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ACT CIVIL & ADMINISTRATIVE TRIBUNAL
SHARIFI v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2017] ACAT 24
AT 29/2016
Catchwords:ADMINISTRATIVE REVIEW –land tax – penalty tax – failure to take reasonable care
Legislation cited:Land Tax Act 2004 ss 9,14, 19A
Tax Administration Act 1999ss 30,31, 37,
Cases cited:JokhanJokhan & Commissioner for ACT Revenue [2012] ACAT 15
Theron & Commissioner for ACT Revenue [2013] ACAT 33
Tribunal:Senior Member G Lunney SC
Date of Orders:10 April 2017
Date of Reasons for Decision:10 April 2017
AUSTRALIAN CAPITAL TERRITORY)
CIVIL & ADMINISTRATIVE TRIBUNAL)AT 29/2016
BETWEEN:
SHAHRIAR SHARIFI
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL:Senior Member G Lunney SC
DATE:10 April 2017
ORDER
The Tribunal orders that:
1.The decision under review is confirmed.
………………………………..
Senior Member G Lunney SC
REASONS FOR DECISION
1.This is an application for review of a decision dated 7 June 2016. The application seeks review of a decision disallowing an objection to an assessment of land tax, interest, and penalty tax dated 4 January 2016. The Tribunal does not have jurisdiction to review the assessment of interest and the amount of the assessment of land tax was not challenged at the hearing or was the liability to pay it. The issue was liability to pay penalty tax.
Law
2.The Land Tax Act 2004 (the Act or LTA) provides for the imposition of tax on property rented for residential purposes and also the liability to pay penalty tax when there is a tax default in respect of that obligation.
3.Section 9 of the Act imposes land tax on rented residential land. Section 14 creates an obligation to inform the Commissioner of the rental of the property and when that occurred. It provides as follows:
14Commissioner to be told if residential land rented
(1)This section applies in relation to a parcel of land that—
(a)is leased for residential purposes; and
(b)is rented by a tenant.
(2)A relevant person must tell the commissioner, in writing—
(a)that the parcel is rented; and
(b)when the rental began.
Note 1If a form is approved under the Taxation Administration Act 1999, s139C, the form must be used.
Note 2It is an offence to fail to notify the commissioner under this section (see Taxation Administration Act 1999, s 67 (2)).
Note 3It is also an offence to knowingly avoid paying, or disclosing a liability to pay, part or all of an amount of tax (see Taxation Administration Act1999, s 65 (1)).
(3)The relevant person must tell the commissioner the information mentioned in subsection (2) not later than 30 days after—
(a)if there is a change of ownership of the parcel—the day the ownership changes; or
(b)in any other case—the day the rental begins.
(4)This section does not apply if the owner of the parcel of land is a corporation.
(5)In this section:
relevant person means—
(a)the owner of the parcel of land; or
(b)if the owner has authorised an agent to act on the owner’s behalf in relation to the rental of the parcel—the agent.
Examples—agent
accountant, real estate agent, solicitor
NoteAn example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s126 and s 132).
4.Penalty tax is payable pursuant to section 19A(5)(a) of the Act as follows:
19AInterest and penalty tax payable on land tax if no disclosure
(1)This section applies if—
(a)land tax is imposed on a parcel of rateable land; and
(b)the owner of the parcel of land fails to comply with section 14 (Commissioner to be told if residential land rented) or section14A (Commissioner to be told if residential land owned by an individual as trustee).
(2)The owner is liable to pay interest on the amount of land tax from the end of 30 days after the 1st day of the 1st quarter for which the tax is imposed.
(3)Interest on the amount of land tax is worked out—
(a)for each month that the amount is payable; and
(b)on the 1st day of that month; and
(c)at the interest rate applying to that day; and
(d)on the total amount of land tax that is payable on a day when the interest is worked out.
NoteThe Minister may determine an interest rate for this section under the Taxation Administration Act, s 139.
(4)For subsection (3) (a), if an amount of land tax is payable for part of a month, interest is payable for the whole month.
(5)The Taxation Administration Act, division 5.2 (Penalty tax) applies to the owner of the parcel of land as if—
(a)the owner’s failure to comply with section 14 or section14A were a tax default; and
(b)a reference to interest under division 5.1 were a reference to interest under this section; and
(c)a reference to the amount of tax unpaid were a reference to the amount of land tax payable.
(6)This section applies to land tax imposed before or after the commencement of this section.
5.Where a taxpayer has failed to pay tax under a tax law, the taxpayer is liable to pay penalty tax in addition to the unpaid tax and interest.[1]
6.The default rate of penalty imposed by statute is 25%.[2]
7.If the Commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of a taxpayer) to take reasonable care to fulfil their obligations, the penalty tax payable is 50% of the amount of tax unpaid.[3]
8.The Commissioner may remit the penalty tax in certain circumstance set out as follows in section 31(6) of theTax Administration Act 1999(the TAA):
31Amount of penalty tax
(6)No penalty tax is payable in relation to a tax default if the commissioner is satisfied that—
(a)the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or
(b)the tax default happened solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.
NoteThe commissioner’s decision to impose penalty tax is an internally reviewable decision (see s107, def internally reviewable decision), and the commissioner must give an internal review notice to the taxpayer (see s107B).
9.Section 37 of the TAA is also relevant:
37Remission of penalty tax
The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that—
(a)either—
(i)the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or
(ii)the circumstances that resulted in the liability for penalty tax were exceptional; and
(b)it would be fair and reasonable to remit all or part of the penalty tax.
NoteThe commissioner’s decision to refuse to remit penalty tax payable by a person is an internally reviewable decision (see s107, def internally reviewable decision), and the commissioner must give an internal review notice to the person (see s107B).
Evidence
10.The applicant says that he was not aware of his obligation to pay land tax prior to the commencement of the investigation by the respondent. He had originally lived in the premises until moving out and renting it. He was the proprietor of another business.
11.Upon moving out of the property he had engaged a real estate agent to let the premises and an accountant managed his financial affairs. He had not sought advice from either of them specifically in relation to land tax, nor made any enquiries of them that may have resulted in that advice being given. When asked whether he asked the estate agent for advice he said that he hadn’t: he asked them to ‘look after the house’.
12.The practice in his family was for his wife to open the mail and tell him what accounts had to be paid. He did not see any document relating to land tax. Although he may have been shown some accounts, he only looked at the amounts to be paid.
Submissions and consideration
13.The applicant submitted that he had complied with section 31(6) in that by engaging the two professionals, the real estate agent, and the accountant, he had taken reasonable care to comply with the tax law. The applicant’s solicitor said in written submission:
The applicant contends that engaging not one but two professionals to manage the property and his taxation matters meets the standard of being “reasonable”.
14.The difficulty that I have with that submission is that the respondent did not request advice about the relevant tax law or even general advice regarding any obligations he may have as lessor of the property, from either professional. The accountant was engaged primarily to attend to the applicant’s taxation affairs against the background of the applicant being the self employed proprietor of another business; and the real estate agent was engaged to manage the tenancy of the property. Neither was engaged to give advice of a general nature that may have brought forth the land tax obligations. Without seeking that sort of advice, there was no attempt at all made by the applicant to comply with the relevant tax law when engaging either of the professionals in my view.
15.In any event, it seems to me to be essential for a person who claims that they have taken steps to comply with a law to have at least some knowledge of the law’s existence, a need to comply with it, and some understanding of what compliance might involve. What steps might be reasonable steps to comply would be the subject of factual determination in individual cases. In my view section 31(6) requires a conscious attempt to comply with the provision and thus at least some knowledge of the provision. Random behaviour which could possibly lead to compliance with the section is not in my view contemplated by the section. It is suggested by the applicant that the hiring of a professional such as an accountant or an estate agent could have, and should have led to compliance as a result of advice from them. In my view that suggestion must be rejected. There was no evidence that his appointment of either professional was to gain advice as to compliance with the LTA or any other legislation that cast an obligation on him as a result of his letting the property. Such a submission was rejected by Senior Member Loftus in JokhanJokhan & Commissioner for ACT Revenue [2012] ACAT 15 at paragraphs 28 and 29.
16.The applicant also relied on section 37 of the TAA reproduced above, in particular section 37(a)(i) and 37(b).
17.In relation to section 37(a)(i), it was submitted that the hiring of the two professionals constituted “taking reasonable steps to mitigate ….” for the purposes of the subsection. I do not agree with that submission. The Macquarie Dictionary gives the meaning of mitigate to include “to lessen in force or intensity”, or “to moderate the severity of”. This in my view requires purposive behaviour specifically intended to achieve a result in relation to a known state of affairs. There was no evidence that the respondent appointed either professional in order to achieve any outcome in relation to an existing or potential obligation under the LTA. As far as such an obligation was concerned, his actions were entirely random and my comments made above in relation to section 31(6) apply.
18.The comments of Presidential Member Symons in Theron & Commissioner for ACT Revenue [2013] ACAT 33 at paragraphs 57 and 58 are applicable:
[57] The remission of penalty tax calls for either “reasonable steps to mitigate” or “exceptional circumstances” to be established as well as “being satisfied that it would be fair and reasonable to remit all or part of the penalty tax”. Otherwise the deterrence scheme in the LTA would be undermined.
[58]. As stated above, the Tribunal is comfortably satisfied that the Applicant did not ascertain what obligations and liabilities flowed from renting her property and ignored information sent to her with her rates notices. Nor did she voluntarily disclose her failure to pay land tax to the Respondent or contact the Respondent, prior to their commencing their investigation, regarding the payment of land tax during the rental period. The Tribunal is not satisfied, from the evidence, that the Applicant took any or any reasonable steps to mitigate the circumstances, or the effect of the circumstances, which resulted in her liability for land tax.
19.The Presidential Member is following many cases in which ignorance of obligation has been found not to justify non-compliance.
20.Since section 37(a) and (b) form a combination, it is unnecessary to examine whether the provisions of sub-section (b) apply. There was no suggestion that section 37(a)(ii) applied.
21.The decision under review should be confirmed.
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Senior Member G Lunney SC
HEARING DETAILS
FILE NUMBER: / AT 29/2016PARTIES, APPLICANT: / ShahriarSharifi
PARTIES, RESPONDENT: / Commissioner for ACT Revenue
COUNSEL APPEARING, APPLICANT / N/A
COUNSEL APPEARING, RESPONDENT / N/A
SOLICITORS FOR APPLICANT / Mr Jeffrey Silk
SOLICITORS FOR RESPONDENT / ACT Government Solicitor
TRIBUNAL MEMBERS: / Senior Member H Lunney SC
DATES OF HEARING: / 23 September 2016
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[1] Section 30, Tax Administration Act 1999
[2]Section 31(1), Tax Administration Act 1999
[3]Section 31(2), Tax Administration Act 1999