Taxes and Duties - Land tax - Returns and assessment - Assessment - In general - Tasmania - Aggregation of parcels owned by related companies - Trustees of different trusts.

Land Tax Act 2000 (Tas), s24(2).

Judgment Number: [2010] TASSC 2

1 This is an appeal pursuant to the Taxation Administration Act 1997, s89, against a determination by the respondent ("the Commissioner") making assessments of land tax against the appellant. At all material times, the appellant owned land in Tasmania as the trustee of a trust, but owned none as a beneficial owner. At all material times, the appellant was related to 23 other companies, all of which owned land in Tasmania as the trustees of different trusts, and none of which owned land in Tasmania beneficially. The Commissioner decided that the appellant was liable to pay land tax not just in respect of the land held by it, but also in respect of all the land held by the 23 related companies. The decision relates to four financial years - the years ending on 30 June 2005 to 2008 inclusive. The appellant contends that it was liable only to pay land tax in respect of the land held by it, and not liable to pay land tax in respect of any of the land held by any related company during any relevant year.

2 Liability for land tax is created by the Land Tax Act 2000, s10(1), which reads as follows:

"(1) Land tax is payable in respect of land that is not exempt land by the person who is the owner of the land as at the commencement of the financial year."

3 Under s24(1A), there are three different classes of land for land tax purposes: "principal residence land, primary production land and general land". When an owner owns more than one parcel of land of the same class, "land tax is to be levied on the aggregate land value of those parcels of land as if they were a single parcel of land": s24(1).

4 The rates of land tax are prescribed by the Land Tax Rating Act 2000, Sch1. The marginal rate of land tax, as a number of cents for each dollar of the relevant land value, depends on the total value of the land in respect of which land tax is payable. The greater the total value, the higher the marginal rate of land tax.

5 With the rates of land tax fixed in that way, liabilities for land tax could be minimised if extensive land holdings could be distributed amongst a number of related companies, with each company paying land tax only in respect of the land owned by it. To prevent that happening, Parliament has included a provision in the Land Tax Act, s24(2), which reads as follows:

"(2) If a company or related companies own more than one parcel of land, land tax is to be levied on the aggregate assessed land value of those parcels of land as if they were a single parcel owned by a single company."

6 The appellant contends that that subsection applies only when related companies own more than one parcel of land beneficially, and that it does not apply when related companies each hold parcels of land upon different trusts. The Commissioner contends that the subsection applies in both of those situations.

Relevant principles of statutory interpretation

7 It is worth repeating some statements of principle that have been made in the High Court about statutory interpretation. In Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54; (1920) 28 CLR 129 at 161 - 162, Higgins J said:

"The fundamental rule of interpretation, to which all others are subordinate, is that a statute is to be expounded according to the intent of the Parliament that made it; and that intention has to be found by an examination of the language used in the statute as a whole. The question is, what does the language mean; and when we find what the language means, in its ordinary and natural sense, it is our duty to obey that meaning, even if we think the result to be inconvenient or impolitic or improbable."

8 In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at par[78], McHugh, Gummow, Kirby and Hayne JJ said (omitting footnotes):

"However, the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning."

9 In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at par[47], Hayne, Heydon, Crennan and Kiefel JJ said (omitting footnotes):

"This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy."

10 The critical question in this case is whether s24(2) should be interpreted in a way that makes it applicable when related companies hold parcels of land on different trusts. The subsection applies if "a company or related companies own more than one parcel of land". If the appellant's contentions are correct, the word "own" means "beneficially own". If the Commissioner's intentions are correct, the word "own" refers not just to beneficial ownership, but also to the situation where land is owned by a trustee, upon trust for others. It could be said that the word "own" is sometimes used to refer only to beneficial ownership. It is therefore necessary to consider s24(2) in its legislative context.

11 At the outset, it should be noted that at all material times the Act did not contain definitions of "own" or "owner". A definition of "owner" has been inserted in s3 with effect from 1 July 2008 by the Taxation and Related Legislation (Miscellaneous Amendments) Act 2008. That definition is not relevant because this appeal concerns assessments in respect of earlier years.

12 Section 10(1), which imposes liability for land tax upon "the owner of the land" is silent as to whether it applies only to beneficial owners or to trustees as well. Any ambiguity is overcome by s15, which makes it clear that a trustee is liable for land tax. Under s15(2), where a trustee owns some land as its beneficial owner and holds other land as a trustee, land tax has to be assessed as if the trust land and the other land were owned by two different owners. Section 15 provides as follows:

(a) to be assessed for land tax in respect of that land in a representative capacity; and

(b) liable for any land tax in respect of the land as if the land were the trustee's.

(2) An assessment of land tax payable as a trustee is separate from an individual assessment of land tax payable by the trustee.

(3) If an owner of land is represented by an agent, the agent is liable for any land tax in respect of that land.

(4) Any agent or trustee is -

(a) to do anything required to be done by the owner under this Act; and

(b) subject to the same penalty or liability for any neglect, refusal or default in respect of any obligation or requirement of this Act as the person whom the agent or trustee represents would be subject to."

13 Consistently with s15(2), s41(1), which relates to the keeping of accounts by the Commissioner, provides as follows:

"(1) The account of a taxpayer relating to land tax payable in a representative capacity is to be kept separate and distinct from the account of land tax payable by that taxpayer as an individual."

14 A trustee who has paid land tax in respect of trust property is given statutory rights of recoupment by s40(3), which provides as follows:

(a) recover from any person for whom, or on whose behalf, he or she is liable to pay and has paid land tax the amount of land tax so paid; or

(b) retain out of any money coming in his or her representative capacity sufficient money to pay the land tax."

15 It can be seen from ss15(2), 41(1), and 40(3), that the Act not only treats trustees as owners for the purpose of imposing a liability for land tax, but treats land held on trust differently from land owned beneficially. The fact that trustees are treated as owners for the purpose of imposing liability suggests that the word "own" in s24(2) should be interpreted as referring not just to beneficial ownership but also to ownership upon trust. The provision for separate assessments in respect of land held upon trust, and for the recoupment of tax by trustees from beneficiaries, are entirely consistent with the holding of land on trust being regarded as a form of ownership.

16 The requirement of s24(1), whereby parcels of land of the same class are to be aggregated and treated as if they were a single parcel, is qualified in relation to parcels held by trustees by s24(3) and (4). Those subsections provide as follows:

"(3) For the purpose of subsection (1), if a company co-owns land with a natural person, a trustee or another company, the company is the owner of the land if it owns more than 50% of the land.

(4) If land is held by a trustee on behalf of more than one trust, land held on behalf of one trust is not to be aggregated with land held on behalf of another trust if the trustee is -

(b) an executor, an administrator, a guardian, a committee, a receiver or a liquidator; or

Neither of those subsections applies to the appellant or to any of the 23 companies related to the appellant.

17 As I understand the submissions for counsel for the appellant, he relied in part on the proposition that s24(3) draws a distinction between land held by a trustee and land owned beneficially by a natural person or a company. That may be so, but I do not think that is significant. It is significant however that the word "co-owns" is used to refer to the situation where a company "co-owns land with ... a trustee". In that context, s24(3) treats the holding of an interest in land by a trustee as amounting to ownership.

18 Section 24(4), apart from creating a limited number of exceptions, makes it clear that, as a general rule, parcels of land held by a trustee upon more than one trust are to be taxed as if they were owned by a single owner. However I think that subsection sheds no light at all on the meaning of the word "own" in s24(2).

19 The Act does not contain any express provision for the aggregation of trust land held by related trustees. Parliament could easily have included such an express provision. Such express provisions existed in the Pay-roll Tax Act 1971, ss11B - 11K, and are now to be found in the Payroll Tax Act 2008, s72. Counsel for the appellant submitted that the absence of such a provision suggested that Parliament did not intend s24(2) to apply to trust land held by related trustees. The absence of such a provision is relevant to the task of interpreting s24(2), but by no means compels a conclusion favourable to the appellant.

20 Counsel for the appellant submitted that an anomalous situation would arise if s24(2) were held to apply to trust properties held by related trustees. His argument can be summarised as follows:

•

The aggregation provision in s24(2) applies only to related companies. There is no equivalent provision in relation to related individuals. Therefore, if 24 related individuals held land under 24 different trusts for the same beneficiary, land tax would be assessed as if the land belonged to 24 different owners.

•

If a registered trustee company were to be the trustee of the same 24 trusts, s24(4)(a) would apply, and land tax would be assessed as if the parcels of land were held by 24 different owners.

•

It would be anomalous if the parcels of land held by 24 ordinary companies upon 24 different trusts were treated as land held by a single owner when the position would be otherwise if there were 24 individuals acting as trustees, or if there were a single registered trustee company acting as the trustee of all the same trusts. Parliament could not have intended such a result.

21 If the appellant's contentions are correct, anomalies could still occur. For example, an individual to whom s24(4) did not apply, holding land upon 24 different trusts for unrelated beneficiaries, would have to pay tax as if all the land was held by a single beneficial owner. Whichever of the competing interpretations is correct, Parliament has gone only part of the way towards imposing tax by reference to beneficial ownership, and by reference to related groups of beneficial owners. The anomalous result pointed out by counsel for the appellant does not by any means compel a conclusion that Parliament must have intended a different result.

22 Counsel for the appellant submitted that certain aspects of the history of the relevant legislation supported his client's case. I disagree. In order to explain why I disagree, it is necessary to go on quite a lengthy excursion.

23 In the beginning there was the Land and Income Taxation Act 1910. It did not contain any provisions as to the aggregation of parcels of land owned by related companies, or anything of that nature, until 1 July 1997. That was the date of commencement of relevant amendments introduced by the Land and Income Taxation Amendment Act 1996. However the ancestors of the present ss15 and 40(3) were included in the 1910 Act, as originally enacted, in s21. That section was renumbered in 1935 to become s16. Section 21(2), which later became s15(2), provided as follows:

"Every such agent and trustee shall, subject to the provisions of Subsection (6.), be chargeable with the land tax payable in respect of such land in the same manner as if the land were his own; but he shall be assessed in respect thereof in a representative character only, and the provisions of Section Twenty-one shall apply, and each such assessment shall be kept separate and distinct from the individual assessment (if any) of such agent or trustee."

24 Counsel for the appellant submitted that the distinction drawn by this provision between land held as a trustee and the trustee's own land supported the view that, in the 2000 Act, references to owning land should be construed as referring to beneficial ownership only. I disagree. What is significant is that, as long ago as 1910, trustees were treated as owning land for the purpose of land tax legislation.

25 Some amendments were made to s16, which had previously been s21, by the 1996 Act. In my view they were inconsequential. They separated the provisions relating to trustees and the provisions relating to agents into different subsections.

26 Prior to the 1996 amendments to the 1910 Act, s12(1), provided as follows:

"Land tax shall be levied and paid as follows:-

(a) By every owner of land in respect of all land, other than principal residence or rural land, in respect of which land tax is levied of an amount determined by reference to the assessed land value thereof;

(b) In the case of an owner of several estates or parcels of land (not being a trustee of different estates for the benefit of different cestuis que trustent), the aggregate of the values of such several estates or parcels shall be regarded for the purposes of taxation as if such aggregate represented the land value of a single estate or parcel."

27 The amendments that were introduced by the 1996 Act with effect from 1 July 1997 included the following:

•

The words "(not being a trustee of different estates for the benefit of different cestuis que trustent)" were omitted from s12(1)(b).

•

A provision for the aggregation of parcels of land owned by related companies, very similar to the present s24(2), was inserted as s12(1)(c).

•

A provision as to co-ownership by a company with "a natural person, a trustee or another company", the equivalent of the present s24(3), was inserted as s12(2).

•

A non-aggregation provision relating to registered trustee companies etc, the equivalent of the present s24(4), was inserted as s12(3).

28 The effect of the first and last of these amendments was to introduce a requirement that parcels of land held by a single trustee on a number of different trusts were to be aggregated unless the trustee were a registered trustee company, an executor, an administrator, a guardian, a committee, a receiver, a liquidator, or a court appointee.

29 Counsel for the appellant submitted that the amendments drew a distinction between a trustee and a company, and required aggregation in relation to trusts only when there was one trustee for a number of trusts. He submitted that the 1910 Act continued to treat "ownership" as synonymous with beneficial ownership. In my view it did the opposite. Section 16(1), by expressly providing that a trustee of any land was to be assessed in respect of that land, overcame any ambiguity as to the meaning of s12(1), which imposed liability for land tax on "every owner of land ...". Section 14 applied (inter alia) to persons "owning land as ... co-trustees". Prior to the 1996 amendments, the wording of s12(1)(b) indicated that the term "an owner" applied not only to a beneficial owner but also to a trustee.

30 The 1996 Act introduced some amendments, relating to exemptions from land tax, with effect from 1 July 1996. Under the new s12(4), the Commissioner of Taxes was empowered to grant an exemption for land held by a trustee and used or occupied for domestic purposes by a beneficiary. Under s12(5), there was a similar power in relation to land owned by a company and used or occupied by a person or persons who owned 50 per cent or more of the shares in the company, and who did not already own any principal residence land. Section 12(5) was reproduced in the 2000 Act: s6(4). That subsection was amended by the Taxation Legislation (Miscellaneous Amendments and Repeal) Act 2002, s24(b). Before that amendment, s6(4) and its predecessor applied if "the land is owned by the company". After that amendment, s6(4) applied when "the land is beneficially owned by the company".

31 Counsel for the appellant submitted that the 2002 amendment was an administrative amendment, made only to confirm the construction which applied already when the amendment was made. He referred me to passages in the relevant second reading speech (House of Assembly, 19 November 2002) in which the Secretary to Cabinet and Treasury Spokesperson, Mr Kons, said that the amendments were not intended to raise any additional revenue, and did not impose changes to current practice. That might have been the intention. However I do not think that the amendment of s6(4) in 2002 sheds any light on the intended meaning of s24(2), given that it was enacted in 2000 and replicated a provision introduced into the previous legislation in 1996.

32 Having scrutinised 100 years of land tax legislation with an intensity perhaps more appropriate to haruspication, it seems to me that, whilst Parliament has recognised the distinction between beneficial owners and trustees, it has consistently treated words such as "owning", "co-owns", and "owner" as referring not just to beneficial ownership but also to ownership upon trust.

33 The Acts Interpretation Act 1931, s8A, requires an interpretation of a provision of an Act that promotes the purpose or object of that Act to be preferred to an interpretation that does not promote that purpose or object. In my view s24(2) was enacted in order to prevent the minimisation of land tax by the distribution of land holdings amongst related companies. An interpretation of s24(2) whereby it applies to related companies that hold land on trusts would promote the purpose or object of the subsection, and a contrary interpretation would not.

34 Having regard to the purpose of the subsection and the use of words relating to ownership in the legislation, my conclusion is that s24(2) must be interpreted as applying not just to companies that own land beneficially, but also to companies that own land upon trust. It follows that the assessments made by the Commissioner were correct. I therefore confirm the assessments.