Introduction
The issue in this proceeding was whether the Applicant, a “foreign person” for the purposes of s 5A of the Land Tax Act 1956 (the LTA), who was at the relevant time not an Australian citizen but an Australian permanent resident and was not “ordinarily resident” in Australia in the 12 months preceding the taxing date for the 2024 land tax year, was liable to pay surcharge land tax for the 2024 land tax year. The key issue for determination was whether the Applicant’s absence from Australia was, firstly, due to exceptional circumstances and, secondly, was brief, such that the discretionary exemption to surcharge land tax in s 5B(2B) of the LTA was enlivened. The Tribunal ultimately found that the exemption in s 5B(2B) of the LTA was not enlivened and the Applicant was therefore liable to pay surcharge land tax for the 2024 land tax year.
Background
On 10 March 2021, the Applicant purchased property in New South Wales (the Property).
In the 2023 and 2024 calendar years, the Applicant spent time outside of Australia during two key periods: being, between 3 May 2023 to 6 January 2024, and between 1 April 2024 to 24 June 2024. The periods of time spent in Australia was 122 days in 2023 and 278 days in 2024.
On 1 April 2024, the Applicant travelled to China to assist her sister in circumstances where her brother-in-law was suffering from terminal cancer. He passed away on 6 May 2024. Throughout May and until 24 June 2024, the Applicant remained in China to assist her sister with “funeral arrangements and other necessary administrative matters”. The Applicant returned to Australia on 24 June 2024 and remained in Australia until the end of the 2024 calendar year (namely, for 191 days).
On 16 September 2024, the Chief Commissioner issued a land tax assessment notice assessing her as liable for surcharge land tax in relation to the Property for the 2024 land tax year.
On 18 October 2024, the Applicant’s son, on her behalf, objected to the assessment.
On 12 December 2025, the Chief Commissioner of State Revenue (the Chief Commissioner) disallowed the Applicant’s objection.
On 7 February 2025, the Applicant sought administrative review of the Chief Commissioner’s disallowance of her objection, pursuant to s 96(1)(a) of the Taxation Administration Act 1996.
The Statutory Framework
Under s 5A of the LTA, surcharge land tax is leviable on residential land owned by “foreign persons”.
The definition of “foreign person” is found in s 2A of the LTA, which relevantly provides that foreign person has the same meaning as Chapter 2A of the Duties Act 1997 (Duties Act). Under s 104J of the Duties Act, “foreign person” has the same meaning as that under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (the FATA). Section 4 of the FATA defines “foreign person” as an individual not “ordinarily resident” in Australia.
Section 5 of the FATA provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and is therefore not a foreign person) if and only if:
- (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and
(b) at that time:
(i) 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
(ii) 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 provides exemptions from surcharge land tax for a principal place of residence. That section states:
“(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 -
(a) the person is a permanent resident at midnight on 31 December of the previous year, and
(b) 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
(c) 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.
(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.
(3) If the residence requirement is not complied with by the person, surcharge land tax liability is to be assessed or reassessed as if the person’s exemption from liability to pay surcharge land tax for the land tax year had never applied.
(4) The failure of the person to comply with the residence requirement is taken to be a tax default for the purposes of Part 5 of the Taxation Administration Act 1996.
(5) Any interest that is payable on the tax default in accordance with Part 5 of the Taxation Administration Act 1996 accrues on the amount of surcharge land tax assessable to the person for the period commencing on the last day allowed for furnishing the land tax return for the land tax year and ending on the day when the assessment or reassessment referred to in subsection (3) is made.
Submissions
The Applicant submitted that, while she was absent from 1 April 2024 to 24 June 2024 from Australia, this was due to exceptional circumstances (namely, the prolonged customary grieving period following her brother-in-law’s death). Moreover, the Applicant contended that her absence was “brief”, in that she was only absent from Australia for just less than 25% of the calendar year. She also submitted that the brevity of her absence should not be divorced from the exceptional circumstances that compelled that absence. The Applicant submitted, therefore, that the discretionary exemption available under s 5B(2B) was enlivened in her case.
On the other hand, whilst the Chief Commissioner accepted that there were exceptional circumstances that explained, in part, the Applicant’s physical absence from Australia, her absence was nevertheless not “brief”. The Chief Commissioner submitted that the Tribunal’s approach to construing the word “brief” in Fleuren v Chief Commissioner of State Revenue [2024] NSWCATAD 177 (Fleuren) was incorrect. The ordinary meaning of “brief” is “of little duration” and a period of absence from Australia for 83 days – irrespective of whether that was measured against the calendar year or the 200-day period of occupation and use required by s 5B of the LTA – was not brief. The Chief Commissioner submitted that, accordingly, the discretionary exemption in s 5B(2B) was not enlivened and the Applicant was liable to pay surcharge land tax.
Decision
The Tribunal accepted that the Applicant’s physical absence from was triggered by exceptional circumstances (at [33]-[34]), but noted that exceptional circumstances are not, of themselves, sufficient to enliven the s 5B(2B) exemption (at [35]).
Whilst the Tribunal did not comment expressly on its previous decision in Fleuren, the Tribunal took a different approach to construing and applying the meaning of “brief” to the Applicant’s physical absence from Australia. In particular, the Tribunal stated, at [41]:
I do not think that the words “brief physical absence from Australia” lend themselves to allow for a severance of an actual period of physical absence into different parts. The words in my opinion mean what they say, namely a “brief physical absence from Australia”. They do not allow the Tribunal to carve out of the period of actual physical absence a shorter period, such as the 9 day period preceding the 191-day period when the Applicant was physically present in Australia, even if that 9-day period taken in isolation can answer the description of “a brief physical absence from Australia”. What is a brief physical absence from Australia must be determined having regard to the actual period of physical absence.
The Tribunal also rejected the Applicant’s submission that the Applicant’s customary mourning period should be taken into account when assessing whether the Applicant’s physical absence from Australia was “brief” (at [41]).
Ultimately, the Tribunal confirmed that the Chief Commissioner’s assessment of surcharge tax liability (at [43]).
Orders
The assessment under review is confirmed.
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