Hannagan v Chief Commissioner of State Revenue [2012] NSWADT 15

Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Hannagan v Chief Commissioner of State Revenue [2012] NSWADT 15 Hearing dates: 28 November 2011 Decision date: 08 February 2012 Jurisdiction: Revenue Division Before: A Verick, Judicial Member Decision: The assessment is set aside and the matter remitted to the Respondent to issue an assessment to Kurt Huneke on a dutiable value of $204,187.50. Catchwords: Duties Act - whether transfer exempt Legislation Cited: Duties Act 1997 Family Law Act 1975 (Cth) Administrative Decisions Tribunal Act 1997 Taxation Administration Act 1996 Cases Cited: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 Oamington Pty Ltd v Commissioner of Land Tax (1997) 98 ATC 5051 ISPT Nominees Pty Ltd v Chief Commissioner of State revenue [2003] NSWSC 697 Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSWADT 271 Category: Principal judgment Parties: Kimberley Hannagan (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel T L Wong (Respondent) K Hannigan (Applicant in person) Crown Solicitor (Respondent) File Number(s): 116012

Decision 1The Applicant seeks review of an assessment issued by the Chief Commissioner of State Revenue (the "Respondent") on 28 June 2010 to the Applicant and her husband, Kurt Blaine Huneke. Under the assessment they were required to pay duty on a transfer dated 26 February 2010 from Patrick Julian Kenny of his interest in the property consisting of Lot 30 of Section C1 in Deposited Plan 3300 being 110, Essilia Street, Collaroy Plateau (the "Property"). 2The facts leading to the transfer are essentially not in dispute and it is convenient to adopt the following summary of the facts as set out in the Applicant's written submissions: 1. Kimberley Ann Hannagan (Kimberley Hannagan) married Patrick Julian Kenny (Julian Kenny) on August 24, 1991. On 29 April 1994 they bought a house at 110 Essilia Street Collaroy Plateau (the Property). They were registered on the title as Joint Tenants. 2. Kimberley Hannagan and Julian Kenny lived at the Property together from 1994 until 2003. During this period they had two children, Daniel and Laura (the Children). 3. The Property was refinanced with the Commonwealth Bank in 2002 to an amount of $440,000. The increase in finance was to pay down debt and make some improvements to the Property. 4. Kimberley Hannagan and Julian Kenny separated in a gradual amicable process through 2001/2002. However both parties remained living in the Property until March 2003. 5. On or about March 2003, Kimberley Hannagan began a relationship with Kurt Blaine Huneke (Kurt Huneke). 6. Julian Kenny moved out of the Property on or about March 2003 and Kimberley Hannagan and the Children continued to reside at the property. 7. On or about August 2003 Kurt began residing with Kimberley Hannagan at the Property. 8. On or about March/April 2004 Julian Kenny, Kimberley Hannagan and Kurt Huneke reached an agreement in respect to the property that would see the Children remain in the home and be stable during their schooling years. The agreement was that the Property would be refinanced and Kurt Huneke would be added to the title. 9. On 8 April 2004, the Property was mortgaged to the Commonwealth Bank to a value of $640,000. Julian Kenny and Kimberley Hannagan remained on the title with 99/200 shares each and Kurt Huneke was added with a 2/200 share. The three parties were named on the title as Tenants in Common. This transfer was made to comply with bank requirements to qualify for the loan. All three incomes were required to borrow the required sum. The money was borrowed to improve the house and assist with paying debt. From that time, Kurt Huneke and Kimberley Hannagan have been responsible for the repayments of the mortgage. 10. The transfer of 2/200 interest was made to Kurt Huneke and ad valorem duty was paid on the transfer of the 2/200 interest in the Property. 11. Kimberley Hannagan and Julian Kenny were divorced on May 31 2004. 12. Kimberley Hannagan and Kurt Huneke were married on 19 January 2006. 13. In 2010 Julian Kenny requested that his name be removed from the title of the Property as agreed between the parties. While Julian Kenny had no responsibility for the repayment of the mortgage, he however was encumbered on the title and this limited his applying to borrow money in his own right. 14. To free Julian Kenny of the encumbrance, on or about early January 2010 Kimberley Hannagan and Kurt Huneke agreed to refinance the loan on the Property in their names and arrange to have Julian Kenny's name removed from the title. It was further agreed between the parties that Julian Kenny's share in the Property would be transferred to Kimberley Hannagan and then the Property would be transferred from Kimberley Hannagan to Kurt Huneke with a view to the interest in the property being shared as tenants in common by Kimberley Hannagan and Kurt Huneke. 15. The agreement for the transfer of the property from Julian Kenny to Kimberley Hannagan was given effect in Consent Orders of the Local Court at Manly on February 12 2010 File No FL 125/100001 attached to the Affidavit of Kimberley Hannagan. 3On or about 19 February 2010, the Applicant attended on the Respondent's office "to enquire about the transfer of the property" and sought advice from "the staff at the OSR counter on the question of duty whether there needed to be one transfer for Julian Kenny to Kimberley Hannagan and then a transfer from Kimberley Hannagan to Kurt Huneke, or whether there could be one transfer from the original parties to Kimberley Hannagan and Kurt Huneke". The Applicant claims that she "was advised that 'it didn't matter'" and on that basis the original transfer from Julian Kenny to Kimberley Hannagan was stamped "section 68(1) - Original No Duty Payable". 4On 20 February 2010, the Applicant claims she returned to the Respondent's office and on the advice given on the previous day the Applicant presented the original transfer as an amended transfer by now including the name of Kurt Huneke as a transferee and the tenancy was described as 'TENNANTS IN COMMON IN EQUAL SHARE'. The changes were noted by the Office of State Revenue but no duty was charged. 5On 10 March 2010, the transfer was registered with the Applicant and Kurt Blaine Huneke as tenants in common in equal shares. 6On 19 April 2010, the Applicant and Kurt Huneke were informed that the Respondent was investigating the transfer of the Property to them. In the letter the Respondent also indicated as follows: I note that Ms Hannagan applied for exemption from duty on a transfer of the above property from Julian Kenny to herself subsequent to their divorce. This exemption under section 68 of the Act provides that no duty is chargeable on a transfer of matrimonial property where that property is transferred to the parties to a marriage that is dissolved, or to either of them. That is, a transfer of Mr Kenny's interest to Ms Hannagan would have been exempt under section 68. However, the transfer that was lodged for registration at the Land and Property Management Authority shows that Mr Kenny's interest was transferred to both of you. Accordingly, the said exemption cannot apply to the transfer. This transfer is a dutiable transaction under the Act and duty is payable on the encumbered value of the interest transferred as at the date of the transfer. Accordingly, please furnish a valuation by a registered valuer of the subject property as at 19 February 2010. 7On 18 June 2010, the Applicant forwarded to the Respondent a valuation prepared by a qualified valuer indicating that 'Kenny Julian's interest (49.5%) had a dutiable value of $408,375'. 8In a short audit report prepared by a senior compliance officer pursuant to the investigation, the officer concluded that: 'No suggestion that the alteration was anything other than an innocent mistake'. 9The Respondent issued a Notice of Assessment on 28 June 2010 requiring the Applicant and Kurt Huneke to pay the sum of $14,052.81 being the duty payable on the transfer as determined by the Respondent. 10An objection was lodged by the Applicant against the assessment on 20 August 2010. The objection was disallowed on 6 December 2010.