What is the role of VCAT on review of a land tax assessment?

1. Under the TA Act, if a matter is referred to VCAT, VCAT's role is to determine whether to confirm, reduce, increase or vary the assessment or decision under review.[4] This is a review on the merits, rather than a judicial review of the process by which the decision or assessment was made.
2. In Drake v Minister for Immigration and Ethnic Affairs,[5] Bowen CJ and Deane J said that the role of a tribunal in undertaking a review on the merits is to make the "correct or preferable" decision "on the material before the Tribunal".[6] This description has been accepted in the context of a review by VCAT under the TA Act.[7]
3. If only one decision is available on the application of the law to the relevant facts, then that will be the correct decision; however, if the legislation under review provides a discretion, a tribunal must make the decision that is preferable among the possible decisions available.[8]
4. In the latter regard, where a discretion exists, VCAT effectively 'steps into the shoes' of the decision maker[9] and can exercise (or determine not to exercise) that discretion.

Did Motticant's 1992 Disclosures satisfy the Unitholder Notice Provisions?

1. In May 1992, as a result of the changes to the grouping provisions in the then applicable land tax legislation,[10] the Commissioner wrote to Motticant requiring that Motticant complete a Schedule relating to its ownership of the Rosebud Land and its relationship with other landholding entities.
2. On 24 June 1992, Motticant completed the Schedule, disclosing that it held the Rosebud Land as trustee of the PDT for the benefit of Perissa Holdings Pty Ltd as sole unitholder. It is this information that I have referred to as the 1992 Disclosures.
3. At the hearing, Mr Saunders appropriately conceded that the 1992 Disclosures did not satisfy the "literal requirements" of the Unitholder Notice Provisions. In this regard, section 46C(2) requires that any notice 'must be in the form, and contain the information, determined by the Commissioner'. In this case, the 1992 Disclosures were not in the form required and, more significantly, as the unitholders of the PDT had changed between 1992 and 2006, did not contain all of the necessary information.
4. Despite this, Mr Saunders contended that, having been put on notice that Motticant held the Rosebud Land as trustee of the PDT, the Commissioner was then under an obligation to enquire as to the unitholders in 2006.
5. Section 46C of the LT Act makes it clear that a trustee of a unit trust may provide the information necessary to satisfy the Unitholder Notice Provisions. There is no obligation to do so, and there is nothing in the language of the provision that suggests the onus shifts to the Commissioner if he has some, but incomplete or out of date, information regarding any trust arrangements.
6. I reject Motticant's submission and find that, subject to the discretion issues discussed below, the decision to impose the trustee surcharge rate and issue the 2011 Reassessment was correctly made in accordance with the LT Act and the TA Act.

Did the Commissioner have a discretion to extend the time to comply with the Unitholder Notice Provisions?

1. There is no discretion given to the Commissioner in section 46C of the LT Act, or elsewhere in the LT Act, to extend the time for satisfying the Unitholder Notice Provisions.
2. Up until 2014, the requirement to notify unitholdings by 30 June 2006 in order for a trustee holding 'pre-2006 land'[11] to avoid the surcharge was absolute in the sense that, if the deadline was missed, it could not be remedied for future years. However, in 2014, the section was amended to provide that the trustee surcharge would cease to apply in the year following the giving of a notice in compliance with the Unitholder Notice Provisions.[12] The fact that Parliament sought fit to address the consequences of the notification of unitholders after 30 June 2006 arguably tells against any implied discretion to extend time for compliance with the requirements of section 46C.
3. However, Motticant says that the Commissioner does have a discretion to extend time, pointing to the fact that the Commissioner extended the time for all taxpayers to satisfy the Unitholder Notice Provisions from 30 June 2006 to 30 September 2006 (General Extension).
4. Consistent with the position put to me by Ms Pierce in Grove Auto Electrical as trustee for the R Foster Property Trust v Commissioner of State Revenue (Foster),[13] the Commissioner initially submitted that it was the Treasurer rather than the Commissioner that had allowed the General Extension. It was further submitted that, consistent with the decisions in both Foster and Leong v Commissioner of State Revenue (Leong),[14] as there was no discretion for the Commissioner to extend time, it also followed that VCAT could not extend time. However, it transpires that the factual premise for those submissions is not correct.
5. On 19 October 2017, a few days prior to the hearing, Mr Saunders received a letter from Mr Darren Joyce, signed as the Acting Commissioner of State Revenue. The letter appears to be in response to queries raised by Mr Saunders on behalf of another company, Pedan Pty Ltd, as to the source of the power to grant the General Extension. The letter indicates that the Commissioner granted the General Extension based on his powers of general administration. It would appear that this is a reference to section 63 of the TA Act which provides that the Commissioner 'has the general administration of the taxation laws', which includes the LT Act.
6. There do not appear to have been any cases in which the Commissioner's power of general administration has been considered in any detail or in the present context by VCAT or the Victorian courts.[15]
7. However, guidance may be drawn from decisions in the Federal sphere. In this regard, the Federal Commissioner of Taxation (FCT) is also vested with the power of general administration of the income tax law.[16] It has been held to authorise a range of activities undertaken by the FCT, including decisions affecting taxpayers generally[17] and decisions affecting particular taxpayers.[18] Relevantly, in the present context, it has been held to authorise the FCT to extend time for a given action.[19]
8. There is no reason to suppose that the power of general administration granted to the Commissioner is any narrower than the power granted to the FCT. Accordingly, in my view, the Commissioner does have an ability to grant extensions of time to comply with the requirements of the LT Act, both generally (as for the General Extension) and in the circumstances of a particular taxpayer.

Is the Commissioner's decision not to extend time reviewable?

1. It is clear that VCAT only has jurisdiction to deal with matters that are vested in it under legislation.[20]
2. Section 111 of the TA Act provides that VCAT must review a matter referred to it under section 106 of the TA Act. The "matter" referred to is the rejection of a taxpayer's objection against an assessment. It is the underlying assessment that is the subject of the review, and which VCAT determines whether to confirm, reduce, increase or vary.
3. There is no power granted to VCAT under the TA Act or otherwise to review decisions which may be made in exercise of the power of general administration under section 63 of the TA Act. However, that begs the question as to how such a decision may interact with the assessment itself and, to the extent they are connected, whether a decision authorised by that provision can be reviewed by VCAT and confirmed or varied.
4. Again, there appears to be no VCAT or other Victorian decision that has discussed this issue.
5. However, in Isaacs v Commissioner of Taxation (Isaacs),[21] the Federal Court of Australia considered whether a decision not to exercise a discretion to extend time to make an election under the Income Tax Assessment Act 1936, and which resulted in an adverse assessment of a taxpayer, was reviewable by the Administrative Appeals Tribunal. The Court determined that the decision not to exercise that discretion was not reviewable on the basis that it was 'logically anterior to the process of assessment of the taxable income of [Mr Isaacs]'.[22] Conti J went on to explain 'that the exercise of a function, which may allow or deny a taxpayer the opportunity of alteration of the factual basis upon which his or her assessment of tax is to be made, does not thereby render that function to be part of the taxation assessment process'.[23]
6. If anything, the present case is weaker in the sense that here there is no express discretion to extend time and Motticant seeks to have VCAT extend time based on the Commissioner's power of general administration. For the same reasons as discussed in Isaacs, to the extent that the Commissioner had a discretion to extend time, the decision not to do so was necessarily a decision that was made separately, and prior to, the 2011 Reassessment. It follows that it is not a discretion that can be exercised again or differently by VCAT on a review of the 2011 Reassessment.

If the Commissioner's decision not to extend time is reviewable, was that the preferable decision?

1. While the conclusion that the decision not to extend time is not amenable to review by VCAT makes its unnecessary, for completeness I would in any event find that the decision made by the Commissioner not to extend time was the preferable decision.
2. There is no direct evidence of the rationale for the decision to grant the General Extension. However, it can be reasonably inferred that the Commissioner considered that the provision of the General Extension would help as a transitional measure to ensure or improve compliance with the LT Act. In this regard, the 2005 Land Tax Amendments came into force on 29 November 2005 and required a person who held land on trust to notify the Commissioner of that fact on or before 31 December 2005,[24] just over a month later. The Commissioner extended the time for compliance with this measure until 31 March 2006, and then also extended the time for lodging a notice under section 46C of the LT Act by 3 months from 30 June to 30 September 2006.
3. There was no suggestion that similar considerations are relevant to the exercise of discretion in the present circumstances.
4. However, Mr Saunders argues that an extension of time should be granted because Motticant had already made the 1992 Disclosures and because there is no contention that the trust arrangements in place were not legal or were the kind of arrangement targeted by the 2005 Land Tax Amendments. In the latter respect, he submits that the Second Reading speech for the 2005 Land Tax Amendments evidences that the mischief to which they were directed was the 'ability of taxpayers to minimise tax by disaggregating their land-holdings through trusts'.[25]
5. Mr Saunders accepts that Motticant received a letter from the Commissioner about the 2005 Land Tax Amendments in or around July 2006. The failure to act once that letter was received was not explained. In this regard, if Motticant had considered that the 1992 Disclosures were sufficient to meet the Unitholder Notice Provisions, it would seem to me that the reasonable course of action would have been to write to the Commissioner to confirm this.
6. In relation to Mr Saunders contention that the discretion to extend time should be exercised consistently with the purpose of the 2005 Land Tax Amendments, I note that the structure of sections 46A and 46C is to impose the surcharge on a trustee unless and until the trustee provide details of the unitholders. While the 2005 Land Tax Amendments may be explained by concerns regarding tax minimisation, the imposition of the surcharge is not conditioned on the existence (or otherwise) of a purpose of tax minimisation.
7. Relevantly, in both Foster and Leong, assessments based on the trustee surcharge rate were confirmed by reason of the failure to notify the beneficiaries of discretionary trusts within the time lines provided in section 46F of the LT Act. Mr Saunders argues that those cases can be distinguished on the basis that, in each case, there had been no prior disclosure of the existence of a trust.
8. However, given Mr Saunders acknowledges that the 1992 Disclosures were neither correct in form nor in substance (that is, in terms of the identity of the unitholders of the PDT in 2006), it is hard to accept this as a meaningful distinction.
9. In all the circumstances, if VCAT had jurisdiction concerning this issue, I would consider that the decision not to extend time is the preferable decision.

Is the Commissioner's decision to assess reviewable?

1. Section 9 of the TA Act provides that the Commissioner 'may make one or more reassessments of a tax liability of a taxpayer'.
2. Mr Saunders contends that the use of "may" implies a discretion not to reassess and points to the Victorian Court of Appeal in ACN 005 057 349 Pty Ltd v Commissioner of State Revenue[26] as support for the proposition that in undertaking his functions, the Commissioner should 'seek to do right both to the Crown and to the taxpayer'.[27]
3. On the other hand, in that case, the Court also observed that the 'underlying duty of the Commissioner ... [is] to collect the correct amount of tax, and "not a penny more, not a penny less".'[28]
4. While there is no express reference to any discretion, as with any regulator, the Commissioner has a degree of "prosecutorial discretion" and could presumably decide, in an appropriate case, not to reassess even if the circumstances for reassessment otherwise exist.
5. As noted above, VCAT steps into the shoes of the Commissioner in relation to the exercise of any discretion relevant to the decision under review. However, it is not clear to me that a "prosecutorial discretion" is the kind of discretion that VCAT can exercise. The parties have not referred to any authorities that have suggested a tribunal can do so.
6. In any event, as indicated above, the role of VCAT is to review the assessment (or in this case reassessment) which has been made and determine whether it is correct or preferable. In this regard, except in relation to payroll tax, a taxpayer can only object to an assessment rather than any decision of the Commissioner.[29] This may be contrasted to the equivalent provision in New South Wales,[30] which has been held to permit merits review in respect of a range of decisions, including decisions made prior to any assessment.[31]
7. Like a decision to extend time, the decision to reassess is logically anterior to the reassessment itself. It is only the reassessment itself that is the subject of review by VCAT.
8. It follows that the decision of the Commissioner to assess is not reviewable by VCAT and I reject Motticant's submission in this regard.

[1] Separate proceedings in respect of the 2012 to 2015 land tax years were struck out, with a right of reinstatement, by order of the Tribunal on 30 March 2017.

[2] Duties and Land Tax Acts (Amendment) Act 2005.

[3] The applicant's written submissions couch some of its concerns regarding the Commissioner's actions in more emotive terms as involving gross injustice, an abuse of process and breaches of the Universal Declaration of Human Rights.

[5] (1979) 24 ALR 577.

[7] See, for example, Roth v Commissioner of State Revenue [2006] VCAT 2536.

[8] K O'Callaghan and M Howard, 'Promoting administrative justice: the correct and preferable decision and the role of government policy in the determination', (2013) 32(1) UQLawJl 169, 173.

[9] Mond v Perkins Architects Pty Ltd [2013] VSC 455 [10].

[10] Under the Land Tax (Revision) Act 1991, which amended the Land Tax Act 1958.

[11] That is, land acquired prior to 2006.

1. [12] On 25 October 2017, after the hearing had concluded, Mr Saunders provided a copy of amendments made to section 46C(3)(b) of the LT Act in 2007 and submitted that this already allowed a notice to be submitted at any time and to take effect from the tax year in which the notice was lodged. However, in my view, this merely dealt with when a notice submitted in time takes effect, and did not change the requirement to lodge the notice within the time frames specified in section 46C(2).

[14] [2016] VSC 274.

[15] Section 63 of the TA Act is referenced, but not discussed, in Vasiliades v Commissioner of State Revenue [2016] VSC 544.

[16] Income Tax Assessment Act 1936 (Cth) s 8.

[17] Such as the conduct of a program of audits concerning deductions for work related expenses: Knuckey v Federal Commissioner of Taxation 98 ATC 4903.

[18] Such as the issue of a notice to produce documents to a particular taxpayer: Stergis v Federal Commissioner of Taxation 89 ATC 4442.

[19] In the applicable case, relating to the time for compliance with a notice to produce documents: Clarke & Kann v Deputy Federal Commissioner of Taxation 83 ATC 4764.

[20] Victorian Civil and Administrative Tribunal Act 1998 (Vic) s 42; J Pizer QC & E Nekvapil, Annotated VCAT Act (5th Ed, Thomson Reuters, 2015) [VCAT.42.40].

[21] [2005] FCA 832.

[22] Ibid [68], adopting the description used in Harts Australia Ltd v Commissioner of Taxation 2001 ATC 4572.

[24] Section 52I of the Land Tax Act 1958 (Vic).

[25] Hon. Bill Forwood, Hansard, Legislative Council, Thursday 24 November 2005, at 2319, quoting from the budget paper announcing the measure.

[26] [2015] VSCA 332.

[27] Ibid [138], quoting from the decision of Hunt J in Boyded Industries Pty Ltd v Commissioner of Taxation [1985] 81 FLR 293, 297.

[28] Ibid [123], quoting from the decision of Mildren J in Commissioner of Taxation v Tourism Holdings Ltd [2002] NTCA 10; [2002] 171 FLR 166, 168.

[30] Taxation Administration Act 1996 (NSW) s 86.

[31] Chief Commissioner of State Revenue (NSW) v Print National Pty Ltd [2013] NSWCA 96.