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Chen v Chief Commissioner of State Revenue [2024] NSWCATAD 164 Commissioner of Taxation v Ryan (2000) 201 CLR 109; [2000] HCA 4 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Wang v Chief Commissioner of State Revenue [2023] NSWCATAD 1 Wang v Chief Commissioner of State Revenue [2023] NSWCATAP 331
Background
The Applicant is an Italian citizen and permanent resident of Australia. She owns several properties including 3 residential properties in suburban Sydney – two in Chiswick and one in Regents Park. On 5 December 2019, the Applicant departed from Australia and travelled to Italy. She did not return until 14 January 2024. The Applicant claimed that she intended to return to Australia sooner but was prevented from doing so as a result of COVID-19 restrictions and border closures.
The Applicant objected to the Respondent's assessment of surcharge land tax in respect of the properties for the 2021 to 2023 land tax years. The Applicant claimed, among other things, that she was entitled to rely on the PPR exemption from liability to pay surcharge land tax for one of the Chiswick properties ("Unit 22"). The objection was disallowed by the Respondent, so the Applicant asked that the Tribunal review the assessment and grant the exemption she was seeking.
During the hearing before the Tribunal, the Applicant's representatives accepted that the Applicant was liable to surcharge land tax on two of the three residential properties.
The issue for determination by the Tribunal as to the remaining property, Unit 22, was whether the Applicant was liable to surcharge land tax in respect of Unit 22 for each of the relevant land tax years. This required consideration of:
whether the Applicant was in Australia during 200 or more days in the preceding calendar year; and
whether the Applicant used and occupied Unit 22 as her PPR for a continuous period of 200 days during the land tax year; and
if not, whether there was an overriding discretion available to exempt her from the surcharge.
The Statutory Framework
Surcharge Land Tax
Section 5A(1) of the Land Tax Act 1956 (NSW) ("LTA") provides that surcharge land tax is payable in respect of "residential land" owned by a "foreign person" (at midnight on 31 December in any year commencing with 2016).
The meaning of "foreign person" for the purposes of the LTA has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW)("Duties Act"), which in turn refers to meaning of "foreign person" under the Foreign Acquisitions and Takeovers Act 1975 (Cth)("FATA"), as modified by s104J of the Duties Act. The modifications in s104J were not applicable to the Applicant's circumstances in this proceeding because she has never been an Australian or New Zealand citizen.
In the FATA, a "foreign person" is an individual who is not "ordinarily resident" in Australia1. Further, an individual who is not an Australian citizen is "ordinarily resident" in Australia at a particular time if and only if the individual satisfies both of the following:
The individual has been in Australia for 200 or more days in the 12 months preceding that time ("200-day requirement"); and
At that time, the individual is either:
In Australia and the individual's continued presence in Australia is not subject to any limitations as to time imposed by law2; or
Not in Australia, but immediately before the individual's most recent departure from Australia, the individual's continued presence was not subject to any limitation in time imposed by law3.
A foreign person is exempt from liability to pay surcharge land tax in respect of the land for a land tax year where the land is their principal place of residence only if the person is eligible for the exemption under s. 5B of the LTA4.
Section 5B of the LTA provides for an exemption from Surcharge Land Tax in respect of residential land if it is used and occupied as the owner's principal place of residence for a continuous period of 200 days in the land tax year ("residence requirement"). Section 5B was amended in May 2022, with effect from the 2023 land tax year onwards, by the inclusion of subsections 5B(2A) and (2B) in the following terms:
(2A) A person does not use and occupy land as the person's principal place of residence during a period of the person's physical absence from Australia.
(2B) The Chief Commissioner may, in exceptional circumstances, waive the requirement in subsection (2A) in relation to a person's brief physical absence from Australia.
Applicant's Submissions
The Applicant submitted that she was initially prevented from returning to Australia because of the closure of Australia's borders during the COVID-19 pandemic. Then, once international flights were resumed, she was not allowed to board a flight (for which she had a ticket) since she had not been vaccinated. She says she did not want to risk taking the vaccine because of her age (she is now 93 years old).
Additionally, the Applicant's representatives asked the Tribunal to exercise a discretion in her favour on the basis that the surcharge land tax was arbitrary or unfair, and that the circumstances that prevented her return to Australia were beyond her control.
Decision
Senior Member Frost held that the Applicant was a foreign person for the purposes of s. 5A of the LTA for each relevant land tax year, as she did not satisfy the requirements in s. 5(1)(a) of the FATA and therefore was not "ordinarily resident" in Australia. It follows that subject to any exemption, she was liable for surcharge land tax in respect of each of the properties, including Unit 22.
For the 2021 and 2022 land tax year, the Senior Member held that the PPR exemption from liability to pay surcharge land tax was not applicable as the Applicant was not in Australia at all during the relevant tax years and therefore could not satisfy the eligibility requirements in s. 5B of the LTA.
For the 2023 land tax year, the legislation relating to the PPR exemption differed from the prior years. The addition of subsection (2A) reinforced the fact that the Applicant had failed to meet the residence requirement under subsection 5B(2), and subsection (2B) was not enlivened unless there were 'exceptional circumstances', and then only in respect of a person's 'brief physical absence from Australia.' Senior Member Frost declined to express an opinion as to whether the circumstances were considered 'exceptional', as an absence that spanned the entire 2023 land tax year could not be regarded as 'brief', such that the conditions necessary for the exercise of the discretion had not been established.
The Tribunal held that the Applicant was therefore liable for surcharge land tax on Unit 22 for the relevant land tax years, and that the PPR exemption from liability to pay surcharge land tax was not available.
The Tribunal also rejected the Applicant's overarching submissions that the assessment for surcharge land tax was "unfair and unjust". Those submissions asked the Tribunal to do something beyond its power. There is no discretion in the legislation that allows the Tribunal to override the clear terms of the relevant statutory provisions. Appeals to leniency or fairness, and factors contributing to an applicant's failure to satisfy a statutory requirement, are not relevant considerations for the validity of an assessment.
1 LTA s. 2A, read with Duties Act s. 104J(1) and FATA, s. 4 (definition of “foreign person”); see also LTA, s. 5A(6) (now repealed), as applicable before 5 March 2018. 2 LTA, s. 2A, read with Duties Act, s. 104J(1) and FATA, s. 5 3 Ibid. 4 LTA s 5A(4)(g).
