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Madikian v Chief Commissioner of State Revenue [2017] NSWCATAD 263

Date of judgement 30 August 2017 Proceeding No. AR Boxall, Senior Member
Judge(s) AR Boxall, Senior Member
Court or Tribunal New South Wales Civil and Administrative Tribunal
Legislation cited Civil and Administrative Tribunal Act 2013

Duties Act 1997

First Home Owner Grant (New Homes) Act 2000

Taxation Administration Act 1996
Catchwords First home owner grant; residency requirement; interest on unpaid duty; penalty tax; costs
Cases cited Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19

Knight v Chief Commissioner of State Revenue [2008] NSWADT 83

Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215

RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64

Background

The Applicant sought a review of decisions of the Chief Commissioner to withdraw a stamp duty exemption and require repayment of a first home owner grant relating to the Applicant’s purchase on 19 December 2011 of a residence located at 7 Appletree Road, West Wallsend (“the Property”). The Property was subject to an existing tenancy at the time of purchase.

The instrument of transfer was initially determined to be exempt from stamp duty pursuant to the First Home Plus scheme under s.74 of the Duties Act and a grant of $7,000 was paid to the Applicant under ss. 7 and 17 of the FHOG Act.

On 19 October 2015, the Chief Commissioner sent the Applicant a Notice of Investigation concerning the stamp duty exemption and the Grant. The Applicant provided the Chief Commissioner with a statutory declaration indicating that he lived in the Property from 1 November 2011 to 1 June 2012 and that he did not live in the Property with a third party under a lease or other arrangement. The Applicant stated that he did not change his personal details due to the short term nature of his living arrangements. He indicated he sought records from Telstra and Energy Australia to support his claim, but was told by both Telstra and Energy Australia that these documents could not be provided.

Enquiries made by the Chief Commissioner, however, revealed that the Applicant had entered into Management Agency Agreements with two separate agencies and did not change his address on official documents. The existing tenants continued to reside in the Property until shortly before 27 August 2013, when their rental bond was returned to them. On 30 August 2013, the Applicant entered into a residential tenancy agreement with new tenants, for a term of 12 months. The new tenants paid a rental bond on 2 September 2013, which was returned to them on 16 October 2014. The tenancy ledgers maintained by the Applicant’s managing agent record the receipt of rent from the new tenants.

On 23 March 2016, the Chief Commissioner issued assessments requiring the Applicant to pay the stamp duty from which he had been exempted, repay the Grant, and pay interest and penalties.

The Statutory Framework

At the time when the Applicant purchased the Property, the Duties Act provided for exemptions from transfer duty under the First Home Plus scheme where:

  1. the purchaser was an eligible first home owner;
  2. the value of the property was no more than $600,000; and
  3. the residence requirement was met subsequent to the purchase.

Section 7 of the FHOG Act also allowed for payments to be made to a person upon the acquisition of their first home, provided the relevant criteria, which included a residence requirement, were met.

Issues

The Applicant did not dispute that:

  1. he failed to meet the residence requirements in respect of the Property under the Duties Act and the Grant Act, or

  2. he is obliged to pay to the Chief Commissioner the transfer duty form which he was exempted, and the grant which was paid to him.

However, the Applicant submitted that he should not be required to pay the interest or penalties assessed by the Chief Commissioner, as he was not informed by the Chief Commissioner’s officers of:

  1. the likely amount or basis of calculation of interest and penalties in relation to the stamp duty payable or the recoverable grant; or

  2. the scope for remission of interest or penalties;

The Applicant further argued that the nature of his discussions with the Chief Commissioner’s officers was such that they caused him to make a “panicked [sic] and in hindsight irresponsible decision” and that he would have been more candid if he had been better informed about the interest and penalty regime, the scope for reductions referrable to disclosure and the possibility of payment plans.

The Chief Commissioner submitted that the interest and method of calculation were in accordance with the Taxation Administration Act 1997 (“TA Act”) and that circumstances allowing for the remission of interest did not apply in this case. In relation to the penalty tax, the Chief Commissioner considered that the amount required to be paid was the standard amount provided for under s. 27(1) of the TA Act. Given the conflicting information provided by the Applicant during the investigation and during the hearing, the penalty that had been imposed was considered to be lenient. Further, the Chief Commissioner proposed that the penalty that had been imposed in relation to the Grant was both consistent with policy and justified, given the Applicant’s conduct.

Decision

The Tribunal, in reaching its decision took into account the following circumstances which arose during the investigation:

  1. The Applicant provided to the Chief Commissioner two versions of his residential history, before he finally recognised that he had failed to satisfy the relevant residency requirements;

  2. The Applicant maintained these successive positions for several months and also led the Chief Commissioner’s officers to believe he was undertaking enquiries with Telstra to provide further evidence; and

  3. The Applicant maintained these positions in light of objective evidence to the contrary.

The Tribunal, citing the approach taken in Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, found that the interest and penalty tax imposed in relation to the stamp duty owed were both in accordance with policy and reasonable, given the misleading and obstructive way in which the Applicant acted during the investigation. The penalty relating to the Grant was also found to be acceptable by the Tribunal, on the basis that the Applicant did not provide evidence that he ever resided at the Property; he had not been candid in his response to the Chief Commissioner; his conduct was calculated to impede or delay the Chief Commissioner’s enquiries; and the Grant had not been repaid.

Costs

The Chief Commissioner submitted that the Applicant’s appeal was baseless, misconceived and lacking in substance, thereby giving rise to the necessary “special circumstances” to award costs under s.60 of the Civil and Administrative Tribunal Act 2013.

In contrast, the Applicant submitted:

  1. had he been aware of the likely amounts involved, he would have withdrawn his application;

  2. offers made to settle the matter were rejected by the Chief Commissioner;

  3. had he been informed of the amount of interest and penalties he would have withdrawn his application; and

  4. he was unable to pay costs.

The Tribunal found that, based on the Applicant’s behaviour, special circumstances allowing for an award of costs did exist.

The Chief Commissioner had advised the Applicant before the hearing that an application for costs would be made, and provided the Applicant with an estimate of the amount that would be sought. However, this communication was sent to a different address to the Applicant’s designated address for email correspondence. The Tribunal was satisfied that the Applicant was unaware of the Chief Commissioner’s advice on costs.

Accordingly, the Tribunal did not exercise its discretion to award costs against the Applicant on the basis that the Applicant was “deprived of a significant opportunity to resolve the matter (prior to the hearing) without risking an award of costs” (at [80]).

Orders

  1. The decisions of the Chief Commissioner of State Revenue was affirmed.

  2. The Chief Commissioner’s application for costs was dismissed.

Link to decision

Madikian v Chief Commissioner of State Revenue [2017] NSWCATAD 263

Last updated: 27 September 2017