Khatiz v Chief Commissioner of State Revenue [2019]

Background

The Applicant had applied for administrative review of land tax assessments issued by the Chief Commissioner in respect of a property at Marayong which is a licensed childcare centre (“the Property”). The Applicant owns a 25% interest in the Property.

The Applicant sought an exemption under what is now section 10(1)(u) of the Land Tax Management Act 1956 (“LTMA”). At the time the 2011, 2012 and 2013 Land Tax Assessment Notices were issued the relevant provision was section 10(1)(g)(iii) of the LTMA which was in substantially the same terms as the current provision.

History of assessments

On 5 August 2011 the Chief Commissioner wrote to the Applicant advising him of the potential land tax liability in respect of three properties including the Property and advising that if he wanted to claim an exemption or dispute the liability it was necessary for him to contact the Office of State Revenue (“OSR”, now Revenue NSW). The Applicant did not notify the Chief Commissioner of any exemption in relation to the Property in response to that letter.

The Land Tax Assessment Notice for the 2011 land tax year was issued on 5 September 2011. The Land Tax Assessment for the 2012 land tax year was issued on 9 February 2012.  Both assessments included the relevant property.

There were two Land Tax Assessment Notices issued for the 2013 land tax year. The first Notice was issued on 6 February 2013 and omitted the relevant property.   On 11 February 2013, the 2013 Land Tax Assessment Notice was reissued after the Applicant telephoned OSR on that day to inform OSR that the Property had been mistakenly excluded from the 2013 notice.  The Applicant confirmed his 25% interest in the Property.

In cross-examination the Applicant said he advised the OSR officer the Property was used as a childcare centre in that telephone call, but there was no record in OSR file notes of any reference to the use of the Property as a childcare centre.  The Chief Commissioner submitted the use of the Property was not raised in the Applicant’s 11 February 2013 phone call.

The Applicant paid the land tax and did not lodge an objection, which must be submitted in writing within 60 days by section 89 of the Taxation Administration Act 1996 (“TAA”).

From 2014 to 2018 Land Tax Assessment Notices were issued to the Applicant which also included the relevant property and did not allow the exemption for use of the Property as a childcare centre.

The Applicant made no further contact with OSR about the Property until he lodged a written Land Tax Variation Return on 16 May 2018 claiming exemption from land tax back to 2010.

On 5 June 2018 the Chief Commissioner allowed the exemption for the 2014 to 2018 land tax years.

The Chief Commissioner denied the exemption for the 2011, 2012 and 2013 Land Tax Assessments on the basis that those initial Assessments were issued more than five years before the application was made on 16 May 2018, and the Chief Commissioner was prevented from reassessing pursuant to section 9(3)(a) and section 9(3)(d) of the TAA, which provide:

(3) The Chief Commissioner cannot make a reassessment of a tax liability more than 5 years after the initial assessment of the liability unless:

(a)   the reassessment is to adjust tax to give effect to a decision on an objection or review as to the initial assessment, or

(d)   the reassessment is made as a consequence of an application by a taxpayer, being an application made within 5 years after the initial assessment of the liability and the reassessment reduces the tax liability.

Submissions

The Applicant’s case was that he informed OSR in the telephone conversation on 11 February 2013 that the Property was being used as a childcare centre and that he was told he did not have to put anything in writing and that the OSR would correct the position.  The Applicant also submitted that his telephone call could be treated as objections to the 2011 and 2012 Land Tax Assessment Notices and that section 9(3)(a) and/or section 9(3)(d) of the TAA applies.

The Chief Commissioner submitted that section 9(3)(a) of the TAA did not apply as there was no objection to the initial assessments of the 2011, 2012 and 2013 land tax years lodged within the 60 days of each of the initial assessments for each land tax year pursuant to section 89 of the TAA, or within 5 years of the initial assessments. Nor was any other “application” made in writing in respect of the initial 2011, 2012 and 2013 assessment notices until May 2018, and this application was made outside the five-year time limit within which a reassessment may be made pursuant to section 9(3) of the TAA.

Date of judgement

Decision

The Tribunal found as follows:

1. For the 2013 tax year the second notice of assessment issued on 11 February 2013 was the initial assessment of the Property for that land tax year. The Property had not been included in the first Land Tax Assessment Notice for that land tax year. The phone call to OSR was before the issue of the second assessment and therefore cannot be an objection because there was nothing to object to.
2. The written objection to the second Land Tax Notice of Assessment for 2013 was lodged on 7 June 2018.  This is outside the 60-day period for objection specified in section 89 of the TAA (and no extension was granted by the Chief Commissioner under section 90 of the TAA). Accordingly, the Chief Commissioner has no power to reassess the 2013 land tax year.
3. For the 2011 and 2012 land tax years the written objection was lodged on 7 June 2018 and the time bars applicable to the objection against the 2013 assessment are equally applicable.
4. If the phone call on 11 February 2013 could be treated as an objection to the 2011 and 2012 assessments, the objections are required to be in writing (section 86 TAA) and must be lodged within 60 days of the assessment unless the Chief Commissioner allows them to be lodged out of time (sections 89 and 90 TAA). No extension has been allowed for the 2011 and 2012 verbal objections which were out of time.

Orders

Chief Commissioner’s decision affirmed.

Link to decision

Khatiz v Chief Commissioner of State Revenue [2019] NSWCATAD 121