The decision of the respondent, and notice of assessment 11914604 dated 7 October 2016 imposing duty of $65,725, is confirmed.

1. On 7 September 2016, LRM Property Investments Pty Ltd (Trustee) transferred a residential property located at 6 Columbia Street, North Balwyn (Relevant Property) to Mrs Goletsos for no consideration.
2. Before the transfer, the Trustee held the Relevant Property as trustee of LRM Property Investments Trust (Trust), and Mrs Goletsos was within the class of beneficiaries who could receive distributions of income or capital from the trust.
3. On 7 October 2016, the Commissioner of State Revenue (Commissioner) assessed the transfer to duty of $65,725, which has been paid.
4. On 14 October 2016, Mrs Goletsos lodged an objection claiming that the transfer was exempt from duty under section 36A of the Duties Act 2000 (Act), which applies to the transfer of dutiable property from a discretionary trust to a beneficiary of such a trust.
5. The objection was disallowed by the Commissioner on 26 April 2017 on the basis that the Trust was not a discretionary trust, as defined in section 36A(3) of the Act, but rather a trust to which a unit trust scheme relates. It is that decision which is the subject of the referral to the Tribunal.
6. There is no dispute between the parties as to the facts. The controversy is whether the Trust is a discretionary trust or a trust to which a unit trust scheme relates. If it is the former, the Commissioner does not dispute that the other requirements for exemption in section 36A are satisfied. If it is the latter, Mrs Goletsos concedes that the assessment must be confirmed.

1. Section 36A(3) defines a discretionary trust in the following terms:-

"discretionary trust" means a trust under which the vesting of the whole or any part of the capital of the trust estate -

(a) is required to be determined by a person either in respect of the identity of the beneficiaries or the quantum of interest to be taken, or both; or

(b) will occur in the event that a discretion conferred under the trust is not exercised; or

(c) has occurred but under which the whole or any part of that capital will be divested from the person or persons in whom it is vested if a discretion conferred under the trust is exercised -

but does not include a trust to which a unit trust scheme relates;

1. It can be seen that the definition of discretionary trust expressly excludes 'a trust to which a unit trust scheme relates'.
2. Unit trust scheme is defined in section 3 of the Act in the following terms:-

"unit trust scheme" means any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits, income or distribution of assets arising from the acquisition, holding, management or disposal of any property whatever pursuant to the trust;

1. The Trust was established by a Deed of Trust dated 6 May 2008 (Trust Deed). It is what is colloquially known as a 'hybrid trust'[1] in that it is unitised, but the Trustee has broad discretions as to the distribution of income and capital, which is not limited to the holders of units in the Trust.
2. At the time of the Trust's establishment, the settlor contributed $10 by way of settled sum and, under clause 5.4 of the Trust Deed, 1,000 units were issued at $1 per unit to LRM Global Pty Ltd, which was and remains the sole unitholder of the Trust. The settled sum, the amounts received for units and any other money, investments and property paid to or accepted by the Trustee form the 'Trust Fund'.
3. Based on the last accounts for the Trust for the year ended 30 June 2015, the equity of the Trust included 'units in issue' of $2,504,851. It is unclear how many units this comprised but, if additional units were issued, this was presumably under the power contained in clause 5.5 of the Trust Deed. The Trust Deed provides for the issue of unit certificates,[2] the maintenance of a unit register,[3] the transfer of units[4] and the redemption of units.[5]
4. The 'Beneficiaries' of the Trust are defined in clause 1.4 of the Trust Deed. Where a unitholder is a company, the Beneficiaries are:
   • the company;
   • the directors and shareholders of the company;
   • any other person who would qualify as a beneficiary if the directors and shareholders of the company were unitholders (eg. a spouse of a director);[6] and
   • any charity.
5. A unitholder and any Beneficiary that is a determined by reference to that unitholder are referred to as a 'Class'.[7]
6. Clause 5.3 of the Trust Deed provides that no individual Beneficiary is entitled to any part of the Trust Fund.
7. The distribution of the trust's income for an accounting period[8] is dealt with in clause 21.3 of the Trust Deed. Subject to one proviso, the Trustee may distribute the income to any Beneficiary.[9] However, if this would result in a distribution between Classes not in proportion to the units held by each unitholder, any unitholder has an ability to veto that distribution.[10]
8. The Trustee can make capital distributions from time to time among all Beneficiaries, subject again to a unitholder veto if there would be a disproportionate capital distribution.[11]
9. Upon termination of the Trust, the Trustee must realise the assets of the Trust, use the available cash to first distribute to unitholders an amount equal to the amount they paid for their units and can thereafter distribute the remainder to any Beneficiary,[12] or as otherwise directed by the unitholders.[13]
10. It is the unitholders who can attend and vote at meetings,[14] control the removal of the Trustee and the appointment of a replacement trustee[15] or amendments to the Trust Deed.[16]

1. For Mrs Goletsos, it was accepted that the Trust is unitised, however it was contended that the breadth of the Trustee's powers in relation to the distribution of income and capital meant that the Trust should be regarded as a discretionary trust within section 36A.
2. It was further contended that, if applied literally, the definition of 'unit trust scheme' was so broad it would capture all discretionary trusts leaving no room for section 36A of the Act to operate. As such, it should be interpreted consistently with the purpose of the provision which was said to be to provide an exemption where a transfer did not involve a change of beneficial ownership.[17] It was submitted that the transfer from the Trust to Mrs Goletsos did not involve a change in beneficial ownership.
3. This approach was said to be supported by the Explanatory Memorandum to the State Taxation Legislation (Miscellaneous Amendments) Bill,[18] which led to the introduction of section 36A. There it was said that:

The Bill amends the Duties Act 2000 to provide -

• an extension of the exemption relating to transfers of property from a trustee to a beneficiary to confirm the intent of the legislation in relation to transfers to beneficiaries of trusts, whilst removing prejudicial elements for family trusts;

1. Mr Clement, for the applicant, said that 'family trust' was effectively the same as a 'discretionary trust' and, as the Trust only had one unitholder, it fell within the concept of a 'family trust' to which the benefit of the amendments were directed.

1. The Commissioner accepted that the Trustee has broad powers in relation to the distribution of income and capital which satisfied the 'positive' limbs (ie. paragraphs (a) to (c)) of the definition of discretionary trust. However, as the Trust was unitised, it follows that it also satisfied the definition of 'unit trust scheme' and so was excluded from being a discretionary trust by what Mr Tran (for the Commissioner) referred to as a tie-breaker rule.
2. The Commissioner submitted that the 'status' of unitholder was fundamental because:

1. the Trust Fund was held 'for the benefit of each Class in proportion to the number of Units held from time to time by the Relevant Unitholders of each Class'; 2. unitholders had the rights one would normally expect a unitholder to have (eg. to receive certificates for their units, to transfer those units and to have the ownership of units recorded and maintained in a register); and

1. while distributions could be made to a broad Class of Beneficiaries, it was still only permissible to make distributions to persons defined by reference to their relationship with unitholders (or charities).
2. In relation to the tie-breaker rule, Mr Tran submitted that the legislature had clearly contemplated that a trust might have characteristics of both a discretionary trust and a unit trust, otherwise there would be no need for the 'negative stipulation' (ie. the exclusion of a unit trust scheme) in the definition of discretionary trust. He also pointed out that the classification of a trust as a unit trust scheme does not deny relief on a transfer of property to a beneficiary of such a trust, it is just that the requirements to attract the exemption differ.

1. As was said in CPT Custodian v Commissioner of State Revenue,[19] there is no 'constant, fixed normative meaning' of what is a unit trust.[20] Rather, in the absence of any statutory definition, the nature of a trust will depend on an analysis of its terms rather than 'a priori assumptions as to the nature of unit trusts under the general law and principles of equity'.[21]
2. It is evident that the Parliament has taken care to define three particular types of trust (ie. fixed trusts, discretionary trusts and unit trusts) and to specify conditions which must be satisfied for a transfer from each type of a trust to a beneficiary to qualify for an exemption from duty. The Parliament has also sought to address the potential for overlap between the different definitions. As such, the definition of a discretionary trust[22] excludes a trust to which a unit trust scheme relates, while the definition of fixed trust[23] excludes both a discretionary trust and a trust to which a unit trust scheme relates.
3. The definition of unit trust scheme is broad, perhaps deliberately so. Although it does not refer to units, in ElectNet (Aust) Pty Ltd v Federal Commissioner of Taxation,[24] the High Court decision made it clear that unitisation is a defining feature of a unit trust.
4. The Trust is unitised. As the Commissioner submitted, the status of unitholder is significant. It is only the unitholders - not the wider class of Beneficiaries - who can attend meetings, vote and remove the trustee. Relevantly, the unitholders invest by acquiring units and can participate in both income and capital in that they are Beneficiaries to whom the Trustee may distribute income (as occurred in the years ended 30 June 2014 and 2015)[25] and capital. Further, unitholders have a right to return of the amount paid for their units on termination of the Trust, although that right is defeasible given the ability of the Trustee to make capital distributions that diminish the Trust Fund.
5. In Electnet, Nettle J. commented that:

it is conceivable that there may be a unit trust in which each unit holder's beneficial interest in the trust estate is contingent rather than vested. But so to observe in no way implies that a discretionary trust which is not unitised in the plain and ordinary sense of that term is properly to be regarded as a unit trust for the purposes of Div 6C.[26]

1. Conversely, if there is a trust that is unitised, the fact that the beneficial interests held by the unitholders may be contingent does not prevent it being regarded as a unit trust.
2. It is the combination of:

1. the unitisation of the Trust; 2. the provision of funds for investment through the purchase of units; and

1. the ability of unitholders to participate in distributions of both income and capital and on termination of the Trust,

which, in my view, causes the Trust to fall to be regarded as a trust to which a unit trust scheme relates.

1. It necessarily follows from this finding that the Trust cannot be a discretionary trust, regardless of how broad the powers of the Trustee to distribute to persons other than unitholders may be.
2. Mr Clements sought to argue that the reference to 'facilities for the participation by [persons having funds available for investment], as beneficiaries under a trust' in the definition of unit trust scheme was only apt to apply where participation in income and capital was limited to unitholders. In the present case, he observed, anyone within the extended class of 'Beneficiaries' could benefit from the Trust.
3. The difficulty with that argument is that the definition on its face does not require a correlation between the funds invested and the extent of participation. Further, a contrary indication is given by section 36B of the Act dealing with transfers from a unit trust scheme to unitholders. That provision has a mechanism for dealing with the potential for disproportionate distributions,[27] which would be unnecessary if the definition of unit trust scheme necessarily required a correlation between the level of investment and the entitlement to distributions.
4. I reject the contention put for Mrs Goletsos that the definition of 'unit trust scheme' is so broad that section 36A is left with no work to do. It is quite likely that there will be garden variety family trusts that meet the definition of discretionary trust, but are not unit trust schemes because they are not unitised and do not provide facilities for investment or for participation by investors in income or capital of the applicable trust. Indeed, Mr Tran pointed to a recent decision, Fagridas v Commissioner of State Revenue,[28] where section 36A was considered to be the relevant exemption (albeit that the relevant taxpayer failed to meet the requirements for that exemption).
5. Where, as in the present case, a choice is made to establish a hybrid trust, it cannot be a cause for complaint that the legislative schema requires satisfaction of the conditions in section 36B, rather than section 36A, for an exemption to be available in relation to a distribution of trust property to a beneficiary.
6. While Mr Clement arguably conceded the point in his oral submissions, for the record I reject the contentions that:

1. as a general proposition, the Act evidences an intention to exempt from duty transactions that do not involve a change in beneficial ownership. That proposition is inconsistent with the inclusion of a change in beneficial ownership (as defined) as a specific type of dutiable transaction.[29] The comments of Croft J. in Konnan relied upon by the applicant relate to a different exemption concerning a change in the trustee of a trust; 2. the transfer from the Trust to Mrs Goletsos did not result in a change in beneficial ownership of the Relevant Property. Prior to the transfer, the Relevant Property was part of the Trust Fund held for the benefit of each Class in proportion to the number of units held by the relevant unitholder. After the transfer, Mrs Goletsos owned the Relevant Property absolutely. This is clearly a change in beneficial ownership; or

1. it is permissible, as a matter of statutory construction, to read down the express words used in legislation (in this case, the definition of 'unit trust scheme') to conform to some notion of its underlying purpose. As said by the majority of the High Court in Alcan (NT) Alumina Pty Ltd v Commissioner of Taxation:[30]

the task of statutory construction must begin with a consideration of the text itself. ... The language which has actually been employed in the text of the legislation is the surest guide to legislative intention.[31]

1. Having regard to the foregoing, it follows that the decision of, and assessment issued by, the Commissioner must be confirmed.

[1] This description was used in the Applicant's objection letter dated 7 September 2016 at page 5 (included in the documents filed by the Commissioner at T5).

[4] Ibid cll 13 to 16, depending on the circumstances.

[6] Mrs Goletsos was a beneficiary of the Trust under this limb as her husband, Mr Goletsos, was a director of LRM Global Pty Ltd, which was the sole unitholder.

[8] Usually a period of 12 months ending on 30 June; Trust Deed cl 1.1.

[16] Ibid cl 29.1, again by a 75% majority and subject to protection of Class rights.

[17] Konnan Pty Ltd v Commissioner of State Revenue (2015) 100 ATR 772 [31]-[33] (Croft J).

[18] Included in the document filed by the Commissioner at T8.

[19] [2005] HCA 53; (2005) 224 CLR 98.

[22] Act, s 36A(3).

[23] Ibid, s 36(5).

[24] [2016] HCA 51; (2016) 259 CLR 73.

[25] Distributions of $68,915 and $466 were made to LRM Global Pty Ltd in the 2014 and 2015 financial years respectively: T17, page 4.

[26] [2016] HCA 51; (2016) 259 CLR 73 at 99 [98].

[27] Act, ss 36B(1)(d) and (5).

[28] [2018] VSC 145.

[29] Act, s 7(1)(b)(vi).

[30] [2009] HCA 41.