CITATION: De Carle v Chief Commissioner of State Revenue [2008] NSWADT 9 DIVISION: Revenue Division APPLICANT PARTIES: Paula J De Carle RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 076098 HEARING DATES: On the papers SUBMISSIONS CLOSED: 7 December 2007 DATE OF DECISION: 7 January 2008 BEFORE: Block J - ADCJ (Judicial Member) CATCHWORDS: Land tax - assessment of interest MATTER FOR DECISION: Principal matter LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125; Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151; Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19; Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21; CASES CITED: Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21; Downs v. Chief Commissioner of State Revenue [2002] NSWADT 51 Olah v. Chief Commissioner of State Revenue [2002] NSWADT 22,; Macsif Pty Ltd v. Chief Commissioner of State Revenue [2007] NSWADT 116; Anastasovksi v Chief Commissioner of State Revenue [2003] NSWADT 270 In person REPRESENTATION: JO'Loughlin, solicitor ORDERS: Interest at the market rate was correctly imposed and accordingly the decision under review must be affirmed Part A - Background and preliminary 1 The decision under review in this matter is the decision by the Respondent imposing interest in connection with land tax levied under the Land Tax Management Act 1956 ("LT Management Act") in respect of the property situated at 47 Little Lake Crescent, Warilla NSW ('the Property") for the 2002 to 2004 land tax years, both years inclusive ("the relevant years"). It is relevant to note that the Applicant does not contest the fact that she was liable for land tax in respect of the Property for the relevant years, and in fact the land tax proper has been paid. The Applicant disputes only the interest charge. It is also relevant to note that interest was originally levied at both the market rate and the premium rate but subsequently interest at the premium rate was remitted leaving only interest at the market rate in dispute. 2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Appeals Tribunal Act 1997, and in addition submissions furnished by the parties. In August 2007, the Tribunal issued directions in respect of the filing of written submissions by the parties to be followed by a decision on the papers but subject to the proviso that the Applicant was entitled by notice to seek a formal hearing. In fact the Applicant did not seek a formal hearing, and indeed, and as the papers reveal, this matter is quintessentially one which can and should be decided on the papers. It may be noted also, although nothing turns on it, that the Applicant's submissions were filed a few days after the date scheduled and in consequence of which the Respondent's submissions were delayed by a few days. 3 A consideration of the Applicant's submissions stated 10 October 2007 indicated in clear terms that she went to some considerable trouble in preparing them. Her submissions however contain a number of statements, which are, in important respects, inaccurate. In the first paragraph of her submissions the Applicant stated that "my objection submitted for the Tribunal's review, is related to interest charges and penalty charges on Land Tax, imposed on me for failure to returned a questionnaire in 2006 at the request of the Chief Commissioner of State Revenue. The interest and penalty were imposed in hindsight for the years 2002 - 2006 inclusive." In this particular context: (a) In fact land tax was imposed in respect of the relevant years and not the years 2002 - 2006 inclusive; (b) The Respondent did not impose both penalty and interest; an interest charge was levied, at both the premium rate and the market rate but interest at the premium rate was subsequently remitted. It is clear also that the fact that the questionnaire was returned late was not a relevant factor. Moreover the Applicant's statement that interest and penalty were in imposed in hindsight was without foundation. 4 The Applicant's submissions state in categoric terms " The Office of State Revenue was paid by the due date the full land tax liability ." As will be seen that statement was not accurate. The land tax was paid long after the due dates in respect thereof. 5 The Applicant's submissions also state "It is a usual commercial practice to send an invoice, or in this case an assessment notice, and to provide the client with time to pay by the due date on the invoice or assessment notice. A statement at the end of the month is then issued with a due date for payment. It is not usual practice to begin charging interest before the client has had a chance to pay by the due date." None of those statements are apposite in the context of the relevant legislation. 6 It is convenient to draw on the Respondent's submissions under the head of "Background" and contained in clauses 3 to 13 of his submissions, and reading without footnotes, as follows: 3. The general background to this matter may be summarised as follows. 4. The Applicant was the registered proprietor of the property between 3 November 1995 and 24 June 2004. 5. On 20 July 2006, the Respondent conducted searches and enquiries to determine whether the Applicant had, during her entire period of ownership of the Property, occupied it as her principal place of residence for the purposes of the LT Management Act. These searches revealed that a NSW Rental Bond Board bond was lodged with respect to the Property on 17 April 2001 (the Applicant as landlord) and that the Applicant was enrolled to vote at 19 Reddall Parade, Lake Illawarra as at 8 July 2002 (that property having been acquired by the Applicant on or about June 2001.) 6. On 20 July 2006, the Respondent wrote to the Applicant advising her of possible land tax liabilities and requested that she complete a Land Tax Questionnaire ("the Questionnaire"). 7. By 14 August 2006, the Respondent had not received a response to the above letter and wrote to the Applicant requesting that she complete the Questionnaire by 28 August 2006. 8. On 31 October 2006, the Respondent issued the Applicant with a Land Tax Notice of Assessment with respect to the Property for the 2002 to 2004 land tax years, requiring the Applicant to pay a total amount of $24,985.27 including Interest on Late Lodgement. The interest on late lodgement included the market and premium rate components pursuant to s. 22 of the Taxation Administration Act 1996 (NSW) ("the TAA"). 9. On 11 December 2006, the Applicant paid the outstanding land tax under the 31 October 2006 Notice of Assessment, in the amount of $17,350.98. The Applicant did not pay Interest on Late Lodgement, which totalled $7634.27. 10. On 11 March 2007, the Applicant lodged an objection ("the Objection") to the imposition of interest on the outstanding land tax. In her Objection, the Applicant cited, inter alia, the following grounds: "I did not receive the letter until late September as I had been delayed interstate with pressing family matters... I was shocked to receive charges dating back to 2002 including interest charges for this period of time. The interest appears to have been charged on the interest itself, as well as on the land taxes. Since, in all this time, I have never been billed and was unaware that Land Tax was due, I naturally had not had occasion to pay it." 11. The Respondent decided to allow the Applicant's Objection in part. In remitting the premium rate of interest, the Respondent, in his internal review memorandum, noted: "I accept that the client was away and may not have received the land tax questionnaire and therefore was not able to respond. The client is only liable for 47 Little Lake Crescent, Warilla. I do not consider the client had intentionally disregarded the law and hence the premium rate of interest should be remitted." 12. On 28 May 2007, the Respondent wrote to the Applicant informing her of the decision to allow her Objection in part. The premium interest imposed on her 2002 — 2004 land tax obligations was remitted and only the market rate of interest (in respect of late lodgement), in the amount of $3,073.52, was determined to be payable. The Respondent noted the following: "[T]he Office considers that a further remission of interest is not warranted as to further remit the interest would be inequitable to other taxpayers who did lodge their return and paid by the due date." 13. The Applicant lodged an Application for Review with the Administrative Decisions Tribunal ("ADT") on 27 July 2007. In accordance with s. 100(3) of the TAA, the onus is on the Applicant to prove her case. Part B -The legislation 7 It is convenient also to draw on the Respondent's submissions in order to set out the legislation which is relevant; it is contained in clauses 14 to 17 which without footnotes and also without emphasis, are included in this decision as follows: 14. Section 21(1) in Pt 5 of TAA provides that if a "tax default" occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under Pt 5 Div 1 of the TAA. By s. 3 of the TAA, a tax default means "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay". Where a tax default occurs, a taxpayer is also liable to pay penalty tax in addition to the amount of tax unpaid: see s. 26(1). 15. In accordance with s. 12 of the LT Management Act, taxpayers are required to furnish land tax returns to the Chief Commissioner. Section 72(1) of the LT Management Act provides that a taxpayer who "fails or neglects duly to furnish any return or information as and when required by this Act or the Chief Commissioner, or who fails to include in any return any land owned by the taxpayer, is taken to have committed a tax default for the purposes of Part 5" of the TAA. Pursuant to s. 72(2) of the LT Management Act, in relation to the tax default: "(a) interest is payable in accordance with Part 5 of the Taxation Administration Act 1996 but accrues on the amount of land tax assessable to the taxpayer for the period commencing on the last day allowed for furnishing the return or information, or the correct particulars of land ownership , and ending on: (i) the day on which the return or information is furnished or the correct particulars are furnished, or (ii) the day on which the assessment calculated on the basis of the return or information that is required, or the correct particulars that are required, is made, or (iii) the day on which the whole of the land tax assessable to the person is paid, whichever occurs first … " 16. As for the rate of interest that applies under Pt 5 Div 1 of the TAA, s. 22(1) provides that the interest rate is the sum of the market rate component and the premium component, as follows: "22 Interest rate (1) The interest rate is the sum of: (a) the market rate component, and (b) the premium component. (2) The market rate component is: (a) unless an order is in force under paragraph (b), the Bank Accepted Bill rate rounded to the second decimal place (rounding 0.005 upwards), or (b) the rate specified for the time being by order of the Minister published in the Gazette. (3) The premium component is 8% per annum. (4) In this section, the Bank Accepted Bill rate in respect of any day is the yield rate for 90-day Bank Accepted Bills published by the Reserve Bank for the month of May in the financial year preceding the financial year in which the day occurs." 17. Pursuant to s. 25 of the TAA, the Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit interest payable in respect of a tax default. Part C - The facts 8 The facts fall within a very narrow compass indeed. The Applicant was the owner of the Property in respect of the relevant years. She was not entitled to any relevant exemption for the relevant years and was liable for the tax. She complains that the Respondent did not furnish her with any notification or otherwise advise her as to her liability for land tax. The plain fact is that there is no obligation on the part of the Respondent to do anything of the kind. The LT Management Act obliges all owners of land in New South Wales to render returns and discharge their obligations as to land tax in accordance with the law. The fact that the Applicant was not aware of her obligations is not relevant. The documentation before the Tribunal indicates that the Applicant labours under the misapprehension that her failure to send in a questionnaire in a timely manner is the reason why she was assessed for interest. 9 The Applicant's submissions make it clear that in her view "the OSR us guilty of neglecting its obligation to inform me of my land tax liability in a timely fashion". This statement appears in her submissions dated 10 October 2007. As set out previously the Respondent was under no such obligation. 10 It is clear enough that the Applicant committed a tax default and in consequence of which the Respondent imposed interest at both the market rate and also the premium rate. However the Respondent decided to remit interest at the premium rate and thus leaving, as the only issue, interest at the market rate. Part D - The case law 11 Put in succinct terms the law as established by the cases and including, in particular, a decision of the Appeal Panel of this Tribunal, is that whereas interest at the premium rate will on occasion and for good cause be remitted, interest at the market rate will not be remitted unless there was default on the part of the Respondent. In this case there is no evidence whatever of any default by the Respondent. The complaint by the Applicant that the Respondent did not inform her of her obligations is without foundation simply because the Respondent was, as I have noted, not under any obligation to do so. As the cases make clear interest at the market rate is designed to compensate the Respondent for the fact that he did not receive the tax at the proper time. 12 In her submissions, the Applicant asserted: "the OSR is guilty of neglecting its obligation to inform me of my land tax liability in a timely fashion." She also complains of being unaware of her obligation to pay land tax. However, under s. 12 of the LT Management Act, the burden of lodging a land tax return on or before the due date is on the taxpayer (see further Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125 at para [14]). The failure to do so will occasion a "tax default" and, as noted above, once the default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid. Of course the result is occasioned irrespective of a taxpayer's awareness or otherwise of the obligation (see generally comments in Anastasovksi v Chief Commissioner of State Revenue [2003] NSWADT 270 at para 6). 13 As the Tribunal noted in Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151 (at para. [16]): "The complaints by the Applicant as to non-notification by the Respondent are without foundation. The Act [ie the LT Management Act] is framed on the basis of owners of land or (sic) obliged to furnish returns; the Tribunal refers in particular but not only to section 12 of the Act." 14 The relevant principles governing the imposition and remission of interest were considered in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19 ("Incise Technologies") at para [60] as follows: "60. In our view the primary interest rate (the market rate component) 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. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. 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." 15 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, Verick JM stated as follows in relation to the imposition and remission of the market rate component (at paras. [25] & [27]): "25. The market rate component would reflect the use by the party in question of the relevant amount of money on one hand, and the lack of use of the relevant funds by the state on the other. But the fixed premium rate component is a rate imposed by way of a penalty for the "tax default" in question. A premium rate of interest is imposed where a "tax default" is a result of some culpable conduct on the part of the taxpayer. The Chief Commissioner can also impose a penalty tax under s 26 of the TAA in cases where more serious tax defaults occur due to deliberate conduct of taxpayers. 27. In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the "tax default" is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes)." 16 The Tribunal refers also to Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21, at para. [8], Downs v. Chief Commissioner of State Revenue [2002] NSWADT 51, at pars [30], Olah v. Chief Commissioner of State Revenue [2002] NSWADT 22, at para. [30] and Macsif Pty Ltd v. Chief Commissioner of State Revenue [2007] NSWADT 116, at para. [22] ff, particularly in relation to the principle that "exceptional circumstances" will be required to justify a remission of market rate interest. Part E - Conclusion 17 As I have noted the Respondent decided after the Applicant lodged her objection to remit that interest which had been imposed at the premium rate. 18 However there is not basis as a matter of law for any further remission of interest and so that the assessment of interest at the market rate must stand. It follows that the decision under review must be 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.