Gao v Chief Commissioner of State Revenue [2020] NSWCATAD 216

Background

This is a case about surcharge purchaser duty (SPD) payable under Chapter 2A of the Duties Act 1997 (the Duties Act). The outcome of the case turns on whether the applicant was a ‘foreign person’ when he became the owner of an apartment in a block in St Leonards.

The applicant is a permanent resident of Australia but he is not an Australian citizen. On 28 March 2018 he entered into a contract to purchase the apartment. Settlement occurred on 3 January 2019 and the transfer was registered on the same day. The Chief Commissioner made an assessment of the duty payable on the agreement, including SPD under s. 104L(1)(b)(i) of the Duties Act, because the agreement was for the sale or transfer of residential-related property to a foreign person’. The assessment was paid in full.

The Applicant then sought a refund of the SPD on the basis that on the date of completion he was no longer a ‘foreign person’ for the purposes of the Duties Act. The Chief Commissioner rejected the refund request, taking the view that the Applicant was a ‘foreign person’ on the date of completion.

The Applicant’s objection to the decision was disallowed, and he applied to the Tribunal for review of the objection decision. The Tribunal accepted that it was an objection against the assessment decision. The application was lodged two days late, but the Tribunal granted an extension of time to seek a review. The Chief Commissioner did not oppose the request for an extension of time.

The Statutory Framework

The issue was whether the applicant satisfied s. 104ZF of the Duties Act which provided for a reassessment and refund of SPD if property is transferred to a person who is no longer foreign as defined in s. 104J(1) of the Duties Act, which provides that:

• “foreign person means a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, (FAT Act) as modified by this section”.

Section 4 of the FAT Act provides that a foreign person means an individual who is not ordinarily resident in Australia.

Relevant to this case, section 5 of the FAT Act states:

1. "An individual who is not an Australian citizen 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…”

Submissions

Both parties’ submissions related to whether the Applicant was, at the relevant time, a ‘foreign person’ based on the number of days during which he had ‘actually been in Australia’ in the relevant 12 month period. The Applicant submitted that he had ‘actually been in Australia’ for 201 days. The Respondent submitted that the Applicant had ‘actually been in Australia’ for 199 days.

The main issue in dispute turned on two extra days being 31 March 2018 and 28 July 2018 that the Applicant thought should be treated as days when he had ‘actually been in Australia’. The Applicant said he was “in Australia” on these two days because in each case the flight he was on did not leave Australian airspace until after midnight on each date. Although the movement records show he departed Australia on 30 March 2018 and 27 July 2018, the Applicant says in each case he did not leave Australia until the following day.

The Applicant submitted that a person sitting in a commercial aircraft cruising at an altitude of several kilometres above either the Australian land or the Australian territorial sea is ‘in Australia’ for the purposes of s. 5(1)(a) of the FAT Act.

The Respondent accepted and the Tribunal found as follows:

1. Flight CA174, which departed from Sydney Airport on the evening of 30 March 2018, was still over Australian land shortly after midnight Australian Eastern Daylight Savings Time on 31 March 2018; and
2. Flight CA174, which departed from Sydney Airport on the evening of 27 July 2018, was at latitude 11 59’7.58”S and at longitude 134°8’54.98”E (which the Applicant believes to be over Australian land) shortly after midnight Australian Eastern Standard Time (AEST) on 28 July 2018; and in any event the flight was over Australian territorial sea at 7am AEST on 28 July 2018.

According to the Applicant it should follow that he was in Australia for part of 31 March 2018 and part of 28 July 2018, and so he passed the 200-day requirement reaching 201 days during the relevant period.

The Applicant submitted that the expression ‘in Australia’ in s. 5 of the FAT Act is specifically a geographical reference, and noted in support of that submission the definition of ‘Australia’ in s. 4 of the FAT Act (‘when used in a geographical sense, includes the external Territories’). There being no limitation on the geographical sense of Australia in the FAT Act, it includes airspace.

The Respondent submitted that s. 5 of the FAT Act should be read in light of the Migration Act 1958 (Cth) (“the Migration Act”), because the concept of persons who are in, not in, or remain in, Australia, is the most apposite to section 5 of the FAT Act. That is because the Migration Act is intended to regulate the circumstances in which non-citizens can enter, exit and remain in Australia and therefore the circumstances in which they can be resident in Australia.

In response, the Applicant submitted that the Respondent’s choice of definition was inapplicable based on arts. 1 and 2 of the Chicago Convention on International Aviation.

The Senior Member was of the view this issue was not resolved by looking at the Migration Act, or the Civil Aviation Act, or the Chicago Convention, but by looking at the words of the statute, and working out their meaning in context. He agreed with the Applicant’s submission that ‘Australia’, when used in s. 5(1)(a), is used in a geographical sense.

In the Senior Member’s view, the two days in question (31 March 2018 and 28 July 2018) were not days during which the Applicant had ‘actually been in Australia’. The Senior Member stated:

“To say that Mr Gao was ‘actually in Australia’ when the aircraft was at cruising altitude above the very limits of Australian territory, on the way to China, strains the language beyond breaking point”.

Meaning of “at a particular time” and “during”

The Senior Member asked both parties to comment on the phrase in s. 5(1) of the FAT Act, ‘at a particular time’. At the conclusion of the hearing the Tribunal granted leave to both parties to file further submissions on the meaning of ‘at a particular time’. The Respondent was also granted leave to make submissions on the meaning of ‘during’ in s. 5(1)(a) of the FAT Act.

The Applicant submitted that the meaning of the word ‘during’ in s. 5(1)(a) of the FAT Act means ‘at some point in the duration of’, rather than ‘for the entirety of’. The Respondent submitted that the meaning of ‘during’ is either ‘through the continuance of’ or ‘in the course of’. The Respondent submitted that if either meaning applied, the Applicant was not ‘actually in Australia’. The Tribunal decided that ‘during’ means ‘for some part of’.

The Applicant submitted that the phrase ‘at a particular time’ in s. 5(1)(a) of the Fat Act refers to the actual time of registration of the transfer. The Respondent submitted that the phrase ‘at a particular time’ refers to period of a calendar day, not a particular time of day, relying on s. 2G of the Acts Interpretation Act 1901 (Cth). The Tribunal sought submissions from both parties because both had assumed the ‘particular time’ referred to the date of settlement.

Decision

The Tribunal decided that:

• the concept of ‘ordinarily resident’ must be determined by whether or not the Applicant satisfied the 200-day requirement;
• the ‘particular time’ at which it must be determined whether the Applicant was ‘ordinarily resident’ in Australia is at the time of registration of the transfer, not the date of settlement;
• the ‘relevant period of 12 months’ for examining the days during which the Applicant was ‘actually in’ Australia is the ‘period of 12 months immediately preceding’ the time of registration of the transfer, being the period from 3 January 2018 to 2 January 2019;
• the Applicant fell short of the 200-day requirement set out in s. 5(1) of the FAT Act by one day and he was a ‘foreign person’ for the purposes of s. 104J(1) of Act at the time the transfer of the apartment to him was registered;
• accordingly, the Chief Commissioner’s decision to refuse the refund of SPD was confirmed.

https://www.caselaw.nsw.gov.au/decision/1744ca38ec3199b0f71b4bd9