CITATION: WM v Chief Commissioner of State Revenue [2006] NSWADT 199 DIVISION: General Division APPLICANT PARTIES: WM RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 053141 HEARING DATES: 6/04/2006 SUBMISSIONS CLOSED: 04/24/2006 DATE OF DECISION: 07/05/2006 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 CASES CITED: Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158Chief Commissioner of State Revenue v Farrington (GD) [2004] NSWADTAP 41McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214 APPLICANT In person REPRESENTATION: RESPONDENT S Benjamin, solicitor ORDERS: The decisions under review are affirmed REASONS FOR DECISION 1 WM lodged an application for a grant of $7,000 under the First Home Owners Grant Act 2000 ("the Act") in relation to a unit known as Unit 1, 34 Goulburn Street, Liverpool ("the property"). The contract of sale entered into on 29 July 2002 was expected to settle on 2 September 2002. WM advised that he expected to occupy the property by that date. 2 The Office of State Revenue processed WM's application and the grant was paid in advance subject to compliance with the residency requirement of the Act. 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 WM to occupy the home to which the application relates as his principal place of residence within 12 months after completion of the eligible transaction i.e. settlement. The settlement in respect of the property actually took place on 9 September 2002; therefore the residency requirement should have been satisfied by 8 September 2003. 4 On 7 September 2004, the Chief Commissioner of State Revenue issued a notice under section 45 of the Act, together with an assessment for $8,400. The assessment was issued based on the response dated 7 June 2004 received from WM that he used and occupied the property as his principal place of residence within 16 months from the date of settlement. The requirement under the legislation is that the owner should occupy the property within 12 months from the date of settlement. 5 WM lodged an objection to the assessment. The objection was disallowed insofar as it required the repayment of the grant however the penalty was reduced from $1,400 to $700. WM then lodged an application for review with the Tribunal. 6 The issues for determination which are raised in this application are as follows: (a) whether the Chief Commissioner's decision to reverse the provision of the grant to WM and require repayment was the correct and preferable decision in the light of all of the relevant circumstances; and (b) whether the decision of the Chief Commissioner to impose a penalty of 10% was the correct and preferable decision in the light of all of the relevant circumstances. 7 The facts are not in dispute. WM asserted that he had and continues to have a genuine intention to reside at the property. He purchased the property with the intention of using it as his principal place of residence, after his marriage. WM and his fiancée were engaged in May 2000 and were looking to marry towards the end of 2002. He said that his culture required that he remain living in his family's home until his marriage and that it is culturally significant that he have a home to reside in with his wife, after marriage. He claims that he purchased the property with tenants and did not want to take up occupation on his own prior to the marriage. 8 After WM had signed the contract to purchase the property he separated from his fiancée and his parents forbid him from moving into the property alone. Accordingly, WM claims that he was unable to take up residence as intended due to the irreconcilable break down in his relationship with his fiancée. He says that if he had taken up residence after the break-up with his fiancée he would have been completely ostracised from his community and his family, and his reputation tarnished. At that time, WM needed and valued the support of his family. 9 In June 2003, WM travelled to Egypt, where he met a woman. The pair became engaged shortly thereafter, and they subsequently married. The marriage took place in Cairo in October 2003 but it took sometime for WM's wife to migrate to Australia. WM's wife's visa was delayed due to pregnancy and she was told that she would not be able to enter Australia until she gave birth. This delayed the immigration process by several months. 10 After WM received notification that his wife's visa would be granted, WM advised his agent to give the tenants of the property notice so that they would vacate the property. The tenants delayed leaving the property until Mid April 2004. 11 WM's wife arrived in Australia at the beginning of April 2004 and as soon as the tenants vacated the property WM and his wife moved in. WM says that this move was in accordance with his cultural and religious practice. 12 WM says that even though he has not satisfied the residence requirement as set out in section 12 if the Act, the Commissioner has a discretion under sections 23 and 45 of the Act as to whether he would or would not reverse the original decision. In exercising his discretion under these provisions the Commissioner is required to take into account the objects and requirements of that Act and the matters put forth by the applicant. He submitted that the Commissioner has not given enough attention to these matters in making his decision. 13 He says that the correct and preferred decision is that the decision by the Chief Commissioner to refuse his application for an extension of the time within which to occupy the property as his principal place of residence be set aside and in substitution, a decision be made to extend the period of time within which WM was to occupy the property as his principal place of residence to 13 April 2004. 14 The Chief Commissioner's contention is that WM did not meet one of the key criteria under the Scheme, that is, taking up residence in the property purchased with the grant and using and occupying it as his principal place of residence. Grant applicants must notify 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. WM did not do this. The Chief Commissioner relies on the provision in section 20(3) of the Act, which provides 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 the fact to the Chief Commissioner, and (b) repay the amount of the grant. 15 The Chief Commissioner contends that while there is discretion to approve a longer period for an applicant to take up residence in the property, that request must be made within the 12 month of the settlement of the property. If the permission is not sought until after the end of the period of 12 month, then the breach of the condition has already occurred. If WM could not fulfil the conditions of the grant he should have returned the amount within 14 days after the expiry of 12-month period. 16 The Chief Commissioner also contends that the power under section 45(3) of the Act allows the Chief Commissioner to impose a penalty because WM did not notify the Chief Commissioner of non-compliance with the residency requirement. WM had the opportunity of informing the Chief Commissioner about his situation and sought permission to occupy the property. In the event that such permission was not granted, then WM could have returned the grant of $7,000. 17 In determining whether the above decisions of the Chief Commissioner were the correct and preferred decisions, regard must be had to all the relevant facts and the applicable law, including the objects of the Act. 18 The law on these issues is now settled. I accept the evidence in regard to WM's intentions at the time he made his Grant application and that it was based on a belief that he and his fiancée would reside in the property within 12 months of the purchase of the property. However, WM's intention was not the only basis on which the Chief Commissioner made the grant. As provided in section 20(1) of the Act it was made on the anticipation of compliance with the residency requirements. That is, it was made on the basis that WM would meet these requirements and occupy the property as his principal place of residence before 8 September 2003. Meeting this requirement included residing in the property and it is not sufficient to only have an intention to do so: Chief Commissioner of State Revenue v Farrington (GD) [2004] NSWADTAP 41. 19 In McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214, the Tribunal's President, O'Connor DCJ, stated at paragraphs 20 – 21: "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)." 20 I agree with that view. Further, the President's comments at paragraph 23 are equally applicable here: "23 There is nothing here to suggest that the applicant was at any time trying to escape the notice of the Commissioner. ... 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." 21 WM did not seek an extension of the time in which he was required to occupy the property. The "residency requirements" of section 12 of the Act was an essential eligibility criterion that WM had to meet in order to qualify for the grant. As WM did not satisfy the "residency requirements", the decision of the Chief Commissioner to give WM a grant was not correct. 22 For these reasons, in my opinion, the Chief Commissioner made the correct and preferred decision when he determined to reverse the decision to pay WM the first home owner grant of $7,000. I make a similar finding in respect of the Chief Commissioner's decision to require WM to repay that grant. 23 In respect of the imposition of a penalty, section 45 of the Act gives the Chief Commissioner the power to request the repayment of the amount of grant paid and the power to impose penalties. 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 preferred decision. These factors are: 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 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 co-operation with the authorities; and h) in the case of a natural person, the attitude of the offender. 24 I agree that the decision in Calcaro provides a helpful guide on what factors are to be taken into account when exercising this particular discretion. There are numerous other authorities to which Mr Benjamin has referred in which these factors have been considered. In the circumstances of this matter, a penalty of 10% has been imposed. WM submitted that the correct decision is that the time for complying with the residency requirement should be extended. If that were the case no penalty would be warranted. Given the view I have already expressed, I do not agree with that submission. 25 A number of relevant facts should be considered. These included that: (a) at all material times WM intended to reside at the Property and did so as of 13 April 2004; (b) WM did not wish to avoid his obligations under the Act but due his circumstances he was unable to comply with the residency requirement; (c) WM has not previously ever engaged in similar or related conduct; (d) WM was co-operative and frank in their dealings with the Chief Commissioner 26 In this case, the Chief Commissioner contends that WM's situation did not constitute an exceptional circumstance. He did not have to take leave from work and while his circumstances no doubt caused him distress they did not prevent him from contacting the Office of State Revenue to inform about his situation and to seek an extension of the period to comply with the residency requirement. Nor did they prevent him from repaying the grant amount during the 12 months and 14 days from the date of settlement of the property. 27 The Chief Commissioner considered that a reduction of the penalty should apply because of WM's circumstances. Otherwise the penalty rate would have been 20%. The Chief Commissioner's view is that there is no exceptional reason for reducing the rate of penalty below 10% in this matter and therefore, it is submitted that the 10% penalty should be affirmed. 28 In the circumstances, it is my view that the appropriate factors to consider are those outlined in Calcaro. In reaching my decision I have taken into account the facts to which WM and Mr Benjamin referred. In my view, the decision of the Chief Commissioner to impose a penalty of 10% of the grant is reasonable. Accordingly, it is my view that the decision of the Chief Commissioner to require WM to repay the grant of $7,000 and to impose a penalty of 10% of the grant (i.e. $700) should be affirmed. Orders The decisions under review are 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.