Chalik and Chalik v Chief Commissioner of State Revenue [2025] NSWCATAD 254;

1. Where tax has been assessed, s 86 of the Administration Act, allows rights of objection to a taxpayer dissatisfied with an assessment, including a reassessment of the kind made in this matter. This is an internal review process under which the Chief Commissioner of State Revenue, the Respondent in these proceedings, must consider and determine the objection (s 91 of the Administration Act).
2. A taxpayer who is dissatisfied with the decision made upon the Respondent's determination of an objection, may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (NSW) ("ADR Act") of the decision of the Chief Commissioner of State Revenue.
3. These circumstances have arisen in the present matter as set out in the background above, so bringing the matter within the jurisdiction of the Tribunal.
4. The onus of proving their case lies with the Applicants (s 100(3) of the Administration Act).
5. The Tribunal, dealing with the taxpayer's application, may do one or more of the following under s 101 of the Administration Act:

"(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit."

1. The Duties Act at the relevant times charged duty on various transactions listed in s 8, referred to in the Duties Act as "dutiable transactions". They include an agreement for the sale or transfer of "dutiable property" (s 8(1)(b)(i)) and a transfer of dutiable property (s 8(1)(a)).
2. "Dutiable property" is defined in s 11 to include both "land in New South Wales" (s 11(1)(a)) and a "land use entitlement" (s 11(1)(c)).
3. The Dictionary of the Duties Act defines "land" to include a stratum. There was no dispute that the subject of the 2023 Transfer was a stratum and as such, "land in New South Wales".
4. The Applicants' contention was that the duty in respect of the 2023 Transfer ought to have been assessed with fixed duty pursuant to s 64 of the Duties Act and not with ad valorem duty. The Respondent disagreed and said that ad valorem duty applies because s 64 did not apply in the circumstances of the case.
5. Section 64 of the Duties Act at the time of the 2023 Transfer provided as follows:

"64 Conversion of land use entitlement to different form of title

The duty chargeable on the transfer of a lot in a freehold strata scheme within the meaning of the Strata Schemes Development Act 2015 or a lot in a deposited plan is $50 if -

(a) the transferee, immediately before registration of the strata plan or deposited plan, held a land use entitlement in respect of the land or part of the land the subject of the strata plan or deposited plan, and

(b) the transfer is part of an arrangement under which the transferee will take an interest in the lot similar in effect to and in substitution for the interest the transferee had under the land use entitlement immediately before registration of the strata plan or deposited plan, and

(c) one of the following applies -

(i) ad valorem duty under this Chapter or Chapter 3 was paid on the transaction by which the land use entitlement was acquired by the transferee,

(ii) section 55, 57 or 63 applied to the acquisition of the land use entitlement by the transferee, and duty was paid as provided for by the section that applied,

(iii) no duty was chargeable on the acquisition of the land use entitlement by the transferee because of section 68,

(iv) no duty was chargeable on the acquisition of the land use entitlement by the transferee because of section 78A or 78AA (which relate to the First Home Buyers Assistance scheme).

1. Section 64 in other words allowed for fixed duty of $50 to be assessed on a conversion of a land use entitlement to strata title of a kind falling within the section. Section 64 was subsequently amended to increase the amount of fixed duty to $100.
2. There was no dispute that the Applicants satisfied s 64(a) and (b). The matter in dispute between the parties concerned whether s 64(c) was also required to be satisfied and if so, whether it had been satisfied.
3. The particular matter in dispute is whether the requirements of s 64(c)(i) needed to be satisfied and if so, whether they had been satisfied. That subparagraph requires that ad valorem duty under Chapter 2 or Chapter 3 of the Duties Act was paid on the transaction by which the relevant "land use entitlement" had been acquired by the Applicants.
4. What is a "land use entitlement" is set out in the Dictionary of the Duties Act. It says:

"land use entitlement means an entitlement to occupy land within New South Wales conferred through an ownership of shares in a company or an ownership of units in a unit trust scheme, or a combination of a shareholding or ownership of units together with a lease or licence".

1. There was no dispute that the rights attaching to the shares in the Company gave rise to a "land use entitlement" at the time of the Reassessment. Under the terms of the Constitution of the Company, the Applicants had an entitlement. That was an entitlement to occupy land within New South Wales conferred "through an ownership of shares in a company", namely share no 1 in the Company. That right was an "exclusive right" to "use, enjoy and occupy" a unit on the relevant land, subject to the terms of the Constitution. As such, the rights the Applicants had answer the description of a "lease or licence" within the meaning of the definition of "land use entitlement".
2. Whether satisfying the requirements of paragraphs (a) and (b) alone is sufficient to obtain the benefit of s 64 requires consideration of the structure of the section. The word "and" at the end of paragraph (b) joins the words of paragraph (c) to the words in paragraph (b) preceding it. The word "and", at the end of paragraph (a) also joins that paragraph to paragraph (b). As such, the requirements of paragraphs (a), (b) and (c) within s 64 are not expressed as having to be satisfied in the alternative. In these circumstances, it is quite clear that the requirements of each paragraph must be met. These are cumulative requirements that need to be satisfied to obtain exemption from ad valorem duty pursuant to s 64. What follows is that in addition to satisfying paragraphs (a) and (b), unless a taxpayer also satisfies paragraph (c), their circumstances will not fall within s 64.
3. The next question is whether the Applicants have satisfied s 64(c). Section 64(c) sets out five subparagraphs numbered (i) to (iv). Section 64(c) requires that one of the numbered subparagraphs must apply. It follows that if one of the subparagraphs within s 64(c) is satisfied (together with paragraphs (a) and (b)), the Applicants are entitled to exemption from ad valorem duty under s 64.
4. What subparagraph (i) of s 64(c) requires is that "ad valorem duty under this Chapter or Chapter 3 was paid on the transaction by which the land use entitlement was acquired by the transferee". Even though Mr Chalik did not pay duty on the 2007 Allotment and Mrs Chalik did not pay ad valorem duty when she acquired her half interest in the relevant "land use entitlement" attaching to share 1 in the Company, the Applicants say that they still satisfied the requirements of s 64(c)(i).
5. I understood the Applicants' submission to be that the reference to ad valorem duty in subparagraph (i) of s 64(c) referred to ad valorem duty payable, if any, with the consequence that if no ad valorem duty was payable in the first place on the 2007 Allotment or the transfer to Mrs Chalik in 2017, they have satisfied s 64(c)(i). That submission appears to involve the proposition that the purpose of s 64(c)(i) is to require that ad valorem duty payable must have been paid but if that none was payable on the acquisition of the relevant land use entitlement, there is no subject matter that s 64(c)(i) can attach to and as a result, it will have been satisfied (or does not need to be satisfied).
6. I am unable to agree that the requirements of s 64(c)(i) will have been satisfied (or do not need to be satisfied) in circumstances where no ad valorem duty was payable on the transaction by which the relevant "land use entitlement" was acquired by the transferee. Section 64(c)(i) requires that "ad valorem duty under this Chapter .. [Chapter 2] ... or Chapter 3 was paid". These words in their plain meaning require that ad valorem duty under Chapter 2 or Chapter 3 must have been paid.
7. Chapter 3 Part 4 taxes acquisitions of a "land use entitlement" by an allotment of shares or an issue of units to any person in the circumstances set out in that Part. Chapter 2 brings to duty a transfer of, or other relevant "dutiable transaction" concerning a "land use entitlement" (s 8(1)(a) and (b) and s 11(1)(c)). Unless duty was paid on either basis, I cannot see how s 63(c)(i) can have been satisfied (or does not need to be satisfied).
8. The context supplied by s 64 also bears upon the task of ascertaining whether s 64(c) has been satisfied. Other subparagraphs within s 64(c) specifically address circumstances where the paragraph can be satisfied where no duty was chargeable. These circumstances include cases where no duty was chargeable on the acquisition of a land use entitlement under s 68 (s 64(c)(iii)) (where there has been a break-up of a marriage or domestic relationship) and under s 64(c)(iv) (which relates to the First Home Buyers Assistance scheme). These are situations where s 64(c) can be satisfied despite duty not having been chargeable on the acquisition of the relevant land use entitlement.
9. If the intention was to take a taxpayer as having satisfied s 64(c)(i) in all cases where no duty was paid on the acquisition of the relevant land use entitlement, s 64(c)(iii) and (iv) would have no work to do. I think that the intention manifested in these two subparagraphs is to set out the specific circumstances where a claim under s 64(c) can be maintained where no duty was paid, having not been chargeable, on the acquisition of the relevant land use entitlement. These are not circumstances that, on the evidence, apply to the Applicants.
10. The Applicants say that the "intention of s 64 is to reduce ad valorem duty to nominal duty where the substance of the transaction is a "mere conversion of title". If the Applicants' submission is that the purpose of s 64 as manifested in s 64(a) and (b), allows for the conclusion that satisfying the requirements of only these provisions is sufficient, I cannot agree for the reasons set out at [40] above. Such a construction of s 64 would leave s 64(c) with no work to do. This could not have been intended.
11. The determination of this matter also requires consideration of the history of s 64. In its original form, s 64 did not contain paragraph (c). A later amendment added a previous version of the paragraph, requiring that "ad valorem duty was paid at the time that the land use entitlement was acquired by the transferee". The State Revenue Legislation Amendment Act 2002 (NSW) subsequently replaced the entire section. It added a new version of s 64(c) which included subparagraphs (ii) and (iii). The State Revenue Legislation Amendment Act 2008 (NSW) made further amendments to s 64(c)(i) bringing the subparagraph into its present form.
12. Section 64 at its inception did not include paragraph (c) and only included paragraphs (a) and (b) (in their original form). Parliament later introduced s 64(c) into s 64. Adding s 64(c), in my opinion, evinces an intention that Parliament intended to create requirements additional to those already set out in s 64(a) and (b) that a taxpayer must satisfy in order to obtain the benefit of s 64.
13. The purpose of s 64(c)(i), after it came into effect, is clear. It is that a taxpayer must have paid ad valorem duty on the transaction by which it acquired its land use entitlement. If it did not, it must satisfy one of the other subparagraphs of s 64(c) as well as s 64(a) and (b) in order to obtain exemption from ad valorem duty. There is no evidence that the Applicants' circumstances come within any of the subparagraphs (ii) - (iv) within s 64(c).
14. The Applicants said that, in any event, they satisfied s 64(c)(i) by reason of the payment of ad valorem duty on the contract by which the Company in 2007 acquired the land that was later subdivided. I understood their submission to be that the transaction occurring in 2007 both resulted in the Company's acquisition of the undivided land as well as the "land use entitlement" which Mr Chalik obtained, so that the payment of duty on the contract satisfied s 64(c)(i).
15. I am unable to agree that the payment of duty on the contract under which the Company acquired the undivided land should also be taken to be the payment of duty on the acquisition by Mr Chalik of a "land use entitlement". The Duties Act taxes an agreement for the sale or transfer of dutiable property under Chapter 2. It taxes under Chapter 3 Part 4 the acquisition of a "land use entitlement". These are separate transactions taxed as such under separate provisions of the Duties Act.
16. When ad valorem duty was paid on the contract in 2007, that is the transaction for which the duty was paid. That duty was not duty also paid by Mr Chalik for the acquisition of a land use entitlement. If duty was payable on the acquisition of the relevant land use entitlement, taxation could only have occurred under Chapter 3. However, no such duty was paid.
17. In other words, the contract and transfer were not the transaction "by which" the relevant land use entitlement was acquired. The transaction by which the acquisition of the relevant land use entitlement occurred was the 2007 Allotment, even if the exercise of the rights comprising the land use entitlement required the transfer of the relevant land to the Company to have occurred.
18. In circumstances where the Duties Act treats an agreement for sale or transfer of land and the acquisition of a "land use entitlement as separate transactions brought to duty under different provisions within the Duties Act, I do not think that both of these transactions can be conflated into a single "transaction by which the land use entitlement was acquired" for the purposes of s 64(c)(i).
19. Mrs Chalik, when she acquired her half interest in share no 1 in 2017, also did not pay any ad valorem duty. Accordingly, she does not satisfy the requirement of s 64(c)(i) that ad valorem duty under Chapter 2 or Chapter 3 was paid on the transaction by which she acquired her interest in the relevant land use entitlement.
20. The Applicants rely on s 18 in aid of their submission that the duty paid on the contract should be treated as duty paid by them for the purposes of s 64. Section 18 provides as follows:

"18 No double duty

(1) If a dutiable transaction is effected by more than one instrument, one instrument is to be stamped with the duty payable on the dutiable transaction and each other instrument is chargeable with duty of $10.

Note -

Instrument includes a written statement.

(2) The duty chargeable in respect of a transfer of dutiable property made in conformity with an agreement for the sale or transfer of the dutiable property is $2 if the duty chargeable in respect of the agreement has been paid.

(3) The duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $2 if:

(a) the duty chargeable in respect of the agreement has been paid, and

(b) the transfer would be in conformity with the agreement if the transferee was the purchaser under the agreement, and

(c) the transfer occurs at the same time as, or proximately with, the completion or settlement of the agreement, and

(d) at the time the agreement was entered into, and at the completion or settlement of the agreement:

(i) the purchaser under the agreement and the transferee under the transfer are related persons, except as provided by subparagraph (ii), or

(ii) if the purchaser purchased as a trustee, the transferee and the beneficiary are related persons.

(4) The duty chargeable on a transfer to a trustee of dutiable property subject to a declaration of trust is $2 if ad valorem duty has been paid on the declaration of trust in respect of the same dutiable property".

1. The Applicants say that the contract, transfer and "land use entitlement" in issue involved a "bundle of dutiable property" and ad valorem duty was paid by the Company when it paid duty in 2007 on the relevant contract and transfer in respect of that bundle. I understood the Applicants to say that these matters involved a single transaction within s 18(1) on which ad valorem duty had been paid and that this was duty that should be recognised for the purposes of s 64(c)(i). They say that the relevant transaction was effected by several instruments including the Constitution of the Company and that the Constitution was a "written instrument" within the meaning of s 18(1).
2. I do not agree that the contract, transfer and "land use entitlement" together dealt with a "bundle of dutiable property" under a single dutiable transaction within the meaning of s 18(1). The contract and transfer of 2007 under which the Company acquired the undivided land and any acquisition by Mr Chalik of his "land use entitlement", do not in my opinion, when taken together, answer the description of a single dutiable transaction, whether for the purposes of s 18(1) or otherwise.
3. The contract and transfer are each a "dutiable transaction" brought to duty under Chapter 2 of the Duties Act effected respectively by the instrument containing the contract and that containing the transfer. These dutiable transactions, in the circumstances of the case, are not effected by any other instrument, whether the instruments effecting the 2007 Allotment or the Constitution of the Company.
4. The Constitution is an instrument that evidences the existence of the Company and is part of the machinery governing its operation. Its existence as a legal entity is undeniably necessary for the Company to have the ability to contract. What the Company does also needs to be in accordance with its Constitution.
5. However, these are not circumstances that make the Constitution an instrument effecting any dutiable transaction to which the Company is party. The instruments effecting the relevant dutiable transactions were the contract and the transfer. The instruments effecting the 2007 Allotment including the Constitution were not further instruments effecting either or both of these two "dutiable transactions".
6. The 2007 Allotment, for its part, is not a "dutiable transaction" as defined in s 8 and expressly taxed as a transaction that is not a dutiable transaction (s 105).
7. I do not in these circumstances think that s 18(1) has any application to allow the Applicants to claim that ad valorem duty was paid in respect of the relevant "land use entitlement" occurring following the 2007 Allotment, on the basis that it formed part of a "bundle of dutiable property" dealt with under a single "dutiable transaction" that was "effected by more than one instrument".
8. The Applicants additionally claimed that the acquisition of the land use entitlement in issue satisfied ss 18(3)(a), (b), (c) and (d). I understood the Applicants' submission to be that having satisfied the requirements for fixed duty under s 18(3), they could attach the benefit of the ad valorem duty paid on the contract to the relevant land use entitlement because of the relationship of the contract to the acquisition of the land use entitlement.
9. The ability of the Applicants to maintain a claim for fixed duty on the 2007 Allotment under s 18(3) (or s 18(2)) requires that the allotment answer the description of a "transfer".
10. A transfer of a "land use entitlement" is a category of "dutiable transaction" in the nature of a "transfer of dutiable property" (Duties Act, s 8 (1)(a) and 11(1)(c)).
11. What is a "transfer" in Chapter 2 is defined in s 8(3) of the Duties Act as follows:

"transfer includes an assignment, an exchange and a buy-back of shares in accordance with Division 2 of Part 2J.1 of the Corporations Act 2001 of the Commonwealth".

1. As such, a "transfer" will encompass what is a "transfer" in its ordinary sense, namely a passing of an existing bundle of rights from one person to another (Commissioner of Taxes (Qld) v Camphin [1937] HCA 30; Coles Myer Ltd v Commissioner of State Revenue (Vic) 97 ATC 4110; on appeal 98 ATC 4537).
2. In my opinion, the 2007 Allotment was not a "transfer" of any kind involving the passing of an existing bundle of rights, but the initial acquisition of rights on their creation, namely the shares giving rise to the relevant "land use entitlement". As a consequence, s 18(2) and (3), applying as they do to relevant "transfers", can have no application to the 2007 Allotment.
3. The Applicants placed weight on the heading of s 18; "No double duty", to support their submission that once ad valorem duty had been paid on the contract, no further duty should apply to the 2023 Transfer. I am unable to agree. Section 18(2) and (3) prevent the application of duty to certain transfers, once duty on the agreement relating to the transfer has been paid. Section 18(2) and (3) go no further for the reasons set out above. The heading to s 18 does not have independent operation to prevent the incidence of double duty. The prevention of double duty applies in the specific circumstances set out in s 18. These are not circumstances applicable in the present case for the reasons set out above.
4. The Respondent made his Reassessment having formed the opinion that the 2007 Allotment did not give rise to a "land use entitlement" for the reasons set out at [21] above. The Applicants describe the interest acquired at that time as a _future "_land use entitlement". I have not considered whether or not, in fact, the 2007 Allotment was an acquisition of a "land use entitlement" brought to duty under Chapter 3 of the Duties Act at the time of the allotment. I do not need to do so given that whatever the nature of the rights acquired pursuant to the 2007 Allotment, no ad valorem duty was in fact paid on that acquisition at the time of that acquisition. Consequently, whether or not the 2007 Allotment was an acquisition of a "land use entitlement" at that time, the absence of payment of any duty on that acquisition resulted in a failure on the part of the Applicants to satisfy s 64(c)(i) of the Duties Act.
5. In summary:

(1) The Applicants need to satisfy each of paragraphs (a), (b) and (c) of s 64 of the Duties Act in order to obtain the benefit of s 64.

(2) The Applicants have not satisfied the requirements of s 64(c) of the Duties Act, not having paid ad valorem duty on the transaction by which the acquisition of any land use entitlement occurred.

(3) As a consequence, the Respondent's Reassessment must stand.

1. The Applicants asserted that the Respondent had acted "in bad faith and in breach of model litigant obligations in repeatedly reinterpreting the legislation to maximise its duty claim". I understood the Applicants' submission to arise out of the fact of the original assessments in this matter having been made in respect of the 2007 Allotment and the 2023 Transfer and a different position being later taken by the Respondent when making the Reassessment.
2. The Administration Act specifically confers on the Respondent a power to make a reassessment under s 9. That power of reassessment is to be exercised "in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time" (s 9(2)).
3. I do not think in the circumstances of the present matter that making an assessment at a particular time based on views taken at that time and subsequently making a reassessment of itself amounts to bad faith or a breach of model litigant principles, whether or not these can be matters grounding any claim for relief by reason of s 9 or otherwise.
4. There is no evidence before the Tribunal setting out what particular assessment practices and interpretations of the legislation underlie the Reassessment or indeed previous assessments of the 2007 Allotment or the 2023 Transfer. Having found that the Reassessment is well founded in law, I see nothing in the circumstances surrounding the Reassessment that allow for a conclusion that the Respondent in making the Reassessment fell outside s 9(2) of the Administration Act.
5. The Applicants submit that the Respondent is estopped from reassessing duty on the 2023 Transfer by reason of his earlier assessment of that transfer to fixed duty. I do not see how the Applicants' submission can survive the express power allowed to the Respondent to reassess duty under s 9 of the Administration Act.

1. The Applicants also disagreed with the dutiable value upon which the Respondent made the Reassessment. The Respondent relied on his power under s 11(2) of the Administration Act to make assessment by way of estimate. The Applicants described that estimate as a "random number without any supporting empirical or documentary evidence".
2. However, the Applicants did not tender evidence as to what the actual dutiable value was in their opinion. The Applicants, as the party bearing the onus of proof, as a consequence, has not established what the dutiable value was nor established that the Respondent acted outside the powers allowed to him under s 11(2). I do not in these circumstances see reason to impugn the Reassessment.
3. If the Applicants subsequently provide new valuation evidence to the Respondent that shows a lower dutiable value, it is open for them to seek a further reassessment. The power to do so runs for 5 years from the date of the initial assessment, other than in the specific circumstances set out in 9(3) of the Administration Act.

1. The assessment under review should stand for the reasons set out at [74] and [81] above.
2. The Applicants sought an order that costs be awarded to them. I see no basis for doing so having found that the Respondent's assessment should stand.
3. The ordinary position as regards costs is set out in s 60 of the Civil and Administrative Tribunal Act 2013 (NSW). Under s 60, each party to proceedings in the Tribunal is to pay the party's own costs. The Tribunal may, however, award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.
4. I see no special circumstances allowing me to depart from the ordinary position.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.