CITATION: Greig v Chief Commissioner of State Revenue [2006] NSWADT 146 DIVISION: Revenue Division APPLICANT PARTIES: Colin Richard Greig RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 066015 HEARING DATES: 05/05/06 SUBMISSIONS CLOSED: 05/05/2006 DATE OF DECISION: 05/19/2006 BEFORE: O'Connor K - DCJ (President) CATCHWORDS: First Home Owners grant - reversal of original decision MATTER FOR DECISION: Principal matter LEGISLATION CITED : First Home Owner Grant Act 2000 Taxation Administration Act 1996 Chief Commissioner of State Revenue -v- Ferrington (GD) [2004] NSWADTAP 41 CASES CITED: Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158 Rauf -v- Chief Commissioner of State Revenue [2005] NSWADT 176 APPLICANT In person REPRESENTATION: RESPONDENT S Benjamin, solicitor ORDERS: 1. Decision to recover grant affirmed; 2. Decision to impose penalty varied to substitute 10% ($700). REASONS FOR DECISION 1 The applicant purchased a flat in Bradbury on 22 May 2003. He was a first time buyer. The purchase was an eligible transaction within the meaning of the governing legislation, the First Home Owner Grant Act 2000 (the Act). The administrator of the scheme is the respondent, the Chief Commissioner for State Revenue (the Commissioner). 2 The administrator formed the opinion, after taking account of information provided by the applicant, that the applicant had not fulfilled a condition of eligibility for the grant, being that the property be occupied as the applicant's principal place of residence within 12 months of purchasing the property. Section 12, as in force at the time of the transaction, required relevantly: ' 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.' 3 At the time the transaction was completed, he and his wife were, he said, separated, and divorce was a possibility. They have since divorced. He moved to the new flat which he had purchased alone. The applicant's evidence that it was his intention at the time of the grant application to occupy the new flat as his home is not disputed by the Commissioner. 4 His evidence at hearing was that he moved to his new flat a week prior to the settlement date, and set it up with a bare minimum of possessions – clothes, single bed, hand-built tall boy, entertainment unit (not connected). His said that he stayed there as needed, and sometimes stayed elsewhere with friends most commonly on weekends. He says that he used the flat regularly in this way between 15 May 2003 and 17 August 2003. In his written statement given to the Commissioner dated 24 November 2004 he put it a little differently: 'At the time it was not uncommon for myself to stay with friends for long periods while myself and my now Ex wife attempted reconciliation.' In mid-August 2003 he moved out so that the flat could be let. 5 During his time at the flat, he said that he did not connect up the electricity, he did not use the oven there, but sometimes consumed take away meals there. He said he had used camping equipment which had a gas bottle a few times to heat things up. As to using the flat without the benefit of lighting, he said this was feasible as he was a night shift worker. 6 His work was nearby. He was employed in various capacities of a supervisory nature with a company at Minto, called Mayne Logistics which was involved in the distribution of Kellogg's products mainly by truck. He travelled back and forth from the flat to work, about 7 minutes away, by motorcycle. He kept his motorcycle in the grounds of the block when he stayed at the flat. He said the night shift ran from about 10 pm to 6 am. 7 Similar information was given by the applicant in a statement of 24 November 2004. 8 The difficulty, as the Commissioner sees it, is that the applicant did not supply sufficient independent proof of his account of his circumstances. There was, for example, no evidence provided of bills to do with usage of electricity or other services, or rate notices addressed to him at the flat. The applicant's explanation is that he did not take steps of this kind, due to the maelstrom of the marriage break-up and because he had not made any long-term decision about his place of residence. He continued to collect mail, for example, from his former address in West Hoxton on the occasion of visits there to see his child. 9 The applicant provided two pieces of independent material to the Commissioner in the response of 24 November 2004 supporting his account. The first was a short statement from the real estate agent who had acted for the vendor of the flat at Bradbury, Steve Hedges. Mr Hedges said that the applicant did at that time indicate to him his intention to live in the property, and referred to his divorce situation. Mr Hedges said later that the applicant called him about the possibility of renting it out. He put the time as mid-August 2003. Mr Hedges recalled that the premises were 'a typical bachelor pad' that had basic furniture, a bed and not much else. Mr Hedges gave a telephone number on which he could be contacted. The Commissioner did not contact him. 10 The property was rented out. The applicant provided a copy of the lease. The applicant sold the flat in June 2004. The transfer information shows that the flat was sold for a little more than the applicant had paid for it 13 months before. This suggests that, having regard to entry and exit costs, he took a loss or at most a small profit. 11 The other piece of evidence was a motorcycle repair receipt dated 21 May 2003 showing the new flat's address as the applicant's address. 12 The applicant was asked in cross-examination about his living arrangements after mid-August 2003. He said that he often used his work premises for that purpose, or stayed with friends. He said at one stage he lived for a few weeks in Queensland with his grandparents. He referred again to the disturbance in his personal life, and how that had affected his behaviour. He said he had continued to go to work normally but the rest of his life was in a state of upset. 13 The Commissioner expressed concern that the agent was not available for cross-examination. The applicant said that he had not asked his estate agent to attend, as he was worried about having to ask him to take a day off work. The Tribunal offered the applicant the opportunity of an adjournment. He said he did not wish to have an adjournment so as to make it possible for Mr Hedges to give evidence. He said that he wanted to have the matter resolved one way or the other at this hearing. 14 In submissions, the Commissioner repeated that there was no dispute that the applicant had intended to take up occupation in the property as his principal place of residence (thus satisfying another requirement of the Act, see s 20). Moreover the Commissioner had not moved to recover the amount of the stamp duty concession, because the relevant legislation only required there to have been such an intention. Unlike the Act presently under notice, it did not have an additional requirement of actual occupation as a principal place of residence. 15 The Tribunal accepts the evidence of the applicant that he did use the flat as a place of occupation after separating from his wife. The problem for the Tribunal is to reach a conclusion, with reasonable confidence, as to whether it was his 'principal' place of residence for any period after separating from his wife. (The legislation has since been amended, effective 1 January 2004, to require a period of 6 months' residence.) 16 The difficulty in this case is that the Tribunal has only the applicant's word for what occurred as to the state of his living arrangements at the flat and the extent of his occupation. He has indicated that there was at least one other place where he stayed during the three months period, and his living history after mid-August appears to have been a relatively itinerant one. It may be that this was the situation also during the three month period, the point the Commissioner's questions were seeking to test. 17 The only independent evidence of any real value in this regard was the estate agent's statement. Mr Hedges is licensed to undertake a regulated occupation, and must act in a way that maintains public confidence in his fitness, integrity and honesty. As already noted, the Commissioner could, if he had wanted, followed up and asked Mr Hedges for more information. Instead the Commissioner has left it to the applicant to make the running. 18 The Commissioner may see that as appropriate having regard to the provision applicable to proceedings of the present kind which casts an 'onus' on an applicant to prove his or her case, both at the internal objection stage and before the Tribunal. As to the position before the Tribunal, the Taxation Administration Act 1996, s 100(3) provides: '(3) The applicant has the onus of proving the applicant's case in an application for review.' Assessment 19 I think that the applicant is a genuine person. He presented his evidence to the Tribunal in a relaxed and positive way. He gave plausible answers to the questions asked of him. 20 However, there were many options open to him by way of providing independent proof. He could have produced the friend with whom he said he often stayed on weekends (a Mr Clark), or at least a statement from Mr Clark. He could have produced records from his employer which might have corroborated aspects of his account of his circumstances at the time. He could have produced the estate agent. The estate agent's statement was, in my view, supportive of the key elements of his account. 21 The Act speaks of a 'principal' place of residence. There is an implicit acknowledgement that a person can have more than one place of residence. The applicant's case, as I have understood it, is that for the first three months after he purchased the flat, he did use the flat as his 'principal' place of residence, essentially during the Monday to Friday work-week. He used it, as I see it, as a 'crash pad' or, to use the estate agent's expression, as a 'bachelor pad'. 22 He did not have in place some of the other usual accoutrements of a 'principal' place of living such as useable cooking facilities, electricity and the like. See further Chief Commissioner of State Revenue -v- Ferrington (GD) [2004] NSWADTAP 41. The informality of the applicant's arrangements are not, the Tribunal thinks, untypical of the way young people sometimes organise themselves, and can also be explained by the emotional upheaval he was experiencing. Nonetheless, the Tribunal accepts that the absence of the usual indicia of permanent living arrangements presents a problem for the Commissioner. 23 The Tribunal is mindful of the onus provision, and the importance of encouraging an approach on the part of taxpayers where they bear the burden of putting corroborative material in front of the Commissioner. On the other hand, I think it is unfortunate that in this case the estate agent, Mr Hedges, was not produced (possibly by telephone, if that was acceptable to the Tribunal after taking account of any submissions by the Commissioner). 24 The Tribunal also accepts the applicant's evidence (it is reflected in various documents lodged on his behalf with the Commissioner) that he believed, based on what his solicitor had told him, that all he needed to show was an intention to occupy the residence as his principal place of residence, in order to retain the grant. 25 The Tribunal does not have sufficient information, at this stage, to satisfy itself as to the question of what the applicant's 'principal' place of residence was during the three month period under notice. 26 It is possible that he was merely transient in his living arrangements during the three months period, and, while using the flat sometimes, had another principal place of abode. 27 It is regrettable, I think, that the applicant did not take up the opportunity for an adjournment and allow for Mr Hedges to be produced, and have his statement tested. Mr Hedges' evidence may well have tipped the balance in his favour. 28 But I am satisfied that the applicant declined the opportunity for an adjournment, well understanding the implications. 29 My conclusion is that the applicant has not established that he complied with the residency requirement. Greig (No 2) 30 These reasons, ending at para 29, above were released to the parties by mail on 16 May 2006, accompanied by an order stating: application for review dismissed; decision under review affirmed. I realised that I had not dealt with one of the submissions of the applicant. I advised the parties that I would issue additional reasons dealing with the overlooked point. The applicant asked that if he was unsuccessful in relation to his primary application, that consideration be given to relieving him of the penalty imposed by the Commissioner. 31 The Commissioner imposed a penalty of 20%. 32 The Commissioner's power to require repayment is given by s 45 of the Act. The provision also deals with the power to impose a penalty. Section 45 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.' 33 In this instance the penalty is imposed pursuant to s 45(3) on the basis that the applicant has failed to make a repayment required under the conditions of the grant. 34 The Tribunal has upheld the Commissioner's primary decision, so the Tribunal is satisfied that there has been non-compliance with the conditions of the grant. 35 The imposition of a penalty is a discretionary matter. In the letter dated 28 February 2005 notifying the applicant of its decision (confirmed on internal review after representations from his solicitor, letter dated 29 November 2005), the Commissioner's office, the Office of State Revenue, gave the following reasons for imposing a 20% penalty: '– You failed to advise the Office of State Revenue that you would not reside in the grant property within the required time period. – You failed to repay the grant to the Office of State Revenue within 14 days, following the expiry of the 12 months residency requirement period.' 36 In Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158, the Tribunal (Molony JM) suggested that the following factors were relevant to the imposition of a civil penalty: '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."' 37 The way in which the Commissioner exercises the penalty discretion is the subject of detailed discussion in the decision of the Tribunal (Montgomery JM) in Rauf -v- Chief Commissioner of State Revenue [2005] NSWADT 176, responding to detailed submissions. The reasons include a close examination of the internal administrative guidelines used by staff of the Office of State Revenue to determine penalty. The matter was not debated in this way in this case. 38 Essentially, the applicant says that he thought that it was enough to justify being permitted to retain the grant that he had at the time of application a genuine intention to occupy the property as his principal residence. As explained in the Tribunal's decision dealing with that issue, more is required. 39 The applicant has had the benefit of the grant since mid-2003. It is now mid-2006. As a starting point it seems to me that the applicant should give back the equivalent in value of the amount received. Without being too exact that would involve an adjustment of about 10% to take account of inflation over the last three years. 40 The material filed does disclose that he had the assistance of a solicitor for a time in his dealings with the Office of State Revenue over the request for repayment. The material shows consistent reference to the contention that intention was sufficient, including in the material filed on his behalf by the solicitor. I am satisfied that the applicant, as he has said to the Tribunal, did have legal advice to that effect. The Office has accepted that he did have such an intention, and for that reason no recovery action has been taken in respect of the stamp duty concession. 41 I view his approach as having been co-operative. He had some evidence to support his claim that he occupied the property as a principal place of residence, but I did not think it was sufficient. 42 This is not, as I see it, a case of complete disregard of his responsibilities as a grant recipient. I have accepted that he made some use of the flat during the period May to August 2003. There was some foundation, therefore, for his case. It is not, as I see it, so definite a case as to justify the conclusion that he 'failed to advise the Office of State Revenue that [he] would not reside in the grant property within the required time period'. These circumstances, as I see it, provide an explanation for his failure to repay the grant within the 14 day period following the expiry of 12 months. This is not a case of complete indifference by the applicant to his responsibilities. 43 In these circumstances, I think it is sufficient to impose by way of penalty 10% not 20%; so the Commissioner's decision on penalty is varied from 20% to 10%, i.e. reduced from $1400 to $700. Order 1. Decision to recover grant affirmed. 2. Decision to impose penalty varied to substitute 10% ($700). 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.