Neal v Chief Commissioner of State Revenue [2014] NSWCATAD 26

Date of judgement 14 March 2014 Proceeding No. 126126
Judge(s) NS lsenberg, Senior Member
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Administrative Decisions Review Act 1997 (formerly Administrative Decisions Tribunal Act 1997)

Civil and Administrative Tribunal Act 2013

Land Tax Management Act 1956

Taxation Administration Act 1996
Catchwords Land tax – principal place of residence exemption – onus of proof – whether intentional disregard of taxation law – penalty – s27(2) Taxation Administration Act 1996
Cases cited Gaskell v Denkas Building Services Pty Limited [2008] NSWCA 35

Jones v Dunkel (1959) 101 CLR 298

Manly Council v Byrne [2004] NSWCA 123

Touma v Chief Commissioner of State Revenue [2012] NSWADT 2


The taxpayer initially sought a review of the Chief Commissioner’s decision to assess her Birchgrove property for land tax, and to impose interest, and penalty tax of 75% for intentional disregard of the law.  During the hearing the taxpayer amended her application to seek a review only of the imposition of penalty tax at the 75% rate.

The Tribunal found that it was incumbent upon the taxpayer to positively establish that she did not intentionally disregard the relevant law.  The Tribunal was not satisfied that the taxpayer had done so, and affirmed the Chief Commissioner’s decision to impose penalty tax at the rate of 75%.


At all times relevant to the decision, the taxpayer owned several properties. The taxpayer had claimed a principal place of residence (“PPR”) exemption under the Land Tax Management Act 1956 (“LMTA”) in relation to two of these: a residential property consisting of two flats at Birchgrove (“the Birchgrove property”) and another residential property she jointly owned at Huntley’s Point (“the Huntley’s Point property”).

On 1 May 2012, the Chief Commissioner issued land tax assessment notices to the taxpayer by which he reversed the PPR exemption previously afforded to her in respect of both properties. Both of the assessments included a penalty tax of 75%, as well as interest.

On 3 July 2012, the Taxpayer objected to several aspects of the assessments. The Chief Commissioner disallowed those objections. The taxpayer in turn lodged an application for review of that decision with the Administrative Decisions Tribunal (as it then was). On 17 July 2013, the taxpayer amended her application such that it referred only to the Birchgrove property. In doing so, the taxpayer filed a statement by which she asserted that throughout the relevant period she:

  1. spent a large amount of time at a property at Marks Point (“the Marks Point Property”) but kept most of her personal belongings at the Birchgrove property, only part of which was rented to tenants;

  2. lived at the Birchgrove property during all holiday periods; and

  3. lived at the Birchgrove property in a domestic relationship with a “Mr BB” until the relationship ended in 2003.

Issue for determination

Following the amendment of the application, the Tribunal was required only to assess the decisions of the Chief Commissioner to:

  1. impose penalty tax for the land tax years 2000 to 2006 in respect of the Birchgrove property; and

  2. impose that penalty tax at a rate of 75%.

The taxpayer did not challenge the decision that she was liable for the land tax in the first place. 

Relevant law

Senior Member Isenberg commenced his findings with a summary of the relevant law. At the outset, he confirmed that, pursuant to s100(3) of the Taxation Administration Act 1996 (“TA Act”),a taxpayer has the onus of proving his or her case on a review.

As to the substantive provisions in issue, the Tribunal observed that, under s26 of the TA Act,a taxpayer is liable to pay penalty tax in the case of a tax default under a ‘taxation law’.  The amount of penalty tax payable is calculated in accordance with s27 of the TA Act. In the ordinary case, penalty tax will comprise 25% of the unpaid amount [s27(1)]. In cases, however, where the Chief Commissioner is satisfied that the default was caused wholly or partly by the intentional disregard of a taxation law, the amount of penalty tax can be increased to 75% [s27(2)]. If on the other hand, the taxpayer took reasonable care to comply with a taxation law, or the default occurred solely because of circumstances beyond their control, the Chief Commissioner may decide not to impose penalty tax [s27(3)].


The taxpayer contended that the Chief Commissioner’s imposition of a 75% penalty tax should be reviewed on the basis that she did not, at any time during the relevant period, “intentionally disregard the law”. Specifically, she submitted that she claimed the Birchgrove property as her PPR on account of a mistaken belief that, in circumstances where she owned multiple properties, she was entitled to the exemption for one of those properties, irrespective of whether:

  1. part of the property was rented out to another person; and

  2. she actually lived in the property.

That belief was, she said, based on advice she received from two accountants, one or more officers of the Office of State Revenue and a solicitor. Additionally, the taxpayer asserted that for part of the relevant periods she had suffered certain medical conditions. She submitted that those conditions significantly impacted on her cognitive capacity, reasoning and decision making.

The Chief Commissioner responded by adducing a range of material in support of the contention that throughout the relevant period, the taxpayer resided at the Marks Point property. Among other things, the Chief Commissioner produced a property management agreement, payroll records, workers compensation records, and bank records showing the taxpayer’s address as the Marks Point property. The Chief Commissioner also adduced evidence to demonstrate that, after becoming aware that she was the subject of an investigation by the Office of State Revenue, the taxpayer changed her address in records held by the Commonwealth Bank, the Greater Building Society and the St George Bank.

The Chief Commissioner also provided material in support of the assertion that the taxpayer had deliberately misled Office of State Revenue personnel. The material relied on by the Chief Commissioner included evidence that the taxpayer had instructed her then solicitor that she and Mr BB did not live together, and had never done so. Finally, the Chief Commissioner relied on a statement suggesting that the taxpayer had offered a tenant of the Birchgrove property “6 months free rent” if he agreed to “help her out” in respect of “trouble with her land tax”.


In reaching his decision, Senior Member Isenberg referred favourably to the decision of the ADT in Touma v Chief Commissioner of State Revenue [2012] NSWADT 2, where it was held that it is not necessary for the Chief Commissioner to produce evidence of intentional disregard of a taxation law in order for the imposition of a s27(2) penalty to be affirmed. Instead it is incumbent upon the taxpayer to positively establish that that they did not intentionally disregard the relevant law.  The Tribunal was not satisfied that the taxpayer had done so.

In particular, Senior Member Isenberg found that there was nothing in evidence that supported the taxpayer’s submission that she relied on expert advice in claiming the PPR exemption. In relation to the taxpayer’s medical condition, Senior Member Isenberg determined that notwithstanding she had “been adversely affected by stressors which caused anxiety”, s27(3) of the TA Act did not apply; the taxpayer had not established, on the balance of probabilities, that the tax default occurred solely because of circumstances (i.e. the taxpayer’s medical condition) beyond her control. 

In rejecting the taxpayer’s submissions, the Tribunal referred to a number of matters adversely affecting the taxpayer’s credibility, including the changing of her address after the commencement of OSR investigations, and the instructions she gave to her solicitors regarding her living arrangements with Mr BB.

The Tribunal buttressed its findings in this respect by reference to the principles in Jones v Dunkel (1959) 1010 CLR 298 and related authorities. In particular it referred to Gaskell v Denkas Building Services Pty Limited [2008] NSWCA 35. There, Bryson AJA observed that a party’s failure to call a witness who might have been able to cast light on a particular subject matter, may allow a Tribunal to draw an inference unfavourable to that party, provided there is other evidence available to support the inference.

The Tribunal did not clearly identify the specific Jones v Dunkel inferences it was drawing. Nevertheless, it made the general observation that, in light of the aforementioned credibility issues, the taxpayer’s failure to call either a medical practitioner who provided treatment to her during the relevant period or, indeed, any person who gave her relevant taxation advice, militated against the acceptance of her contentions.


The decision of the Chief Commissioner to impose a penalty tax for the relevant years at a rate of 75% was affirmed.

Link to decision

Neal v Chief Commissioner of State Revenue [2014] NSWCATAD 26

Last updated: 18 May 2016