement or completion. 13 The applicant gave evidence that he intended to use the subject property as his principal residence and he did in fact take occupation on or about February 2005. THE LEGISLATION 14 At the time the applicant made his application for his FHOG grant and claim for corresponding exemption from Stamp Duty, the following sections of the First Home Owners Grant Act 2000 (Act) applied: Section 7 Entitlement of 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 8A(2), 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. Section 13(1)(a) Eligible transaction (1) An eligible transaction is: (a) a contract made on or after 1 July 2000 for the purchase of a home in New South Wales, or … 15 Section 7(1)(a) required the applicant to satisfy 5 eligibility criterion contained in Division 2 of Part 2 of the Act and in the present situation the applicant also had to comply with and satisfy the fifth criterion in Section 12(1) of that same Act: 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) 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. 16 In the applicant's case his occupation time condition commenced to run as from 11 April 2003, and he failed to comply with it. 17 In the present case the Commissioner paid the grant in anticipation of the residence condition being met by the applicant pursuant to Section 20. 18 Section 20(3) of the Act provided at the relevant time that where a 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." 19 Failure to notify the commissioner of the taking up of residence within S.20(3) is an offence, which is punishable by a maximum penalty of 50 penalty units as set out in S.20(4). 20 The Chief Commissioner has the power to require repayment of the grant and to impose a penalty by virtue of S.45(3) of the Act : S.45 Power to require repayment and impose penalty … (3) 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. 21 The residency requirement must be met to initiate the First Home Owners exemption from stamp duty pursuant to the Duties Act 1997 and the failure to meet that requirement leads to revocation of the exemption pursuant to the following sections: S.74 Eligible agreements or transfers (1) The agreement or transfer must be for the acquisition of a first home or for the acquisition of a vacant block of residential land intended to be used as the site of a first home. S.76 Residence requirement (1) The home must be occupied or intended to be occupied by the person or persons who are acquiring it on or before settlement or within 12 months after settlement, as the principal place of residence. S.79 Determination of applications An application is to be determined solely at the discretion of the Chief Commissioner whose decision is final. REASONS FOR DECISION AND ORDERS 22 The applicant has readily conceded in his evidence and by statutory declaration that he failed to occupy the subject property within the requisite 12 month period, notwithstanding at all times he had the requisite intention to make the subject property his residence. Unfortunately, intention by itself is not enough to satisfy all of the conditions specified in the Act, and therefore to complete full eligibility as set out in the case of Zakariya v Chief Commissioner of Revenue [2003] NSWADT 26 at paragraph [14] and other decisions in this Tribunal. 23 The applicant was unilaterally responsible for the consequences which ultimately led to his inability to take up residence in the subject property and thereby created the circumstances of his own failure, namely: a) the tenanting of the subject property, immediately after settlement and within the requisite period required for residency by the applicant, thereby creating the limitation for the taking of occupation. b) the breach of the Motor Traffic Act, by speeding and attracting the consequences of such wrong-doing. The offence took place 1 month before the expiry of the period for occupation and the suspension period became operative about 2 months after the occupation period had expired. In addition to the timing incongruity relied upon by the applicant, as a matter of law the applicant is not able to rely on his illegal act and breach under another piece of legislation, to excuse himself from compliance with the Act. c) the transport requirements of the applicant's girlfriend have no relevance or application here as she was not a co-owner of the subject property nor was she a joint applicant for the original grant. The applicant was the sole recipient of grant and the sole purchaser of the subject property. 24 The legislation sets the conditions of receiving the grant and all conditions need to be met. In this case the applicant failed to perform all conditions and his reasons are not sufficient to constitute special circumstances that are beyond his control in this instance. 25 The legal representative for the Chief Commissioner made submissions as to the state of the case law based on an anticipated application by the applicant that there should be an exercise by the Commissioner of his discretion to permit the Applicant to retain the grant and exemption, based on an extension of the period in which to take occupation. In this matter there is no application by the applicant in either his application by letter dated 21 March 2005 to the Commissioner as prepared by his solicitor or his formal application for a review, filed in the ADT dated 15 June 2005. The applicant in his verbal evidence advised the Tribunal that he did not know he had any opportunity to apply for an extension to occupy the subject residence and he confirmed he did not do so. In this case the Tribunal will follow the principles set down in Taylor v The Chief Commissioner of State Revenue [2004] NSWADT 36 and McKenzie v Chief Commissioner of Revenue [2005] NSWADT 214: that the Commissioner has no power to extend the time period of compliance with the residence requirement after the expiry of the period and that must be the position in this case particularly when no request was ever made by the applicant, either within or out of time. 26 On the facts and the evidence, the applicant has failed to: a) advise the Commissioner within 12 months after settlement of his failure to take up occupation of the subject property; and b) to repay the grant within either the 14 day period after settlement or 12 months after settlement; and c) the applicant took occupation in February 2005, some 21 months after completion and had an intention to occupy; and d) the applicant had use of the grant money of $7000.00 for a period from 19 May 2003, the date of payment, until the Commissioner issued a Notification for repayment on the 28 January 2005. e) the applicant was honest in his replies to the Commissioner's office in response to the audit and readily admitted he had not taken up occupation within 12 months. 27 These are the five points raised in a number of cases set out hereunder where a 20% penalty was imposed pursuant to S.45 of the Act. The last case was Tarak Adasi v Chief Commissioner of Revenue, unreported, 27 September 2004 where the grant was held for at least 2 years and the resulting effect of the applicant's circumstances were similar although the facts were different. In this case the applicant has met the 5 points as set out above and the Tribunal therefore considers in this case that the penalty shall also be 20% as the applicant has had the use of that money. The supporting cases cited by the Commissioner and acknowledged here as to the 5 point test are: Calcaro v Chief Commissioner of Revenue [2004] NSW ADT158 Tarak Adasi v Chief Commissioner of State Revenue, unreported, 27 September 2004 Marcus v Chief Commissioner of State Revenue [2005] NSWADT 97 Zebedee Clifford Madex v Office of State Revenue, unreported, 21 January 2005 Ansari v Chief Commissioner of State Revenue [2005] NSWADT 98 Tomasian v Chief Commissioner of State Revenue [2004] NSWADT 37 Pundir v Chief Commissioner of State Revenue [2005] NSWADT 108 Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 28 In this matter the eligibility of the applicant to retain the FHP concession is also reliant upon the 12 month occupation condition being met as determined by the Commissioner and is therefore not subject to review by this Tribunal. ORDERS The decisions of the Chief Commissioner of State Revenue are 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.