Dinheiro Pty Ltd v Chief Commissioner of State Revenue [2024] NSWCATAD 347 | Case summary | Zoe

NSWNSWCATAD

Dinheiro Pty Ltd v Chief Commissioner of State Revenue

[2024] NSWCATAD 347

NCAT Administrative and Equal Opportunity|2024-09-20

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Source facts

Court

NCAT Administrative and Equal Opportunity

Decision date

2024-09-20

Source

Original judgment source is linked above.

Judgment (35 paragraphs)

[1]

REASONS FOR DECISION

The central issue in this case is whether nominal duty should apply to a transfer of land which was not in conformity with the agreement to purchase.
An agreement for sale (Contract) was entered into by Craig Doyle and his wife Susan Doyle on 2 August 2017 (Contract Date). The Contract was for the purchase of an "off the plan" townhouse in Maryville, New South Wales (Property) for a price of $875,000. A 5% deposit ($43,750) was paid by Mr Doyle and Mrs Doyle. This agreement was stamped with full ad valorem duty, which was paid. That is not in dispute.
But the transfer of the Property was not made to Mr and Mrs Doyle when settlement occurred on 23 October 2019 (Settlement Date). It was transferred to the Applicant, Dinheiro Pty Ltd.
The Applicant is a private company, and Mr Doyle is and was the only shareholder and director. The Applicant was also the trustee of a trust. It had originally been a discretionary trust, known as the "Craig Doyle Family Trust" (the Trust). But the Trust had been converted from a discretionary trust to a unit trust in 2013 by a Deed of Variation, which also changed its name to the "Craig Doyle Fixed Trust". It was accepted by the Respondent to become a "fixed trust" for land tax purposes, and that is not in dispute.
Although Mr Doyle and Mrs Doyle were both beneficiaries of the Trust when it was a discretionary trust, Mr Doyle became the sole unitholder of the Trust under the Deed of Variation, holding 100 units.
Both the agreement for sale and the transfer of property are dutiable transactions under ss 8(1)(b)(i) and 8(1)(a) of the Duties Act 1997 (NSW) (Duties Act). But s 18 of the Duties Act applies to relieve double duty in certain situations.
In this case, nominal duty of $10 was self-assessed and paid by the Applicant on the transfer, on the basis that s 18(3) of the Duties Act was satisfied.
Following an investigation, the Respondent reassessed the Applicant for transfer duty, interest and penalties (the Assessment). In issuing the Assessment, the Respondent formed the view that the conditions of s 18(3) were not satisfied and, as a result, the nominal duty chargeable under that section did not apply to the transfer of the Property to the Applicant.

[2]

What are the issues?

Section 18(3) of the Duties Act provided (at the relevant time) as follows: (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 $10 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 (other than a purchaser who purchased as a trustee) and the transferee under the transfer were related persons, or (ii) if the purchaser purchased as a trustee (other than as a trustee of a self managed superannuation fund) - the transferee and the beneficiary were related persons, or …. Note - Section 64C also provides for a duty concession in respect of a transfer of dutiable property that is made in partial conformity with an agreement for the sale or transfer of the property. The concession applies if the interest in the property transferred to the transferee is not identical to the interest agreed to be transferred to the transferee under the agreement. …
The Respondent accepts that s 18(3)(a), (b) and (c) are satisfied. But the Respondent says that the Applicant has not established that s 18(3)(d) is satisfied.
The issues arising under s 18(3)(d) are: 1. Issue 1 - Was the Property acquired by the Applicant as transferee in its capacity as trustee of the Trust? 2. Issue 2 - Were each of Mr Doyle and Mrs Doyle "related persons" as at the Contract Date and the Settlement Date, having regard to the capacity in which the Property was acquired by the Applicant? 3. Issue 3 - Would ad valorem duty be payable on half the value of the Property or on the full value of the Property if only one of Mr Doyle or Mrs Doyle satisfied the "related persons" requirement at both the Contract Date and the Settlement Date?
If duty is payable by the Applicant, the question of interest and penalties must also be considered.

[9]

Craig Doyle Family Trust becomes the Craig Doyle Fixed Trust

On 23 November 2013, the Applicant (as Trustee) and Mr Doyle (as Appointor) entered into a deed titled Deed Varying the Craig Doyle Family Trust (Deed of Variation: R1 p.114). Mr Doyle said this was done for land tax purposes, and was accepted by the Respondent.
In any event, the parties are agreed (and have confirmed that it is not in dispute) that the effect of the Deed of Variation was that the Trust was converted from a discretionary trust to a fixed trust (unit trust), and that Mr Doyle became the holder of 100 units in the Trust on 30 November 2013.
This is supported by the following changes made (inter alia) by the Deed of Variation, which had an "Effective Date" of 30 November 2013: 1. The name of the Trust was changed to the "Craig Doyle Fixed Trust" (clause 2.1(a)); 2. The existing "Schedule of Beneficiaries" was deleted, and replaced by a "Schedule" which listed Mr Doyle (only) as the "Unit Holder", and the number of units as 100 units: clause 2.1(i) of the Deed of Variation; 3. The Trustee could, with the consent of the beneficiaries, create additional units: new clause 2(c); 4. No person could be a Unit Holder unless they were a Beneficiary of the Trust prior to the Effective Date: new clause 2(d); 5. Existing clause 3 (Trust of Net Income) was amended (as italicised) to read: Until the Vesting Day the Trustee will stand possessed of the Trust Funds upon trust as to the Net income thereof derived during each year:- (a) to pay or apply the whole or any part of such income whether paid or applied, for the benefit of the Unit Holders; (b) to accumulate if the Trustee in its absolute discretion so resolves the whole or any part of such income not so paid or applied for a period terminating not later than the Vesting Day so that such income is added to capital and held upon the trusts as to capital hereinafter contained; (c) the beneficial interest in the Trust Fund and the Net Income is held for the Unit Holders and is divided into the total number of units specified in the Schedule and the Register; (d) [deleted] 1. "Unit Holders" was defined to mean: a person who on or after the Effective Date holds units in the Trust and is for the time being registered in the Register as the holder of units 1. "Register" was defined to mean: the register of units to be kept in accordance with clause 16 1. A "new clause 16" (noting there was already an existing clause 16) was inserted in the following terms: (a) The Register must be kept up to date by the Trustee. (b) Any change of name or address of any Unit Holder will be notified to the Trustee who will alter the Register accordingly. (c) Any Unit Holder is entitled free of charge at any time to inspect the Register. (d) The Trustee will recognise a Unit Holder as the absolute owner of units for which it is registered and the receipt of that Unit Holder of any money payable for the units specified on the certificate will be a good discharge to the Trustee.
The Deed of Variation did not make any amendments to the definition of "Beneficiary" which referred to the [now replaced] Schedule referring to Mr Doyle and the 100 units.
The Deed of Variation did not specifically provide for the creation of different classes of units, nor did it refer to "Ordinary Units".

[10]

Investigation by the Respondent

On 28 November 2023, the Respondent issued a Notice of Investigation to the Applicant. The Notice said, inter alia (my emphasis): Based on the information available from ASIC data for Dinheiro Pty Ltd, [Mrs Doyle] does not satisfy the related person requirement. As a result, nominal duty pursuant to Sec 18(3) of the Act does not apply and ad valorem duty (based on 50% of the value only as [Mr Doyle] is a related person) is payable for the transfer.
The Respondent requested a copy of the stamped Contract and Transfer, a copy of the Purchaser/Transferee Declaration (and supporting documents), and a statutory declaration "stating the capacity in which the purchaser and the transferee will hold the property and detailing how the purchaser under the agreement and transferee under the transfer are "related persons" at the relevant times".
There followed, as set out in the Respondent's submissions (R2 at [41]-[44]), a series of responses from Mr Doyle which, in summary, variously advised (my emphasis) that: 1. he no longer had any files for the matter, due to the sale and/or closure/merger of the firm (McDonald Johnson Lawyers) in 2019, his retention of that trading name and commencement of a new firm "under the same name" in 2021, and the effluxion of time; 2. his wife and he were "related persons", and it "may have happened" that his wife "could have" transferred her interest to him, who then transferred it (presumably, the combined interest) to Dinheiro Pty Ltd; 3. he recalled the issue was "considered very carefully at the time and the opinion of a barrister may have even been obtained"; 4. Mrs Doyle had a "1% interest in the property", which he recalled was transferred to him, who then nominated Dinheiro Pty Ltd as the purchaser, all transferees were "related persons" when the contract was entered into, and "It may be relevant that Dinheiro Pty Ltd purchased the property as trustee of a trust and that Susan Doyle is also a beneficiary of that trust".

[12]

Objection

An objection was lodged by the Applicant on 5 April 2024. It was authored by Mr Doyle and stated (errors in original at R1, p.64): I refer to the assessment in this matter. There is a litany of emails between me and your department and I incorporate those communications into this objection. I no longer have the file nor documents relating to this transaction because the firm closed in 2019 and then reopened in 2021. Nonetheless, I remember this transaction well. Craig and Susan entered into the Contract. I do not recall the proportions or in what tenancy. They were unable to borrow funds for the completion because of the responsible lending requirements which had then come into use by the banks. They obtained advice form a barrister to the effect that they could transfer the purchaser before completion to a related entity under section 18 of the Duties Act. Craig was a Director and Shareholder of Dinheiro Pty limited. I do not recall whether Susan was at that time but in any event Susan was Craig's wife. So Susan could have transferred her interest (whatever it was) to Craig who could then have transferred his interest to his related company, Dinheiro Pty Limited. There is no prohibition on the number of transfers pursuant to section 18 prior to completion so long as they were compoliant. The substitution of Dinheiro as Purchaser prior to completion was completely lawfull and for this reason the post event assessment is incorrect; Further, and assuming it is relevant (which is is not) Craig could have transferred his interest of Dinheiro and then only half the duty would be applicable. The assessment is incorrect and unjust in circumstances where the use of section 18 was lawful. If a step was missed, it had no effect on the end result and no loss to the Office. There are other ways in which Susan could have transferred her interest to her spouse. The Office should not be attemdting to obtain revenue in circumstances where the result was lawful.
On 10 April 2024, the Applicant sent a letter to the Respondent asserting that the Applicant was the trustee of the "Craig Doyle Family Trust" and that Mr Doyle and Mrs Doyle were both beneficiaries of the trust (R1, p.71).

[15]

Evidence of Mr Doyle

In addition to the s 58 documents and other materials before the Tribunal, Mr Doyle provided four affidavits. He confirmed those affidavits and was cross-examined by the Respondent at the hearing.
Mr Doyle has been a solicitor for 40 years. He said that he prepared the Affidavits before the Tribunal in these proceedings. He has a specialist accreditation in Business Law from the Law Society of New South Wales.
He said that on 28 June 2014 he was involved in a serious accident and suffered a brain injury (although there was no medical evidence before the Tribunal to this effect). He said this may have affected his mental capacity for quite a period after that injury occurred.
He said that the Trust was converted to a fixed trust in 2013 for land tax reasons, because it owned a property at Hamilton. He acknowledged that there were errors made because he hadn't revisited the Trust because of his accident and had left it to the accountants. He said "if I was on the ball I would have picked it up" and he "never went back to check".
Mr Doyle said that the EDR lodgments were done by an authorised stamping clerk (ASC) at his firm (McDonald Johnson Lawyers) who was responsible for those matters, and he had never prepared or lodged one personally. He said they were prepared based on the contract. He confirmed that his usual practice as an experienced solicitor was to obtain instructions for matters, and only act on the basis of those instructions.
In respect of the EDR completed for Dinheiro Pty Ltd, he said he gave no specific instructions whether it was a trustee of a trust or not, on the basis that "the transferee always acted as trustee of the trust".
He said that when the Contract was entered into, it was intended that the Property would be acquired as to 50% each by himself and his wife. He was asked why he had to transfer the Property to the company and he said that it had to be "transferred to Dinheiro" because he and his wife could not borrow the money to fund the purchase price.

[16]

The reference to a 1% interest in the Property held by Mrs Doyle, and a transfer of that interest to Mr Doyle

There was some confusion over Mr Doyle's reference to a 50% interest because of the letter to the Respondent dated 29 January 2024 (see para 37(4) above) where he referred to a 1% interest in the Property being held by his wife in the following terms (my emphasis): The writer recalls that Susan Doyle, who had a 1% interest in the property, transferred her interest to her husband, Craig Doyle, who was a related pursuant to section 18 of the Act. Craig was a related person of Dinheiro Pty Limited and nominated Dinheiro Pty Limited as the Purchaser under Section 18. So far as we are aware, and after extensive research, there does not appear to be any restriction on this use of section 18. All transferees were related persons when the contract was entered into. It may be relevant that Dinherio Pty Ltd (sic) purchased the property as trustee of a trust and that Susan Doyle is also a beneficiary of that trust.
Under cross-examination, Mr Doyle said he "didn't know" why there was a reference to 1%. He said that "section 18 would allow a chain of transfers of that nature".
The reference to a 1% interest in the Property held by Mrs Doyle is also inconsistent with Mr Doyle's affidavit dated 13 August 2024 (A3) which set out calculations of duty payable under the following 4 hypothetical scenarios, which refer to a "half interest" held by him: 1. If duty had been paid by the due date; 2. "if a ½ half interest were transferred otherwise than pursuant to Section 18 of the Duties Act"; 3. "duty and interest that would be payable if a transfer did not occur pursuant to section 18"; and 4. "duty and interest of $25,153.00 that would be payable if such is payable on the transfer of a ½ interest to my wife", and concludes: I attach these calculations because it is a fact that I was related to the Applicant as I was a Director and Shareholder at all times. I could have transferred my ½ interest to the Applicant pursuant to section 18 in which case duty and interest of $25,153 only would be payable for the transfer of my wife's share.
I find, on the basis of the evidence before me, and the submissions made by the Applicant, that upon entry into the Contract, each of Mrs Doyle and Mr Doyle intended to acquire a 50% interest in the Property, consistent with the EDR as lodged. I also find that there was no transfer of any interest in the Property from Mrs Doyle to Mr Doyle.

[17]

Were 10 units in the Craig Doyle Fixed Trust transferred from Mr Doyle to Mrs Doyle?

Mr Doyle said the Trust was converted to a fixed trust in 2013 for land tax reasons, due to another property which it owned. I accept that explanation, and find that this was the status of the Trust (based on the Deed of Variation) at both the Contract Date and the Settlement Date.
Mr Doyle accepted that: 1. under the Schedule to the Deed of Variation, he was stated to be the holder of all the issued units of the Trust (100 issued units); 2. no register of Unitholders was maintained for the Trust; 3. the accountants had continued to account for the Trust on the basis it was a discretionary trust after the Deed of Variation was executed; and 4. payments had been made to Mrs Doyle by the Trust during the years following the execution of the Deed of Variation (which he said were "trust distributions").
There were no written records showing units ever being issued by the Trust to Mrs Doyle.
However, in his Affidavit sworn on 12 August 2024 (A2), Mr Doyle had referred to a transfer of 10 units from himself to Mrs Doyle in 2016 at paragraph [8] as follows (my emphasis): Annexed and marked "F" is a true copy of a transfer of Units which I found with the records of the Trust I recall signing this document shortly after the Trust was converted to a Fixed Trust. I recall that my wife and I were living in rented accommodation at this time at Linwood in Maryville. We moved to Maryville in 2026 (sic) after we sold out (sic) house and to the best of my knowledge and belief the Transfer would have been signed in 2016.
The form at Annexure F to that Affidavit was undated. It was titled "Transfer of Units", for the transfer of ten (10) "Ordinary Units" in "Craig Doyle Legal Trust" from Mr Doyle (transferor) to Mrs Doyle (transferee) for consideration of "$1.00". The address for each of Mr Doyle and Mrs Doyle was stated to be at Corlette Street, Cooks Hill, NSW. The form was signed by Mr Doyle as transferor and Mrs Doyle as transferee. It was witnessed by a person called Tahlia Fletcher. In his cross-examination, Mr Doyle told the Tribunal he bought a property in Cooks Hill (in Newcastle) "in 2017".
Subsequently, in his Affidavit sworn on 22 August 2024 (A4), Mr Doyle said: The affidavit of 12 August 2024 attached an incorrect annexure "F" as it did not refer to the correct trust. I attach the correct transfer, which was on the records of the Company.
The "correct transfer" which was annexed was identical in all respects to Annexure F in his 12 August 2024 Affidavit, other than one. It was also undated. All text was the same. The witness was the same, and the signatures and handwritten names were all identical. The only difference was that the name of the trust was "Craig Doyle Fixed Trust", and not "Craig Doyle Legal Trust". The original document was not before the Tribunal, but it was clear (and Mr Doyle accepted) that the word "Legal" had been "whited-out", and "Fixed" had been handwritten in its place. There was no initialling by the parties, or the witness, that evidences that this amendment was made prior to the time the transfer document was executed and witnessed.

[19]

Evidence of Brendan McNabb

Mr McNabb joined by phone. He confirmed the contents of his Affidavit (A5), which he said was sworn on 22 August 2024. It read as follows (my emphasis): (1) I am a chartered accountant, practicing with McGregor & McGregor, Chartered Accountants & Financial Advisors at [address] (2) I have been the accountant for the Craig Doyle Family Trust which I understand is also referred to as the Craig Doyle Fixed Trust since about 2021. (3) I know that Susan Fay Doyle is a beneficiary of the Craig Doyle Fixed Trust, has been treated as such and has a substantial beneficiary loan account balance. (4) The deeds and amendments of which I am aware reflect that Dinheiro Pty Ltd is the Trustee of the trust and I understand that Dinheiro does not trade in its own right. (5) I have been advised by the director of Dinheiro Pty Ltd that it has no assets in its own right and only acts as Trustee of the trust. (6) The trust financials reflect that the trust bought [the Property] in the 2019-2020 year. (7) The trust made no profit during the 2021 financial year and no income was distributed to any beneficiary.
Mr McNabb appeared by phone and was cross-examined by the Respondent. He said that he was appointed in August 2022, but had started talking with Mr Doyle "sometime in 2021". He said Mr Doyle had given him a certified copy of the Discretionary Trust Deed (the Original Trust Deed) and financial statements for the 2019 financial year prepared by the Former Accountants, and he had not been aware that it was not a discretionary trust at that time, nor of the change of name of the trust, as he had not then seen the Deed of Variation.
He confirmed that he had prepared the financial statements and income tax returns starting with the 2021 financial year on the basis it was still a discretionary trust, and there was a loss in that year, so no distribution was made to Mrs Doyle. He said the recording of distributions made to Mrs Doyle in the 2022 and 2023 year in the financial statements and tax returns were based on the "written or verbal advice from Craig Doyle".
In relation to the statement at paragraph (3) of his Affidavit: "I now know it is a fixed trust, and that there was a transfer of 10 units [from Mr Doyle to Mrs Doyle]". he said he now knew this, and also knew that Mrs Doyle was a beneficiary, because he had been "shown the further document that transferred units to Susan", and that she was "receiving distributions".
He said that he did not he did not know how many units Mrs Doyle held in the Trust in 2017 because he was not appointed at that date and had never seen the files.
He also said that he didn't perform an audit of the Trust.
Counsel for the Respondent took Mr McNabb to the 2020 financial accounts (prepared by the Former Accountants), and specifically to the "beneficiary accounts" in the liability section of the balance sheet. Mr McNabb said he didn't know the history of those accounts - i.e. when they had first arisen, and when the relevant amounts were credited.
He said that he recalled that the purchase price for the Property was $910,000 including stamp duty.
He said that, to his knowledge, Mrs Doyle was never entered onto a register of unitholders for the Trust.

[21]

Observations on the evidence and submissions

The Tribunal is not bound by the rules of evidence and may "inform itself of any matter in such manner as it thinks fit, subject to the rules of natural justice": CAT Act, s 38(2).
Nonetheless, as submitted by the Respondent, a taxpayer who does not keep contemporaneous documents recording the transactions which they subsequently seek to rely on as having occurred faces considerable obstacles in discharging their onus. In Imperial Bottleshops Pty Ltd & Egerton v Federal Commissioner of Taxation (1991) 91 ATC 4546 Hill J explained (at 4552) the difficulty faced by a taxpayer in these circumstances: A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be "tested most closely, and received with the greatest caution"… It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that the evidence of a taxpayer is not to be regarded as prima facie unacceptable.
In this case, the following matters are apparent: 1. Errors were made in the accounts and income tax returns of the Trust. For example, the 2021 income tax return for the Trust incorrectly said that the trust name was the Craig Doyle Family Trust, that it was a discretionary trust, and that distributions were recorded as having been made to Mrs Doyle when they should not have been under the terms of the Trust. These issues were also reflected in the accounts; 2. There are inconsistencies (in statements and records) in respect of: 1. interests in the Property of Mrs Doyle upon entry into the Contract, and subsequently (1% vs 50%); 2. the existence of the "Craig Doyle Legal Trust" - "there is no trust known as the Craig Doyle Legal Trust, only the Craig Doyle Family Trust" (Applicant's submissions in reply at [25]) but the reference in Attachment E to those submissions to "Equity in Doyle Legal Trust" as a non-current asset of the Trust in the 2020 financial statements; 1. Records have been lost, not produced, not prepared, or cannot be located - e.g. minutes of the Trustee relating to distributions made to Mrs Doyle, and the basis of those distributions, entry into transactions, loans etc; 2. No unit register for the Trust was created or maintained, in breach of new clause 16 inserted by the Deed of Variation; and 3. The Applicant's submissions continued to misstate the current name of the Trust (see 82(2)(b) above).
These matters are all taken into account in my findings of fact in this case.

[25]

Singular includes the plural

In this case, there is only one "transferee", being Dinheiro Pty Ltd.
However, there are two "purchasers" (under the agreement), being Mr Doyle and Mrs Doyle. There is no evidence that either of them were acting in the capacity as trustee, and so s 18(3)(d)(ii) is not relevant.
The references to the purchaser in s 18(3)(d) should be read as a reference to the purchasers due to the operation of the Interpretation Act 1987 (NSW) (Interpretation Act). As Block JM stated in Warner v Chief Commissioner of State Revenue [2011] NSWADT 212 (Warner) at [10]-[12] and [21]: 10 Section 18(3)(d) of the Duties Act refers to "the purchaser" and "the transferee" in the singular form. 11 Section 8(b) of the Interpretation Act 1987 relevantly provides: "a reference to a word or expression in the singular form includes a reference to the word or expression in the plural form," 12 It is clear that section 8(b) of the Interpretation Act will apply to section 18(3)(d) of the Duties Act, except insofar as the contrary intention appears in the Duties Act: section 5(2) Interpretation Act 1987. There is nothing in the Duties Act which evidences an intention that the word "purchaser" should not include purchasers and the word "transferee" should not include transferees. It follows that the phrase " the purchaser " as it appears in section 18(3)(d) of the Duties Act includes the purchasers and the phrase the transferee includes the transferees . … 21. Section 18(3) of the Duties Act will have the effect that the Transfer attracts nominal duty if, and only if, all (and not some) of the persons named as the purchaser in the Contract are related to all (and not some) of the persons named as the transferee in the Transfer.
This is also the position stated by the Respondent in Revenue Ruling DUT 010v2: Transfers Pursuant to an Agreement for the Sale or Transfer of Dutiable Property at [12] and [13]: 12. If a transfer is not in conformity with an agreement, $10 duty will still be payable if the transfer would have been in conformity but for the transferee not being the purchaser under the agreement, provided the purchaser under the agreement and the transferee under the transfer were related persons at the time the agreement was entered into. 13. Where there is more than one purchaser under the agreement, or more than one transferee under the transfer, the test for related persons is to be applied to each transferee and purchaser. The concession applies "if, and only if, all (and not some) of the persons named as the purchaser in the Contract are related to all (and not some) of the persons named as transferee in the Transfer": Warner v Chief Commissioner of State Revenue [2011] NSWADT 212 at [21].

[26]

Issue 1: Was the Property acquired by the Applicant (transferee) as trustee of the Trust?

Mrs Doyle was never a "related person" of Dinheiro Pty Ltd. She is neither a director nor a shareholder of Dinheiro Pty Ltd. Nor has she ever been.
Accordingly, if Dinheiro Pty Ltd acquired the Property in its own capacity, and not as trustee of the Trust, one of the "purchasers under the agreement" did not satisfy the requirements of s 18(3)(d)(i) at either the Contract Date or the Settlement Date.
The Applicant submits that it acquired the Property in its capacity as Trustee of the Craig Doyle Fixed Trust.
The Applicant relies on the Affidavits and oral evidence of Mr Doyle, together with: 1. The letter from Mr McNabb (Current Accountants) dated 22 June 2023 which stated: We act as accountants and tax agents for Craig Doyle. We can confirm that Dinhero Pty Ltd (sic) is a trustee company only and does not trade in its own right, nor does the company have any assets or liabilities in its own right. 1. An email from Balmain NB Commercial Mortgages Limited (Balmain) dated 15 September 2019 and a further letter from them dated 29 September 2019.
In respect of the letter from Mr McNabb, it was clear from Mr McNabb's oral evidence that he not only relied upon information supplied by Mr Doyle, but that his "knowledge" of matters was solely obtained from Mr Doyle and representations made by him.
In respect of the correspondence from Balmain, this was explained by Mr Doyle in his Affidavit dated 12 September 2024 (A9) as follows: (8) I have observed in the submissions made by the respondent that criticism is made of the fact that I have not produced documents concerning obtaining finance for the Property. (9) My wife and I entered into a contract to purchase this property off the plan in 2017. We intended to live in the Property as we had sold our house and were renting nearby. The estimated completion date for construction was not reached and the proposed date for completion kept "blowing out". Because of this, we bought another property at Cooks Hill where we then lived for about 5 years. (10) We had money in the bank when we exchanged contracts to buy this property at Maryville but used that money to buy our property at Cooks Hill. (11) When we came to settle this purchase, we went to our usual bankers, Westpac Banking Corporation to try and obtain finance. (12) Our application to Westpac was rejected, and I attach and mark "C" an email dated from Rod Lear at Westpac confirming dated 8 August 2019 advising that that we were unable to obtain finance. (13) We then tried to borrow money from Balmain Partners, who are a second tier lender and possibly a lender of last report. They have a fairly high interest rate. (14) Annexed and marked "D" is a copy of a letter from Gaven Drummond dated 19 September 2019 with an approval to the Applicant. As stated in my previous affidavit, it is for this reason we transferred to the property to the Applicant. (15) Dionheiro still owns the property, and it has been refinanced again.
The Balmain correspondence (Annexure D) was an "Indicative Funding Proposal" for a 24 month interest only loan for $650,000, to be applied to the purchase of the Property. Both the email and Funding Proposal referred to the borrower as Dinheiro Pty Ltd as trustee for the "Craig Doyle Family Trust" (not the "Craig Doyle Fixed Trust"). The Funding Proposal did not evidence the actual advancing of the funds on settlement. Nor was a settlement statement in evidence.
It is clear from the above that the documentary evidence is deficient. There are also issues, as noted above, in respect of the income tax returns and the accounts. Nonetheless, it is clear that the Property was transferred to the Applicant on 23 October 2019, and so the accounts for the Trust for the 2020 financial year accounts and the 2021 income tax return for the Trust (which were annexed to the Applicant's submissions in reply and therefore not in evidence when the Respondent's submissions were prepared) are of some relevance. They reflect: 1. a net increase of $827,317 in "Property, Plant and equipment" - from $503,464 (2019) to $1,330,781 (2020), a net increase of $552,841 in "Bank Loans" (liability) - from $293,514 to $846,355, as well as an increase in the liabilities for "beneficiaries" (which may relate to the deposit funded by Mr and Mrs Doyle). 2. recording of an interest expense of $45,505 and rental income of $37,505 in the 2021 year in respect of the Property (with the address of the Property also stated on the Rental Property Schedule in the 2021 income tax return).
Further to the above: 1. There is a history of correspondence between Mr Doyle and the Respondent regarding the previous amendments made to the Trust in 2013, and the reason for those amendments was to manage the land tax liability of the Trust. In circumstances where the Trust has previously acquired real property in Hamilton (also shown in the income tax return, and also leased), then it would be reasonable for the Trust to follow that course in respect of this acquisition. 2. The capacity in which the Applicant acquired the Property is one of the few matters that Mr Doyle has remained consistent on in his submissions and evidence.
Accordingly, although none of the evidence before the Tribunal adequately explained to the Tribunal what the source of funds were for completion of the purchase, who they were lent by, or when they were repayable, it appears that funding was received, it would have been secured by a mortgage (likely over both properties owned by the Trust), and it would make sense for losses arising from a rental property to offset other income derived by the Trust.
In short, even in the absence of further documentation, and having regard to the ERD trustee flag of "No", I find it "more likely than not" that the Property was acquired by the Applicant in its capacity as trustee as recorded in the 2020 balance sheet and 2021 income tax return of the (incorrectly named) Trust.
I have also had regard to the Applicant's submissions that it was not required to disclose the capacity of the trustee in respect of land acquisitions under the Real Property Act 1900 (NSW). The Tribunal is not here concerned with that legislation; nor does it absolve the Applicant from the onus of proof in respect of factual matters required to be established.
For completeness, I agree with the Respondent's submissions that if the Property was not acquired by the Applicant in its capacity as trustee of the Trust, then s 18(3)(d) of the Duties Act would not have been satisfied because Mrs Doyle was not a "related person" of the Applicant - being neither a shareholder nor director of Dinheiro Pty Ltd at any time.

[28]

Mrs Doyle was not a unitholder in the Trust

I find that Mrs Doyle was never a unitholder in the Trust: 1. She was not stated to be a unitholder in the Schedule to the Trust Deed, as amended by the Deed of Variation; 2. There was no subsequent variation to the terms of the Trust; 3. There was no unit register maintained by the Applicant that evidenced her as a unitholder; 4. There are various references (in Mr Doyle's oral evidence, Affidavits, correspondence, and the Applicant's submissions) to "a transfer of units [to Mrs Doyle] signed sometime in 2016" following the receipt of advice of a tax accountant and/or a barrister, but there were conflicting versions before the Tribunal. The sole documentary evidence was the signed Transfer Form for 10 units purportedly transferred by Mr Doyle to Mrs Doyle. But it was undated so its execution date cannot be verified, and the two versions cast serious doubt on the legitimacy of the hand-amended version relied upon, and the Cooks Hill address stated on the Transfer Form for Mr Doyle and Mrs Doyle does not accord with the address on the Contract being a Mayfield address, and Mr Doyle's affidavit extracted above suggesting the Cooks Hill property was purchased after the Contract Date, and was a contributing reason why they could not personally fund the purchase of the Property; 5. There are no other minutes or other records of the Trustee evidencing that units were issued to or held by Mrs Doyle, or that any transfer of units to her had occurred. Nor was there a unit certificate or evidence of payment (for the price of the units); and 6. The accounts are of no relevant assistance to this issue, being conceded in the Applicant's submissions that a unit holding by Mrs Doyle "was not recorded in the books of the Trust". The evidence established that the accounts were prepared by persons who had no knowledge at that time of the conversion of the Trust to a unit trust.
As a result, the Applicant has not satisfied its onus of proof that Mrs Doyle held any units in the Trust at either the Contract Date or the Settlement Date.

[29]

Mrs Doyle was not a "beneficiary" of the Trust

The term "beneficiary" is not defined in the Duties Act, and therefore adopts its common law meaning. As noted by Gzell J of the Supreme Court in CPT Manager Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1286 at [55]: Under the old Chancery practice, any beneficiary was entitled, as of right, to have the trust administered by the Court of Chancery and to that end to obtain a decree for general administration (McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 633-638). But that right arose because the beneficiary had an interest in the trust that needed protection. If the "beneficiary" lacked any equitable interest in the trust, there was nothing to protect and, contrary to the Chief Commissioner's submission, there was no entitlement to due administration. A person in that position is a stranger to the trust and cannot be regarded as a beneficiary.
As Mrs Doyle was not a unitholder in the Trust, she had no entitlement to call for due administration of the Trust. The trust property was not held for her benefit.
It does not matter that she received (or was credited for) "distributions" purportedly made to her after the Effective Date of the Deed of Variation by the Trustee. Such distributions, if made, were without power, and in breach of the terms of the Trust.
Nor does it matter that there was a "beneficiary account" recorded in the accounts, regardless of whether it included the distributions noted above. An amount owing to her may provide Mrs Doyle with rights as a creditor, but that does not enliven any relevant equitable interests relating to the terms of the Trust or its administration. And "beneficiary" accounts were also maintained in the name of other persons who had been discretionary beneficiaries prior to the amendments effected by the Deed of Variation (e.g. their children). They, similarly, were not beneficiaries under the terms of the Trust as amended in 2013. Nor was it suggested that they were unit holders in the Trust.
The fact that both the Trust and Mrs Doyle may have lodged income tax returns showing assessable distributions to her also does not establish that Mrs Doyle was a beneficiary.
From 30 November 2013 (the effective date of the Deed of Variation), a reference to a "Beneficiary" was defined by reference to the (new) "Schedule". And Mr Doyle was the only unitholder on that Schedule.
I find that the Deed of Variation, on a proper construction, effected a change that left Mr Doyle solely as the beneficiary of the Craig Doyle Fixed Trust. (A similar finding was recently made by SM MacIntyre in Baxter v Chief Commissioner of State Revenue [2024] NSWCATAD 153 at [67].)
As Mrs Doyle was not a "beneficiary" of the Trust at either the Contract Date or the Settlement Date, Mrs Doyle did not satisfy the "related persons" test.
Accordingly, s 18(3)(d) was not satisfied.

[30]

Issue 3 - No estoppel against the Respondent

The Applicant refereed to the Notice of Investigation dated 28 November 2023 (see para 35 above) stating that if Mr Doyle met satisfied the "related persons" test, but Mrs Doyle did not, ad valorem duty would be reassessed "based on 50% of the value only as [Mr Doyle] is a related person". The Applicant said that amount would $15,177.50, and not the amount now assessed. On that basis, the Applicant submitted that "NSW Revenue is now estopped from demanding a higher amount".
However, the Respondent is not estopped from issuing the Assessment for the full amount of duty. The relevant principles are conveniently stated by NS Isenberg, Judicial Member in Zhuang v Chief Commissioner of State Revenue [2013] NSWADT 103 at [43] ff: 43. The Chief Commissioner submits that "no conduct on the part of the Chief Commissioner could operate as an estoppel against the operation of the Duties Act: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117 per Kitto J" (written submissions dated 14 November 2012). 44. Wade and other High Court decisions were cited in this Tribunal in Stature Pty Ltd -v- Chief Commissioner of State Revenue [2002] NSWADT 271 at [11] and [12] where Verick JM said: "It is well established that the doctrine of estoppel cannot be invoked by a taxpayer so as to prevent the Commonwealth Commissioner of taxation assessing tax pursuant to the statutory duty so to do.... The accepted view is, therefore, clearly that no conduct on the part of revenue can operate as an estoppel against an obligation imposed by revenue legislation to assess for the correct amount of tax subject, of course, to any specific statutory provisions which prevent the revenue from exercising its statutory duties." 45. I find that even if the Applicants received and relied on advice as alleged, that does not stop the Chief Commissioner assessing the registered transfer for duty in accordance with the Duties Act. 46. The Applicants submitted that the real transaction was a transfer of a 20% interest in the Property from Bo Zhuang to his father. No transfer from Bo Zhuang to his father was produced to the Tribunal. I find that the transfer the subject of these proceedings transferred a fee simple in the whole of the dutiable property to the Applicants. 47. The Applicants also submitted that a technical error had been made by their conveyancers while acting as agent for the OSR in operating under the electronic Duty Return Scheme. Accordingly "it was a mistake made by the administration body of the Office of State Revenue not the Applicants". If the Applicants had not received advice from the OSR the registered transfer would not have been drafted as it was and the Purchasers would have been the transferees. (paragraphs 7 - 10 of the Applicants' submissions). 48. These proceedings deal with documents brought into existence and signed, not documents which may, but were not, brought into existence and produced to the Tribunal. Even if the conveyancers were the agent of the Chief Commissioner for the purpose of assessing the transfer for duty, which is denied by the Chief Commissioner, for the reasons expressed in paragraphs 43 and 44 above the Chief Commissioner is not estopped from reassessing duty on the registered transfer in accordance with the Duties Act. 49. The Applicants claim that the April 2012 Decision is unfair and unjust. In response to a similar submission by a taxpayer in Stature Pty Ltd, Verick JM said at [10] "It is fairly basic to say that "moral and ethical grounds" have very little role in construing revenue statutory provisions... The Chief Commissioner acted quite properly within the statutory framework of the law." I find that the Chief Commissioner is exercising a statutory responsibility in relation to the collection of revenue in accordance with the Duties Act. All taxpayers are subject to the legislation which provides exemptions and concessions should certain circumstances apply. It is not unfair or unjust for the Applicants to be subject to the same statutory imposts as other taxpayers.
Estoppel does not lie against a fiscal authority on the basis that the authority cannot be prevented from carrying out the public duties cast upon it by legislation: BBLT Pty Ltd v Chief Commissioner of the Office for State Revenue [2003] NSWSC 1003 at [111] per Gzell J. See also Brataniec v Chief Commissioner of State Revenue [2013] NSWADT 65 at [36]; Re Precise Training [2018] NSWSC 1383 at [28] and authorities cited therein; Macquarie Bank Ltd v FCT (2013) 215 FCR 403 at [49] and [69]; and s 119 of the TA Act.
As no discretion is provided under s 18(3), principles of "fairness" do not apply. Neither the Respondent nor the Tribunal can ignore the statutory provisions, which require the additional duty in circumstances not within those prescribed by s 18.

[32]

Interest and penalties

In its submissions in reply (at [33]), the Applicant said: In the alternative, the Tribunal should exercise its powers to do the following: • Find the duty payable as: Transfer Duty in the amount of $34,827.00; and (a) Market Rate of interest (to be calculated by the Respondent) •.remit Penalty Tax in the amount of $8,701.15; •. remit the Premium Rate of Interest of 8%; • allow the Applicant to pay the amount within 28 days.
The Applicant also relied on the submissions and oral evidence of Mr Doyle regarding his accident, and his attempts to maintain his affairs as best he could.
The Respondent submitted that the circumstances did not warrant the exercise of any discretion to remit interest or penalties, and noted that: 1. although there was oral evidence that Mr Doyle suffered a serious injury in 2014, there was no medical evidence in support of that claim; 2. throughout the relevant period, Mr Doyle continued his legal practice, ran his business affairs and entered into property purchases; and 3. the Applicant had failed to maintain records as required under the provisions of the TA Act.
In this case, there was a lack of rigour and oversight by Mr Doyle in respect of the ERDs, the trust deed amendments, the failure to record unitholdings in a register, other lodgements, and his instructions to accountants.
As noted by the Respondent, taxpayers have an obligation to keep records and for the period required by the TA Act. I accept that Mr Doyle's business circumstances may have led to a loss of records held by his firm, but as those records related also to his own personal affairs, he should have retained adequate records relating to every entity on his own account, and in his capacity as sole director of the Applicant as the trustee of the Trust.
I accept that the Applicant (and Mr Doyle) had no malicious intent, and that Mr Doyle did not meet his own standards, which he accepted in his oral evidence. Even though there is no medical evidence as to Mr Doyle's injury, he exhibited to me a general state of not being fully in control. This was evident from his confusion and inconsistency throughout his written correspondence, submissions and oral testimony (as set out at paragraph 82 and more generally throughout these reasons), and advancing hypotheticals which were irrelevant to establishing what occurred as a matter of fact. It has likely been a cause of frustration also for the Respondent; the length of their written submissions dealing with the various matters raised throughout the dispute is indicative of that.
This matter has clearly resulted in double duty. It has been found above that there was no transfer of units from Mr Doyle to Mrs Doyle prior to entry into the Contract, on the balance of probabilities. If Mr Doyle had paid full attention and received proper advice at all relevant times, it is likely that no double duty would have arisen. Unlike section 18 of the Duties Act, there are discretions available to remit interest and penalties under the provisions of the TA Act. The TA Act provides that the imposition or remission of interest is not relevant to the imposition or remission of penalty tax (s 33(2); see also s 25(4)). I have therefore considered each separately, but the matters above are relevant to each consideration.
I have decided that it is appropriate in this case to exercise the discretion under s 33 of the TAA to remit the penalty to 15%. I have had regard to the Respondent's guidelines, but note that in light of the broad and unfettered character of the discretion, an absence of reasonable care for the purpose of s 27(3)(a) does not preclude an exercise of discretion to fully or partly remit penalty tax under s 33.
In respect of interest, and given the penal nature of the premium component, I have decided that it is also appropriate in this case to exercise the discretion in s 25(1) of the TA Act to remit the premium component to nil. There is no basis upon which I would be satisfied in this case to remit the market rate interest component, which remains as assessed.

Dinheiro Pty Ltd v Chief Commissioner of State Revenue

At a glance

Court

Decision date

Source

Judgment (35 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (7)