TAXES AND DUTIES – STAMP DUTIES – APPEAL, CASE STATED ETC
– where the applicant (as the original buyer) entered
into a contract to
purchase real property – where the property was leased to a tenant who
Source
Original judgment source is linked above.
Catchwords
TAXES AND DUTIES – STAMP DUTIES – APPEAL, CASE STATED ETC– where the applicant (as the original buyer) enteredinto a contract topurchase real property – where the property was leased to a tenant whoagreed (with the original buyer)to pay $50,000 in lieu of make good obligationsat the lease end which was due after settlement – where the contract wascancelledat the request of the seller and a replacement contract entered intowith a new buyer who was a related person to the applicant –where thereplacement contract delayed the settlement date such that the lease expiredbefore the settlement date rather than after– where, consequently, thenew buyer of the property was not the lessor who received the agreed $50,000from the tenant inlieu of complying with make good obligations – wherethe replacement contract included a special condition reducing the balancepurchase price to be paid by the new buyer by $50,000 (contract price otherwise
the same as the cancelled contract) – where
the seller gave indemnities in
favour of the original buyer for any duty that might be incurred on the
cancelled contract –
where transfer duty was paid on the original contract
as well as the replacement contract – where there was application to
the
Commissioner for the duty paid on the cancelled contract to be refunded –
where the Commissioner refused to refund the
transfer duty on the cancelled
contract on the basis that the replacement contract was a “resale
agreement” and an exemption
from transfer duty on the cancelled contract
under s. 115(1)(d) of the Duties Act 2001 (Qld) did not apply –
where the applicant appeals the Commissioner’s decision – whether
the replacement contract
constitutes a “resale agreement” for the
purposes of s. 115(1)(d) of the Duties Act 2001 (Qld) – whether
either the $50,000 paid under the special condition or the indemnities
constitute a disqualifying “financial
benefit” under s. 115(2)(b) of
the Duties Act 2001 (Qld)
Duties Act 2001 (Qld), ss. 115,
500
Revenue and Other Legislation Amendment Act 1999 (Qld),
s. 44
Revenue and Other Legislation Amendment Act 2011 (Qld),
Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41
(2009) 239 CLR 27,
cited
Australian National Airlines Commission v Commissioner of Stamp
Duties [1989] 1 Qd R 246, considered
Barob Pty Ltd v Commissioner of
Stamp Duties [1999] 2 Qd R 468, considered
Queensland
Chamber of Commerce and Industry Ltd v Commissioner of State Revenue (2015)
108 ACSR 334, cited
Wakefield v Commissioner of State Revenue [2019] QSC 85
[2019] 3
Qd R 414, cited
Judgment (141 paragraphs)
[1]
TAXES AND DUTIES - STAMP DUTIES - APPEAL, CASE STATED ETC - where the applicant (as the original buyer) entered into a contract to purchase real property - where the property was leased to a tenant who agreed (with the original buyer) to pay $50,000 in lieu of make good obligations at the lease end which was due after settlement - where the contract was cancelled at the request of the seller and a replacement contract entered into with a new buyer who was a related person to the applicant - where the replacement contract delayed the settlement date such that the lease expired before the settlement date rather than after - where, consequently, the new buyer of the property was not the lessor who received the agreed $50,000 from the tenant in lieu of complying with make good obligations - where the replacement contract included a special condition reducing the balance purchase price to be paid by the new buyer by $50,000 (contract price otherwise the same as the cancelled contract) - where the seller gave indemnities in favour of the original buyer for any duty that might be incurred on the cancelled contract - where transfer duty was paid on the original contract as well as the replacement contract - where there was application to the Commissioner for the duty paid on the cancelled contract to be refunded - where the Commissioner refused to refund the transfer duty on the cancelled contract on the basis that the replacement contract was a "resale agreement" and an exemption from transfer duty on the cancelled contract under s. 115(1)(d) of the Duties Act 2001 (Qld) did not apply - where the applicant appeals the Commissioner's decision - whether the replacement contract constitutes a "resale agreement" for the purposes of s. 115(1)(d) of the Duties Act 2001 (Qld) - whether either the $50,000 paid under the special condition or the indemnities constitute a disqualifying "financial benefit" under s. 115(2)(b) of the Duties Act 2001 (Qld)
[1] This case concerns the proper construction of ss. 115(1)(d) and (2) of the Duties Act 2001 (Qld) (DA) regarding when an exemption from paying transfer duty will arise in relation to a cancelled agreement.
[2] The applicant (FKG01) was a buyer of real property under a cancelled agreement (the Original Contract / the cancelled agreement) who paid transfer duty on the cancelled agreement. FKG01 appeals against the refusal of the respondent, the Commissioner of State Revenue (theCSR), to refund the duty that FKG01 paid on the cancelled agreement.
[3] The key issue for determination is whether the replacement contract that was entered into, after the cancelled agreement, between the same seller and a new buyer (who was a related company to FKG01, namely 122 Margaret Steet Pty Ltd (122Marg)) (the Replacement Contract), was a resale agreement under ss. 115(1)(d) and (2) of the DA.
[4] The CSR submits that 122Marg and FKG01 received certain financial benefits that make the Replacement Contract a resale agreement, with the consequence that transfer duty is payable, and not refundable, on the Original Contract. The relevant financial benefits are submitted to be:
[12]
(a) in favour of 122Marg, an adjustment (by reduction) of $50,000 to the balance purchase monies payable for the real property pursuant to special condition 13 of the Replacement Contract;
(b) in favour of FKG01, the promise by the seller contained in clause 5.1 of the Deed of Rescission with Replacement Contract to indemnify FKG01 against any duty that might be incurred in relation to the deed or the Original Contract.
[13]
[5] FKG01 submits that there was no financial benefit to it or 122Marg as alleged and no resale agreement, and so it is entitled to a refund of the transfer duty paid on the cancelled agreement (s. 115(1)(d) of the DA being satisfied).
[14]
[6] Despite having been commenced by originating application, the proceeding is properly an appeal. Section 70A of the Taxation Administration Act 2001 (Qld) (TAA) provides that, on the appeal, FKG01 has the onus of proving FKG01's case.
[7] In Queensland Chamber of Commerce and Industry Ltd v Commissioner of State Revenue,[1] Jackson J described the powers of the Court in an appeal under the TAA. Having considered the statutory text and context_,_ he ruled that "on appeal the court may make the decision that the [CSR] ought to have made on the original disallowance of the objection."[2]
[8] In Wakefield v Commissioner of State Revenue,[3] Bowskill J (as her Honour then was) described the nature of the appeal to the Supreme Court. In the context of an appeal that involves the application of the law to objective conclusions of fact, her Honour said:
[15]
"it is open for the Court to give such judgment on the appeal as it considers ought to have been given, on the law and facts as they are at the time of the hearing of the appeal. The exercise of the Court's powers in this regard are not dependent upon the demonstration of some legal, factual or discretionary error by the decision-maker."
[16]
Whilst under s. 70(5) of the TAA, FKG01's grounds of appeal are confined to the grounds in the objection unless the Court otherwise orders, since the Court's task is to make the decision that the CSR ought to have made, the Court (and the CSR[4]) is not confined to the reasons that were advanced in the objection decision.
[17]
[10] On 25 May 2022, FKG01 (as buyer) and Jeteld Pty Ltd (Jeteld) (as seller) entered into the Original Contract to purchase/sell the real property situated at 122 Margaret Street, Toowoomba. The purchase price under the Original Contract was $10 million.
[11] The lease schedule in the Original Contract listed two tenancies:
[18]
(a) a lease to Suncorp expiring on 19 June 2022;
(b) a lease to Jades Fortune Pty Ltd expiring on 27 August 2022.
[19]
[12] The settlement date under the Original Contract was initially set for 15 June 2022, shortly prior to the Suncorp lease expiring.
[13] Prior to 15 June 2022, FKG01's agent (with the apparent consent of Jeteld) negotiated an amendment to the obligations owed by Suncorp under its lease. Rather than satisfying the "make good" obligation at the expiry of the Suncorp lease on 19 June 2022, a payment of $50,000 plus GST would be made by Suncorp to the lessor, and certain chattels and fixtures would be left behind. If settlement of the Original Contract had proceeded on 15 June 2022 as originally set, then FKG01 would have been the lessor of the Suncorp lease at the time that lease expired. FKG01 would therefore have been entitled to receive the $50,000 payment on expiry of the Suncorp lease on 19 June 2022 from Suncorp.
[14] The Original Contract was the subject of a return self-assessment, as provided for in Division 2 of Part 3 of the TAA, and Chapters 12 and 12A of the DA. In anticipation of settlement the next day, on 14 June 2022, a self-assessor assessed the Original Contract, endorsed that assessment on the face of the Original Contract, and transfer duty of $555,525.00 was paid (Assessment). Under s. 14 of the TAA, the Assessment is taken to be made by the CSR and notice of the Assessment is taken to be given to FKG01.
[15] On 15 June 2022, before settlement of the Original Contract, Jeteld's solicitors approached FKG01 with a proposal for "revised contractual terms", including rescission of the Original Contract so that it could be replaced with a new contract. Jeteld sought rescission and replacement of the Original Contract because there were income tax advantages for Jeteld if the contract for the sale of the property was entered into on or after 1 July 2022.
[16] The proposed revised contractual terms for the new contract relevantly provided that:
[20]
(a) pending its rescission, the settlement date for the Original Contract would be extended to 15 August 2022 - that, notably, was a date after the expiry of the Suncorp lease;
(b) Jeteld would finalise the agreed arrangements with Suncorp;
(c) there would be an adjustment of the purchase price under the new contract equal to the payment from Suncorp (to account for the fact that Jeteld, as lessor at 19 June 2022, would receive the payment from Suncorp, rather than the new lessor).
[21]
[17] Suncorp vacated the property at the expiration of its lease, and Jeteld invoiced Suncorp for the payment. On 4 July 2022, the payment was paid by Suncorp to Jeteld, as the then lessor under the Suncorp lease.
[18] Subsequently, the settlement date under the Original Contract was extended several times while FKG01 and Jeteld negotiated terms for its rescission: to 1 August 2022, then to 8 August 2022, then to 15 August 2022, then to 19 August 2022, then to 26 August 2022, and finally to 2 September 2022.
[19] In its objection, FKG01 asserted several reasons for the rescission of the Original Contract and entry into the Replacement Contract:
[22]
(a) first, there were income tax advantages for Jeteld if the sale of the property was entered on or after 1 July 2022;
(b) second, the arrangement commercially suited FKG01 because:
(i) the sole director of both FKG01 and 122Marg decided it was "administratively more convenient" for the owner of the property to be a trust with a different unitholding compared to FKG01, and so 122Marg was established as the preferred purchasing entity;
(ii) after Suncorp vacated the property, FKG01 was engaged in the process of negotiating for a new tenant, with a likely delayed commencement of a new lease in late 2022 or early 2023;
(iii) since the property was not going to be returning income from the old Suncorp tenancy while vacant, it suited 122Marg to delay incurring holding costs (rates and land tax) and interest on its borrowed purchase funds until a later purchase date.
[23]
[20] I note at this juncture that I do not consider the reasons for the recission of the Original Contract and the entry into the Replacement Contract as relevant for the purpose of the statutory construction this decision requires. The identified reasons are simply noted for completeness as part of the background presented by the parties.
[21] It is not in dispute that 122Marg is a "related person" of FKG01 for the purposes of s. 115(2)(b) of the DA.
[22] On 31 August 2022, FKG01, Jeteld and 122Marg entered into a Deed of Rescission under which, upon satisfaction of conditions precedent, the Original Contract was rescinded. Those conditions included Jeteld and 122Marg entering into the Replacement Contract.
[23] The Replacement Contract was dated 31 August 2022. The terms of the Replacement Contract were similar, but not identical, to the Original Contract, and included the following:
[24]
(a) the purchase price remained $10 million;
(b) the settlement date was set at 3 October 2022;
(c) the Suncorp lease, having expired, was no longer in the lease schedule;
(d) a new special condition 13, dealing with what will be referred to as the Adjustment, was inserted in the following terms:
[25]
13 Adjustment to the Purchase Price in favour of the Buyer
[26]
In addition to any other adjustment to the Purchase Price, at settlement the Purchase Price will be reduced by the amount of $50,000, being the amount of compensation received by the Buyer [sic] from the former tenant Suncorp Corporate Services Pty Ltd in consequence of the [sic] this contract not being entered into until after the termination of the former tenant's lease.
[27]
[24] Despite its wording, the parties agree (and it is obvious) that it was intended for special condition 13 to refer to "compensation received by the Seller from the former tenant...". It was Jeteld that had received the $50,000 payment from Suncorp.
[25] On 29 September 2022, a self-assessor assessed the Replacement Contract, endorsed that assessment on the face of the Replacement Contract, and transfer duty of $555,525.00 was paid.
[26] By a letter dated 11 October 2022, in-house legal counsel acting for both FKG01 and 122Marg made an application to the CSR, citing the exemption in s. 115 of the DA and seeking the reassessment and refund of the transfer duty that had been paid on the Original Contract.
[27] On 8 February 2023, the CSR refused to apply the exemption in s. 115 of the DA, on the basis that the Replacement Contract was a resale agreement under which 122Marg, being a related person of FKG01, received a financial benefit comprising the Adjustment.
[28] Under s. 500 of the DA_,_ the CSR's refusal to make that reassessment is treated as an assessment against which an objection may be made under Part 6 of the TAA_._ The objection was lodged on 24 March 2023:
[28]
(a) by the solicitors for Jeteld;
(b) acting for Jeteld;
(c) where Jeteld has power of attorney for FKG01;
(d) where FKG01 authorised Jeteld's solicitors to deal with the CSR in relation to the objection.
[29]
[29] The CSR disallowed the objection in a letter dated 27 October 2023. FKG01 has appealed under s. 69 of the TAA from the CSR's decision to disallow FKG01's objection. That is this proceeding.
[30]
[30] Section 115 in Division 1 (Exemptions for cancelled agreements ...) of Part 13 (Exemptions for transfer duty) of the DA relevantly provides:
[31]
(1) Transfer duty is not imposed on a dutiable transaction that is an agreement for the transfer of dutiable property (the cancelled agreement) if -
[32]
(d) the agreement is ended with the consent of the parties to it and there is no resale agreement.
[33]
(2) For subsection (1)(d), an agreement is a resale agreement if -
[34]
(a) under the agreement, any of the dutiable property the subject of the cancelled agreement is or will be transferred or is agreed to be transferred; and
(b) the transferee under the cancelled agreement or a related person of the transferee receives, or will receive, directly or indirectly a financial benefit other than -
(i) the release of the transferee from the transferee's obligation under the cancelled agreement; or
(ii) an interest in the dutiable property to the extent that the unencumbered value of the interest does not represent a profit for the transferee because of the resale agreement.
[35]
(3) If, on an assessment, transfer duty has been paid on an agreement that is not liable to transfer duty because of this section, the commissioner must make a reassessment if an application is made within 6 months after the agreement is ended ...
(a) duty is not imposed on an agreement for the transfer of property where the agreement is ended with the consent of the parties to it (not here contentious) and there is no resale agreement (here contentious);
(b) a resale agreement can be with any buyer, and involves a transfer or an agreement to transfer any of the property (not here contentious);
(c) an agreement is a resale agreement if the original buyer or a related party to the original buyer receives or will receive, whether directly or indirectly, a financial benefit that goes beyond:
(i) the release of the original buyer from obligations under the original agreement;
(ii) an interest in the subject land to the extent that the unencumbered value of the interest does not represent a profit for the original buyer because of the resale agreement.
[38]
[32] The policy underlying s. 115 of the DA appears clear enough. First, in a simple case involving no cancelled agreement, where Person A sells to Person B, and Person B then on-sells to Person C, there are two dutiable transactions. Second, whilst it is convenient to charge conveyance duty (now called transfer duty) on a contract of sale in anticipation of the conveyance happening, in most cases such duty is not payable if the sale does not proceed. That result is achieved by providing for the refund of duty paid on a cancelled contract in certain circumstances.
[33] Section 115 of the DA is designed to address a combination of those two types of transactions - namely, a situation where Person A contracts to sell to Person B, but the plan changes for Person A to sell to Person C. It specifies the situations in which that will be treated as two dutiable transactions, or only one dutiable transaction.
[34] The rationale for having only one dutiable transaction relies upon the original buyer or a related party not financially benefiting from the new arrangement except in two limited ways:
[39]
(a) by being released from obligations under the original contract (to effect the release);
(b) by obtaining an interest in the subject land to the extent that the unencumbered value of the interest does not represent a profit for the original buyer because of the resale agreement.
[40]
[35] If the original buyer or a related party financially benefits from the new arrangement in some other way, then there will a resale agreement and two dutiable transactions.
[41]
[36] The current "cancelled contracts" exemption has its origins in the Stamp Act 1894 (Qld) (Stamp Act), the predecessor to the DA.
[37] Until the passing of the Stamp Act Amendment Act 1975,[5] s. 54 of the Stamp Act relevantly provided:
[42]
54 Certain contracts to be chargeable as conveyances on sale.
[43]
... For the sale of any estate or interest in any property ... shall be charged with the same ad valorem duty as if it were an actual conveyance on sale of the estate, interest, or property contracted or agreed to be sold. ...
[44]
(6) Where duty has been duly paid in conformity with the foregoing provisions, the conveyance or transfer made to the purchaser shall upon production of the contract or agreement ... duly stamped not be chargeable with any duty ...
[45]
(7) Provided also that the ad valorem duty shall not be claimed in any case where evidence satisfactory to the Commissioner ... is produced that such contract or agreement was rescinded within 30 days after execution; or if ad valorem duty has been paid upon any such contract or agreement which is afterwards rescinded, such duty shall be refunded to the person entitled thereto upon evidence of such rescission, satisfactory to the Commissioner, being produced: ...
[46]
[38] Section 54, as substituted by the Stamp Act Amendment Act 1975 by s. 12, substituted the following for the above subsection (7):
[47]
(7) Ad valorem duty with which a contract or agreement would otherwise be chargeable shall not be claimed in any case where there is produced to the Commissioner evidence satisfactory to him that such contract or agreement was rescinded within 30 days after its execution.
[48]
(7A) If ad valorem duty has been paid on a contract or agreement which is at any time afterwards rescinded such duty shall be refunded to the person entitled thereto if -
[49]
(a) there is produced to the Commissioner evidence satisfactory to him that the contract or agreement has been so rescinded; and
(b) the application for the refund of duty is made - [and the section set out the different times within which the application had to be made, depending on the date of contract].
[50]
[39] Section 54 was next amended in 1979, by the Stamp Act Amendment Act 1979,[6] s. 17 of which relevantly provided:
[51]
(a) in subsection (l), omitting the proviso and substituting the following proviso:-
[52]
'Provided that where there are executed two or more contracts or agreements for sale -
[53]
(b) that together evidence or give effect to what is, in substance, one transaction of sale,
[54]
the full amount of the duty which would have been payable if only one contract or agreement for sale had been executed in respect of the transaction shall be chargeable and that duty shall be apportioned to and stamped upon such contracts or agreements for sale as the Commissioner determines.';
[55]
(c) in subsection (6), inserting after the words 'the conveyance or transfer' wherever they occur the words 'or conveyances or transfers';
(d) adding to subsection (6) the following paragraphs:-
[56]
'The foregoing provisions of this subsection do not apply in respect of a conveyance or transfer made to a person other than the person named as purchaser in the contract or agreement for sale to which the conveyance or transfer is intended to be pursuant unless the Commissioner is satisfied that at the time the contract or agreement for sale was executed the person named therein as purchaser was acting in the transaction evidenced by such contract or agreement as agent for the person to whom the conveyance or transfer is made (either as a general agent or in relation to the particular transaction) and was so acting under authority given to him by such person in writing executed prior to the execution of the contract or agreement for sale.
[57]
Where the purchaser under a contract or agreement for sale is expressed to be a named person or his nominee, then for the purposes of this subsection the purchaser named therein shall be taken to be such named person.'"
[58]
[40] That was the legislative position prior to the decisions in Australian National Airlines Commission v Commissioner of Stamp Duties [1989] 1 Qd R 246 (ANA) and Barob Pty Ltd v Commissioner of Stamp Duties[1999] 2 Qd R 468 (Barob) that resulted in further legislative amendments.
[59]
[41] The above provisions were the subject of judicial consideration by the Queensland Full Court in ANA.
[42] The contract that was purported to have been rescinded in ANA contained a mechanism whereby the initial purchaser could introduce a new purchaser to the vendor, at which time the vendor was bound to rescind the initial contract and enter into a new contract with that new purchaser. The mechanism allowed the initial purchaser to market the property and obtain a payment from a new third-party purchaser as consideration for conferring the opportunity to enter into a contract with the vendor. The object was, rather than incurring a second assessment as a sub-sale to the new purchaser, if the initial contract was validly rescinded, then that course could result in the initial purchaser either not being liable for duty or obtaining a refund of duty on the initial contract.
[43] In ANA the Full Court ruled that the initial contract had not been rescinded at all. Rather, by exercise of the mechanism and entry into the new contract, one of the terms in the initial contract had actually been performed, not rescinded, such that the initial contract was never entitled to exemption from duty.
[44] The taxpayer in ANA sought special leave to appeal the decision to the High Court. Before the leave application was heard, the Queensland legislature introduced amendments that put the outcome beyond doubt, and so made the High Court's review of the issue in ANA of no future relevance, with the consequence that special leave was denied.
[45] In particular, s. 54 of the Stamp Act Amendment Act 1988 (Qld) was enacted that relevantly provided:
Amendment of s. 54. Certain contracts to be chargeable as conveyances on sale.
[60]
(d) by adding at the end of the section the following subsection:-
[61]
'(8) For the purposes of subsection (7) and without limiting its meaning, a contract or an agreement which has been rescinded includes a contract or agreement under which all rights and obligations are at an end and the parties to the contract or agreement have been returned to the original positions in respect of the property the subject of the contract or agreement which they held prior to the execution of the contract or agreement: The term does not include a contract or agreement which is at an end because the vendor has entered into or has agreed to enter into a further contract or agreement with a person nominated, introduced, substituted or otherwise by the purchaser in the original contract or agreement or some other person pursuant to that original contract or agreement or a related document.'
[62]
[46] The last sentence in this new subsection (8) was squarely directed at the "introduction" mechanism contained in the first contract in ANA.
[63]
[47] That new subsection 54(8) was then the subject of judicial consideration by the Queensland Court of Appeal in Barob.
[48] The initial contract in Barob was for the combined sale of a hotel property and the hotel business to Barob Pty Ltd. That contract was rescinded and substituted with a new contract for the sale of the hotel land to Barob Pty Ltd, and a separate new contract for the sale of the hotel business to a subsidiary of Barob Pty Ltd.
[49] The Court of Appeal was satisfied that the initial contract had been validly rescinded, and that the two new contracts were not affected by section 54(8), because they did not arise by an introduction or nomination that was "pursuant to that original contract or agreement or a related document".
[50] In response to the decision in Barob, the Queensland legislature clarified the characteristics of an arrangement that would be entitled to exemption from duty upon rescission, as well as the arrangements that would be denied the exemption from duty.
[51] Section 44 of the Revenue and OtherLegislation Amendment Act 1999 (Qld) deleted all the words from "the term does not include..." in s. 54(8), and added the following additional subsections (9) and (10) to s. 54 of the Stamp Act to prescribe the circumstances when the exemption under subsections (7) and (7A) of s. 54 was not available:
[64]
(9) However, subsections (7) and (7A) do not apply to a contract or agreement (the "first contract or agreement") if -
(a) there is 1 or more arrangements, contracts or agreements resulting in any of the property the subject of the first contract or agreement being conveyed, or agreed to be conveyed, other than by the first contract or agreement; and
(b) the purchaser under the first contract or agreement receives a direct or indirect financial benefit under the arrangements, contracts or agreements.
[65]
"financial benefit" does not include a benefit arising merely because the purchaser under the first contract or agreement -
[66]
(a) is released from the purchaser's obligations under the first contract or agreement; or
(b) acquires a right or benefit in respect of all or part of the property the subject of the first contract or agreement.
[67]
[52] As originally enacted, s. 115(2) of the DA (the replacement of s. 54 of the Stamp Act) provided:
[68]
(2) For subsection (1)(d), an agreement is a resale agreement if -
[69]
(a) under the agreement, any of the dutiable property the subject of the cancelled agreement is or will be transferred or is agreed to be transferred; and
(b) the transferee under the cancelled agreement receives, or will receive, directly or indirectly a financial benefit other than -
(i) being released from the transferee's obligation under the cancelled agreement; or
(ii) an interest in the dutiable property to the extent that the unencumbered value of the interest does not represent a profit for the transferee because of the resale agreement.
Clause 115 provides for an exemption from transfer duty for an agreement for the transfer of dutiable property where the agreement is subsequently cancelled. Clause 115(1) provides that transfer duty is not imposed on an agreement that is ended in one of 4 listed ways. Clause 115(2) sets out what is a resale agreement for the purpose of the clause. Clause 115(3) provides for the reassessment and refund of duty paid on the agreement that has been cancelled.
[74]
[54] The Explanatory Notes are not helpful to construe the new form of words found in s. 115(2)(b)(ii) of the DA as compared to the words in s. 54(10)(b) of the Stamp Act.
[75]
2011 amendment of the original s. 115 of the DA
[76]
[55] Section 115(2) was amended (to its current state) by s. 29 of the Revenue and Other Legislation Amendment Act 2011,[7] that provided:
[77]
29 Amendment of s 115 (Exemption - cancelled agreements)
'cancelled agreement or a related person of the transferee receives,'.
[80]
Explanatory notes to the 2011 amendment of s. 115 of the DA
[81]
[56] The Explanatory Notes to the Bill for the Revenue and Other Legislation Amendment Act 2011 relevantly read:
[82]
Concessions for cancelled agreements and transfers, and other instruments
[83]
The Duties Act 2001 was amended by the Revenue and Other Legislation Amendment Act 2010 to provide that duty is not payable on cancelled transfers of dutiable property if certain conditions are satisfied, including that no resale agreement occurs. As resale agreements commonly occur in transactions between related persons, the Duties Act 2001 expressly provides that a resale agreement arises where the transferee under the cancelled transfer, or a related person of the transferee, receives a direct or indirect financial benefit.
[84]
A similar concession applies under the Duties Act 2001 for agreements to transfer dutiable property where the agreement is subsequently cancelled. This concession also includes a condition which limits its application where there is a resale agreement. However, in these instances, the term resale agreement covers only cases where the transferee directly or indirectly receives a financial benefit, and does not extend to the receipt of a financial benefit by a related person.
[85]
As the no resale agreement condition of both exemptions seeks to address potential revenue risk, the circumstances in which a resale agreement exists should be consistent. Consequently, the definition of resale agreement for the cancelled agreement exemption will be amended to align with that applying for the cancelled transfer exemption.
[86]
What can be taken from the legislative history recited above
[87]
[57] Section 115(2) of the DA is concerned with identifying the circumstances in which there is a resale agreement. If there is a resale agreement, no exemption from transfer duty for a cancelled contract arises under s. 115(1)(d) of the DA.
[58] What the legislature seeks to address is when the original purchaser under a dutiable original contract:
[88]
(a) can procure that the property the subject of the original contract is transferred to another buyer, under a second arrangement;
(b) but at the same time, obtain an exemption or refund of duty by cancelling the original contract.
[89]
And that depends on what financial benefit, if any, in connection with the cancellation of the original contract the original purchaser or a related party obtains.
[90]
[59] The legislative history of s. 54(10) of the Stamp Act assists in construing the two limited categories of financial benefit under s. 115(2)(b)(i) and (ii) of the DA that are permitted to accrue to the original purchaser or a related party without attracting double duty:
[91]
(a) under the definition of financial benefit in s. 54(10) of the Stamp Act, the fact that the initial purchaser:
(i) is released from the rescinded agreement, taken alone, does not amount to a disqualifying financial benefit; and
(ii) acquires a right or benefit in respect of all or part of the property that was the subject of the rescinded agreement (i.e., the facts that were held not to disqualify exemption in Barob), taken alone, does not amount to a disqualifying financial benefit,
(b) however, a financial benefit that arises in addition to or outside these descriptions remains a disqualifying financial benefit.
[92]
[60] Section 115(2)(b) of the DA similarly provides that:
[93]
(a) for s. 115(2)(b)(i) - the release of the initial transferee from the transferee's obligation under the cancelled agreement, taken alone, does not amount to a disqualifying financial benefit;
(b) for s. 115(2)(b)(ii) - the receipt of "an interest in the dutiable property, to the extent that the unencumbered value of the interest does not represent a profit for the transferee because of the resale agreement", taken alone, does not amount to a disqualifying financial benefit,
(c) however (as in s. 54(10) of the Stamp Act), a financial benefit that arises in addition to or outside these descriptions remains a disqualifying financial benefit.
[94]
Brief summary of the competing positions of the parties
[95]
[61] The CSR submits that the Original Contract does not qualify for exemption from transfer duty under s. 115(1)(d) of the DA because there is a resale agreement comprising:
[96]
(a) as to the first element in s. 115(2)(a) of the DA - the transfer of the property to 122Marg (not contentious);
(b) as to the second element in s. 115(2)(b) of the DA:
(i) the Adjustment provided in Special Condition 13 of the Replacement Contract, which is a financial benefit received by 122Marg[8] (contentious); and/or
(ii) the indemnity given by Jeteld in clause 5.1 of the Deed of Rescission, which is a financial benefit received by FKG01 (contentious),
[97]
where neither the Adjustment nor the indemnity is excluded by ss. 115(2)(b)(i) or (ii) of the DA.
[98]
[62] On the other hand, FKG01 submits that in this case on the proper construction of the DA, the Original Contract qualifies for exemption under s. 115(1)(d) of the DA because there is no resale agreement. It says there is no resale agreement because neither it nor 122Marg receive any financial benefit under the arrangements beyond those permitted under s. 115(2)(b) of the DA namely:
[99]
(a) the release of FKG01 from its obligations under the cancelled agreement;
(b) in respect of 122Marg, an interest in the property which does not represent any element of profit to FKG01.
[100]
Dispute about relevance of s. 115(2)(b)(ii) of the DA
[101]
[63] In the process of preparing this decision, I considered it necessary to put to the parties a possible construction of the DA that I considered had not been squarely raised by either of the parties. That led to an exchange of supplementary written submissions.
[64] From those supplementary submissions a dispute has arisen as to whether in determining this appeal FKG01 is prohibited from seeking to rely upon the exemption in s. 115(2)(b)(ii) of the DA because of some earlier disavowal of the relevance of that section to the appeal. The CSR has always maintained that s. 115(2)(b)(ii) has no application in this case. Whatever submissions have been advanced by FKG01, for the reasons stated in [7]-[9] above, I consider that I am not at liberty to ignore the possible application of s. 115(2)(b)(ii), and in circumstances where I have now given the parties an opportunity to address the issue and no party has otherwise sought to re-open the hearing, I would allow FKG01 to rely, as it chooses to do so, on s. 115(2)(b)(ii) in its submissions. The CSR has put on supplementary reply submissions and so has had an adequate opportunity to address FKG01's submissions.
[65] I note in any event that any non-reliance by FKG01 on that section previously, or concession about it not applying, was equivocal at best - in its initial written submissions FKG01 expressed that the present transaction came within s. 115(2)(b)(ii)[9] and a failure to re-assert reliance on that exclusion later does not mean reliance had been abandoned. Ultimately in the interests of justice I consider that I should and will consider the substance of the parties' submissions on the possible application of s. 115(2)(b)(ii) to the facts of this case.
[102]
The parties agree, and I agree, that the fact that the DA is a taxing statute does not require that the legislation be strictly construed against the CSR.[10]
[103]
[67] The parties are then in dispute about whether the following approach described in Pearce, Statutory Interpretation in Australia is applicable in this case:
[104]
9.44 Despite...general statements that would seem to minimise distinctions between taxing and other legislation, it seems likely that the courts will maintain the view that 'it is for the Crown to show that a taxing statute imposes a charge on a person sought to be taxed'...[11] In addition, it is 'a strong thing' to read into an Act of Parliament words which are not there and it is 'a particularly strong thing to do so when it amounts to modifying, as against the fiscal subject, words which have a plain natural and ordinary meaning in his favour'...
[105]
[68] FKG01 says that approach is here applicable. The CSR says that approach is not applicable because:
[106]
(a) there is no dispute that the DA initially imposed transfer duty on the Original Contract;
(b) the CSR has shown the sections of the DA that govern relief from that transfer duty;
(c) the CSR has done so relying on the statutory text, without:
(i) "read[ing] into an Act of Parliament words which are not there"; or
(ii) "modifying, as against the fiscal subject, words which have a plain natural and ordinary meaning in his favour".
[107]
[69] I agree that the approach contended for by FKG01 has little application here. The Original Contract is subject to transfer duty unless an exemption applies. The legislation in its terms, in specifying what is a resale agreement, simply seeks to identify the types of transactions that will constitute a resale agreement and therefore not fall within the exemption. The focus should be upon the words of the statute.
[70] While the mischief (properly identified) may be relevant context, the focus should be on the constructional question. As French CJ explained in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue,[12] identifying the mischief does not, of itself, answer the constructional question because:
[108]
...to identify the purpose... as providing a remedy for the mischief so described does not answer the constructional question... Its purpose says nothing about the extent of that imposition, which must be determined by reference to its terms.
[109]
The first alleged disqualifying financial benefit - the Adjustment
[110]
[71] FKG01 submits that the Replacement Contract is not a resale agreement as a consequence of the Adjustment. It says that:
[111]
(a) the Adjustment does not amount to a financial benefit to 122Marg;
(b) if the Adjustment is a financial benefit, it falls within the scope of s. 115(2)(b)(ii) of the DA.
[112]
[72] The CSR submits, in relation to the effect of the Adjustment, that FKG01 falls into error by mistakenly relying on the terms of the Original Contract as they existed when it was initially entered on 25 May 2022, without taking account of the material amendments that were made by the time of the rescission of the Original Contract on 31 August 2022.
[73] I think that the CSR's submission actually sets up a false issue and its conclusion is divorced from the reality of the actual arrangements between the relevant parties and the terms of the legislation to be applied.
[74] I start by agreeing with the CSR that when initially entered, the Original Contract had the following characteristics:
[113]
(a) settlement was set for 15 June 2022;
(b) the Suncorp lease was included in the lease schedule, and would still be on foot at the set settlement date;
(c) the Suncorp lease had a make good obligation.
[114]
[75] Further, I agree with the CSR that when the Original Contract was rescinded on 31 August 2022, those characteristics differed because:
[115]
(a) the settlement date had been extended several times:
(b) the Suncorp lease had expired;
(c) FKG01's agent (with the apparent consent of Jeteld) had negotiated with Suncorp for the make good obligation to be deleted from the Suncorp lease in exchange for a $50,000 payment to the lessor;
(d) Jeteld had received the negotiated payment from Suncorp as it was still the lessor at the time of the expiry of the Suncorp lease.
[116]
[76] The CSR's submission proceeds on the basis that if the Original Contract had then proceeded to settlement (rather than being rescinded), Jeteld would have had no obligation to account to FKG01 for the payment received from Suncorp. That is, in my opinion, not a realistic proposition. Although it might not have been formally recorded anywhere, it was inevitable that Jeteld was going to have to account to FKG01 for the payment received from Suncorp. Jeteld was not at liberty, once it entered into the Original Contract, to change the leasing arrangements with Suncorp to the detriment of FKG01 - note clauses 16.3, 32.1(a) and (c), 32.2 and 32.3 of the Original Contract. The change to the Suncorp lease that did occur plainly occurred with the consent of FKG01 and that could only have been on the basis of Jeteld accounting to FKG01 for the payment once settlement occurred. All the requirements for implying a term in fact to that effect are readily satisfied.
[77] In fact, correspondence from Jeteld to its solicitor on 16 June 2022 (after the expiry of the Suncorp lease and prior to the recission of the Original Contract) confirmed:
[117]
I have invoiced Suncorp for the $50,000 make good / defit contribution as agreed with the intended buyers (copy attached) and I have advised FKG that we have issued the invoice and it will be adjusted in the selling price and everyone was in agreement.
[118]
[78] I do not accept, therefore, that at the date of the recission of the Original Contract that FKG01 was in a position where Suncorp's lease had ended without making good and Jeteld was to retain the $50,000 Suncorp payment that permitted Suncorp not to make good.
[79] The CSR seems to be critical of FKG01 where it knew that:
[119]
(a) FKG01's agent negotiated the terms for the deletion of the make good obligation from the Suncorp lease;
(b) FKG01 agreed to extend the settlement date beyond expiry of the Suncorp lease;
(c) FKG01 was aware that Jeteld received the payment as compensation for the deletion of the make good obligation,
[120]
that it did not then negotiate for the Original Contract to be amended so that it included compensation for the detriment that arose from those changes. The CSR submits that because the make good obligation in the Suncorp lease had been deleted in exchange for the payment that was received by Jeteld then, in order to argue that the Original Contract was entitled to reassessment in accordance with s. 115 of the DA, either:
[121]
(d) an amendment should have been made to the Original Contract, requiring Jeteld to pay the same amount as the payment to FKG01; or
(e) there should have been no Adjustment as provided for in the Replacement Contract.
[122]
[80] In a perfect world a formal amendment to the Original Contract might have been recorded, but the failure to do so does not change the correct legal position between the parties that if the Original Contract settled, Jeteld was required to account for the Suncorp payment to FKG01 (expressly by informal agreement or impliedly).
[81] I agree with the CSR that when the Replacement Contract was entered on 31 August 2022, it had the following characteristics:
[123]
(a) the buyer was 122Marg, a related person of FKG01;
(b) settlement was set for 3 October 2022;
(c) the Suncorp lease had expired, and so was not included in the lease schedule;
(d) 122Marg would acquire the property "as is" (that is, without Suncorp making good);
Jeteld agreed to the Adjustment in favour of 122Marg.[13]
[124]
[82] FKG01 notes that the alleged financial benefit was received, not from the second buyer (122Marg), but from the seller (Jeteld). That is of no relevance. It finds no support in the words of the section.
[83] FKG01 secondly notes that the financial result is, in fact, exactly the same under the Replacement Contract as it would have been under the Original Contract. Thus the present case is said to be outside the mischief that the relevant section is intended to remedy. Rather than focus on the mischief, I prefer to focus on the words of the section.
[84] "Financial benefit" is not defined in the DA. The words will carry their ordinary English meaning. The CSR agrees with FKG01 that "financial" should be taken to mean "pertaining to monetary receipts and expenditure" and the term financial benefit should be construed accordingly.
[85] The CSR suggests in its first supplementary submissions at [3.3] that the exact nature of an alleged financial benefit must be identified prior to considering the exceptions under s. 115(2)(b). Relevantly, there are two direct and indirect financial benefits FKG01 and 122Marg receive under the Replacement Contract:
[125]
(a) FKG01 is released from its obligations under the Original Contract;
(b) 122Marg obtains an interest in the property for a sum of money.
[126]
[86] The first benefit - FKG01 being released from its obligations under the Original Contract - falls directly within s. 115(2)(b)(i) and is therefore not a financial benefit that results in the Replacement Contract being a resale agreement.
[87] As to the second benefit - 122Marg obtaining an interest in the property for a sum of money - the CSR submits that the relevant financial benefit is the Adjustment, being a reduction in the purchase price, rather than any interest in the dutiable property. As such, properly characterised, the CSR submits that the character of the financial benefit is akin to a payment of money and is not "an interest in the dutiable property" as described in s. 115(2)(b)(ii).
[88] I accept that, following the Adjustment, 122Marg's interest in the property represented a "financial benefit". I also accept that the Adjustment reduced the purchase price, which created a benefit derived by 122Marg pertaining to the monetary expenditure required to obtain the property. However, I do not accept that, properly characterised, this benefit is akin to a payment of money rather than being an interest in the dutiable property. The Adjustment specifically provided for a reduction of the purchase price of the dutiable property. Ultimately, the benefit acquired by 122Marg was an interest in the property for a reduced sum of money, not the payment of that money itself. The question then is whether the unencumbered value of that interest represents a profit for FKG01 because of the resale agreement (s. 115(2)(b)(ii)).
[89] The answer to that question in this case must be no. 122Marg pays market value for the property which simply takes into account an adjustment for the lack of Suncorp making good at the end of its lease. There is no part of that transaction that represents a profit for FKG01 because of the Replacement Contract.
[90] It does not matter of itself that 122Marg ultimately pays a different price for the property than FKG01 may have paid under the Original Contract. The question is whether the difference represents a profit for FKG01 or a related person because of the resale agreement.
[91] If the "discount" given to 122Marg in obtaining its interest in the property could be properly characterised as representing a profit to FKG01 (for example, a kickback so that 122Marg pays less than market price for the property), then that may be a financial benefit of the type contemplated by s. 115(2)(b) of the DA. But that is not this case.
[127]
[96] It is not essential to the outcome to identify how the relevant indemnity came into existence, but for completeness, a summary is set out here.
[97] Jeteld sought the rescission of the Original Contract because there were tax advantages for it if the contract for the sale of the property was entered on or after 1 July 2022.
[98] In response to Jeteld's request, on 15 June 2022, FKG01 agreed in principle to Jeteld's proposal, and expressed a requirement for an indemnity from Jeteld for any transfer duty payable on a Deed of Rescission.
[99] On 17 June 2022, Jeteld's solicitor forwarded a draft Deed of Rescission (First Draft Deed) to FKG01's solicitor. Clause 5.1 of the First Draft Deed contained an indemnity from Jeteld to FKG01, limited to duty payable in relation to the Deed of Rescission.
[100] On 24 June 2022, FKG01's solicitor forwarded marked up proposed amendments to the draft Deed of Rescission (Second Draft Deed). Clause 5.1 of the Second Draft Deed was amended by FKG01 so that the indemnity from Jeteld extended to duty payable in relation to the Deed of Rescission and the Original Contract.
[101] By an email dated 29 June 2022, resubmitted in an email dated 12 July 2022, FKG01's solicitor forwarded further proposed amendments to the draft Deed of Rescission (Third Draft Deed).
[102] The Third Draft Deed contained:
[128]
(a) further amendments to clause 5.1, but retaining the indemnity;
(b) a new clause 5.3, which provided for the parties to cooperate in any application to the CSR, for reassessment under s. 115 of the DA.
[129]
[103] By an email dated 29 August 2022, Jeteld's solicitor forwarded further proposed amendments to the draft Deed of Rescission (Fourth Draft Deed).
[104] Clause 5 of the Fourth Draft Deed:
[130]
(a) retained the indemnity in clause 5.1(b);
(b) in clause 5.3 - contained more detailed provisions governing the parties' cooperation in making an application for reassessment under s. 115(1) of the DA;
(c) in clause 5.5 - provided that Jeteld could give a notice to FKG01 requiring it to object to and appeal the decision in respect of the reassessment, with Jeteld to bear "all costs and expenses of taking such actions and any costs awarded in favour of the Commissioner";
(d) in clause 5.6 - after the notice is given under clause 5.5, conferred on Jeteld power of attorney of FKG01 to advance any objection or appeal in the name of FKG01.
[131]
[105] The indemnity was given by Jeteld to FKG01, in those terms, by entry into the Deed of Rescission on 31 August 2022.
[106] It can be accepted from the above summary that FKG01 was at least concerned about the prospect of double duty and wished to protect itself in that regard.
[132]
[107] The CSR submits that the indemnity in clause 5.1 was a financial benefit received by FKG01, not within the terms of ss. 115(2)(b)(i) or (ii) of the DA.
[108] FKG01 submits that no financial benefit has been received (directly or indirectly) by FKG01 (or 122Marg) by reason of one or more of the indemnities in clause 5 of the Deed of Rescission, because the related party 122Marg is receiving no more than FKG01 would have received if the Original Contract had settled - the indemnities merely ensure that no detriment is suffered by reason of the substitution of a buyer.
[109] In my view, the indemnities could only provide any type of financial benefit to FKG01 if in fact there was liability for transfer duty on the cancelled agreement. If there is not, the indemnities provide no financial benefit. An indemnity that does not operate to provide an actual financial benefit is not itself a financial benefit. Any reasoning to the contrary is circular. A financial benefit under s. 115(2)(b) of the DA must be real and not merely theoretical.
[110] The indemnity in clause 5.1 is not a financial benefit for the purposes of s. 115(2)(b) of the DA.
[133]
[111] The consequence is the Replacement Contract is not a resale agreement pursuant to s. 115(2) of the DA. Section 115(1)(d) of the DA has application to the cancelled contract. Accordingly, the appeal is allowed. I will hear from the parties as to the form of order and costs.
[13] It had initially been contemplated that there would be a $50,000 reduction in the purchase price but 122Marg specifically requested that the purchase price remain the same and the Replacement Contract permit for an adjustment in the settlement figures - email from Stratton to Beresford dated 24 June 2022.
Parties
Applicant/Plaintiff:
FKG01 Pty Ltd
Respondent/Defendant:
Commissioner of State Revenue [2025] QSC 105
Legislation Cited (9)
Act 1894(Qld)
Other Legislation Amendment Act 1999
Other Legislation Amendment Act 2011
Amendment Act 1975
Amendment Act 1979
Amendment Act 1988
Administration Act 2001
Amendment Act 1999
Other Legislation Amendment Act 2010
Cases Cited (3)
(2009) 239 CLR 27
(1994) 181 CLR 466
(1951) 84 CLR 105
[92] Here there is, in my opinion, no financial benefit falling outside of s. 115(2)(b) of the DA. 122Marg did not obtain any interest in the property beyond what it paid market value for, nor did it pay any less money than market value to obtain that interest in the property. The lower purchase price it did pay under the Replacement Contract simply counterbalanced a different financial benefit that FKG01 would have obtained had the Original Contract proceeded to settlement (even at the later date post the expiry of the Suncorp lease). Therefore, there is nothing representing a "profit" for FKG01 or a related person because of the Replacement Contract.
[93] FKG01 relies upon an example concerning the adjustment of outgoings in relation to real property to demonstrate that the CSR's arguments must be wrong. I have already reached conclusions contrary to those submitted for by the CSR. But I will deal with the example proffered by FKG01. The example goes as follows. Person A contracts to sell real property to Person B. There are unpaid rates that are required to be adjusted at settlement. The contract between Person A and Person B is cancelled. A replacement contract is entered into between Person A and Person C (who is a related party of Person B). It is in the same terms bar the purchaser and a later settlement date. That means that at the later settlement date (rates remaining unpaid) Person C will be entitled to a larger adjustment in its favour in respect of unpaid rates than Person B would have been (thereby reducing the balance purchase price payable by Person C).
[94] FKG01 contends that on the CSR's construction, that larger adjustment in Person C's favour would be a financial benefit to Person C that would disentitle the exemption from duty on the cancelled contract.
[95] That is a strawman argument by FKG01 that I do not accept. Adjustments to outgoings are not a financial benefit in the sense contemplated by s. 115(2)(b) of the DA as they do not affect the price paid for the real property. A usual adjustment to outgoings in no way represents a profit for the transferee because of the resale agreement.