Guo v Chief Commissioner of State Revenue [2024] NSWCATAD 309

Background

The Chief Commissioner of State Revenue (Chief Commissioner) issued assessments to the Applicant for land tax and surcharge land tax in respect of a property in Greenwich NSW (the Property) for the 2019 to 2023 land tax years.

The Applicant and her husband were married in 1998. They both lived and worked in China before arriving in Australia in around 2015.

The Applicant is a Chinese citizen and held an Australian permanent resident visa as at each taxing date. Her husband is an Australian citizen.

The Applicant purchased the Property in 2015 in her sole name. It was not in dispute that:

1. the Property was bought to be the “family home” of the Applicant and her husband, and had been maintained as such at all relevant times;
2. the Applicant and her husband had lived at the Property whenever they were in Australia;
3. the Property was never rented out; and
4. neither the Applicant nor her husband owned any other properties during the relevant land tax years.

The Applicant’s movement records showed that, since her arrival in Australia in 2015, she had never stayed in Australia for a continuous period of six months. The Applicant did not stay in Australia at all during the 2020 to 2023 calendar years.

The Applicant contended that it was necessary for her to be in China to attend to the daily needs and “continuous medical attention and care” of her mother.

During the Applicant’s time in China, she stayed in “roughly three different apartments” in 2018 and 2019. In late 2019, the Applicant entered into a three-year lease for an apartment in China.

The Statutory Framework

Land Tax

Land tax is levied on the taxable value of all land in NSW under s. 7 of the Land Tax Management Act 1956 (NSW) (LTMA). Section 10(1)(r) of the LTMA provides an exemption from land tax for land that is exempt from taxation under the principal place of residence exemption (PPR exemption).

Schedule 1A to the LTMA sets out the relevant provisions regarding the PPR exemption. Clause 2 of Schedule 1A relevantly provides:

2. Principal place of residence exemption
   1. Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is:
      1. a parcel of residential land, or
      2. a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots.
   2. Land is not used and occupied as the principal place of residence of a person unless:
      1. the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or
      2. in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person’s principal place of residence.

Clause 8(1) of Schedule 1A provides:

8. Concession for absences from former residence
   1. A person is taken, for the purpose of the principal place of residence exemption, to continue to use and occupy land formerly used and occupied by the person as a principal place of residence (a former residence), after the person ceases to so use and occupy the former residence, if the Chief Commissioner is satisfied that:
      1. the person used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months, and
      2. the person does not own any other land used and occupied by the person as a principal place of residence.

Surcharge Land Tax

From the 2017 land tax year onwards, surcharge land tax is payable under s. 5A(1) of the Land Tax Act 1956 (NSW) (LTA)  in respect of residential land owned by a “foreign person”. Surcharge land tax is payable in addition to any land tax payable on the same land, and is payable even if no land tax is payable on that land (s. 5A(3)).

The LTA adopts the meaning of “foreign person” in Chapter 2A of the Duties Act 1997 (NSW), which adopts the meaning in the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).

Section 4 of the FATA defines a “foreign person” as an individual who is not “ordinarily resident” in Australia. Section 5(1) of the FATA provides that, for an individual who is not an Australian citizen, he or she is ordinarily resident in Australia at a particular time if and only if:

1. the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and
2. the individual is in Australia and the individual’s continued presence in Australia is not subject to any limitation as to time imposed by law; or the individual is not in Australia but, immediately before the individual’s most recent departure from Australia, the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law.

Section 5B of the LTA sets out the requirements for a PPR exemption from surcharge land tax. Section 5B relevantly provides:

5B Surcharge land tax—residence requirement applying to principal place of residence exemption

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.

For the 2023 land tax year, s. 5B of the LTA included the following additional provisions:

(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.

Submissions

The Applicant submitted that:

1. In relation to land tax:
   1. the Applicant was unable to return to Australia due to the COVID-19 pandemic, the related international travel restrictions, and her own and her mother’s health issues. The Applicant nevertheless always intended to live at the Property upon her return to Australia;
   2. the Applicant and her husband had no other properties during the relevant land tax years, and had always treated the Property as their principal place of residence;
   3. prior to her last departure in 2019, the Applicant had almost met the six-month continuous use and occupation requirement in Clause 8, Schedule 1A to the LTMA. The Applicant’s true intention and circumstances should be factored in and an exemption from land tax should be granted under clause 8; and
   4. the imposition of the land tax and surcharge land tax (of more than $433,000) was unduly burdensome.
2. In relation to surcharge land tax, the Applicant submitted that the LTA provisions should not apply to her circumstances, and that the tax was unduly burdensome.

The Chief Commissioner submitted that:

1. On the available evidence, the Tribunal could not be satisfied that the Applicant had continuously used and occupied the Property as her principal place of residence at the time relevant to each land tax year, nor had she done so for any continuous period of six months. Therefore, the Applicant was liable to pay land tax for the relevant land tax years.
2. As at each taxing date, the Applicant had not been in Australia for 200 or more days in the preceding 12-month period. As such, the Applicant was a “foreign person” for the purposes of surcharge land tax.

Decision

The Tribunal accepted the Chief Commissioner’s submissions in this matter.

Land Tax

In relation to clause 2(2)(a) of Schedule 1A to the LTMA, the Tribunal noted that, during the relevant period, the Applicant was only in Australia for 86 days (2018 calendar year) and 154 days (2019 calendar year) and never lived at the Property for a continuous period of six months. As such, the Applicant did not, as a matter of fact, meet the six-month requirement in clause 2(2)(a).

In relation to clause 2(2)(b), the Tribunal found that the Applicant had not demonstrated that she used and occupied the Property as her principal place of residence as at each relevant taxing date of 31 December in 2018, 2019, 2020, 2021 and 2022. The Tribunal said that it was necessary for the Applicant to show that her use and occupation of the Property “had a degree of permanence to it [because] a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient” (at [46]). In this regard the Tribunal indicated:

1. the duration of a person’s residence is relevant but not determinative; and
2. it is the nature of the occupation which provides the element of permanence, and “objective considerations include both the extent and quality of the use and occupation of each place of residence” (at [48]).

The Tribunal accepted the Chief Commissioner’s submission that, in each of the relevant years, the Applicant spent the majority or all of her time living in China. More particularly:

1. for the 2019 land tax year, the Property was not the Applicant’s principal place of residence because the Applicant was present in China from 23 April 2018 to 26 June 2019, and her presence in China was neither transient nor temporary (at [53(1)]); and
2. for the 2020, 2021, 2022 and 2023 land tax years, the Property was not the Applicant’s principal place of residence because the Applicant lived at her Chinese residence under the terms of a three-year lease, and there was no evidence that she returned to Australia during any of these years (at [53(2)]).

The Tribunal noted that, for the purpose of the PPR exemption, it was irrelevant that the Applicant did not own the properties in China where she resided (at [54(1)]).

In relation to clause 8, the Tribunal noted that the Applicant was never in Australia for a continuous period of six months. As such, the “six month” requirement in clause 8(1)(a) was not met (at [56(3)]). Further, the reason for the shortfall in days is not relevant (at 56[4]).

Surcharge Land Tax

The Tribunal held that the Applicant was liable to surcharge land tax as assessed for the following reasons:

1. As at each taxing date, the Applicant had not been present in Australia for 200 days in the preceding 12-month period. As such, the Applicant was a “foreign” person for the purposes of assessing surcharge land tax.
2. The Applicant did not satisfy the residence requirement under s. 5B(2) of the LTA and, for the 2023 land tax year, she did not satisfy the requirement for the exercise of a discretion under s. 5B(2B) (at [68] - [69]).

Finally, the Tribunal said that, as there is no general discretion to waive the Applicant’s tax liabilities for both the land tax and surcharge land tax, the Tribunal must affirm the Respondent’s position in relation to both land tax and surcharge land tax (at [73]).

Orders

The assessments to land tax and surcharge land tax are affirmed.

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