Nerang Subdivision Pty Ltd & Ors v Hutson & Anor [2023] QSC 268

TAXES AND DUTIES - GOODS AND SERVICES TAX - REGISTRATION - BASIC RULES - where over 300 hectares of land forms part of an estate administered by the first respondent - where the first respondent and first and second applicants entered a development deed for a master planned community on the land - where the development involves subdivision of the land and sale of thousands of lots - where the third applicant was appointed under the deed as project manager - where the first respondent and third applicant are parties to four leases provided for by the deed over different parts of the land - where the deed and leases provide for the distribution of the proceeds of sale of the lots including an owner's return and developer's return - whether the first respondent is "carrying on an enterprise" - whether the sale of lots in the development would amount to a supply by way of a transfer of a capital asset owned by the first respondent - whether the first respondent is, or will be, required to be registered for GST pursuant to s 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth)

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS - whether on the proper construction of the agreements the amount of the return on the sale of the lots is to be reduced by any GST payable by the first respondent regardless of whether the purchaser of the lot pays GST under schedule 1, subdivision 14E of to the Taxation Administration Act 1953 (Cth) - whether on the proper construction of the documents the developer's return from the sale of a lot is to be increased by the amount of the first and second applicant's liability for GST - whether on the proper construction of the documents an adjustment that increases the amount to be paid by a purchaser at settlement of the sale of a lot by reason of land tax having been paid prior to settlement is an adjustment within the meaning of that term in the definition in the leases

A New Tax System (Goods and Services Tax) Act 1999 (Cth), s 9-5, s 9-10, s 9-20, s 9-40, s 9-75, s 23-5, s 23-15, s 188-10, s 188-15, s 188-20, s 188-25, s 195-1

A New Tax System (Goods and Services Tax) Regulations 2019 (Cth), reg 23.15.01

Taxation Administration Act 1953 (Cth), schedule 1, subdivision 14E

Associated Newspapers Ltd v Federal Commissioner of Taxation [1938] HCA 73; (1938) 61 CLR 337, cited

BHP Billiton Finance Ltd v Federal Commissioner of Taxation [2009] FCA 276; (2009) 72 ATR 746, cited

Californian Copper Syndicate v Harris (1904) 5 TC 159, cited

Casimaty v Deputy Commissioner of Taxation (1997) 151 ALR 242, cited

Collins v Federal Commissioner of Taxation (2022) 114 ATR 682, considered

Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 150 CLR 355, considered

Commissioner of Taxation v Williams [1972] HCA 31; (1972) 127 CLR 226, considered

Federal Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49; (2014) 254 CLR 376, cited

Federal Commissioner of Taxation v Myer Emporium Ltd [1987] HCA 18; (1987) 163 CLR 199, cited

Federal Commissioner of Taxation v Swansea Services Pty Ltd [2009] FCA 402; (2009) 72 ATR 120, considered

Hudson's Bay Co Ltd v Stevens (1909) 5 TC 424, considered

McClelland v Commissioner of Taxation [1970] HCA 39; (1970) 120 CLR 487, cited

Official Receiver in Bankruptcy v Federal Commissioner of Taxation [1956] HCA 63; (1956) 96 CLR 370, considered

Rolls v Miller [1884] UKLawRpCh 137; (1884) 27 Ch D 71, cited

Ruhamah Property Co Ltd v Federal Commissioner of Taxation [1928] HCA 22; (1928) 41 CLR 148, cited

Scottish Australian Mining Company Limited v Federal Commissioner of Taxation [1950] HCA 16; (1950) 81 CLR 188, considered

Statham v Federal Commissioner of Taxation (1988) 20 ATR 228, cited

Stevenson v Commissioner of Taxation (1991) 29 FCR 282, cited

Toyama Pty Ltd v Landmark Building Developments [2006] NSWSC 83; (2006) 197 FLR 74, considered

United Collieries Ltd v Inland Revenue Commissioners (1930) SC 215, cited

J Hmelnitsky SC, with H Atkin, for the first and third applicants

S Doyle KC, with M May and F Wood, for the first respondent

M O'Meara SC, with B McMillan, for the second respondent

Australian Government Solicitor for the second respondent

• [1] This proceeding concerns the disbursement of the proceeds of sale of subdivided lots in a staged development of 312.3 hectares of land at Worongary on the Gold Coast (the Land).
• [2] The Land forms part of the estate of the late Nancy Ullman Loeskow. The first respondent (the Administrator) is the administrator of Mrs Loeskow's estate and, in that capacity, is the registered owner of the Land.
• [3] The Administrator and the first and second applicants (together, the Developer) are parties to a development deed (the Deed) which governs the development of the Land into a new master planned community known as "SkyRidge" (the Project).
• [4] The Project involves the staged development and subdivision of the Land and the promotion, marketing and sale of thousands of newly created residential and other lots (Lots). The third applicant (the Project Manager) has been appointed under the Deed as project manager for the Project. The second applicant is a co-venturer with the first applicant and has agreed that the first and third applicants will have the conduct of this proceeding. The second applicant did not appear at the hearing but will abide by the order of the court.
• [5] The Administrator (as "Landlord") and the Project Manager (as "Tenant" and nominee of the Developer) are parties to four leases (each a Development Lease), provided for by the Deed over different parts of the Land and reflecting different stages of the Project.
• [6] Both the Deed and the Development Leases provide for the distribution of the proceeds of sale of newly created Lots. In particular, the Administrator is to receive the "Owner's Return", being an amount equal to 25% of the "Gross Sale Proceeds" of a Lot. The Developer is to receive the "Developer's Return", comprising all proceeds of sale of a Lot and all other monies received in respect of the Project, but excluding the Owner's Return. The Deed and the Development Leases also contain clauses which address GST liabilities arising from payments made under those agreements.
• [7] Disputes have arisen between the parties to the Project as to whether the Administrator is required to be registered for GST and, further, as to the proper construction of provisions of the Deed and the Development Leases which provide for the distribution of the proceeds of sale and which GST liabilities arising in respect of payments made under the agreements.

(a) whether the Administrator is presently required (or, alternatively, will be in the future be required) to be registered for GST pursuant to s 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act);

(b) whether the amount of the Owner's Return which the Administrator will receive on the sale of each Lot is to be reduced by any GST payable by the Administrator on that sale, regardless of whether the purchaser of the Lot pays GST in relation to the supply under the GST withholding provisions in subdivision 14E of schedule 1 to the Taxation Administration Act 1953 (Cth);

(c) whether the Deed or the Development Leases bring about the result that the Developer's Return from the sale of a Lot is to be increased by the amount of the Developer's liability for GST;

(d) whether an adjustment that increases the amount to be paid by a purchaser at settlement of the sale of a Lot by reason of land tax having been paid prior to settlement is an adjustment within the meaning of that term in the definition of Gross Sale Proceeds in the Development Leases.

• [9] The second respondent (the Commissioner) was joined to the proceeding because the first issue concerns the application of the GST Act.
• [10] The role of the Commissioner was limited to making submissions on the proper construction of the relevant provisions of the GST Act and the application of principles derived from relevant authorities to assist the court to determine whether to make the declarations sought in respect of the first issue and to ensure that such declarations as might be made do not inhibit the discharge of the Commissioner's statutory duties in connection with the administration of the GST Act.
• [11] The findings I have made in this proceeding are based on the facts as found on the evidence before the court when the matter was heard. In circumstances where the Commissioner's statutory function of administering the taxation laws with respect to the parties to the Project continue beyond any findings or orders made in this proceeding, and must be discharged having regard to the facts known to the Commissioner at the time any future decision is made, the findings I have made do not preclude the Commissioner, in any future consideration of different or diverging facts or circumstances involving those parties, from applying the taxation laws to the facts which then exist.

• [12] The Land was part of a larger parcel of land acquired by Mrs Loeskow's father, John Francis Lewis Anthes, in 1925 and later transferred to her brother, Robert John Anthes, in 1945. Robert Anthes lived on that larger parcel of land and used it to operate a dairy farm until around the 1970s, to conduct a beehive operation until around the 1990s, and to graze cattle.
• [13] Mrs Loeskow inherited the Land on her brother's death on 22 October 2004. The only improvements on the Land at that time were the house in which her brother had lived, some sheds and a cattle yard.
• [14] When her brother passed away, Mrs Loeskow was residing at a nursing home and her capacity was impaired at times and diminishing. The Land was accruing significant local council rates. In those circumstances, Mrs Loeskow's son, Alastair Loeskow, and her daughter, Gwynfa Harrett - acting under an enduring power of attorney previously granted by Mrs Loeskow - took steps to sell the Land.
• [15] On 2 June 2005, Mrs Loeskow (by her attorneys) entered into a development deed with the Project Manager in relation to the Land. A subsequent version of that development deed was signed in 2006.
• [16] Mrs Loeskow died on 22 May 2008. Alistair Loeskow and William Fischer were appointed as her executors. The executors entered into the Deed with the Developer on 30 September 2009. Under the Deed, the executors are named as the "Owner".
• [17] The Administrator was appointed as the administrator of Mrs Loeskow's estate on 21 September 2018. From that time, he acceded to the rights and obligations of the Owner under the Deed.

• [18] The Deed provides for the carrying out of the "Development".[1] By cl 2.1 of the Deed, the parties have agreed to associate together to carry out the "Project", which is defined to mean undertaking the Development, selling the Lots and distributing the sale proceeds in accordance with the Deed.[2] Clause 2.2 of the Deed records that the aims of the Project are to obtain local council approval and all other necessary approvals, to carry out the Development, and to sell the Lots and distribute the proceeds of sale in accordance with the "Development Documents".[3]
• [19] Despite the parties' agreement to associate together to carry out the Project, cl 2.3.1 of the Deed provides that the document does not create a partnership, joint venture, agency or fiduciary relationship between the Developer and the Owner.
• [20] The Development is being undertaken on a staged basis. A "Stage" refers to that part of the Land that is designated as a stage of the Development in the Master Program. The Owner is required to grant a "Development Lease" for each Stage. The form of the Development Lease is prescribed in a schedule to the Deed. Consequently, the Development Leases are all in relevantly identical terms.
• [21] Under the Deed, the Developer:

(a) has agreed:

(i) to prepare a Master Plan and, in doing so, use its best endeavours to maximise the number of Lots to be developed as part of the Project (cl 4.1);

(ii) to prepare a Master Program setting out the program for carrying out the Development, including timeframes for obtaining necessary approvals, for start and finish dates for works in each Stage and for other relevant activities (cl 4.2);

(iii) subject to limited exceptions, to pay rates and charges and land tax levied on the Land (cll 5.4 and 5.6)

(iv) to seek to obtain (at its costs) the approvals required to undertake the Development (cll 6.1, 6.2 and 6.4);

(v) to undertake the Development in accordance with the Development Documents and its obligations under the Deed, and for that purpose can engage and instruct all necessary advisers, consultants, contractors and agents in connection with the exercise of its rights and the performance of its obligations under the Deed (cl 7.3);

(vi) to provide a detailed report to the Owner on the progress of the Project within 14 days after the end of each quarter (cl 7.13.1);

(vii) to provide a marketing and sales plan to the Owner, which includes a list of Lots to be released for sale and their proposed sale price, prior to commencing marketing and selling of Lots (cl 7.13.2);

(b) by cl 7.2, has (together with the Project Manager) the sole and exclusive right to exercise overall control of the Project, which right is stated to include:

(i) managing and carrying out the Project;

(ii) making all day to day decisions;

(iii) determining the design, development program and timeframe for the Project and each separate Stage of the Development;

(iv) determining the type, style, size, configuration and number of Lots to be achieved;

(v) obtaining all consents and approvals for the Project;

(vi) the incurring of Project Costs;

(vii) the marketing and sale of the Lots (including the price at which they will be offered for sale to third parties, the manner of sale, whether by auction or private treaty, contract terms and completing contracts for the sale of Lots);

(a) co-operate fully with the Developer and use its best endeavours to bring about the successful performance and completion of the Project, including in relation to the application for necessary approvals (cll 2.4.3 and 6.3);

(b) do all acts and things which are required for the purposes of carrying out and completing the Project (cl 7.11);

(c) within 14 days of receiving the Master Plan and Master Program from the Developer, approve the Master Plan and Master Program or notify the Developer of the full changes required to reflect the overall objectives of the Project (cl 4.4);

(d) deal with the Land in accordance with the terms of the Deed, including by allowing access to the Land and, as and when the Developer requires full possession and use of a Stage to undertake the development work, to deliver up possession of the Stage and grant a Development Lease for it (cll 2.5, 6.3.3, 7.17, 7.18, 8.1).

(a) the Project Manager is required to:

(i) prepare a subdivision plan for the Lots to be created from the Stage and lodge that plan for registration (cll 4.1 and 4.3);

(ii) prepare a partial surrender of the Development Lease so far as it relates to the sale of a Lot to a third party (cl 4.5.1);

(iii) use reasonable efforts to promote, market and sell the Lots and, for that purpose, is authorised by the Administrator to engage real estate agents and lawyers, to negotiate contracts of sale on behalf of the Administrator and to collect and distribute the proceeds of settlement (cll 5.1 and 5.2);

(iv) pay the Owner's Return to the Administrator upon settlement of the sale of each Lot (cl 5.3);

(b) the Administrator is required to:

(i) sign and return the subdivision plan to the Project Manager and do all things necessary to assist the Project Manager in obtaining approval and registration of that plan (cll 4.2 and 4.4);

(ii) sign and return to the Project Manager the partial surrender of the Development Lease relating to the sale of a Lot (cl 4.5.2);

(iii) authorise the Project Manager to do things reasonably necessary to satisfy its obligations to promote, market and sell the Lots (cl 5.2).

• [24] In December 2010, the Project Manager applied for approval for a material change of use under the Sustainable Planning Act 2009 (Qld) in relation to a bespoke development code in relation to the Land. The executors of Mrs Loeskow's estate consented to the making of that application for development approval. The development code provided for:

(a) a maximum of 3,500 dwellings, delivered in a range of housing products, including attached housing and detached housing on Lots ranging from 180 square metres to 1,500 square metres;

(b) a residential population in the range of 8,000 to 10,000 persons;

(c) a village centre with a mixture of residential, commercial, educational, retail and open spaces;

(d) an industrial precinct to include land for industrial, manufacturing and storage activities; and

(e) a broad continuous corridor that provides central green open space.

• [25] The application was approved subject to certain conditions in March 2015. Between July 2015 and December 2021, the Project Manager sought and obtained approval for changes to be made to the development approval. The personal representatives of Mrs Loeskow's estate (initially the executors and later the Administrator) provided their consent to each of these requests to change the development approval.
• [26] On 23 January 2019, the Project Manager provided the Administrator with a copy of the initial Master Plan for the Project. The Administrator approved that Master Plan on 23 April 2019. That initial Master Plan contemplated that the Development of the Land would yield 2,274 Lots. The Master Plan has been revised on two occasions. The most recent version of the Master Plan in evidence contemplates that the Development of the Land will yield 2,141 Lots.
• [27] In February 2021, the Project Manager commenced marketing Lots for sale. The Administrator has executed at least 160 contracts for the sale of Lots with a total purchase price of at least $84.5 million. Each sale contract has a price not less than $75,000. At the time of the hearing, title for the Lots had not been issued but the Developer anticipated that would occur in October 2023. The Developer anticipated that the sale contracts which have already been executed are likely to settle before February 2024. Some 24 of the sale contracts contain a sunset date falling before 1 March 2024.
• [28] The Project is expected to result in the creation of thousands of residential Lots from the Land with sales of those Lots to occur over more than a decade. The Developer expects the Project to generate more than $2 billion in revenue.

• [29] The GST Act imposes an obligation to pay the GST payable on any "taxable supply" made by a person.[4] The person will make a taxable supply if they make the supply for consideration, the supply is made in the course or furtherance of an enterprise that the person carries on, and the person is registered or required to be registered under the GST Act.[5]
• [30] A person is required to be registered for GST if they are carrying on an enterprise and their GST turnover meets the registration turnover threshold.[6]
• [31] An "enterprise" is relevantly defined to be an activity, or series of activities, done:[7]

(a) in the form of a business; or

(b) in the form of an adventure or concern in the nature of trade; or

(c) on a regular and continuous basis, in the form of a lease, licence or other grant of an interest in property.

• [32] However, an enterprise does not include an activity, or series of activities, done by an individual without a reasonable expectation of profit or gain.[8]
• [33] The concept of "carrying on" an enterprise is defined to include doing anything in the course of the commencement or termination of the enterprise.[9]
• [34] A "business" is defined as including any profession, trade, employment, vocation or calling, but does not include occupation as an employee.[10]
• [35] The GST registration turnover threshold is set at $75,000.[11] A person's GST turnover will meet the registration turnover threshold if:[12]

(a) the person's current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that the person's projected GST turnover is below the turnover threshold; or

(b) the person's projected GST turnover is at or above the turnover threshold.

• [36] A person's "current GST turnover" in a particular month is defined to be the sum of the values of all the supplies that the person has made, or is likely to make, during the 12 months ending at the end of that month, other than (relevantly) supplies that are not made in connection with an enterprise that the person carries on.[13]
• [37] A person's "projected GST turnover" in a particular month is defined to be the sum of the values of all the supplies that the person has made, or is likely to make, during that month and the next 11 months, other than (relevantly) supplies that are not made in connection with an enterprise that the person carries on.[14] Further, in working out a person's projected GST turnover, any supply made, or likely to be made, by the person by way of transfer of ownership of a capital asset of the person is to be disregarded.[15]
• [38] Resolving the question whether the Administrator is required to be registered for GST requires consideration of the following issues:

(a) whether the Administrator is "carrying on an enterprise" in any of the forms identified in the GST Act;

(b) if the Administrator is found to be carrying on an enterprise:

(i) whether the sale of a Lot by the Administrator is a supply made by way of transfer of ownership of a capital asset of his (and so disregarded in working out his projected GST turnover);

(ii) whether the sale of a Lot by the Administrator is a supply that is not made in connection with the enterprise carried on by him (and so excluded from the calculation of his current GST turnover and his projected GST turnover);

(iii) whether the Administrator's current GST turnover or his projected GST turnover meets or exceeds the registration turnover threshold of $75,000.

Carrying on an enterprise: activities in the form of a business or in the form of an adventure or concern in the nature of trade

• [39] The Developer and Project Manager submitted that the activities undertaken by the Administrator under the Deed and the Development Leases are being carried on in the form of the business and (or alternatively) in the form of an adventure or concern in the nature of trade. In making that submission, the Developer and Project Manager emphasised the scale of the Development involved in the Project, the change in the character and the physical form of the Land resulting from the Development, as well as the period over which the Project has been pursued to date and for which it will be pursued in future.
• [40] The Administrator submitted that the business of developing the Land is being undertaken by the Developer and not by the Administrator, whose role is limited to realising a long-held family asset.
• [41] Several authorities have considered similar issues relating to liability to pay income tax in the context of land which is subdivided and sold. Based on those authorities, the Administrator identified the following features as being relevant:

(a) The circumstances in which land was acquired. A purchase with the intention of later sale at a profit is indicative of a business or profit-making venture, whereas sales of land received by way of inheritance or a gift are more likely to be characterised as mere realisation of a capital asset.[16]

(b) The extent of the person's personal involvement in any development activity. A person who takes a less active role in conducting development activities is more likely to be found to be merely realising a capital asset than to be engaging in a business, even if the development results in the creation and sale of a substantial number of lots over multiple stages.[17]

(c) The fact that land is developed by way of subdivision, including physical works required to achieve such subdivision, does not preclude a conclusion that the person selling the land is merely realising a capital asset and is not carrying on a business or an adventure or concern in the nature of trade.[18]

(d) Although the scale of the development activity undertaken by the person carrying out the development can be relevant, it is not determinative.[19]

• [42] Having regard to the statements of principle in those authorities, the Administrator submitted that the court should find that he was not, by reason of his involvement in the Project, carrying on an enterprise in the form of a business or an adventure or concern in the nature of trade, but merely realising a capital asset. That was said to follow from the following circumstances:

(a) Mrs Loeskow did not acquire the Land for the purpose of developing and selling it, but inherited it from her brother.

(b) Sale by way of subdivision was the most advantageous way of disposing of the asset Mrs Loeskow inherited, but that does not warrant the conclusion that she carried on a business of property development.

(c) The Developer has accepted all the business risk associated with undertaking the Project.[20] The Owner is not obliged to incur any costs of any development activities, and such costs do not diminish the amount of the Owner's Return. The Owner has agreed to sell the Lots for a fixed percentage of the Gross Sale Proceeds irrespective of whether the sale produces a profit or a loss for the Developer. The only risk to which the Owner is exposed is market risk arising from the timing of sales.

(d) The Owner's role in relation to the Development is, on the Administrator's submission, passive. It is limited to providing consents and signing documents required to facilitate decisions or actions taken by the Developer or Project Manager in circumstances where the Deed grants those entities the sole and exclusive right to exercise overall control of the Project.[21] The Administrator's evidence was that when he received a request from the Developer or Project Manager to sign, approve or consent to documents relating to the Project he would consider whether the request is consistent with the Deed and/or the relevant Development Lease. He would comply with the request if he concluded that such compliance was consistent with his obligations, as Owner and/or Landlord, under those agreements.

(e) The fact that the sale process involves repetitious transactions concerning a large number of Lots over a period of years does not involve the Owner in business-like activity. The Owner's role in signing sale contracts and other necessary transaction documents reflects the machinery for giving effect to what the Administrator characterised as being one substantive transaction, recorded in the Deed, being the means adopted by Mrs Loeskow (via her personal representatives) to realise the Land.

• [43] In my view, the matters identified by the Administrator are not sufficient to prevent the conclusion that, by engaging in the activities required to comply with his obligations under the Deed and the Development Leases, he is engaging in activities done in the form of a business and, consequently, carrying on an enterprise for the purposes of the GST Act.
• [44] Importantly, the issue must be determined by reference to principles set out in more recent authorities, referred to by the Commissioner, which address the relevant provisions of the GST Act.
• [45] In Federal Commissioner of Taxation v Swansea Services Pty Ltd,[22] McKerracher J held that the GST Act definitions of "enterprise" and "carrying on an enterprise" appear on their face to be substantially broader than the concept of "carrying on a business" for the purpose of income tax regulation. In circumstances where it would have been a simple matter for parliament to confine registration for GST to those entities "carrying on a business" in the income tax sense, earlier income tax cases determining whether there has been a carrying on of a business may need to be considered with some caution in this different context.[23]
• [46] Swansea Services concerned the purchase of art and antiques with the intention to sell later with a view to profit. In that context, McKerracher J stated that it could not be discerned from the GST Act, or from the explanatory memoranda to the GST Act, that parliament's intention was that "capital" activities would not amount to the carrying on of an enterprise, even though such activities may not ordinarily amount to the carrying on of a business or the undertaking of a profit-making scheme.[24]
• [47] In Toyama Pty Ltd v Landmark Building Developments,[25] White J held that the words "in the form of" have the effect of extending the meaning of "enterprise" beyond the carrying on of a business, to encompass activities that have the appearance or characteristics of business activities,[26] and referred to the statement by Lindley LJ in Rolls v Miller,[27] that the word "business":[28]

"... means almost anything which is an occupation, as distinguished from a pleasure - anything which is an occupational duty which requires attention is a business ..."

• [48] In Toyama, the sale of a development site by statutory trustees was found to be a supply in the course and furtherance of an enterprise carried on by the trustees. White J described the sale of the development site as a commercial transaction,[29] and the activities engaged in by the trustees - including selling the site - as having a commercial character.[30] This description of the trustee's conduct accords with the observation by McKerracher J in Swansea Services that, for an activity to be in the form of a business, it must still be reasonably intended to be profit making in the case of an individual.[31]
• [49] The Commissioner also referred to the observation by Gordon J in BHP Billiton Finance Ltd v Federal Commissioner of Taxation,[32] that the activities necessary to constitute a business are not onerous or extensive.
• [50] In the present case, the parties' agreement to undertake the Project is a commercial arrangement. There is no evidence in the material before me of the amount for which the Owner might have sold the Land in an undeveloped state. However, the evidence of Alistair Loeskow was that he believed that the offer from the Project Manager which led to the execution of the initial development deed in June 2005 (see [14] above) would deliver the highest and best value for the benefit of Mrs Loeskow from the sale of the Land. Consequently, it is reasonable to infer that the Owner has entered the commercial arrangement and agreed to accept the fixed percentage of the Gross Sale Proceeds of each Lot in return for the Developer and Project Manager developing the Land with the intention of ultimately receiving more from the Owner's Return on the sale of all of the Lots than would have been realised from a sale of the undeveloped Land.
• [51] Although the Developer and the Project Manager exercise control over the Project, undertake the development work and bear the risk associated with the cost of that development, the Administrator's role in the commercial arrangement is not entirely passive. Critically, the aims of the Project cannot be achieved without the Administrator granting Development Leases and delivering up possession of the relevant parts of the Land to be developed as a Stage and, subsequently, executing contracts of sale for Lots pursuant to his obligations under the Deed and the Development Leases. I am satisfied that this conduct, which facilitates the Development and the ultimate sale of the Lots under the terms of the commercial arrangement with the Developer and Project Manager, amounts to a series of activities done in the form of a business and, accordingly, comes within the broadly expressed definition of enterprise in the GST Act. Having regard to the number of Development Leases and sale contracts the Administrator has entered, and will enter in the future, I am satisfied that he is carrying on that enterprise for the purposes of s 23-5(a) of the GST Act.

Carrying on an enterprise: activities in the form of a lease

• [52] My conclusion in [51] is sufficient to resolve the dispute as to whether the first requirement for GST registration in s 23-5(a) of the GST Act - that the Administrator is carrying on an enterprise - is satisfied in this case. For completeness, I will also address the further basis which the Developer and Project Manager relied upon to submit that the Administrator is carrying on an enterprise.
• [53] As already noted, the Administrator has granted four Development Leases in accordance with his obligations under the Deed and will be required to grant Development Leases for further Stages of the Project in future.
• [54] In observing and continuing to observe the covenant of quiet enjoyment under the Development Leases, the Administrator is appropriately characterised, for the purposes of the GST Act, as engaging in an "activity" done "on a regular or continuous basis, in the form of a lease".[33] Although this proposition was denied in the Administrator's defence, I did not understand that denial to be maintained during argument.[34]
• [55] However, the Administrator argued that, in circumstances where the rent paid under each Development Lease is $1.00, this activity was done "without a reasonable expectation of profit or gain" so that it is excluded from the definition of enterprise by the operation of s 9-20(2)(c) of the GST Act. I do not accept that argument. As the Developer and Project Manager submitted, I can see no basis in the text or purpose of the GST Act to limit the phrase "reasonable expectation of profit or gain", when considered in this context, to the rent payable under a lease.
• [56] As noted in [50] above, I infer that the Owner agreed to the terms of the commercial arrangement for the development of the Land - including its obligation to grant and observe the Development Leases - in the expectation that the amount of the Owner's Return from the sale of Lots, following development facilitated by the Development Leases, will exceed the proceeds of selling the undeveloped Land. In those circumstances, the activity comprised by the observation of the covenant of quiet enjoyment has been done with a reasonable expectation of gain and is not excluded from the definition of enterprise under s 9-20(2)(c) of the GST Act.

Whether the Administrator's GST turnover meets the registration turnover threshold

• [58] The Developer and Project Manager advanced arguments addressing the second requirement for GST registration in s 23-5(b) of the GST Act by reference to both current GST turnover and projected GST turnover.
• [59] They did not submit that the Administrator's current GST turnover meets the registration turnover threshold of $75,000 on facts which presently exist. The Developer and Project Manager acknowledge that the Administrator does not presently have any current GST turnover. However, they initially submitted that this state of affairs will shortly change as the Administrator settles the contracts for sale of Lots, thereby making supplies with a combined value far in excess of $75,000. Once that occurs, pursuant to s 188-10(1)(a) of the GST Act, the registration turnover threshold would be met, provided that the Commissioner is not satisfied that the Administrator's projected GST turnover is below that threshold.[35]
• [60] On the basis of that argument, the Developer and Project Manager sought a declaration in paragraph 3 of the Further Amended Originating Application, not as to a present obligation on the part of the Administrator to be registered, but that the Administrator:

"will be required to be registered for GST pursuant to section 23-5 of the GST Act at the time of sale of the first of the Lots to be sold pursuant to the [Deed] between the [Developer] and the [Administrator]."

• [61] The Administrator objected to that formulation of the case against him because it seeks to have the court make a declaration based on matters that are presently, and will remain, hypothetical until such time as he has a current GST turnover that is at or above the registration threshold and the occasion has arisen for the Commissioner to form a view on his projected GST turnover for the purposes of s 188-10(1)(a).[36]
• [62] The Commissioner also submitted that the court should not make a declaration premised upon the existence of a particular state of mind where the occasion for the formation of that state of mind has not arisen.[37]
• [63] Having considered those submissions, the Developer and Project Manager did not press their case concerning the Administrator's current GST turnover. They limited their case to one based on the Administrator's projected GST turnover.[38]
• [64] There remain two issues to consider in determining whether the Administrator's projected GST turnover is at or above the registration turnover threshold. First, whether sales of the Lots are supplies by way of a transfer of ownership of a capital asset and therefore, pursuant to s 188-25(a) of the GST Act, to be disregarded in working out the Administrator's projected GST turnover. Secondly, relevant only to the lease enterprise issue, whether sales of the Lots are supplies that are not made in connection with the lease enterprise and therefore, pursuant to s 188-20(1)(c) of the GST Act, excluded from the aggregated value of the supplies which comprises the Administrator's projected GST turnover.

Whether sales of Lots are supplies by way of transfer of ownership of a capital asset

• [65] The GST Act does not define the term "capital asset". In the income tax context, a capital asset has been described as an asset that forms part of the taxpayer's "profit-yielding subject"[39] or the "business entity, structure or organisation set up or established for the earning of profit".[40] There is a distinction between these assets, which the taxpayer exploits in an effort to earn profits, and revenue assets (or trading stock) which are "turned over and bought and sold in the course of trading operations".[41] In general terms, the sale of revenue assets reflects the process by which a taxpayer operates to obtain regular returns.[42] However, a sale transaction entered into with the intention or purpose of making a profit or gain may amount to a revenue transaction (that is, the sale of a revenue asset) even though the transaction occurs otherwise than in the course of the taxpayer's business or can be characterised as an isolated venture or a one-off transaction.[43]
• [66] The only decision which has considered the operation of s 188-25(a) of the GST Act in this context is that of Senior Member Olding in the Administrative Appeals Tribunal in Collins v Federal Commissioner of Taxation.[44]
• [67] In that decision, Senior Member Olding accepted a submission by the Commissioner that the character of an asset must be determined at the time the relevant supply is made (or is likely to be made).[45] On that basis, the question whether the taxpayer has a profit-making intention or object at the time the relevant asset was acquired has less significance in considering the application of s 188-25(a) than it has in the income tax jurisprudence addressing the question whether an asset sold by a taxpayer was held on capital account or revenue account (see [41](a) above). Despite that distinction, Senior Member Olding accepted that income tax cases which address the capital/revenue distinction are relevant to a consideration of the application of s 188-25(a), although their utility is limited by the extent to which the outcomes in each case turn on its parti[46]lar facts.46 Ultimately the application of s 188-25(a) in turned on the question whether, on the facts of that case, the sale of subdivided land was more than the mere realisation of an asset in an enterprising way.

(a) the activities undertaken by the Administrator under the Deed and the Development Leases in furtherance of the Project;

(b) the duration of the Project, which has been pursued by the parties for a period of more than a decade already and which is expected to continue with sales of Lots on a staged basis for a decade into the future;

(c) the scale of the Project, involving subdivision of the Land into more than 2,000 Lots for dwellings, a potential school site and a neighbourhood centre site;

(d) the requirement for the grant of ministerial approval of a material change of use of the Land under s 242 of the Sustainable Planning Act 2009 (Qld) and the adoption of a bespoke development code.

• [71] In those circumstances, the Developer and Project Manager submitted that, by making the land available to be developed in accordance with the terms of the Deed, the Owner ventured the land into a profit-making undertaking or scheme.[47]
• [72] The Administrator emphasised that the term "mere realisation of an asset" - which is used in the income tax cases - has not been included in s 188-25(a) of the GST Act and that, having regard to the language of the provision itself, all that is required to exclude a supply from the calculation of the projected GST turnover is that the supply comprise a transfer of ownership of a capital asset.
• [73] Nevertheless, the Administrator also addressed the principles derived from the income tax cases in considerable detail and submitted that the court should reject the suggestion that the Owner had ventured the Land into a profit-making venture. In his submission, the authorities which refer to land being ventured into a business do not identify a test for when that has occurred, but instead amount to expressions of the relevant conclusion to be drawn from the facts of those cases, taking into account the various relevant factors discussed in [41] above. The Administrator ultimately contended that, having regard to those principles and the relevant features of the present case identified in [42] above, the court should conclude that he will hold the Lots (once those Lots are created) as capital assets such that the supplies constituted by his sale of the Lots should be disregarded in working out his projected GST turnover.
• [74] The Commissioner did not make a submission on the ultimate question whether the sale of the Lots would be characterised as the transfer of a capital asset for the purposes of s 188-25(a) of the GST Act but addressed relevant statements of principle from the income tax cases.
• [75] In summary, the Commissioner identified the following principles:

(a) A "capital asset", within the meaning of s 188-25(a) of the GST Act, is one which is transferred because of a mere realisation or change of investment by the owner of the asset rather than a transfer undertaken as part of the operation of a business or the carrying out of a scheme of profit making.[48]

(b) Although the fact that an asset was not acquired for the purposes of making a profit by sale is a factor which may point to it being a capital asset, such an asset may be ventured into a business or into a profit-making undertaking or scheme and, in that event, it will become a revenue asset.[49]

(c) The fact an owner of land does not itself carry out any development activities does not foreclose a conclusion that the owner has ventured that land into a business or a profit-making undertaking.[50] Determining whether a person is carrying on a business or has ventured an asset into a profit-making undertaking or scheme turns largely upon a consideration of the activities being undertaken, not whether those activities are being carried on personally by the taxpayer or by contractors.[51] However, the degree of personal involvement in the activities can be relevant with a lack of personal involvement sometimes pointing towards a conclusion that the character of the activities had not crossed over from being a mere realisation of a capital asset to a business or the carrying out of a profit-making undertaking or scheme.[52]

(d) The magnitude of a development is relevant to determining whether a sale of land is more than a mere realisation of a capital asset.[53] The magnitude of a substantial subdivisional enterprise commonly entails such a degree of systematic organisation, planning, management and repetition of purposeful profit-making activity that the carrying on of a business may be more clearly discerned.[54]

• [76] Given the attention which each of the parties paid to Whitfords Beach, it is necessary to say something further about that case.
• [77] Whitfords Beach concerned a company which, in 1954, purchased a tract of undeveloped bushland near Perth. The purpose of the acquisition was to secure access for the company's shareholders to fishing shacks which they occupied on an adjoining beachfront. Planning restrictions precluded the subdivision of any part of the land. The articles of association of the company expressed the intention of the original shareholders to subdivide the land if and when it became practicable to do so and to distribute the subdivided land among the shareholders so that each of them would acquire one or more residential sites with a value corresponding to their shareholding.
• [78] On 20 December 1967, the shareholders sold the shares in the company to three companies with no association to any of the selling shareholders. The three new shareholding companies - which were experienced in land development - purchased the shares to obtain control of the land and intended that the company would become solely engaged in the development, subdivision and sale of the land over a period of years at a profit which was expected to be many times the price paid for the shares. On the same day, the company adopted a new set of articles which omitted the special distribution provisions. Part of the land was rezoned in 1969 to enable it to be subdivided. Development and subdivision began in 1970, and from 1971 lots were sold to the public by selling agents engaged by the company. The company received substantial sums from the sale of the subdivided lots. The question which arose was whether the profit it earned from sales was assessable to income tax, either on the basis that those amounts were received in the course of carrying on a business or that they were profits received from a profit-making undertaking or scheme.
• [79] In the High Court, Gibbs CJ, Mason and Wilson JJ held that the profits were assessable because they were received in the course of carrying on a business. Murphy J agreed that the profits were assessable but concluded that was because they were received from a profit-making undertaking or scheme.
• [80] In terms of the relevant principles under the income tax jurisprudence, Gibbs CJ stated:

"The question whether the profits were income within ordinary concepts depends on the application of the tests laid down in Californian Copper Syndicate v. Harris and in the cases that have followed that decision. Was what was done merely a realization of the taxpayer's asset, or was it something done in what was truly the carrying on or carrying out of a business? In other words the question is 'whether the facts reveal a mere realization of capital, albeit in an enterprising way, or whether they justify a finding that the' [taxpayer] 'went beyond this and engaged in a' [business of profit-making] 'in land albeit on one occasion only': see McClelland v. Federal Commissioner of Taxation where however the words used are 'a trade of dealing in land'; the words which I have ventured to substitute seem more consonant with the Australian authorities. The words 'merely' and 'mere' in these statements seem to me to be an important part of the definition of the line between profits that are taxable and those that are not. If the taxpayer does no more than realize an asset, the profits are not taxable. It does not matter that the taxpayer goes about the realization in an enterprising way, so to secure the best price. As I have said in Federal Commissioner of Taxation v. Williams:

'The situation is not altered by the fact that the landowner seeks and acts upon the advice of an expert as to the best method of subdivision and sale or by the fact that he carries out work such as grading, levelling, road building and the provision of reticulation for water and power to enable the land to be sold to its best advantage.'

Further, the mere magnitude of the realization does not convert it into a business: Commissioner of Taxes v. British Australian Wool Realization Association. But if the taxpayer does engage in an operation of business, the proceeds are income and taxable."

• [81] Although Gibbs CJ noted that, because the question to be decided is one of fact, it would be unprofitable to examine the circumstances of the cases in which the question had previously been addressed, he did refer to the cases of Scottish Australian (as the strongest authority supporting the taxpayer's position) and Fox's Case (relied on by the Commissioner). In determining the question before the court,[56] Gibbs CJ expressed doubt whether the profits resulting from the development, subdivision and sale of the land would have been taxable if not for the events which occurred on 20 December 1967, which he considered transformed the company from one which held land for the domestic purposes of its shareholders to one whose purpose was to engage in a commercial venture with a view to profit. It was in the light of those circumstances that the work of development and subdivision was seen by Gibbs CJ to be more than the mere realisation of an existing asset and to be work done in the course of what was truly a business venture.
• [82] Mason J expressed the relevant principles as follows:[57]

"The principal, if not the essential, question under the second limb of s. 26(a), as under s. 25(1), is whether more is involved than the mere realization of an asset. As Deane J. noted in his dissenting judgment in the Federal Court, we must not overlook the importance and the scope of the word 'mere'. To bring this case within the second limb the Commissioner does not need to show that the respondent was carrying on a business. As we have seen, it is enough to answer the statutory description that there was a profit-making undertaking or scheme which exhibited the characteristics of a business deal, even though it did not amount to the carrying on of a business. If what has happened amounted to no more than the mere realization of an asset then it was not a profit-making undertaking or scheme."

• [83] On the facts of the case, Mason J concluded that on 20 December 1967 the company committed the land in question to a profit-making undertaking or scheme of considerable magnitude involving the development and subdivision of the land into residential allotments.[58] His Honour observed that, in deciding whether the development, subdivision and sale of the land was the mere realisation of an asset or the carrying out of a profit-making undertaking or scheme, it was relevant to take into account that the company came under the ownership and control of new shareholders whose purpose was to use the company for the execution of what - judged from their point of view - was a profit-making undertaking or scheme. Likewise, in deciding whether the company was carrying on the business of land development it was material that the new shareholders would have been carrying on such a business had they purchased the land from the company and carried out the development and sale on their own account. However, Mason J considered that, even apart from those matters, the nature of the subdivision itself showed that it involved more than mere realisation of an asset, stating:[59]

"In this respect I do not agree with the proposition which appears to be founded on remarks in some of the judgments that sale of land which has been subdivided is necessarily no more than the realization of an asset merely because it is an enterprising way of realizing the asset to the best advantage. That may be so in the case where an area of land is merely divided into several allotments. But it is not so in a case such as the present where the planned subdivision takes place on a massive scale, involving the laying out and construction of roads, the provision of parklands, services and other improvements. All this amounts to development and improvement of the land to such a marked degree that it is impossible to say that it is mere realization of an asset. We need to bear in mind that the subdivision of broad acres into marketable residential allotments involves much more in the way of planning, development and improvement than was formerly the case."

• [84] Wilson J also identified the relevant issue as being whether the company, in proposing to maximise the amount of money it received on sale of the land, committed the land to a business venture or to a profit-making undertaking or scheme or merely sold the land to the best advantage. As to that, His Honour stated:[60]

"In answering this question, I begin by focussing on the true significance of the events of 20 December 1967. I do not find it necessary to consider whether or in what circumstances the profit-making purpose of the new shareholders may be attributed to the taxpayer .... There is enough in the changes in its constitution and the contracts into which it entered to signify the launching of a business of developing, subdividing and selling the land. It remains a question of degree whether the proceeds of that business constitute income according to ordinary concepts, and the answer depends, in my opinion, whether what happens to the subject land in the course of conducting that business is such as to take the process beyond what may properly be described as mere realization.

In the present case, a great deal had to be done in order that the land could be sold in residential subdivision. Its character had to undergo significant change. That which at 20 December 1967 was no more than a distant potentiality had to be brought within the range of practical achievement. I am inclined to question whether some of the earlier cases have not assumed too readily that the conversion of broadacres into residential allotments with all the services and facilities that are requisite to an urban environment is no more than the realization of a capital asset in an enterprising way. But that question need not be pursued here, because this case exhibits the additional feature that at the material time the subject land as a matter of law could not be sold otherwise than in its unsubdivided state. The business upon which the taxpayer embarked in 1967 required active measures to be undertaken in order to remove the legal impediment to development of the subject land. That change in its character was essential to the successful achievement of the taxpayer's purpose. Taken together with all the attendant circumstances, it satisfies me that the taxpayer ventured the subject land as the capital of the business in such a way as to make the proceeds of that business assessable income within the meaning of s. 25 of the Act."

• [85] Having regard to the judgments in Whitfords Beach, I accept the Commissioner's submission that the older authorities referred to by the Administrator - including Hudson's Bay, Scottish Australian and Williams - which suggest that even very extensive developments of land will not necessarily go beyond the mere realisation of a capital asset, do not reflect the approach adopted more recently by Mason J[61], Murphy J[62] and Wilson J[63].
• [86] It remains then to consider whether, having regard to the circumstances of this case and the principles derived from the income tax jurisprudence concerning the capital/revenue dichotomy, sale by the Administrator of Lots in accordance with his obligations under the Deed and the Development Leases amounts to a supply made, or likely to be made, by way of transfer of a capital asset for the purposes of s 188-25(a) of the GST Act.
• [87] As previously noted, although the Administrator accepted that the Project involves the conduct of an extensive land development business, he submitted that this business is being conducted solely by the Developer and Project Manager and not being conducted by him. He argued that the Owner agreed to sell the Land in exchange for a fixed percentage of the Gross Sale Proceeds which is not dependant on the success or otherwise of the business conducted by the Developer and Project Manager. That is because, in circumstances where the Owner is not required to pay any of the expenses of the Development, such costs do not diminish the Owner's Return. Instead, the Developer bears all the risk and stands to benefit (or lose) if development costs come in under (or over) budget.
• [88] I accept that, in circumstances where the Owner does not bear the risk of the cost of the development, the Owner is not engaged in the same business as the Developer and Project Manager. That fact simply serves to highlight that, for the purposes of the GST Act, the enterprise which the Administrator is carrying on is different in form to that which the Developer and Project Manager are carrying on. It does not compel a conclusion that the sale of Lots should be disregarded when calculating the Administrator's projected GST turnover.
• [89] In my view, determining whether Lots will be held by the Administrator as capital assets for the purposes of s 188-25(a) requires consideration of the potential benefits gained and risks borne by the Owner under the commercial arrangement, set out in the terms of the Deed and the Development Leases, which has facilitated the subdivision of the Land. As previously noted in , I infer that the Owner entered that arrangement for the purpose of obtaining a greater return, in the form of the agreed fixed percentage of Gross Sale Proceeds of the Lots, than would otherwise have been achieved from a sale of the Land in an undeveloped state. I am satisfied on the material that the Owner's conduct in agreeing the terms of the commercial arrangement with the Developer, complying with the obligation to facilitate the Development and ultimately selling Lots has been (and I infer will continue to be), to adopt words used in , "planned, organised and cohent".64 In that sense, by entering into and acting in accordance with the terms of the commercial arrangement struck with the Developer, the Owner has pursued an undertaking or scheme that, from the Owner's perspective, satisfies the description "profit-making". Having regard to both the commercial nature of the arrangement with the Developer and the character, scale and duration of the Project, I am ultimately satisfied that, by making the Land available for the Development, the Owner has committed that land to a profit-making scheme or undertaking.

Whether sales of Lots are supplies that are not made in connection with the lease enterprise

• [93] It was common ground that if, as I have found, the Administrator is carrying on an enterprise in the form of a business the sale of the Lots would constitute supplies made in connection with that enterprise and, therefore, would not be excluded from the calculation of the Administrator's projected GST turnover under s 188-20(1)(c) of the GST Act. In case I am wrong in concluding that the Administrator is carrying on an enterprise in the form of a business I will deal briefly with the Administrator's argument that sales of the Lots would not be supplies made in connection with the lease enterprise.
• [94] The Administrator submitted that the supply constituted by the sale of a Lot is fundamentally different to the supply made under the Development Leases, namely providing exclusive possession of the Stage Land for the permitted use of developing that land.
• [95] During the course of argument, both the Administrator and the Commissioner made submissions on the proper construction of the phrase "in connection with an enterprise" in this context. The Administrator submitted that phrase should be construed as having the same meaning as the phrase "in the course or furtherance of an enterprise" in the definition of a taxable supply in s 9-5(b) of the GST Act. The Commissioner submitted for a broader construction.
• [96] Ultimately I have not found it necessary to resolve that issue of statutory construction because, even if I were to accept the Administrator's construction, I would be satisfied that the sale of a Lot would be a supply made in connection with the lease enterprise for the reasons already addressed in [54] to [57] above. Where the Administrator has granted the Development Leases and observed their terms for the purpose of achieving a gain from the sale of Lots following development facilitated by those leases, I am satisfied that sales of Lots would properly be characterised as supplies made in the course or furtherance of the lease enterprise and therefore, even on the Administrator's submission, would be supplies made in connection with the lease enterprise.

The Administrator's projected GST turnover exceeds $75,000

• [97] My conclusion on the foregoing issues means that the value of sales of subdivided blocks are to be included in the calculation of the Administrator's projected GST turnover. Based on the evidence that the Developer expects settlement of the sales contracts already executed by the Administrator - each of which has a purchase price not less than the GST registration turnover threshold of $75,000 - will commence in November 2023, I am satisfied that (when calculated from September 2023 being the month in which the matter was heard) the sum of the values of all the supplies that the Administrator person has made, or is likely to make, during that month and the following 11 months exceeds $75,000. This means that, by reason of s 188-10(1)(b) of the GST Act, the Administrator's GST turnover meets the registration turnover threshold.

• [98] In circumstances where I am satisfied that:

(a) the Administrator is carrying on an enterprise in the form of a business (or alternatively, on a regular and continuous basis, in the form of a lease); and

(b) the Administrator's GST turnover meets the registration turnover threshold,

I have concluded that, under s 23-5 of the GST Act, the Administrator is required to be registered for GST.

• [99] Accordingly, I will make the declaration sought in paragraph 2 of the Further Amended Originating Application.

The Administrator's liability to pay GST on sales of Lots

• [100] The requirement that the Administrator be registered for GST has the consequence that the sale of a Lot will be a taxable supply pursuant to s 9-5 of the GST Act. The Administrator will be the person who makes the taxable supply upon the sale of a Lot. Consequently, he must pay the GST payable on the supply pursuant to s 9-40 of the GST Act.
• [101] The mechanism by which the Administrator's liability to pay GST on the sale of a Lot will be satisfied is found in the GST withholding provisions in subdivision 14E of schedule 1 to the Taxation Administration Act 1953 (Cth) which apply to certain real estate sales after 1 July 2018. Under the GST withholding provisions, the person who receives a taxable supply that includes new residential premises or potential residential land (i.e. the purchaser of a Lot) would be the person liable to pay the Commissioner an amount in respect of GST at the time of settlement.[65] The person who makes the taxable supply (i.e. the Administrator) would be entitled to a credit in respect of the third party purchaser's payment.[66]
• [102] I turn now to the construction issues in dispute between the parties to the Project.

• [103] The Owner's right to receive the Owner's Return is provided for in cl 5.1 of the Deed:

"5.1 The Owner is to receive the Owner's Return in accordance with the terms of each Development Lease."

• [104] The Developer's entitlement is provided for in cl 5.7 of the Deed:

"5.7 The Developer is entitled to receive and be paid the Developer's Return."

• [105] Clause 17.1 of the Deed defines "Developer's Return" and "Owner's Return" as follows:

"Developer's Return means all of the proceeds of sale of Lots and all other monies received in respect of the Project, but excluding the Owner's Return.

Owner's Return means the amount payable to the Owner under a Development Lease, excluding rent, outgoings and monies paid by a tenant on account of GST."

• [106] Both cl 5.1 and the definition of Owner's Return in the Deed direct attention to the terms of the Development Leases.
• [107] Clause 5 of each Development Lease addresses the sale of Lots and the subsequent distribution of the proceeds of sale. By cl 5.1, the Tenant/Project Manager is obliged to use reasonable endeavours to promote, market and sell the Lots. In order for the Tenant/Project Manager to satisfy that obligation, the Landlord/Owner authorises the Tenant/Project Manager to, among other things, collect and distribute the proceeds of settlement of Lots (cl 5.2.3).
• [108] The parties' return from the proceeds of sale is then addressed in cll 5.3 and 5.4 of each Development Lease:

5.3 The Tenant will pay the Landlord on the date of settlement of each Lot, an amount equal to 25% of the Gross Sale Proceeds for that Lot.

5.4 The Tenant is entitled to receive and be paid all the proceeds of sale of Lots and other monies received in respect of the Works and the Development for the Stage, after payment of the amounts due to the Landlord under clause 5.3."

• [109] "Gross Sale Proceeds" is defined in cl 22.1 of each Development Lease to mean:

"• in the case of a vacant unimproved Lot the actual amount received at settlement from the sale of the Lot comprising the sale price plus or minus any adjustments to it (eg Rates or Charges) pursuant to the contract for the sale of the Lot less any GST payable on that amount;

• in the case of any Lot which is sold or disposed with Building Improvements, an amount equal to that part of the sale price attributed to the unimproved value of the Lot (ie without any Building Improvements) as agreed between the parties, or failing agreement within 7 days after the contract or agreement for the sale of the Lot is signed, then as determined by the Valuer, and in either case less any GST payable on that amount."

• [110] In that context, the Developer and Project Manager seek a declaration in the following terms:

"In calculating the amount of the Owner's Return to be received by [the Administrator] pursuant to clause 5.1 of [the Deed] and cl 5.3 of [the Development Lease], the Gross Sales Proceeds (as that term is used in [the Development Lease]) for each Lot will be equal to the proceeds of sale of each Lot less the amount of any GST payable by [the Administrator] (whether or not the purchaser of the Lot makes a payment of GST in relation to that supply pursuant to section 14-250 of schedule 1 to the Taxation Administration Act (Cth) 1953) in respect of the supply of that Lot."

• [111] The Developer and Manager submitted that this declaration would do no more than recite the operation of the provisions of the Deed and the Development Leases. Any payment actually made by a purchaser of a Lot pursuant to the GST withholding provisions would not affect the operation of the contractual provisions. What is relevant to the calculation of the Owner's Return is the amount of GST payable, not by whom it is paid. On that basis, the Developer and Project Manager submitted that the Gross Sale Proceeds will be the actual amount received at settlement of the sale contract less the GST payable on the price of the Lot.
• [112] From that point, the Developer and Project Manager argued that an amount equivalent to the GST payable on the sale of a Lot forms part of the Developer's Return because the "proceeds of sale" referred to in cll 5.4 of each Development Lease (and in the definition of Developer's Return in cl 17.1 of the Deed) comprise the entirety of the price for the Lot without any deduction for GST payable on the sale. That was submitted to be the consequence of the parties not adopting, in cl 5.4 of each Development Lease, the defined term "Gross Sale Proceeds" which was used in cl 5.3 and which specifically excludes GST payable. The Developer and Project Manager emphasised that it would have been a simple matter to state that the return they were to receive was to be calculated after deducting GST if that had been parties' intention. They submitted that the ordinary meaning of the broadly expressed entitlement to payment - in cl 5.4 of each Development Lease to "all the proceeds of sale of Lots and other monies received in respect of the Works and the Development" and in the definition of Developer's Return in cl 17.1 of the Deed to "all of the proceeds of sale of the Lots and all other monies received in respect of the Project" - is that the Developer is entitled to receive and be paid all amounts received on the sale of a Lot after the Owner's Return has been paid, without any deduction on account of GST payable on the Owner's supply of a Lot to a purchaser.
• [113] Notwithstanding the matters identified by the Developer and Project Manager, I do not accept the construction they advanced.
• [114] Construing the language of the relevant contractual provisions according to its natural and ordinary meaning, having regard to the context of the provisions within the Deed and each Development Lease and the purpose of the commercial arrangement to carry out the Project, I consider that a reasonable business person in the position of the parties would have understood that the Owner's Return was an amount calculated after payment of GST to the Commissioner. Gross Sale Proceeds comprise the GST inclusive price of the Lot less the amount of GST required to be paid to the Commissioner from that GST inclusive price. Put simply, Gross Sale Proceeds comprise the amount received upon settlement of the sale of a Lot, net of GST. GST would be paid to the Commissioner from the GST inclusive price for the Lot. The Owner's Return would be 25% of the Gross Sale Proceeds which remained after the payment of GST. On this basis, the parties' objective intention was that the Owner's Return would be an amount that was net of the GST payable on the sale of a Lot.

(a) the Gross Sale Proceeds would be $200,000, being the GST inclusive price received at settlement less the $20,000 GST payable on that amount;

(b) the Owner's Return would be $50,000, being 25% of the Gross Sale Proceeds;

(c) the Developer's Return would be $170,000, being the GST inclusive price received at settlement less the Owner's Return;

(d) the Owner would then be required to pay $20,000 GST to the Commissioner from the Owner's Return, effectively reducing that sum by the amount of GST payable on the sale of the Lot.

• [118] The result is no different in circumstances where the purchaser pays the GST amount of $20,000 to the Commissioner pursuant to the GST withholding provisions. In those circumstances, the effect of the Developer and Project Manager's construction would be:

(a) the Gross Sale Proceeds would be $200,000, being the GST inclusive price less the $20,000 GST paid to the Commissioner by the purchaser;

(b) although the Owner's Return would notionally be $50,000, being 25% of the Gross Sale Proceeds, the amount actually received by the Owner would be reduced by the $20,000 GST payable on the sale of the Lot, with that amount being included in the Developer's Return even though GST had in fact been paid by the purchaser;

(c) the Developer's Return would be $170,000, being the GST inclusive price received at settlement less the (notional) Owner's Return.

• [119] On either basis, the Owner would not receive the full amount of the Owner's Return. Instead, the amount received by the Owner from the sale of the Lot would be reduced, and the amount of the Developer's Return would be increased, by the GST payable on the sale. For the reasons I have set out above, I consider that outcome to be inconsistent with the parties' objective intention.
• [120] The Developer and Project Manager submitted that examples of this type fail to take account of the Owner's entitlement to an input tax credit for GST paid to the Developer on an invoice for its services and the effect that credit would have upon the Owner's final position. I do not accept that criticism. The declaratory relief the Developer and Project Manager seek, extracted at [110] above, focusses on what is meant by the term Gross Sale Proceeds. Their submissions were addressed more specifically to the question whether, as a matter of construction, the Owner's Return calculated as a fixed percentage of those Gross Sale Proceeds should be reduced by the inclusion in the Developer's Return of GST payable on the sale of a Lot. In my view, the private tax consequences for either party following receipt or payment of the amounts provided for by the Deed and each Development Lease do not bear upon the resolution of the construction questions raised by the Developer and Project Manager. Even if that were not the case, the examples set out in the schedule the Developer and Project Manager handed up during[68]he hearing68 indicate that if their construction is accepted the amount the Owner ultimately receives from the sale of a Lot would still be something less than 25% of the Gross Sale Proceeds.
• [121] For these reasons, I am not prepared to make the declaration sought in paragraph 4 of the Further Amended Originating Application.

• [122] It was common ground between the parties to the Project that, in providing development services pursuant to the Deed and each Development Lease, the Developer makes a taxable supply to the Owner. Pursuant to s 9-40 of the GST Act, the Developer is the person who is liable to pay GST on that supply.
• [123] The issue raised by paragraphs 5 and 6 of the Further Amended Originating Application is whether the Deed or the Development Leases bring about the result that the Developer's Return from the sale of a Lot is to be increased by the amount of the Developer's liability for GST.
• [124] The Deed addresses GST in cl 15.6, which provides:

"15.6 Unless otherwise specified, any payment made by one Party to another under this document is exclusive of GST and:

15.6.1 A Party must pay to the other [Party] an amount equivalent to the GST at the time that that Party is required to make the payment.

15.6.2 The Party making the Taxable Supply must give to the other a tax invoice. If the Party does not provide a tax invoice then the other Party is not required to make any payment of GST under this clause until it has received a tax invoice.

(a) a Project Cost,

(b) any other reimbursement from one Party to the other under this document;

(c) any expense, loss or liability incurred or to be incurred by one Party under this document,

then that Party may include GST payable on the Taxable Supply giving rise to that amount but must deduct the amount of an input tax credit to which that Party is entitled."

• [125] Clause 20 of each Development Lease relevantly provides:

20.1 The amount of rent and all other amounts payable under this Lease are exclusive of GST.

20.2 If the rent or any other payment obligation under or in connection with this Lease is a Taxable Supply, then the consideration for the Supply is increased by an additional amount equal to the amount of that consideration multiplied by the relevant GST rate. The additional amount is payable on receipt of a tax invoice."

• [126] The Developer and Project Manager submitted that the effect of these clauses is that the Developer's Return is exclusive of GST and the Administrator must, upon receiving a tax invoice from the Developer, gross-up payment of the Developer's Return by the amount of GST payable on that supply.
• [127] The Administrator submitted this argument should be rejected because both cl 15.6 of the Deed and cl 20 of each Development Lease apply upon the making of a payment, or an obligation to make a payment, by one of the parties to the other. He argued that the process for distribution of the proceeds of sale of a Lot does not involve the Owner making, or being required to make, a payment to the Developer or the Project Manager.
• [128] The issue turns on whether a reasonable business person in the position of the parties would have understood the Developer's Return to be either: a payment made by the Owner to the Developer within the meaning of cl 15.6 of the Deed; or an amount payable by the Owner, or a payment obligation on the part of the Owner, within the meaning of cll 20.1 and 20.2 of each Development Lease.
• [129] In my view, there is significant force in the Administrator's submission that the words used in cl 5.7 of the Deed - that the Developer is "entitled to receive and be paid" the Developer's Return - do not create an obligation on the part of the Owner to pay the Developer's Return. Clause 5.4 of each Development Lease uses the same words: the Project Manager is "entitled to receive and be paid" all the proceeds of sale of Lots which remain after payment of the Owner's Return.
• [130] Under the mechanism agreed for the collection and distribution of the proceeds of sale of Lots, the Developer controls the distribution of sale proceeds. By cl 5.2.3 of each Development Lease, the Project Manager (as the Developer's nominee) is authorised by the Owner to collect and distribute the proceeds of sale. Consistently with that authority, the sales contracts for Lots include a requirement that the buyer pay the balance of the purchase price to the Project Manager in accordance with the Owner's authority.
• [131] The consequence of the Developer (through the Project Manager) controlling the distribution of the sale proceeds is that there is no occasion where the Owner is called upon or obliged to pay the Developer's Return to the Developer. Having collected the purchase monies from the buyer under the sale contract, the Project Manager pays the Owner's Return to the Owner pursuant to cl 5.3 of each Development Lease and then retains Developer's Return on behalf of the Developer or, alternatively, remits the Developer's Return to the Developer. I do not accept the submission of the Developer and Project Manager that the collection and distribution of the proceeds of sale by the Project Manager with the Owner's authorisation has the effect that the Owner causes purchase monies received by the Owner as the seller of a Lot to be paid to the Developer. The only monies the Owner receives from the sale of a Lot is the Owner's Return.

• [136] By cl 5.6 of the Deed, the Developer is responsible for paying land tax levied and assessed on the Land.
• [137] The sale contracts for Lots provide for an adjustment to increase the purchase price on account of land tax paid prior to settlement.[70]
• [138] The definition of Gross Sale Proceeds in each Development Lease, set out in full at [109] above, refers to the amount received at settlement from the sale of the Lot comprising the purchase price "plus or minus any adjustments to it (eg Rates or Charges) pursuant to the contract for the sale of the Lot".
• [139] The issue is whether the adjustment to increase the purchase price on account of land tax is to be taken into account in determining the Gross Sale Proceeds under the Development Lease and, thereby, the Owner's Return.
• [140] The submission by the Developer and Project Manager that, on the proper construction of the Deed and each Development Lease, the additional amount paid by a buyer in respect of land tax is not to be considered in calculating the Gross Sale Proceeds or the Owner's Return does not sit comfortably with the ordinary meaning of the broad language used in the definition of Gross Sale Proceeds: "any adjustments" to the purchase price "pursuant to the contract for the sale of the Lot". An adjustment under the sale contract to increase the purchase price on account of land tax would seem to fall within the plain meaning of those words.
• [141] In addressing this difficulty, the Developer and Project Manager submitted that when the definition of Gross Sale Proceeds is read together with the definition of "Rates and Charges" in each Development Lease (which expressly excludes land tax), it is evident that the parties have specifically excluded land tax from the parenthetical phrase "(eg Rates or Charges)" in the definition of Gross Sale Proceeds. That is, the parties have excluded land tax from their description of the types of adjustments which may be taken into account when calculating the Gross Sale Proceeds.
• [142] I do not accept this contention. The Administrator submitted that the exclusion of land tax from the definition of "Rates and Charges" in the Development Leases is explained by the fact that the first iteration of the Deed was entered into in June 2005, when s 44A of the (Qld) rendered unenforceable a provision in a lease requiring a lessee to pay land tax or to reimburse a lessor for land tax. Even without that explanation, as the Administrator further submitted, the Developer and Project Manager's argument treats the parenthetical example of "Rates or Charges" as limiting the scope of the adjustments it is said to exemplify. I cannot accept that the parties intended that the inclusion of the phrase "Rates or Charges", as an example of an adjustment to the purchase price which might be made pursuant to the sale contract, would exhaust the categories of included adjustments or limit the otherwise broad language of the definition of Gross Sale Proceeds to exclude an adjustment for land tax from the calculation.

• [148] It is declared that the first respondent is required to be registered for GST pursuant to s 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).
• [149] Otherwise the Further Amended Originating Application is dismissed.
• [150] I will hear the parties as to costs.

[1] The "Development" is defined to be the development of the Land to create a master planned community with various uses, including residential lots for detached and non-detached dwellings.

[2] The term "Lot" is defined to mean each separate parcel of land created upon subdivision being in a final and developed state intended for sale.

[3] The "Development Documents" are defined to mean the Deed, the Master Plan and Master Program, a Development Lease, the local government approval for the Development and any other applicable approval, and any instrument which the Owner and the Developer acknowledge to be a Development Document.

[11] GST Act, s 23-15(1)(b) and A New Tax System (Goods and Services Tax) Regulations 2019 (Cth) (GST Regulations), reg 23.15.01.

[16] Hudson's Bay Co Ltd v Stevens (1909) 5 TC 424 (Hudson's Bay), 436, 437-8 and 439-40; Scottish Australian Mining Company Limited v Federal Commissioner of Taxation [1950] HCA 16; (1950) 81 CLR 188 (Scottish Australian), 195; Ruhamah Property Co Ltd v Federal Commissioner of Taxation [1928] HCA 22; (1928) 41 CLR 148 (Ruhamah), 154-5; McClelland v Commissioner of Taxation [1970] HCA 39; (1970) 120 CLR 487, 495; Commissioner of Taxation v Williams [1972] HCA 31; (1972) 127 CLR 226 (Williams), 241, 245-6 and 248-9.

[17] Statham v Federal Commissioner of Taxation (1988) 20 ATR 228 (Statham), 235-6; Casimaty v Deputy Commissioner of Taxation (1997) 151 ALR 242.

[18] Hudson's Bay, 437-8; Scottish Australian, 195-6; Williams, 249; Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 150 CLR 355 (Whitfords Beach), 368; Statham, 235.

[19] Hudson's Bay, 436; Statham, 233; Scottish Australian, 196; Whitfords Beach, 368.

[22] [2009] FCA 402; (2009) 72 ATR 120 (Swansea Services).

[23] Swansea Services, 141-2 [65]-[68].

[25] [2006] NSWSC 83; (2006) 197 FLR 74 (Toyama).

[26] Toyama, 87 [69]; see also Swansea Services, 146-7 [98]-[99].

[27] [1884] UKLawRpCh 137; (1884) 27 Ch D 71.

[28] [1884] UKLawRpCh 137; (1884) 27 Ch D 71, 88.

[32] [2009] FCA 276; (2009) 72 ATR 746, 777 [101].

[33] Federal Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49; (2014) 254 CLR 376, 391 [37].

[39] United Collieries Ltd v Inland Revenue Commissioners (1930) SC 215, 220 cited in Associated Newspapers Ltd v Federal Commissioner of Taxation [1938] HCA 73; (1938) 61 CLR 337 (Associated Newspapers), 360.

[43] Whitfords Beach, 376; Federal Commissioner of Taxation v Myer Emporium Ltd [1987] HCA 18; (1987) 163 CLR 199, 209-10.

[44] (2022) 114 ATR 682 (Collins).

[48] Californian Copper Syndicate v Harris (1904) 5 TC 159, 166; Ruhamah, 154.

[49] Williams, 245; Whitfords Beach, 396-7.

[50] Official Receiver in Bankruptcy v Federal Commissioner of Taxation [1956] HCA 63; (1956) 96 CLR 370 (Fox's Case), 387; Whitford's Beach, 394; Collins, 693 [63].

[51] Stevenson v Commissioner of Taxation (1991) 29 FCR 282 (Stevenson), 290-1.

[55] Whitfords Beach, 367-368 (citations omitted).

[65] Taxation Administration Act 1953 (Cth), sch 1 s 14-250.

[66] Taxation Administration Act 1953 (Cth), sch 1 s 18-60.

[67] For arithmetic simplicity, the argument before me proceeded on the basis that the amount of GST payable on the supply of a Lot would be 10% of the value of the taxable supply, the value being 10/11 of the supply's price: see ss 9-10 and 9-75 of the GST Act. Neither party argued that the construction questions would be resolved differently if the margin scheme applied.

[69] For example, see cll 6.11 and 11.11 of the Deed and cll 2.1, 2.2, 2.4, 2.5, 3.11, 4.3.4, 4.5.4, 13.9 and 16.1 of each Development Lease.

[70] See cl 2.6(1) and the definition of "Outgoings" in cl 1.1(2)(z), each as amended by Special Condition 2.