CITATION: Farrelly -v- Chief Commissioner of State Revenue [2002] NSWADT 254 DIVISION: Revenue Division APPLICANT PARTIES: Ashlyn Farrelly RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 026011 HEARING DATES: 05/07/2002 SUBMISSIONS CLOSED: 07/05/2002 DATE OF DECISION: 12/04/2002 BEFORE: Hole M - Judicial Member APPLICATION: Taxation Administration Act - liability to pay interest MATTER FOR DECISION: Principal matter LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 CASES CITED: Moore -v- Chief Commissioner of State Revenue [2002] NSWADT 49 APPLICANT REPRESENTATION: In person RESPONDENT D Martin, agent ORDERS: The interest on the Land Tax payable by the Applicant for the years 1998, 1999, 2000 and 2001 be at the premium rate of interest only of 8%. 1 The Applicant has filed an Application for the review of the Decision by the Commissioner to assess land tax on property owned by herself and her sister since 1987. 2 There are three properties being at Dolphin Street, Randwick and Kalakau Avenue, Forrester's Beach and a Unit at Rae Street, Randwick (hereinafter referred to as "Dolphin Street", "Forrester's Beach" and "Rae Street" respectively). 3 The property at Dolphin Street had been the residence of the Applicant's mother, the property at Rae Street had been the residence of the Applicant's sister, Karen Farrelly. The property at Forrester's Beach had belonged to the Applicant's parents and following the distribution of the Applicant's mother's estate in 1989 both the property at Dolphin Street and the property at Forrester's Beach became the property of both the Applicant and her sister jointly. 4 Up until October 2001, the Applicant was not aware that she could be liable for land tax. At that time she received advice from the Office of State Revenue that she may be liable and completed a form sent to her and returned it promptly to the Office of State Revenue. 5 The Applicant submitted that she had not heard of Land Tax provisions in New South Wales. She lives in the ACT and she had received advice from various professionals including an accountant in the ACT and the advice has not included any reference to a liability for land tax. 6 The Applicant submitted that as she lives in the ACT and that her sister now lives in Melbourne and that she had relied on an agent for the purposes of renting the properties and that she had attended to all necessary issues in relation to the properties including payment of any rates and taxes thereon through the services of the agent that the issue in relation to liability for Land Tax was outside her control. 7 The Applicant submitted to the Tribunal that she and her sister had attended to the Application for Probate of her mother's estate through which they have obtained Title to the property at Dolphin Street and Forrester's Beach. The Applicant also submitted that she had not received valuation notices for the properties. 8 The representative of the Chief Commissioner submitted that on receipt of the form completed by the Applicant in October 2001, the Office of State Revenue had assessed Land Tax on the properties from and including the Land Tax Year 1998. Notwithstanding that the properties came into the ownership of the Applicant and her sister some years prior to that. 9 The Representative of the Chief Commissioner submitted that the obligation in respect of liability for Land Tax rests on the owner of the land. 10 The Representative of the Chief Commissioner further submitted that on receipt of the Return completed by the Applicant dated 30 October 2001, the Commissioner did not assess penalty tax in the amount of 20%. The Commissioner had assessed interest at a rate of 8% together with a variable market rate of interest on the amounts for each of the Land Tax years of 1998, 1999, 2000 and 2001. 11 The Applicant referred to receiving a copy of the decision of Moore -v- Chief Commissioner of State Revenue [2002], NSWADT 49 and submitted that the issue in her circumstances fell into the "very narrow category of situations" which arose outside the control of the Applicant and that would therefore entitle her to a remission of the premium interest rate plus the variable market rate of interest. 12 Land Tax was introduced in NSW in 1956. 13 The Applicant undertook the processes of attending to her mother's estate in NSW and to renting the properties in NSW through an agent and further obtaining advice in relation to accounting matters concerning property. For this reason, the Applicant does not fit within the narrow category referred to as the Applicant has, as and when the need arose in her opinion, sought appropriate advice in respect of her entitlement to ownership of the land and subsequently to her accounting needs. 14 The Representative of the Chief Commissioner submitted that the Chief Commissioner had taken into account that the Applicant had not been aware of her liability to pay Land Tax and had consequently remitted the premium rate of interest of 20%. 15 The levying of Land Tax and payment thereof is a matter of public policy, the responsibility and the ownership of the property, including the necessity to be assessed and pay rates and taxes on the property remains with the land owner and those advising the land owner. The Applicant has found herself in a position that although she was not aware of the provisions relating to the payment of Land Tax, she was nevertheless liable. The parties advising the Applicant in relation to her tax liabilities, in the event that those parties were aware of the Applicant's ownership of other property, would have been in a position to advise the Applicant of her liabilities. 16 The Chief Commissioner has in the past made an effort to notify land owners of their liabilities and continues to do so, the Chief Commissioner also attempts to bring the liability of payment of Land Tax to the attention of professional advisors. 17 There is no doubt the Applicant, if she had been aware of her liability, would have attended to being assessed and subsequently paying any Land Tax due on the properties at the appropriate times. 18 The Applicant has provided a chart as to the nett income of one of the properties over the period from 1997 to 2001 disclosing a loss nett income on that particular property over that time. The Applicant has submitted that if she had been aware of land tax, she would have sold and invested in other investments where land tax would not be imposed whilst taking into account that the land value shown over that period for that property discloses that the value for the years are 1997 - $150,000, 1998 - $180,000, 1999 - $189,000, 2000 - $217,000, 2001- $271,000. 19 The Applicant has submitted that she is in receipt of a Land Tax bill for the assessed period which includes approximately $7,000 for interest and penalties imposed on an amount of approximately $30,000 for Land Tax. 20 Taking into account the submission of the Applicant that she considered the circumstances of the liability for Land Tax was outside of her control and that she has had professional advice, it is considered that those circumstances are not entirely outside the control of the taxpayer even though the tax payer was not aware of her liability to pay Land Tax. 21 It is noted that the Applicant has made arrangements for payment of the assessments as made and that the only issue outstanding is the payment of the 8% premium rate of interest plus a variable market rate which varied over the four subject years of Land Tax assessment by 1998 – 8.8%, 1999 – 4.72%, 2000 – 5.95% and 2001 – 4.89%. 22 This situation is not considered to be in the category whereby the Premium rate of interest should be remitted. However, in view of the submission of the Applicant and that she had taken advice as to her liabilities, the market component should be remitted. 23 I therefore make the following order: The interest on the Land Tax payable by the Applicant for the years 1998, 1999, 2000 and 2001 be at the premium rate of interest only of 8%. 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.