The decision of the respondent is set aside, and notice of re-assessment no 11652056 dated 16 September 2016 is varied, to reduce the duty to $3,300,000.

1. On 4 May 2018, the Commissioner of State Revenue (Commissioner) referred this matter to the Tribunal at the request of the applicant, South Wharf Towers (SWT), under section 106 of the Taxation Administration Act 1997 (Vic) (TA Act).
2. SWT seeks review of the Commissioner's decision[1] to disallow its objection[2] to the Commissioner's re-assessment (Reassessment) of duty under the Duties Act 2000 (Vic) (Duties Act) in respect of the transfer to SWT of a property at 85-93 Lorimer Street, Docklands (Relevant Property).
3. SWT acquired the Relevant Property for $60 million under a contract of sale entered on 29 April 2016,[3] with settlement taking place on 28 July 2016. SWT intends to develop the Relevant Property into a substantial residential apartment complex, with 950 to 1,000 apartments across two towers. Duty of $3.3 million was assessed on the transfer, and paid by SWT.
4. On 16 September 2016, the Commissioner issued a notice of re-assessment, assessing SWT to duty of $5.1 million on the transfer of the Relevant Property, with an additional $1.8 million payable under the Reassessment. The Reassessment was to impose what is colloquially referred to as foreign purchaser additional duty (FPAD). FPAD applies where a 'foreign purchaser' acquires 'residential property' in Victoria, and is additional to the duty ordinarily payable on a transfer of property (ie. the $3.3 million originally assessed). At the relevant time, the rate of FPAD was 3%.[4]
5. SWT accepts it is a 'foreign purchaser' as defined, because all of its shares are owned by Mid-Universe Developments Limited (MUD), a Hong Kong registered company. However, SWT contends that FPAD does not apply because it did not acquire 'residential property' as defined.[5]
6. Alternatively, SWT asks the Tribunal to exercise a discretion to treat MUD as not having a controlling interest in SWT, with the effect that SWT would not be a 'foreign purchaser' as defined.

Relevant provisions of the Duties Act

1. Under section 18 of the Duties Act, stamp duty is payable on the dutiable value of dutiable property that is the subject of a dutiable transaction, at the rates specified in Part 3 of the Duties Act.
2. Section 28 of the Duties Act sets out the general rates of duty, depending on the dutiable value of the dutiable property which is the subject of a dutiable transaction, ranging from 1.4% (where the dutiable value does not exceed $25,000) to 5.5% (where the dutiable value exceeds $960,000).
3. Section 28A of the Duties Act provides for additional duty in relation to a dutiable transaction 'under which a land-related interest in residential property is transferred to a foreign purchaser'. As noted above, the applicable rate of additional duty was 3%.
4. At the time when the contract for sale of the Relevant Land was entered, the definition of 'residential property' set out in section 3 of the Duties Act was in the following terms:

residential property means land in Victoria -

(b) on which a foreign purchaser intends to affix a building that -

(i) is designed and constructed solely or primarily for residential purposes; and

1. The phrase 'foreign purchaser' is defined in section 3 of the Duties Act, and includes a transferee that is a 'foreign corporation', in turn defined in that section as:
   • (a) a corporation that is incorporated outside Australia; or
     • (b) a corporation in which one of the following persons has a controlling interest -

1. Under section 3E of the Duties Act, the Treasurer may exempt a person that would otherwise be taken to have a controlling interest in a foreign corporation, such that the person is not taken to have the interest. If the exemption is applied, an acquisition of dutiable property by the putative foreign corporation is not subject to the FPAD.
2. Section 3E provides as follows:
   • (1) Despite sections 3A, 3B, 3C and 3D, a person is taken not to have a controlling interest in a foreign corporation, or a substantial interest in the trust estate of a foreign trust, if the person has an exemption under subsection (2).

(2) The Treasurer, for the purposes of subsection (1), may, in writing, exempt a person who has a controlling interest in a foreign corporation, or a substantial interest in the trust estate of a foreign trust, if the Treasurer is satisfied that, having regard to any one or more of the following matters, the person should not be taken to have that interest -

• (a) in the case of a person who has a controlling interest in a foreign corporation -
  • (i) the nature and degree of ownership and control the person has in the corporation;
  • (ii) the practical influence the person exerts or any rights the person enforces to determine or influence, directly or indirectly, the outcome of decisions about the corporation's financial and operating policies;
  • (iii) any practice or behaviour of the person affecting the corporation's financial or operating policies;
• (iv) any other relevant circumstances;

1. Under section 3E(4) of the Duties Act, the Treasurer must issue guidelines for the exercise of the power of exemption, with section 3E(5) clarifying that such guidelines are 'not a legislative instrument within the meaning of the Subordinate Legislation Act 1994'.
2. By virtue of section 3E(5) of the Duties Act, the Treasurer is permitted to delegate both the power to grant an exemption, and the power to delegate such power, to the Commissioner.

1. The guidelines applicable to the acquisition of the Relevant Land were those made by the Treasurer on 11 August 2015 (Treasurer's Guidelines). An extract of those guidelines is set out in the Appendix to these reasons. It is accepted by both parties that they have not been certified under section 57 of the Victorian Civil and Administrative Act 1998.[6]
2. The relevant provisions of the Duties Act, and associated guidelines, have not been the subject of any consideration by VCAT or the Courts.
3. However, in Kamirice Pty Ltd v Commissioner of State Revenue (Kamirice),[7] Senior Member Davis had occasion to consider the provisions in the Land Tax Act 2005 dealing with 'absentee owners', and associated guidelines, which are provisions imposing a land tax surcharge on foreign owners of Victorian land. Davis SM observed of the land tax guidelines:[8]

The Guidelines are in fact a statement of Government policy, and therefore I should have regard to and apply the Guidelines in the exercise of the discretion conferred by s.3B(2), unless there are '....reasons that warrant departure from those policy guidelines' see Re Drake v Minister for Immigration and Ethnic Affairs (No.2) (1999) 2 ALD 634 and 641, also Neat Domestic Trading Pty Ltd v AWB Ltd (2003) 2016 CLR 277 at 298 [24] (Leeson C J).

1. At paragraph 39 of his decision, Davis SM said that the 'discretionary power to grant an [exemption] is properly informed by the purpose and policy of the absentee provisions' and that the 'matters set out in s.3B(2) [of the Land Tax Act 2005], interpreted in light of the Guidelines, are considerations to which I may have regard when exercising the discretion [to] grant or refuse the exemption'.
2. In Tadcaster Sorrento Pty Ltd v Commissioner of State Revenue (Tadcaster Sorrento),[9] Judge Harbison (in her honour's capacity as a Vice President of VCAT) considered the Tribunal's role in relation to the exercise of a discretion under state tax legislation,[10] stating:[11]

I have approached this question [regarding the exercise of the discretion] from the perspective that given the nature of my enquiry, it is not appropriate for either party to bear any general burden of proof. Of course, where facts are asserted and relied on by a party, that party bears the onus of proving those facts. ... my task is to take into account all relevant matters and exercise the discretion anew.

1. After quoting from the decision of Menzies J in Giris Pty Ltd v Federal Commissioner of Taxation,[12] Judge Harbison observed:[13]

So I must be guided by the purpose and policy of the Act, excluding fanciful or farfetched interpretations of that policy in exercising what might otherwise appear to be a discretion without any boundaries.

1. I was provided with a range of material by the parties, including the Explanatory Memorandum to the State Taxation Acts Amendment Bill 2015 (EM),[14] the second reading speech of the Treasurer, Mr Tim Pallas (2RS),[15] the debate in the Legislative Assembly when the Treasurer's Guidelines were read into Hansard (TG Debate)[16] and the report (including transcripts) of the Inquiry into the State Taxation Acts Amendment Bill 2015 dated 16 June 2015 (STAA Report) by the Economic and Infrastructure Committee of the Legislative Council (Committee).
2. Section 35 of the Interpretation of Legislation Act 1984 (Vic) (IL Act) provides that when interpreting a provision of an Act or subordinate instrument, regard can be had to:
   • reports of proceedings in any House of the Parliament;
   • explanatory memoranda or other documents laid before or otherwise presented to any House of the Parliament; and
   • reports of Royal Commissions, Parliamentary Committees, Law Reform Commissioners and Commissions, Boards of Inquiry, Formal Reviews or other similar bodies.
3. Accordingly, it is appropriate to have regard to the EM, 2RS, STAA Report and TG Debate in trying to understand the purpose and policy of the FPAD. Judge Harbison took a similar approach in Tadcaster Sorrento.

1. The EM states that the State Taxation Amendment Bill 'amends the Duties Act 2000 ... to set the rate for an additional duty chargeable in respect of transfer of residential property to foreign purchasers'.[17] In the commentary on clause 15 of that Bill, relating to what are now sections 3A to 3E of the Duties Act, the EM states that:[18]

New section 3E provides that the Treasurer may, in certain circumstances, exempt a person who has a controlling interest in a foreign corporation or a substantial interest in the trust estate of a foreign trust. A person who has an exemption is taken not to have the controlling interest or substantial interest.

1. The EM is otherwise silent on the purpose of the FPAD.

1. The 2RS is more illuminating as to the purpose of the FPAD. The Treasurer explained:[19]

The Victorian government recognises that housing affordability is an increasing problem for homebuyers, including first home buyers. For some segments of the market, prices have moved out of reasonable reach. That is why the Victorian government is committed to improving housing affordability for Victorian families and through the measures contained in this bill, will place Victorians in a more competitive position in the housing market.

Importantly, while local families have contributed significantly to the funding of government services and infrastructure through state and commonwealth taxes, foreign investors and absentee landowners do not contribute equivalently like those living and working here do. Foreign purchasers and absentee landowners are mostly investors who enjoy capital growth from their investments, adding to their own personal wealth. Yet it is the same services and infrastructure generally paid for by Victorian families over many years that supports capital growth for these investors.

Therefore, the Victorian government is introducing a 3 per cent stamp duty surcharge on the purchase or acquisition of residential property in Victoria (either directly or indirectly) by a foreign purchaser from 1 July 2015. ... appropriate exemptions will apply to ensure relevant Australian-based corporations and trusts are not unintentionally caught.

These taxation measures are appropriate to assist in adjusting the increasing inequity in the local housing market and in order to promote a fairer tax system. Combined, these represent equity measures designed to reduce the barriers to home ownership that many Victorian families face.

1. Based on the 2RS, two purposes can be identified, being to improve housing affordability and to ensure that foreign purchasers make a contribution to the services and infrastructure supporting the capital growth they enjoy.

1. The STAA Report was directed to the question of 'how the ... provisions would impact on housing supply and affordability in Victoria'.[20]
2. Despite this focus, the Committee noted that 'witnesses were unable to advise how this surcharge would impact on foreign investment and the supply or affordability of housing in Victoria'.[21] Indeed, the Committee quoted evidence from the Department of Treasury that 'we do not anticipate a really significant demand response pursuant to this 3 per cent impost'.[22]
3. The Committee also stated the evidence indicated the following objective of the FPAD:[23]

Foreign investors do not pay local taxes (such as GST or income tax) over an extended period of time. These taxes are used by governments to provide services (such as parks, public transport, schools, etc) which can affect the value of a property. Witnesses from the Department of Treasury and Finance indicated that the purpose of the proposed surcharge was to ensure that foreign buyers contributed to the provision of government services.

1. The purpose of ensuring foreign purchasers make equitable contributions to government infrastructure is also reflected in the TG debate where Ms Thomson (the Member for Footscray who spoke on behalf of the government) states:[24]

We know that everyone should be paying their fair share and contributing to that, and that applies to those who buy and purchase property who do not reside in this state. They should do the same. Why should those from overseas be exempt from contributing to this economy, from contributing to the betterment of our infrastructure and to the social fabric of the community?

1. Relevantly, Ms Thomson observed that '[t]here will be exemptions for developers. When developers are making a positive contribution to the Victorian economy, there will be the capacity to exempt developers, and when they are adding legitimately to our housing stock, they will be exempt'.[25]
2. That this is a purpose of including a discretion for the Treasurer to grant exemptions is also supported by the STAA Report, in which the Committee observed:[26]

The Bill gives the Treasurer discretion to issue an exemption from the surcharge. This is essentially to ensure that the end user payers the surcharge and not developers or companies who may have foreign backing who may have purchased land to develop and resell.

Was the Relevant Property 'residential property' as defined?

1. It is common ground as between the parties that, at the time of the transfer:
   • the Relevant Property did not contain a building 'designed and constructed solely or primarily for residential purposes'; but
   • SWT intended to construct such a building.
2. Where the parties diverge is whether the reference in the definition of 'residential property' to a building that 'may lawfully be used as a place of residence' is apt to apply to a residential apartment development of the kind that SWT intends to construct on the Relevant Property.
3. The Relevant Property is a site of some 8,847 square metres. At the time of transfer, there was a permit in place for 940 apartments to be built across a 47 and 49 level two tower design.[27] The evidence is that SWT intends to develop the property in line with that design and permit.[28] The overall development will 'include a substantial podium top space offering a vast array of resort-style resident amenities, retail outlets, 778 parking bays and 400 bicycle bays'.[29] Further, an area of approximately 2,100 square metres will be public park space to be vested in the City of Melbourne.[30] Among other things, the permit allows for the demolition of existing buildings on the site, the construction of towers above the shared podium and the 'use of the land for dwellings'.[31]
4. SWT submits that the definition of 'residential property' was 'taken directly from the definition of "principal place of residence" in s 53(1) of the Land Tax Act 2005' and, as such, 'clearly only contemplated individual homes and is, respectfully, only capable of applying to individual homes', noting that '[i]t is, after all, only an individual home that could qualify for the "principal place of residence" exemption'.[32]
5. The Commissioner says that SWT's construction of the definition should be rejected as it 'is not permissible to limit the plain meaning of the words used ... by reference to the operation of a different concept of "principal place of residence" in a different statutory context', which is not 'in pari materia' (ie. the same subject matter).[33]
6. The Commissioner submits the definition of residential property does not 'state that the building must be used in its entirety as a place of residence by a single person'; rather, 'it is enough that the building - ie, the proposed residential towers that [SWT] intends to build - "may lawfully be used as a place of residence" by as many people as the planning laws permit to use and occupy the built premises'.[34]
7. In SWT's closing submissions,[35] SWT contends that although section 37 of the IL Act provides that expressions in the singular must be read in the plural, this is so 'unless the contrary intention appears'. SWT says that the contrary intention does appear in the present case because the 'principal purpose of the tax cannot be achieved if the tax is imposed at a wholesale level'.[36] This is so given that, where the tax is absorbed by the developer (as the evidence suggests is likely in this case), 'its imposition can have no impact on housing affordability in Victoria'.[37] By contrast, SWT says the tax can have an impact on housing affordability 'when the imposition of the tax is applied at the retail (purchaser [of individual apartments]) level'.[38]
8. In my view, the Commissioner's interpretation is to be preferred.
9. First, it is consistent with the plain and ordinary meaning of the words used in the definition. When the definition refers to a building that may lawfully be used as a place of residence, it does not require that the whole of the building be capable of such use. Rather, it is bringing in planning concepts. Relevantly, in this regard, the planning permit relating to the Relevant Property permits both the construction of 'towers' (ie. two buildings) and the 'use of the land for dwellings' (ie. the use of the buildings as a place of residence for those who acquire dwellings after construction).
10. Second, I reject SWT's suggestion that the tax cannot have been intended to apply to developers because it can have no impact on housing affordability in Victoria, as compared to the effect it has at a retail level. This is gainsaid by the Treasurer's Guidelines which specifically require consideration to be given to 'whether the amount of housing stock that is supplied by the entity to the Victorian market is significant'. The reference to housing stock being 'supplied by the entity' only makes sense as a relevant consideration where the foreign purchaser is a developer.
11. If SWT's contentions were to be accepted, it would mean that if a foreign individual was to buy a derelict suburban house with the intention of demolishing the existing building, subdividing the land, and then constructing two houses, one for herself and one for her children, with some common property to be used by both of them, she would not be subject to the FPAD. That would clearly be inconsistent with the purpose of the FPAD and suggests that 'residential property' should be given a broad construction, with an exemption available to ameliorate its impact in certain specified circumstances.[39]
12. For these reasons, I find that the Relevant Property is 'residential property' as defined (at the relevant time) in section 3 of the Duties Act.

Should the discretion in section 3E of the Duties Act be exercised?

The nature and degree of ownership and control the person has in the corporation

1. The first matter that the legislation requires to be considered is the nature and degree of ownership and control the foreign person has in the corporation.[40]
2. In the present case, the foreign person referred to is MUD, and the corporation is SWT, which is a wholly owned subsidiary of MUD.
3. The Treasurer's Guidelines refer to the following factors in relation to this matter:
   • The degree of day-to-day control or input into the decisions of the corporation or trust a foreign person may have.
   • Whether the foreign person's interest in the corporation or trust only grant to them limited rights.
   • The remoteness of the foreign person's investment in the corporation or trust. For example, is it direct ownership or more remote through a series of other entities or investment platforms?
4. SWT says that, when assessing the nature and degree of ownership that MUD has in respect of SWT, regard should be had to the evidence of Ms Li, an Australian citizen, that:
   • she has complete and independent control over SWT's business;[41] and
   • MUD is predominantly 'owned' (through a chain of companies) by Ms Li and other family members that are also Australian citizens (including her husband, son and son-in-law).[42]
5. As such, SWT submits that these considerations 'emphatically - if not decisively - support the exercise of the discretion'.[43] This is because MUD 'is not, in truth, a "foreign corporation" - as it is 80% owned by Australian citizens' and '[c]ontrol lies with SWT's sole director - who is an Australian citizen'.[44]
6. The Commissioner notes that 'by reason of its 100% shareholding in [SWT], MUD has the highest degree of ownership and control'.[45]
7. The Commissioner goes on to observe that, 'if the [Relevant Property] were held directly by MUD ... [t]here would be no scope for any exemption from the [FPAD] - irrespective of the level of capital expenditure incurred in managing the property, or any contractors or consultants engaged in Victoria, and irrespective of the citizenship of the foreign corporation's shareholders'.[46] This is so because the discretion under section 3E of the Duties Act does not apply to an entity that is a foreign corporation because it is 'incorporated outside Australia'.[47]
8. He submits that 'the interposition of a wholly-owned subsidiary as a vehicle for the ownership of the [Relevant Property] does not provide a strong basis on which to grant an exemption from the [FPAD] that would otherwise be applicable to MUD as a foreign corporation'.[48]
9. As such, the Commissioner says 'the nature and degree of MUD's ownership and control of [SWT] provides a strong factor against the exercise of the discretion'.[49] The Commissioner says the position of SWT should be contrasted with 'a substantive Australian developer who may be majority owned, or even potentially wholly owned by foreign interests, but is an Australian developer with a track record'.[50]
10. The Commissioner made a similar submission in Kamirice, which Davis SM accepted 'has considerable force and is a matter that I should take into account'.[51] Davis SM also rejected Kamirice's submission that the fact of 100% ownership was not of significant importance, observing that 'the nature of the ownership is the highest possible ownership that can be held. This is a statutory matter, and is something to which I should give considerable importance'.[52]
11. I reject SWT's submission that the reference to 'nature and degree of ownership' requires consideration of the nationality of the ultimate owners. The focus of the statutory test is on 'the person' that has the putative controlling interest.
12. That MUD has 100% direct ownership of SWT is clearly a relevant consideration pointing against the exercise of the discretion. It may be contrasted, for example, with the situation where a foreign person is deemed to have the maximum interest in a discretionary trust if he or she is an object of the trust,[53] even though that person may receive no distributions and have no control over the trust. In that situation, the 'nature and degree of ownership' may be a consideration pointing to the positive exercise of the discretion.
13. While this factor is important, and should be given a high weighting, it is still one of a number of factors that need to be considered in line with the purpose and policy of the FPAD, and may well be outweighed by those other factors.
14. For completeness, I reject the Commissioner's suggestion that the 'interposition of a wholly-owned subsidiary' is a relevant consideration. This seeks to convert a relieving provision to an anti-avoidance provision. There is nothing in the legislation, or the associated materials, to suggest that this was a purpose or policy of the FPAD or the discretion.

The practical influence the person exerts to determine or influence the outcome of decisions about the corporation's financial and operating policies

1. The second consideration is the practical influence the foreign person exerts to determine (directly or indirectly) the outcome of decisions about the corporation's financial and operating policies.[54]
2. The Treasurer's Guidelines suggest regard should be had to the following factors when considering this matter:
   • Whether the foreign person acquired its controlling interest or substantial interest as part of an investment strategy solely for the purposes of obtaining an income stream.
   • The level of involvement of the foreign person in the investment decisions of the corporation or trust.
3. In Kamirice, the Commissioner said that this factor 'is directed to practical influence that is in fact exerted by the [foreign] person; in other words, it is concerned with actual influence rather than theoretical capacity to influence'.[55] That interpretation was accepted and applied by Davis SM.
4. SWT says the evidence of Ms Li is clear, that 'she, as the sole director of SWT, is directly responsible for decisions made by SWT - including those operational decisions that she has outsourced'.[56]
5. By contrast, the Commissioner submits that '[a]ny suggestion that MUD has no practical influence over [SWT] cannot be seriously entertained, in circumstances where [SWT] is wholly owned by MUD and its sole director is also a director of MUD'.[57]
6. The evidence given by Ms Li was that the day to day operation of the development of the Relevant Property was outsourced to LM Develop Pty Ltd (LMD), which in turn has delegated many of the functions to KM Develop Pty Ltd (KMD). However, she also gave evidence of being consulted by LMD on some decisions, and certainly of being contacted when additional funds were required. In those cases, Ms Li would arrange additional funds after discussing matters with her husband. The funding would be arranged from their funds in China and make its way down a chain of foreign entities, and ultimately lent from MUD to SWT.
7. The evidence suggests that MUD is a passive holding company and so cannot itself be regarded as having any actual practical influence over the financial and operating policies of SWT. Rather, I find that practical influence over:
   • the operating policies of SWT was exerted by LMD and/or KMD; and
   • the financial policies of SWT was exerted by Ms Li and, to some extent, her husband.
8. LMD and KMD are both Australian companies controlled by Australian citizens. Ms Li and her husband are also Australian citizens, albeit currently resident in Hong Kong or China.
9. The definition of 'foreign purchaser' in section 3 of the Duties Act also includes a 'foreign natural person', which is in turn defined in that section to mean 'a natural person who is not ... an Australian citizen'. The focus on Australian citizenship is consistent with the policy and purpose of the FPAD.
10. Accordingly, the absence of practical influence exerted by MUD, and the exertion of practical influence by Australian citizens or companies, can be seen to a matter which points towards the positive exercise of the discretion. As it is a legislated factor, it should be given a high weighting.

Any practice or behaviour of the person affecting the corporation's financial or operating policies

1. The third matter is any practice or behaviour of the person affecting the corporation's financial or operating policies.[58]
2. The Treasurer's Guidelines point to the following factors:

The ability to influence the outcome of financial, operating and management decisions of the corporation or trust

• Whether the directors of the corporation or trustee of the trust are controlled or are required to follow the directions of the foreign person.
• The relationship between the persons responsible for the day-to-day operation of the corporation or trust and the foreign person.

1. SWT submits that, to the extent the heading for this limb of the Treasurer's Guidelines refers to the 'ability to influence' financial, operating and management decisions, they are ultra vires on the basis that this term does not appear in the provision.[59] SWT also says the Tribunal fell into error in Kamirice by proceeding on the basis of flawed submissions from the Commissioner relating to foreign entity's ability to control the taxpayer through its 100% ownership and as a significant creditor of the taxpayer.[60]
2. In its submissions in the present proceedings, the Commissioner focused on the practical influence exercised by MUD over SWT, and did not seek to argue that the reference to 'any practice or behaviour' affecting the corporation's financial or operating policies was a reference to the 'ability to influence' the outcomes of financial, operating and management decisions.
3. While it is unnecessary to decide the point given the approach taken by the Commissioner in this proceeding, I have sympathy for the view that the reference in the Treasurer's Guidelines to the 'ability to influence' is not consistent with the legislation to which those guidelines relate and, to that extent, should not be taken into account in determining whether or not to exercise the discretion.
4. For present purposes, given this factor largely overlaps with the analysis in the preceding section, I consider this to be a neutral factor.

1. The legislation itself provides no guidance as to the other relevant circumstances to be considered under this head.[61] However, having regard to both Tadcaster Sorrento and Kamirice, it is clear that to be relevant the other circumstances must be consistent with the purpose and policy of the FPAD.
2. The Treasurer's Guidelines identify 6 broad categories of relevant circumstances being the impact on the economy, the effect on competition, the impact on the community, whether any requirements of the Foreign Investment Review Board (FIRB) have been satisfied, the character of the controlling interest and the independence of management. I consider each of these below.
   • - Impact on the economy
3. The Treasurer's Guidelines indicate that consideration should be given to the following matters:
   • Whether the corporation with a foreign controlling interest or trust with a foreign substantial interest can demonstrate that it is actively investing in and significantly adding to the supply of housing stock in Victoria, or that its main commercial activity is in purchasing existing property or properties for redevelopment, refurbishment or conversion for sale or re-sale where the primary use of the redeveloped, refurbished or converted property is for residential purposes.
   • Where land is acquired for development, re-development, or conversion purposes, the extent and nature of that development, re-development or conversion will be taken into account.
   • Whether the entity has heavily invested in the development, re-development or conversion of the property and how far progressed they are in terms of obtaining any relevant planning or building approvals that is necessary for such development, re-development or conversion.
4. SWT refers to the contribution to housing stock as a 'dominant consideration',[62] noting that it is consistent with the Treasurer's Guidelines which state that:

corporations ... that are not intended to be captured under the non-resident duty surcharge ... are those ... whose commercial activities add to the supply of housing stock in Victoria (either through new developments or through redevelopment, where such development is primarily residential)

1. SWT says the evidence demonstrates that it is actively investing in, and significantly adding to, the supply of housing stock in Victoria, noting that:[63]
   • SWT paid $60 million to acquire the land.
   • SWT will invest in the vicinity of $400 million to develop the land.
   • The commercial residential development will produce approximately 950 to 1,000 residential dwellings.
   • The construction of those dwellings will take approximately 38 months to complete.
2. SWT also relies on the expert report of Robert Southern, an economist and Senior Managing Director of the Economics and Financial Services practice at FTI Consulting (Australia) Pty Ltd. Mr Southern's opinion is that the construction of 1,000 residential dwellings under the project represents around 1.46 per cent of dwelling unit commencements in 2015-16, which 'suggests that the Project is likely to make a significant contribution to the stock of Victorian housing'.[64] Mr Southern also states that 'the Project would make up 19.13 per cent of the estimated undersupply of dwellings in 2015-16', which 'supports a strong conclusion that the Project would be likely to have a significant impact on the Victorian market for residential buildings'.[65]
3. SWT says that, 'if SWT's project is not considered to be one that will be "adding significantly to the supply of housing stock in Victoria", then it is hard to imagine any residential development that would'.[66]
4. SWT goes on to add that, having regard to the size and scale of the development and the projected expenditure of over $400 million, the other two bullet points in relation to the impact on the economy (set out in paragraph 79 above) are also satisfied.[67] In this regard, SWT points to the evidence of Mr Southern that the project 'will likely generate an economic impact on [gross state product] of a multiple of the estimate [sic] $420 million total expenditure', 'will have a significant impact on employment, particularly given the reliance on Victorian builders, consultants and contractors' and, as such, 'it is reasonable to conclude that [SWT's] Project is likely to have a highly favourable impact on the Victorian economy'.[68]
5. Lastly, SWT submits that the payment of stamp duty of $3.3 million on the acquisition and ongoing land tax of $297,000 a year (ignoring any surcharge) is '[a]nother positive impact on the Victorian economy'.[69]
6. The Commissioner did not lead any expert evidence of his own, but approaches the question of increase in the supply of housing stock from a somewhat different perspective. While conceding that 950 to 1,000 apartments is 'significant',[70] the Commissioner submits that, having regard to the fact that the planning permit was in place prior to the purchase of the land:[71]

The fact that a residential development by a foreign purchaser will create additional houses or apartments does not necessarily demonstrate that there will be a significant addition to the supply of housing stock in Victoria, in circumstances where the same or a similar development would have been carried out by a local developer.

1. The Commissioner also says it is relevant that the proposed development 'appears to be heavily targeted towards the sale of apartments to overseas purchasers ... as opposed to sales to local families in the Victorian market'.[72] This is because 'it doesn't really increase or advance housing affordability to have a number of apartments created with foreign investor landlords, then renting to Victorian families who are unable to purchase themselves'.[73]
2. SWT responds by saying that the discretion 'is to be exercised by reference to the facts (that is, bricks and mortar), and not counterfactuals'.[74] In closing submissions, SWT provided a copy of the relevant planning scheme[75] which suggests that the Relevant Property could be used for purposes other than residential apartments, eg. a hotel, such that there is no certainty a local purchaser would construct apartments.
3. Some support for a comparative or counterfactual approach to the assessment of the impact on the economy can be found in the Tribunal's decision in Kamirice where Davis SM stated: [76]

It is noted, that it is likely that whoever owned the property whether it be an absentee landlord or a local landlord, there would be considerable expenditure involved in maintaining and upgrading a business such as that on the property.

1. Later in his reasons, Davis SM says:[77]

I do believe that this is a comparative exercise where one should look at the situation that if the absentee owner were not present what would happen? In this particular situation I can infer, in all probability, if the absentee owner did not own the property, it would be owned by a local owner who would be doing precisely the same things with the property as the absentee owner has done.

1. In my view, there are a number of factors that militate against the comparative approach contended for by the Commissioner in the present case as follows:
   • There is no reference in the Treasurer's Guidelines to such a comparative approach being required or, indeed, of any reference to who obtained any planning approval for the property.
   • The Treasurer updated his guidelines in 2018 to provide that a corporation 'will be regarded as significantly adding to the Victorian housing stock if the developments or redevelopments add 50 residential premises within a 12-month period that includes the transaction in question'.[78] That supports the contention that the focus is on 'bricks and mortar' (as SWT puts it), rather than a counterfactual, because otherwise the updated guidelines would need to establish a base against which the additional 50 residential premises is to be compared.
   • A focus on actual construction of dwellings is consistent with the purpose and policy of the FPAD, and the provision for exemption from the FPAD, relating to housing affordability. In base economic theory, an increase in the supply of the good or service will bring down the price of the good or service as supply and demand move to equilibrium. As Mr Southern said under cross examination, 'the economic instance in the market is really about the matching of supply and demand at a point in time'.[79] In the housing market, this may not be as clear cut, although a recent ANU study states that 'modelling suggests that there is some evidence, albeit relatively weak, that a housing shortage is associated with higher house price growth'.[80]
2. Even if I were to accept a comparative approach was appropriate:
   • Unlike the taxpayer in Kamirice, SWT has provided expert evidence in support of its contention that the development will have a positive impact on the Victorian economy, and the Commissioner has not put on any evidence to the contrary.
   • There is no evidence, expert or otherwise, as to what a local purchaser might have done if it had acquired the Relevant Property. As SWT contends, the planning scheme allows different uses. It would be open to a purchaser to decide to let the existing planning permit lapse and apply for a new one if that purchaser considered some other development (eg. a commercial office tower) to be more profitable.
   • While Davis SM was prepared to make inferences as to what a local owner might do in Kamirice, and the Commissioner invited me to do the same in this proceeding, Kamirice concerned an existing commercial office building where it is apparent there would be less conjecture about future use. The present case concerns an effectively vacant site, with medium term development potential where any future development is a matter of significant conjecture. If the Commissioner seeks to posit a fact or matter as going against the exercise of the discretion, he bears the onus of proof,[81] and it is incumbent on the Commissioner to lead evidence in support of that fact or matter.[82]
3. In relation to the Commissioner's contention concerning SWT's intention to market the apartments to foreign purchasers I note that, in response to a question from me, Mr Southern was not able to express a view as to the impact of an apartment sale to a foreign purchaser on apartment pricing generally.[83] However, Mr Southern indicated that SWT itself was effectively a 'price-taker' in that:[84]

the prices would largely be set in what I term an exogenous way, and by exogenous, I mean the fact that from an economic perspective, that the prices tend to be set by the market, and the market at that point in time is going to be for people looking for dwellings in that general location and that general area with those general features, and that standard of quality of finish that the development has got.

1. In my view, it stands to reason that a rational foreign purchaser would only buy an apartment from SWT if it could not purchase a comparable apartment at a cheaper price from another developer. As such, even if SWT was to only sell to foreign purchasers (which is not the evidence), it would still have an effect on the demand and supply of apartments for both local and foreign purchasers and some (albeit unquantifiable) impact on housing affordability.
2. Accordingly, in my view, the considerations identified in the Treasurer's Guidelines under 'impact on the economy' support a favourable exercise of the discretion, and should be given a high weight given it is consistent with the policy and purpose of the FPAD to improve housing affordability.
   • - Competition
3. The Treasurer's Guidelines indicate that consideration should be given to the following matters:
   • Whether the foreign corporation or foreign trust is able to compete fairly in the Victorian marketplace and whether there are wider consequences for Victoria.
   • Whether entities that are Australian-based but foreign controlled will be at a competitive disadvantage in providing an equivalent service or product in Victoria compared to locally domiciled entities.
4. SWT say that the 'imposition of a "penal" tax of 3% ... does on any view, subject SWT to a disadvantage in the marketplace',[85] pointing to the evidence of Mr Southern that '[SWT] will likely bear these additional costs ... in the form of a lower rate of return' which will 'reduce its ability to compete fairly in the Victorian residential property market'.[86]
5. SWT contends that, all other things being equal, in 'any sale or auction process, [a] local developer will be able to offer up to 3% more than SWT for the purchase of land', illustrating the competitive disadvantage arising from the tax in 'any competitive sale process'.[87]
6. In his closing submissions, the Commissioner said that, based on the evidence given by Mr Southern, the duty imposed on SWT is not able to be passed on (ie. because SWT is a price taker), such that there can be no negative impact on housing affordability by reason of the FPAD.[88] Further, when considered on an apartment basis, the Commissioner says the amount of the FPAD was modest (ie. $1,914 per apartment).[89] Lastly, as there is no suggestion that the FPAD makes the project unviable, it will not impact on the supply side of the housing affordability issue.[90]
7. In Kamirice, Davis SM took the view that while the question of competitiveness should be taken into account, he did not 'believe it should be given a lot of weight' in the circumstances, including that he was 'able to infer that expenses would only be passed on to the tenant as to the extent that the market would bare (sic)'.[91]
8. Ultimately, in this case, I consider competition to be a neutral consideration in relation to the exercise of the discretion. While the imposition of the FPAD increases the cost for SWT, it was aware of the potential for the FPAD to apply and proceeded with the purchase. It must have considered the potential returns on the project, taking account of the FPAD, to justify the price it agreed to pay. In those circumstances, it is hard to see any deleterious impact on SWT's competitiveness.
   • - Impact on the community
9. The Treasurer's Guidelines indicate that consideration should be given to the following matters:
   • Whether the amount of housing stock that is supplied by the entity to the Victorian market is significant.
   • Whether there is a considerable level of Australian participation in the corporation that conducts its activities in Victoria with a foreign controlling interest or trust with a foreign substantial interest.
   • Whether the entity predominately employs or contracts for the services, materials of Australian building contractors and suppliers to engage in the development, re-development or conversion of residential property.
10. The first bullet point under this heading has already been addressed at paragraphs 79 to 95 above in relation to the wider consideration of the impact on the economy.
11. In relation to the second and third bullet points, SWT says that, having regard to the evidence, the 'development will ... be almost a 100% Australian-made product'.[92] In this regard, it is noted that clause 6.2 of the Development Management Agreement between SWT and LMD requires that the latter 'use its reasonable endeavours to only use materials suggested and supplied by Victorian building contractors and suppliers' and Mr Yong (the sole director of LMD) states that the 'construction work for the Project will be undertaken by an Australian construction contractor'.[93]
12. Other beneficial community impacts relied on by SWT are:
    • the contribution of the project to meeting Places Victoria's 'Docklands Community and Place Plan';[94]
    • the impact of the project on the amenity and vibrancy of the new Fishermans Bend precinct;[95] and
    • the gift of 2,100 square metres to the City of Melbourne for use as a public park.[96]
13. The Commissioner did not directly address this factor in his contentions. However, the gist of his response appears to be that SWT is not carrying on any commercial activities itself, 'by reason of its absolute delegation of powers to [LMD]'.[97] The Commissioner says that this means that SWT cannot be seen to be 'Australian-based', notwithstanding that 'its director, or the persons who hold a beneficial interest in a distantly-related company of the corporation, are Australian citizens'.[98]
14. The notion of a corporation being 'Australian-based' is not contained in the specific guideline. Rather the introductory material in the Treasurer's Guidelines states that the corporations 'that are not intended to be captured under the non-resident duty surcharge ... are those corporations ... that are Australian-based'. However, the 'Australian-based' concept arguably finds expression in the focus in the second bullet point on 'Australian participation in the corporation that conducts its activities in Victoria'.
15. In the present case, SWT does not itself have any employees.[99]
16. It seems clear that Ms Li - an Australian citizen - is the directing mind and control of SWT and, to the extent that SWT carries on activities, it could thus be said there is a level of Australian participation in the corporation. However, it would be hard to characterise that participation as 'considerable' in light of the evidence that the day to day activities associated with development of the Relevant Property are carried on by LMD and KMD.
17. To my mind, the question which follows is whether the involvement of Mr Yong (for LMD) and Mr Wong (for KMD) should be regarded as 'Australian participation in [SWT] that conducts its activities in Victoria' through their agency. Alternatively, is the fact that they are not employees of SWT fatal to satisfaction of this aspect of the Treasurer's Guidelines?
18. A corporation, being an artificial legal entity, must necessarily carry on its activities through the agency of natural persons, whether those persons are directors, employees or agents. As the authors of Principles of Corporation Law observe:[100]

Although a company is a discrete legal entity separate from its directors and members in the sense of having its own legal rights, privileges, duties and liabilities separate from theirs, it is in other respects not separate. After all, a company cannot act (for example, entering a contract or acquiring or disposing of property) unless its directors (or sometimes it members), or agents whom they appoint, act on behalf of the company.

1. I cannot see a basis to say that the activities being conducted on SWT's behalf by LMD and KMD, under contractual delegation, should not be considered to be activities conducted by SWT. Having regard to the fact that Mr Yong and Mr Wong are both Australian residents based in Victoria, I find that there is a considerable level of Australian participation in SWT's conduct of its activities in Victoria.
2. Further, the evidence shows that 'only Australian professional consultants and contractors have been engaged by or on behalf of SWT' and that the 'construction work for the Project will be undertaken by an Australian construction contractor'.[101] That SWT might have outsourced or will outsource the engagement of the Australian consultants, building contractors and suppliers to LMD does not deny the fact that it is SWT which is the principal for whom the contractors and suppliers are engaged.
3. While the Development Management Agreement gives Mr Yong wide latitude to carry on the development and to engage contractors without recourse to Ms Li, this on the basis that:

initially, Mr Yong gave us a general plan from the project - it is about this project from the beginning to the end. If he is following this plan, then he doesn't really need to report everything to me.[102]

1. Ms Li is kept informed of the project through regular reports from LMD[103] and is actively involved with 'big decisions' or when additional funding is required.[104] For instance, Ms Li approved the subcontracting from LMD to KMD.[105]
2. The Commissioner responds by saying that SWT 'holds its interest in the [Relevant Property] as a passive investment' and is 'no more than a shell company' that 'has done nothing other than to receive, and then to forward on, the funds that other companies (either MUD and/or [entities above MUD] have transferred to it'.[106]
3. The evidence is that the funds are ultimately sourced from Ms Li and family and flow down through a chain of entities to reach SWT.[107] In her evidence, Ms Li explained why MUD was originally used as the purchaser, namely that the family funds were held in China and, due to restrictions on outbound capital flows, the only way they could get the money to Australia in time to pay the deposit required to acquire the Relevant Property was through an existing entity, being MUD.[108]
4. Ms Li indicated that this continues to be a reason for MUD being part of the funding chain when SWT requires funds for the development of the Relevant Property.[109] In my view, this is not a basis on which to effectively pierce the corporate veil and treat MUD as the real owner of the Relevant Property.
5. Having regard to the preceding analysis, the impact on the community is a factor that sits in favour of the exercise of the discretion. Again, as the impact on the community goes to matters of housing affordability, it is a factor that should be given a high weighting.
   • - Satisfaction of Foreign Investment Review Board requirements
6. The Treasurer's Guidelines indicate that consideration should be given to the following matters:
   • Whether the Australian-based corporation with a foreign controlling interest or trust with a foreign substantial interest has notified the Foreign Investment Review Board (FIRB) for the purposes of purchasing residential property for development either as part of its 'annual program' or otherwise.
   • The nature of the approval that has been provided by the FIRB for the purposes of purchasing residential property for development.
   • Whether the FIRB has imposed any conditions on the entity.
7. In relation to this aspect of the Treasurer's Guidelines, SWT notes that it received approval from FIRB to acquire the Relevant Property,[110] and that it has been granted an exemption certificate for the sale of its apartments to foreign persons.[111]
8. The Commissioner did not comment on this aspect of the guidelines.
9. Accordingly, SWT's satisfaction of the FIRB requirements is a positive consideration for the exercise of the discretion. That said, the connection between this consideration and the policy and purposes of the FPAD is not entirely clear, so I give it a low weight.
   • - Character of the controlling interest
10. The Treasurer's Guidelines indicate that consideration should be given to the following matters:
    • The extent to which the corporation or trust operates in a transparent manner and the extent to which it is subject to adequate and transparent regulation and supervision.
    • The corporate governance practices of the entity.
11. SWT says that it 'has, from the time of its establishment, always operated in a transparent manner and has registered for GST and income tax with the Australian Tax [sic] Office and has complied with all taxation laws, and has paid all taxes that it has been required to pay'.[112] As an example, SWT observes that the stamp duty assessment has been paid in full.[113]
12. The Commissioner, by contrast, contends that SWT does not operate in a transparent manner because:
    1. It has delegated the entirety of its decision-making responsibilities and powers to LMD, including the keeping of records associated with the development.[114]
    2. The evidence indicates that SWT holds the Relevant Property as a passive investment for another foreign corporation, ie. MUD or the entities in the chain of entities above MUD.[115]
13. Apart from the payment of stamp duty and the suggestion that SWT will pay its land tax when due, there is no evidence of SWT's tax compliance. That said, given that construction is yet to commence, it is unlikely that SWT will have incurred any significant income tax or GST compliance obligations to date. However, it was not submitted - and there is no evidence to suggest - that SWT will not comply with its income tax or GST obligations in due course.
14. I do not accept the Commissioner's contention that because SWT has outsourced its record keeping obligations to LMD, this demonstrates that it is not transparent. There is nothing inherently untoward in a company arranging for another party to carry on a business activity on its behalf (eg. the manager of a hotel). In such cases, it is likely that the party having day to day control is going to be in a better position to maintain records relating to that business activity than the principal.
15. I also do not accept that SWT should be characterised as a passive investment vehicle for the reason that it is carrying on a substantial residential development business, albeit through the agency of LMD and KMD.
16. However, the chain of entities between Ms Li (and her family) and SWT is somewhat opaque, with evidence of changes in ownership occurring from time to time.[116]
17. It is not clear, on the evidence before me, whether those changes in ownership have been conducted in compliance with the regulatory environment in each relevant jurisdiction. Further, there is no evidence whether the potential for some of those changes to have triggered Victorian duty consequences under the landholder duty provisions[117] has been considered.
18. As the Commissioner sought to emphasise in his submissions, the equality aspect of the FPAD - ie. ensuring foreign purchasers make an appropriate contribution to the services and infrastructure that supports the capital growth of their residential properties - is an important part of the policy and purpose of the FPAD.[118]
19. On that basis, I consider that this factor militates against exercise of the discretion and should be given a high weighting.
    • - Independence of management
20. The Treasurer's Guidelines indicate that consideration should be given to the following matters:
    • The location of the entity's central management and the ability for the management to make decisions independent of the foreign person that holds the controlling interest in the corporation or substantial interest in the trust estate
21. SWT says that, based on the evidence of Ms Li, 'the management of SWT lies solely, and ultimately, with Helen Li, as sole director of SWT'.[119] Given that Ms Li is an Australian citizen, and 'also holds an indirect shareholding of 27.93% in [MUD], and in SWT', it 'may therefore be safely concluded that SWT makes its decisions "independent[ly] of the foreign person",' ie. MUD.[120]
22. In his closing submissions, the Commissioner contended that MUD exerts practical influence on SWT by providing funds to SWT when required and that there are no 'independent decisions made by SWT'.[121] He also observed that there was no documentation relating to the funds advanced, which Ms Li explained was because she regards them as the 'same company'.[122]
23. I accept the evidence of Ms Li that she made the decisions concerning SWT, in consultation with her husband, where they were major decisions.[123] While MUD was the immediate source for funding required by SWT, the funds were ultimately coming from Ms Li and her family in China.
24. In my view, based on these considerations, SWT's central management and control was located in Hong Kong or China where Ms Li (its sole director) is based and that, while Ms Li was also a director of MUD, in making decisions about SWT, she was doing so independently of MUD.
25. Accordingly, I consider this to be a factor in favour of the exercise of the discretion, albeit of medium weight.

1. I asked counsel for both parties as to whether they had considered the relevance or otherwise of the Charter of Human Rights and Responsibilities Act 2006 (Vic) (Charter) to the exercise of the discretion.
2. SWT had not considered and did not seek to rely on the Charter.[124]
3. Similarly, the Commissioner had not considered the matter, but referred to the Statement of Compatibility related to the State Taxation Acts Amendment Bill 2015, which introduced the FPAD, and indicated that:[125]

To the extent that the bill differentiates between taxpayers' liability on the basis of a person's nationality, it limits a person's right to recognition and equality based on the person's race.

This differentiation is central to the purpose of the proposed measures.

1. Having regard to these matters, I do not consider that the Charter is a relevant consideration for the present case, although it may well be engaged in other matters concerning the imposition of the FPAD.

1. The table below summarises my analysis of the application of the legislation and Treasurer's Guidelines to the facts and circumstances in this proceeding:

Duties Act s 3E(2)(a)(i)

The nature and degree of ownership and control the person has in the corporation

Duties Act 3E(2)(a)(ii)

The practical influence the person exerts to determine or influence the outcome of decisions about the corporation's financial and operating policies

Duties Act 3E(2)(a)(iii)

Any practice or behaviour of the person affecting the corporation's financial or operating policies

Satisfaction of Foreign Investment Review Board requirements

Character of the controlling interest or substantial interest

1. The table illustrates that the positive factors with a high weight (3) outweigh the negative factors with a high weight (2), and that there are more positive factors overall (5) than negative factors (2).
2. In my view this is an appropriate case in which the discretion ought to be exercised consistent with the purpose and policy of the FPAD, and the provision of a discretion to exempt a foreign controller when assessing the application of the FPAD rules.

In determining whether an exemption should be granted, the decision maker will have regard to any one or more of the following general principles and circumstances:

1. The nature and degree of interest or ownership and control
   • The degree of day-to-day control or input into the decisions of the corporation or trust a foreign person may have.
   • Whether the foreign person's interest in the corporation or trust only grant to them limited rights.
   • The remoteness of the foreign person's investment in the corporation or trust. For example, is it direct ownership or more remote through a series of other entities or investment platforms?
2. Practical influence to determine, directly or indirectly, the outcome of decisions of the entity
   • Whether the foreign person acquired its controlling interest or substantial interest as part of an investment strategy solely for the purposes of obtaining an income stream.
   • The level of involvement of the foreign person in the investment decisions of the corporation or trust.
3. The ability to influence the outcome of financial, operating and management decisions of the corporation or trust
   • Whether the directors of the corporation or trustee of the trust are controlled or are required to follow the directions of the foreign person.
   • The relationship between the persons responsible for the day-to-day operation of the corporation or trust and the foreign person.
4. Any other relevant circumstances

In assessing other circumstances which would be relevant, consideration may also be given to the following:

• Whether the corporation with a foreign controlling interest or trust with a foreign substantial interest can demonstrate that it is actively investing in and significantly adding to the supply of housing stock in Victoria, or that its main commercial activity is in purchasing existing property or properties for redevelopment, refurbishment or conversion for sale or re-sale where the primary use of the redeveloped, refurbished or converted property is for residential purposes.
• Where land is acquired for development, re-development, or conversion purposes, the extent and nature of that development, re-development or conversion will be taken into account.
• Whether the entity has heavily invested in the development, re-development or conversion of the property and how far progressed they are in terms of obtaining any relevant planning or building approvals that is necessary for such development, re-development or conversion.

• Whether the foreign corporation or foreign trust is able to compete fairly in the Victorian marketplace and whether there are wider consequences for Victoria.
• Whether entities that are Australian-based but foreign controlled will be at a competitive disadvantage in providing an equivalent service or product in Victoria compared to locally domiciled entities.

For example, in purchasing residential property for the purpose of adding to new residential supply, consideration may be given to the competitive advantage/disadvantage that a wholly owned Australian company may have compared to an Australian-based company with a controlling interest held by a foreign person/entity.

• Whether the amount of housing stock that is supplied by the entity to the Victorian market is significant.
• Whether there is a considerable level of Australian participation in the corporation that conducts its activities in Victoria with a foreign controlling interest or trust with a foreign substantial interest.
• Whether the entity predominately employs or contracts for the services, materials of Australian building contractors and suppliers to engage in the development, re-development or conversion of residential property.

Satisfaction of Foreign Investment Review Board requirements

• Whether the Australian-based corporation with a foreign controlling interest or trust with a foreign substantial interest has notified the Foreign Investment Review Board (FIRB) for the purposes of purchasing residential property for development either as part of its 'annual program' or otherwise.
• The nature of the approval that has been provided by the FIRB for the purposes of purchasing residential property for development.
• Whether the FIRB has imposed any conditions on the entity.

Character of the controlling interest or substantial interest

• The extent to which the corporation or trust operates in a transparent manner and the extent to which it is subject to adequate and transparent regulation and supervision.
• The corporate governance practices of the entity.

• The location of the entity's central management and the ability for the management to make decisions independent of the foreign person that holds the controlling interest in the corporation or substantial interest in the trust estate.

[3] The contract of sale was entered into by SWT's parent company, Mid-Universe Developments Ltd, and nominated in favour of SWT.

[4] The rate of additional duty had increased to 7% by the time that the purchase of the Relevant Property was settled, but the Commissioner does not seek to contend that the higher rate applies having regard to the transitional rules contained in clause 34 of Schedule 2 to the Duties Act.

[5] This ground was not raised in SWT's objection and leave is sought under section 109 of the TA Act to raise it. Leave is granted, noting that this issue was raised in the Applicant's Statement of Legal Contentions filed with the Tribunal on 12 October 2018, raises a discrete legal point and leave is not opposed by the Commissioner.

[6] That section requires VCAT to apply a statement of policy which has been certified by the relevant Minister.

[7] [2017] VCAT 2087.

[9] [2015] VCAT 611.

[10] In that case, the discretion to group companies under section 50 of the Land Tax Act 2005 (Vic).

[11] [2015] VCAT 611 [40].

[12] [1969] HCA 5; (1969) 1 ATR 3, at 14.

[14] The Bill through which the FPAD was introduced.

[15] Hansard, Legislative Assembly, Thursday 7 May 2015 at 1444 to 1445.

[16] Hansard, Legislative Assembly, Tuesday 26 May 2015 at 1523 to 1525.

[22] Ibid, quoting the evidence of Mr Michael Brennan.

[23] Ibid at 4. The evidence referred to appears to be the evidence of Mr Brennan, Deputy Secretary - Economic (STAA Report at 12) who suggested that 'the primary motivation for these measures and the stated rationale for these measures as set out in budget paper 2 is really, if you like, an equity measure. It is largely about ensuring that foreign investors who gain the benefit of the capital appreciation and price growth, particularly pursuant to state government investment in services and infrastructure, pay their fair share for those things. It obviously does have some bearing on housing affordability.'

[26] STAA Report at 5. This appears to also be based on the evidence of Mr Brennan at pages 18 to 19.

[27] Flyer prepared by Colliers International for the sale, as handed up by the Commissioner at the hearing.

[28] Witness Statement of Steven Kin Meng Wong dated 9 October 2018 (Wong WS) [17].

[32] Applicant's Statement of Legal Contentions dated 12 October 2018 (ASLC) [4]-[6].

[33] Commissioner's Statement of Legal Contentions dated 9 November 2017 (CSLC) [44].

[34] Ibid [47] (emphasis from original).

[35] Applicant's Closing Submissions (ACS) handed up at the hearing on 20 November 2018.

[39] Noting that section 3E of the Duties Act also includes a power to exempt a person from holding a 'substantial interest' in a 'foreign trust'.

[40] Duties Act, s 3E(2)(a)(i).

[47] Paragraph (a) of the definition of 'foreign corporation' in section 3 of the Duties Act.

[50] Transcript, 19 November 2018, page 25, lines 20-26.

[51] [2017] VCAT 2087 [46]-[47].

[53] Duties Act s 3B(2).

[54] Ibid s 3E(2)(a)(ii).

[55] [2017] VCAT 2087 [53], quoting from the Commissioner's submission in that proceeding.

[58] Duties Act s 3E(2)(a)(iii).

[60] Ibid [87]-[95] referring to Kamirice [2017] VCAT 2087 [58]-[63].

[61] Duties Act, s 3E(2)(a)(iv).

[63] ASLC [112], referring to T Document T4 at 7 and the Wong WS.

[64] Witness Statement of Robert Southern dated 5 October 2018 (Southern WS) [3.1.2]-[3.1.3].

[70] Transcript, 19 November 2018, page 30, lines 16-18.

[73] Transcript, 19 November 2018, page 34, lines 21-28.

[74] Applicant's Reply dated 15 November 2018 [12].

[75] Schedule 4 to the Melbourne Planning Scheme, relating to the Fishermans Bend Urban Renewal Area.

[76] [2017] VCAT 2087 [84].

[78] Victorian Government Gazette, S450, 1 October 2018, p 5.

[79] Transcript, 19 November 2018, page 70, lines 15-17.

[80] B. Phillips and C. Joseph, 'Regional housing supply and demand in Australia', CSRM WORKING PAPER NO. 1/2017, available on the website of the Australian National University.

[81] Per Tadcaster Sorrento [2015] VCAT 611 [40].

[82] Mr Horan did put a question to Mr Southern in this regard, but Mr Southern was unable to answer whether a local developer would have made the same addition to housing stock: Transcript, 19 November 2018, page 63, lines 7-13.

[83] Transcript, 19 November 2018, page 71 (lines 14-24) and 80 (lines 7-14).

[86] Southern WS [6.12.12]-[6.1.13].

[88] Referring to the evidence of Mr Southern: Transcript, 19 November, 2018, page 67, lines 8-10.

[91] [2017] VCAT 2087 [103].

[93] Witness Statement of Lu Yong dated 5 October 2018 (Yong WS) [12].

[99] Transcript, 19 November 2018, page 38, lines 6-10.

[100] Ford, Austin & Ramsay's Principles of Corporations Law (LexisNexis Online) at [4.140.6].

[102] Transcript, 19 November 2018, page 38, lines 24-29 (see also page 45, lines 6-10).

[107] Transcript, 19 November 2018, page 42, lines 10-16.

[110] Wong WS [69] and Exhibit SW-19.

[116] Transcript, 19 November 2018, pages 48 to 59.

[117] Duties Act, Chapter 3.

[118] Transcript, 19 November 2018, page 31, lines 1-15.

[121] Transcript, 20 November 2018, page 121, lines 13-16.

[123] Transcript, 19 November 2018, page 39, lines 9-31 and page 40, lines 1-12.

[124] Transcript, 19 November 2018, page 4, lines 21-22.

[125] Hansard, Legislative Assembly, 7 May 2015 [1442].

[126] Victoria Government Gazette, G33, 20 August 2015, pp 1804-1806.