Pitard and Others v Commissioner of State Revenue (Review and Regulation) [2019] VCAT 1074

Subject to the remission of penalty tax in accordance with the determination of the respondent dated 21 February 2018, the assessments issued to the applicants on 21 August 2017 (and as identified below) are confirmed:

1. Mr Simon Maurice Pitard (No. 14305749)
2. 4 Kitmont Street Pty Ltd [now Steller Capital Pty Ltd] (No. 14304840)
3. Steller Developments Pty Ltd (No. 14304484)
4. Steller Projects Pty Ltd (No. 14305448)
5. Steller Elite Pty Ltd [now Supreme Elite Pty Ltd] (No. 14305820)

Mr P Solomon QC and Mr N Kotros, of Counsel (instructed by Strongman & Crouch)

Mr D Williams QC and Mr D. Morgan, of Counsel (instructed by State Revenue Office Legal Services Branch)

1. Each of the applicants was the named purchaser of land in Victoria under one or more contracts of sale entered between 9 December 2014 and 2 July 2015. The applicants provided a table identifying 35 such contracts.
2. The first applicant, Mr Simon Pitard, is a registered domestic and commercial builder and a principal of a group of loosely related entities referred to as the Steller Group.[1] His evidence is that the Steller Group is a 'vertically integrated development company' involved in the construction of residential, mixed use, residential aged care, vertical retirement living, child care and hotel developments.[2]
3. Apart from Mr Pitard, the other 'central invidividuals involved in the group have been Nicholas Smedley, James Cirelli, Thomas Vines and Alastair Williams' (collectively the Principals).[3]
4. In his Statement of Evidence, Mr Pitard explained the 'commonality in the process around the development activities' of the Steller Group.[4] Relevantly, although the applicants were named as the purchasers of land in the contracts of sale, the transferee of each parcel of land was a different entity. This was because each property 'was purchased, invariably before it was decided which entity within the group was to be nominated as purchaser'.[5] The entities nominated as transferees were determined at monthly meetings of the Steller Group, 'broadly informed by cash flow and equity contribution considerations'.[6] The transferees were companies, generally acting as trustees of discretionary or unit trusts, where the directors, shareholders and beneficiaries were largely one or more of the Principals, relatives of the Principals or entities associated with the Principals.[7]
5. Between the time of entry into the contracts of sale and the date on which the ultimate transferees were nominated, applications were made for planning permits in relation to development of the relevant properties.
6. It is common ground between the parties that the applications for a planning permit amounted to 'land development' as defined in section 3(1) of the Duties Act 2000 (Duties Act) and that, as the applications were made between the date of entry into the contracts of sale and the date on which the nomination of the transferees was made, it gave rise to duty consequences for both the applicants and the transferees under Division 3 of Part 4A of the Duties Act (commonly referred to as the Sub-sale Provisions).
7. On 21 August 2017, the Commissioner of State Revenue (Commissioner) issued assessments to the applicants for duty, penalty and interest totalling $3,781,681.78 as follows (Assessments):

4 Kitmont Street Pty Ltd [now Steller Capital Pty Ltd] (14304840)

Steller Elite Pty Ltd [now Supreme Elite Pty Ltd] (14305820)

1. In their objection dated 20 October 2017,[8] which was supplemented by a further submission dated 20 November 2017,[9] the applicants contended that:
   1. in relation to duty, '[t]he Commissioner has a discretion not to assess, or to reassess or withdraw an assessment, which discretion should be exercised favourably to the taxpayers, in the circumstances of their case'; and
   2. in relation to penalty tax, the 'taxpayers took reasonable care to comply with the taxation law' and the penalty 'should be remitted, in whole or in part'.
2. In his determination made on 21 February 2018 (Determination),[10] the Commissioner determined to remit the penalty tax in full, but to disallow the objection in all other respects.
3. On 29 June 2018, the Commissioner referred five applications (being one for each applicant) to the Tribunal at the request of the applicants under section 106 of the Taxation Administration Act 1997 (Vic) (TA Act).[11]
4. By orders made by the Tribunal on 17 July 2019, the proceedings were consolidated and the register was amended to reflect the change in name of the second and fifth applicants and to refer to the Commissioner as the respondent in a consistent manner.
5. The issues in the proceeding are as follows:
   1. Does the Commissioner have a discretion not to assess where a liability to duty arises under the Duties Act?
   2. If the Commissioner has a discretion not to assess, then:
      1. can that discretion be exercised by the Tribunal on review of an assessment under the TA Act?
      2. if the Tribunal can exercise that discretion, should it do so?
6. At the hearing, the only witness was Mr Pitard. The documentary evidence was comprised of the documents filed by the Commissioner for each applicant under clause 89(1) of Part 19 of Schedule 1 to the Victorian Civil and Administrative Tribunal Act 1998 (T Documents) and the Statement of Evidence of Simon Maurice Pitard dated 26 October 2018.
7. Having regard to the important issues of principle raised by the applicants as to the powers of the Commissioner and the Tribunal, at the end of the hearing, I reserved my decision.
8. For the reasons which follow, subject to remission of penalties in line with the Commissioner's Determination, the assessments should be confirmed. In relation to the issues which have been identified in paragraph [12], the answers are:
   1. Yes.
   2. (i) No.

(ii) Not applicable but, if the Tribunal could exercise the discretion, it would decline to do so in the circumstances of the present proceedings.

1. The Duties Act ordinarily imposes duty on a transfer of dutiable property, which is relevantly defined to include an estate in fee simple, and which is payable by the transferee.[12]
2. However, the Sub-sale Provisions can operate to modify this situation in relation to certain transfers where:
   1. the identity of the transferee differs from the purchaser identified in an original contract of sale or the person to whom an option to acquire land has been granted; and
   2. an identified event has occurred between the entry into the contract of sale or option and the transfer of the land to the transferee, being the provision of additional consideration,[13] land development[14] or nomination under an option, coupled with either additional consideration or land development.[15]
3. In the case of Division 3, the identified event is 'land development',[16] which is defined quite broadly in section 3 of the Duties Act as follows:

"land development", in relation to land, means any one or more of the following -

(a) preparing a plan of subdivision of the land or taking any steps to have the plan registered under the Subdivision Act 1998;

(b) applying for or obtaining a permit under the Planning and Environment Act 1987 in relation to the use or development of the land;

(c) requesting under the Planning and Environment Act 1987 a planning authority to prepare an amendment to a planning scheme that would affect the land;

(d) applying for or obtaining a permit or approval under the Building Act 1993 in relation to the land;

(e) doing anything in relation to the land for which a permit or approval referred to in paragraph (d) would be required;

(f) developing or changing the land in any other way that would lead to the enhancement of its value;

1. Where land development occurs and the other conditions for the application of Division 3 are satisfied,[17] then section 32J of the Duties Act provides that:
   • (1) Duty on a transfer to which this Division applies is not charged in respect of the transfer from the vendor to the transferee, but is charged separately and distinctly on -
     • (a) the dutiable value of the sale contract as if it had been completed by the first purchaser; and
     • (b) the dutiable value of the subsequent transaction by which the final subsequent purchaser obtained the transfer right;
2. It is the duty imposed by section 32J(1)(a) of the Duties Act that formed the basis for the Assessments issued to the applicants.
3. Relevantly to the issues in this proceeding, section 5 of the Duties Act provides:

This Act is to be read together with the Taxation Administration Act 1997 which provides for the administration and enforcement of this Act and other taxation laws.

1. In this regard, the Commissioner is vested with the general administration of taxation laws, including the Duties Act, and 'may do all things that are necessary or convenient to give effect to the taxation laws'.[18]
2. Part 3 of the TA Act deals with 'assessment of tax liability', and section 8(1) provides that the 'Commissioner may make an assessment of a tax liability of a taxpayer'.
3. Relevantly, section 45(1) of the Interpretation of Legislation Act 1984 (IoL Act) indicates that:

Where in this Act or any Act passed or subordinate instrument made on or after the commencement of this Act the word "may" is used in conferring a power, that word shall be construed as meaning that the power so conferred may be exercised, or not, at discretion.

1. Part 10 of the TA Act deals with 'objections, reviews and appeals', with section 106 providing that a taxpayer can 'request the Commissioner to refer the matter to the Tribunal' if the taxpayer is 'dissatisified with the Commissioner's determination of the taxpayer's objection'.
2. Once it is referred, section 111 of the TA Act provides that the Tribunal 'must review a matter referred to it and ... may confirm, reduce, increase or vary the assessment or decision'.
3. In Cusmano v Commissioner of State Revenue (Cusmano),[19] Deputy President Macnamara (as his Honour then was) noted that the 'powers set out in Section 111 [of the TA Act] are relatively limited' and determined that the 'convenient course is to regard the sets of powers in Section 11 (sic) and Section 51 [of the VCAT Act] as cumulative'.[20] This was important as it allowed the Deputy President to set aside the assessments under review and remit them to the Commissioner to be varied in accordance with his reasons.
4. Although the TA Act has been in operation for over 20 years, it seems that the question of whether the Commissioner has a discretion under section 8 to not issue an assessment - and the consequent impact on the Tribunal's power of review - has never been considered. However, in Motticant Pty Ltd v Commissioner of State Revenue (Motticant),[21] I had occasion to consider the same issue in relation to the Commissioner's power of reassessment under section 9 of the TA Act. In that proceeding, admittedly unaided by submissions from counsel, I determined that:
   1. the Commissioner 'could presumably decide, in an appropriate case, not to reassess even if the circumstances for reassessment otherwise exist'.[22]
   2. 'the decision of the Commissioner to assess (sic) is not reviewable by VCAT',[23] because 'the decision to reassess is logically anterior to the reassessment itself' and it 'is only the reassessment itself that is the subject of the review by VCAT'.[24]

Does the Commissioner have a discretion not to assess where a liability to duty arises under the Duties Act?

1. It appears that the Commissioner originally contended that he had no discretion not to assess under section 8 of the TA Act where he has formed a view that there is a duty liability.[25]
2. However, in the Commissioner's Statement of Legal Contentions (Commissioner's Contentions), the Commissioner concedes that he has a discretion not to assess, although he submits that once a decision to assess is made, he does not have a further discretion as to the amount of duty.[26]
3. The conventional wisdom is that it is the obligation of a tax authority to collect the correct amount of tax and 'not a penny more, nor a penny less'.[27]
4. Thus, in Chubb Electronic Security Australia Pty Ltd v Commissioner of State Taxation (Chubb),[28] White J observed in relation to stamp duty that:[29]

[i]t is significant that the powers of the Commissioner to ameliorate the burden of a liability to pay stamp duty are limited.

The Commissioner does have the power to make some refunds of tax and to correct errors. However, the power to make refunds may be exercised only in relation to tax which has been overpaid by the taxpayer and the power to grant relief so as to correct errors is narrowly confined.

Similarly, the power vested in the Commissioner by s 104 of the [South Australian tax administration legislation] to write off unpaid tax is enlivened only if the Commissioner is satisfied that recovery action is impractical or unwarranted. Perhaps more significantly for present purposes, s 102G of [that legislation] permits the Commissioner to grant a form of relief in respect of some later transfers of a "prescribed interest" in a land holding entity. In such cases, the Commissioner may, if satisfied that it is just and equitable to do so, exempt the later transfer, wholly or in part, from duty.

The fact that the Commissioner has been granted only these specific and limited ameliorative powers speaks against the Commissioner having some more general power to grant relief on discretionary grounds from stamp duty liability.

Taken in combination, these matters indicate that the Commissioner is to assess stamp duty in accordance with the [South Australian stamp duty legislation] and, that other than in the limited circumstances mentioned, the Commissioner is to do so without exercising a discretion based on matters such as hardship or the merits of a particular case.

1. By contrast, it has been recognised that the Treasurer has a broader jurisdiction to grant ex gratia relief where he or she considers it appropriate to do so.[30]
2. It appears that the applicants to some extent accepted this conventional wisdom as, by letter dated 24 January 2018, they requested the Treasurer of the State of Victoria to relieve them from the tax imposed by the assessments.[31] The Hon. Tim Pallas MP responded by letter issued on or around 5 June 2018 granting ex gratia relief for half the duty because he was 'satisfied that, in the particular circumstances of this matter, it is not appropriate that a full second lot of duty and interest should be paid by the Steller Group for these transfers'.[32] Relief was limited to half the duty as 'these liabilities largely arise because of the failure ... to take reasonable care to comply with the law'. However, as a result of the applicants pursuing this review, Counsel for the applicants suggest that the availability of that ex gratia relief has fallen away.
3. Notwithstanding the above, it is also recognised that a tax authority must balance the obligation to collect all tax owing with the duty of 'good management'. This balancing exercise was discussed - in an income tax context - by Lord Scarman in Inland Revenue Commissioners v National Federation of Self-Employed & Small Businesses Ltd (National Federation),[33] who said that:[34]

... in the daily discharge of their duties inspectors are constantly required to balance the duty to collect 'every part' of due tax against the duty of good management. This conflict of duties can be resolved only by good managerial decisions, some of which will inevitably mean that not all the tax known to be due will be collected.

1. His Lordship went on to observe that the legislative provisions under consideration:

... establish a complex of duties and discretionary powers imposed and conferred in the interest of good management upon those whose duty it is to collect the income tax ... I am persuaded that the modern case law recognises a legal duty owed by the Revenue to the general body of taxpayers to treat taxpayers fairly, to use their discretionary powers so that, subject to the requirements of good management, discrimination between one group of taxpayers and another does not arise, to ensure that there are no favourites and no sacrificial victims. The duty has to be considered as one of several arising within the complex comprised in the care and management of a tax, every part of which it is their duty, if they can, to collect.

1. The concession which is made by the Commissioner is consistent with:

1. my view in Motticant, discussed at paragraph [28(a)] above; 2. the operation of section 45 of the IoL Act on the word 'may' as used in section 8 of the TA Act;

1. the Commissioner's own practice in terms of recognising that, although he has the 'power under the [TA Act] to assess any tax outstanding for past periods regardless of how long these periods may be', '[i]n most cases, the Commissioner will limit the period of retrospectivity' to five years;[35] and

1. the duty of good management identified in National Federation.
2. It is also supported by the decision of the High Court in Commissioner of State Revenue v ACN 005 057 349 Pty Ltd[36] which held that section 19 of the Land Tax Act 1958 - providing that '[t]he Commissioner may from time to time amend an assessment' - was discretionary and did not impose a duty to reassess.
3. I agree that the Commissioner has a discretion not to assess under section 8 of the TA Act, including in circumstances where a liability to duty arises under the Duties Act.

If the Commissioner has a discretion not to assess, then can that discretion be exercised by the Tribunal on review of an assessment under the TA Act?

1. Having determined that the Commissioner has a discretion not to assess, the question then becomes what, if any, power does the Tribunal have to re-exercise that discretion on review of an assessment.
2. It is a matter of considerable importance because, as the applicants' senior counsel accepted, if the Tribunal determines that it can exercise that discretion, it would open the 'floodgates' in the sense that the discretion would not be limited to assessments made under the Sub-sale Provisions under the Duties Act, but rather any assessment of duty, payroll tax, land tax or other tax to which the TA Act applies.
3. However, the identification of the potential consequences that may flow from such a decision is not a relevant consideration in assessing the proper interpretation of the provisions of the TA Act.

1. The applicants observe that, in exercising its review jurisdiction, the Tribunal has 'all of the functions of the decision-maker'[37] and, under section 51(2)(c) of the VCAT Act,[38] may make an order to 'set aside the decision under review and make another decision in substitution for it'.[39]
2. The applicants then submit that, in this case, the decision under review is the 'decision that the Commissioner made on 21 August 2017 to exercise the power conferred by section 8(1) of the [TA Act] so as to assess double duty'.[40]
3. The applicants say that 'a necessary part of the assessment process (and not something separate and 'anterior') is a decision that it is appropriate in the particular case (or not) to create this consequence'.[41] As they put it, the process involves a decision whether 'an assessment is not only open but appropriate'.[42]
4. As the applicants' case has always been that 'no tax should be levied by assessment, as a matter of discretion', this forms the basis on which they are dissatisfied (for the purposes of section 96(1)(a) of the TA Act) with the Assessments.[43]
5. The applicants point to the decision of Jolly v Commissioner of Taxation,[44] where the High Court discussed the role of the Taxation Board of Review (which may be viewed as precursor to the taxation division of the Administrative Appeals Tribunal (AAT)) on review of an income tax assessment. Section 44(1) of the Income Tax Assessment Act 1922-1934 provided that the Board shall have power to review such decisions of the Commissioner as a referred to it under the Act, and for the purposes of reviewing such decisions 'shall have all the powers and functions of the Commissioner in making assessments, determinations and decisions under the Act'. In that case, dealing with a discretion to remit additional tax, Rich and Dixon JJ posed the following question:[45]

If it be a function of the Commissioner to consider in assessing additional tax whether the case calls for an imposition of less than the full prima facie amount of the additional tax, why is this not a function which in exercising its power of review in relation to assessment of additional tax the Board obtains under sec. 44?

1. They then proceeded to answer that question in the following terms:[46]

It appears to us that sec. 44 must confer upon the Board the function which falls to the Commissioner under [the remission provision], unless the word "decision" in sec. 44 is not wide enough for that purpose. ... Why should not all this be covered by the word "decision"? It is a word of the widest connotation. It has no technical meaning. The Board is only another executive body in an administrative hierarchy. The purpose of erecting it was to enable taxpayers to have a reconsideration or re-examination of the process by which liability has been imposed upon them, particularly in relation to matters where the Commissioner had a discretion. The important discretion given by the [remission provision] possesses no features which make it less proper for the Board to review it. Indeed, we should think that all the arguments of fairness were on the side of a review of the ascertainment, including the discretionary remission, of an amount which may prove a ruinous imposition.

1. Ultimately, the High Court held that the Board could 'review the entire process of assessing additional tax' and exercise the discretion to remit additional tax.[47] The applicants say that there 'is no relevant distinction with respect to [VCAT]'.[48]
2. The applicants draw attention to section 96(2) of the TA Act, which provides that '[n]o court or administrative review body, including the Tribunal, has jurisdiction or power to consider any question concerning an assessment', except under the review or appeal processes dealt with in Part 10 of that Act. They say that, if the Tribunal is unable to review 'the discretionary aspect inherent in the Commissioner's assessment process, the assessment on that front would be completely incontestable', an outcome that would be 'unexpected, and is plainly unpalatable'.[49]
3. The applicants say that the 'obiter dicta in Motticant cannot stand' with the other authorities, particularly Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue[50] (Conte Mechanical) and Fletcher v Commissioner of Taxation[51] which confirmed that VCAT and the AAT respectively can re-exercise any discretion available to the relevant Commissioner.
4. In their reply, the Applicants say that the Commissioner's approach to the interpretation of the TA Act (as outlined below) 'seeks to place a gloss on section 96 of the [TA Act] ... [which] does not in terms limit the scope of inquiry to an assessment's correctness or "content".'[52]
5. They say that while an objection 'may well "presuppose the existence of an assessment" ... it need not result in the continued existence of one".[53]

1. The Commissioner observes that the Tribunal's jurisdiction is 'enlivened by having a matter referred to it under s 106 of the TA Act' which, working backwards, is triggered by a taxpayer's dissatisfaction with the Commissioner's determination of its objection to an assessment.[54]
2. The Commissioner submits that there is 'no right in the [TA Act] for a taxpayer to object to the "making of an assessment" or, put another way, to the Commissioner declining to exercise a discretion not to make an assessment'.[55] In this regard, the Commissioner says that 'the making of a valid objection presupposes the existence of an assessment' and the 'purpose of the objection is to put in issue the content of that assessment'.[56] It follows, in the Commissioner's submission, that the Tribunal 'does not have any power to decide that the Assessments (or any assessment) should not have been issued'.[57]
3. In his submissions, the Commissioner refers to my analysis at paragraphs [44] to [46] in Motticant and submits that, 'albeit that it does not step through the relevant provisions of the [TA Act]', the 'analysis is, with respect, correct'.[58]

1. As a general observation, there is a paucity of case law directly considering the ability of a merits review tribunal to exercise any discretion regarding the making of duty (or broader tax) assessments.
2. In Commissioner of Taxation v Tourism Holdings Ltd & Anor,[59] Mildren J considered a discretion to reassess under the equivalent Northern Territory tax administration legislation, concluding that '[s]o long as the Commissioner properly considers [a request to reassess], his decision will not be reviewable, because it is afterall, his opinion that counts under [the relevant provision]'. However, that conclusion has to be considered with care given it was drawn in the context of an appeal to a court concerned with the legality of the decision made, rather than a tribunal undertaking a merits review.
3. In Cusmano, the Commissioner apparently conceded that 'the making of the amended assessments in 2008 was insofar as Section 19 of the [Land Tax Act 1958] was invoked an exercise of discretion by the Commissioner which was open to re-exercise by the Tribunal on review'.[60] A similar concession was made in respect of the discretion to reassess (for later land tax years) under section 9 of the TA Act.[61] However, importantly, no such concession is made in the present case.
4. The only Tribunal decision to consider this point expressly is my decision in Motticant. In that case, I formed the view that the decision to reassess is 'logically anterior to the reassessment'[62] and therefore was not reviewable.
5. The applicants say that this cannot stand in light of the decision of the Supreme Court in Conte Mechanical where Pagone J noted that section 51 of the VCAT Act 'permits the Tribunal to re-exercise for itself any discretion which had otherwise been given to the Commissioner'.[63]
6. Of course, Pagone J's comments about the powers of the Tribunal were themselves obiter dicta as the taxpayers had 'elected to request the Commissioner to treat the objections as appeals and to cause them to be set down for hearing in [the Supreme Court]'.[64] As His Honour observed, this choice 'was not without significant importance'[65] because the Court cannot stand in the shoes of the Commissioner and re-exercise any discretion itself: rather, assuming legal error could be shown, the Court's power was limited to setting aside the decision and remitting it back to the Commissioner for re-determination.[66]
7. Further, the provision with which Conte Mechanical was concerned was a discretion to de-group companies for payroll tax purposes which:
   1. was expressly provided for under section 9A(1J) of the Pay-roll Tax Act 1971 and section 79 of the Payroll Tax Act 2007; and
   2. included criteria for the exercise of that discretion.
8. In my view, nothing that was said in Conte Mechanical is necessarily inconsistent with my decision in Motticant.
9. The authorities provided by the parties includes the decision of the Court of Appeal in Anthony Davidson v Victorian Institute of Teaching.[67] In that case, the Court held that, in a review of a determination under the Victorian Institute of Teaching Act 2001, the Tribunal was not restricted to review of the ultimate determination of - and could also review findings made by - the Victorian Institute of Teaching panel. In reaching this conclusion, Neave J.A. observed that:

The law as to the amplitude of the Tribunal's powers on merits review is so well established in Victoria that Parliament must be taken to known that a conferral on the Tribunal of jurisdiction to "review" a decision carries with it all of the powers under the VCAT Act.

1. While that is undoubtedly true, the question in the present case is what the decision under review is, and whether the particular act (or omission) sought to be reviewed forms part of that decision.
2. In Jolly, Rich and Dixon JJ interpreted the word 'decision' as being a 'word of the widest connotation', and thus the power of the Taxation Board of Review to review decisions of the Commissioner of Taxation referred to it was held to extend to review of the discretion to remit additional tax (ie. equivalent to penalty tax under the TA Act).[68]
3. By contrast, Starke J considered there was a distinction to be made between the imposition of additional tax, which had previously been held to form part of the process of assessment, from any remission of that tax: with the former 'clearly not' forming part of the function or process of assessment.[69] This was because, in deciding on remission, the Commissioner is 'authorized to act upon reasons which appear sufficient to him ... [which] may include matters of hardship, and questions of general policy and administration'.[70] He observed that while the calculation of additional tax was 'readily capable of review and amendment', the 'remission or pardon under the [relevant provision] partakes more of the nature of the discretion involved in the exercise of the pardoning power of the Crown, and is not so readily capable of review and amendment'.
4. Ultimately, Starke J was disposed to adopt a 'liberal construction to this beneficial provision'[71] and supported the outcome reached by the majority. However, he cautioned that 'it is clear from other provisions that it is not every conclusion reached by the Commissioner in his administration of the statutory provisions which is subject to objection and review'.[72]
5. While this decision of the High Court is clearly relevant when considering the extent of powers of the Tribunal in this proceeding, I consider that the decision is distinguishable having regard to the differences in the provisions under consideration.
6. In Jolly, additional tax was imposed as a line item in the notice of assessment issued to the taxpayer and so could readily be seen to form part of the overall assessment. Further, there was an express power of remission, albeit expressed in broad terms, which could also be seen to be relevant to the assessment itself.[73]
7. By contrast, in the present case, the discretion not to assess is not explicit but, instead, arises from the oblique reference to 'may' in section 8 of the TA Act coupled with the operation of section 45(1) of the IoL Act. More importantly, the exercise of that discretion necessarily precedes the assessment which is the subject of review by the Tribunal.
8. As recognised in Fletcher v Commissioner of Taxation,[74] 'the powers and discretions given by s 43(1) [of the Administrative Appeals Tribunal Act 1975 to the AAT for income tax purposes][75] are the powers and discretions which may be vested in the original decision-maker for the purposes of making the decision under review', but do not extend to 'powers and discretions which may be vested in the decision-maker for some other purpose'.[76]
9. Adopting this bifurcated approach, it can be seen that the discretion whether or not to issue an assessment is not vested in the Commissioner 'for the purpose of making an assessment' because:
   1. if the discretion is exercised, there is no assessment made; or
   2. if the discretion is not exercised, then the assessment is defined by reference to the legislative criteria for its imposition such that the discretion plays no role in the assessment itself.
10. As previously noted (at paragraph [55]), the Commissioner submits that 'the making of a valid objection presupposes the existence of an assessment' and the Tribunal 'does not have any power to decide that the Assessments (or any assessment) should not have been issued'.
11. The making of an assessment is a matter of some significance as section 127 of the TA Act provides that:

(a) conclusive evidence of the due making of the assessment; and

(b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection, review or appeal proceedings (in which it is proof in the absence of evidence to the contrary).

1. In Bayview v Commissioner of State Revenue,[77] Pagone J noted that this provision has a 'substantial similarity with the equivalent provision found in s 177 of the Income Tax Assessment Act 1936 (Cth)'[78] and 'should be construed consistently'.[79] His Honour observed that there are:[80]

two categories of challenges that might be made to an assessment that are dealt with by s 127. The two are, first, the due making of the assessment and, secondly, the correctness of the amount and the particulars of the assessment. The first, namely, the due making of the assessment, is given conclusivity by s 127 in all proceedings. The second, namely, the correctness of the amount and all of the particulars, is given conclusivity only in proceedings that are not objection review or appeal proceedings contemplated by the Act. In other words, one category of challenge is put beyond challenge in all disputes; the other is capable of being challenged in proceedings contemplated by the Act.

1. Part 10 of the TA Act deals with the process of objection, review and appeal. The commencing point is section 96(1) of the TA Act which states that:

A taxpayer may lodge a written objection with the Commissioner if the taxpayer is dissatisfied with -

(a) an assessment, other than a compromise assessment

1. This is also similar to the equivalent income tax provisions (known as Part IVC).[81] In Commissioner of Taxation v Administrative Appeals Tribunal,[82] the Full Federal Court observed that Part IVC 'enables taxpayers to seek review of some decisions made by the Commissioner',[83] but that there are 'other provisions of taxing Acts or regulations which empower the Commissioner to make a decision or determination but which do not provide that a person affected may object under Pt IVC'.[84]
2. The Court went on to observe that the latter category includes:[85]

a decision infected with jurisdictional error, so that it is not a decision at all. This could include a decision to issue an assessment.

1. In reaching this conclusion, the Court referred to the decision in Kennedy v Administrative Appeals Tribunal[86] which was an appeal from a decision of the AAT rejecting a submission that the Commissioner of Taxation file additional foreign documents, under section 37(2) of the Administrative Appeals Tribunal Act 1982,[87] which were said by Mr Kennedy to be:[88]

relevant to the validity of the Commissioner's amended assessments, which validity is challenged on the ground that the assessments were not made in good faith or were made for an improper purpose. Mr Kennedy also submits that the additional documents are relevant to his substantive liability under the assessments, if valid. On this latter point, the essence of Mr Kennedy's submissions is that the Commissioner's function of deciding the amount on which tax should be paid miscarried because of the "doubtful authenticity" of some of the material on which the Commissioner relied to make the objection decisions. ... Mr Kennedy also says that the documents are relevant to the formation by the Commissioner of the opinion that there was fraud and evasion by Mr Kennedy for the purposes of s 170(2) of the Income Tax Assessment Act 1936 (Cth)[89]...

1. The AAT rejected the application on the basis that it did not have the jurisdiction to determine the validity of the amended assessments because the proceedings were brought under Part IVC. In this regard, the AAT member had observed that a 'properly constituted appeal assumes there is a valid assessment'.[90] This was upheld by the Full Federal Court who concluded:[91]

Mr Kennedy's challenge in the Tribunal to the validity of the Commissioner's assessments, based on the contentions that they were made in bad faith or the Commissioner's view as to fraud and evasion was incorrect, must fail. The Tribunal has jurisdiction to hear and determine the present review under Part IVC of the TAA because each assessment purports to have been made in exercise of powers conferred by that enactment. Whether or not the assessments were, as a matter of law, validly made does not attenuate this finding.

1. The Full Federal Court goes on to refer to the High Court decision in FJ Bloemen Pty Ltd v Federal Commissioner of Taxation[92] in relation to the effect of section 177 of the Income Tax Assessment Act 1936 (which, as previously noted, is 'substantially similar' to section 127 of the TA Act), quoting from the judgment of Mason and Wilson JJ who said:[93]

... once the Commissioner takes advantage of s 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment... The taxpayer is entitled to dispute his substantive liability to tax in proceedings under [Part IVC] ... production [of an assessment] will put beyond contention the due making of the assessment so that the [Supreme] Court cannot find that no assessment was made ...

1. The inclusion of a discretion in section 8 of the TA Act - by operation of section 45(1) of the IoL Act - should not in my view be taken to signal a departure from the fundamental scheme of the legislation. That scheme prevents a challenge to the due making of an assessment once a notice of assessment is produced, with any challenge under Part 10 of the TA Act limited to challenging the substantive liability under the assessment.
2. Accordingly, in my view, the Tribunal does not have the ability to exercise the discretion under section 8 of the TA Act on a review brought under Part 10 of the TA Act.

If the Commissioner has a discretion not to assess, and the Tribunal can exercise that discretion, should it do so?

1. Despite my conclusion that the Tribunal cannot exercise the discretion that the Commissioner has to not issue an assessment where a duty liability arises, having regard to the extensive submissions by the parties and the importance of the issue, it is appropriate to also consider the question of whether any discretion should be exercised.

1. The applicants say that the policy rationale underlying the introduction of the Sub-sale Provisions was 'that double duty is warranted only where the transaction involves a commercial sale or arrangement with a profit element'.[94]
2. The applicants observe that the 'nominations here were between associated parties without payment or profit, and were seen by the Treasurer [in terms of the grant of ex-gratia relief referred to at paragraph [34]] as not warranting double duty'.[95] In other words, the 'present transactions fall outside this policy'.[96]
3. As such, the applicants contend that 'no occasion sensibly presents in these circumstances for the imposition of double duty'.[97] On the contrary, '[h]arsh would be the levy of a second lot of $3.4 million merely because of the timing of the planning application - which themselves already attracted substantial levies'.[98]
4. In response to the Commissioner's position, the applicants submit that it 'cannot be of moment for the Commissioner to point to the planning application ... [being] the trigger for the statutory provisions to apply'.[99] They contend 'it is not ... a useful feature in this case on the exercise of the discretion'.[100]
5. They say that the Commissioner's submissions are 'unpersuasive' because they 'in truth amount to little more than a proposition that double duty should be assessed because it can be'.[101] By contrast, they say, the 'resolution of the real controversy, on [this] issue, requires the existence and purpose of the discretion to be recognised'.[102]

1. The Commissioner says that what the applicants seek is 'invoke a discretionary exemption to be applied where the plain words of the [Duties Act] are apparently inconsistent with the legislative intention as revealed in the extrinsic materials'.[103]
2. The Commissioner goes on to observe that the 'extrinsic materials provide only a high-level overview of the operation of the [Sub-sale Provisions]' and while 'the label "commercial arrangement" might be a convenient way to group [the three different situations covered by the Sub-sale Provisions] together, ... it is not an expression used at all in Part 4A [of the Duties Act]'.[104]
3. In any event, the extrinsic material 'cannot be used to displace the clear meaning of the test'.[105]

1. The Commissioner contends that the discretion should not be exercised, based on the policy said to be expressed in extrinsic materials in circumstances where:[106]

1. the provision employs clear and certain criteria for its application; 2. those clear and certain criteria are consistent with, but do not directly adopt, language used in extrinsic materials;

1. the provision is engaged by certain transactions and the exemption does not apply.

1. In his Statement of Evidence, Mr Pitard explained the reason the applicants were the named purchasers in the following terms:[107]

... the property was purchased, invariably before it was decided which entity within the group was to be nominated as purchaser.

As the 35 transactions evidence, there were five distinct purchasers: me, 4 Kitmont Street Pty Ltd (a company associated with Nicholas Smedley), Steller Developments Pty Ltd (a company associated with various controlling individuals), Steller Projects Pty Ltd (a company associated with various controlling individuals) and Steller Elite Pty Ltd (a company associated with me).

In the main, as the documents in the nine folders [of T Documents] evidence, I signed the Contract of Sale (either in my personal capacity or as a director of a corporate purchaser). The identity of the purchaser was always a matter of administrative convenience and availability, and on occasion was also based on which of the central individuals involved in the Steller Group had the relationship with the vendor's real estate agent.

In addition, for the transactions where I was the purchaser in my personal capacity, this was generally a result of the relevant vendors preferring to sell only to an individual so as to avoid perceptions of complexity arising from personal guarantees required where a company was the purchaser;

1. Mr Pitard then explained that a decision was made at month-end meetings as to which entity would be nominated as purchaser, which was 'broadly informed by cash flow and equity contribution considerations' in that 'monies needed to be available at settlement, and (further) monies then needed to be available for the construction project itself'.[108] His evidence was that '[t]here was no element of profit in the process of nomination'.[109]
2. Under cross-examination, Mr Pitard:

1. explained how the planning permit applications were dealt with. They used an 'in-house' planner, Mr Bowden, who would do some of the work before the contracts of sale were entered, and then complete that work between the time of entry into the contracts of sale and their settlement; 2. accepted that there was some 'internal accounting', 'adjustment' or 'recompense' to reflect the benefit of the work undertaken by the planner to the nominated purchaser;[110]

1. did not accept that the planning work necessarily increased the value of a project,[111] but accepted that it was reflected in an increase in 'work in progress' (which I take to be a reference to the accounting for the cost of a project);

1. agreed that, while the nominated purchaser was determined at the month end meetings, the actual nomination may occur some time later because it 'sits in the solicitor's office' and that, until that occurs, the nominated purchaser could change;[112] 2. accepted that no advice was sought on the stamp duty impact of the nominations because 'it hadn't crossed my mind'.
2. In response to a series of questions from me, Mr Pitard indicated that:

1. the relevant duty forms associated with a purchase were prepared by the conveyancer (Sargeants Port Phillip); 2. in relation to the specific question about whether there had been land development, which was ticked 'no',[113] Mr Pitard was of the view that, as the Steller Group 'didn't physically own the land', they 'couldn't do anything' that would amount to land development. He did not, however, read the instructions to the form which explained what 'land development' meant in terms of the question (ie. including '[p]reparing a plan of subdivision or taking any steps to have a plan registered'); and

1. the Steller Group had not brought any proceedings against its conveyancer for failing properly to advise it on the process of nomination.

1. In NT Tourism Holdings, Mildren J noted:[114]

[the] principle of administrative law that every person entrusted with a discretion granted by statute must exercise it in accordance with law and in accordance with the purposes for which the discretion is given. Where the power to make an administrative decision is given in broad terms, the question of whether or not the action taken is within power is to be determined by implication from the subject matter, scope and purpose of the Act ...

1. One of the authorities provided by the parties in their joint book of authorities was Challenger Listed Investments Ltd (as trustee for Challenger Diversified Property Trust v Commissioner of State Revenue[115] (Challenger).
2. In that case, the Court was dealing with the imposition of landholder duty under section 89C of the Duties Act, and the discretion then found in section 85(2) for the Commissioner to determine that an acquisition was exempt if 'satisfied that the application of this Part to the acquisition in the particular case would not be just and reasonable'.
3. Pagone J rejected the Commissioner's contention that the test was whether the outcome was 'anomalous or abnormal', saying there is 'no warrant for the substitution of ... the statutory formula', concluding that:[116]

What the Commissioner is compelled to consider is everything which may bear relevantly and probatively both for and against the exercise of the discretion and to do so by reference to the statutory criteria.

1. In Challenger, Pagone J also considered the discretion under section 30(3) of the TA Act to determine that no penalty tax was payable in certain specified circumstances. After referring to the use of 'may' and the impact of section 45(1) of the IoL Act on its construction, his honour observed that a difficulty was that:[117]

It is not clear how such a discretion is to be exercised where the statute conferring the power stipulates all of the considerations relevant to the exercise of the discretion. In particular it is not clear how s 45(1) might permit the Commissioner not to exercise the power if the only considerations permitted by the conferring statute to be taken into account have been satisfied. Indeed, if the Commissioner were to take into consideration factors other than those in the conferring statute it might be thought that the exercise of the discretion had been misdirected and was wrong in law. Nevertheless, the effect of s 45(1) upon s 30(3) of the [TA Act] would appear to be to confer upon the Commissioner a discretion not to exercise the power notwithstanding that the only conditions capable of being taken into account in favour of the exercise of the discretion have been satisfied.

1. After suggesting that the purpose of section 45(1) of the IoL Act might have its genesis in avoiding 'arid pedantic arguments' as to whether may means must, his Honour observed:[118]

sometimes the legislature has used the word "may" to confer a power which is to be exercised when the conditions it has determined for its existence have been found to exist and which is to be exercised only by reference to the criteria which the legislature has identified as those which must be considered. In such cases there is no room for the repository of the power refusing to exercise it as a matter of discretion by criteria which are not stipulated by the legislature and which may be inconsistent with those that are.

1. The discretion provided in section 8 of the TA Act is, on its terms, unconstrained.
2. The only example provided of its application by the Commissioner - in relation to issues of retrospectivity[119] - suggest that the considerations that go to the exercise, or otherwise, of that discretion may be informed by matters of public policy and good administration.[120]
3. However, neither party was able to articulate the considerations the Tribunal should (or should not) generally have regard to if it were to find that there was a discretion to be exercised, remembering that it would apply across all state taxes to which the TA Act applies.
4. In closing submissions, Mr Solomon (for the applicants) contend that the decisive factors in favour of a favourable exercise of the discretion are:

1. the purpose of the Sub-sale Provisions, as indicated in the extrinsic materials, is to impose double duty on commercial arrangements with a profit element; 2. in the present case, the evidence given by Mr Pitard (and on which he was not cross-examined) indicates a 'lack of profit' arising from the nomination from the applicant named in the contract of sale to the transferee; and

1. that, aside from two of the contracts, each nomination was within the Steller 'family' in that the nominee was a family trust (or in some cases, a partnership of trusts) controlled by a Steller Group Principal or his family or the corporate trustee of such a trust, such that the arrangements lack the commerciality underlying the provisions.
2. In his closing submissions, Mr Williams (for the respondent) contends that there is 'no language in the Duties Act itself' to support the characterisation of its purpose being limited to nominations involving a profit component. Rather, the question is whether there has been 'land development' or not, with that phrase then 'clearly defined to include a planning permit'. The existence or otherwise of additional consideration is not relevant to whether there is land development. As such, the suggestion of a profit element being required is an 'impermissible overlay'.
3. Further, Mr Williams says it is not correct to treat the purchasers and nominees as all being in a 'family'. Rather, the association between the Principals is as business partners, who divvy up projects amongst themselves and their associated entities with the decision as to the purchaser being a 'commercial decision' driven by cash flow considerations.
4. Lastly, Mr Williams points to the errors in the stamp duty forms and asks why the Tribunal should exercise any discretion in favour of someone who actually submitted a false form (even if the falsity is unintentional).
5. In my view, the correct or preferable decision is the one which has been made by the Commissioner, ie. to exercise the discretion to assess (or, to put it the other way around, refuse to exercise any discretion to not assess).
6. I am not convinced that the underlying purpose contended for by the applicants is made out.
7. In circumstances where the legislature has seen fit to establish two alternative tests when double duty applies, namely where there is additional consideration provided or where land development occurs, it seems incongruous to effectively suggest that profit (which is really a different term for additional consideration) is a decisive factor for exercising a discretion to not assess duty otherwise imposed under section 32J of the Duties Act.
8. Similarly, the fact that there is a specific exemption for sub-sales involving certain related parties[121] is inconsistent with the suggestion that the absence of commerciality (by reason of nomination within a 'family' of related businesses) is a decisive factor.
9. In my view, this suggests the considerations which go to the exercise (or otherwise) of any discretion about whether to assess under section 8 of the TA Act are beyond those found in the relevant taxing provision.
10. Limiting the period of retrospectivity is a good example because it supports good administration (in the sense used in National Federation) by providing certainty (in terms of finalisation of tax obligations) and ensuring equivalence between the rights of taxpayers (in terms of limitations on seeking refunds of overpaid tax) and the powers of the Commissioner (in terms of assessing or reassessing unpaid or underpaid taxes).
11. There might be other cases where it is inappropriate to assess, such as where the taxpayer is insolvent such that the prospects of collection are minimal, or where an amnesty is offered to encourage greater compliance going forward.
12. There is nothing in the present proceedings which raise those kinds of broader considerations.
13. Rather, what appears to have occurred, is that the applicants have embarked upon a course of action without any real consideration of the duty consequences. If that were a single instance of inadvertent error, and promptly disclosed to the revenue authority, then perhaps there would be a basis for the exercise of the discretion.
14. However, in this case, there were 35 transactions over a two and a half year period.[122] The applicants or their conveyancer should have been put on notice by the Form 6A and the explanatory notes to that document. Despite this, they entered into a further 34 transactions after the lodgement of the first of those forms.[123]
15. Moreover, there was no voluntary disclosure of the error by the applicants to the Commissioner. Rather, the issue was discovered in the course of an investigation by the Commissioner.
16. In all the circumstances, even if the absence of profit and commerciality is accepted as relevant considerations, they are in my view outweighed by countervailing considerations against the exercise of any discretion not to assess.

[1] Statement of Evidence of Simon Maurice Pitard dated 26 October 2018 [1] and [2], as corrected in examination in chief.

[7] Ibid Annexure A. This is the table referred to in paragraph [1], which includes a row identifying the 'relationship between purchaser & nominee'.

[11] Proceedings Z581/2018, Z582/2018, Z587/2018, Z588/2018 and Z589/2018.

[12] Duties Act, ss 7(1)(a), 10(1)(a)(i) and 12.

[13] Duties Act, Pt 4A, Div 2.

[14] Duties Act, Pt 4A, Div 3.

[15] Duties Act, Pt 4A, Divs 3A and 4.

[16] Duties Act, s 32I(1)(c).

[17] See Duties Act, s 32I(1).

[19] [2010] VCAT 1056.

[21] [2017] VCAT 1820.

[24] Ibid [46]. The reference to something being 'logically anterior' to the assessment was drawn from the decision of Conti J in Isaacs v Commissioner of Taxation [2005] FCA 832, a case decided in the context of decisions under Federal income tax legislation (Motticant [29]).

[25] Applicants' Statement of Issues, Facts, Contentions and Orders Sought (Applicants' Contentions) [9] referring to page 7 of the Commissioner's Determination.

[26] Commissioner's Contentions [27]-[29].

[27] Lighthouse Philatelics Pty Ltd v Commissioner of Taxation (1991) 32 FCR 148 at 155.

[28] [2012] SASC 164.

[29] Ibid [41]-[44] (footnotes omitted).

[30] The decision in Chubb concerned the ability to review the withdrawal of such relief.

[31] Attachment B to Mr Pitard's Statement of Evidence.

[32] Attachment C to Mr Pitard's Statement of Evidence.

[33] [1981] UKHL 2; [1982] AC 617.

[35] Revenue Ruling GEN014 'Assessments - Period of Retrospectivity', issued by the Commissioner in December 2007.

[36] 261 CLR 509; [2017] HCA 6.

[38] Noting that, in Cusmano, the Tribunal determined that the powers under section 51 of the VCAT Act were additional to those in section 111 of the TA Act.

[40] Applicants' Contentions [28]. The reference to double duty means the duty assessed to the applicants under the Assessments, being additional to the duty assessed to the transferees of the relevant properties.

[44] (1935) 53 CLR 206; [1935] HCA 21.

[50] (2011) 85 ATR 120; [2011] VSC 104 at [2]- [3].

[51] (1988) 19 FCR 442 at 453.

[52] Applicants' Submissions in Reply [7].

[54] Commissioner's Contentions [35].

[59] [2002] NTCA 10.

[60] [2010] VCAT 1056 [37].

[62] Per Isaacs v Commissioner of Taxation [2005] FCA 832.

[63] [2011] VSC 104 [2], citing Fletcher v Federal Commissioner of Taxation (1988) 19 FCR 442, 453.

[67] [2006] VSCA 193.

[68] [1935] HCA 21; [1935] 53 CLR 206 at 214-5.

[73] The relevant provision was section 67 of the _Income Tax Assessment Act 1922-_1934 (C'wth) which provided that 'the Commissioner may, in any particular case, for reasons which he thinks sufficient, remit the additional tax or any part thereof'.

[74] (1988) 19 FCR 442.

[75] Being similar to section 51 of the VCAT Act.

[76] (1988) 19 FCR 442 at 452.

[77] [2009] VSC 568.

[81] See Part IVC of the Taxation Administration Act 1953 (Cth).

[82] [2011] FCAFC 37.

[86] [2008] FCAFC 124.

[87] Which is similar to the requirements imposed on the Commissioner under clause 89(1) of Part 19 of Schedule 1 to the VCAT Act.

[88] [2008] FCAFC 124 [4].

[89] This section deals with the limitation periods on reassessments by the Commissioner, with no limitation period applicable in the case of fraud or evasion.

[90] Quoted at [2008] FCAFC 124 [12].

[92] (1981) 147 CLR 360; [1981] HCA 27.

[94] Applicants' Contentions [2(3)] referring to the Explanatory Memoranda to the State Taxation Acts (General Amendment) Bill 2005, p 5 and the State Taxation Amendments Bill 2012, p 6.

[96] Applicants' Submissions in Reply [13].

[98] Applicants' Submissions in Reply [13].

[101] Applicants' Submissions in Reply [11].

[103] Commissioner's Contentions [42].

[107] Statement of Evidence of Simon Maurice Pitard dated 26 October 2018 [17(d)].

[110] From Mr Pitard's response to a question I raised, it appears that there were changes in the entity responsible for paying the planner (and hence entitled to be compensated) over time.

[111] He noted that whenever they sold a project with a planning permit, the sale was at a loss.

[112] The Commissioner points to one example at tabs 193 and 194 of the T Documents for Supreme Elite Pty Ltd where the contract was entered on 13 June 2015 and the nomination was not made until 9 June 2016 (ie. almost a year later).

[113] Question 23 on Duties Form 6A, an example of which is included in tab 22 of the T Documents for Steller Developments Pty Ltd.

[114] [2002] NTCA 10 [10] (references omitted).

[115] [2010] VSC 464; (2010) 80 ATR 630.

[119] Commissioner of State Revenue, Revenue Ruling GEN 014 'Assessments - Period of Retrospectivity', December 2007.

[120] The ruling states that the limits on retrospective assessments are intended to ensure that 'general equivalence is maintained between the refund period and period of assessing tax arrears, and taxpayers are provided with some certainty on their tax liability'.

[121] Duties Act, s 32W.

[122] The earliest contract of sale was entered on 6 August 2014 (SRO reference B21) and the last settlements took place on 23 January 2017 (SRO references A4 and E4).

[123] The first Duties Form 6A was lodged on 25 May 2015 in relation to a contract of sale entered by Supreme Elite Pty Ltd concerning a property in Balaclava: Tab 127 of the T Documents for Supreme Elite Pty Ltd.