Introduction
On Ms Roen ('Applicant') entered into a contract to purchase a house as a joint tenant with her husband. They paid transfer duty of $38,195.00 on the purchase. The Chief Commissioner of State Revenue ('Chief Commissioner') assessed Ms Roen to an additional liability to surcharge purchaser duty ('SPD') of $38,080.00, together with penalty tax of $7,616.00 and interest of $13,585.13.
The Applicant admitted she was a foreign person within the meaning of Chapter 2A of the Duties Act 1997 (NSW) ('Duties Act') and as such was liable for SPD, which had been paid in full. She only sought review of the penalty tax and interest. Penalty tax was imposed at 20% rather than the rate of 25% that applies under s 27(1)(a) of the Taxation Administration Act 1996 (NSW) ('TA Act'). Interest was imposed at the market and premium rates, with no remission. At the hearing, the Tribunal was informed that no guidelines were issued as at the date of the hearing for the purpose of s. 25(2) as amended and, although proposed, they would be issued with prospective effect: [20] of the decision.
Background
At the time of purchase, the Applicant was a Canadian citizen residing in Australia on a temporary Bridging B Visa, granted 12 August 2019. On 30 November 2020, the Applicant and her husband entered into a contract to purchase the house located at 16 Rowland Street, Revesby NSW 2212 ('Property'). Thomson Geer solicitors acted on the purchase. The Applicant’s uncle was a partner at the firm. Spectrum Solutions ('Spectrum') were hired by Thomson Geer to attend to the electronic lodgements for the Applicant and her husband.
Thomson Geer directed the Applicant and her husband to complete and return a purchaser/transferee declaration form. Following this, Spectrum would use the information entered for the purposes of electronic lodgement, triggering the automatic issue of a notice of assessment.
On or around 22 December 2020, the Applicant completed a purchaser/transferee declaration form in respect of the acquisition of the Property. The Applicant completed one copy of the form (the 'Original Form'), e-signed it, and returned it to Thomson Geer. The Original Form contained several errors: the Applicant stated that her visa type was a 'Bridging Visa A', which was incorrect as she held a 'Bridging Visa B'. The Applicant input her Australian visa number. She correctly ticked 'yes' in response to the question, 'is the purchaser/transferee a foreign person' but also erroneously ticked the box affirming she was an Australian citizen. Furthermore, the Applicant ticked 'no', to Question 2.2: whether ‘the purchaser/transferee [is] an exempt permanent resident who will occupy the property as their principal place of residence for a continuous period of 200 days within the first 12 months after the liability date (date of agreement)?’ The Applicant declared that all information provided in the Original Form was true and correct [40].
Late on 22 December 2020, Spectrum sent an email to Thomson Geer, requesting a copy of the Applicant’s and her husband’s purchaser declarations. Later that evening, a paralegal at Thomson Geer emailed the Applicant’s Original Form to Spectrum.
On 23 December 2020, Spectrum and Thomson Geer engaged in email correspondence regarding the errors in the Original Form. Spectrum provided Thomson Geer a form, stating response from 'no' to 'yes' to Question 2.2 ('Amended Form'). The Amended Form was also amended to indicate that the Applicant was a person 'ordinarily resident in Australia' as opposed to 'an Australian citizen'.
Spectrum used this information to effect lodgement. Due to the exemption claimed in s 2.2. of the Amended Form, no SPD was assessed in the original duties notice of assessment issued 23 December 2020 ('Initial Assessment').
On 21 June 2024, the Chief Commissioner commenced an investigation to determine if the Applicant was liable to pay SPD.
On 6 September 2024, the Chief Commissioner issued a revised notice of assessment, following the discovery of the errors made on the Amended Form.
On 10 September 2024, the Applicant objected to the notice of assessment. On 30 September 2024, the Chief Commissioner issued a further notice of assessment, which set out the payments that the Applicant had made against the assessment.
On 12 November 2024, the Applicant’s objection was disallowed for the following reasons:
- the Applicant should have contacted the Chief Commissioner with any questions regarding liability to SPD if doubt arose,
- surcharge duty was in operation for over 3 years, and during such time, it was expected that here would be an awareness of SPD and the definition of a ‘foreign person’, by the Applicant or Thomson Geer,
- reliance on a legal representative to facilitate purchase of property is insufficient to establish reasonable care being taken to comply with the law,
- the Applicant should have sought professional advice or made inquiries to the Chief Commissioner regarding the issue or payment arrangements to ensure tax liabilities were met,
- unawareness of liability until the investigation is not a valid reason to remit interest or penalty tax,
- a 20% remission of penalty tax had already been applied, and as such, personal and financial circumstances are not valid reasons for a further remission.
Critically, there was no evidence of reasonable care having been taken to comply with the law, to support the argument for a remission of interest and penalty tax.
On or around 19 November 2024, the Applicant realised that the form provided to Spectrum and lodged with Revenue NSW was not the Original Form that she had completed, but the Amended Form. The Applicant sent an email to the Chief Commissioner concerning this discrepancy, alleging that it contradicted the points raised in the Chief Commissioner’s determination.
On 25 November 2025, the Chief Commissioner advised the Applicant via email, that the 'reasonable care' standard applies not only to the Applicant but to her legal representatives. The Chief Commissioner noted that Thomson Geer’s failure to identify and rectify the error was 'not deemed to be taking reasonable care'. Furthermore, failure by Thomson Geer to correctly inform the Applicant of the amendments to the form could not 'deter the Chief Commissioner from imposing the correct duty and applicable interest of penalties' [58].
On 19 January 2025, the Applicant filed the application for administrative review in the Tribunal registry and on 8 February 2025, the Applicant accepted the liability to SPD but sought review of the imposition of interest and penalty tax.
The Statutory Framework
'Foreign person' and interaction with SPD
Under s 104L Duties Act, SPD is chargeable on a transfer or an agreement for sale or transfer of residential-related property to a foreign person. Residential-related property includes residential land in NSW, under s 104K(a).
Under s 104J, a ‘foreign person’ is one so defined within s 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) ('FATA'), namely that they are not ‘ordinarily resident’ in Australia. Under s 5(1) of FATA, a person is ‘ordinarily resident’ in Australia if the individual has physically been in Australia for over 200 days in the preceding 12 months, and no legal limitation has been placed on continued presence.
In relation to charging SPD on a surcharge duty transaction, under s 104J(3) Duties Act, a person who is not an Australian citizen is a ‘foreign person’, if they are deemed one when liability for duty charged on the transaction arises. This occurs during a transfer of dutiable property and if the transfer is effected by an instrument, when that instrument is executed (per s 104Q).
Under s 104W, SPD must be paid within 3 months of the liability arising.
Interest
Under s 3(1) of the TA Act, a tax default occurs following a failure to pay whole or part of the tax when it is liable to be paid.
Under s 21(1) of the TA Act, following a tax default, the taxpayer is liable to pay interest on the amount of tax unpaid, calculated daily. The interest rate is the sum of the market rate and premium components (s 22(1)).
Under s 25, interest can be remitted by the Chief Commissioner. No guidelines pursuant to s. 25(2) were issued at the date of hearing for the purposes of remission.
Penalty tax
Under s 26(1) of the TA Act, following a tax default, the taxpayer is also liable to pay penalty tax in addition to the amount of tax unpaid. Under s 27(1)(a), the amount of penalty payable is 25% of the amount of tax unpaid, or under s 27(1)(b), 50% of the amount of tax unpaid if the taxpayer is a significant global entity. Under s 27(2), the amount can be increased to 75% if the default was caused wholly or partly by the intentional disregard of the taxpayer.
Under s 27(3), no penalty tax may be payable if the Chief Commissioner is satisfied that the taxpayer took reasonable care to comply with the law or if the default occurred solely due to circumstances outside the taxpayer’s control.
Alternatively, under s 29(1), a 20% reduction in penalty tax can be applied if, following an investigation launched by the Chief Commissioner, the taxpayer discloses in writing sufficient information to enable the nature and extent of the default to be ascertained.
The Chief Commissioner also retains discretion under s 33 to remit penalty tax.
Submissions
Role of Spectrum
In the decision, SM Sullivan highlights the issue of the role of Spectrum in this matter. The Applicant contented that Spectrum was an agent of the Chief Commissioner, such that their actions or errors were attributable to the Respondent and not the Applicant [61], whereas the Respondent submitted and provided evidence to show that this was incorrect. The Applicant’s solicitor conceded this threshold matter during the hearing [62].
The Applicant contended that she should not be assessed for interest or penalty tax in circumstances where:
- she had correctly completed all the key information on the form,
- she returned the form to her solicitors,
- the form was changed, sent to Spectrum, and lodged on a different basis without her approval,
- she had no knowledge that the Amended Form had been lodged, and
- she relied on Thomson Geer and Spectrum to check the relevant information.
The Applicant further contended that the errors arose due to a 'glitch' in the PDF version of the Original Form, which was outside of her control.
On the other hand, the Chief Commissioner submitted the following:
- while the Chief Commissioner has no legal duty to advise taxpayers of their legal obligations, on the form the Chief Commissioner did warn the Applicant of the need to consult the information published on the Revenue NSW website,
- no evidence points to the Applicant seeking assistance or receiving advice from Revenue NSW,
- unawareness of legal obligations is not a ground for remission of interest or penalties, and
- the Applicant had not produced sufficient evidence to show that she or her agent (Thomson Geer or Spectrum) took reasonable care, nor had she established any other grounds for the remission of penalty tax and/or interest.
The question before the Tribunal was whether it was the correct and preferable decision to remit:
- some or all of the penalty tax of $7,616 (which included a reduction from 25% to 20% under s 29 of the TA Act); and
- some or all of the interest of $13,585.13 (imposed at the market and premium rate).
Decisions
Penalty tax
Reduction under s 27(3) TA Act
SM Sullivan found that although the Tribunal does have the discretion to remit penalty tax, this could not be exercised here because the Tribunal could not be satisfied that the Applicant or her agent took reasonable care to comply with their legal obligations and the default did not arise due to circumstances beyond their control [73]-[75].
The Tribunal found that Thomson Geer and Spectrum both held the correct visa information, yet they did not complete/lodge the purchaser declaration form correctly. The Tribunal was also critical of the fact that the purchaser declaration form was amended without the Applicant’s knowledge.
While the Applicant was not a lawyer and had no legal training, the Tribunal held that she too did not exercise reasonable care. Although the 'material' parts of the Original Form were completed accurately, the Applicant did not seek or receive specific instructions when completing the form and made errors despite affirming the veracity of the information. On cross-examination, the Applicant also failed to recall if she had in fact read the Explanatory Notes set out on the purchaser declaration form [77]-[80].
The Tribunal noted that even if the Applicant had taken reasonable care, penalty tax would not have been reduced to nil given the totality of behaviours of all parties involved [83].
Remission under s 33
Under s 33, the Tribunal has discretion to remit penalty in whole or in part where appropriate. However, given the Tribunal’s findings above, since reasonable care could not be established, there were no special circumstances which would warrant the Tribunal’s remission of penalty tax in whole or in part, under s 33 of the TA Act.
Interest
As set out above, under s 25 TA Act, the Chief Commissioner (and the Tribunal) have the discretion to remit interest. However, in this case SM Sullivan found that discretion could not be exercised.
Market Rate Component
Senior Member Sullivan noted that the market rate component of interest is intended to compensate for delayed payment and can only rarely be remitted because it would discriminate against taxpayers who tax pay on time. Since there were no exceptional circumstances that would justify remission (as the 'glitch' in the PDF form could have been remedied within the appropriate time), the Tribunal could not justify the remission of the market rate component of interest.
Premium Rate Component
The Tribunal emphasised that the premium rate component of interest is a form of penalty which is intended to deter late payment. Relying upon the 4 criteria set out in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19, to ascertain whether remission could be granted, the Tribunal found in this case that:
- all principal tax had been paid,
- the taxpayer did cooperate with the Chief Commissioner,
- cooperation occurred before or shortly after investigation, and
- there was no wilful default.
However, as set out above, the Applicant was found not to have taken reasonable care, a key factor when deciding upon remission. While per Golden Age & Hannas the Rocks v Chief Commissioner of State Revenue [2024] NSWSC 249 the premium rate could be reduced to nil even if an error was caused by a failure of the taxpayer’s solicitor’s failure to take reasonable care, in that case, the Applicant did seek and receive legal advice. On the facts of this case, the Applicant herself did not take similar 'reasonable care'. [93]-[96].
As such, the Tribunal was not persuaded that the present circumstances warranted the reduction of the premium interest component by any amount.
Orders
In light of the above, the Tribunal made the following order:
- The assessment to penalties and interest is affirmed.
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