Grange Property Group Pty Ltd ATF Grange Property Group Unit Trust v Chief Commissioner of State Revenue

Procedural matters

1. There are several issues with this application: 1. Firstly, the only decisions which can be under review are those made by the Respondent on 27 April 2017; the Taxation Administration Act 1996 (TAA) sets up a process for objections to and reviews of decisions by the Respondent, and in doing so provides in section 96 that a: "… taxpayer may apply to the Civil and Administrative Tribunal for an administrative review under the Administrative Decisions Review Act 1997 of a decision of the Chief Commissioner that has been the subject of an objection under Division 1". 1. Neither of the decisions in respect of which the Applicant says that it seeks a review strictly falls within that section, but: 1. counsel for the Respondent confirmed that this formal non-compliance was not a point which the Respondent intended to take, and accordingly that the Respondent accepted that the application was to be treated as an application for review by the Tribunal of the Respondent's decisions of 27 April 2017, as embodied in the Assessments; 2. the Applicant's representative, Mr Craddock, agreed with this approach; and 3. the Tribunal decided to proceed accordingly. 1. The original review application was received on 28 May 2019, which was over 8 months after the Respondent issued its letter of 7 September 2018 disallowing the Applicant's objection. This was well outside the 60-day period provided for in section 99 of the TAA for the making of review applications. This application was supplemented (or perhaps replaced) by a further application lodged on 26 July 2019 pursuant to certain directions made at a directions hearing on 9 July 2019. The Respondent, however, agreed not to object to the application (whether made in May or July 2019) being made significantly out of time, and accordingly the Tribunal decided to exercise its discretion under section 99(1) of the TAA to extend the relevant period, by ordering that the time for the Applicant to lodge its application be extended to 26 July 2019.
2. The application has figured in two directions hearings: 1. The first was on 9 July 2019. Various consent orders were made, subject amongst other conditions to the Applicant filing a new administrative review application form (which occurred on 26 July 2019). 2. These orders included, relevantly, orders that the Applicant file and serve its evidence and submissions by 30 July 2019 and its evidence and submissions in reply by 2 September 2019. 3. The second was on 3 September 2019 when the matter was set down for hearing, and the Respondent was ordered to file and serve any further evidence by 6 September 2019.
3. Despite this timetable, the Applicant's representative sought at the hearing to have a Mr K Ohlmeyer provide oral evidence. Counsel for the Respondent objected, on the basis that: 1. The Applicant had not provided the Respondent with any notice of this application or any written statement by Mr Ohlmeyer; 2. The Respondent might well need to obtain further evidence in response to Mr Ohlmeyer's evidence; 3. The timetable for the provision of evidence was clear and had been agreed between the parties' representatives; 4. To allow at this late stage Mr Ohlmeyer to give evidence potentially placed the Respondent in a position of significant and unfair disadvantage; and 5. To adjourn the hearing at this late stage in order to allow the Respondent to consider and address the matters which emerge from Mr Ohlmeyer's evidence would result in significant wasted costs.
4. The Tribunal agreed with these submissions. To introduce evidence at this stage without adequate notice to the Respondent presented a real risk of placing the Respondent at an unfair disadvantage. This was precisely the situation which the directions hearings and the orders made at them had been intended to avoid, and in the circumstances the Tribunal did not consider it appropriate to allow the request for Mr Ohlmeyer to provide evidence.
5. One of the other orders made on 9 July 2019 was to allow the Applicant to be represented by its accountant, Mr PJ Craddock.

The general nature of the review

1. The provisions of section 100 of the TAA apply to this review. Notably: 1. sub-section 100(2) of that Act provides that neither the Applicants nor the Respondent are limited in the present application to the grounds of the Objection; and 2. sub-section 100(3) of that Act provides that the Applicants have: "… the onus of proving the applicant's case in an application for review", an onus which is discharged by reference to the ordinary civil standard: B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481.
2. Under section 63(1) of the Administrative Decisions Review Act 1997, in conducting a review the Tribunal: ".. is to decide what the correct and preferable decision is having regard to the material then before it, including the following: (a) any relevant factual material, (b) any applicable written or unwritten law".
3. Moreover, under section 63(2) of the Administrative Decisions Review Act 1997, in doing so the Tribunal: "… may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision".

Legislative Background

1. The legislative starting point is the LTA which, as outlined above, sets out the rates at which land tax is calculated. Relevantly, section 3AL and Schedule 13 establish the circumstances in which a fixed tax of $100 is applied in calculating land tax during the relevant tax years up to a certain threshold amount, after which tax is calculated at a percentage rate. The fixed-tax threshold does not, however, apply to land which is "… subject to a special trust"*. (*LTA, section 3AL(2)(b) and Schedule 13, Part 2.)
2. It is the LTMA, however, which determines when land is subject to a special trust: 1. Section 3A(1) provides that: For the purposes of this Act, a trust is a special trust if: (a) the trust property includes land, and (b) the trustee of the trust is the owner of the legal estate in the land, and (c) the trust is not a fixed trust. 1. Section 3A(2) provides that: a trust is a fixed trust if the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes. 1. Section 3A(3A) provides that: If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is the subject of the trust and, accordingly, the trust is taken to be a fixed trust. 1. Section 3A(3B) provides (and so provided in relation to all relevant tax years) that: For the purposes of this section, the relevant criteria are as follows: (a) the trust deed specifically provides that the beneficiaries of the trust: (i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and (ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property, (b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed, 1. That sub-section also provides in relation to the 2014 and subsequent tax year, that the relevant criteria include the following: (c) if the trust is a unit trust: (i) there must be only one class of units issued, and (ii) the proportion of trust capital to which a unit holder is entitled on a winding up or surrender of units must be fixed and must be the same as the proportion of income of the trust to which the unit holder is entitled.

The application of these provisions

1. It is undisputed that: 1. The Applicant agreed to acquire the Property on 5 October 2012*; (Affidavit dated 27 August 2019 of Lisa Springer.) 1. Legal title to the Property was transferred to the Applicant on 30 November 2012*; (**Affidavit dated 27 August 2019 of Lisa Springer.) 1. The Applicant holds the Property as trustee for the Grange Property Group Unit Trust (the Trust); 2. The Trust was constituted under a trust deed (the Trust Deed) dated 7 September 2012 between the Applicant, as trustee, and four individuals as unit holders; 3. Each of those four individuals was issued on 7 September 2012 with 5 ordinary units in the Trust and at all relevant times those individuals were the only holders of units in the Trust; and 4. The Trust Deed was amended as at 30 December 2016 in such a fashion as variously: 1. to remove those aspects of it which, in the Respondent's view, failed to satisfy, or 2. to insert provisions which in the Respondent's view were required in order for it to satisfy, the relevant criteria provided set out in section 3A of the LTMA.
2. It is thus undisputed that the Trust satisfied two of the elements of the definition of special trust set out in section 3A(1) of the LTMA: the Trust property includes land (section 3A(1)(a)) and the Applicant, as trustee of the Trust, is the owner of the legal estate in that land (section 3A(1)(b)).
3. Equally, there appeared to be no disagreement that, before its amendment as at 30 December 2016, the Trust Deed did not satisfy the relevant criteria. In the Tribunal's view this was the case, for the following reasons: 1. At no time relevant to the assessment of land tax for the tax years in question did the Trust Deed contain a provision which "…specifically provides that the beneficiaries of the trust … are presently entitled to the income of the trust….", as required by section 3A(3B)(a)(i) of the LTMA; 2. During those periods, the Trust Deed authorised in clause 6.1(c)(5) the Applicant, as trustee, amongst other powers to "reclassify receipts of income as receipts of capital" and "to reclassify distributions of income as distributions of capital", thus making it impossible to conclude that any unitholder was at any time presently entitled to the income of the Trust; 3. During those periods, the existence of provisions allowing for the issue of units with differential or priority rights to capital or income, as follows from clause 2.2(c), clause 2.3 and the Third Schedule of the Trust Deed make it impossible to conclude that any unitholder was presently entitled to the income of the Trust; the Tribunal's decision in TECH 1 Pty Ltd ATF ROVI Investments Unit Trust v Chief Commissioner of State Revenue [2015] NSWCATAD 123 supports this conclusion; 4. Although during those periods the Trust Deed provided in clause 4(f) for the termination of the Trust, this was only if so resolved by a special resolution* of the Unit Holders, so that a unitholder could not be said either to be presently entitled to the capital of the Trust or to require its winding up, as required by section 3A(3B)(a)(ii) of the LTMA; and (*Defined in clause 1 as a resolution passed by a 75% majority of votes cast by those present and voting on the resolution.) 1. The existence of provisions allowing for different classes of units with different entitlements to capital also prevent the conclusion that any unitholder was presently entitled to the capital of the Trust section 3A(3B)(a)(ii) of the LTMA; and 2. For the 2014 to 2016 tax years, the Trust did not satisfy section 3A(3B)(c)(ii) of the LTMA, because the potential for the issue of classes of units having different entitlements to Trust capital mean that ".. the proportion of trust capital to which a unit holder is entitled on a winding up or surrender of units .." was not necessarily fixed.

Administrative classification of the Trust

1. That, however, is not the end of matters: 1. Section 3A(6) of the LTMA provided at all relevant times that: Despite anything to the contrary in this section, a trust is taken to be a special trust in relation to a land tax year if the trust is classified as a special trust in respect of that land tax year under section 25A, and the classification has effect in respect of that land tax year; 1. Section 25A(1) and (2) of the LTMA provided relevantly that: (1) If land is subject to a trust, the Chief Commissioner may classify the trust as a special trust for land tax purposes: (a) … , or (b) on the Chief Commissioner's own motion. (2) Without limiting subsection (1) (b), the Chief Commissioner may classify a trust as a special trust in relation to a land tax year if any information required to be provided for that land tax year in relation to the trust, the land that is the subject of the trust or the beneficiaries of the trust is not provided as required under this Act. 1. In exercise of its powers under section 12(1) of the LTMA, the Respondent published in the New South Wales Government Gazette, No 126 of 7 December 2012, an Order requiring the owners of land in New South Wales at midnight on 31 December 2012 to lodge a land tax return in respect of their land, if it is not exempt from land tax. Paragraph 7 of that Order specifically required trustees of relevant land to lodge a return on behalf of the trust, and noted that if there was a failure to provide the information specified in the return concerning the beneficiaries of the trust, "… the trust may be assessed as if it were a special trust …". 2. Section 12 of the LTMA requires relevantly as follows: (1) The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year. (1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year. (1B) A land tax return required to be furnished by a person must: (a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and (b) set out, or be accompanied by, any information, as to the following, that may be required to complete the return: (i) the person's land ownership, (ii) the eligibility of the land for an exemption from land tax or for a reduction in the taxable value of the land. (1C) If land is the subject of a trust, the land tax return must also: (a) set out, or be accompanied by, such information in relation to the trust and the beneficiaries of the trust as may be required to complete the return, and (b) state the trustee's opinion as to whether the trust is a special trust.
2. The Respondent says that although the Applicant did register on-line for land tax on 31 January 2013: 1. the registration neither: 1. disclosed the existence of or provided information concerning the Trust, as required by section 12(1C)(a) of the LTMA; nor 2. expressed a view as to whether the Trust was a special trust, as required by section 12(1C)(b) of the LTMA; and 1. in consequence, it was authorised both: 1. generally under section 25A(1)(b), and 2. specifically under section 25A(2) of the LTMA as a consequence of the initial (and continuing in subsequent tax years) non-disclosure by the Applicant concerning the Trust status of the Property, to treat the Trust as a special trust.
3. In support of that proposition draws the Tribunal's attention to: 1. the copy of the Applicant's Land Tax Registration return dated 31 January 2013, which is attached to Mr Craddock's submission dated 24 July 2019 supporting the Applicant's application; this, the Respondent notes, refers under the item entitled "Client Name" only to "GRANGE PROP GROUP PTY LTD" without any mention of that entity's trustee status or the trusts to which the Property was subject; and 2. certain entries in the Respondent's Client Notes Report, which appears as Annexure D to the Affidavit of Ms Springer*, notably: (*Affidavit dated 27 August 2019 of Lisa Springer.) 1. the entry dated 31 January 2013, which is as follows: "Phil, accountant 02 ******** provided cid and corro id for online services"; this, the Respondent says, does not indicate any reference in the course of discussions with Mr Craddock to any trust over the Property and is consistent with the registration form referred to above; 1. the entry dated 14 January 2014, which is as follows: "John, director called re LT for Sep 2012. Client advised ppty held in trust, adv him not registered correctly. Briefly told him liability if held in unit trust. Client believes type if fixed trust, requested him to send in trust deed for assessing: grange prop group unit trust"; this, the Respondent says, is the first reference in its records to the possibility that that the Property might be held on trust; 1. the entry dated 24 October 2016 recording a conversation with a person named John, who said he was a director of the Applicant; relevantly this entry is as follows: "Adv client we requested trust to be registered in 2014, but it has not since been. Client adv is fixed trust. Adv may be required to forward trust deed. Client required copy of IR. Emailed"; this, the Respondent says, is the next engagement with the Respondent concerning the trust status of the Property; and 1. a succession of 16 subsequent entries from 8 December 2016 to 23 March 2017, concerning the provision of a full copy of the Trust deed, which was eventually received on 23 March 2017.
4. The Applicant, however, says that: 1. Certain correspondence in September 2012 between Mr Craddock, on behalf of the Applicant, and the KDA Group* concerning the provision of a trust deed for the Trust which was compliant with the Respondent's requirements indicates that the trustee status of the Applicant (and the status of the Property as trust property) were matters of which the Respondent had been informed - albeit informally - at all material times, such that it cannot be concluded that the Applicant simply failed to make the relevant disclosures to the Respondent; (*A firm of accountants to whom Mr Craddock delegated the task of documenting the establishment of Grange Property Group Unit Trust.) 1. A time sheet entry dated 10 September 2012 for Ms Emily Tregenza of KDA Group supports the proposition that the Applicant was aware of the relevant requirements; 2. Mr Craddock's email dated 5 February 2013 to Ms Tregenza, in the following terms: John has obtained land tax registration - Client ID *********. The OSR have indicated we need to send copy of trust deed to their address: landtax@osr.nsw.gov.au Could you kindly look after this for us? supports the proposition that the Applicant disclosed its trustee status in relation to the Property to the Respondent on or about 31 January 2013; and 1. The extract from the on-line registration is incomplete, and so cannot demonstrate conclusively that the Applicant did not make the relevant disclosure of its trustee status.
5. The Applicant's position is unconvincing: 1. It may well be a reasonable inference from Mr Craddock's email of 5 February 2013, that there was some discussion between Mr Craddock and an officer of the Respondent concerning the relevance of the Applicant's trustee status in assessing land tax on the Property. All that follows, however, is that from then onwards the Applicant had general notice both of (I) the potential effect of trustee status on the quantum of its liability to land tax, and (II) the existence of its obligations under section 12(1C) of the LTMA, which on the evidence were not complied with until at the earliest 23 March 2017, some 3 years later; and 2. The extract from the Land Tax Registration return dated 31 January 2013 does not, as the Applicant correctly points out, demonstrate that the Applicant failed to comply with section 12(1C) of the LTMA. That is not, however, the point: none of it, the correspondence to which the Applicant refers or the Respondent's internal records indicate that it did comply. 3. This is the relevant issue since section 12 expressly imposes on the landowner the obligation to register and to provide either in the relevant land tax return or in documents appended to it the prescribed information as to trust matters. There is no evidence that this was done, and an informal conversation at that time between the Applicant's representative and one of the Respondent's officers (which I am inclined, on the basis of the material to which Mr Craddock referred in his submissions, to accept did occur) does not amount to compliance with section 12.
6. The Applicant raises a further issue. It says that: 1. its decision in late 2012 to constitute the Trust on the terms of the Trust Deed was based on advice from the Respondent at that time that a particular form of trust deed which had been prepared by Hunt & Hunt Solicitors (and of which it subsequently obtained use through KDA Group from a vendor named Reckon Documents) satisfied the relevant criteria set out in section 3A(3B) of the LTMA; and 2. in consequence, it should not be assessed with the additional duty in the Assessments.
7. The evidence for the first proposition is found in: 1. Ms Tregenza's timesheet entry of 10 September 2012, which appears to cover the following: "OSR complying fixed unit trust deed - p/c OSR, Hunt & Hunt, Reckon, websites, CST p/c"; 1. An internal email dated 10 September 2012 between Ms Tregenza and one of her colleagues, which states relevantly: "According to OSR Hunt & Hunt have a complying fixed unit trust deed"; and 1. A letter dated 13 September 2012 from Mr K Dunlop of KDA Group to the Applicant, c/- Mr Craddock, which states relevantly as follows: "Following it's [sic] purchase of property, the trust will be required to register for land tax within three months of settlement. A Hunt & Hunt deed has been used for the Grange Property Group, as the OSR advised that this was a complying land tax unit trust deed".
8. The Respondent: 1. describes this evidence as "sparse"; 2. notes that the Respondent has no record of any such conversation or advice, which is perhaps unsurprising if the enquiry were a general or preliminary one, made by telephone in anticipation of a future transaction and not in relation a current taxpayer; 3. observes that Ms Tregenza herself has given no evidence as to her recollection of the content of the call; 4. points out that there are a number of requirements in the tax laws administered by the Respondent with which a trust deed can be either compliant or non-compliant; without knowing exactly what was discussed during the telephone conversation with the Respondent's officer it cannot be concluded that whatever information the officer may have provided was incorrect; and 5. notes that, in any event, the history of any such conversation is irrelevant for present purposes, since the conduct of the Respondent and his officers cannot bind the Respondent's taxing powers: Vlahos v Chief Commissioner of State Revenue [2013] NSWADT 215, at [26]-[29] where this Tribunal's predecessor tribunal rejected a claim that oral advice given by officers of the Respondent could bind his ability to exercise his taxing powers; in doing so it relied on the longstanding High Court authority in FCT v Wade (1951) 84 CLR 105, and the more recent decision of Gzell J in BBLT Pty Ltd v Chief Commissioner of the Office for State Revenue (2003) 54 ATR 323 at 337, where His Honour observed that: "… estoppel does not lie against a fiscal authority on the basis that the authority cannot be prevented from carrying out the public duties cast on it by legislation".
9. The Tribunal agrees with the Respondent's submissions: 1. The evidence provided as to the conversation is too general and unspecific to allow any conclusion to be drawn, save that a general conversation took place between Ms Tregenza and an officer of the Respondent concerning trust deeds of property trusts, and that Ms Tregenza drew certain conclusions from that conversation; those conclusions may or may not have been correct, but in the absence of more detailed evidence as to the content of that conversation it is impossible to form an assessment; the Applicant has not therefore satisfied the applicable standard of proof; and 2. In any event, even if it had that could not alter the fundamental rule, that it is the taxpayer's responsibility to comply with taxation law, not that of the Chief Commissioner to equip the taxpayer with everything he needs in order to do so.

Conclusion and orders

1. The Applicant has not satisfied the onus placed on it to demonstrate the incorrectness of the Respondent's decisions.
2. The Tribunal therefore affirms the decisions made by the Respondent in the Assessments. 1. The Applicant's application for Mr K Ohlmeyer to be allowed to give evidence is refused. 2. The time for the Applicant to lodge this application is extended to 26 July 2019. 3. 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: 09 January 2020