Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Doumanis v Chief Commissioner of State Revenue [2012] NSWADT 59 Hearing dates: 5 March 2012 Decision date: 04 April 2012 Jurisdiction: Revenue Division Before: A Verick, Judicial Member Decision: The Chief Commissioner was entitled to issue the assessments to recover the grant and the duty payable on the transfer and mortgage of the property. Catchwords: Jurisdiction - requirement that applicant occupy the premises for six months period within 12 months of payment- whether power to shorten the period may be exercised after 12 months has elapsed - First Home Owner Grant Act 2000, ss 12(1), 20(2), 45(1) and Duties Act 1997, ss 76, 76A. Legislation Cited: First Home Owner Grant Act 2000 Duties Act 1997 Taxation Administration Act 1996 State Revenue Legislation Further Amendment Act 2005 Cases Cited: Lawrance & Anor v Chief Commissioner of State Revenue [2002] NSWADT 104 Taylor v Chief Commissioner of State Revenue [2004] NSWADT 36 McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214 UH v Chief Commissioner of State Revenue [2005] NSWADT 284 WH v Chief Commissioner of State Revenue [2006] NSWADT 199 Basonovic v Chief Commissioner of State Revenue [2006] NSWADT 236 Fisk v Chief Commissioner of State Revenue [2008] NSWADT 59 Sobhani v Chief Commissioner of State Revenue [2009] NSWADT 198 Category: Principal judgment Parties: Anthony Doumanis (Applicant) Chief Commissioner of State Revenue Representation: Counsel L Sanderson (Respondent) T A Doumanis OAM (Applicant) Crown Solicitor's Office File Number(s): 116049 REASONS FOR DECISION 1The applicant applied for and received on 12 January 2006 a $7,000 first home owner grant under the First Home Owner Grant Act 2000 ("the FHOG Act") to assist the applicant to purchase a unit situated in Waverley, New South Wales ("the Property"). By virtue of the First Home Plus Concession Scheme ("the FHP Concession") under the Duties Act 1997 ("the Duties Act") the applicant did not pay duty on the transfer and mortgage of the Property. 2On 13 November 2008, following an investigation, the Chief Commissioner formed the view that the applicant had failed to comply with the "residence requirement" under both the FHOG and Duties Acts. The Chief Commissioner reversed the decision to pay the grant and proceeded to issue an assessment to recall the grant under s 45 of the FHOG Act with a penalty ($2,100). The Chief Commissioner also on 13 November 2008 issued a re-assessment under s 9(1) of the Taxation Administration Act 1996 ("the TA Act") to recover $15,292 (with interest of $3,966.21) the duty payable on the transfer and $1,351 (with interest of $349.93) the duty payable on the mortgage. 3The Chief Commissioner disallowed objections against the assessments. 4The applicant seeks a review of the determinations made by the Chief Commissioner to issue the assessments. But, at the hearing, the parties agreed that an initial preliminary question arises in this matter. The parties agreed that the resolution of the particular question might avoid the need to deal with the review of the assessments. 5The preliminary question is whether or not the provisions found in s 12 of the FHOG Act and s 76 of the Duties Act, as they stood at the relevant time, gave the Chief Commissioner any discretion to allow a shorter period of occupancy after the expiration of the period in which an applicant was required to comply with the residence requirement. 6In relation to the FHOG Act, the residence requirement at issue was in the following terms: 12Criterion 5 - Residence (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 for a continuous period of at least 6 months. (1A)However, if the Chief Commissioner is satisfied there are good reasons to do so, the Chief Commissioner may: (a)approve a shorter period, or (b)exempt the applicant from the requirement to comply with subsection (1). (1B)The period of occupation required under subsection (1), or the shorter period approved under subsection (1A)(a), must start with 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner. (2)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. 7The equivalent residence requirement in s 76 of the Duties Act was in relation to this matter in the following terms: 76Residence requirement (1)The home must be occupied by the person or persons who are 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 the person or persons, or (b)exempt the person or persons 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 person or persons who are acquiring it as their principal place of residence. (4)The residence requirement does not apply to a person who acquires an interest in the property concerned solely for the purpose of assisting the eligible persons under the scheme in financing the acquisition. (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. (6)(Repealed) 8It was the Chief Commissioner's view that the relevant provisions do not grant the Chief Commissioner a power, on a retrospective basis, to shorten the period of occupancy in a case where no application was made within 12 months or any extended period allowed to take up residence. 9The factual background relevant to consider the preliminary question was not in dispute. 10Settlement of the purchase of the Property occurred on or around 16 January 2006. The applicant occupied the Property but, sometime between 17-20 February 2006, he vacated the Property and recommenced to reside with his parents at their San Souci property. 11The applicant leased the Property to a tenant under a lease dated 25 February 2006, initially for a term of six months. The Property remained continuously leased to the same tenant until the Applicant sold the Property on or around 30 October 2008. 12On 18 December 2008, the applicant wrote to the Chief Commissioner seeking a shorter period of occupancy under s 12(1A)(a) of the FHOG Act and s 76(2)(a) of the Duties Act. Submissions 13The Chief Commissioner's counsel, Ms Sanderson, in the written submissions first noted that in a number of decisions, including Lawrance & Anor v Chief Commissioner [2002] NSWADT 104; Taylor v Chief Commissioner of State Revenue [2004] NSWADT 36; McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214; UH v Chief Commissioner of State Revenue [2005] NSWADT 284; WH v Chief Commissioner of State Revenue [2006] NSWADT 199; Basonovic v Chief Commissioner of State Revenue [2006] NSWADT 236; Huertas v Chief Commissioner of State Revenue [2007] NSWADT 28; Fisk v Chief Commissioner of State Revenue [2008] NSWADT 59 and Sobhani v Chief Commissioner of State Revenue [2009] NSWADT 198, "the Tribunal has determined that, under the relevant form of s 12 of the FHOG Act and its predecessor, a grant recipient may only seek, and the Chief Commissioner may only approve, an extension to the 12 months within which occupation as the principal place of residence must commence within the period for compliance with the residence requirement" and that there "is no discretion to approve a longer period after that period has expired". 14Counsel than proceeded to make the primary submission "that the reasons which caused the Tribunal to recognise a time limit in respect of seeking a longer period within which occupation must commence apply equally to recognising a time limit in respect of seeking a shorter period of occupation". 15Counsel further submitted that - ... there is no textual basis within the FHOG Act to treat the different elements of the residence requirement differently. That is, to the extent that ss 20(3), 20(4) and 45 are enlivened by a failure to satisfy the residence requirement, they are enlivened equally by a failure to satisfy the requirement of occupation as the principal of residence for a continuous period of at least six months and a failure to commence that occupation with 12 months after settlement. 16Counsel also referred to the decision in McKenzie where the President of the Tribunal had in considering the provisions of s 12 of the FHOG Act noted that "Parliament intended to set strict rules" and made the following observations: ... The usual strict boundary is provided by the twelve month rule that is people can have the grant in advance but they must move in within twelve months. This view is borne out by the following provisions - section 7(1)(b)(ii); section 7(2); section 12(1); and section 20(2). 21. The scheme of the Act contemplates certainty as to the period within which a person must move in. Any change must be made known ahead of the expiry of what might be called the usual period. The period of permitted delay is either twelve months or such extended period as has been permitted ahead of the expiry of that period (plus fourteen days)." 17It was submitted that there "is nothing in the text of s 12 to suggest that the requirement that occupation be for a continuous period of at least six months was intended to set less strict boundaries" and there "is, therefore, no reason of policy to treat the six months requirement less strictly than the 12 months requirement". 18Finally, it was submitted "that the power to grant exemptions or approvals under s 76 of the Duties Act is, by parity of reasoning, subject to the same limitations as to time as apply under s 12 of the FHOG Act". 19The applicant's solicitor submitted that "it is a long bow to draw" to submit that the combined effect of sections 12(1B) and 20(3) allowed the interpretation suggested by counsel for the Chief Commissioner. And that the only effect those provisions had was that "if an applicant intends to commence occupation of the home subject of the First Home Owner's Grant, it must do so within 12 months, otherwise it must seek approval of the Chief Commissioner". 20It was further submitted "that Section 20(3) is to be read in the context that if occupation does not start within 12 months after completion of the eligible transaction and the First Home Owner's Grant has been paid in anticipation of compliance, an applicant must within 14 days after the end of the period allowed for compliance give written notice of the fact to the Commissioner". 21It was also submitted that by "parity of reasoning as regards the Duties Act ... there is no such reading of Section 76 to that argued by the Chief Commissioner under Section 12 of the FHOG Act". Consideration and Reasons 22The Chief Commissioner's principal contention to determine the preliminary question was that, upon the proper construction of s 12 of the FHOG Act and s 76 of the Duties Act as they stood at the time of the grant, an application to shorten the residence requirement had to be made prior to the expiration of the period allowed to comply with the residence requirement under both Acts. The submission was made essentially on the basis of what was said by the President in McKenzie and followed in a number of cases. 23I accept that contention. 24The relevant provisions were enacted with "strict boundaries". In particular, s 12 of the FHOG Act sets out strict rules relating to occupation. The timetable set out in the section ensures that an applicant receiving the grant occupy the property as his or her principal place of residence and not use the property as an investment asset. 25My view is that the scheme of s 12 requires an applicant to seek the approval of the Chief Commissioner for a shorter period of residence prior to the expiration of the period allowed to comply with the residence requirement. 26The scheme is quite clear and simple. Subsection (1) states that an applicant is required to occupy the grant property as his or her "principal place of residence for a continuous period of at least 6 months". Subsection (1A) then gives the Chief Commissioner a discretion, if satisfied there are good reasons to do so, to approve a shorter period or exempt the applicant from the 6 months residence requirement. What is critical and, in my view, determinative of this issue, is the requirement set out in subsection (1B). The provisions clearly state that the 6 months period required under subsection (1), or the shorter period approved under subsection (1A)(a), must start within 12 months after completion of the eligible transaction or a longer period approved by the Chief Commissioner. The provisions require an applicant to obtain the Chief Commissioner's approval for any shorter period within the 12 months period after completion of the purchase of the first home or within any longer period approved by the Chief Commissioner to take up residence. The words "must start" lay down an imperative that an applicant needs to commence the required period of residence within either the 12 months after completion or any longer period allowed by the Chief Commissioner. The requirement in s 12(1B) is a requirement that must be complied with and which the Chief Commissioner has no power to waive. As observed by the President in McKenzie, the "scheme of the Act contemplates certainty as to the period within which a person must move in" and that any "change must be made known ahead" of the expiry of the 12 months or the extended period permitted prior to the expiration of the period allowed for occupation. 27In cases where applicants have not sought to obtain a longer period to comply with the residence requirement, occupation to comply with the residence requirement must start within the 12 months period after completion of the eligible transaction. When that period has elapsed, and an applicant has not complied with the residence requirement, sections 20 and 45 operate to require the applicant to refund the grant. Section 20(3) provides that if a first home owner is paid a grant 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 end of the period concerned: (a) give written notice of that fact to the Chief Commissioner, and (b) repay the amount of the grant. In cases where an applicant fails to give the written notice and to repay the amount of the grant, the Chief Commissioner is given a broad power under s 45 to issue an assessment to recover the grant and impose a penalty. 28When dismissing an application seeking an extension of time to comply with the residence requirement under s 12 in UH V Chief Commissioner of State Revenue his Honour regarded it of importance to note that - ... it is clear law that powers to extend time must be clearly conferred in schemes of this kind, especially schemes that have to do with the protection of revenue in particular. 29The relevant provisions under review clearly do not provide the Chief Commissioner with any discretion to be exercised in the manner submitted by the applicant. 30Section 12 was amended in 2005 by State Revenue Legislation Further Amendment Act 2005 which inserted a new subsection (5) in section 12. Subsection (5), which applies from 7 December 2005, allows the Chief Commissioner to give an approval or exemption under s 12 "at anytime, even if, the period of 12 months after completion of the eligible transaction has already expired or if the applicant's occupation of the home as a principal place of residence has already ceased". This amendment applies to applications for grants made on or after the commencement of the amendment. Unfortunately, it does not apply to the present matter where the application for the grant was made on 8 November 2005. 31The provisions of s 76 of the Duties Act are not in the same terms as s 12 of the FHOG Act, although they operate in the same manner. Subsection (1) states that a home must be occupied for a continuous period of 6 months starting within 12 months or such longer period approved by the Chief Commissioner. Subsection (2) gives the Chief Commissioner a discretion to modify the residence requirement by approving a shorter period of occupation or exempt the applicant from the requirement to comply with the residence requirement. Section 76 is similar in requiring the start of the occupation, whether for 6 months or a modified shorter period, to start within 12 months after completion of the purchase agreement or transfer unless a longer period is approved. 32Like the provisions of s 12 of the FHOG Act, any shorter period to comply with the residence requirement under s 76 must be approved by the Chief Commissioner prior to the expiration of the 12 months period. It would follow that, in cases where an applicant has good reasons to a shorter period of occupation or exemption, that approval must be in place prior to the expiration of the 12 months period. 33It follows that, under both s 12 of the FHOG Act and s 76 of the Duties Act in the relevant form applicable to this matter, any shorter period of occupation to comply with the residence requirement had to be in place prior to the expiration of the period allowed for compliance of the residence requirement. 34It was not in dispute in this matter that the applicant had not occupied the Property for a continuous period of six months. It was also not in dispute that the applicant had not sought the Chief Commissioner's approval for any shorter period of occupation within 12 months after completion of the purchase of the Property. In these circumstances, the applicant was in breach of the statutory condition imposed by s 20(3) and the Chief Commissioner was entitled to act under s 45 to recover the grant. 35It was also not in dispute that the applicant failed to give the Chief Commissioner written notice under s 76A of the Duties Act of the fact that he had not complied with the residence requirement and had not paid the relevant duty to the Chief Commissioner. 36In these circumstances, the Chief Commissioner was entitled to issue the assessments to recover the grant and the duty payable on the transfer and mortgage of the Property. 37The matter will be re-listed for hearing submissions as to the final orders that the tribunal should make in this application on 30 April 2012 at 10am. 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: 04 April 2012