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TAXES AND DUTIES – Dutiable transfers – Exemptions – First Home Buyers Assistance Scheme – Principal place of residence – Occupation as a principal place of residence for a continuous period of at least 6 months
Bates v Chief Commissioner of State Revenue [2004] NSWADT 13 Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Re Gaines and Secretary, Department of Health, Housing and Community Services [1992] AATA 197
Background
The facts, briefly stated, were as follows:
The Applicants moved into the Cessnock Property on 18 October 2018, which was within 12 months of the completion of the purchase on 21 November 2017.
The Applicants commenced extensive renovations of the Cessnock Property in February 2019.
Mr Zgrivets moved out of the Cessnock Property sometime in February 2019 and entered into an agreement to lease a unit in Newcastle (“the Newcastle Property”) to be closer to his new full-time job in Newcastle CBD. The lease agreement was in the name of both Applicants.
Mr Zgrivets would occasionally return to the Cessnock Property on the weekends to assist Ms Diaz with the renovations.
Ms Diaz claimed to have continued to occupy the Cessnock Property as her principal place of residence until 27 April 2019, when the renovations to the bathroom made it unusable and a dispute with the builder stalled the completion of the renovations.
During the renovation period, Ms Diaz claimed that she lived in one of the bedrooms of the house which was not affected by the demolition works and had access to a mini fridge, microwave and some basic kitchenware and camping equipment (chairs and a portable gas stove) to cook any meals. Ms Diaz said that she would commute by bus or car from the Cessnock Property to her part-time job in Islington, a suburb in Newcastle. The Applicants claimed that on her days off she would remain at the Cessnock Property to assist with the renovation works to reduce the labour costs and progress the project.
Ms Diaz moved into the Newcastle Property on or around 27 April 2019, after she ceased her employment in Islington.
The Applicants did not recommence occupying the Cessnock Property after the renovation works were completed and subsequently leased the property to tenants.
Facts 1-3 and 7 were not in dispute in the proceedings.
The key issue in the proceedings was whether Ms Diaz continued to occupy the Cessnock Property as her principal place of residence for a continuous period of 6 months: that is, until at least 18 April 2019.
The Applicants did not dispute the imposition of the penalty tax and interest and therefore, this was not in issue in the proceedings.
The Statutory Framework
The residence requirement is set out in s 76 of the Duties Act:
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.
Accordingly, in order to discharge their onus in this case, the Applicants had to establish that:
the Cessnock Property was occupied by at least one of them;
as a principal place of residence;
for a continuous period of at least 6 months; and
the period of occupation commenced within 12 months of the date of transfer.
Decision
The Tribunal found that the Applicants had not discharged their onus of establishing that one of them had occupied the Cessnock Property as their principal place of residence for a continuous period of at least 6 months.
The Tribunal considered that elements (1) and (4) were satisfied in this case. Both parties accepted that the Applicants moved into the Cessnock Property on 18 October 2023, which was within the 12 month timeframe specified in the legislation. This fact was not in dispute.
In respect of element (3), the Tribunal ultimately found that there had been a “continuous period of occupation” of the Cessnock Property by Ms Diaz following the commencement of the renovation works in February 2019.
In making this finding, the Tribunal accepted the following facts from Ms Diaz’ oral evidence:
Ms Diaz worked part-time in Islington until March 2019.
During the period when she worked in Islington:
she spent most Sunday nights, most Monday nights and many Tuesday nights in Newcastle;
she usually returned to Cessnock directly after finishing her last shift for the week;
she spent few Sunday or Monday nights, some Tuesday nights and every Wednesday, Thursday, Friday and Saturday night at the Cessnock Property;
she did not work on Thursday or Friday but was based in Cessnock during those days;
she spent the weekends in Cessnock and travelled to Newcastle on Sunday afternoon or evening.
The Tribunal did not consider that Ms Diaz’ reduced occupation of the Cessnock Property throughout the renovation period was sufficient to amount to a disruption in her continuous period of occupation.
The Tribunal’s decision then turned on whether Ms Diaz continued to occupy the Cessnock Property as her principal place of residence. The Tribunal found that she did not and described Ms Diaz’ occupation from February 2019 as “transient, temporary or contingent or of a passing nature” (borrowing from the concepts referred to in Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41).
This finding was based on the Tribunal’s consideration of the following facts from the evidence:
Ms Diaz had entered into a residential tenancy agreement with Mr Zgrivets for the Newcastle Property;
Ms Diaz generally stayed in the Newcastle Property 2/3 nights per week; and
the Cessnock property was sparsely furnished, the kitchen mostly unusable, the bathroom somewhat functional and the water and electricity usage negligible.
The Tribunal therefore concluded that the Cessnock Property did not appear to be a place of residence for her, much less a principal place of residence.
The Tribunal also observed that it was not Ms Diaz’ intention to continue to live in the Cessnock Property throughout the renovations. This intention was ascertained by the fact that Ms Diaz ultimately moved out of the property once the nature of the renovations made residing in it practically impossible for her.
Importantly, the Tribunal found that Ms Diaz’ occupation of the Cessnock Property “was directed towards maintaining a foothold, with a view to establishing a 6-month connection with the Property and consequent satisfaction of the residence requirement” (at [54]). The Tribunal found that this was not sufficient to obtain the duty exemption.
Orders
The decision of the Chief Commissioner to reverse the Applicant’s exemption from duty under the FHBA Scheme is affirmed.
