1. Section 50 of the Land Tax Act 2005 provides that

"The Commissioner of Land Tax may treat related corporations as a single corporation for the purposes of the Act."

1. The Commissioner has decided to treat all of the Australian Tadcaster companies as a single corporation in calculating the land tax liabilities of each of these companies.
2. This has the effect that the companies do not have the individual advantage of the no tax threshold. They therefore pay significantly more tax as a group than would have been paid if the companies had been individually assessed.
3. The applicant, Tadcaster Sorrento has appealed against this decision.
4. So the question I have to decide in this proceeding is whether the discretion contained in section 50 should be used to group the applicant with the other Australian Tadcaster companies.
5. However, it is agreed between the parties that my decision will apply to not only Tadcaster Sorrento, but to all of the Tadcaster companies, as each are in the same position in respect of this issue.
6. The applicant agrees that all of these companies are properly described as related under the Act. However, it says that in the circumstances of this case, it is not appropriate to exercise the discretion to group the companies so as to treat them as a single corporation.

1. In hearing this application, I am conducting what is often referred to as a merits review. This means that I am not sitting in appeal against the Commissioner's decision. The question is not whether the Commissioner made any legal or factual error in exercising his discretion under section 50. Rather, I must look at all the evidence afresh and exercise the discretion set out in the Act. To use a description often utilised in applications of this sort, my task is to stand in the shoes of the Commissioner and consider afresh whether the discretion should be exercised.
2. In his written submissions, the Commissioner suggested that the applicant bore the onus of proving that it was unjust or inappropriate for the assessed corporations to be assessed as a single corporation. The question of who bears the burden of proof in this application was not explored in oral submissions by either party.
3. I have approached this question 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. But I do not treat the applicant as being required to prove to me that it is unjust or inappropriate for the individual companies to be grouped. Rather, my task is to take into account all relevant matters and exercise the discretion anew.

1. I accept that the discretion contained in section 50 is very wide. I accept also that its exercise is governed by the principles outlined in Condor Tower v Commissioner of State Revenue 88 ATR 123. In that case the Supreme Court of Victoria was considering a statutory discretion given to the Commissioner of State Revenue which was expressed in the following terms.

"The Commissioner, in such circumstances as the Commissioner considers appropriate, may remit the interest payable by the taxpayer under this division by any amount."

1. So the discretion given to the Commissioner, and under consideration in that case, was extremely broad and at first blush unfettered. The Commissioner, purportedly in the exercise of that discretion, published a revenue ruling in which he indicated that he would refuse to remit interest payable except in "exceptional circumstances ".
2. The court held that this was the wrong way to exercise the discretion. In discussing the discretion the Court said this at page 141.

"It is a broad and general discretion given to the Commissioner to be applied when Commissioner considers it appropriate that it be applied in each case. Each case in which the question of remission under this section arises must be considered on its own facts and circumstances without the imposition of an unenacted threshold hurdle of a need for there to be "exceptional circumstances". That is not to say that the Commissioner was bound in this case to remit interest beyond the amount remitted. It does mean however that the Commissioner should consider the matter afresh without a fetter that is not found in the section."

1. So, in the case before me I must consider the question of whether or not the companies should be grouped, without the imposition of any artificial fetter (unless of course that fetter is contained in or justified by a proper reading of the legislation.)
2. Assistance as to the manner of exercise of this discretion is also found in some other cases which were placed before me by both parties.
3. I was referred to the observations of Menzies J in Giris Pty Ltd v FC of T Vol [1969] HCA 5; 1 ATR 3 at page 14 where he said of a similarly worded discretion ;

"but, in cases of that kind, the circumstances in which the question arises provide criteria for a solution. Here the Commissioner's discretion is apparently at large. It does not clearly emerge from the Act in respect of what matter - or whose interests, that the taxpayer or of the revenue - he is to consider whether it would be reasonable or unreasonable to apply section 99 IE in the case of any particular trust estate. He is to have regard to certain stated matters; but what weight or influence each is to have is not made clear. Moreover, the Act requires that he shall have regard to such other matters if any as he thinks fit. However, I assume that he is to be guided and controlled by the policy and purpose of the enactment, so far as that is manifest in it.

That would exclude from his consideration any matter which it would be unlawful for him to take as a criterion, such as the State residence of the trustee or other beneficiaries of a trust. It would also I think exclude all merely fanciful and prejudiced tests which were hypothetically suggested in argument, such as location, religion, colour of skin or hair. Nevertheless the statute seems to allow great latitude to Commissioner in forming his opinion."

1. 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.
2. I was also referred to some observations of Windeyer J in Finance Facilities Proprietary Limited v the Federal Commissioner of Taxation (1971)127CLR 106, where at page 134 he says this.

"While Parliament uses the English language the word "may" in the statute means may. Used of a person having an official position, it is a word of permission, an authority to do something, which otherwise he could not lawfully do. If the scope of the permission be not circumscribed by context or circumstances it enables the doing, or abstaining from doing, at discretion of the things so authorised. But the discretion must be exercised bona fide, having regard to the policy and purpose of the statute conferring the authority and the duties of the officer to whom it was given; it may not be exercised for the promotion of some end foreign to the policy and purpose of those duties."

1. Each of the above passages thus tells me that I must exercise the discretion given to me in section 50 bona fide taking into account both the policy and purpose of the Act, and not taking into account matters extraneous to that policy and purpose.
2. This far, the parties are in agreement.
3. Both parties accepted that in exercising the discretion, I should have regard to the purposes of the Act, and in particular the policy and purpose of the grouping provisions in the Act. Both agreed I should not have regard to inappropriate or farfetched or fanciful considerations.
4. I must ensure that in exercising the discretion under section 50 I identify and apply so far as I can the policy and purpose of the Act, and in particular the grouping provisions of the Act, and that I do not take into account any irrelevant considerations.

1. The crucial difference between the parties is this.
2. The applicant submits that the policy and purpose of the grouping provisions of the Act is to combat the intentional avoidance or evasion of land tax by the splitting up of properties into different corporate entities.
3. The applicant says that there is no evidence that this has occurred in this case and indeed there is uncontested sworn evidence that none of the directors of the company knew of the potential application of the land tax grouping provisions and did not set up any of the company structures with the objective of avoiding land tax.
4. In those circumstances, in the absence of evidence of deliberate tax avoidance or evasion, the applicant says it would be inappropriate to exercise the discretion to group the companies.
5. On the other hand, the Commissioner submits that to characterise the intent of the legislation as requiring proof of intentional avoidance is to misunderstand the purpose of the Act generally and the grouping provisions in particular.
6. The Commissioner accepts that proof of intentional or deliberate avoidance or evasion would be a significant factor to take into account in exercising the discretion. However the Commissioner does not agree that this is the only, or even the most important factor that needs to be taken into account in exercising the discretion. The Commissioner submits that the provisions are directed to the consequences of the splitting up of land rather than the purpose or intent in doing so.
7. He submits that it is almost impossible to prove subjective intent, particularly when this must be proven to be the intent of a group of companies, rather than that of an individual. He says that if subjective intent were required as a prerequisite for the exercise of the discretion, the discretion would be rarely able to be exercised.
8. He says the consequence of such an approach would be to dilute the aggregation principle, which is the very foundation of liability for land tax under the Act.
9. He points to the underpinning principle of land tax regime as being set out in section 36 of the Act. This provides for land tax to be assessed with a tax-free threshold of $250,000 and then a sliding scale of tax rates to apply to land holdings of over that value.
10. The Commissioner says that section 50 performs the role of ensuring that the aggregation principle is applied justly and fairly to all landholders, so that, irrespective of motive, landholders are not artificially treated as separate taxpayers when the community of interest between superficially disparate entities is clear.
11. He submits that section 50 allows the Commissioner to look behind the structure of the company and restore the aggregation principle wherever it is avoided because of a related company structure, whether intentionally or not. This, he says, promotes equality of treatment between all taxpayers.
12. He submits that I should not equate the concept of avoidance or evasion of land tax with deliberate intent. He suggests that if I were to do so the grouping provision would be emasculated.
13. I was not able to ascertain how often the discretion under section 50 has previously been exercised by the Commissioner, and in what circumstances. All that I was told is that it was not commonly used.
14. Surprisingly, although this is not recent legislation, this case appears to be the first time the circumstances governing the exercise of that discretion has been considered by a Court or Tribunal.

1. New Zealand appears to have been the first jurisdiction to introduce land tax legislation, closely followed by the Commonwealth of Australia, and then the governments of each state and territory, with the exception of the Northern Territory.
2. I was asked by each party to look carefully at the wording of the various iterations of Australian land tax legislation, together with their extrinsic materials, such as parliamentary debates and law reform reports to assist me in understanding the policy and purpose behind the present legislation.
3. Lest there be any doubt as to the appropriateness of this course, I was referred to some passages in CIC Insurance Ltd v Bankstown Football Limited (1997) HCA 2 at page 15 where the following appears.

"It is well settled that at common law, apart from any reliance upon s15AB of the Acts Interpretation Act 1901(Cth) the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage where ambiguity might be thought to arise, and (b) uses context in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous."

1. The next words were emphasised in argument before me. They are as follows.

"In particular, as McHugh J A pointed out in Isherwood v Butler Pollnow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist a court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent."

1. On the other hand, the Commissioner warned that it is important that this principle is not overstated. In this context the Commissioner referred me to the conclusion of the Court of Appeal in the Treasurer of Victoria v Tabcorp Holdings Ltd 2014 VSCA 143. After referring to a decision of the High Court in Alcan, the Court went on to say this.

"As the High Court has pointed out, there are powerful reasons of principle for giving primacy to the statutory text. First, the separation of powers requires nothing less. Axiomatically, it is for the Parliament to legislate and for the courts to interpret. Close adherence to the text, and to the natural and ordinary meaning of the words used, avoidance the twin dangers of a court constructing its own idea of the desirable policy, or making some are priority assumption about its purpose.

Secondly, giving the text its natural and ordinary meaning maximises the comprehensibility and accessibility of statute law, and the accountability of the legislature."

1. The first Commonwealth land tax grouping legislation is found in section 40 of the Land Tax Assessment Act 1910(Cth).
2. It is in these terms.

"Any two or more companies which consist substantially of the same shareholders shall be deemed to be a single company, and shall be jointly assessed and liable accordingly, with such rights of contribution or indemnity between themselves as is just.

1. This provision was considered in Osborn v the Commonwealth (1911)12 CLR 321, where at page 370 of the judgement this passage appears;

"The intermediate section 40 is a precautionary measure, to prevent, amongst other things, a company owning land launching one or more offshoots with slightly different shareholders transferring portions of its land to nominally different but practically identical owners, and so evading the progressive nature of the tax."

1. The words 'the progressive nature of the tax' do not refer to it being socially progressive legislation. Rather, they refer to the mathematical progression of increased monetary liability over a threshold amount below which no land tax is payable.
2. The applicant also referred me to one sentence in the judgement of Rich J in the High Court case of Burns Philp v Commissioner of Land Tax [1929] ArgusLawRp 99; 1929 43 CLR 58 as support for the characterisation of this provision as relating to intentional evasion. His Honour said this.

"Section 40 is not addressed to anything but an attempt to sever the ownership of land by using two or more companies to own separate parcels."

1. Although there are references in this refreshingly concise judgment suggesting a need to establish intentional evasion, the quotation of Rich J relied upon by the applicant does not appear to have been part of the ratio decidendi of that case. In that case the real issue was the extent of unity of ownership required in order for companies to be grouped, rather than proof of intentional evasion.
2. In his judgement, Rich J identifies three presumptions of law contained in section 40. He describes the first of them as follows.

"The first is a substantive presumption creating liability to aggregation where there is technically separate but really united ownership."

1. In that sentence he does not appear to consider that intent to avoid or evade is a precondition in order for the presumption to be applied.

LAND TAX ACT 1910 (VIC)

1. The Victorian Parliament passed similar land tax legislation to the Commonwealth the same year. Its grouping provision is contained in sections 41 and 46 of the Land Tax Act 1910 (Vic).
2. That section reads as follows.

"If two or more companies consist substantially of the same shareholders, these companies shall be deemed for the purposes of the tax to be a single company, and shall be jointly assessed and liable accordingly, with such rights of contribution or indemnity between themselves as in the opinion of the Commissioner are just."

1. Extracts from the parliamentary debates at the time this legislation was introduced were put before me. Mr Walsh, the Attorney General at the time when speaking about related sections of the Act said this.

"These clauses are essential to prevent the evasion which is sometimes attempted in regard to the exemptions from taxation."

"Clauses 41, 42 and 48 are clauses framed to prevent the possibility of evasion, and are only important in so far as they prevent companies, joint owners, or joint occupiers from unfairly obtaining the value of the exemption."

1. The Land Tax Act was amended in 1958, presumably as part of the wholesale consolidation of Victorian Acts which occurred in that year. Section 44 (1) of the 1958 Act reproduces what was the old section 41 in the 1910 Act without change.

1. The Act was again amended in 1968.
2. The previous sections which I have so far set out provided for mandatory grouping of related companies. I observe that this mandatory grouping applied regardless of whether the company structures had been set up deliberately to avoid land tax or not.
3. The 1968 amendments introduced for the first time two different concepts. Instead of mandatory grouping for companies with substantially the same shareholding, the section gave the Commissioner a discretion as to whether or not to jointly assess those companies.
4. So section 44(1) of the amending act reads as follows.

"Any two or more corporations which consist substantially of the same shareholders may, if the Commissioner thinks fit, be deemed to be a single company, and shall be jointly assessed and liable accordingly, with such rights of contribution or indemnity between themselves as is just."

1. This Act also provided another significant change. Section 44(2) of the amending act provided that a corporation consists substantially the same shareholders if shares representing more than one half of the share capital were held by or on behalf of shareholder.
2. So the section both gave a discretion to the Commissioner, and reduced the threshold at which a corporation could be described as consisting substantially the same shareholders from a previous level of 75% to ' more than one half".
3. The Commissioner says that it is significant that both of these provisions were introduced at the same time. The previous legislation contained no discretion, but also covered a narrower field.
4. The Second Reading Speech in relation to the introduction of this legislation contains these observations.

"The principle that related companies should be jointly assessed for land tax is already recognisable in section 44 of the Act, which applies this principle to any two or more companies having a substantial identity of shareholders. Substantial identity of shareholders is defined as existing where 75% or more of the shares in each company are held by the same shareholders, in which case the Commissioner must issue a joint assessment. In other words the land holdings of company may be aggregated for the purpose of ascertaining the appropriate rate of land tax."

1. So this paragraph to which I have just referred to sets out the position prior to the 1968 amendments.
2. The Second Reading Speech goes on as follows.

"It is now proposed to extend the application of the aggregation principle in two ways. A common shareholding of more than 50% rather than 75% will, in future, be the test of substantial identity of shareholders.... This will achieve greater clarity of terminology and thus greater certainty in the application of the aggregation principle."

"A tightening up of the provisions of Land Tax Act for the joint assessment of related companies has for some time been recognised as vital to the fair spreading of the incidence of land tax amongst landowners. The Commissioners present power is very easily avoided by an establishment of a chain of subsidiaries and distribution of land holdings over the group. This defeats the aggregation provisions of the act and gives the group the benefit of lower rates of tax. The new provisions will permit the aggregation of all such land holdings."

1. The applicant argues that it is clear from this legislative history that the purpose of the 1968 provisions, following logically on from the foundation built by the earlier land tax acts, was to combat the deliberate avoidance of land tax by splitting parcels of land into different ownership. So the argument of the applicant is that the history of this legislation so far, with its emphasis on combating evasion and avoidance of tax, clearly demonstrates that the evil which it sought to address was that of intentional tax evasion or avoidance.
2. The Commissioners answer is that when one looks closely at the structure of these 1968 amendments, and the extrinsic material accompanying the amendment, it can be seen that the purpose of the legislation is to protect the aggregation principle enshrined in the Act by addressing the splitting of parcels of land which has the effect of avoiding aggregation, whether intentional or not.
3. It is vital to appreciate that the earlier legislation provided for mandatory grouping. If a particular landholding structure could be defined as related, no further investigation was required. Certainly, there was no need to explore the concept of intentional evasion or avoidance in the context of the grouping provisions. Whether the structure was created with an intention to avoid land tax or not was completely irrelevant.
4. My conclusion from this is that the observations made about tax evasion and avoidance in the extrinsic materials relating to the earlier land tax legislation are therefore of less importance to my determination than is contended by the applicant.
5. There appears to be a significant difference of approach reflected in the extrinsic documents to the 1968 legislation. There is no longer an emphasis on intent, or avoidance or evasion. Although the word "avoid" is used in the Second Reading Speech it appears to be in the context of discussing the consequence of the establishment of "a chain of subsidiaries and distribution of land holdings over the group" rather than in the context of a quest to identify occasions on which this consequence has been intentionally engineered by tax evaders..

1. The Act was amended again in 1991, following the recommendations of the Fordham Land Tax Review.
2. The Fordham Review, describing the deficiencies in the 1968 legislation, observed as follows at page 34.

"The need for grouping provisions arises from the progressive land tax rate scale and the relatively high general exemption level. Given these factors, land owners clearly have an incentive to split ownership of land to minimise or avoid land tax liability."

1. The report goes on to say this in its final recommendations;

"As part of the review of land tax, it was necessary to consider the effectiveness of existing provisions in the land tax act relating to the grouping of corporations and joint owners for the purposes of determining liability. Given that the review, in the interests of maintaining the tax base, has supported the retention of a modified progressive rate structure, general exemption level and aggregation provisions, it is essential that tight controls exist over the liability for land tax.

It was pointed out in one key submission that owners of large landholdings are able, without too much difficulty, to order their affairs in such a manner as to avoid the imposition of the aggregation or grouping provisions of the Land Tax Act. This avoidance occurred, by virtue of the use of multiple company or trust structures so that the registered proprietors of these various landholdings could avoid the progressive rates of land tax."

".... it is evident that the existing grouping provisions are inadequate and need to be extended to cover situations where a person can exercise effective control over two or more entities with landholdings. This matter has been previously considered and effectively handled in New South Wales. For example, under section 29 of the NSW Land Tax Management Act, provisions cover not only the ownership of the issued share capital of the companies but also the control of the composition of boards of directors and the control of the voting power at a company general meeting. Such anti-avoidance provisions are clearly necessary in order to ensure an equitable distribution of the land tax burden."

1. The recommendations of the review were carried into effect in the passing of the 1991 amendments.
2. The new section 44 of the Act widened the definition of relatedness, setting out the circumstances in which corporations were deemed to be related to each other, and in particular taking up the issue of controlling the composition of the board by the holding of share capital.
3. It also reproduced the Commissioner's discretion to group corporations for the assessment of land tax if two or more corporations were related within the meaning of the new section.
4. The explanatory memorandum accompanying this legislative change relevantly reads as follows.

"The grouping provision for related companies is primarily intended to prevent tax avoidance by splitting landholdings among two or more commonly owned or controlled companies to obtain the benefit of the general exemption for each company in calculating its tax liabilities."

1. The applicant emphasises the use of the words anti avoidance and tax avoidance in these materials, and says that this legislative history follows on from the earlier focus on intentional avoidance or tax evasion as the foundation of the grouping provisions.
2. The Commissioner says that it is clear, particularly in relation to the 1968 and 1991 amendments and the extrinsic materials accompanying those amendments, that deliberate evasive conduct or intention is not required to attract the exercise of the discretion. The Commissioner submits that when one looks at the legislative history, in particular as it relates to the 1968 and 1991 amendments, the intention of the legislation is to prevent the avoidance of tax, not to prevent the intentional avoidance of tax. This can be seen by the emphasis within those documents on the principle of aggregation. The Commissioner says that it is clear that what is sought to do is to promote the equitable distribution of the payment of tax to prevent the tax being sidestepped by corporate structures.
3. The Commissioner characterised the post 1968 amendments as being attempts to lift the corporate veil; in other words to look behind corporate structures to assess whether there are in fact common interests behind what appear to be disparate landholdings. He says that this approach gives substance to the aggregation principle and thus prevents the undermining of the policy and purpose of the Act. It is an emphasis on the consequences of particular landholding structures, rather than on the reasons those structures came into existence.

THE COMMISSIONERS POLICY - REVENUE RULING LT.002

1. The issue is clouded by the fact that in some of its correspondence the Commissioner appears to assert that in grouping the applicant companies it was applying a policy set out in a revenue ruling.
2. That policy, set out in revenue ruling LT.002 reads as follows

"The Commissioner has adopted the view that where two or more corporations are related those corporations will be grouped and assessed as if they were one entity, except where it is unjust to do so."

1. The applicant has forcefully argued that the application of such a policy misstates the Commissioner's power- that is, that it casts the onus on the applicant to show that it is unjust to group. The section is an unwarranted fetter on the discretion given by section 50, in the way that term is used in Condor Tower.
2. The Commissioner submitted that I should give weight to that policy unless there were cogent reasons the contrary, whilst acknowledging that the policy was only one factor to be taken into account. I was urged by the Commissioner to see the entire policy as directing attention to the merits of any particular fact situation, and containing sufficient flexibility to allow for departure from the apparent inflexibility of its terms in appropriate circumstances.
3. I agree with the applicant that the ruling misstates the discretion given to the Commissioner in section 50. I accept that the Commissioners position is that it is not centrally relevant to the issues under consideration by me. I do not need to apply it in making this determination.
4. In the circumstances of this case, the policy being so clearly at odds with the legislation, I have accorded the policy no weight at all.

WHAT DO THE WORDS TAX EVASION AND TAX AVOIDANCE MEAN?

1. Tax evasion and tax avoidance are controversial concepts. The applicant submitted that it was clear from the ordinary meaning of these words that there must be some intent to avoid tax.
2. Dictionary definitions differ. The applicant referred me to the definition of "tax avoidance" in Black's Law Dictionary. The definition is this.

"The minimisation of one's tax liability by taking advantage of legally available tax planning opportunities. Tax avoidance may be contrasted with tax evasion which entails the reduction of tax liability by using illegal means."

1. The same dictionary also has a definition of "tax evasion" as being

"illegally paying less in taxes than the law permits; committing fraud in filing or paying taxes."

1. I was also referred to Stroud's Judicial Dictionary .Under the heading of "evasion" the following appears;

"Everybody agrees that "evade" is capable of being used in two senses; (1) which suggests underhand dealings; (2) which means nothing more than the intentional avoidance of something disagreeable."

1. I was further referred to the Shorter English Dictionary definition of "avoidance". There are seven disparate definitions given of this word in that text. The one relied upon by the applicant was "the action of avoiding anything unwelcome or shunning a person". However I note that one of the alternative definitions is simply "invalidation".
2. Overall, there did not appear to me to be much assistance to be gained from these dictionary definitions.
3. In considering those dictionary definitions the Commissioner in particular emphasised the reasoning in which I have previously set out of the High Court in CIC Insurance; that is that where the words evasion and avoidance are used in the extrinsic documents those words, capable of having many meanings, must be read in the light of the mischief which the statute was designed to overcome and the objects of the legislation, and further that any inconvenience or improbability resulting from a proffered meaning may assist the court in preferring an alternative construction to that of the literal meaning which is reasonably open and more closely aligns to the legislative intent.
4. Many attempts have been made to authoritatively distinguish between tax evasion and tax avoidance. They are each words laden with emotion and social history. I have concluded that these words can mean different things in different contexts. I must look at the words in the context of the Land Tax Act rather than giving too much weight to what their popular or historical meanings may be in other contexts.

WHAT IS THE PURPOSE OR POLICY BEHIND THE GROUPING PROVISIONS?

1. I agree that the extrinsic materials accompanying the early versions of grouping legislation are couched in terms of intentional evasion. Clearly the issue of deliberate avoidance or evasion of tax was uppermost in the minds of the drafters of the 1910 legislation. The value of those extrinsic materials in interpreting the purpose of the legislation is however lessened by the fact that intentional evasion was not required to be proven in that legislation.
2. I accept that by the time of the 1968 amendments, the emphasis in the extrinsic materials appears to have moved to support of the aggregation principle, rather than the legislation being viewed as simply clamping down on intentional or quasi-criminal evasion.
3. The essence of the applicant's case was that if I was not persuaded that the applicant had engaged in evasion or avoidance of the grouping provisions of the Act, my task would be at an end. If intentional avoidance was not established, there could be no other considerations which could justify the exercise of the discretion against the applicant.
4. I do not accept that this is so. The discretion is in broad terms. If the purpose of the grouping provision was solely to address intentional avoidance of tax, the broadness of its expression would have been unnecessary.
5. Further, the proposed limitation on the discretion significantly limits the scope of the discretion, and presents the Commissioner with a much more difficult evidentiary task. If this were what Parliament intended, I would have expected that the section would have contained clear words spelling this out.
6. My conclusion is that section 50 certainly encompasses consideration of the presence of intentional avoidance or evasion, but that its purpose is not so confined. Its purpose is to protect the aggregation principle established by the Act -and standing behind that is the social good requiring the need for all taxpayers to be treated equally. It does this by allowing the Commissioner to make an assessment as to whether a particular landholding structure ostensibly containing many different taxpayers is in fact a structure controlled by a single entity.
7. I conclude that the discretion requires consideration of such matters as the degree of relatedness of the companies under consideration, the degree of control by the directors of the day-to-day activities of each company, the uses to which the separate parcels of land are put, and the negative impact if any on the taxpayer of the exercise the discretion, as well of course as matters relating to whether the structure has been designed to avoid the payment of tax.
8. I will deal with each of these considerations which I have identified above separately.

1. The Commissioner accepted that the existence of an intention to undermine or defeat land tax provisions was one highly relevant consideration.
2. It was not directly suggested to the applicant's witnesses in cross-examination that this was the purpose of the structure of the Tadcaster group of companies.
3. Indeed the evidence was that the structure had been set up for quite different purposes. It was set up to carry on separate activities managed on a day-to-day basis by separate managers, and to insulate those activities from each other.
4. There was some cross-examination of Mark Hinkley that touched upon this issue. Mr Hinckley agreed that the legal advice which he had received on establishing the structure referred to the tax consequences of the structure. However, Mr Hinckley's evidence was that the issue of land tax was not specifically brought to his attention for in his mind at that time. He said that he was thinking rather of income tax, and had no particular knowledge as to what liability would be for land tax, or the effect of grouping companies for land tax.
5. The applicant points out the structure is not a tax effective structure overall as there is a significant income tax detriment given that some companies have losses and other significant profits it is not possible under the structure for those losses to be taken advantage of introducing products.
6. I accept the evidence in this case is that the companies were not established for the purpose of avoiding land tax. I also accept that Hinckley and Hatherley appreciated that there may be some income tax detriment to this company structure, but that this detriment was outweighed in their view by the advantage of insulating each company from the other.
7. I regard the fact that structure was not demonstrated to have been established with the intention of avoiding land tax as a significant factor to take into account in the applicant's favour in exercising the discretion.

SHOULD THE DISCRETION BE EXERCISED JUST BECAUSE THE COMPANIES ARE RELATED?

1. In this case the applicant agrees that all of the Tadcaster companies fall within the definition of related companies in the Act.
2. The Commissioner accepted that the mere fact that the corporations are related is not of itself sufficient to justify the exercise of the discretion. Otherwise, the discretion would need to be exercised in every case.
3. The fact that the organisational structure fits the definition of relatedness under the Act is a neutral fact.

1. The real issue of relatedness turns on the issue of the extent of effective control of the landholding structure by one common interest.
2. It is important to note at the outset that the definition of a related corporation in the Act contemplates many different varieties of company structure. It includes a situation where one corporation either controls the composition or, or is a position to cast more than 50% of votes and generally or holds more than 50% of the issued share capital of the corporation.
3. The Commissioner pointed out that there may thus be many different degrees of control within the definition of relatedness. They may be related because they have common directors, or common shareholders. There may be different classes of share through which control is exercised. The degree of commonality is infinitely variable.
4. Tadcaster Australia holds 100% of the shares in each company and has common directors and shareholders. The Commissioner submits that the fact that there are no other shareholders holding an interest in any of the Tadcaster companies is a strong factor supporting the exercise of the grouping discretion.
5. Ownership of each of the companies is not of course the same thing as ownership of all of the land owned by the companies. The applicant points out in relation to Tadcaster Bluestone that this company was not the sole owner of the two properties which were assessed for land tax in Ballarat. It held only a 25% interest in those two properties. Tadcaster Bluestone shared ownership of that property with the other Ballarat investors.
6. However, it is important to emphasise, as counsel for the Commissioner pointed out, that there are no other shareholders holding an interest in any of the Tadcaster companies themselves. There may be situation in which a Tadcaster company has invested in land as a joint venturer with others. There is no subsidiary company in which any degree of control at all over the company (as distinct from the business carried out on the land) is effectively exercised by anyone other than Hinkley and Hatherley. This is not a borderline case, where the structure meets the definition of relatedness, but only just. It is a clear case of control of the landholding structure overall by the same common interest.
7. I regard the fact that the parent company has overwhelming control of each of the subsidiaries, and is itself controlled by the Singapore company, which is effectively controlled by Hinkley and Hatherley, as being of great significance to the exercise of the discretion.

THE DEGREE OF CONTROL BY THE DIRECTORS OF THE DAY TO DAY OPERATION OF EACH PROJECT

1. Mr Hinckley provided detailed evidence of the separate financial structures of each of the subsidiary companies. Each of them appears to have had separate bank accounts and separate loan arrangements.
2. He said this in evidence.

"I think that managing the company is managing the business and everything which is within the company. I don't think my role was ever to run the company; the managers on the ground ran the company. They were building, they were making sure they were sticking to budget, they were trying to get the sales through. Our job was - or our role was to find the next project to invest in, to hopefully move back to."

"We oversaw the company, as directors should, but we didn't - the companies were individually run. That's why we paid good salaries, because we hired consultants."

1. His evidence was that the managers in effect did manage each of the separate companies, and they were in charge of managing the accounts of each project. He said that project accounts were the only accounts prepared, and the day-to-day running of the business was done by the managers, not by the directors of each company.
2. He talked about there being independent "investors" in each of the subsidiary companies. However what he appeared to mean by that was that the managers had a financial stake in the success of the project because of the terms of their individual contracts with the relevant subsidiary company. Such persons could be described as "investors" in the particular project they managed. They were not of course persons with an investment or shareholding holding in any of the Tadcaster properties.
3. Hinkley said this

"The builders had an investment in it because if they delivered a good project and a successful project they shared in the profit share. So if it sold for a profit, then their building fee would increase."

1. It is true that each of the companies engaged different agents, each of whom had a very broad discretion as to how their project was to be carried out. After all, these agents were the specialists in the subsidiary company's area of operation, not Hinkley or Hatherley.
2. However, the discretion was exercised within the parameters of the projects themselves. None of these agents had any control over the company with whom they had contracted. I accept the Commissioner's argument that the arrangements were not such as to diminish the degree of common ownership and control within the group. Bonuses based on percentage of profit share did not equate into external control or ownership of the any of the individual subsidiary companies.

1. Clearly this case does not involve a large parcel of adjoining land being artificially divided into smaller parcels, each held by a separate tax payer. It is not suggested that any of the parcels of land were geographically close to each other.
2. The applicant submitted that the disparate uses of the land and complete separation of the activities of each company from the other was a significant factor to the exercise of the discretion. In this case, the separation is indeed complete. The applicant provided a table setting out the properties owned by each of the companies, the use of those properties, and the persons responsible for the management of those activities. The uses range from the development of a single holiday house, a subdivision of the vacant block, the renovation and operation of restaurant and bar, the redevelopment of a nightclub, and the development of four apartments.
3. Each of the seven companies carried out its activities in different locations and through different managers. Although it is true that the activities could be generally described as property developments, there were no joint activities or common usage of land between any of the companies.
4. The applicant's submission was that not only were there genuinely separate activities carried on by the companies in relation to each individual parcel of land, each of those companies had separate accounts, separate bank accounts and credit cards and separate finance facilities. No company cross-guaranteed the other company's liability. Furthermore, each of the managers had a significant discretion as to how to design, plan, and execute the services to be provided to the subsidiary company.
5. It was submitted that each of the subsidiary companies had simply an oversight function rather than any effective control of day-to-day activities of the project.
6. It was submitted that I should be satisfied that because of this, the landholding structure could not be characterised as a common or single enterprise. In those circumstances, it was said to be inappropriate to exercise the grouping discretion, given that separate activities were being carried out by each of the companies on separate landholdings.
7. The real question is -should I take into account the disparate nature of activities and control on the land itself, or should I focus on the essential nature of the overall operation conducted by the group of companies?
8. In my view, the functions of each subsidiary were virtually identical, in that each existed as an entity to hold land for the purpose of promoting and funding a particular project on the land. Each subsidiary company was a channel for funds to be injected through the ultimate owner of the structure into a particular land development project. The raison d'etre of each company was very similar - although the activities carried out on the land were not.

THE DEGREE OF INTERRELATIONSHIP BETWEEN EACH COMPANY

1. Here each of the companies has the same degree of interrelationship with its parent company. Mr Hinckley agreed in evidence that it was an integral part of the enterprise that each Tadcaster subsidiary company would purchase whatever the project was, inject funds into it and then develop it to the stage where it was self-sufficient and sell it off.
2. None of the companies had anything to do with the other, and in particular none of the companies had anything at all to do with the projects being developed by the other companies.

THE NEGATIVE IMPACT OF EXERCISING THE DISCRETION.

1. The applicant further argued that in exercising the discretion I should have regard to the impact of grouping on the financial position of each of the companies.
2. None of the Tadcaster companies had previously been grouped for land tax. It was submitted that they had planned and structured their affairs on the premise there was no land tax grouping and that this was reasonable given that the Commissioner had not grouped the companies in the past.
3. I was asked to consider this argument in the context that the land tax system is not a self-assessment system. It is not up to an individual taxpayer to assess land tax payable. It is up to the Commissioner to make the assessment.
4. The applicant submitted that I must consider this in the context of the Commissioner having applied a flawed policy, not supported by the provisions of the act, and in a situation where the reassessment does not appear to have been made because of some information that was previously withheld to the Commissioner when the original land tax determination was made.
5. This argument of course depends on the degree and timing of any notice given to the companies regarding the Commissioners intention to group.
6. I was given very little real evidence of the negative impact on the applicant or the other companies in the group of the decision to group.
7. The financial detriment to the companies was not spelled out in any detail at all by the applicant.
8. It was left to the Commissioner to produce a table of the relative financial impact of grouping as opposed to individual tax assessments. In looking at these calculations, it is important to bear in mind that the companies were notified of the Commissioners intention to group in. Any reliance on past assessments, and detriment suffered thereby, must then logically apply to actions taken by the company before that date.
9. The difference between the two calculations for the 2010 Land Tax year is quite small - $13505 - relating to only two of the companies. If 2011 is also taken into account the sum involved, while larger, is not significantly so - $33,576.25 relating to five companies. The difference in the 2012 land tax year is $40,466.25 - relating to seven companies.
10. Jennifer Hinkley gave evidence that some of the companies have been sold and investors have received distributions. She said that some of the companies suffered losses and so the additional tax could not be simply distributed between the companies. She said some of the companies might need to be wound up. She agreed in cross-examination that some of the properties had been sold.
11. My conclusion overall is that, even allowing for the impact of future assessments, the financial impact of grouping does not amount to a significant detriment.

1. I note here that my discretion does not limit me to considering just one alternative - that is that either all the companies are to be grouped together, or none of them. I must make this decision in relation to each of the companies. It is open to me to find that some are to be grouped, and some are not, as long as I do not make that decision because of some fetter not supported by the legislation.
2. However, in this case the circumstances relevant to each company are for all practical purposes identical. There is no warrant for me to suggest that different treatment should be afforded to one or other of the subsidiary companies.
3. I have determined that this is an appropriate case in which the discretion should be exercised to group the applicant with the other Tadcaster companies for the purpose of assessing land tax. It is true that there is no evidence of deliberate avoidance or evasion of land tax by the applicant or any of the other Tadcaster companies. This is an important issue to take into account. It is true also that there has been some reliance by those companies on the initial assessments of the Commissioner which were made without applying the grouping provisions. I also take this matter into account in the applicants favour, although the demonstrated financial or other detriment is small.
4. I take into account that the various landholdings are used for different purposes. I find this of lesser significance than the applicant suggests, as the very scheme behind the landholding structure was that each of the subsidiary companies would purchase land for the successful completion of disparate projects on those separate parcels of land. I accept that there is a common theme to these purchases of investment in land with the ultimate purpose of realising a profit by the sale of that land. This is a factor which I have weighed in the balance in exercising the discretion.
5. The matter to which I have given most weight in exercising the discretion is the complete unity of effective ownership of each of the Tadcaster companies. The landholding structure which has been utilised has the consequence that if the discretion were not exercised to group, a structure which is essentially controlled by one common interest would be treated as containing multiple taxpayers.
6. Such a result offends against the policy of the Act
7. It follows that the application is dismissed and the land tax assessment of the applicant is confirmed.