De Tarle v Chief Commissioner of State Revenue [2021] NSWCATAD 270
Background
In March 2017, the Applicant purchased a property in Neutral Bay NSW and became liable under the Duties Act 1997 (NSW) (“Duties Act”) to pay duty of $25,585 by 9 June 2017.
The Applicant attended the Parramatta office of Revenue NSW (“RNSW”) on 9 June 2017 regarding methods intending to make a part payment of $18,000 in duty by electronic means, but was given incorrect advice that payment had to be submitted electronically through a third party as an Electronic Duties Return (“EDR”). This advice was corrected on 19 June 2017 in an email to the Applicant. From that time until the full payment of duty in March 2020, RNSW and the Applicant engaged in extensive correspondence regarding payment of the duty, including instalment plans for payment.
By a notice of assessment dated 11 June 2020, the Chief Commissioner assessed the Applicant as being liable to pay interest on the outstanding duty. On 5 October 2020, the Applicant lodged an objection to the notice of assessment, and on 3 February 2021, the Chief Commissioner disallowed the objection.
The statutory framework
Sections 8, 9, 11, 12, 13 and 17 of the Duties Act are relevant to what is dutiable property, when liability to pay duty arises, who is liable for such duty and when it must be paid.
Sections 3, 4, 21, 22, 25, 101 and 107 of the Taxation Administration Act 1996 (NSW) (“TA Act”) relate to tax defaults and interest, as well as the discretion afforded to the Chief Commissioner regarding the remission of interest.
The statutory framework is dealt with at [38] to [41] of the decision.
Submissions
The submissions of the Applicant were summarised as follows at [42], [43] and [51]:
- he had never disputed that he was liable to pay duty in the sum of $25,585;
- he was in a position as at 9 June 2017 to pay $18,000 and had taken steps to enable him to do so. In particular, the Applicant relied upon his communications with RNSW between April and 8 June 2017;
- he was prevented from paying the duty by an employee of RNSW, who refused to accept his documents for stamping and his intended payment of $18,000 when he attended the Parramatta office of RNSW on 9 June 2017. This was a mistake made by RNSW, which the Applicant said was acknowledged in subsequent emails;
- after 9 June 2017, the Applicant continued to attempt to pay part of the $25,585, but he was not in a position to make payment until he was given a reference number or payment code that he could use for an electronic transfer of funds, which did not occur until the notice of assessment was issued;
- on 14 July 2017, during his second visit to the Parramatta office of RNSW, an employee of RNSW indicated that payment could not be accepted because RNSW needed to generate an electronic payment code to reconcile the payment with the assessment, and that the notice of assessment would be issued within about a week;
- when the Applicant did not receive the notice of assessment, he wrote again to the Chief Commissioner, but he did not receive the notice of assessment until 24 August 2017;
- the notice of assessment required payment by 5 September 2017;
- in these circumstances, the Applicant argued that interest should only be charged:
- from 6 September 2017; and
- on the basis that as at that date the balance owing was $25,585 less $18,000, that is, $7,585; and
- alternatively, there should be a remission of interest in the amount of $670.92, being interest up to and including 5 September 2017, on the basis that this had been promised by the Chief Commissioner.
The Chief Commissioner’s submissions were summarised as follows [52]:
- the relevant principles are set out in Chief Commissioner of State Revenue (NSW) v Incise Technologies Pty Ltd [2004] NSWADTAP 19; 56 ATR 82 (“Incise”);
- the market component is rarely waived, and this is not a case where there should be a waiver because the Chief Commissioner did not contribute to the tax default; and
- as to the premium component, the four criteria identified by the Appeal Panel in Incise were not satisfied.
Decision
SM Goodman affirmed that the discretion conferred by s. 25 if the TA Act is broad and is to be exercised by reference to the particular facts of the case, per Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 743 at [185].
The Senior Member also affirmed that the principles which inform the exercise of that discretion are set out in the decision of Incise at [60]-[63].
In applying those principles SM Goodman held that the evidence gave rise to the following considerations, which informed the exercise of the discretion:
- from early April 2017 and at least until his 2 August 2017 email, the Applicant was actively seeking to pay a substantial part of duty for which he was liable;
- as at 9 June 2017, the Applicant had the capacity to pay $18,000.00 of the duty owing;
- on 9 June 2017, an employee of RNSW mistakenly informed the Applicant that his documents could not be lodged over the counter. This mistake was corrected in the RNSW email to the Applicant dated 19 June 2017, in which he was invited to lodge his documents over the counter at the Parramatta office of RNSW;
- The Applicant wished to make an electronic transfer of funds in part-payment of the duty owing;
- The Applicant did not have the payment code required to make the electronic transfer until 24 August 2017, when the notice of assessment was sent to him by email;
- The Applicant did not make any payment until 5 or 6 September 2017, when he paid the sum of $10,000 to the Chief Commissioner.
- Whilst the Applicant wished to make payment using an electronic transfer of funds, this was not the only means of payment available to him, per s. 107(1) of the TA Act;
- The Applicant chose on 14 July 2017 not to pay the duty by bank cheque and instead chose to wait for an assessment to be issued so that he could pay by electronic funds transfer. The Applicant has provided no explanation as to why he did not pay the duty using a bank cheque or money order.
Considering the above, the Senior Member found that the appropriate exercise of the discretion was to excuse the Applicant from the obligation to pay interest while the mistake made by RNSW was operative (i.e. that the Applicant’s documents and payment of duty had to be lodged electronically). This accords with the observations in Incise at [60] and [63], namely that it may be appropriate to remit the market and premium components of interest where the Chief Commissioner has in some way contributed to the tax default. Senior Member Goodman found that the relevant date was shortly after 19 June 2017 and thought it appropriate to allow for a further short period of time for the Applicant to act upon the rectification of the mistake, thereby placing the starting date for calculation of interest at 1 July 2017.
Notably, the Senior Member found that it is not appropriate to order that any calculation or interest be made on the basis of a reduced principal amount of duty. The Senior Member also rejected the Applicant’s submissions that only interest calculated from 6 September 2017 should be charged and therefore that there should be a remission of interest up to and including 5 September 2017, because the Applicant’s argument lacked merit.
Orders
- Duties Notice of Assessment No.9125472 is remitted to the Chief Commissioner for determination in accordance with these Reasons (that is, interest to be charged from 1 July 2017).
Link to decision
https://www.caselaw.nsw.gov.au/decision/17becd9b6508253ef1db9085