Anastasovksi v Chief Commissioner of State Revenue [2003] NSWADT 270

CITATION: Anastasovksi v Chief Commissioner of State Revenue [2003] NSWADT 270 DIVISION: Revenue Division APPLICANT PARTIES: Goran Anastasovski RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 036043 HEARING DATES: 16/12/03 SUBMISSIONS CLOSED: 12/16/2003 DATE OF DECISION: 12/18/2003

BEFORE: Block J - Judicial Member APPLICATION: Taxation Administration Act - liability to pay interest MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 Monaro Invests Pty Ltd as trustee for the Troost Family Trust v Chief Commissioner of State Revenue [2003] NSWADT 234 Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 CASES CITED: Olah v Chief Commissioner of State Revenue [2002] NSWADT 22 Moore v Chief Commissioner of State Revenue [2002] NSWADT 49 Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 APPLICANT REPRESENTATION: In person RESPONDENT S Benjamin, solicitor ORDERS: The objection decision under review is affirmed

1 The objection decision under review is the refusal by the Respondent by letter dated 25 October 2003 of an objection by the Applicant dated 1 October 2003 against the imposition of the interest component of a land tax assessment referable to real property at 16 Burgess Street, Beverley Park, New South Wales (the "Property") in respect of the land tax years 1999 to 2002 (both years inclusive); the land tax years in question are referred to as the "relevant years" and each is a "relevant year"; a relevant year preceded by a reference to the actual year relates to that year. It should be noted that the assessment in question related also to the 1993 land tax year but there was no interest charge in respect of the land tax assessed for that year 2 The Tribunal had before it the documents submitted in terms of section 58 of the Administrative Decisions Tribunal Act 1997. In addition the Applicant handed the Tribunal his notice of assessment for the relevant years which indicates firstly that the total amount of land tax due, inclusive of interest, was $18024.81, and secondly that that amount was calculated in relation to the relevant years so as to give allow a credit for all relevant years, other than the 2003 year; in respect of the 2003 year there was (as I have noted) no interest charge. I was informed that the credits relate to the premium component of interest which was thus in respect of the relevant years, remitted in full, leaving only the market rate component to be paid by the Applicant. I was advised also that the Applicant accepted an offer to pay the amount of land tax due by instalments, and being $7061.60 on 3 November 2003 (which has been paid) $5481.60 on 3 December 2003 (which has also been paid) and the balance of $5481.60 to be paid on 2 January 2004. 3 The facts fall within a very narrow compass indeed; the Tribunal was informed from the bar table by the Applicant and not, in other words as sworn evidence as to the relevant facts, and about which there is in fact no dispute. The Applicant purchased the Property in 1996, (although he was not certain of the exact date of purchase); the Property has since purchase been let and will become vacant on 23 December 2003 when the tenant vacates it. The Applicant did not know that he was obliged to pay land tax and first became aware of his obligations a few months ago in the course of a conversation with a friend who mentioned that he had to pay land tax in respect of an investment property owned by him. In consequence of that conversation the Applicant consulted his tax agent (whose name he did not remember) and whose services he has used for the past two years. A land tax return was put in and that return lead to the assessment and against which the Applicant has objected. 4 The Applicant has indeed since 1996 purchased another investment property and being a unit in Kogarah (the "Kogarah unit") acquired in 2002 and which was also let and which has recently become vacant. The Applicant said that he had mortgages on each of the Property and the Kogarah unit and that his mortgage commitments would prevent him from making payment of the final instalment of arrear land tax on 2 January 2004. 5 Mr. Benjamin explained that in respect of land tax the Respondent does not send out returns or notices but advertises extensively. It is the policy of the Respondent, so he advised, and where there has been no wilful default, to assess the tax for the current and the four previous land tax years but not for any prior years. The Respondent in these circumstances (where there is no wilful default) often remits the premium component of any interest charge and confines his assessment to the market rate component of the interest charge. So it is that in respect of the Applicant land tax has been assessed in respect of the relevant years but not the two previous (1996 and 1997) years. Mr. Benjamin advised also that, contrary to the Applicant's calculation that the market rate is in excess of 9%, the rate has been and is much lower. The rate was 8.8% for the period from 1 January 1998 to 30 June 1999; it became 4.72% from 1 July 1999 until 30 June 2000, 5.95% from 1 July 2000 until 30 June 2001, and 4.89% on 1 July 2001. Subsequent to the hearing, Mr. Benjamin arranged for the despatch to the Tribunal of a fax as to the market rate which applied thereafter. While the Tribunal appreciates that Mr. Benjamin did so in order to assist the Tribunal it also considers that it is inadvisable for it to refer to any document not actually before it in the hearing. 6 The Applicant complained that he is a young married man, and that he and his wife do not earn very much and so that this impost has been a great burden to them. He complained also that the Respondent should have sent out notices or claims to all owners of real property. It was pointed out to him that the law does not require the Respondent to do so and that for the Respondent to send out notices or claims to every home owner would be unduly onerous given that so many homes are exempt under the principal residence exemption. Mr. Benjamin noted that so far as he was aware, about 80% of residential properties are in fact exempt. There have of course been many cases on all fours with this case coming before the Tribunal; I refer in this context to a taxpayer who did not comply with his land tax obligations out of ignorance of his obligations to do so. The decisions of this Tribunal have, in general terms, and in such circumstances been to remit the premium component of the interest but not the market rate component which is designed to compensate the Respondent for the fact that he has received the tax due to him later than should have been the case. The contrary is of course also relevant in that late payment means that the taxpayer has the benefit of the relevant funds for a period when in accordance with the law, that money should have been paid to the Respondent. In his letter to the Applicant dated 23 October 2003, the Respondent said inter alia and in the fourth paragraph: We have examined your letter. You failed to advise this Office of the ownership of the land at Beverley Park within the required time and interest was imposed for this default. Your liability extended from 1994. However by way of a concession, we only assessed the tax from the 1999 tax year and without imposing the 8% premium interest. We consider that remission of the market rate of interest in this case would be inequitable to other taxpayers who had lodged their returns and paid their tax on time. Your objection is disallowed. 7 It will be noted then that according to the Applicant the Property was purchased in 1996 while the Respondent considers that liability arose as from the 1994 year. I am concerned only with the relevant years and need not be concerned as to this particular difference. 8 In a recent decision of this Tribunal (in Monaro Invests Pty Ltd as trustee for the Troost Family Trust v Chief Commissioner of State Revenue [2003] NSWADT 234) the Tribunal (Mr. A.Verick) noted that the relevant legislative scheme is as follows: 5. Section 12(1) of the Land Tax Management Act , 1956 (the LTM Act) provides that the Chief Commissioner may, in accordance with orders published in the Gazette, require all persons or specified classes of persons to furnish land tax returns. The Chief Commissioner makes such Gazette notifications annually. In addition, s 12(1A) of the LTM Act provides that every person subject to such requirement shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year. 6.Section 72(1) of the LTM Act provides that a taxpayer, who fails or neglects to duly furnish any return when required by the LTM Act or the Chief Commissioner, is taken to have committed a "tax default" for purposes of Part 5 of the TA Act. Section 72(2) of the LTM Act provides, in relation to the "tax default", that interest is payable but accrues on the amount of land tax assessable to the taxpayer commencing on the last day allowed for the furnishing of the return and ending on the day on which the return is finally furnished. Taxpayer is defined in s 3(1) of the LTM Act to mean any person chargeable with land tax. In the present matter the applicant had failed to duly furnish a return by the due date and as such is taken to have committed under s 72(1) of the LTM Act a "tax default" for the purposes of Part 5 of the TA Act. 7. Interest imposed under s 22 of the TA Act consists of two components - the market rate and the premium component. The variable market rate component is linked to the Treasury note yield rounded to the second decimal place and the premium component rate is fixed by s 22(3) of the TA Act at 8 per cent per annum. The Chief Commissioner is allowed under s 25 of TA Act to remit either the market rate component or the premium rate component of interest, or both, by any amount in such circumstances, as the Chief Commissioner considers appropriate. 8. In the present matter, the respondent at the time of making the relevant assessment also remitted any interest that he was entitled to impose as a premium component for the tax default in question. 9 I include also clauses 13 to 20 (both inclusive) of Mr. Verick's decision in Monaro, noting that they are entirely apposite for the purposes of this decision as follows: 13. The respondent in his statement of reasons for decision for purposes of s 58 of the Administrative Decisions Tribunal Act 1997 (the ADT Act) has provided the following grounds to support the interest imposed at the market rate: "In the present case, interest was imposed at both the premium and market rate at the time of assessment as the taxpayer failed to lodge a land tax return as required by s 12(1A) of the Land Tax Management Act. Accordingly, it was determined that the imposition of late lodgment interest at the reduced market rate was appropriate, because to remit the interest in full would be inequitable to other taxpayers who did lodge their return by the due date. The letter of objection dated 18 December 2002 advised that the taxpayer was unaware of land tax, and that the accountant had overlooked the lodgment of the land tax return. However the grounds of the objection only related to the interest imposed. There was no issue with the assessed land tax. An initial return was lodged on 19 November 2001. However, a tax default did occur by the failure to lodge a land tax return, the return should have been lodged by 28 February 1999. The advice that the taxpayer was unaware of its obligations has been previously accepted by the Chief Commissioner and that is why the interest was remitted to market rate. The client operates a business at the property, which is subject to land tax. The land was a very expensive acquisition. It cost $1,450,000. Its price should have alerted the accountant to the probability of land tax. Having regard to these facts it is not fair and equitable for the Chief Commissioner to treat it any differently to other clients." 14. At the hearing Mr Benjamin for the respondent also added further grounds that supported the respondent position that this was not a case for any further remission of the interest imposed at the market rate. Mr Benjamin drew attention to advertisements in the relevant year placed by the respondent in the media, which clearly sent a message to land owners that there was an obligation to lodge return if they owned taxable properties. He also emphasised that the purchase of the property by the applicant was a large transaction and its advisers ought to have informed the applicant of its land tax obligations. As to the delay of some 11 months for an assessment to be issued, he confirmed that it made no difference to the amount of interest that was imposed in respect of the relevant tax default. Reasons and decision - whether any remission of any market rate interest imposed is warranted 15. The LTM Act clearly places the onus of lodging a land tax return in each year with the owner. In the present matter, the applicant failed to lodge the land tax return by 28 February 1999 and it was only lodged on 19 November 2001. A tax default occurred in terms of the provisions found in s 72(1) of the LTM Act and the respondent was entitled to impose interest at both the market rate and the premium rate under sections 21 and 22 of the TA Act. 16 The respondent remitted the premium component at the time of making the assessment for the relevant years and the only issue before this Tribunal is whether the amount of interest at market rate should be remitted in full or some part of it be remitted. 17 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 and Olah v Chief Commissioner of State Revenue [2002] NSWADT 22, I have broadly, stated that it is necessary to show that the tax default was in some way contributed to by the Chief Commissioner to warrant any remission of interest imposed at market rate. The reason for the imposition of market rate, is as I have indicated in Moore v Chief Commissioner of State Revenue [2002] NSWADT 49, " essentially to compensate the state for being denied the use of funds to which it is clearly entitled to at a particular point in time" and that it can only be remitted in "a very narrow category of situations, which arise entirely outside of the control of the taxpayer". 18 The delay of some 11 months in issuing the assessment did not in any way affect the amount of interest imposed. The respondent imposed the interest for the period commencing on the last day allowed for furnishing the return and ending on the day on which the return was furnished. This is provided for in s 72(2(a)(i) of the LTM Act. 19 The applicant's current planning difficulties are matters that are not relevant in any way to warrant any remission of the market rate interest. In the present matter, the applicant has failed to show any special circumstances that would justify remission of the interest imposed by the respondent at the market rate. 20 There was a clear statutory duty on the part of the applicant to lodge the land tax. 10 This is a case which accords with many others and where in particular the Respondent remits or does not charge the premium component, but does charge the market rate component. As Brennan J said in re: Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, consistency in decision making is desirable, and I note that I agree with Mr. Verick's decision in Monaro and also the other decisions cited in Monaro. The Applicant has in fact been treated quite generously; the Respondent has not assessed him for two tax years (or perhaps more depending on when precisely the Property was purchased) and in respect of which he could as a matter of law have assessed him; moreover the Respondent both remitted the premium interest rate component and in addition allowed the Applicant time within which to pay. As noted earlier in these reasons the Applicant said that he would not be able to pay the January 2004 instalment and in particular because the parcels of real property owned by him are or will be untenanted. He had said that the Property in particular had been purchased and let because he could not afford to live in it, a statement which appears odd in the light of the fact that he subsequently could afford to purchase another investment property and being the Kogarah unit. As was the case in Monaro, the Applicant has not shown any special circumstances which would justify the remission of the market rate component of the interest; I agree in particular with Mr.Verick's view as expressed in Monaro that it will always be relevant to enquire whether the default was in any way attributable to the Respondent. 11 This is not a case where any further remission of interest can be justified or is warranted and accordingly the decision under review must be affirmed.