CITATION: Murdocca v Chief Commissioner of State Revenue [2005] NSWADT 118 DIVISION: Revenue Division APPLICANT PARTIES: Ida Murdocca RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 056007 HEARING DATES: 23/05/2005 SUBMISSIONS CLOSED: 05/23/2005 DATE OF DECISION: 05/27/2005 BEFORE: Block J - ADCJ (Judicial Member) APPLICATION: Taxation Administration Act - liability to pay interest MATTER FOR DECISION: Principal matter LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 CASES CITED: Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 Chief Commissioner of State Revenue -v- Incise Technologies Pty Ltd & Anor (RD) [2004] NSWQADTAP 19 APPLICANT REPRESENTATION: In person RESPONDENT B Baker, solicitor ORDERS: The decision under review is affirmed REASONS FOR DECISION 1 The decision under review is the disallowance of an objection dated 3 November 2004 by the Applicant against an assessment dated 23 September 2004 of land tax (and including an interest component) for the 2001 and 2002 land tax years in respect of the Property situated at 240 South Ave Austral (the "Property"). 2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997; it also admitted into evidence a number of exhibits and including Exhibit A2 which is a batch of 18 documents filed by the Applicant and Exhibit R1 which is a statement of evidence by Anushiya Moharanraja, a compliance officer in the employ of the Respondent; she was referred to by the Applicant as "Anusha" and is referred to in these reasons as the "Compliance Officer." 3 The Property was purchased by the Applicant and her husband, Mr Giuseppe Murdocca (the "husband") in 1987. The Applicant and the husband separated in 2000; in that year the husband transferred his one half of the Property to their three children, Domenic Murdocca, Marianne Murdocca and Peter Murdocca. It is Domenic Murdocca who is most relevant for the purposes of this decision and he is referred to as "Domenic". The effect of that transfer was that the Applicant owned one half of the Property and the children owned the other half. 4 A land tax questionnaire (the "questionnaire") was completed by the Applicant on 11 August 2004, that questionnaire having been sent to the Applicant by the Respondent for completion. The questionnaire commences with a warning statement in bold type and ends with a declaration appearing just above the signature. I include in respect of the questionnaire, the warning, its content under the head of claim for exemption, concession or reduction in land value, and the declaration as follows: Land Tax Questionnaire The information provided to OSR in this form is required by law to determine your land tax liability. Under the Taxation Administration Act 1996, It is an offence to give false or misleading information. You may also render yourself Liable to interest and/or penalty tax. You may review or correct any personal information provided by you by contacting OSR. Please note that this completed form may be accepted as an approved return in terms of section 34 Taxation Administration Act 1996 if the land holdings render the owner liable to land tax. Claim for exemption, concession or reduction in land value Please refer to the information booklet provided, pages 2-4) Are you claiming any of the land listed as your principal place of residence? Yes No If so, on which Property are you claiming this concession? Land description (include street name, valuation no., Strata Plan/DP no) (handwritten) 3 ACRES – 240 SIXTH AVENUE AUSTRAL end Date From: 2000 Date to: Present VALUATION NO.-----2518083 (?) DD No.2475 If you were absent from the Property which you claim as your principal place of residence, did you rent the Property out at any time? (handwritten) NOT IN THE PAST 4 YRS Yes No Declaration I declare that the information I have given is true, accurate and complete in every particular. Signature: (signed) Date: 11/8/04 Name: (print name clearly) IDA MURDOCCA Position: Please note that sections 21 and 26 of the Taxation Administration Act (1996) provide for the imposition of interest and penalty for tax defaults. 5 The manner in which the Applicant completed the questionnaire was untrue; in fact it, the Property, was never her principal place of residence ("PPR"). It was rented out from the time of its acquisition until 2002 and when the Applicant's son Domenic went into occupation of it. It apparently became his PPR but only from the time upon which he took occupation. 6 The Applicant said, in a lengthy opening statement, that she received the questionnaire midway through 2004. She said that she did not consider the Property as her PPR in that she has been resident at her home in Liverpool for the past 32 years. She said also that she did not answer the questionnaire on her own behalf but that she did so on behalf of Domenic who was, she said, living in the Property when the questionnaire was completed. 7 The Applicant went on to say that land tax was paid in respect of the Property until 2000 when her husband was able, without informing her, somehow to sever the joint tenancy and to transfer his one half interest in the Property to the children. She said that the solicitor "did everything" and that she thought that the solicitor and accountant who signed the transfer (Tab 9(b) of the section 58 documents) would have told him (her husband) that he should notify the Respondent. (As to what purpose such a notification would have served is unclear) 8 The Applicant said also that when she received the questionnaire, she completed it on the basis that Domenic had moved into the Property at the beginning of 2001. She received a call from the Compliance Officer (whose statement is Exhibit R1) after the Respondent received the questionnaire. The Compliance Officer said in the course of that conversation something to the effect that the Property had been let to tenants who vacated the Property on 22 April 2002. 9 The Applicant said that on that particular day she was not feeling well and that she was confused. She rang the rental bond board but was unable to obtain the information she was seeking. She said that in completing the questionnaire she made a mistake. In fact she had given instructions to solicitors who sent a letter dated 13 February 2002 to Mr. And Mrs Paul (the "tenants"), and requesting them thenceforth to deposit the rent to a special account with Commonwealth Bank. This arose, so she said, from the fact that her husband had been collecting the rent but was not accounting to her for her half share. The tenants having received that letter moved out about a week later (and on this basis on or about 20 February 2002) but not, according to the Applicant on 22 April 2002. The Applicant said also that she had and nevertheless returned all of her share of the rental income to which she was entitled, for tax purposes. 10 The Applicant's commencing statement continued for some considerable time but I do not think that I need to deal with all of it in detail. It was frequently confused. She was not sure about how many conversations she had with the Compliance Officer. She thought that the Compliance Officer might have told her in the course of the first conversation that she could ascertain when Domenic moved into the Property by inquiries as to when electricity and telephone services were connected for use by him. 11 The Applicant said that she thought that the question in the questionnaire as to "absence from the Property" (and set out previously in these reasons) referred to her son Domenic. She said categorically that she understood the question as a reference to Domenic and moreover as a reference to him while he was living in the Property. The Applicant said that she thought Domenic moved into the Property in early 2001. In fact Domenic moved in to the Property after the tenants left it, more than a year thereafter, and thus inferentially, in late February or perhaps March 2002. 12 The Applicant said that she was angry with the Compliance Officer; this was because the latter appeared to have assumed that because the rental bond was repaid on 22 April 2002 this was also the date on which the tenants vacated the Property. (The Applicant did not at any time appear to appreciate that the fact that the Compliance Officer may have equated the date of vacation of the Property by the tenants with the date of repayment of the rental bond was of no importance and in no way relevant to the issue and hardly a cause for anger on her part. 13 The Tribunal does not believe that the Applicant thought that Domenic took occupation in early 2001 when in fact he took occupation more than a year later. Prior to his move Domenic had lived in the home in Liverpool with his parents. Nor does the Tribunal accept that the Applicant was completing the questionnaire on behalf of Domenic since it contains no indication to this effect. 14 The Applicant referred to the fact that exhibit A2 includes a document received by her indicating that no land tax owed in respect of the Property for the 2001 year. She said that she received that document in 2002, whereas she completed the questionnaire in 2004. She said also that "I made a few more inquiries" and then (and somewhat inconsequentially) "I think solicitors and accountants should inform people." 15 At the end of the Applicant's lengthy statement Ms Baker indicated that she desired to cross-examine the Applicant. The Applicant, after some hesitation and with some reluctance, agreed to be sworn in for this purpose. She commenced by saying that everything she had told the Tribunal during the hearing and contained in her opening statement was true. Ms Baker cross-examined the Applicant in particular as to the questionnaire. The Applicant said that she did not read the warning contained in the questionnaire (even though it appeared in bold type) but that she did read the declaration towards the end. She said that she thought that what she had said in the questionnaire was true at the time but "it was not." 16 I do not think it necessary for me to detail the further cross-examination. It is relevant to note that she agreed that she wrote to the Respondent on 3 November 2004 (Tab 3 of the section 58 documents), and in which she said inter alia that in completing the questionnaire she made a "small error" 17 The Applicant agreed that she wrote the letter dated 3 November 2004 after she had spoken to the Compliance Officer but did not remember what had been said. It was put to her that she became angry because the Compliance Officer suggested that the Property was rented until 2002. She said "well I don't remember". She agreed also that in her letter she made no reference whatever to her conversation or conversations with the Compliance Officer. 18 The Compliance Officer gave evidence on behalf of the respondent. Her statement of evidence (Exhibit R1 reads as follows: I, Anushiya Mohanraja, Compliance Officer of 31-33 Macquarie St, Parramatta state the following: 1. This statement accurately sets out the evidence which I would be prepared, if necessary, to give before the Tribunal as a witness and it is true to the best of my knowledge and belief 2. I am a compliance officer employed by the Office of State Revenue ("OSR") and have knowledge of these proceedings. 3. On 23 July 2004 a land tax questionnaire was issued to the Applicant and the completed questionnaire was received by the OSR on 30 August 2004. In the questionnaire the Applicant claimed that property situated at 240 Sixth Ave, Austral, the subject property in these proceedings, ("the property") had been her principal place of residence since 2000. 4. A search by the OSR of the Rental Bond Board records showed that the property had been leased to tenants from February 1996 to April 2002. 5. On 23 September 2004 I telephoned the Applicant to discuss the issues. The Applicant said in words to the following effect: "The property is my principal place of residence and has not been rented in the past." I informed the Applicant that the OSR had obtained information that indicated that the property had been rented previously. The Applicant said in words to the following effect: "Yes, for a short period." I informed the Applicant that land tax assessments would issue with late lodgement interest calculated at the maximum rate. 6. In late September, following receipt of the assessments, the Applicant contacted me by telephone, saying in words to the following effect: "The interest charge was unfair." I informed the Applicant of the reasons for the charge, in words to the following effect: "Interest is imposed in cases where a return is not lodged on time. Interest has been charged at maximum rate because you did not disclose the facts in the return" The Applicant appeared to be angry at the situation and I provided the Applicant with a break down of the prime tax and interest at her request. I then informed the Applicant in words to the following effect: "You may write to the OSR with reasons requesting the interest to be reviewed, but you should pay the full amount of $7,105.20 as stated in your notice of assessment to avoid further interest being accrued." 7. On 3 November 2004, the Applicant telephoned me to discuss the matter further. The Applicant said in words to the following effect: "You advised me to pay only the prime tax and not the interest." I denied to the Applicant that this had been the case. I then informed the Applicant as to what I had said to her on the previous occasion that she had contacted me, repeating that my previous statement had been, in words to the following effect: "You may write to the OSR with reasons requesting the interest to be reviewed, but you should continue to pay the assessment to avoid further interest being accrued." The Applicant then informed me that she was experiencing financial difficulties and I provided her with the telephone number of the OSR Collections Division. I requested that the Applicant contact the OSR Collections Division as they may have been able to grant her an extended instalment plan. 8. On 5 November 2004, the Applicant telephoned the OSR Client Services Division and spoke to another OSR employee. OSR records indicate that the Applicant had claimed, in that conversation, that the property was her principal place of residence. The OSR officer who received the Applicant's telephone call altered the OSR computer system so as to apply the exemption for the period 29 June 2000 (date of acquisition) to current. 9. On 9 November 2004 I noticed that the OSR system had been altered to show the incorrect exemption period and I subsequently modified the exemption date to reflect the correct period, being 1 May 2002 to current. 10. I have had no further communication with the Applicant in relation to this matter." 19 The Compliance Officer confirmed that the contents of her witness statement were true. She said also that as a compliance officer she carries out investigations and searches as to properties, the results of which are usually known before the dispatch of a questionnaire. Put in other words, where searches reveal discrepancies a questionnaire is said to the landowner in order to elicit information as to those discrepancies. Invited to cross-examine a notion the Applicant said merely that "I disagree with everything". 20 The evidence of the Compliance Officer is in all cases to be preferred to that of the Applicant. The Compliance Officer gave her evidence in a clear and comprehensive and above all coherent manner. The same cannot be said of the evidence of the Applicant. It is clear enough that in preparing the questionnaire she either deliberately completed it falsely or in the alternative completed it in a manner which was grossly reckless and negligent. Of the two possibilities the former is other more likely. 21 The Respondent furnished the Tribunal with helpful written submissions; clauses 13, 14 and 15 are included in these reasons: 13. Full interest was imposed on the late lodgement of the return. This was because of the Applicant's inaccurate statements to the respondent. In particular: (a) In the land tax questionnaire, the Applicant stated that the Property had not been rented out "for the past 4 years". In fact, the Property was rented during 2000 and 2001. (b) The Applicant telephoned the respondent on 23 September 2004. The Applicant spoke to Anushia Mohan Raj. The Applicant denied that the Property had been rented out until Ms Raj advised the Applicant that the respondent had evidence proving that the Property was rented out. (Ms Raj is currently overseas. A statement from Ms Raj will be provided on her return.) (c) In her letter dated 3 November 2004, the Applicant then stated that she "put 2000 rather than 2002 where it said about rental of the Property".'0 She then conceded that D M Murdocca had started living in the Property around April. May 2002. 14. The imposition of full (or premium) interest was appropriate in these circumstances. In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 at paras [24]-[27], Judicial Member Verick made the following comments about the imposition of premium interest: (a) "[24] The interest regime found in the TA Act is essentially designed to promote compliance of the relevant taxation laws. The interest regime also promotes equity between the taxpayers who meet their taxation obligations on time and taxpayers who do not meet such obligations as and when required by the law. In addition, it compensates the state for loss of use of funds. (b) [25] The market rate component would reflect the use by the party in question of the relevant amount of money on one hand, and the lack of use of the relevant funds by the state on the other. But the fixed premium rate component is a rate imposed by way of a penalty for the 'tax default' in question. A premium rate of interest is imposed where a 'tax default' is a result of some culpable conduct on the part of the taxpayer. The Chief Commissioner can also impose a penalty tax under s 26 of the TA Act in cases where more serious tax defaults occur due to deliberate conduct of taxpayers." 22 The Applicant deliberately misled the respondent in the information she conveyed to the respondent concerning her liability for land tax. The imposition of premium interest is necessary to deter both the Applicant, and other taxpayers from conveying false information to the respondent in respect of land tax. In these circumstances, the imposition of premium interest is appropriate. 23 The Tribunal was referred also to the decision of the Appeal Panel of this Tribunal in Chief Commissioner of State Revenue -v- Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19; clauses 62 and 63 of that decision are of particular relevance and are included in these reasons as follows; 62 The Tribunal did not have the benefit of a detailed statement of the considerations relevant to the s 25 discretion as seen by the Commissioner. Moreover, the Commissioner has not developed any public guidelines going to the exercise of this discretion, in contrast to the position that applies in Victoria. Before the Appeal Panel, the Commissioner nominated four cumulative criteria for the circumstances where the premium component of interest should be remitted, namely: (1) all principal tax that is owing and not in dispute has been fully paid; (2) there has been co-operation by the taxpayer in providing relevant information to the Commissioner so as to enable the Commissioner to issue assessments; (3) such co-operation by the taxpayer has occurred prior to any investigation being commenced by the Commissioner (voluntary disclosure) or, at the very least, within reasonable time after requests for information have been made by the Commissioner i.e. the taxpayer has taken reasonable care; and (4) there has been no wilful default by the taxpayer in not paying tax on time. 63 The first of these criteria could be clarified to 'all principal tax that has been assessed and is not in dispute has been fully paid at the time of the request for remission of interest'. With this change, we agree that these four cumulative criteria are relevant and appropriate to the question of the circumstances in which the Commissioner should remit the premium component of interest. There may also be other circumstances where it could be appropriate to remit the premium component such as, as previously noted, where the Commissioner has in some way contributed to the tax default. 24 The Tribunal considers that the default was wilful. It is inconceivable that the Applicant was not aware of when her son Domenic left home in order to live in the Property. Her statements to the effect that she was completing the questionnaire on behalf of her son cannot be correct in the absence of any indication to that effect on the questionnaire. The Applicant said that she did not check any of her answers. In fact her own tax returns would have indicated that rental was received after 2000 and into 2002. 25 At the end of the hearing the Applicant tendered a brief medical certificate dated May 2005 as to her health. It is difficult to see how it could be relevant. Also at the end of the hearing and notwithstanding everything which had gone before, the Applicant said "I deny that I answered wrongly. It was found out later that there were a few things wrong—a date had changed". I believed that what I put down at the time was right". It is perhaps relevant to mention that the documentation before the Tribunal included numerous other letters with which it is not necessary to deal. I would note however that the manner in which the objection was framed was unfortunate. 26 The criteria to which the Appeal Panel referred in Incise Technologies (referred to above) are applicable. In particular there was wilful default, and the Applicant did not cooperate with the Respondent. This is not a case in which it would be proper or appropriate to reduce the interest component of the land tax assessments and 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.