YH v Chief Commissioner of State Revenue [2006] NSWADT 293

CITATION: YH v Chief Commissioner of State Revenue [2006] NSWADT 293

DIVISION: General Division

APPLICANT PARTIES: YH RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 053149

HEARING DATES: 5/07/2006

SUBMISSIONS CLOSED: 08/04/2006

DATE OF DECISION: 10/06/2006

BEFORE: Montgomery S - Judicial Member

CATCHWORDS: first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision

MATTER FOR DECISION: Principal matter

LEGISLATION CITED : First Home Owners Grant Act 2000

Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158 CASES CITED: Gharakhan v Chief Commissioner of State Revenue, NSWADT unreported, 6 April 2005 McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214 Rauf v Chief Commissioner of State Revenue [2005] NSWADT 176 Zhang and Zhou v Chief Commissioner of State Revenue [2005] NSWADT 178

APPLICANT In person REPRESENTATION: RESPONDENT S Benjamin, solicitor

ORDERS: The decision of the Chief Commissioner of State Revenue is affirmed

REASONS FOR DECISION 1 In these reasons name of the applicant has been anonymised so as to preserve the privacy of her personal affairs. In these reasons the Applicant is referred to as YH. 2 In February 2003 YH received a grant of $7,000.00 under the First Home Owners Grant Act 2000 ("the Act"). The grant was in relation to the purchased of a property at North Parramatta NSW (the property). 3 Section 7(1)(a) of the Act requires applicants to comply with the eligibility criteria. Section 12(1) contains eligibility criterion 5, which requires YH to occupy the property as her principal place of residence within 12 months after completion of the eligible transaction. 4 At the time of the application for the Grant, it was YH's intention to reside in the property as her normal residential address, within twelve months of the date upon which the Grant was made. 5 In June 2004, YH responded to a letter sent by the Chief Commissioner requesting confirmation of the residency requirement. Along with the letter of explanation, she attached a signed Statutory Declaration advising that she did not take up residency of the property due to her anxiety and clinical depression. 6 In September 2004, the Chief Commissioner issued a notice under section 45 of the Act, together with an assessment for $8,400.00 in respect of First Home Owner Grant. The notice was issued on the basis that YH did not occupy and use the property as her principal place of residence within 12 months from the date of settlement. 7 The Chief Commissioner disallowed YH's objection to the assessments on the basis that (a) the Chief Commissioner determined that YH had failed to adhere to the conditions of the grant and (b) she had failed to inform the Chief Commissioner and repay the grant. YH has applied to the Tribunal for review of the Chief Commissioner's determination. 8 YH did not attend the hearing, however I allowed her time to respond to the submission made on behalf of the Chief Commissioner. She provided further submissions and enclosed a letter from a Clinical Psychologist. I have taken these into account. Applicable Legislation 9 Section 7 of the Act provides: 7 Entitlement to 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. 10 Prior to 31 December 2003 section 12 of the Act provided in part: Section 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. 11 From 1 January 2004 section 12 of the Act provides in part: 12 Criterion 5—Residence requirement (1) An applicant for a first home owner grant must: (a) commence occupation of 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 the period approved by the Chief Commissioner under this section, and (b) occupy the home as a principal place of residence for a continuous period of at least 6 months or the period approved by the Chief Commissioner under this section. (2) This requirement is referred to in this Act as the "residence requirement. 12 Section 20 of the Act provides: 2 0 Payment in advance, subject to statutory conditions (1) The Chief Commissioner may authorise payment of a first home owner grant: (a) before completion of the relevant eligible transaction, if the Chief Commissioner is satisfied that it is appropriate to do so in particular circumstances, or (b) in anticipation of compliance with the residence requirement, if the Chief Commissioner is satisfied that each applicant who is required to comply, but has not yet complied, with the residence requirement, intends to occupy the home as his or her principal place of residence for a continuous period of at least 6 months commencing within 12 months after completion of the eligible transaction or a longer period allowed by the Chief Commissioner, or both. (2) If a first home owner grant is paid before completion of the relevant eligible transaction, the payment is made on condition that, if the transaction is not completed within 12 months of the commencement of the transaction or a longer period allowed by the Chief Commissioner, the applicant must within 14 days after the end of the period concerned: (a) give written notice of that fact to the Chief Commissioner, and (b) repay the amount of the grant. (3) If a first home owner 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. (4) A person who fails to comply with the condition prescribed by this section is guilty of an offence. Maximum penalty (subsection (4)): 50 penalty units. 13 Section 23 of the Act provides: 23 Power to correct decision (1) If the Chief Commissioner decides an application, and is later satisfied (independently of an objection under this Act) that the decision is incorrect, the Chief Commissioner may vary or reverse the decision. (2) A decision cannot be varied or reversed under this section more than 5 years after it was made. 14 Section 45 of the Act provides: 45 Power to require repayment and impose penalty (1) The Chief Commissioner may, by written notice, require an applicant (or former applicant) for a first home owner grant to repay an amount paid on the application if: (a) the amount was paid in error, or (b) the Chief Commissioner reverses the decision under which the amount was paid for any other reason. (2) If, as a result of an applicant's dishonesty, an amount is paid by way of a first home owner grant, the Chief Commissioner may, by the notice in which repayment is required or a separate notice, impose a penalty not exceeding the amount the applicant is required to repay. (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. (4) If an amount is paid in error on an application for a first home owner grant to a third party, the Chief Commissioner may, by written notice, require the third party to repay the amount to the Chief Commissioner. 15 Section 46 of the Act provides: 46 Power to recover certain amounts (1) This section applies to the following amounts: (a) an amount that an applicant (or former applicant) for a first home owner grant is required to repay under the conditions of the grant or by requirement of the Chief Commissioner under this Act, (b) the amount of a penalty imposed on an applicant (or former applicant) for a first home owner grant, (c) the amount that a third party is required to repay under section 45 (4). (2) An applicant (or former applicant) for a first home owner grant is liable to pay an amount referred to in subsection (1) (a) or (b) to the Chief Commissioner and, if there are 2 or more applicants, the liability is joint and several. (3) If an applicant (or former applicant) who is liable to pay an amount referred to in subsection (1) (a) or (b) has an interest in the home for which the first home owner grant was sought, the liability is a charge on the applicant's interest in that home. (4) A person referred to in subsection (1) (c) is liable to pay an amount referred to in that paragraph to the Chief Commissioner. (5) The Chief Commissioner may recover an amount to which this section applies as a debt due to the Crown. (6) The Chief Commissioner may enter into an arrangement (which may include provision for the payment of interest) for payment of a liability outstanding under this section by instalments. (7) The Chief Commissioner may write off the whole or part of a liability outstanding under this section if satisfied that action, or further action, to recover the amount outstanding is impracticable or unwarranted. Applicant's Case 16 The facts are not in dispute. YH asserted that she had a genuine intention to reside at the property. She stated that she could not take up residence in the property as required by section 12(1) and use it as her principal place of residence due to health related reasons. 17 YH suffers from a medical condition, which has been diagnosed as including clinical depression and anxiety. She is receiving active treatment for her condition. She asserts that as a consequence of that condition she firstly felt unable to move out of her parents' home and into the property, and secondly that her capacity to function in many ways was adversely affected. The letter from YH's Clinical Psychologist supports these assertions. 18 YH also asserts that one of the ways in which her condition impacted upon her was that she did not make an application to the OSR to vary or reverse the decision to approve the Grant or to vary the condition requiring her to move into the subject property within twelve months of the date of the Grant. 19 YH submits that section 12(1)(b) of the Act empowers the Chief Commissioner to vary, or indeed totally exempt, an applicant from the requirement to occupy the premises continuously for six months. She further submits that pursuant to section 14(6) of the Act, the Chief Commissioner has a discretion to allow an application for variation/exemption to be made either before or after the prescribed application period. Pursuant to section 14(7) of the Act, an applicant may, with the consent of the Chief Commissioner, amend an application and it would seem that the amendment can be made at any time. There appears to be no doubt that the original Application was made within the relevant "application period" in this case. 20 Written submissions from YH's solicitor to the Chief Commissioner assert that by her letter of 30 June 2004 YH specifically set out that she suffered from a medical condition which would, within the knowledge of any reasonable person, have a significant impact upon her capacity to function generally and her relevant processes in particular, during the relevant period. YH's solicitor suggests that it was incumbent upon the OSR at that point, having been fixed with the knowledge of her medical condition, to then make further enquiries from her if insufficient information had been provided, and to treat her letter as an application for variation. 21 YH's solicitor contends that as the OSR neither questioned the diagnosis in general terms, nor did it seek any further supporting medical evidence, it must be assumed that the OSR had accepted that YH indeed suffered from the stated medical condition. He submits that as a matter of procedural fairness the OSR should have either requested supporting evidence in regard to that stated intention if the OSR did not accept her statement, and/or warned her that it did not accept her statement before proceeding to make a determination. 22 YH's solicitor contends that in spite of the requirement in the Act for provision of reasons, the OSR failed to provide adequate or proper reasons for the decision that it required YH to repay the amount of $8,400.00. The OSR letter of 8 September 2004 advising YH of the decision simply refers to the fact that she did not reside in the property within twelve months and had not repaid the Grant. 23 YH's solicitor also contends that when the OSR wrote to YH in June 2004 seeking information from her, the OSR should have informed her of the potential consequences any failure to provide the material requested; that a determination would be made by the OSR based solely on whatever response YH made to the request; that she would not be told that any aspect of her explanation was considered inadequate before a determination was made; or the possible outcomes of the OSR determination. It is also submitted that YH should have been advised that she should consider whether or not to obtain independent legal advice before responding. 24 It is also submitted that the Chief Commissioner was in error in failing to deal with the application for a variation of the original decision. It seems that no consideration was given to a variation of the original decision, as distinct from reversal of the original decision, and therefore there was a total failure to even consider whether or not to exercise that power. 25 In her objection YH again referred to her medical condition and provided the further information that in addition to the affects of the condition itself, her medication was having adverse side-affects on her in a relevant way. She also expressed the view that the OSR had not considered the reasons she had provided and repeated an offer to provide medical records and to allow the OSR access to her treating psychologist. The Chief Commissioner's Case 26 The Chief Commissioner relies on the requirement in section 7(l)(a) of the Act that YH comply with the eligibility criteria for a grant. Section 12(1) contains eligibility criterion 5, which requires YH to occupy the property as her principal place of residence within 12 months after completion of the eligible transaction i.e. within 12 months after YH becomes entitled to possession of the property. 27 It is not in dispute that YH did not occupy the property as her principal place of residence within that period. The Chief Commissioner argues that YH has failed to adhere to the conditions agreed to by YH when she applied and obtained the grant. As required by clause 4 under Part E - Declaration, YH agreed to occupy the grant property as her principal place of residence within 12 months. Pursuant to clause 9 in the same Declaration, YH was required to notify the Chief Commissioner of any notifiable event. What is a notifiable event is defined in the Glossary as "Applicants must notes the Chief Commissioner in writing of any circumstances that may affect their eligibility for the grant, for example, where the residency requirement is not met". This is evident from the application, a copy of which is attached to this statement. 28 While not disputing YH's assertion that she has suffered a form of depression and anxiety, the Chief Commissioner's solicitor, Mr Benjamin, asserts that the letter from YH's Psychologist shows that YH had this condition prior to applying for the grant. Further, YH has not provided any evidence that her condition prevented her from continuing her normal employment or that it prevented her from notifying the Chief Commissioner that she was unable to take up occupation of the property and use it as her principal pace of residence within the time limits. 29 Mr Benjamin also submits that because the Chief Commissioner was not given the opportunity to cross-examine either YH or her Psychologist to understand the extent of YH's depression and anxiety, the letter from YH's Psychologist should not be given serious consideration. 30 In the matter of McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214, the President of the Tribunal dealt with the question of discretionary power and stated: "16 It has been explained today that had the applicant made known his change of circumstances to the Commissioner within the twelve month period (or possibly within the extended period of twelve months and fourteen days: see s 20(2)) he may have received some benefit of the exercise of discretion and have avoided the situation in which he now finds himself. But the scheme of the Act does not appear to permit any possibility of achieving that result now. So it is a case which is unfortunate and highlights the difficulty that schemes with strict rules sometimes produce. … 20 The Parliament intended to set strict boundaries. The usual strict boundary is provided by the twelve months rule, that is people can have the grant in advance but they must move in within twelve months. This view is borne out by the following provisions – s 7(1)(b)(ii); s 7(2); s 12(1); and s 20(2) . 21 The scheme of the Act contemplates certainty as to the period within which a person must move in. Any change must be made known ahead of the expiry of what might be called the usual period. The period of permitted delay is either twelve months or such extended period as has been permitted ahead of the expiry of that period (plus fourteen days). 22 I acknowledge what the applicant said today and I have got no doubt is correct that had he been aware of the desirability of him letting the Commissioner know once November came and he was not moving in that there might be a delay of three or so months, he would have acted to protect his interests and make an application. I was impressed by the applicant, and accept that he would, had he known, have taken that step. The application for extension may well have been granted. 23 There is nothing here to suggest that the applicant was at any time trying to escape the notice of the Commissioner. At the outset he said he will not be moving in for ten months. As it has happened he has moved in at the thirteen month point. It is an unfortunate case but I think the submissions that have been made and the case law of the Tribunal is irresistible. At this point, the Commissioner is obliged to apply the rules and, as I see it, does not have any power to extend time. Once the taxpayer falls into default the position is irrecoverable and the only hope that one then has is that the Commissioner might not issue the notice; but the notice has issued in this case." 31 The Chief Commissioner argues that in this case, YH failed to occupy and use the property as her principal place of residence and having failed to occupy and use the property as her principal place of residence she failed to inform the OSR and return the grant. In fact, YH continues to reside at this address where she was residing at the time the property was purchased. Further, the Chief Commissioner argues that while YH has indicated that she was suffering from anxiety and clinical depression, she was working and carrying on her normal activities. 32 Mr Benjamin referred to a number of matters where the issue of applicants not informing the OSR of their inability or the failure to occupy and use the grant property as their principal place of residence and failure to return the grant were considered by the Tribunal. 33 At paragraph 46 of her decision in Bates v Chief Commissioner of State Revenue [2004] NSWADT 13, Judicial Member Higgins said in respect of the Commissioner's powers to reverse his decision under section 23(1) of the Act and his discretion to request a refund of the monies advanced: " However, that discretion must be exercised in accordance with the policy and purposes of the Act. ... that policy and purpose is to provide first home owners with assistance in purchasing their first home and the eligibility for such assistance is expressly stated to include a requirement that the applicant occupies the property the subject of the grant as his or her principal place of residence within twelve months of a grant. That is, the Act does not provide assistance where an applicant fails to occupy the premises within the requisite period and rents out that property notwithstanding the applicant's intention to ultimately make the property his or her permanent place of residence." 34 The Chief Commissioner says that even after taking all the factors into account, it is clear that YH did not occupy and use the property as her principal place of residence and therefore the notice to repay the grant is in order. In the opinion of the Chief Commissioner of State Revenue, there is no exceptional circumstance in this particular case warranting the exercise of the discretionary power. In any event, on the interpretation given by the President of the Tribunal in McKenzie the discretionary power could be exercised only within 12 months (plus, possibly, 14 days) from the date of settlement of the property. 35 Mr Benjamin also referred to a number of matters where the issue of imposition of a penalty has been considered. In Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158, Judicial Member Molony made reference to a number of factors which were considered useful in determining whether a discretionary decision to impose a civil penalty was the correct and preferable decision. He stated at paragraph 51: 51 A useful list of relevant factors which a court might take into account in determining the amount of a civil penalty was proposed by the Australian Law Reform Commission in Principled Regulation: Federal Civil and Administrative Penalties in Australia (2002) ALRC 95 in recommendation 29-1. These factors concern the discretionary imposition of civil penalties under Commonwealth Legislation, which given the non-discretionary nature of Commonwealth administrative penalties, are more akin to the discretionary imposition of penalties under the First Home Owners Grant Act. The recommendation said: "Unless unsuitable to a particular provision, in determining the amount of a civil penalty, the courts should take account of all relevant factors, including: (a) the deterrent effect of the penalty; (b) the nature and extent of the contravention; (c) any loss or damage suffered, or gain made, as a result of the contravention; (d) the circumstances in which the contravention took place, including the deliberateness of the conduct and the period over which it extended; (e) whether professional advice had been obtained in relation to the contravention, prior to the breach; (f) whether the person has previously been found by a court to have engaged in any related or similar conduct; (g) the degree of cooperation with the authorities; and (h) in the case of a natural person, the attitude of the offender." 36 The Judicial Member considered the particular circumstances of Mr Calcaro's matter and stated at paragraph 62: "62 The question that then arises is one of the amount of the penalty. Applying the criteria discussed above, the factors relevant to the determination of penalty in Mr Calarco's case are: a) the need to deter others from not complying the conditions of grant; b) the fact that Mr Calarco provided incorrect information as to when he would be occupying the premises in his application to grant; c) the fact that (as I have found) Mr Calarco's initial intention was to live in the premises as his own home at the end of the tenancy; d) the fact that Mr Calarco's original intention was frustrated by his own financial circumstances; e) the opportunity cost factor; f) the fact that Mr Calarco showed little respect for matters of propriety and less attention to detail in his dealings with the Administrator; g) Mr Calarco's failure to be candid with the Administrator and the Tribunal; h) Mr Calarco's straitened financial circumstances." 37 Mr Benjamin also referred to a number of matters where the Tribunal has upheld the imposition of a penalty, although at various rates: Gharakhan v Chief Commissioner of State Revenue, NSWADT unreported, 6 April 2005 , wherein the penalty rate was reduced from 20% to 17%. This matter involved $7,000.00 in grant. Zhang and Zhou v Chief Commissioner of State Revenue [2005] NSWADT 178, wherein the penalty rate was reduced from 20% to 15%. The matter involved $14,000.00 in grant and $2,800.00 in penalty. Rauf v Chief Commissioner of State Revenue [2005] NSWADT 176, wherein the penalty was reduced from 20% to 15%. This matter involved $7,000.00 in grant. Snow v Chief Commissioner of State Revenue (No 1) [2005] NSWADT 244 in which the President of the Tribunal affirmed a penalty of 30%. Allan v Chief Commissioner of State Revenue [2005] NSWADT 172 the Tribunal affirmed the decision of the Chief Commissioner to impose a 20% penalty 38 Mr Benjamin argues that given the circumstance of this case, the Chief Commissioner's decision is the correct and preferable decision and consequently should be affirmed. Findings 39 The facts and evidence of this case indicate that YH did not meet the key criteria under the Scheme, i.e. taking up occupation of the grant property and using it as her principal place of residence within the required period. Indeed she has not used it as her residence at all. 40 The intention of the grant is to assist first home buyers to purchaser a home to be used as the recipient's principal place of residence. It is not intended to help applicants to purchase a property to be used as an investment property, even if this were to be an unintentional outcome. 41 In the circumstances, it is my view that the appropriate factors to consider are those outlined in Calcaro. There is a high degree of overlap between these factors and those that Mr Benjamin and YH have submitted should be taken into account. This is also a consistent view that has been taken in recent decisions of this Tribunal. In reaching my decision I have taken into account the facts to which YH has referred. 42 Of the eight factors listed in paragraph 62 of Calarco, factors (f) and (g) do not apply in this case. In Calcaro the Tribunal found that Mr Calcaro showed little respect for matters of propriety, little candour and less attention to detail. Those factors are not present in this case. Here, YH has been straightforward with both the Chief Commissioner and with the Tribunal. There is no basis on which to make a finding that she acted dishonestly in respect to her application for a grant. 43 I agree that YH's condition is a circumstance that should be taken into account. However, without the opportunity to hear from YH or her psychologist I cannot be satisfied that it would have prevented YH from contacting the Chief Commissioner to advise of her changed circumstances. 44 In my view it is relevant that at all material times YH intended to reside at the Property; YH did not wish to avoid her obligations under the Act but due her circumstances she felt that she was unable to comply with the residency requirement; and YH has not previously ever engaged in similar or related conduct. 45 On the other hand, there is no dispute that she failed to repay the grant within 14 days after the period in which she was required to occupy the property as her principal place of residence. 46 Having regard to these factors, in my opinion the Chief Commissioner has adopted an appropriate position in regard to the YH's failure to meet the conditions of the grant. I am satisfied that the decision of the Chief Commissioner is the correct and preferable one and should be affirmed. Order The decision of the Chief Commissioner of State Revenue is affirmed.