Administrative Decisions Tribunal New South Wales Medium Neutral Citation: O'Hara v Chief Commissioner of State Revenue [2011] NSWADT 289 Hearing dates: On the papers Decision date: 07 December 2011 Jurisdiction: Revenue Division Before: J.Block, judicial member Decision: The decision under review is affirmed Catchwords: failure to comply with residency requirements - discretionary relief and principles involved - penalty - interest Legislation Cited: First Home Owners Grant Act; Duties Act; Taxation Administration Act Cases Cited: Federal Commissioner of Taxation v G.M. Swift and others 89 ATC 5101; Federal Commissioner of Taxation v G.M. Swift and others 89 ATC 5101; Giris Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia (1968) 119 CLR365; Philpott v Chief Commissioner of State Revenue (RD) [2008] NSWADTAP 18; Knight and anor v Chief Commissioner of State Revenue [2008] NSWADT 83l; Cameron v Chief Commissioner of State Revenue [2009] NSWADT 64; 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; Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21,], Downs v. Chief Commissioner of State Revenue [2002] NSWADT 51, Macsif Pty Ltd v. Chief Commissioner of State Revenue [2007] NSWADT 116 Category: Principal judgment Parties: Dagmar O'Hara (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Applicant in person Adam Gerard for the Respondent File Number(s): 116016 REasons for decision Part A Preliminary and Background 1The Applicant, Dagmar O'Hara, seeks review of a decision of the Chief Commissioner of State Revenue ("the Chief Commissioner" or "the Respondent") requiring her to repay a First Home Owner Grant of $7,000.00 ("the Grant") issued under the First Home Owner Grant Act 2000 ("the FHOG Act "), together with a penalty of 20% ($1,400.00). 2The Applicant also seeks review of a decision of the Chief Commissioner to revoke the stamp duty exemption granted to her in accordance with the First Home Plus Concession Scheme ("FHP Concession") under the Duties Act 1997 (" Duties Act "). The dutiable amount ("dutiable amount") owed by the Applicant on the transfer (including interest) is $12,054.32 3The Grant and the FHP Concession relate to the property located at 51 Bailey Street, Coffs Harbour ("the property"). 4The essential issue in dispute relates to the question of whether the Applicant is entitled to an exemption from the residence requirements of the FHOG Act and the Duties Act; there are also issues as to penalty referable to the Grant and interest referable to the dutiable amount. 5The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997; it may be noted that the section 58 documents in this matter are considerably lengthier than is usually the case in matters of this nature. 6At a directions hearing which took place on 31 August 2011, and for which purpose the Applicant attended by telephone link, the Tribunal directed the parties to file evidence and submissions, in the case of the Applicant by 14 October 2011, and in the case of the Respondent by 14 November 2011; the Tribunal also directed that this decision be made on the papers. 7The Tribunal, on 18 October 2011, received the Applicant's submissions and which can be regarded as both submissions and evidence. In respect of the Respondent's submissions the Tribunal allowed a short extension of time until 30 November 2011; that extension was necessary and was granted in the context of an objection at or about that time by the Applicant to the disclosure to the Respondent of documents produced under summons. The terms "AS" and "RS" relate to the Applicant's submissions and the Respondent's submissions respectively; the Tribunal has drawn on the submissions for the purposes of these reasons. Part B The Submissions. 8AS, excluding only the photograph which appears at its end, is included in full in these reasons as follows: SUBMISSIONS by Applicant DAGMAR O'HARA FIRST HOME BENEFITS APPLICANT- Client ID 11200613 FILE NUMBER 116016 Submissions for the Tribunal I refer to the directions hearing of the 31.8.2011 to file evidence and submissions by the 14.10.2011. About me I speak fairly fluent English, but I have difficulties in writing English and also great difficulties in understanding written English - official forms. Official forms are difficult to interpret, when your first language is not English. Especially when it is only me, who is the principal carer making sure that all things for the family run smoothly in that I am the mother of two boys, one at university and one at primary school - both in Germany. A very good friend helped me with the formulation of this submission. I am not able to prepare a folder like the commissioners from the OSR did, when I received it, I was scared to open it. Nevertheless, I will do my best, that you can see/follow the main idea. SUBMISSIONS As you can read in the first submission from the 15.7.2010 my plan for life was different, when I met James O' Hara and he asked me to get married in 2001, having a baby and moving to Australia in 2001. After this failed, my plan to live in Germany for good got cancelled, when I realized, that I have very good friends in Australia and that I missed Australia as a country very much. So I started to look for house prices in Coffs-Harbour. And it happened in '08, that I found the perfect place for me, my son and my ideas. The house was only on the market for 2 days, the owner took it back, because his sister was interested to buy it. I kept in contact with the real estate company and so, when his sister pulled back, I was able to get it. And then everything started in a hurry, as you can read in the submission in the folder from the OSR page 81 to 96. When I signed the form for the FHOG -I read the application form under pressure of time and thought I will have time to read it properly when I am back in Germany. So I didn't realize, that I have to inform the chief commissioner, if I can't live in the house for the time, it was required. I even didn't read the contract for the loan to buy the house- I just signed. When I was back in Germany to organize the move back to Australia in 2008-disaster struck- my next plan of life fell apart, as you can read in the first submission below (pages 79-96). My father got sick at the beginning of November '08 and passed away on the 18 that month and so I had to take care of my mum. Because the nurses in the nursing home did not feed her proper (no time and no interest) I went for nearly 5 months every day at 5 pm to feed her. When she passed away in November '09, I was exhausted .My sister didn't care for my parents, but when it comes to inherit something, interest is waking up. In March 2010 I was at the end mentally (burned out) and my doctor advised me to go into a sanatorium. I was in no condition to interpret forms in a foreign language. And this was the time, when the investigation letter arrived. In my memory I ticked a box in the way I understood the questions without thinking about the conditions from the FHOG. Refer to the answer (21.12.2010) (page 212) to my objection from the chief commissioner. a) I was aware when I signed the form in 2008, I understood the word occupation in a different way (explanation in the first submission) (page 79) under my special circumstances at the time, when I ticked the box in the investigation letter. As I mentioned before I had another plan. Occupation in my electronic translator has different answers: like to have a house or what is your work or military based etc. I thought basically the form meant and was asking (that the OSR asked) if the house was still mine. I answered "yes" thinking I was answering the house was still mine. A phone call to friend learned me something different (that I had misinterpreted the form) and I did ask if I can fill out the form again and provide reasons for not living in the house, and it got accepted And so I did start to write the story /history of my life from 1997 up to now, to provide good reasons for not living in the house. (Pages 79 to 96) Back to the letter (page 212) b)-f) of the letter (pages 212/213) Special e) (page 212) (and includes a passage below from the letter- page 212) "The Chief Commissioner does have discretion to alter the FHOG also include: Hospitalisation, tendering to sick relatives...." My father passed away in November 2008 and my mother in November 2009 (see death certificate in the folder from the OSR) They did not pass away in the same year. (THEY PASSED AWAY ROUGHLY 12 MONTHS APART) FATHER NOVEMBER 2 0 0 8 MOTHER NOVEMBER 2 0 0 9 (That was too difficult for the OSR to interpret - the OSR deciding that my parents died within the same period of each other (page 212e)) f) As I wrote in the first submission I allowed my eldest son to study at the private university to give him a chance for a good job and a wealthy future. So I had to keep working in Germany, because there is no adequate work and income in Australia possible for me. So, one thing came to the other. I had a plan, but it didn't work out, so that I had to think in other directions. BUT my target is to move back to Australia, when my eldest son finishes his degree 2012/13 in Germany- and I am only responsible for my little one - 9 and we can live from a smaller income, because I saved up some money to start an old age care business with friends. My principles are that I work to support myself not sponge on the Australian Government by means of Centrelink benefits-but I was planning in 2008 to move back to Australia and find work if I could. I know that I am not meeting the conditions to get the FHOG, BUT my plans went down the hill. But isn't it enough punishment, if your life-plan has to be changed and you have to live in a country, where you don't want to live (that is Germany) Page 159- point 17 - 19/8/2009-------for business" This shows that I am thinking like an Australian resident and that Australia is my PPR-and that I had to return to Germany for work and support my children in their education. The thinking is then I regarded Australia as my home. I know, that I am not entitled to receive the FHOG and stamp duty by law because of the fact my parents died 12 months apart, but I hope that I have good reasons as requested I didn't ask my parents to die- I would have preferred they live. In early 2008 I was aware that my mother was sick (page 160) In early 2008 I WAS NOT AWARE THAT MY FATHER WAS SICK (YET HE DIED FIRST) Quotation" The Chief Commissioner does have discretion to alter the FHOG residency requirement; such discretion will only be granted if an Applicant has `good reasons' for not meeting this requirement. I would have liked to have to have lived there (Bailey Avenue) for good from 2008- in so doing I would have qualified under the conditions of the FHOG I bet none of the other persons you have failed have had both parents did so short a time apart. I bet it is state government policy to fail everybody however good their excuses are; After all the OSR represents a cash starved government - (I would think) directing that everybody be refused. As to the Family Law Orders (page 160) I could only come to Australia at that time because it was my holidays- the family law orders had nothing to do with my holiday period -it was governed by the time I could get off from school as a teacher. The family law order was made in 2005 and I wanted in 2008 to move back permanently .Regardless of the family law order I wanted to buy a house which I did- I provided the OSR with the family law paper work- regardless of the court order- I wanted to make 51 Bailey Avenue my permanent place of residence- I wanted to show the OSR the background information to everything. I did not provide the OSR with a copy of the family law orders so that they could be used against me- After all I was a permanent resident and in 2009 I became an Australian Citizen Regardless of the family law order- regardless of the stupid ex-husband- I wanted to move back to Australia. I didn't want to go through another cold German winter- Coffs Harbours climate is far better. As to Cheryl Nolans letter (page 160) I let her know that I am the new owner of the house- I met her in front of the house when I looked at it- (PAGE 84/85) there was the history of the tenants and I could not kick them out-in my opinion the letter does not contradict me- I put the electricity in my name because I was going to move in-live downstairs and start to renovate the place- place being 40 years old- why should I provide a letter to be used as ammunition against me by the OSR Pages 159/160 where all the evidence provided by me in support of my special circumstances was misinterpreted by the OSR and was used against me. I never had any intention - at any time - of defrauding the NSW State Government Fritzlar, 9th October 2011 9RS includes under the heading "Background", and in clauses 5 to 45 a comprehensive resume of the facts giving rise to this application; those clauses, as they appear in RS, include footnoted references to, inter alia, the section 58 documents; I have checked those references and have found that they are correct; those clauses, but excluding their footnotes and also after deleting underlining, read as follows: 5 In 1997 the Applicant and James (Jim) O'Hara met in Germany. At that time, the Applicant had children from a previous marriage. The Applicant subsequently married Jim O'Hara in Germany in 2001. 6 At the time the Applicant was a permanently employed teacher, employed by the German Government. 7 In September 2001, the Applicant moved to Australia with Jim O'Hara and commenced residing in Coffs Harbour at Unit 2/17 Thompsons Road Coffs Harbour. In doing so the Applicant took unpaid leave from her permanent teaching job in Germany. 8 In January 2002, Jim O'Hara's and the Applicant's son, Michael, was born in Australia. 9. According to the Applicant, sometime after the birth of Michael the Applicant and Jim O'Hara began to experience difficulties in their marriage. In or around August of 2002, Jim O'Hara and the Applicant returned to live in Germany for a year. 10 After apparently experiencing further relationship difficulties in Germany, Jim O'Hara returned to Australia in May 2003. It appears the Applicant and their son Michael returned to Australia in August of 2003. 11 Following that the Applicant lived with Jim O'Hara and their son Michael in Australia until some point in June 2005. During the period between August 2003 and June 2005 the Applicant took annual trips to Germany to visit friends and relatives. 12 From the Applicant's account, it appears that her relationship with Jim O'Hara broke down completely in or around June 2005. 13 On advice apparently received from friends the Applicant sought to leave Australia with her and Jim O'Hara's son, Michael. 14 On 17 July 2005, Jim O'Hara obtained a "Removal from Australia Order" from the Family Court of Australia restraining the Applicant from "taking or sending or attempting to take" Michael O'Hara from Australia. Family Law Act proceedings subsequently followed. 15 It is clear from the documents available from those proceedings that it was the Applicant's intention and wish to return home, with Michael O'Hara, to live and work in Germany. In support of her case in the Family Law Court, the Applicant filed a report from Psychologist, Chris Boris. Relevantly, the report, based on consultations with the Applicant, stated as follows: "A main concern is upcoming court proceedings to determine if she is allowed to go home to Germany to live with her sons. Dagmar has an 18 year old son Max who lives in Germany and a 3 year old son Michael who has a father who lives in Australia. Dagmar's parents, twin sister, family and friends also live in Germany. Dagmar does not have a support network in Australia. Dagmar has a permanent position as a Teacher in Germany, and is currently on leave; hoping to be allowed to return to work in January. In Australia Dagmar is reliant upon Centrelink benefits: she does not want to raise Michael on a low income. ... Dagmar can return to Australia with Michael for 5 weeks a year during the German School Holidays; and Jim can also visit them in Germany. Other forms of communication could also be encouraged like mail (cards, letters, presents), phone email and chat rooms. The prospect of being unable to return home to her family and career has left her distraught... If Dagmar was made to live in Australia she would loose her job and career and her earning potential... I hope due consideration be given to Dagmar's requests to return home to family and career." 16 The Family Law Act proceedings were subsequently resolved on 2 November 2005, by way of Terms of Settlement. 17 Order 1 of the Terms of Settlement provided that Dagmar could return to live in Germany with Michael. 18 Orders 4(a) and 4(b) of the Terms of Settlement are also relevant. They provide as follows: "4. That the child have contact with the father as follows: (a) for a period of no less than five (5) weeks in July and August of each year to coincide with the Mother's annual leave which falls during the German summer school holiday period. (b) the above contact is implemented by the Mother travelling to the Father's residence ." 19 Following the Family Law Court proceedings being settled the Applicant returned in June 2006 to live in Germany and re-commence her full time career. 20 In accordance with the Family Law Court Terms of Settlement the Applicant returned to Australia in July and August of 2007. During her time in Australia an incident apparently occurred on 17 July 2007, which was the catalyst for Jim O'Hara to apply for an Apprehended Violence Order (AVO) against the Applicant. 21 On 10 August 2007, the Applicant responded to the grounds of complaint contained in the AVO Application. In that document, the Applicant stated: "Mr O'Hara is well aware that we will be leaving Australia on August 14 th , 2007 at the end of our five weeks here... I am returning to Germany to my work as a schoolteacher and am not returning to Australia until July 2008 in compliance with Family Law Court Orders. Until that time the only contact I will have with Mr O'Hara is the change over of Michael and in 2008 the only contact I will have is at the change overs. Therefore, Mr O'Hara cannot possibly fear any violence, harassment or intimidation from me and I ask that this order be dismissed or adjourned until my return in July 2008." 22 At some point in or around May 2008, the Applicant discovered the grant property whilst searching for properties on the internet. The Applicant organised for friends in Australia to inspect the property and a power of attorney to commence the formal purchasing process. 23 Contracts for the sale and purchase of the grant property were exchanged on 17 June 2008, just prior to the Applicant's annual July/August visit to Australia in compliance with the Family Court of Australia Terms of Settlement orders. 24 The Applicant purchased the grant property subject to existing tenancies and with full knowledge of the existing tenancy. The Applicant stated in her objection, "I knew that there were tenants when I signed the contract..." . At that time the tenancy existed in favour of Malieth Madieng Mou and Ayen Muluk Shuwar. The rent was $355 per week. The tenancy was managed by Florent and Munday Real Estate. 25 Settlement of the Applicant's purchase of the grant property occurred on 29 July 2008. 26 During the time the Applicant was seeking a loan to finance the purchase of the grant property, the Applicant allegedly said she was "looking for an investment property" . That notation is contained in a business record of the Bank of Queensland produced under Summons. 27 On the same day the Applicant terminated the managing agency contract of Florent and Munday Real Estate and took personal management of the rental. The rental bond paid in respect of the property was transferred to the Applicant on 29 July 2008. 28 Around this time, in July 2008, the Applicant apparently told Cheryl Nolan, a friend of the tenants, that she knew she needed to live in the house for 6 months in order to satisfy the "First Home Grant Department 29 On 3 August 2008, despite not living in the property the Applicant put her name on the Country Energy electricity accounts, along with Malieth Madding Mou (the tenant). 30 As she indicated she would, on her incoming passenger card completed on 24 June 2008, the Applicant departed Australia for Germany on 3 August 2008. 31 The Applicant did not return to Australia until 13 July 2009. 32 The Applicant's father died in Germany on 18 November 2008. 33 Malieth Madieng Mou and Ayen Muluk Shuwar continued to rent the grant property from the Applicant, paying $355 rent per week ($710 per fortnight) into the Applicant's Bank of Queensland account. 34 Malieth Madieng Mou and Ayen Muluk Shuwar rented the grant property until approximately 1 June 2009. 35 On 5 June 2009, the Applicant commenced renting the grant property to Dobora Ajuek Jarak, Stephen Tong and Rebaka Tong for a fee of $710 per fortnight. That residency is apparently still continuing. 36 The Applicant returned to Australia on 13 July 2009 and departed again, in the usual course, on 19 August 2009. The Applicant returned to Australia again on 25 June 2011 and departed again, in the usual course, on 2 August 2011. The Applicant apparently did not bring her and Jim O'Hara's son Michael to Australia for what Jim describes as "his regular holiday in Australia" during 2010. The Applicant wrote in an email to Jim O'Hara dated approximately 16 June 2010, " Dear Jim, I am writing to advise that I can't come to Australia this year with Michael..." . There was apparently a dispute between the Applicant and Jim O'Hara regarding this. 37 The Applicant has never lived in the grant property. 38 Assuming that rent continues to be paid on the grant property in the sum of $355 per week, the Applicant has earned approximately $63,000+ in rental income. 39 On 3 March 2010, the Chief Commissioner notified the Applicant that he was commencing an investigation into the Applicant's residency at the grant property. The letter requested the Applicant complete an enclosed Statutory Declaration confirming when the Applicant started "living" in the grant property and the periods she "lived" there. It also asked for copies of documents that would assist in verifying that the Applicant "lived" at the grant property. 40 On 22 March 2010, the Applicant returned a completed and sworn Statutory Declaration. The Applicant swore that she "started residing in the property on 30/07/2008" . The Applicant also ticked a box to confirm that "I am still living in the property" . 41 Following investigation by the Chief Commissioner, the Applicant provided a new Statutory Declaration wherein she declared she had never lived in or occupied the grant property. 42 On 17 August 2010, the Chief Commissioner issued the Applicant with a First Home Owner Grant - Notice of Assessment requiring the Applicant to repay the FHOG together with a penalty of 20%, being $1,400.00. On the same date the Chief Commissioner issued the Applicant with a Duties Notice of Assessment requiring the Applicant to pay stamp duty on the purchase of the grant property in the sum of $12,054.32. 43 On 14 October 2010, the Applicant objected to the decisions of the Chief Commissioner to recall the FHOG, together with penalty and to reassess the Applicant's stamp duty liability. 44 The Chief Commissioner disallowed the Applicant's objections on 21 December 2011. 45 On 18 February 2011, the Applicant completed an application for review and filed that document in the Tribunal on 2 March 2011. 10It will be noted that the property was acquired in 2008 and at a time after the Applicant had returned to Germany; it was acquired subject to an existing tenancy and indeed the property has always since its acquisition been occupied by tenants. The Applicant has never lived in the property although as appears from clause 40 of RS she furnished a statutory declaration to the Respondent in March 2010 in which she swore that she started living in the property in July 2008 and moreover, and by ticking the relevant box in the declaration, was still living in it, That statutory declaration was false; it was replaced by a later statutory declaration as to which see clause 41 of RS quoted previously in these reasons. 11Much of the content of AS is open to considerable doubt and in fact cannot be believed: the Applicant's assertion that she "understood the word occupation in a different way" is contradicted by the delivery by her of the statutory declaration referred to in clause 40 of RS. In this context: (a)The Applicant in AS stated that her father died in November 2008 and that her mother died in November 2009. AS refers to her care of her parents in their final illnesses The Applicant returned to Germany years prior to the death of her mother, and, and notwithstanding the lapse of more than 2 years since the death of her father she does not on the evidence before me have any intention of returning to Australia. Her statements as to her desire to return to Australia are contradicted by other and cogent evidence as to which the content of RS quoted previously in these reasons and in this clause 11 is, in particular, apposite. (b)on the evidence before me the Applicant returned to Germany in the circumstances set out in RS for personal and career reasons and in order to remain in Germany;; she had obtained the right to return to Germany with her son despite opposition by her ex-husband. (c)the property was plainly purchased as an investment property (and see clause 26 of RS quoted previously in these reasons) in that it has always been rented out and from which considerable rent has been derived; I include in this context, and, with approval, clauses 104 to 112 of RS reading as follows: 104 The Applicant's case would have the Tribunal conclude that the Applicant intended, in July and August of 2008, to move to Australia permanently and take up residence in the grant property in accordance with her stated intention and the requirements of the FHOG and concession, but was thwarted in that endeavour by the unforseen need to return to Germany to care for her sick father and to prepare her child Michael for such a move to Australia. 105 Unfortunately for the Applicant, this conclusion cannot be accepted by the Tribunal, on the balance of probabilities, on the basis of the evidence before it. A proper analysis of the objective evidence before the Tribunal does not bear that proposition out. 106 In summary, the Applicant's contentions in this regard cannot be accepted for the following reasons: The Tribunal does not have before it objective evidence capable of corroborating the Applicant's assertions made since these proceedings commenced. The only "evidence" supporting this contention are the Applicant's own, after the fact, assertions; This difficulty is compounded by the obvious credit concerns over the Applicant as a witness; Moreover, rather than being suggestive of the Applicant's contentions, the objective material points to a conclusion on the balance of probabilities as follows: The Applicant purchased the grant property during the July/August 2008 period, when she was in Australia to comply with Family Court of Australia orders. July and August are the only two calendar months that the Applicant ever visits Australia and has ever intended to visit Australia since 2006; At the time the Applicant purchased the grant property the Applicant was a resident of Germany; a German national; had a long term full time job in Germany; was raising her young son Michael in Germany; was supporting her elder son Max in Germany and had her home and familial ties in Germany and intended to continue to do so. Indeed the Applicant had as recently as 2 years before gone through Family Court of Australia proceedings with the purpose of being allowed to return to live in Germany, rather than Australia, with her son Michael. 107 The only objective evidence that is even remotely relevant in the sense of supporting the Applicant's contention that she returned to Germany to care for her apparently sick father is the fact of his death on 18 November 2011. That is neither evidence that the Applicant was forced to stay in Germany to care for a sick father or evidence that he suddenly and unexpectedly fell ill at some point after she purchased the property and fell ill in such unexpected circumstances that required her to look after him and completely alter long standing plans to move to Australia. The Tribunal only has the Applicant's unsworn word on this and that unsworn word, in the Respondent's submission, is severely tainted by the mistruths told in the sworn statutory declaration. Neither the Applicant's father's or mother's death adequately explains also why the Applicant still has not moved to Australia. 108 It is for these reasons why the Tribunal, must in this case, look to the objective independent evidence before it. The independent objective evidence, most of which has its genesis long before these proceedings commenced, paint, on the balance of probabilities, a very different story. 109 Between July 2005 and November 2005, the Applicant and Jim O'Hara were involved in Family Court of Australia proceedings relating to their child Michael. The Applicant was seeking to return to live in Germany. There is good reason for that. Germany was and is her home. 110 The psychologist report of Dr Boris, lead in evidence in those proceedings, is instructive. It describes the Applicant having told Dr Boris that; " A main concern is ...if she is allowed to go home to Germany to live with her sons ; the Applicant's parents, twin sister, family and friends also live in Germany. Dagmar does not have a support network in Australia" ; the Applicant has a " permanent position as a Teacher in Germany, and is currently on leave; hoping to be allowed to return to work in January. In Australia Dagmar is reliant upon Centrelink benefits: she does not want to raise Michael on a low income" ; The prospect of being unable to return home to her family and career ... left the Applicant "distraught" ; " If Dagmar was made to live in Australia she would loose her job and career and her earning potential..." ; the Applicant was "requesting" to "return home" to Germany to "family and career" . 111 What has occurred since 2005 is also instructive. The Applicant, still to this day in 2011, has never been back except to "comply with Family Court Orders" which require her to bring Michael to Australia in July and August each year. The only time this did not occur was 2010 when the Applicant and Michael did not come at all. The Applicant described that situation in an email to Jim O'Hara as being " I can't come to Australia this year with Michael" . 112 The nuance in the emails between the Applicant and Jim O'Hara and in the material the Applicant provided in relation to AVO proceedings against her was that she regards Australia as a place she comes to, has to come to, each July and August to comply with court orders. No objective materials bespeak of Australia and the grant property as the place the Applicant is, or was ever, intending to come and live in on a permanent basis. For example, in the AVO proceedings, the Applicant stated: "Mr O'Hara is well aware that we will be leaving Australia on August 14 th , 2007 at the end of our five weeks here... I am returning to Germany to my work as a schoolteacher and am not returning to Australia until July 2008 in compliance with Family Law Court Orders. Until that time the only contact I will have with Mr O'Hara is the change over of Michael and in 2008 the only contact I will have is at the change overs." Part C The legislation. 12References in these reasons to the FHOG Act and other legislation are references (in those instances where there have been relevant statutory amendments) to that statute in the form in which it applied on the dates on which the Applicant acquired the property, applied for the grant and received it. 13Section 7 of the FHOG provided: 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." 14In the Applicant's case the "eligible transaction" was the contract for the purchase of the property; (see s.13(1)(a)). 15Section 12 of the FHOG Act provided: "12 Criterion 5-Residence requirement 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 . (3)The Chief Commissioner may, if satisfied there are good reasons to do so, do either or both of the following: (a)approve the commencement of occupation by the Applicant of the home to which the application relates as a principal place of residence more than 12 months after completion of the eligible transaction, (b)approve the occupation of the home as a principal place of residence for a period of less than 6 months. (4)The Chief Commissioner may, if satisfied there are good reasons to do so, exempt an Applicant from the residence requirement. (5)An approval or exemption under this section may be given by the Chief Commissioner at any time, even if the period of 12 months after completion of the eligible transaction has already expired or the Applicant's occupation of the home as a principal place of residence has already ceased. (6)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. 16In this case, the Grant was paid in accordance with s.20 of the FHOG Act, in July 2008. Section 20(1)(b) of the FHOG Act provided that the Chief Commissioner may authorise the payment of a grant in anticipation of compliance with the residence requirement if the Chief Commissioner is satisfied that the Applicant who is required to comply, but has not yet complied, with the residence requirement, intends to occupy the property as his or her principal place of residence for a continuous period of at least 6 months commencing within twelve months after completion of the eligible transaction or a longer period approved by the Chief Commissioner. Accordingly and under this provision, the Chief Commissioner is given power to issue a grant prior to an Applicant occupying the property as his or her principal place of residence. 17Sub-section 20(3) of the FHOG Act provided that where a 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." 18The term "residence requirement" was defined in s.3 of the FHOG Act. A failure to comply with the condition in s.20(3) constitutes an offence which is punishable by a maximum of 50 penalty units: s.20(4). 19Section 23 of the FHOG Act provides the Chief Commissioner with power to vary or reverse a decision made in respect of an application for a grant where he is later satisfied that the decision is incorrect. 20Section 45 of the FHOG Act provided: "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." 21The Tribunal has jurisdiction to determine this application by the operation of ss.28(1) and s.25 of the FHOG Act and s.38 of the Administrative Decisions Tribunal Act 1997. 22s.74 of the Duties Act provided: "74 Eligible agreements or transfers (1)The agreement or transfer must be for the acquisition of a first home or for the acquisition of a vacant block of residential land intended to be used as the site of a first home. (2)The agreement or transfer must be for the whole of the property. (3)The dutiable value of the dutiable property that is the subject of the agreement or transfer must be less than: (a)$600,000 if the property has a private dwelling built on it, or (b)$450,000 if the property comprises a vacant block of residential land." 23s.76 of the Duties Act provided: "76 Residence requirement (1)The home must be occupied by the first home owner or one of the first home owners who is acquiring it as a principal place of residence for a continuous period of at least 6 months, with that occupation starting within 12 months (or such longer period as the Chief Commissioner may approve) after completion of the agreement or transfer. This requirement is referred to as the residence requirement . (2)The Chief Commissioner may, if satisfied there are good reasons to do so in a particular case: (a)modify the residence requirement by approving a shorter period of occupation by a first home owner, or (b)exempt a first home owner from the requirement to comply with the residence requirement. (3)In the case of an agreement or transfer for the acquisition of a vacant block of residential land, it is sufficient that the Chief Commissioner is satisfied that the vacant block is intended to be used as the site of a home to be occupied by the first home owner or one of the first home owners who is acquiring it as a principal place of residence. (4)(Repealed) (5)For the purpose of this section, an agreement or transfer is completed when a purchaser or transferee becomes entitled to possession of the home and, if the interest in the land acquired by the purchaser or transferee is registrable under a law of the State, the interest is so registered. 24s.76A of the Duties Act relevantly provided: "76A Approval of application in advance of satisfaction of residence requirement (1)The Chief Commissioner may approve an application in anticipation of compliance with the residence requirement under section 76 if the Chief Commissioner is satisfied that each Applicant required to comply 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, with that occupation starting within 12 months after completion of the agreement or transfer or within a longer period approved by the Chief Commissioner. (2)If an application is approved in anticipation of compliance with the residence requirement, the approval is given 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)pay the relevant duty to the Chief Commissioner. (3)The relevant duty is the difference between the total amount of duty that would have been payable on the transactions and instruments the subject of the application, if they had not been eligible under the scheme, and the total amount of duty (if any) paid in respect of those transactions and instruments. (4)A person who fails to comply with the condition prescribed by this section is guilty of an offence. Maximum penalty: 50 penalty units." Part D Case law and some other relevant aspects 25The evidence before me indicates in clear terms that the Applicant did not ever take up residence in the property and (despite her protestations to the contrary contained in AS) and despite the lengthy time period involved does not have any present intention to do so, 26In Federal Commissioner of Taxation v G.M. Swift and others 89 ATC 5101 French J made it clear (in relation to a discretion of a similar nature) that the dispensing power is incidental and ancillary to the primary object of the legislation; he noted also that there will be a threshold beyond which the primary object of the legislation would be defeated; see page 5116 as follows: The dispensing power is incidental and ancillary to the primary object of the legislation. On the spectrum of cases in which it could conceivably be exercised, there will be a threshold beyond which it would defeat the primary object of the legislation. It is unnecessary to define that threshold for present purposes. The discretion cannot, however, be limited to the case where a person has not in any way benefited from the evasion giving rise to the recoupment tax liability. And in this respect ground 4(c) of the grounds of appeal was rightly abandoned. The absence of such a simply expressed limitation from the language of sub-s.5 (4) is indicative of the absence of any such legislative intention. That is not to say that it is not open to consider whether a person claiming dispensation under the sub-section benefited from the sale of shares in the subject company. But, it is not, as a general rule, conclusive. 27See also French J in Swift's case at page 5118 as follows: It may be said that the Tribunal's exercise of its discretion has undermined the objectives of the Act. If that be so, then it is for the legislature to consider confining the dispensing power. But the conflict between the primary purpose of collecting evaded company tax and the ancillary function of dispensation has not risen here to such a level that the primary purpose is defeated. Any dispensation under sub-s.5 (4) will necessarily undermine the primary purpose, for tax which might have been collected will not be collected. That is an inescapable consequence of the operation of Sub-s.5 (4). Its invocation by the Tribunal in this case has not, in my opinion, involved the crossing of that threshold beyond which the exercise of the discretion falls outside the scope and objects of the Act. 28One of the leading cases in this area is Giris Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia (1968) 119 CLR365. At pages 380 and 381 Menzies J noted that discretions of this nature can be difficult to exercise: The section does confer an extraordinary responsibility upon the Commissioner of Taxation. It requires him, in every case where there is income of a trust estate in a particular year of income, to consider whether it is unreasonable "that this section should apply in relation to that trust estate in relation to that year of income". Unless he forms such an opinion the section applies. The section directs the Commissioner in forming his opinion to have regard to certain facts and circumstances but gives no guidance upon what significance should be given to the presence or absence of the facts or circumstances as specified. Moreover, there appears to be no common principle underlying the various matters specified so as to give the Commissioner a lead to other matters to which he might have regard. Accordingly, whether or not the section is to apply to a particular trust estate has been made to depend upon an opinion which the Commissioner may form, after the close of the year of income, and with no legislative guidance other than that he is to have regard to a medley of facts and circumstances. The enactment of such a provision can only be regarded as an acknowledgment by the legislature of its inability to make laws laying down prospectively what will give rise to a particular taxation liability. It leaves, as a problem for the Commissioner to decide, retrospectively and in the light of what has happened, whether the particular provision should not apply to a particular trust estate in respect of a year that has passed. 36 And at page 384 of Giris Windeyer J said: The Commissioner is to ask himself whether it would be unreasonable that s. 99A should apply to any particular trust estate. But the idea of reasonableness seems to be here amorphous. It is, of course, true that, as a measure in fact of time, space, quantity and conduct, reasonableness is a concept deeply rooted in the common law: and so, in such cases, is the power of a court to say whether a particular decision of that fact is or is not within the bounds of reason. But, in cases of that kind, the circumstances in which the question arises provide criteria for its solution. Here the Commissioner's discretion is apparently at large. It does not clearly emerge from the Act in respect of what matter - or whose interest, that of the taxpayer or of the revenue - he is to consider whether it would be reasonable or unreasonable to apply s. 99A in the case of any particular trust estate. He is to have regard to certain stated matters; but what weight or influence each is to have is not made clear. Moreover, the Act requires that he "shall have regard to such other matters, if any, as he thinks fit". However I assume that he is to be guided and controlled by the policy and purpose of the enactment, so far as that is manifest in it. That would exclude from his consideration and matter which it would be unlawful for him to take as a criterion 29This case is quintessentially one in which to grant discretionary relief would run counter to the underlying policy and the purposes of the relevant legislation. 30Apart from the false statutory declaration referred to previously in these reasons the Tribunal notes that in her grounds of objection the Applicant stated, "firstly, if all I thought that 'occupying the home as their principal place' means that the house must be owned by me (so that I couldn't sell it straight away) and not that I actually had to live in the house." 31This is, as the Chief Commissioner contends, an unacceptable explanation having regard to material by Cheryl Nolan which directly contradicts the Applicant's version. It is reasonable to infer that the Applicant relies on the veracity and truth of what Cheryl Nolan says, given that Cheryl Nolan was apparently acting on her behalf and at her instance. Cheryl Nolan said: "Dagmar explained that she needed to live in the house for 6 months in order to satisfy the First Home Grant Department (Office of State Revenue) requirements." 32This statement was provided for the Applicant's benefit and indeed was provided to the Tribunal by her, it casts serious doubt over the Applicant's explanation as to why she (and she contends, unknowingly) made a false statement to the Chief Commissioner. Part E The FHOG penalty 33Pursuant to s.45(1)(b) of the FHOG Act the Chief Commissioner can require repayment of a grant if the Chief Commissioner reverses the decision under which the grant was made. In this matter the Chief Commissioner issued an assessment requiring the Applicant to repay the grant. If an Applicant fails to make a repayment required under s 45 or the conditions of the grant, the Chief Commissioner may impose a penalty not exceeding the amount the Applicant is required to repay: see s.45(3). In this matter the Chief Commissioner has imposed a penalty of 20%. 34The Tribunal refers to the recent decision of the Appeal Panel in Philpott v Chief Commissioner of State Revenue (RD) [2008] NSWADTAP 18 which approved the Tribunal's comments in its recent decision in Knight and anor v Chief Commissioner of State Revenue [2008] NSWADT 83 as to the relevant factors to be considered in determining whether a discretionary decision to impose a penalty was the correct and preferable decision. In Knight Judicial Member Verick held that the factors to be taken into account include: (1)the truthfulness of the original statements made by the Applicant in his or her application for the grant; (2)the surrounding circumstance including the intention of the Applicant in relation to the occupation and use of the property as his or her principal place of residence at the time when seeking the grant; (3)the reasons for failure to comply with conditions of the grant; (4)whether the Applicant has occupied the property as his or her principal place of residence; (5)the candour of the Applicant in his or her responses to compliance inquiries; and (6)whether the grant been refunded . 35Bearing in mind that, on the objective material before me it cannot be accepted that there was ever any genuine intention to meet the terms of the Grant, that the Applicant has continuously leased the property whilst she lives in Germany, that the Applicant failed to inform the Chief Commissioner of her failure to meet the residence requirement and failed to repay the Grant, and that the Applicant made false assertions in a statutory declaration, the Chief Commissioner's decision to impose a penalty of 20% should not be disturbed. Interest 36The Chief Commissioner has imposed market rate interest and also premium rate interest as a result of the Applicants' failure to pay the relevant duty by the due date. The failure by the Applicant to pay the relevant duty within 14 days after the end of the period within which she was permitted to comply with the residence requirement, constituted a "tax default" in terms of s 3 of the Taxation Administration Act . The term "tax" is defined in s 3 of the Taxation Administration Act to include any duty, interest and penalty tax payable under a taxation law: see Cameron v Chief Commissioner of State Revenue [2009] NSWADT 64 at paragraph [70]. 37Section 21(1) of the Taxation Administration Act provides that if a "tax default" occurs, the taxpayer is liable to pay interest on the amount of tax unpaid. The interest rate consists of a variable market rate component and a premium rate component. The market rate component fluctuates and is connected to the Reserve Bank's Bill rate: see s.22(2). The premium rate component is set by s 22(3) of the Taxation Administration Act Act at 8 per cent. 38The relevant principles governing the imposition and remission of market interest were considered in Chief Commissioner of State Revenue v Incise technologies Pty Ltd & Anor [2004] NSWADTAP 19 (" Incise Technologies ") 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."[my emphasis] 39In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, Verick JM stated in relation to the imposition and remission of the market rate component (at paragraphs [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 TA Act 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)." See also 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 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. 40Consistent with these principles the Chief Commissioner's decision to impose market rate interest was correct and cannot be disturbed. There are no exceptional circumstances, which would justify remission of the market rate interest imposed. 41As to the premium component the Tribunal refers to Cameron's case; the Tribunal considers that the imposition of premium rate interest is justified for (inter alia ) the following reasons: (1) the Applicant did not comply with the conditions of the First Home Plus concessions; (2) the Applicant's failure to comply with the residence requirement was as a result of her personal choice; (3) the Applicant has earned market rent from the property in excess of $63,000; (4) the Applicant did not inform the Chief Commissioner of her failure to comply with the "residence requirement"; ( 5) the Applicant swore a false declaration; and (6) the tax payable remains outstanding. Part F Conclusion 42A consideration of all of the evidence before the Tribunal must result in a conclusion that the Applicant was never entitled to the Grant or the duty concession applied for her by her. There is no basis upon which discretionary relief can be granted. The decision under review is 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. Decision last updated: 22 March 2012