Edgely Pty Limited v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2013-06-06

Part A Preliminary and background 1The decision under review is the disallowance by the Respondent (who is usually referred to in these reasons as the "Chief Commissioner") of an objection by the Applicant against an assessment issued on 18 January 2010 ("the relevant assessment") of land tax referable to the 2010 land tax year ("the relevant year"). The Chief Commissioner disallowed the objection on 25 October 2011 and the Applicant filed an application for review on 22 December 2011. (It is important to note that there were throughout the hearing of this matter and for reasons set out below references to other land tax years and in particular the 2002 to 2009 land tax years (both land tax years inclusive) and which are generally referred to by reference to their actual years; it is equally important to note that in respect of all of those other land tax years the Tribunal does not have jurisdiction for the reasons set out below). 2This application commenced in the Administrative Decisions Tribunal ("the ADT") The ADT was merged into the Civil and Administrative Tribunal of New South Wales ("NCAT") on 1 January 2014 and in consequence of which I am authorised and required to determine the matter as a matter of NCAT; see clause 7(2) in Schedule 1 to the Civil and Administrative Tribunal Act 2014 ("NCAT Act"). Matters formerly dealt with in the Revenue Division of the ADT are dealt with in the Administrative and Equal Opportunity Division of NCAT; see section 96 of the Taxation Administration Act 1996 and clause 3(1) (b) in Schedule 3 to the NCAT Act. 3The Tribunal had before it the documents lodged in accordance with section 58 of the Administrative Decisions Review Act 1997 (previously the Administrative Decisions Tribunal Act); it also admitted exhibits as follows: Exhibit A1 is an affidavit by Mr. Ronald Searle dated 14 November 2012; Exhibit A2 is a further affidavit by Mr Ronald Searle dated 2 May 2013; Exhibit R1 is the application for review dated 28 October 2011; Exhibit R2 is a land tax assessment; Exhibit R3 is an affidavit by Mr. Charles Yuen who is in the employ of the Chief Commissioner. 4In respect of each of the parties written submissions were issued and supplemented during the period during which hearings took place. The term "RFS" refers to the most recent of the submissions by the Chief Commissioner while "AFS" refers to the most recent of the submissions for the Applicant.

Part B The Facts. 5The facts which are relevant for the purposes of this decision (and as to which there does not appear to be any dispute) are set out in detail in clause 2 of RFS which is reproduced in full (on the basis that defined terms contained in such clause 2 of RFS have the same meanings when used elsewhere in this decision and bearing in mind that Wes and Elizabeth are the parents of Ronald) as follows: (1)Pursuant to a transfer dated 13 December 1996 49 Holbeche Road Arndell Park (folio number 131/827751) (the "Holbeche Rd property") was transferred to Transtar Express Pty Limited ("Transtar") for $255,000. Transtar held this property until it was transferred by Transtar on 19 February 2009 for $1,625,000. (2)Pursuant to a transfer registered on 15 July 2000 a property at 15 Contaplas Street Arndell Park (folio number 64/1003931) (the "Contaplas St property") was transferred to Edgely for $951,554. Edgely held this property during the 2010 land tax year. (3)Pursuant to a transfer dated 22 May 2002 a property at 28 Sherwin Street, Hunters Hill (folio number 5/15500) (the "Sherwin St property") was transferred to Edgely for $2,530,000. Edgely held this property during the 2010 land tax year. (4)Pursuant to a transfer dated 8 September 2000 a property at 12 Geelans Road Hornsby (folio number 1/578227) (the "Geelans Rd property") was transferred to Edgely for $675,000. By a transfer stamped 9 September 2003, the Geelans Rd property was transferred from Edgely for $1.31 million. (5)On 2 February 2002 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2002 (Yuen Annexure A). Edgely was assessed on the taxable value of the Contaplas St property and Geelans Rd property. Edgely was not assessed as a non-concessional company as that phrase is understood under s 29 of the Land Tax Management Act 1956 ("LTMA"). For that reason it was assessed pursuant to s 3AH(1) and Schedule 9 of the Land Tax Act 1956 ("LTA"), meaning that it was not taxed on that part of the taxable value that was below the tax threshold of $220,000 and was taxed at $100 plus 1.7c for each $1 in excess of the tax threshold. (6)On 31 January 2003 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2003 (Yuen Annexure B). Edgely was assessed on the taxable value of the Contaplas St property, the Geelans Rd property and the Sherwin St property. Edgely was not assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AH(1) and Schedule 9 of the LTA, meaning that it was not taxed on that part of the taxable value that was below the tax threshold of $261,000 and was taxed at $100 plus 1.7c for each $1 in excess of the tax threshold. (7)On 17 January 2004 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2004 (Yuen Annexure C). Edgely was not assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AH(1) and Schedule 9 of the LTA, meaning that it was not taxed on that part of the taxable value that was below the tax threshold of $317,000 and was taxed at $100 plus 1.7c for each $1 in excess of the tax threshold. (8)On 16 January 2005 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2005 (Yuen Annexure D). Edgely was not assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AI (1) and Schedule 10 of the LTA, meaning that it was taxed at 0.4 cents for each $1 under $400,000 in taxable value, $1,600 plus 0.6 cents for each $1 by which the taxable value exceeded $400,000 and $2,200 plus 1.4 cents for each $1 by which the taxable value exceeded $500,000. (9)On 6 February 2006 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2006 (Yuen Annexure E). Edgely was not assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AJ(1) and Schedule 11 of the LTA, meaning that it was not taxed on that part of the taxable value that was below the tax threshold of $352,000 and was taxed at $100 plus 1.7c for each $1 in excess of the tax threshold. (10)In November 2006 an audit was commenced in relation to the affairs of Edgely, Kagua, Transtar and Nitestar. The audit concerned land tax and payroll tax. (11)On 17 January 2007 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2007 (Yuen Annexure F). Edgely was assessed on the taxable value of the Contaplas St property and the Sherwin St property. Edgely was not assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AJ(1) and Schedule 11 of the LTA, meaning that it was not taxed on that part of the taxable value that was below the tax threshold of $352,000 and was taxed at $100 plus 1.7c for each $1 in excess of the tax threshold. (12)On 18 September 2007 the Chief Commissioner concluded his audit and notified Edgely as to his conclusion in respect to the application of s 29 LTMA to Edgely and Transtar for the 2002 to 2007 land tax years (Yuen Annexure G). (13)On 20 September 2007 the Chief Commissioner issued a land tax assessment to Edgely for the land tax years ended 31 December 2002 to 31 December 2007 (Yuen Annexure H). Edgely was reassessed for each of those years. Edgely was assessed as a non-concessional company as that phrase is understood under s 29 of the LTMA. For that reason it was assessed pursuant to ss 3AH (2) of the LTA in the tax years ended 31 December 2002 to 31 December 2004, 3AI (2) of the LTA in the tax year ended 31 December 2005 and 3AJ (2) of the LTA in tax years ended 31 December 2006 and 31 December 2007. Broadly, the effect of being assessed as non-concessional is that Edgely was assessed at a flat rate percentage of between of 1.4% and 1.7% (depending on the relevant land tax year) of the entire taxable value of the Contaplas St property and the Sherwin St property in each of the years ended 31 December 2002 to 31 December 2007. Edgely was assessed for the following amounts of land tax: (a)$24,599 for 2002. (b)$43,146 for 2003. (c)$39,950 for 2004. (d)$37,100 for 2005. (e)$56,100 for 2006. (f)$53,691.65 for 2007. (14)On 12 October 2007 the accountant for Edgely objected to the assessments issued on 20 September 2007 (Yuen Annexure I). (15)On 23 October 2007 the Chief Commissioner gave reasons for grouping Edgely with Kagua Pty Ltd and Transtar for land tax pursuant to ss 29(1)(b)(iii), 29(1)(d) and 29(2)(c) of the LTMA (Yuen Annexure J). Transtar and Kagua were grouped because John and Elizabeth Searle ("Elizabeth") together controlled more than 50% of the voting shares in each company: s 58 at 6. Kagua and Edgely were grouped because Kagua owned more that 50% of the voting shares in Edgely: s 58 at 6. Transtar and Edgely were grouped because Kagua was grouped with Transtar and Edgely: s 58 at 7. The letter relevantly concluded: Please advise if you are still to continue with the objection by 29 October 2007. (16)No response was received by the Chief Commissioner. (17)On 14 January 2008 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2008 (Yuen Annexure K). Edgely was assessed on the taxable value of the Contaplas St property and the Sherwin St property. Edgely was assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AK (2) of the LTA, meaning that it was taxed at 1.6c for each $1 of taxable value of the properties. Edgely was assessed for land tax of $57,520 for the 2008 year. (18)On 14 January 2009 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2009 (Yuen Annexure L). Edgely was assessed on the taxable value of the Contaplas St property and the Sherwin St property. Edgely was assessed as a non-concessional company. For that reason it was assessed pursuant to s 3AL (2)(c) and Schedule 13 of the LTA, meaning that it was taxed at 1.6% of the taxable value of the properties below the premium threshold of $2,250,000 and 2% of the taxable value above the premium threshold. Edgely was assessed for land tax of $62,178.65 for the 2009 year. (19)On 18 January 2010 the Chief Commissioner issued a land tax assessment to Edgely for the land tax year ended 31 December 2010 (Yuen Annexure M). Edgely was assessed on the taxable value of the Contaplas St property and the Sherwin St property. Edgely was assessed as a concessional company. For that reason it was assessed pursuant to s 3AL(2)(c) and Schedule 13 of the LTA, meaning that it was taxed at $100 plus 1.6% of the taxable value of the properties between the tax threshold of $376,000 and the premium threshold of $2,299,000 and 2% of the taxable value above the premium threshold. Edgely was assessed for land tax of $64,754.65 for the 2010 year. (20)The land tax assessment issued on 18 January 2010 reminded Edgely of its liability for land tax for land tax for the 2002 to 2009 land tax years but did not reassess land tax for those years. Specifically, the assessments for land tax dated 20 September 2007 (2002 to 2007 years), 14 January 2008 (2008 year) and 14 January 2009 (2009 year) were summarised and remained unaltered by the land tax assessment issued on 18 January 2010. That is, the amount of land tax for which Edgely was liable in each of the 2002 to 2009 land tax years remained the same as the earlier assessments referable to those years. (21)By letter dated 18 May 2010 James Lahood, commercial manager of Edgely, objected to the land tax assessment issued on 18 January 2010 (Yuen Annexure N). (22)By letter dated 26 July 2011 the Chief Commissioner requested information from Edgely: s 58 at 24; Yuen Annexure P. Specifically, the Chief Commissioner requested: Evidence to support your claim that Edgely P/L owns the properties assessed for land as trustee for the RW Searle Family trust, if you could provide the relevant deed or any other supporting information. (23)By letter dated 22 August 2011 Mr Lahood provided a copy of the RW Searle Family Trust. The trust deed provides for a discretionary trust (s 58 at 31; Yuen Annexure Q), that the Principal (Ronald) may at any time replace the trustee (s 58 at 41 and 46), that the trustee is Kagua and that the beneficiary is Ronald. Attached to the trust deed was a statutory declaration that disclosed that Ronald was a director of Kagua. (24)By letter dated 25 October 2011 the Chief Commissioner determined that Kagua could not be grouped with Transtar but that Transtar and Edgely were still grouped because the companies had the same directors: s 58 at 48; Yuen Annexure R. (25)By letter dated 11 November 2011 Edgely objected to the Chief Commissioner's decision: Yuen Annexure S. (26)By letter dated 24 November 2011 the Commissioner disallowed Edgely's objection: Yuen Annexure T. (27)Since the date of decision the Tribunal has summonsed, at the instance of the Chief Commissioner, further information from Ronald and James Lahood as well as accountant Martin Roughley. (28)Nothing was produced by either Ronald or James Lahood. (29)The information provided by Mr Roughley, former accountant for Edgely, in conjunction with company searches, reveals the following information. (30)In respect to Edgely: (a)It was incorporated on 30 September 1999. (b)During the 2010 land tax year shares in Edgely were held as follows: (i)100 ordinary shares were held on trust by Kagua. (ii)E class share was held beneficially by Ronald. That share gave a right to be paid dividends. (c)Ronald was the sole director of Edgely from some time prior to 31 October 2001 until 7 March 2005. From that time onwards John Weslyn Searle ("Wes") became a director of Edgely. (d)Wes or Ronald customarily attended general meetings of Edgely as representative of Kagua. (e)In respect to Transtar: (i)It was incorporated on 12 July 1973. (ii)Ronald was sole director of Transtar from November 1996 until 7 March 2005 when Wes was appointed director. (f)During the 2010 land tax year the shares in Transtar were held as follows: (i)8,999 ordinary shares, 100 voting non-dividend A Class shares and 900 non-voting C Class dividend shares held by Ronald. (ii)8,999 ordinary shares, 100 A Class voting non-dividend shares and 900 non-voting B Class dividend shares held by Wes. (iii)1 ordinary share held by Elizabeth. (g)In respect to Kagua: (i)It was incorporated on 14 June 1973. (ii)Ronald was the sole director and company secretary of Kagua until 7 March 2005 when Wes was appointed a director and secretary. (h)During the 2010 land tax year the shares in Kagua were held as follows: (i)1 ordinary share held by Elizabeth Mary Searle; and (ii)1 ordinary share held by Wes.

Part C The land tax years other than the relevant year 6There were, as I have mentioned, references throughout the hearing to land tax years other than the relevant year. The assessments for the land tax years 2002 to 2009 were objected to by the Applicant on 12 October 2007 (Exhibit R3; Annexure I). The Chief Commissioner disallowed that objection (Exhibit R3; Annexure J). The Applicant did not seek the review of that decision and accordingly the Tribunal does not have jurisdiction to review those assessments. (Section 96(1)(a) of the Taxation Administration Act 1996 ("TAA")) In respect of the 2008 and 2009 land tax years the Applicant did not lodge objections and for this reason the Tribunal does not have jurisdiction. (It may be mentioned that when the matter came before the Tribunal in March 2014 the Tribunal gave the Applicant leave to take steps to rectify the position but in the result the Applicant did not elect to do so.)

Part D. The Applicant's case 7Having quoted extensively from RFs I include clauses 3 to 5 of AFS as follows: 3. Briefly stated the Applicant's case is that the 2010 Notice of Assessment is incorrect, in that it substantially overstates the Applicant's liability for Land Tax for the 1010 tax year. There is actually no doubt on either party's view that the amount stated as due on the face of the Notice exceeds the amount of tax actually assessed for 2010 to the Applicant on land which for which it is liable at 31 December 2009 4 .In asserting that the Notice of Assessment is wrong the Applicant contends that it is impermissible for the Respondent to "roll into" the 2010 Notice of Assessment other amounts said to be referrable to other years of tax. 5. Those other amounts included in the 2010 Notice appear to reflect a change of position on the part of the Respondent to deny the Applicant the "threshold" in the tax rates imposed under the Land Tax Act 1956 in earlier years where tax had already been assessed and paid by the Applicant. 8The Applicant contended, albeit without conviction, that the grouping decision on which the relevant assessment was founded was incorrect. 9Put in succinct terms the Applicant's case in the main is that the relevant assessment was flawed to such an extent that it did not in respect of the relevant year constitute a valid assessment. 10The Chief Commissioner contends that the relevant assessment was not flawed and moreover that the denial of concessional status to the Applicant in respect of the relevant year was correct.

Part E The relevant assessment -legislation and commentary 11Assessment is defined in s 3 of the TAA as follows: assessment means an assessment made by the Chief Commissioner under Part 3 of the tax liability of a person under a taxation law, and includes: (a) a reassessment and a compromise assessment under Part 3, and (b) an assessment by the Supreme Court or the Administrative Decisions Tribunal on an application for a review. 12Part 3 of the TAA relevantly provides that Chief Commissioner may make an assessment based on the information that the Chief Commissioner has from any source at the time the assessment is made (s 11), may issue a notice of assessment (showing the amount of the assessment) in the form approved by the Chief Commissioner (s 14). 13Accordingly, in order to be valid an assessment must be an assessment made by the Chief Commissioner as to the tax liability of a person. 14Sections 14 and 15 of the LTMA relevantly provide: 14 Assessments to be made (1) Subject to this Act and the Taxation Administration Act 1996, the Chief Commissioner shall from the returns and from any other information in the Commissioner's possession or from any one or both of those sources, and whether any return has been furnished or not, cause an assessment to be made of the taxable value of the land owned by any taxpayer and of the land tax payable thereon. (2) An assessment can be made even if the time for lodging returns has not yet expired. 15 Notice of assessment to contain certain matters A notice of assessment under section 14 of the Taxation Administration Act 1996 in relation to land tax must include a statement as to the taxable value of the land, together with such information as to the amounts determined under the Valuation of Land Act 1916 as to: (a) the land value (or other relevant value) of the land, and (b) any allowances or apportionment factors relevant to the land, from which the taxable value of the land has been derived. 15Where the taxpayer has not paid tax and has thereby committed a tax default a notice of assessment must specify any interest payable by the taxpayer: s 15 TAA. 16However, even if these provisions of the LTMA and TAA are not complied with an assessment remains valid: s 16 TAA. 17In Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 Kitto J considered the meaning of the word "assessment" in the context of s 170 of the Income Tax Assessment Act 1936. Kitto J relevantly observed at 252: "assessment" means, in my opinion, the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case. 18Under the LTMA land tax is charged each year on land owned on 31 December of the previous year: s 8 LTMA. It is levied on the taxable value of the land at that time as indicated in the Register of Land Values: s 9 LTMA. Land tax is due and payable as required by the relevant notice of assessment: s 39 LTMA. 19The land tax assessment for 2010 included on the cover page an amount, expressed to be due and payable, that was the sum of the assessment for the 2010 land tax year and those amounts still due and unpaid from assessments of previous land tax years. This was made plain on the face of the assessment. 20Specifically: (1)The assessment is clearly stated on the cover page to be an assessment of the 2010 land tax year by the words: "Land Tax in this notice has been assessed for the: 2010 Tax Year." (2)The cover page of the assessment incorporates by reference the supporting material by use of the words: "(refer to enclosed supporting information)" (3)The supporting information records the following heading under which the assessment for 2010 appears: "Total balance of this assessment Tax Year Description Debit Credit Balance $ $ $ 2010 Assessment 64 754.65 64 754.65 2010 tax year total 64 754.65 64 754.65"

(4)The document then records the existing liabilities from previous years under the following heading: "Total of other amounts - due and payable" (5)The supporting information for the 2010 assessment specifies that the land value for 2010 was $3,993,334, the taxable value of the land for 2010 was $3,993,334 and the amount of land tax payable by the Applicant for the 2010 land tax year was $64,754.65. 21The Assessment thereby complied with ss 14 and 15 of the LTMA. (1)The Applicant challenges the 2010 assessment on the basis that on the cover page of that assessment there is no statement of the precise amount assessed for that year. The Applicant's contention reduces to the proposition that because the amount assessed for the 2010 year appears in the supporting information of the assessment and is not specified on the cover page it is somehow invalid. 22This contention is incorrect. In circumstances where the supporting information is incorporated by reference on the cover page by use of the words "refer to enclosed supporting information" and where the page numbering is consecutive it can hardly be said that the notice of assessment is separate and distinct from that supporting information. The supporting information could hardly make it plainer that the land value for 2010 was $3,993,334, the taxable value of the land for 2010 was $3,993,334 and the amount of land tax payable by the Applicant for the 2010 land tax year was $64,754.65. That is all that the Chief Commissioner was obliged to do. The assessment complied with ss 14 and 15 of the Land Tax Management Act and constituted the application of ss 8, 9, 11 and 29 of the Land Tax Management Act and s 3AL of the Land Tax Act with the consequence that a specified amount of money became due and payable by the Applicant, namely $64,754.65: Batagol at 252. 23There is no prohibition in either the LTMA or TAA against including reference to other outstanding amounts, referable to earlier land tax years, in the notice of assessment. 24The Applicant asserts that the Chief Commissioner has somehow assessed or reassessed the Applicant for the years 2002 to 2009 in the assessment issued on 18 January 2010. That is plainly not so. As stated in paragraph 2.20 above, the land tax liability for each of those years had earlier been assessed on 20 September 2007 (2002, 2003, 2004, 2005, 2006 and 2007 land tax years), 14 January 2008 (2008 land tax year) and 14 January 2009 (2009 land tax year). The land tax liability for each of those years was summarised in the 2010 land tax assessment but each respective liability remained unchanged from the earlier assessments. The fact that the assessed land tax liability recorded under the heading "total of other amounts - due and payable" remained identical to the earlier assessments of 20 September 2007, 14 January 2008 and 14 January 2009 compels the finding that there was no assessment or reassessment of the 2002 to 2009 land tax years in the assessment issued on 18 January 2010. Further, there is no evidence that the Chief Commissioner's considered any matters relevant to his power to reassess: s 9(3) TAA. 25The Applicant asserts that by inserting a due date on the cover page of the assessment there was somehow a resetting of interest payable for the assessments of the 2002 to 2009 land tax years and therefore a reassessment of those land tax years. That is incorrect. Liability for interest accrues by reason of s 21 of the TAA. The Chief Commissioner's right to assess and reassess is limited to assessing a tax liability, in the present case land tax under s 7 of the LTMA: ss 8 and 9 TAA. He is not conferred power by Part 5 Division 1 of the TAA or elsewhere to assess interest, as distinct from his power to assess tax (s 8 TAA) and determine penalties (s 27 TAA). As interest arises by reason of the operation of s 21 TAA and is independent from any assessment by the Chief Commissioner (albeit that an assessment for land tax is a necessary antecedent to a liability for interest under s 21) it is not a tax liability capable of assessment by the Chief Commissioner, noting that he has power to remit all or part of the interest liability (s 25 TAA).

Part F. Related companies and grouping 26The content of clause 5 of RFS, with which I agree, (and noting that I agree that the decision by the Chief Commissioner as to grouping was correct in accordance with one or more of the alternatives set out below) is included in this clause 24 in its entirety (but without footnotes) as follows: (1)The LTMA provides that persons may be grouped if the requirements of s 29 are satisfied. Subsections 29(1) and (2) relevantly provided in the 2010 land tax year: 29 Related companies (1) For the purposes of this section, 2 companies are related to each other: (a) if one of those companies: (i) controls the composition of the board of directors of the other company, (ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the other company, or (iii) holds more than one-half of the issued share capital of the other company, (b) if the same person has, or the same persons have together, a controlling interest under any of the following subparagraphs in one of the companies and a controlling interest under the same or another of the following subparagraphs in the other company: (i) a person has, or persons have together, a controlling interest in a company if that person or those persons acting together can control the composition of the board of directors of the company, (ii) a person has, or persons have together, a controlling interest in a company if that person is or those persons acting together are in a position to cast or control the casting of more than half of the maximum number of votes that might be cast at a general meeting of the company, (iii) a person has, or persons have together, a controlling interest in a company if that person holds or those persons acting together hold more than half of the issued share capital of the company, (c) if: (i) more than one-half of the issued share capital of one of those companies (in this paragraph referred to as the first company) is held by the other company (in this paragraph referred to as the second company) together with the shareholders of the second company, and (ii) the proportion of the issued share capital of the second company held by shareholders of the first company is more than the difference between one-half and the proportion of the issued share capital of the first company held by the second company, or (d) if one of those companies is related to a company to which the other of those companies is related (including a company which is related to the other of those companies by reason of another application or other applications of this paragraph). (2) For the purposes of subsection (1): (a) companies may be related to each other notwithstanding that those companies do not own land in New South Wales, (a1) in subsection (1) (b), person includes company, (b) a reference in that subsection to the issued share capital of a company does not include a reference to any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital, (c) subject to paragraphs (d) and (e), any shares held or power exercisable by any person or company as a trustee or nominee for any other person or company shall be treated as also held or exercisable by that other person or company, (d) any shares held or power exercisable by a person or company by virtue of the provisions of any debentures of another company, or of a trust deed for securing any issue of any such debentures, shall be disregarded, (e) any shares held or power exercisable by, or by a nominee for, any person or company (not being held or exercisable as mentioned in paragraph (d)) shall be treated as not held or exercisable by that person or company if the ordinary business of that person or company includes the lending of money and the shares are held or the power is exercisable only by way of security given for the purposes of a transaction entered into in the ordinary course of business in connection with the lending of money, not being a transaction entered into with a person associated with that person or company within the meaning of Division 2 of Part 1.2 of the Corporations Act 2001 of the Commonwealth, or (f) without limiting by implication the circumstances in which the composition of a company's board of directors is to be taken to be controlled by a person or another company, the composition of a company's board of directors shall be taken to be controlled by a person or another company if that person or other company, by the exercise of some power exercisable whether with or without the consent or concurrence of any other person, can appoint or remove all or a majority of the directors. (2)The intent behind s 29 is clear. (3)Its provisions are "intended to prevent tax avoidance by splitting land tax holdings among two or more commonly owned or controlled companies to obtain the benefit of the Schedule rate of tax for each company" (4)The assessing provisions contained in s.29(3)(a) of the Act provide various options to the Chief Commissioner in relation to the assessment of related companies that own land in New South Wales. The effect of the assessment and classification options available to the Chief Commissioner under s29(3) is that, inter alia, non-concessional companies grouped under s.29(7) have a flat rate of land tax imposed on them whereas companies classified as concessional have the benefit of tax free thresholds imposed under the Land Tax Act 1956. (5)The legislative history behind s 29 reinforces the legislative intent referred to above. (6)The Act always contained provisions relating to the grouping of companies since it was first enacted in 1956. However, the former s 29 was repealed and replaced by a new section 29 provided for in the Land Tax Management (Amendment) Act 1983 (NSW) which commenced on 31 December 1983. The Second Reading Speech in the Legislative Assembly to the 1983 amending legislation stated that the amendments to the Act were concerned to overcome certain anti-avoidance procedures which came to notice as well as measures to clarify the application of other provisions. The areas of concern in regard to the use of methods to avoid the payment of land tax were those involving companies and discretionary trusts. Section 29 was therefore repealed in 1983 and replaced with a fresh section for the purpose of ensuring that land tax was not avoided by the use of more sophisticated means to relate corporations to each other. (7)In 1990 s 29(1) (b) was amended so as to allow two companies to be related to each other if the same person has a controlling interest in one of the companies and a controlling interest in the other company. The explanatory note to the Land Tax Management (Amendment) Bill 1990 provided that the legislation was meant to extend the related company provisions of the Act to cover the case where two or more persons together exercise the requisite degree of control over the same companies. The intent behind the 1990 amending legislation was also to provide for anti-avoidance measures in relation to grouping of companies and discretionary trusts. The amendments to the grouping provisions were intended to make it clear that the provisions apply where two or more companies are controlled by two or more persons having more than fifty per cent of issued shares, voting rights or control of directors on those companies. (8)Section 29 was based on s 40 of the previous Land Tax Assessment Act 1910 ("the Commonwealth Act"). Section 40 of the Commonwealth Act was described as a precautionary measure to prevent, among other things, a company owning land launching one or more offshoots with slightly different shareholders, transferring portions of its land to nominally different but practically identical owners and so evading the progressive nature of tax. (9)Section 29, consistent with the legislative intent described above, has been interpreted as designed to prevent the evasion of tax. (10)Transtar and Edgly were related companies in the 2010 land tax year because: (i)Wes and Elizabeth held more than half of the issued share capital of Transtar: s 29(1) (b) (iii). (ii)Wes and Elizabeth were the sole shareholders of Kagua: s 29(1) (b) (iii). They also controlled the composition of the board of Kagua by reason of their shareholding in Kagua: 29(1) (b) (I). (iii)By reason of (a) and (b) Transtar and Kagua were related. (11)Kagua was in a position to cast more than one half of the maximum number of votes that might be cast at a general meeting of Edgely: s 29(1) (a) (ii). Kagua also held more than half of the issued share capital in Edgely: s 29(1) (b) (iii). For that reason Kagua and Edgely were related. (12)By reason of (c) and (d) Transtar and Edgely were related: s 29(1) (d). (13)Alternatively, Transtar and Edgely were related companies in the 2010 land tax year because: (a)Ronald and Wes and or Elizabeth had, together, a controlling interest in Transtar because in the 2010 land tax year those persons acting together: (i)Could control the composition of the board of directors of Tran star: s 29(1) (b) (i). (ii)Were in a position to cast more than half of the maximum number of votes that might be cast at a general meeting of Transtar: s 29(1) (b) (ii). (iii)Held more than half of the issued share capital in Transtar: s 29(1) (b) (iii). (b)Ronald and Wes and or Elizabeth had, together, a controlling interest in Edgely because those persons acting together controlled the composition of Edgely's board of directors (ss 29(1)(b)(i) and (2)(f)) because: (iv)Ronald was Kagua's sole director. (v)Wes and Elizabeth, were the sole shareholders in Kagua, and therefore: (a)together had the power to remove Ronald as director of Kagua; and (b)each had the power to prevent the removal of Ronald as director of Kagua. (14)Kagua was in a position to cast more than half of the maximum number of votes that might be cast at a general meeting of Edgely: s 29(1) (b) (ii). (15)Transtar and Edgely being related companies, it was open to the Chief Commissioner to assess Edgely in the way that it did. (16)The fact that Ronald had power to remove Kagua as trustee did not mean that Kagua did not hold more than half of the issued share capital in Edgely in each of the 2010 land tax year (s 29(1)(b)(iii)) or that it was in a position to cast more than one half of the maximum number of votes that might be cast at a general meeting of Edgely in the 2010 land tax year (s 29(1)(a)(ii)).

Part F Miscellaneous and conclusion 27Because it is only the relevant year which is before the Tribunal the concessional status of the Applicant for the 2009 land tax year (and having regard to a property transaction referable to that year) does not arise for the consideration of the Tribunal. 28In summary, the Tribunal finds that the relevant assessment was not flawed as alleged by the Applicant; as to grouping the decision of the Chief Commissioner to deny concessional status to the Applicant in respect of the relevant year was correct and indeed and in closing argument the Applicant did not appear to press any argument to the contrary. In all the circumstances the decision under review is affirmed

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. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 July 2014

Land Tax Management (Amendment) Act 1983(NSW)

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