CITATION: Cook v Chief Commissioner of State Revenue [2006] NSWADT 294 DIVISION: Revenue Division APPLICANT PARTIES: Brad Cook RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 066061 HEARING DATES: On the papers SUBMISSIONS CLOSED: 09/22/2006 DATE OF DECISION: 10/09/2006 BEFORE: Block J - ADCJ (Judicial Member) CATCHWORDS: Taxation Administration Act - liability to pay interest MATTER FOR DECISION: Principal matter LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 CCSR v. Incise Technologies [2004] NSWADTAP 19 CASES CITED: Giunta Chief Commissioner of State Revenue (RD) [2005] NSWADTAP 19 Kinging and anor v Chief Commissioner of State Revenue [2005] NSWADT 239 Trust Co of Australia v. Chief Commissioner [2002] NSWADT 21 APPLICANT In person REPRESENTATION: RESPONDENT M Twohill, solicitor ORDERS: The decision under review is affirmed REASONS FOR DECISION 1 The decision which is under review in this matter relates to the land tax years 2002 to 2005, both years inclusive. Those land tax years are referred to collectively as "relevant years" while individual relevant years are referred to separately by reference to the actual year. All of the relevant years except the 2002 year relate to real property at 5 Blackburn St. St Ives ("the St Ives Property") purchased by the Applicant and his wife as joint tenants in April 1998. The 2002 year relates both to the St Ives Property and also Unit 8/61 Sackville Street Bexley ("the Bexley Property") which was acquired in March 1994. In respect of the 2002 year interest was imposed at both the premium rate and the market rate (referred to more fully later in this decision); in respect of all other years interest was imposed at the market rate only. In April 2006 the Respondent remitted the premium rate component for the 2002 year and accordingly this decision relates only to the question of whether interest at the market rate was correctly imposed for all of the relevant years. 2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. At a directions hearing held on 1 August 2006 the Tribunal directed the Respondent to file written submissions by not later than 1 September 2006 whereafter the matter was to be decided on the papers, and without the need for a hearing. Written submissions by the Respondent were duly received; after receiving them the Tribunal sent them to the Applicant, inviting him to advise the Tribunal whether he wished to reply and if so requiring him to advise the Tribunal that he intended to do so by not later than 22September 2006; the Applicant was advised furthermore that if he elected to reply and advised the Tribunal accordingly he would be allowed until 20 October within which to submit his reply; he was advised also that if he did not so advise the Tribunal by 22 September 2006 that he intended to reply, the Tribunal would issue its decision on the papers before it. The Applicant did not advise the Tribunal whether by 22 September 2006 or thereafter that he intended to reply to the Respondent' submissions. 3 Under the Taxation Administration Act 1996 ("TA") interest is imposed when a tax default occurs. A tax default occurs inter alia when there is a failure to lodge a land tax return. The interest-rate which can be imposed comprises a market rate which is variable and a premium rate of 8%. The relevant legislation is set out in Part B of this decision. 4 The facts fall within the narrowest of possible compasses. The Applicant resides in San Jose, California having moved there with his family in April 2001. There is no dispute as to the fact that the Applicant did not occupy the St Ives Property or the Bexley Property as his principal place of residence during any of the relevant years. In accordance with sections 7 and 8 of the Land Tax Management Act 1956 ("LTMA") land tax was chargeable in respect of the St Ives Property for all of the relevant years and for the St Ives Property and the Bexley Property for the 2002 year. The Applicant does not dispute the fact that in respect of all relevant years he is liable for the actual land tax assessed. However and as set out previously the Applicant does dispute the imposition of interest at the market rate. 5 Tab 3 of the section 58 documents is a letter sent by fax, (which does not bear a date), and which was addressed by the Applicant to the Respondent (and received by the Respondent in April 2006), and which reads as follows: Dear Y Crosby, In reference you letter dated 11 April 2006, I wish to raise a formal complaint and wish to have my case be taken to the Tribunal or Supreme Court. I would like to reference your comment on paragraph 3 alone as a means of dispute. In my letter to you dated 27 March 2006, I explained that I was not living in Australia at the time the so called advertising was taken place. Let me explain to you how ludicrous your own argument is. You reference a "comprehensive annual publicity campaign which included advertising in various media including radio & newspapers" Can you please explain how someone that is not living in Australia would be expected to listen to Australian radio, or read Australian new papers? I take it that who ever reviewed this case has not lived or traveled outside of Australia They would quickly realize that the any forms of media you reference are very difficult to find outside Australia, let alone impossible with some ie: radio advertising. With that in mind I question that you really carefully assessed this case. If I'm not making myself clear? Let me try again. At the time your so called advertising was being rolled out I did not have access to any forms of media you referenced. ie: Australian News papers, Australian radio commercials. To that end, can you please explain how a non resident is supposed to become aware of a new land tax that is being implemented. At the time your media campaign was rolling out I had just moved my family to the United States of America (which I can prove with passports stamps) and had no access to local Australian media that you referenced. I will be taking this case up with the ADT. 6 It will be noted that the letter, referred to in clause 5, was written in response to a letter by the Respondent dated 11 April 2006 (contained in tab 4 of the section 58 documents). The third paragraph of the letter dated 11 April 2006 reads as follows: The Office of State Revenue attempts to make people aware of their obligations through comprehensive annual publicity campaigns which include advertising in various media including radio and newspapers. Land tax like many other taxes including income tax places the responsibility on the taxpayer to disclose a liability because many properties are exempt from land tax. Only property owners can provide the information needed to correctly assess a land tax liability 7 In response to the Applicant's fax referred to in clause 5 the Respondent wrote to the Applicant on 28 April 2006; that letter reads as follows: Thank you for your facsimile letter received in this Office on 25 April 2006. I have carefully considered your complaint and have undertaken a further review of this matter. The third paragraph of our letter dated 11 April 2006 is a standard paragraph advising land taxpayers of the way the Office of State Revenue advertise and educate the property owners in Australia about possible liabilities for land tax. Our publicity campaigns have been in place for a number of years. We are aware that you have been living overseas since April 2001. Having said that, we are also aware that you have been an owner of property since March 1994 when you were the co-owner owner of Unit 8, 61 Sackville St, Bexley and again in April 1998 when 5 Blackburn St, St Ives was acquired. These periods are before you decided to move to America. In addition a brochure about land tax accompanies all Valuer General land value notices. We note a general revaluation occurred for the Ku-ring-gai District in 1999, when you were an owner of the St Ives property and still residing in Australia. There are approximately 3 million properties in New South Wales and there is only about 150,000 properties subject to land tax. It is for this reason that we encourage clients to let us know of their landholdings and its usage because majority of the properties are exempt as their principal place of residence. The usage of the your properties changed when you left Australia to work overseas. The Land Tax Management Act has been in place since 1956 and has been amended from time to time to reflect land and property changes in NSW. I understand your concern that not all the population at large cannot be expected to be aware of education campaigns or advertisements in daily newspapers for their obligations to pay land tax. However, it is also our experience that most investors take on investment knowledge of all its ramifications - capital gains tax, negative gearing, land tax etc. otherwise it would not be a sensible investment. On what they do not know, they usually seek professional advice. I understand that you have a property agent managing your properties in your absence. Incorrect or insufficient advice from an advisor is not an acceptable ground for remission of tax and interest. (Emphasis added by the Tribunal) 8 It will be noted that the Applicant complained that the tax was "a new land tax". That description (contained in his letter sent by fax referred to previously in this decision) was neither apposite nor correct. Part B. The legislation 9 The applicable legislation is contained in some detail in clauses 14 to 23 of the Respondent's written submissions; it is convenient to includes those clauses in this decision as follows: 14. Pursuant to s. 7 and s. 8 of the Land Tax Management Act 1956 ("LTMA"), land tax was chargeable on the taxable value of the St Ives property and the Bexley property for the 2002 Tax Year and for the St Ives property for the 2003 - 2006 tax years based on the ownership of that land as at midnight on 31 December 2001 to 2006 respectively. Accordingly, the applicant is prima facie liable for land tax in respect of the 2002-2006 Tax Years based on the taxable value of those lands unless he falls within one of the exemptions from land tax. The applicant does not appear to be entitled to any exemption. Nor does the applicant appear to contend that he is entitled to an exemption. Rather, as noted above, the applicant appears to accept that he is required to pay land tax. He only contends that he should not be required to pay market rate interest on the properties. 15. Section 7 of the LTMA states: 7 Land tax on land value Land tax at such rates as may be fixed by any Act is to be levied and paid on the land value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act). The land value of land, in relation to a land tax year, is the value entered in the Register as the land value of the land as at 1 July in the previous year. The fact that there is no value entered in the Register on 31 December in a year as the land value of the land as at 1 July in that year does not prevent land tax being levied and charged and becoming payable for the following tax year once that land value is entered in the Register. 16. Section 8 of the LTMA states: 8 Date of ownership for purposes of land tax Land tax shall be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. In this section year means the period of twelve months commencing on the first day of January. 17. Section 12 of the LTMA states: 12 Taxpayer to furnish returns (1) The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year. (1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year. (1B) A land tax return required to be furnished by a person must: (a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and (b) set out, or be accompanied by, such information as to the person's land ownership as may be required to complete the return. … (3) All the provisions of this Act shall extend and apply to any return made or required in accordance with subsection (2). 18. Section 72 of the LTMA provides: 72 Failure to furnish returns or information (1) A taxpayer who fails or neglects duly to furnish any return or information as and when required by this Act or the Chief Commissioner, or who fails to include in any return any land owned by the taxpayer, is taken to have committed a tax default for the purposes of Part 5 of the Taxation Administration Act 1996. (2) In relation to the tax default: (a) interest is payable in accordance with Part 5 of the Taxation Administration Act 1996 but accrues on the amount of land tax assessable to the taxpayer for the period commencing on the last day allowed for furnishing the return or information, or the correct particulars of land ownership, and ending on: (i) the day on which the return or information is furnished or the correct particulars are furnished, or (ii) the day on which the assessment calculated on the basis of the return or information that is required, or the correct particulars that are required, is made, or (iii) the day on which the whole of the land tax assessable to the person is paid, whichever occurs first, and (b) penalty tax is payable in accordance with Part 5 of the Taxation Administration Act 1996 on the amount of tax unpaid. 19. The TA Act applies to taxation laws. Taxation laws are defined by s 4 of the TA Act to include the LTMA. 20. Section 21 of the TA Act states: 21 Interest in respect of tax defaults (1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division. (2) Interest is payable under this section in respect of a tax default that consists of a failure to pay penalty tax under Division 2 but is not payable in respect of any failure to pay interest under this Division. 21. Section 25 of the TA Act states: 25 Remission of interest The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount. 22. Section 3 of the TA Act states: 3 Definitions tax default means 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." 23. Interest is defined by Section 22 of the TA Act which states: 22 Interest rate (1) The interest rate is the sum of: (a) the market rate component, and (b) the premium component. (2) The market rate component is: (a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or (b) the rate specified for the time being by order of the Minister published in the Gazette. (3) The premium component is 8% per annum. (4) In this section, the Bank Accepted Bill rate in respect of any day is the yield rate for 90-day Bank Accepted Bills published by the Reserve Bank for the month of May in the financial year preceding the financial year in which the day occurs. Part C. The case law 10 In Kinging and anor v Chief Commissioner of State Revenue [2005] NSWADT 239 I referred to case authority as regards the imposition of interest and including a decision of the Appeal Panel of this Tribunal which is binding on me. Clauses 30 to 33 of Kinging reads as follows: 30 In this case the Respondent imposed interest at the market rate; the assessments do not include interest at the premium rate. 31 In CCSR v. Incise Technologies [2004] NSWADTAP 19, at para [60], the Appeal Panel of this Tribunal ruled: "In our view the primary interest rate (the market rate component) is intended 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. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation" 32 In Trust Co of Australia v. Chief Commissioner [2002] NSWADT 21 at para [25], Judicial Member Verick ruled: "In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the 'tax default' is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes)." 11 Subsequently to its decision in Incise the Appeal Panel issued a decision to much the same effect, also binding on this Tribunal, in Giunta v Chief Commissioner of State Revenue (RD) [2005] SWADAP 19. 12 There is no evidence of any kind that the Respondent contributed to or was in any way responsible for the default. Accordingly the decision under review 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.