D'Amico v Chief Commissioner of State Revenue [2006] NSWADT 168

CITATION: D'Amico v Chief Commissioner of State Revenue [2006] NSWADT 168

DIVISION: Revenue Division

APPLICANTS PARTIES: Riccardo & Nadia D'Amico RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 066018

HEARING DATES: 19/05/2006

SUBMISSIONS CLOSED: 05/19/2006

DATE OF DECISION: 06/07/2006

BEFORE: Verick A - Judicial Member

CATCHWORDS: Land tax exemption - principal place of residence

MATTER FOR DECISION: Principal matter

Land Tax Management Act 1956 LEGISLATION CITED : State Revenue Legislation Further Amendment Act 2003 Taxation Administration Act 1996

CASES CITED: Chief Commissioner of State Revenue v. Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19

APPLICANT In person REPRESENTATION: RESPONDENT S Benjamin, solicitor

ORDERS: The decision under review is affirmed

REASONS FOR DECISION 1 The decision under review relates to the disallowance by the Respondent of an objection by the Applicants against land tax imposed in respect of a property situated in Greenwich ("Greenwich property") for the 2002 land tax year. Essentially the matter at issue concerns a claim for a principal place of residence exemption by the Applicants in respect of the Greenwich property. In addition to the principal matter, the Applicants are also dissatisfied with the Respondent's decision not to remit the whole or part of the interest included in the land tax assessment of the Greenwich property. 2 The facts are not in dispute. The Applicants purchased a property situated at Osborne Park ("Osborne Park property") on 12 December 2001 and commenced to use it from that date as their principal place of residence. Prior to purchasing the Osborne Park property the Applicants had owned and occupied the Greenwich property as their principal place of residence for a number of years. When the Applicants purchased the Osborne Park property they also sought to sell their Greenwich property. The Greenwich property was sold on 14 January 2002. 3 Sometime in early October 2005, when the Applicants sought from the Respondent a land tax clearance for an investment property, a delegate of the Respondent attending to them identified certain outstanding land tax obligations in respect of the Greenwich property. A land tax assessment for the 2002 land tax year was issued on 11 October 2005 by the Respondent in respect of the Greenwich property to the Applicants on the basis that they were owners of the Greenwich property on the 31 December 2001 which no longer was their principal place of residence on that date. The assessment also included an interest penalty. 4 By the combined effect of sections 7, 8, and 9 of the Land Tax Management Act 1956 (the "LTM Act"), land tax is levied each year on land value of all land in New South Wales owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied other than land which is exempt from taxation under the LTM Act. In the relevant year, land used and occupied as the principal place of residence by the owner of the land was exempt under s 10(1)(r) of the LTM Act. Section 3(1) of the LTM Act defines a "principal place of residence" of a person as "the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person". 5 Since the commencement of land tax year 2004 various new provisions relating to the principal place of residence apply and are found in Schedule 1A of the LTM Act. These new provisions, however, do not apply to the year in issue. 6 Under the law as it stood in the relevant year, the Applicants were only entitled to a principal place of residence exemption in respect of one property that was used and occupied as a residence. The facts, which are not in dispute, clearly establish that the Applicants had on the 31 December 2001 occupied and were using the Osborne property as their principal place of residence. The Applicants owned the Greenwich property on the 31 December 2001, which was no longer, used as their principal place of residence. It was the subject of a sale, which was settled on 14 January 2002. In terms of the provisions of the LTM Act at the relevant time, the Greenwich property was not an exempt property on the 31 December 2001 and as it was owned by the Applicants on that date it was liable to land tax. 7 The Applicants could be said to have been harshly treated by the law in paying land taxes for a property that had been their principal place of residence for some years and was only unoccupied or not used as such for a short period of some weeks prior to its sale. The liability also arose because the Applicants were still the owners of the property on 31 December 2001. The delay in completing the sale was according to the Applicants due to their solicitors taking their Christmas break. 8 The legislature has recognised the fairly inequitable treatment by the law of cases falling in these kinds of circumstances. The State Revenue Legislation Further Amendment Act, 2003 introduced amendments to the LTM Act which allow an owner to claim the principal place exemption concession for two residences in circumstances where the owner has bought a new residence and is in the process of selling the existing residence, but has not been able to complete the sale by the taxing date. The changes introduced are found in Clause 7 of Schedule 1A of the LTM Act. Unfortunately for the Applicants, the concession is only effective from 31 December 2003. 9 The relevant land tax assessment against the Applicants was accordingly properly made by the Respondent under the provisions of the LTM Act that applied to the relevant year. 10 The Applicants also seek a review of the interest imposed in the assessment. 11 Section 12 (1) of the LTM Act provides that the Chief Commissioner may, by an 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. The Chief Commissioner publishes such notifications annually in the Gazette. In addition, s 12(1A) of the LTM Act requires a person affected by a Gazette notification to furnish a land tax return to the Chief Commissioner on or before 31 January in respect of the relevant tax year. 12 In the present matter, the Applicants did not lodge any return in respect of the Greenwich property for the land tax year 2002 because they were under the impression that the Greenwich property was exempt from land tax as it had been their principal place of residence and not an investment property. As the Applicants had failed to furnish any return they were taken to have committed under s 72(1) of the LTM Act a "tax default" for purposes of Part 5 of the Taxation Administration Act 1996 (the "TA Act"). 13 Under s 21 of the TA Act, where a "tax default" occurs the Chief Commissioner is allowed to impose interest on a daily basis from the end of the last day when the payment was due until the day upon which the outstanding land tax is paid. The applicable interest rate consists of a variable market rate component and a premium rate component. The market rate component is the Treasury Note yield rounded to the second decimal place unless a market rate of interest is specified by an order of the Minister made under s 22(2)(b) of the TA Act and published in the Gazette. A premium rate component is fixed by s 22(3) of the TA Act at 8 per cent per annum. 14 The Chief Commissioner is, pursuant to his powers, found in s 25 of the TA Act, able to remit 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. 15 In the present matter, the Respondent taking into account all the background and circumstances of this case only imposed the market rate interest. The only issue for consideration is whether there are grounds to remit wholly or in part the market rate interest included in the assessment. 16 The market rate component, as was observed by the Tribunal's Appeal Panel in Chief Commissioner of State Revenue v. Incise Technologies Pty Ltd [2004] NSWADTAP 19, "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". The Appeal Panel went on to state as follows: "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." 17 In the present matter, the Respondent accepted that the Applicants had not intentionally disregarded their obligations and accordingly did not impose any penalty by way of a premium rate interest component. There is some justification for the Applicants to be dissatisfied with the Respondent for not acting in any prompt manner to assess them in relation to the Greenwich property. The Respondent had in his possession information that was available at some stage before October 2005 for an assessment to be made against the Applicants but action was only taken when the Applicants sought to get a land tax clearance certificate in respect of an investment property. But, unfortunately, there is no legal obligation on the Respondent under Part 3 of the TA Act to issue, in a timely manner, an assessment on the basis of any information with the Respondent. The Respondent is only generally required to act in a timely manner in the efficient administration of the LTM and TA Acts. 18 There was, however, a clear statutory obligation on the Applicants to lodge their return for the land tax year 2002 in relation to the Greenwich property by 31 January 2002. The Applicants failed to do so and have been correctly taken to have committed a tax default for purposes of Part 5 of the TA Act. The Respondent did not contribute in any manner to the commission by the Applicants of the relevant tax default. The Applicants have also failed to establish any other exceptional grounds to warrant a remission of any part of the market interest included in the assessment. 19 The decision under review is accordingly affirmed.