Azam Mohammed & Sarah Azam v Chief Commissioner of State Revenue [2023] NSWCATAD 38

Background

The Applicants were spouses who each held a one third interest in a residential property in Prestons (“Property”). Their son, who is an Australian citizen, is the registered proprietor of the other one third interest in the Property. The Applicants are citizens of Pakistan who each hold a Bridging Visa class WA/010. Under the bridging visa, the Applicants have unlimited work and study entitlements. Except for Mr Mohammed’s short period outside Australia in 2013, both Applicants resided in Australia continuously since 2006. The Applicants each acquired their respective one third interest in the Property on 12 April 2016 and have resided in the Property as their principal place of residence since it was first acquired.

For each of the relevant taxing dates for the 2018 to 2022 land tax years, the Applicants were in Australia for a period of 200 days in the prior tax year.

On 7 March 2022, the Applicants were notified by the Chief Commissioner of the requirement to register for land tax. The Applicants completed land tax questionnaires, attaching VEVO checks, and bills from providers as proof of residence. They also lodged a land tax registration return, seeking exemption from land tax for the Property, being their principal place of residence. On 22 March 2022, the Chief Commissioner issues each Applicant Notices of Assessment for Surcharge Land Tax for the 2018 to 2022 tax years. The Applicants objected to the assessments in April 2022, which was disallowed by the Chief Commissioner in June 2022.

The statutory framework – surcharge land tax

Surcharge land tax has applied to an owner of residential land if the owner is a foreign person from the 2017 land tax year under the Land Tax Act 1956 (“LTA”).

For the purposes of the LTA, an individual is a “foreign person” at a given time if that person is not an Australian citizen [1] and is not “ordinarily resident” in Australia.[2] For these purposes, a person is “ordinarily resident” in Australia if the person satisfies both of the following tests:

• The person has been in Australia for 200 or more days in the 12 months preceding the time (“200-day requirement”); and
• As at the time, the person is either:
• In Australia and the person’s continued presence in Australia is not subject to any limitations as to time imposed by law;[3] or
• Not in Australia, but immediately before the person’s most recent departure from Australia, the person’s continued presence was not subject to any limitation in time imposed by law.[4]

Section 5B of the LTA provides for an exemption from Surcharge Land Tax from the 2018 land tax year in respect of residential land if it is used and occupied as the owner’s principal place of residence subject to specified conditions being met. Section 5B relevantly provides:

1. A person is eligible for an exemption from liability to pay surcharge land tax in respect of residential land for a land tax year because the land is the principal place of residence of the person only if—
   1. The person is a permanent resident at midnight on 31 December of the previous year, and
   2. the Chief Commissioner is satisfied that, during the land tax year, the person intends to use and occupy the land as the principal place of residence of the person in accordance with the residence requirement, and
   3. the person lodges a declaration with a land tax return required to be furnished under section 12 of the Principal Act for the land tax year to the effect that the person has that intention.
2. The person must use and occupy the land as the person’s principal place of residence for a continuous period of 200 days in the land tax year. This requirement is referred to as the residence requirement.

The expression “permanent resident” is not defined in the LTA. The Dictionary to the Duties Act 1997 provides that a permanent resident is the holder of a permanent visa within the meaning of s. 30 of the Migration Act 1958 (Cth). In the Dictionary to the Migration Act, “permanent visa” has the meaning given to it in s. 30(1) and “temporary visa” has the meaning given to it in s. 30(2). Relevantly, s. 37(2) of the Migration Act provides that a “bridging visa” is a class of “temporary visa”.

Submissions

The Applicants accepted that they are “foreigners”, but contended that they were exempt from Surcharge Land Tax under s. 5B as the Property had at all times been their principal place of residence. This was on the basis that they were “permanent residents” at the relevant taxing date for each of the 2018 to 2022 land tax years, as persons whose visas are for an indefinite period.

The Applicants’ case relied on the fact that at the time they purchased the Property in 2016, Surcharge Land Tax had not yet come into effect. They were not informed that they may be required to pay Surcharge Land Tax nor were they aware of the liability for Surcharge Land Tax until they received the retrospective Notices of Assessment in 2022. The Applicants argued that the Chief Commissioner failed to send them the Notice of Assessment for that first year (2018) within a reasonable time period such that they should only be liable for one year of Surcharge Land Tax, or it should be waived given the delay by the Chief Commissioner in issuing assessments.

The Chief Commissioner submitted that the Applicants did not satisfy the permanent resident requirement in s. 5B(1)(a) during the relevant period because their presence in Australia was subject to a limitation imposed by law for the 2018 to 2022 land tax years as they held temporary visas. Consequently, they are “foreign persons” for the purposes of the LTA and therefore not exempt from Surcharge Land Tax.

Issues for determination

Senior Member Bishop stated the material issues to be:

1. Whether the Applicants were ordinarily resident and therefore not a ‘foreign person’.
2. Whether the Applicants were permanent residents such that they qualify for the exemption in s. 5B.
3. Whether there was a discretion to waive or exempt the Applicants from Surcharge Land Tax.

Decision

Senior Member Bishop decided that the correct and preferable decision was to affirm the Chief Commissioner’s decision. Senior Member Bishop concluded:

1. There was no dispute that the Applicants were both in Australia for 200 days or more during the period 12 months preceding each of the taxing dates (therefore satisfying s. 5(a) of the FATA). However, as the Applicants were holders of bridging visas at each of the relevant taxing dates, they were not ordinarily resident and were therefore “foreign persons”.
2. As the Applicants were the holders of bridging visas which are a class of temporary resident visas, they are not “permanent residents” and therefore do not satisfy the criteria for the principal place of residence exemption in s. 5B of the LTA.
3. As Senior Member Bishop had already determined that the statutory criteria for the principal place of residence exemption had not been met in this case and as there was no other statutory power to exempt the Applicants from Surcharge Land Tax based on unfairness, the Applicants were not entitled to an exemption or waiver from Surcharge Land Tax.

Orders

The Chief Commissioner’s decision under review is confirmed.

Read the full decision

Footnotes

1 Land Tax Act 1956 (NSW) (“LTA”), s. 2A, read with Duties Act 1997 (NSW) (“Duties Act”), s. 104J(2)(a).

2 Land Tax Act 1956 (NSW) (“LTA”), s. 2A, read with Duties Act 1997 (NSW) (“Duties Act”), s. 104J(1) and Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”), s. 4 (definition of “foreign person”); see also LTA, s. 5A(6) (now repealed), as applicable before 5 March 2018.

3 LTA, s. 2A, read with Duties Act, s. 104J(1) and FATA, s. 5; see also LTA, s. 5A(6) (now repealed), as applicable before 5 March 2018.

4 Ibid.