Penalty amounts

What this ruling is about

1. This public ruling sets out the principles the Commissioner will apply in deciding whether or not to impose a penalty under the First Home Owner Grant and Other Home Owner Grants Act 2000 (Grants Act).
2. The Grants Act provides for the payment of the first home owner grant¹ (the grant) on application by qualifying applicants.
3. Section 47(1) of the Grants Act empowers the Commissioner to, by written notice, require an applicant or former applicant (the applicant) for the grant to repay amounts paid in response to a grant application that are paid in error (error amount).
4. A grant amount will be paid in error when payment is made on the basis of information or documents provided in the application for the grant, indicating that all eligibility criteria² for entitlement to the grant under the Grants Act have or will be met, but those mentioned criteria are not in fact met.
5. Under s.47(2) and s.47(3) of the Grants Act, the Commissioner may impose a penalty (penalty amount) of not more than the error amount.³ A penalty amount is an administrative sanction for certain conduct by applicants.
6. The Commissioner may impose a penalty under s.47(2) of the Grants Act where the error amount has been paid because the applicant provided statements or documents (in relation to the application for the grant) containing information the applicant knew to be false or misleading in a material particular, in contravention of ss.42(1) and 43(1) of the Grants Act (the honesty obligations).
7. The Commissioner may impose a penalty under s.47(3) of the Grants Act, where the applicant fails to repay an error amount on written notice from the Commissioner under s.47(1) of the Grants Act, or as otherwise required by the conditions of the grant⁴ (the repayment obligations).

Ruling and explanation

General principles

8. A penalty amount is an alternative to prosecution⁵ and acts as an incentive for compliance.
9. The decision as to whether to apply a penalty under the Grants Act, and in what amount, is made by the Commissioner on a case-by-case basis, having regard to all relevant facts and circumstances including:
   1. the nature and extent of the applicant’s culpability
   2. the reason for the applicant’s failure to meet their obligations
   3. that the purpose of the grant is to assist people buying or constructing a home to be used as their principal place of residence.
10. As a general principle, the penalty amount will increase in relation to:
    1. the level of culpability attributable to the applicant’s behaviour that triggers the requirement to pay a penalty amount
       and
    2. the applicant’s behaviour in failing to meet the obligations to repay the grant.
11. Attachments 1, 2 and 3 outline how the general principles apply in determining penalty amounts where there has been a breach of the honesty obligations or repayment obligations.

Section 47(2) of the Grants Act—Penalty amount for breach of the honesty obligations

12. Section 47(2) of the Grants Act provides that the Commissioner may impose a penalty if an error amount was paid because of a breach of the honesty obligations in relation to the application for the grant.
13. Under the honesty obligations, a person must not:
    1. provide to the Commissioner a document containing information the person knows is false or misleading in a material particular
    2. state anything to the Commissioner that the person knows is false or misleading in a material particular.⁶
14. A ‘material particular’ for the purposes of ss.42(1) and 43(1) of the Grants Act will include any matter that has an impact on an applicant’s eligibility for the grant.

Example 1

15. Section 42(1) of the Grants Act does not apply to a person who, when giving the document:
    1. tells the Commissioner or officer—to the best of the person’s ability—how the document is false or misleading
       and
    2. gives the correct information to the Commissioner or officer, if they have or can reasonably get that information.⁷
16. The penalty amount depends on the level of culpability triggering the breach.

Section 47(3) of the Grants Act—Penalty amount for breach of the repayment obligations (failure to repay an error amount as required by written notice)

17. Section 47(1) of the Grants Act enables the Commissioner to, by written notice, require the applicant to repay the error amount.
18. If the applicant fails to meet the requirement to repay the error amount, as required by written notice, the Commissioner may impose a penalty amount under s.47(3) of the Grants Act.
19. The penalty amount depends on the level of culpability triggering the breach.

Section 47(3) of the Grants Act—Penalty amount for breach of the repayment obligations (failure to repay the grant as required by a condition of the grant)

20. Section 47(3) of the Grants Act provides that the Commissioner may impose a penalty if an applicant fails to make a repayment required under the conditions of the grant.
21. The penalty amount depends on the level of culpability triggering the breach and the applicant’s behaviour in failing to meet the obligations to repay the grant. A repayment is late if not made in the time allowed under a condition of the grant.

The conditions

22. Section 22(2)(b) of the Grants Act provides that an applicant must repay the grant where it is paid in anticipation of compliance with the residence requirements under s.15 of the Grants Act⁸ and those requirements are not complied with.

Example 2

23. Repayment under s.22(2)(b) of the Grants Act must be made within 14 days or the earlier of the following:
    1. the end of the period allowed for compliance with the residence requirements
    2. the date on which it first becomes apparent that the residence requirements will not be complied with during the period allowed for compliance.⁹
24. Section 22A(2)(b) of the Grants Act provides that an applicant must repay the grant within 28 days of completion of the relevant transaction where the grant is paid before completion of the relevant transaction and, on completion:
    1. the unencumbered value of the new home or other home, subject of the transaction, results in the transaction not being an eligible transaction under s.5(7) of the Grants Act
       or
    2. the consideration for the transaction results in the transaction not being an eligible transaction under s.5(8) or s.5(9) of the Grants Act.
25. Section 23(1) of the Grants Act provides that the Commissioner may authorise payment of the grant on the reasonable conditions the Commissioner considers appropriate. Under s.23(2) of the Grants Act, the Commissioner may impose a condition on an applicant to repay the grant within a stated period.

Culpability categories

26. In considering the application of a penalty amount, the Commissioner will consider the applicant’s behaviour against three culpability categories, as follows.

Culpability category	Applicant behaviour
1	Applicant breached their obligations despite acting with reasonable care.
2	Applicant negligently or inadvertently breached their obligations.
3	Applicant intentionally disregarded their obligations.

Culpability category 1—Reasonable care

27. Reasonable care requires the applicant to make a reasonable attempt to meet their obligations under the Grants Act and the First Home Owner Grant and Other Home Owner Grants Regulation 2021 (Grants Regulation).
28. The Commissioner will generally be satisfied that reasonable care has been taken by the applicant where the applicant has taken the same care in fulfilling their obligations that could be expected of a reasonable person in the applicant’s circumstances.
29. Without limitation, the Commissioner would expect reasonable care on the part of an applicant to mean, at a minimum, that the applicant has:
    1. read the application form and lodgement guide for the grant or had these materials explained to them by a person reasonably capable of reading, understanding and communicating the content of the material to the applicant, before making the application
       and
    2. made reasonable inquiries with the Commissioner to clarify any uncertainty the applicant may have as to the nature and extent of their obligations in relation to the grant.
30. The Commissioner considers that an applicant’s declarations in their application for the grant indicate that they are aware of the eligibility criteria, including the residence requirements, of the grant and their obligations to notify the Commissioner and repay the grant in the event the eligibility criteria are not complied with.

Example 3

Culpability category 2—Negligence

31. The Commissioner will consider an applicant to have been negligent in meeting their obligations under the Grants Act or Grants Regulation where they fail to take the degree of care a reasonable person would have done in the circumstances.

Example 4

Culpability category 3—Intentional disregard

32. In determining whether an applicant has intentionally disregarded their obligations under the Grants Act or Grants Regulation, the Commissioner considers the actual intentions of the applicant.
33. The Commissioner will be satisfied that the applicant has intentionally disregarded their obligations where information indicates that the applicant was aware of the obligations and made a conscious choice to ignore them.¹⁰ Intentional disregard can be inferred from the facts and surrounding circumstances.¹¹

Example 5

Exceptional circumstances

34. No penalty amount will apply in circumstances where the Commissioner is satisfied that the applicant’s failure to meet the honesty obligations or repayment obligations is due to exceptional circumstances.
35. Exceptional circumstances are matters or events outside of the applicant’s control, such as death, serious illness or natural disasters directly affecting the applicant.
36. Examples of exceptional circumstances may also include matters or events that satisfy the Commissioner that the applicant’s failure to meet the honesty obligations or repayment obligations is a result of coercion or undue influence upon the applicant.
37. To remove any doubt, financial hardship is not considered to be an exceptional circumstance.

Date of effect

38. This public ruling takes effect from the date of issue.

 

Mark Jackson
Commissioner of State Revenue
Date of issue: 31 March 2021

References

Public Ruling	Issued	Dates of effect
		From	To
FHOGA047.1.6	31 March 2021	31 March 2021	Current
FHOGA047.1.5	3 November 2020	3 November 2020	30 March 2021
FHOGA047.1.4	29 June 2018	1 July 2018	2 November 2020
FHOGA047.1.3	1 July 2016	1 July 2016	30 June 2018
FHOGA047.1.2	11 October 2012	11 October 2012	30 June 2016
FHOGA047.1.1	1 December 2011	1 December 2011	10 October 2012

Attachments

Attachment 1

Section 47(2) of the Grants Act—Penalty amount for breach of the honesty obligations

 

Culpability category	Circumstance	Penalty
1	Breach despite applicant taking reasonable care	0–10%
2	Breach result of negligence or inadvertence; for example: failing to check the accuracy of information provided misinterpretation of the eligibility criteria	10–50%
3	Breach result of intentionally and without regard, providing false and misleading information; for example: information provided intended to hide non-eligibility for the grant premises were let or listed for letting during the period in which the intended occupation date occurred the applicant knew of a prior relevant interest in property the applicant used a false name or their maiden name the applicant failed to disclose a spouse (marital or de facto) that previously owned property or received the grant previous receipt of the grant	50–100%

Attachment 2

Section 47(3) of the Grants Act—Penalty amount for breach of the repayment obligations (failure to repay error amount as required by written notice)

Culpability category	Circumstance	Penalty
1	Breach despite applicant taking reasonable care; for example, honest and reasonable mistake	0–10%
2	Breach result of negligence or inadvertence; for example: notice to repay is mislaid failure to ensure sufficient funds are available at time of processing cheque or electronic payment	10–50%
3	Breach result of intentionally and without regard failing to repay; for example: no response to requirement to repay applicant absconds without repaying the grant refusal to repay the grant	50–100%

Attachment 3

Section 47(3) of the Grants Act—Penalty amount for breach of the repayment obligations (failure to repay grant as required by a condition of the grant)

	Late repayment but prior to notice of investigation	Repayment after notice of investigation	No repayment before written notice
Culpability category 1 Breach despite applicant taking reasonable care; for example, genuine and reasonable belief of compliance with the residence requirements or a condition of the grant	5%	10%	25%
Culpability category 2 Breach result of negligence or inadvertence, for example: overlooking the obligation failing to check, with the Commissioner, the accuracy of advice received failing to check, with the Commissioner, the accuracy of assumptions made genuine but unreasonable belief of compliance with the residence requirements or a condition of the grant	10%	25%	60%
Culpability category 3 Breach result of intentional disregard; for example: never intending to comply with a condition or requirement of the grant disguising the fact that a condition or requirement of the grant has not been complied with	25%	60%	100%

Footnotes

1. Section 25N(2) and 25W(2) of the Grants Act generally provide that a reference to the first home owner grant in Part 4 includes a reference to the regional home building boost grant and the HomeBuilder grant respectively.
2. The eligibility criteria for the regional home building boost grant and the HomeBuilder grant are contained in the RHBBG direction and the HomeBuilder direction respectively (see Schedule to the Grants Act).
3. For example, if a grant of $15,000 had been paid in error, the applicant may, by written notice, be required to repay the $15,000, plus potentially a maximum penalty amount of a further $15,000.
4. See, for example, ss.22, 22A and 23 of the Grants Act.
5. See s.51 of the Grants Act.
6. Sections 42(1) and 43(1) of the Grants Act
7. Section 42(2) of the Grants Act
8. Under s.15 of the Grants Act, the applicant must occupy the home to which the application relates as their principal place of residence for at least 6 months, starting within 1 year of completion of the eligible transaction. The Commissioner has the discretion to approve a shorter occupation period, extend the period that occupation must start within or exempt the applicant from meeting the residence requirements.
9. Section 22(3) of the Grants Act
10. See Collier J in Price Street Professional Centre Pty Ltd v Federal Commissioner of Taxation [2007] FCA 345; 2007 ATC 4320; (2007) 66 ATR 1 at paragraph 43.
11. See, for example, Weyers v Federal Commissioner of Taxation [2006] FCA 818; 2006 ATC 4523; (2006) 63 ATR 268.