Verona Hill Holdings Pty Ltd ATF Roveto Family Trust v Chief Commissioner of State Revenue [2026] NSWCATAD 69;

(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.

1. The Assessment is to be treated by the Tribunal as prima facie correct (s 119(b) TA Act) and the Applicant has the onus of proving, on the balance of probabilities, that it is not liable for the assessed surcharge land tax pursuant to the LT Act (s 100(1) TA Act; Southern Cross Community Health Care Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [16]).

1. The Tribunal has had regard to all relevant material relied upon by the parties including the following:

(1) Section 58 Documents - specifically the Trust Deed for RFT, the Land Tax Assessment Notice issued to the Applicant and the Deed of Ratification and Amendment for RFT.

(2) Affidavit of RG affirmed 23 June 2025 - admitted without objection or cross-examination.

(3) Affidavit of RS affirmed 23 June 2025 - admitted without objection or cross-examination.

(4) Written Submissions for the Applicant dated 24 June 2025.

(5) Written Submissions for the Chief Commissioner dated 22 July 2025; and

(6) Written Submissions for the Applicant in Reply dated 7 August 2025.

(7) Oral submissions made during the hearing.

1. The LT Act, the TA Act and the Land Tax Management Act 1956 (NSW) (LTM Act) collectively govern the imposition of land tax and surcharge land tax in NSW (s 1 LT Act; s 7 TA Act; s 4 LTM Act).
2. Relevantly, s 8 and 9(1) LTM Act provide:

8 Date of ownership for purposes of land tax

Land tax shall be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied.

In this section year means the period of twelve months commencing on the first day of January.

9 Taxable value

(1) Land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under this Act.

Owner includes -

(a) in relation to land, every person who jointly or severally, whether at law or in equity -

(i) is entitled to the land for any estate of freehold in possession, or

(ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise,

(b) (Repealed)

(c) in relation to any leasehold estate in land, whether legal or equitable (other than under any lease to which section 21C or 21D applies), a person, or a person who is a member of a class or description of persons, prescribed for the purposes of this paragraph, and

(d) a person who, by virtue of this Act, is deemed to be the owner.

1. The LT Act prescribes that surcharge land tax is payable for the years following 2017 as follows:

5A Levy of surcharge land tax on residential land owned by foreign persons - 2017 and subsequent land tax years

(1) Land tax is payable under this section in respect of residential land owned by a foreign person (surcharge land tax).

(2) In respect of the taxable value of all the residential land owned by the foreign person at midnight on 31 December in any year (commencing with 2016), surcharge land tax is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act for the period of 12 months commencing on 1 January in the next succeeding year at the rate of -

(a) in the case of all residential land owned by the foreign person at midnight on 31 December 2016 - 0.75% of that taxable value as assessed under the Principal Act, and

(b) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2017-2021 - 2% of that taxable value as assessed under the Principal Act, and

(c) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2022 and 2023 - 4% of that taxable value as assessed under the Principal Act, and

(d) in the case of all residential land owned by the foreign person at midnight on 31 December in any other year, commencing with 2024 - 5% of that taxable value as assessed under the Principal Act.

(3) Surcharge land tax is payable in addition to any land tax payable in respect of the residential land under the other provisions of this Act, and is so payable even if no land tax is payable under those other provisions.

(4) The Principal Act applies to surcharge land tax in respect of residential land owned by a foreign person subject to the following -

(a) surcharge land tax is payable as if the residential land were the only land owned by the foreign person,

(b) if the residential land is also owned by a person who is not a foreign person, the taxable value of the land is to be reduced to the proportionate value of the interest in the land of the foreign person,

(c) if the foreign person is a joint owner of the residential land, the person is to be individually (and not jointly) assessed and is liable in respect of the value of the person's proportionate interest in the land as if the person were the owner of a part of the land in proportion to the person's interest (and accordingly section 27 (2)-(4) of the Principal Act does not apply),

(d) if the Chief Commissioner is satisfied that the residential land is used for purposes other than residential purposes, the taxable value of the land is to be reduced by the apportionment factor determined in accordance with section 104ZB of the Duties Act 1997 in relation to the land,

(e) if the foreign person is the trustee of a fixed trust (within the meaning of section 3A of the Principal Act) in relation to the residential land, the person is not liable to surcharge land tax,

(f) the provisions of the Principal Act relating to the persons who are taken to be owners of the residential land apply to surcharge land tax, except that section 23 of the Principal Act does not operate to make a mortgagee in possession an owner of the land unless the mortgagor is a foreign person,

(g) the person is exempt from liability to pay surcharge land tax in respect of the land for a land tax year because the land is the principal place of residence of the foreign person (and accordingly sections 9C and 9D of the Principal Act operate to reduce the land value of the land if it is the principal place of residence of the person) only if the person is eligible for the exemption under section 5B,

(h) the tax thresholds under Division 4A of Part 7 of the Principal Act do not apply to surcharge land tax,

(i) any other modification prescribed by the regulations under the Principal Act applies to surcharge land tax.

(5) If a foreign person defaults in the payment of surcharge land tax then, without releasing the foreign person from his or her liability, the following provisions apply as long as the default continues -

(a) if the foreign person is a joint owner of the land concerned - any other joint owner (whether or not a foreign person) is, on being served with a notice by the Chief Commissioner requiring payment of the unpaid surcharge land tax, responsible for its payment and the unpaid tax may be recovered from that other joint owner as if he or she were the defaulting taxpayer,

(b) if the foreign person is a beneficiary of a trust relating to the land concerned - the trustee (whether or not a foreign person) is, on being served with a notice by the Chief Commissioner requiring payment of the unpaid surcharge land tax, responsible for its payment and the unpaid tax may be recovered from that trustee as if he or she were the defaulting taxpayer,

(c) all payments made under this subsection by that other joint owner or that trustee are taken to be made on behalf of the defaulting taxpayer,

(d) that other joint owner or that trustee may recover from the foreign person any amount paid by that other joint owner or that trustee under this subsection.

1. It is not necessary to set out the full scope of the meaning of 'residential land' pursuant to the Duties Act 1997 (NSW) (Duties Act). It is not disputed that the Applicant owns residential land in NSW on trust for RFT.
2. A 'foreign person' is defined in s 2A LT Act as having the same meaning as in Chapter 2A of the Duties Act. Section 104J of that Act states:

foreign person means a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section.

foreign trustee means a person who is a foreign person because of the person's capacity as the trustee of a trust.

1. In the Foreign Acquisitions and Takeovers Act 1975 (Cth), foreign person is defined in s 4 to include various persons and entities including:

(a) an individual not ordinarily resident in Australia; or

(d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

(e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

1. This definition is modified by s104J(2) of the Duties Act to provide:

(a) an Australian citizen is taken to be ordinarily resident in Australia, whether or not the person is ordinarily resident in Australia under that definition,

(b) a New Zealand citizen who holds a special category visa, within the meaning of section 32 of the Migration Act 1958 of the Commonwealth, at any particular time is taken at that time to be an individual whose continued presence in Australia is not subject to any limitation as to time imposed by law.

1. There is a deeming provision in the LT Act as to the meaning of 'foreign person' which applies specifically to discretionary trusts:

5D Surcharge land tax - discretionary trusts

(1) The trustee of a discretionary trust is taken to be a foreign person in that capacity for the purposes of section 5A if the trust does not prevent a foreign person from being a beneficiary of the trust.

(2) If a discretionary trust prevents a foreign person from being a beneficiary of the trust, the trustee is not in that capacity a foreign person for the purposes of section 5A.

(3) A discretionary trust is considered to prevent a foreign person from being a beneficiary of the trust if (and only if) both of the following requirements are satisfied -

(a) no potential beneficiary of the trust is a foreign person (the no foreign beneficiary requirement),

(b) the terms of the trust are not capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a foreign person (the no amendment requirement).

Note.

Under the transitional arrangements for this section in Schedule 2 to the Principal Act, the no amendment requirement does not apply to a trust that satisfies the no foreign beneficiary requirement immediately before the commencement of this section.

(4) A person is a potential beneficiary of a discretionary trust if the exercise or failure to exercise a discretion under the terms of the trust can result in any property of the trust being distributed to or applied for the benefit of the person.

Note.

A potential beneficiary is not limited to persons named in the trust instrument and extends to the members of any class of persons to whom or for whose benefit trust property can be distributed or applied pursuant to the discretions of the trust.

(5) For the removal of doubt, a person is not a potential beneficiary of a discretionary trust if the terms of the trust prevent any property of the trust from being distributed to or applied for the benefit of the person.

(6) In this section, property includes money, and a reference to the distribution or application of property includes a reference to the payment of money.

(7) (Repealed)

1. Exemptions to the s 5D deeming provision exist in s 5B and 5C of the LT Act, however, neither party contended they were applicable here.

1. Prior to RFT being set up, a director of the Applicant, the appointor, gave instructions to the Accountant, the settlor, which made it clear that it was intended that the RFT would own residential property in NSW and that it should avoid both land tax surcharge and stamp duty surcharge for foreign persons. The Accountant and his assistant gave evidence that, through administrative error, when the template discretionary trust was ordered from ACIS (a company who sells trust deeds) to set up RFT, the order form was endorsed with the following:

Does this trust intend to acquire an interest in residential property in NSW? No

Is the trust deed to irrevocably exclude foreign persons? No

1. The evidence of the Accountant is that when he received the draft RFT trust deed he observed clauses dealing with foreign persons and assumed that it was compliant for NSW land tax purposes. He was unaware of the requirement for discretionary trusts owning residential land in NSW to have specific provisions that are different to other states.
2. The RFT Deed was executed on 13 December 2022.
3. As of 31 December 2023, the Applicant (as trustee for RFT) owned 50% of a residential property in Quakers Hill and 100% of a residential property in Rooty Hill.
4. On 2 September 2024, the Chief Commissioner issued to the Applicant a Land Tax Assessment Notice which assessed the Applicant as liable for land tax and surcharge land tax for the 2024 tax year. The imposition of land tax is not disputed by the Applicant. Surcharge land tax was assessed on the basis that RFT was a foreign person that owned residential land for the purpose of s 5A of the LT Act during the period 1 January to 31 December 2023.
5. On 25 September 2024, the Applicant and the Settlor Accountant entered a Deed of Ratification and Amendment (Amendment Deed). It was intended that these amendments would prevent RFT being deemed to be a foreign person for the purpose of s 5D LT Act. The purported date for the amendments to take effect was 13 December 2022; the date that RFT was originally created.
6. While the Chief Commissioner does not accept the Amendment Deed has effect from 13 December 2022, it does accept that from the date of entering the Amendment Deed, 25 September 2024, RFT is not a foreign person for the purpose of s 5D LT Act.

1. To be successful in these proceedings, the Applicant must demonstrate that a foreign person was irrevocably prevented from being a beneficiary of RFT. That can only be achieved if two tests are satisfied:

(1) No potential beneficiary of RFT is a foreign person (the no foreign beneficiary requirement); and

(2) The trust is not capable of amendment in a manner that would result in there being a potential beneficiary of RFT who is a foreign person (the no amendment requirement).

1. Both of above requirements must be satisfied, therefore, if one is not satisfied then the Assessment should be confirmed.
2. If both are satisfied, then the Assessment should be revoked.

1. The Chief Commissioner has the power to assess the tax liability of a taxpayer (s 8(1) TA Act). The process of making this assessment involves applying the taxation laws to the relevant facts known to and accepted by the Chief Commissioner (Bailey v Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214 at pp 216-217 (Barwick CJ)), often referred to as 'taxable facts'. Taxable facts are those antecedent and independent events to which a taxing statute fixes to, as in this case, impose a taxation liability (Federal Commissioner of Taxation v Thomas [2018] HCA 31; (2018) 264 CLR 382 at [84]- [85] (Gaegler J) (Thomas)).
2. The relevant taxable facts in this case are the terms of the RFT as of 31 December 2023 and whether those terms, properly construed, result in RFT being deemed to be a foreign person for the purpose of s 5D LT Act.

1. As a matter of law, construction of a trust follows the same principles as a contract (Byrnes v Kendle [2011] HCA 26 at [103] (Haydon & Crennan JJ) (Byrnes)).
2. As for contracts, discerning the meaning of a trust is a wholly objective exercise where meaning is discerned from "...an examination of the text of the document in the context of the surrounding circumstances known to the parties..." (Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [4],[14] (Alsop P)). There is no role in this analysis for the subjective intention of the parties (Byrnes at [115]).
3. Therefore, the starting point for construction of an express trust such as RFT is the terms of the trust instrument. It is irrelevant to this enquiry that when RFT was created the appointor and settlor subjectively intended to avoid the imposition of surcharge land tax on land in NSW owned by RFT.
4. The liability for surcharge land tax pursuant to s 5A LT Act is determined by reference to whether RFT was a foreign person at midnight on 31 December 2023, consequently the question of construction also attaches to that date.

1. Although it was argued in the alternative, the Applicant asserted that the legal effect of the Amendment Deed was to vary the terms of the trust from its inception. The Applicant says that consequently the Applicant's liability for surcharge land tax must be ascertained by reference to the terms of the Amendment Deed, not the RFT Deed. It is convenient to deal with this issue first.
2. The Applicant submits that, relying upon the principles of rectification, the Amendment Deed has the effect of amending the trust from its creation, namely 13 December 2022. The Chief Commissioner does not dispute that the Amendment Deed can bring about this effect but submits that it is not binding on the Commissioner so far as it purports to retrospectively vary the application of taxation laws. In response, the Applicant draws from reasoning in Chloe Adolphi Pty Ltd as trustee for The Chloe Adolphi Family Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 48 (Adolphi) and submits that the Commissioner can be bound where the Amendment Deed is merely giving effect to the clear intention of the Applicant to exclude foreign beneficiaries in the manner required to avoid surcharge land tax under the LT Act.
3. There is discussion in Adolphi at [16] to [23] about the principles of equitable rectification. While much of that discussion is uncontroversial, for the reasons that follow the Tribunal is not satisfied the effect of that case or the cases it refers to is that the terms of the RFT Deed are amended by the Amendment Deed as of 31 December 2023.
4. Rectification as a concept is susceptible to much confusion (see M Leeming, "The limits of rectification" (2023) 17 Journal of Equity, 122). According to his Honour Justice Leeming at p 124:

There are two quite distinct doctrines of 'rectification' in law. It is traditional and convenient to call them 'rectification by construction' (or sometimes, and much less preferably, 'contractual rectification') and 'equitable rectification'. One can think of them as doctrines of common law on the one hand and equity on the other, although that is something of a simplification, as shall shortly be shown. [Footnote omitted]

1. Rectification by construction is a tool that is used in aid of construction of an instrument. It applies where there are obvious mistakes on the face of the instrument such as was found in cases like Federal Commissioner of Taxation v Trustee for the Michale Hayes Family Trust [2019] FCAFC 226 (FCT v MHFT). That is not the situation here.
2. The doctrine of equitable rectification comes into play where there is an erroneous instrument which will otherwise have effect according to its terms. In Coolibah Pastoral Co v The Commonwealth [1967] 11 FLR 173 (Coolibah), Blackburn J explained the principle at p 190-1 as follows:

... The doctrine of rectification, like most equitable doctrines, postulates a common-law rule or principle; specifically the principle that a document is effective according to its tenor. It is precisely because the document to be rectified, faulty though it may be, will, if it stands, have the legal effect which its words entail, that the equitable doctrine of rectification is required.

1. Equitable rectification is a remedy that can be applied by a court exercising equitable jurisdiction where a party contends that an instrument is affected by mistake (Meagher, Heydon & Leeming, Meagher Gummow and Lehane's Equity Doctrines & Remedies (4th ed, 2002, Butterworths Lexis Nexis) at [26,005]. Where a court finds that an instrument, including a trust deed, signed a party or parties does not reflect their intention the court may make orders rectifying the instrument (Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at p340 (Sheller JA with whom Mahoney A-P and McLelland A-JA agreed). Importantly, however, this power is discretionary, so that the Court may refuse to grant this remedy if, for example, doing so would affect the rights of a third party (Coolibah at p 190).
2. When this Tribunal reviews a decision of the Chief Commissioner pursuant to s 96 TA Act, it is exercising administrative, not judicial, power (Agrinova Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAP 86). The Tribunal has not been pointed to any law or decision which suggests that the Tribunal has in these proceedings the jurisdiction, let alone power, to grant an equitable remedy and the Tribunal is not satisfied that it can. Therefore, even if the Tribunal accepted that there was a mistake in the RFT Deed which might attract an order for a rectification by a court exercising equitable jurisdiction the Tribunal cannot make that order.
3. It is accepted that where an appointor and settlor exercise the power of variation granted to them in a trust deed, that has the effect of varying the terms of the trust (Re Dion Investments Pty Ltd [2014] NSWCA 367 at [44]). The Tribunal is not, however, satisfied that such a variation has the same legal effect as an order for equitable rectification which amends the previous instrument to reflect the mistaken terms.
4. The Applicant refers to par 23 of Adolphi, which, in context, states:

22. The rectification of a document is enforceable against the parties to the contract or deed. However, as the Chief Commissioner correctly noted in submissions, the retrospective alteration of the parties' rights or obligations under a rectified instrument may be resisted by third parties to whom rights have accrued; Gilsan (International) Pty Ltd v Optus Network Pty Ltd (No 2) [2005] NSWSC 38, or where the rectification affects the obligations of parties under statute; Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184 at [146], Rowe v Federal Commissioner of Taxation [1982] FCA 93; (1982) 60 FLR 475; (1982) 13 ATR 110 at 113. This principle applies with force when considering the position of revenue collectors who are bound to determine liability to taxation on the so-called "taxable facts", being the facts known to and accepted by (in this case) the Chief Commissioner when undertaking the process of assessment; Bailey v Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214 at 217.

23. A deed of rectification may, however, be capable of evidencing the true intention or taxable facts; Davis v Federal Commissioner of Taxation [2000] FCA 44; (2000) 44 ATR 140 at 151 [57], and the obiter dicta of Steward J in Federal Commissioner of Taxation v Trustee for the Michale Hayes Family Trust (2019) 273 FCR 567; [2019] FCAFC 226, at [47]-[52]

1. Isolating [23] and the reference in [22] to a "rectified instrument" might superficially suggest that a deed purporting to rectify a trust deed could vary the instrument or evidence taxable facts. It is not suggested in Adolphi, or by the authorities referenced by that Tribunal, that a deed of rectification can retrospectively change an instrument which is the source of taxable facts. In fact, at [68] in Adolphi the Tribunal made it plain that, consistent with the authorities referred to in [23], "The deed of rectification...to amend the Deed in this case is of evidentiary significance only in these proceedings".
2. In Davis v Federal Commissioner of Taxation [2000] FCA 44; (2000) 44 ATR 140, Hill J discussed in obiter an order for rectification compared with a deed of rectification, saying at [57] as follows:

57 As an alternative to an order of rectification the parties could execute a deed rectifying their prior writing. That deed, if truly operating to record that the parties were under a mutual mistake, and also setting out what the parties acknowledge to be the true agreement between them would not, any more than a court order, actually alter the position as between the parties. It would merely record that agreement as it always was. Whether by court order or by deed, rectification requires that there be a mutual mistake, that is to say what is required is that there be a common intention between the parties as to the effect that the instrument they signed would have had which was inconsistent with the effect which the instrument which they executed in fact had: cf Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 95 ATC 4620. Mistake as to the revenue consequences of the agreement would not bring about the same result: Baird v BCE Holdings Pty Ltd [1996] NSWSC 376; (1996) 40 NSWLR 374 at 384.

1. In the Tribunal's view, the above paragraph does not mean that a deed of rectification has the effect of amending the previous instrument, but rather that such a deed records the subjective intention of the parties when they entered the instrument, which if proven to be accurate, may found an order for rectification of the instrument. That interpretation is consistent with the obiter of Steward J in FCT v MHFT at [47]-[53] as follows:

46. Something brief should be said about the Deed of Rectification, although like the trial judge, I do not think it was needed here given the conclusion I have reached concerning the proper construction of the MJH Fixed Trust Deed.

47. First, as Gordon J. observed in GE Capital Finance Australasia Pty Ltd v Federal Commissioner of Taxation [2011] FCA 849; (2011) 219 FCR 420 at 448 [106], "[r]ectification turns on the subjective intentions of the maker (or makers) of a document: see Carlenka at 331-332; Butlin's Settlement Trusts at 262; Allnutt v Wilding [2007] EWCA Civ 412 at [11]". There needs to be "clear and convincing" proof of that intention: see the authorities for this proposition listed at 712 [451] in Franklins. Gordon J. also observed at 450 [117]:

The "usual type" of mistake capable of rectification involves incorrectly recording the intention of the maker of a document. Such a mistake may be rectified by inserting words or deleting words, or substituting different words because the words that are there have the wrong meaning: see Allnutt v Wilding [2007] EWCA Civ 412 at [12]; Butlin's Settlement Trusts at 260 ...

In GE Capital, Gordon J. ordered the rectification of a form (evidencing a choice to join a multiple entry consolidated group for the purposes of Div 719 of the 1997 Act) by the addition of a date which had been mistakenly omitted. Her Honour did so pursuant to relief which had been sought in proceedings issued in reliance upon s 39B of the Judiciary Act 1903 (Cth) (the "Judiciary Act"). I note that the Commissioner had been a party to those proceedings.

48. Secondly, other than the recitals and terms of the Deed of Rectification, no evidence was led from any witness concerning the subjective intention of the settlor of the MJH Fixed Trust. In my view, the remaining evidence, being the Deed of Rectification itself, fell short of being "clear and convincing" proof of that person's subjective intention. What the Court needed was the testimony of the settlor setting out what had occurred. That such evidence was not adduced is perhaps unsurprising; the issue was only raised by the Commissioner at the very last moment.

49. Thirdly, whilst the Deed of Rectification here may be legally efficacious as between the parties to it, including, perhaps, as between the trustee and the beneficiaries, it cannot bind the Commissioner. The Commissioner can only assess taxpayers by applying the 1936 and 1997 Acts to the "taxable facts" which apply in each year of income, to use the language of Barwick C.J. in Bailey v Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214. The Deed of Rectification, executed in 2018, in and of itself cannot change or alter those taxable facts.

50. My conclusion is supported by Federal Commissioner of Taxation v Thomas [2018] HCA 31; (2018) 264 CLR 382. In that case, the taxpayer obtained from the Supreme Court of Queensland certain "directions" (in the form of declarations) as to the construction of resolutions made by a trustee to distribute net income comprising, amongst other things, certain franking credits. It was contended that these directions bound the Commissioner in his application of Div 207 of Pt 3‑6 of the 1997 Act (which contains rules setting out the effect of receiving a franked dividend). That was because, it was said, of the High Court's decision in Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) [1939] HCA 35; (1939) 62 CLR 545. That submission was rejected by the High Court. Kiefel C.J., Bell, Keane, Nettle, Gordon and Edelman JJ. said at 407-408 [54]-[55]:

Executor Trustee is authority for the proposition that the general law rights of trustee and beneficiary inter se, to the extent that they are defined by a decision made in duly constituted proceedings, are defined as against the Commissioner unless the decision is set aside. In Executor Trustee, the earlier proceedings had determined rights inter se. There was no question of res judicata or of issue estoppel, and the separate declaration did not generate rights in rem against third parties. And, importantly, the earlier proceedings did not determine the application of the taxation law to those rights.

It follows that Executor Trustee is not authority for the proposition that the Commissioner, or a court under Pt IVC, should determine the application of the taxing acts otherwise than according to law. "When the revenue authorities come to impose a tax in relation to such rights [defined by order of the court], they must ... take them as they in fact actually exist between the parties" (emphasis added). But directions made under the equivalent of s 96 of the Trusts Act do not bind the Commissioner in the application of the taxation laws.

(Emphasis in original and footnotes omitted.)

51. Whilst the Deed of Rectification cannot bind the Commissioner, it was received into evidence, and, in my view, was otherwise able be relied upon by the taxpayer as evidence of the mistake that had been made about the identity of the trustee of the MJH Superannuation Fund.

52. Fourthly, I do not think that the observations of Hill J. in Davis, supra, are necessarily inconsistent with Thomas. The point made by his Honour in that case is that a deed of rectification in relation to an agreement is effective in a tax appeal if all it does is "record that agreement as it always was". In other words, it will be efficacious if the taxpayer otherwise proves that it confirms a taxable fact which had not been correctly recorded.

53. Finally, I note that the learned primary judge would have made orders rectifying the MJH Fixed Trust Deed pursuant to s 32 of the Federal Court of Australia Act 1976 (Cth) but for his conclusion concerning the construction of that deed. I respectfully agree that this Court probably had jurisdiction to make orders for rectification on the basis of associated jurisdiction. However, it would not, in any event, have been appropriate for this Court to have made orders for rectification in circumstances where such relief had not been formally sought and the facts which might have supported the granting of such relief had never been pleaded. In my view, in a case such as this, a taxpayer seeking orders for rectification should do so by instituting separate proceedings against the Commissioner pursuant to s 39B of the Judiciary Act. It should ordinarily file and serve an originating application setting out the precise form of rectification sought and this should be accompanied by a statement of claim which sets out the material facts in support of rectification, in particular a statement of the subjective intention of the maker or makers of the instrument in question or, in an appropriate case, an affidavit addressing those matters.

[Emphasis added]

1. Nothing about this discussion suggests that a trust instrument is formally varied by a later deed of rectification. Further none of the cases referred to by the parties leads to this conclusion.
2. For the above reasons, the Tribunal is of the view that the terms of RFT Deed contained the relevant taxable facts as of 31 December 2023 for the purpose of s 5D LT Act. Consequently, the Applicant's liability for surcharge land tax as at that date falls to be determined by reference to the RFT Deed.

A. The Settlor intends to establish a trust to be applied and administered for the benefit of the Beneficiaries.

B. The Settlor has paid, or will pay, the Settlement Sum to the Trustee and the Trustee has consented to hold the Trust Fund on the terms contained in this Deed.

1. Clauses 4 and 5 of RFT Deed give the Trustee the responsibility for determining the income and capital of the trust and broad powers with respect to distribution of the income and capital, including for example to the following:

4.4 (a)(i) to pay, apply or Set Aside any amount for one or more of the Beneficiaries...

5.2 At any time prior to the Vesting Day... the Trustee has the Right to pay, apply or Set Aside the whole, or any part, of the capital of the Trust Fund to, or for the benefit of, any one or more of the Beneficiaries...

1. Beneficiaries of RFT are defined in cl 1.1 as including all Primary Beneficiaries, the Secondary Beneficiaries, the Tertiary Beneficiaries etc, whether in existence or not at the time of creating the trust, but expressly excludes "all Excluded Persons". A review of Schedule of RFT Deed shows the classes of persons who could be a beneficiary of RFT are extremely broad. The Primary Beneficiaries are AR and CR and, according to the Schedule, for example, any of the following could be a beneficiary:

(1) A spouse (Item 11(a)(i));

(2) A child, uncle, aunt, niece, nephew, cousin, parent, brother or sister of AR or CR (Item 11(a)(ii));

(3) A child, uncle, aunt, niece, nephew, cousin, parent, brother or sister of a spouse of AR or CR (Item 11(a)(iii)); and

(4) Or more remotely - the spouse of a director of a proprietary corporation that has been named as a beneficiary (Items 12(a),(g) and (h)).

1. Plainly, unless captured by the definition of Excluded Person in Clause 1.1, the broad definition of Beneficiaries in RFT Deed could allow a person who is not ordinarily resident in Australia, a foreign person (see pars 19 to 21 above), to be a beneficiary. Furthermore, the trustee could in exercise of its powers and discretion referred to in par 55 above, distribute income or property to a foreign person.
2. Clause 1.1 contains the following critical definitions:

"Excluded Person means the following (even if any of them is named or would otherwise be or be included in a class of Beneficiary):

...

(e) any "Foreign Person".

"Foreign Person means:

(a) a foreign person or foreign trust for the purposes of Chapter 4 of the Duties Act 2001 (Qld);

(b) a foreign person or foreign trust for the purposes of Division 4 of Part 3 of the Land Tax Act 2010 (Qld);

(c) a foreign natural person, a foreign corporation or a foreign trust as defined in section 3 of the Duties Act 2000 (Vic);

(d) a person holding a controlling interest in a foreign corporation or a substantial interest in a foreign trust for the purposes of sections 3A and 3B of the Duties Act 2000 (Vic) respectively;

(e) an absentee person as defined in section 3 of the Land Tax Act 2005 (Vic);

(f) an absentee person holding an absentee controlling interest in a corporation for the purposes of section 3A of the Land Tax Acct 2005 (Vic) (unless an exemption under section 3B of that Act applies);

(g) a foreign person or foreign trust for the purposes of section 3 and/or 4B of the Duties Act 2001 (Tas);

(h) a foreign person or foreign trust for the purposes of section 16A of the Land Tax Act 2000 (Tas);

(i) a foreign person or foreign trust for the purposes of Chapter 3A of the Duties Act 2008 (WA);

(j) a foreign person or foreign trust for the purposes of Part 2A of the Land Tax Act 2004 (ACT);

(k) any potential beneficiary of this Trust who would or might cause this Trust to be or become a foreign person or a foreign trust for the purposes of any of the above provisions;

(l) any potential Beneficiary of this Trust who would or might cause this Trust to be or become a foreign person or a foreign trust for the purposes of any other statute,

and who, by being a Beneficiary, would or might cause this Trust to be assessed to additional or increased duty or land tax (in excess of any amount which the Trust would be required to pay had the person, corporation or trust not being so classified) in respect of the acquisition or holding of any direct or indirect interest in real property to which any of the provisions above apply, but only while:

(m) the foreign person, corporation or trust continues to be so classified under the relevant provision; and

(n) the Trust acquires or holds, any direct or indirect interest in real property to which any of the provisions above apply;"

"3 EXCLUSION FROM BENEFITS

3.1 Excluded Persons

Every Excluded Person is specifically excluded from all or any benefits under this Trust. The Trustee must not:

(a) make any determination in favour of or any distribution of Income or capital in favour of any Excluded Person;

(b) pay, distribute, apply or Set Aside any Property of the Trust (including money) to or for the benefit of any Excluded Person.

3.2 Provision not Effective

Any provision of this Deed which does or might have the effect of conferring a benefit on any person contrary to clause 3.1 will be ineffective to confer that benefit and must be read down to the extent necessary to give effect to clause 3.1.

3.3 Irrevocable

This clause 3 is irrevocable and is not capable of being amended".

1. In addition to the prohibition in cl 3.3, the Applicant is expressly prohibited by cl 19.1(iii) from exercising any power by which any Excluded Person could or will become a Beneficiary.
2. Finally, cl 31 provides as follows:

31. SEVERANCE

(a) To the extent that the inclusion or appointment of any Beneficiary is invalid for any reason, that inclusion or appointment will be severed from the Deed and/or the inclusion or appointment of any other Beneficiary.

(b) This Deed will, to the extent possible, be interpreted and construed so as not to be invalid, illegal or unenforceable in any respect. If a provision, on its true interpretation or construction is held to be illegal, invalid or unenforceable:

(i) that provision will be read down to the extent that it may be necessary to ensure that it is not illegal, invalid or unenforceable and as may be reasonable in the circumstances to give it a valid operation unless this would materially change the intended effect of this Deed; or

(ii) if the provision or part of it cannot effectively be read down, that provision or part will be deemed to be void and severable and the remaining provisions of this Deed will not in any way be affected or impaired and will continue regardless of that illegality, invalidity or unenforceability.

Contentions of the parties as to construction of the RFT Deed

1. It was not suggested by any party that the definition of Foreign Person in subcll (a) to (k) referred to at par 59 above was adequate to exclude RFT from being deemed a foreign person pursuant to s 5D LT Act.
2. The Applicant argued however that the combined effect of subcl (l) in the definition of Foreign Person and cll 3.1 and 3.2 satisfy the requirements in s 5D LT Act. Firstly, it was said that subcl (l) excludes any potential beneficiary that causes the trust to be a foreign person for the purposes of "any other statute". Secondly, it was argued that cl 3.1 has the effect of permanently prohibiting persons captured by subcl (l) from ever receiving a distribution of benefits from the trust.
3. The Chief Commissioner appears to accept that subcl (l) of the definition of Foreign Person meets the no foreign beneficiary requirement but argued that the trust did not satisfy the no amendment requirement.
4. The Chief Commissioner relied upon the case of N & G Grima Family Trust Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAD 149 (Grima). Grima concerned a trust that had terms identical to cll 1.1 and 3 set out at pars 59 and 60 above and considered whether that trust irrevocably prevented a foreign person from being a beneficiary for the purpose of s 5D LT Act. Like the present case, the Chief Commissioner in Grima did not argue that the trust failed to meet the no foreign beneficiary requirement. In those circumstances, the argument focused on whether the trust satisfied the no amendment requirement. The Tribunal found it did not for the following reasons:

46. There is, however, a further matter that goes to the determination of whether the "no amendment requirement" is satisfied. That matter is the effect of temporal limits placed by cl 1.1 on the operation of the definition of "Foreign Person" (which in turn forms a category of "Excluded Person").

47. The categories of person who fall within the definition of "Foreign Person" are relevantly described as those falling within various categories, "who, by being a Beneficiary, would or might cause this Trust to be assessed to additional or increased duty or land tax". However, these words have operation "only while ... the foreign person, corporation or trust continues to be so classified" and the trust "acquires or holds any direct or indirect interest in real property to which any of the provisions above apply".

48. The consequence is that once relevant real property is no longer acquired or held by the Applicant in the manner described, persons who previously were a "Foreign Person" will fall outside that definition. As a result, they will also cease to be "Excluded Persons" within paragraph (e) of the definition of "Excluded Person".

49. The effect of this qualification is to place a temporal limit on the operation of cl 3 to the extent that it applies to "Foreign Persons". After such time when the Applicant ceases to hold any direct or indirect interest in relevant real property, persons previously prevented from taking benefits under the trust on account of being a "foreign person", may take.

50. The Respondent submits that once these circumstances arise, cl 19 permits amendment to cl 1.1. In the Respondent's submission, this means that the "no amendment requirement" has not been satisfied.

51. In Waverley Investments Pty Ltd atf The Five Oaks Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 255, the Tribunal described what is required by s 5D of the LTA in the following terms:

"In my view, the question to ask at midnight on 31 December is whether the terms of the trust can ever be amended to include foreign persons as potential beneficiaries. In context, that is the natural meaning of the words 'the terms of the trust are not capable of amendment'. In this respect there is no relevant difference between the once-only taxing point under the Duties Act, and the annual taxing points under the land tax legislation.

There is nothing untoward in the Chief Commissioner's use of the word 'irrevocable': it is simply a convenient shorthand to describe the requirement in the statute.

"In summary, I accept the Chief Commissioner's submission that the language of the 'no amendment requirement' is the language of capacity and future possibility. The provision looks to what is 'capable' of being done to 'result in' a particular outcome - and it is self-evident that the particular outcome, if it ever occurs, will occur at some point in the future, and necessarily after the relevant taxing point when the question (whether the terms of the trust are capable of amendment) is being addressed. That the particular outcome may occur after the land in NSW has been disposed of is irrelevant. In simple terms, s 5D(3)(a) looks to the position now, while s 5D(3)(b) looks to future possibilities".

52. The facts of the Waverley Investments case are distinguishable from the facts at hand. The terms of the trust instrument in that case prevented amendment or variation of the relevant cl "for at any time when and for so long as the assets of the Trust include residential land in New South Wales". Amendment was not prevented when trust assets did not include such land. The trust deed, on the other hand, does not expressly enable amendment of the definition of "Foreign Person" for the purposes of cl 3, when trust property ceases to include relevant real property. What it does is to place a temporal limit on the operation of the definition in the manner described above without any need to amend the trust deed.

53. The effect of the words of limitation included in the definition of "Foreign Person" is to place a time limit on how long a person remains within the definition. That time limit is not referable to a specified date or time. It depends on the occurrence of particular circumstances. The circumstances are relevant real property ceasing to be trust property. If these circumstances arise, someone who remained a "Foreign Person" ceases to be such a person.

54. The occurrence of these circumstances, in turn, changes the operation of cl 3 from that time onwards. Someone who was once an "Excluded Person" (being a "Foreign Person"), for the purposes of cl 3, will, at that point in time, cease to remain within the definition. As a result, cl 3 will no longer prevent them from taking. This alteration to cl 3 what does, occurs not by reason of an amendment to the provision pursuant to the power to amend given to the Applicant under cl 19. It is an alteration, nevertheless, resulting from a change in circumstances. It is a self- executing change.

55. Frost SM said in Waverly Investments that the "no amendment requirement" used "the language of capacity and future possibility" that "looks to what is 'capable' of being done to 'result in' a particular outcome". I do not think the future possibility of amendment by way of a formal amendment of the kind considered in that case should be treated any differently to the same result being achieved by means of a mechanism built into the trust deed that does not require action by the trustee.

56. The "no amendment requirement" requires that the provisions in cl 3 of the trust deed not be capable of amendment. It also requires the cl to be "irrevocable". This is language that is absolute and unqualified. Whether an alteration to the reach of cl 3, occurs by means of exercise of the power to amend under cl 19 or by means of the self-executing mechanism set out in cl 1.1, the result is a change to the work cl 3 does.

57. I observe in passing that the effect of cl 1.1 and cl 3 is that if the Applicant were, at a future date, to dispose of the real property held subject to the trust, the consequences would be twofold. First of all, any persons who were previously "foreign persons" will no longer be prevented from taking. Secondly, the proceeds of sale of the real property will form part of the fund from which they may now take, even though they previously could not take. The result would be to allow "foreign persons" to obtain a benefit from real property previously held within a trust, without having paid the higher rates of tax applicable to them. Such an outcome does not sit easily with the statutory purpose.

58. I do not, however, rely on the matters set out at [57] above to determine the question at hand. That question is whether or not the "no amendment requirement" has been satisfied. This is a question to be determined on the basis of whether or not the meaning and effect of the words of the trust deed satisfy s 5D(3)(b). I have found, for the reasons set out at [54] - [56] above, that the "no amendment requirement" has not been satisfied. The assessment under review must, therefore, be confirmed.

1. The Chief Commissioner also argues that, following the reasoning in par 57 in Grima, the existence of subcl (n) in the RFT Deed causes the trust to fail the no amendment requirement because the ambulatory definition of foreign persons produced by subcl (n) means that once the trust no longer 'holds' any interest in real property in NSW the definition of Excluded Person and Foreign Person can be amended without breaching the prohibition in cl 3. This is another way in which it is said the RFT Deed fails the no amendment requirement.
2. In response to these arguments, the Applicant submitted that:

(1) Clause 3.2 has the effect of requiring the apparently conditional nature of subcl (n) to be read down to give priority to cl 3.1 ; and

(2) Grima should be distinguished. The Applicant submits that the presence of cl 31 in the RFT Deed has the effect that the Tribunal should sever or read down clauses which render the RFT non-compliant with s 5D of the LT Act as they are inconsistent with the overriding objectives of the trust deed.

1. In respect of the latter argument by the Applicant, the Tribunal accepts there is no reference to any clause like cl 31 in Grima and, if cl 31 is relevant in the way contended by the Applicant, the applicability of that case will be limited.
2. During the hearing, the Tribunal raised with the parties that, following the reasoning in Grima, the effect of subcl (l) to (n) in the definition of Foreign Person in cl 1.1 could be that RFT also fails the no foreign beneficiary requirement. At the conclusion of the hearing, the Tribunal directed the parties to file any further written submissions they relied upon about this issue. The Chief Commissioner did not file any submissions. The Applicant's solicitor wrote to the Tribunal advising that the Applicant had no further submissions.

1. Notwithstanding the concession of the Chief Commissioner at par 65 above, the Tribunal considers that on the proper construction of the RFT Deed the trust fails to irrevocably exclude any foreign person from being a beneficiary of the trust because it does not satisfy the no foreign beneficiary requirement.
2. The key is the construction of the definition of Foreign Person and in particular subcll (l), (m) and (n) of RFT Deed which for convenience are replicated below:

Foreign Person means:

(a) a foreign person or foreign trust for the purposes of Chapter 4 of the Duties Act 2001 (Qld);

(b) a foreign person or foreign trust for the purposes of Division 4 of Part 3 of the Land Tax Act 2010 (Qld);

(c) a foreign natural person, a foreign corporation or a foreign trust as defined in section 3 of the Duties Act 2000 (Vic);

(d) a person holding a controlling interest in a foreign corporation or a substantial interest in a foreign trust for the purposes of sections 3A and 3B of the Duties Act 2000 (Vic) respectively;

(e) an absentee person as defined in section 3 of the Land Tax Act 2005 (Vic);

(f) an absentee person holding an absentee controlling interest in a corporation for the purposes of section 3A of the Land Tax Acct 2005 (Vic) (unless an exemption under section 3B of that Act applies);

(g) a foreign person or foreign trust for the purposes of section 3 and/or 4B of the Duties Act 2001 (Tas);

(h) a foreign person or foreign trust for the purposes of section 16A of the Land Tax Act 2000 (Tas);

(i) a foreign person or foreign trust for the purposes of Chapter 3A of the Duties Act 2008 (WA);

(j) a foreign person or foreign trust for the purposes of Part 2A of the Land Tax Act 2004 (ACT);

(k) any potential beneficiary of this Trust who would or might cause this Trust to be or become a foreign person or a foreign trust for the purposes of any of the above provisions;

(l) any potential Beneficiary of this Trust who would or might cause this Trust to be or become a foreign person or a foreign trust for the purposes of any other statute,

and who, by being a Beneficiary, would or might cause this Trust to be assessed to additional or increased duty or land tax (in excess of any amount which the Trust would be required to pay had the person, corporation or trust not being so classified) in respect of the acquisition or holding of any direct or indirect interest in real property to which any of the provisions above apply, but only while:

(m) the foreign person, corporation or trust continues to be so classified under the relevant provision; and

(n) the Trust acquires or holds, any direct or indirect interest in real property to which any of the provisions above apply;"

[Emphasis added]

1. The only sensible interpretation of the definition of Foreign Person is that each of subcll (a) to (l) are disjunctive so that any person falling within any one of those subclauses will be a 'Foreign Person' and therefore an 'Excluded Person'.
2. It is also accepted that subcl (l) is effective to satisfy the requirements of s 5D LT Act to exclude foreign persons from being a beneficiary. That is not the end of the enquiry. The question is what work is done by the paragraph commencing 'and' on the line after subcl (l) (the conjunctive paragraph). On one view, the reference to the word 'Beneficiary' in the conjunctive paragraph plus the use of a comma at the end of subcl (l) instead of a semicolon could mean that the conjunctive paragraph relates only to subcll (l). On another view, which the Tribunal prefers, the conjunctive paragraph relates to each of subcl (a) to (l). The conjunctive paragraph is expressed as relating to real property 'to which any of the provisions above apply', which only makes sense if it is intended to be related to each of subcll (a) to (l). This interpretation is further consistent with standard drafting conventions that words following a list are read as if they are attached to each preceding paragraph, not just the immediately preceding paragraph (Pierce, Statutory Interpretation in Australia (10th ed, 2024, Lexis Nexis) at par 12.3; Council of the City of Ryde v Sally Haddad executor of the estate of the late Dr Jim Haddad [2018] NSWCA 35 at [28]- [29]). Consequently, satisfaction of each of subcll (a) to (l) requires also satisfying the conjunctive paragraph.
3. The Tribunal considers the final words of the conjunctive paragraph "but only while:" introduces two conditional elements to the paragraph. Despite following the alphabetical sequence of subcll (a) to (l), a plain reading of subcll (m) and (n) is that they are not categories of foreign persons, but rather they are conditions that attach to the conjunctive paragraph. The Tribunal is fortified in this view by the reference to 'provisions above' in subcll (n) which fits comfortably with the provisions of statutes referred to in subcll (a) to (l). Finally, the conjoining of subcll (m) and (n) with 'and' means that both subclauses must be satisfied for each of subcll (a) to (l) to be satisfied.
4. The Tribunal agrees with the reasoning in Grima at pars 48, 49 and 53 referred to at par 66 above that the use of the words 'but only while' in the conjunctive paragraph introduce a temporal limit which attaches to the definition of Foreign Person. 'While' in this context is a noun and its' ordinary meaning is a period of time. It follows that only for the period that subcl (m) and subcl (n) are satisfied will a foreign person be excluded from being a beneficiary by subcl (l).
5. In respect of subcl (n) it appears to have been assumed in Grima that subcl (l) excludes a foreign person from being a beneficiary only for the period that the trust holds an interest in real property. The Tribunal agrees with this interpretation.
6. A textual reading of subcl (l) and the conjunctive paragraph is that a beneficiary who might cause the trust to be assessed for surcharge duty or surcharge land tax is excluded from being a beneficiary only for the period that the trust acquires an interest in real property. In the context of an assessment for surcharge land tax, it is ambiguous as to what is meant by the period of time that the trust 'acquires' an interest in real property. One possible view is this should be interpreted as distinguishing between trusts that do or do not acquire real property. On that interpretation, which the Tribunal considers strained, the period must be from the first occasion that a trust acquires real property until the trust is dissolved.
7. The Tribunal considers the better interpretation is that a trust that acquires an interest in real property only satisfies subcl (n) in respect of situations where stamp duty is under consideration, not land tax.
8. The definition of Foreign Person in cl 1.1 exclusively deals with legislation that imposes duties and land tax. In each of those pieces of legislation that deal with duties in respect of real property, the subject of the duty is (usually) an instrument which reflects a transaction by which a person/body has acquired an interest in real property. In each of those pieces of legislation that deal with land tax, the subject of the tax is ownership of an interest in land tax. The distinction between the subject of duty (acquisition) and the subject of land tax (ownership/holding) is maintained in the conjunctive paragraph:

and who, by being a Beneficiary, would or might cause this Trust to be assessed to additional or increased duty or land tax (in excess of any amount which the Trust would be required to pay had the person, corporation or trust not being so classified) in respect of the acquisition or holding of any direct or indirect interest in real property to which any of the provisions above apply, but only while:

(m) the foreign person, corporation or trust continues to be so classified under the relevant provision; and

(n) the Trust acquires or holds, any direct or indirect interest in real property to which any of the provisions above apply;"

[Emphasis added]

1. This interpretation is consistent with the principle of interpretation known as reddendo singula singulis which presumes that qualifications attach to two or more subjects in the order that they appear (Pierce, Statutory Interpretation in Australia (10th ed, 2024, Lexis Nexis) at p 213-4). Although presumptions can be rebutted, in the present case the interpretation offered by applying this principle is both consistent with the surrounding context and gives the most logical meaning to 'acquire/acquisition' and 'hold/holding' in the conjunctive paragraph.
2. Reading the conjunctive paragraph in this way gives it rational meaning as follows:

(1) a beneficiary that might cause the trust to be assessed for surcharge duty in respect of the acquisition of real property is excluded from being a beneficiary, but only while the trust acquires any interest in real property to which duty legislation applies; and

(2) a beneficiary that might cause the trust to be assessed for surcharge land tax in respect of the holding of real property is excluded from being a beneficiary, but only while the trust holds any interest in real property to which land tax legislation applies.

1. It must be remembered the definition of Foreign Person in cl 1.1 of the RFT Deed (albeit inadvertently) did not include the matters necessary to prevent the imposition of surcharge land tax in NSW. Notwithstanding the subjective intention of the appointor and settlor was to make the trust exempt from surcharge land tax in NSW, they did not know how that was achieved and could not be said to have specifically intended to include the clauses which had that effect. The recitals of RFT Deed do not indicate any specific objective of the trust other than to benefit the beneficiaries. It is plain, however, from the definitions of Beneficiary, Excluded Person and Foreign Person in cl 1.1 that the only relevant objective of the trust is to exclude duties, land tax and surcharge duties and surcharge land tax in respect of states and territories that do not include NSW, South Australia and Northern Territory. Therefore, the conjunctive paragraph cannot be interpreted, as the Applicant contends, as having been drafted with the NSW requirements in mind.
2. Applying the above construction, it is only during the period that RFT holds any interest in real property that a foreign person will fall within subcl (l) and is precluded from being a beneficiary of the trust. Conversely, during the period that RFT does not hold any interest in real property a foreign person can be a beneficiary.
3. Although the point was not argued and therefore not considered in Grima, the Tribunal considers the above interpretation means that the RFT must fail the no foreign beneficiary requirement. Simply, there is the potential for a foreign person to be a beneficiary of the trust at any time in the future that RFT does not hold any interest in real property. The terms of RFT Deed allow the Applicant to sell real property and distribute the sale proceeds to a foreign beneficiary. This fails the requirement in s 5D(3)(a) LT Act because the terms of the trust as they currently stand do not prevent any property of the trust from being distributed to or applied for the benefit of a foreign person as required by s 5D(5) LT Act.
4. Once a foreign person is not precluded from being a beneficiary under subcl (l), they are not a Foreign Person and therefore, are not an Excluded Person as defined in cl 1.1. This situation then removes the efficacy of cl 3 because cl 3.1 only prevents Excluded Persons from receiving any benefits under the trust and cl 3.2 does not arise.
5. The Tribunal further does not accept that cl 31 has any role to play in this matter. That clause provides for severance in two circumstances:

(1) Where inclusion or appointment of a beneficiary is 'invalid' for any reason.

(2) Where a provision is found to be 'illegal, invalid or unenforceable'.

1. The ordinary meaning of 'invalid' is "without legal force" or "void" (Macquarie Dictionary 5th Edition (2005). The legal definition of 'unenforceable' in respect of contracts is "The characteristic of being incapable of supporting an action in court for a remedy for breach by another party, despite having been validly formed" (Australian Law Dictionary 3rd ed (2018)). The legal definition of 'illegal' is "An act which the law forbids" (Osborn's Concise Law Dictionary 12th ed (2013)).
2. The Applicant does not explain how it is suggested that the inclusion of a foreign person as a beneficiary of the trust is 'invalid' or what specific provision might be characterised as 'illegal, invalid or unenforceable'. Rather, the Applicant suggests that because the parties subjectively intended to comply with s 5D LT Act, cl 31 can be used as a "safety net" allowing the Tribunal to interpret the deed, or sever provisions, to make the deed compliant. The Tribunal has already determined that the subjective intention of the appointor and settlor are irrelevant to interpreting RFT Deed and, the objective intention of the trust did not include complying with NSW land tax legislation. There is nothing on the face of RFT Deed that makes any of its terms invalid, illegal or unenforceable.
3. As the Tribunal has found RFT Deed does not meet the no foreign beneficiary requirement it is unnecessary to consider the Chief Commissioner's alternative argument about why that requirement is not met.
4. If the Tribunal is wrong in its construction of the RFT Deed and its conclusion that it does not satisfy the no foreign beneficiary requirement, the Tribunal would find that it does not satisfy the no amendment requirement for the same reasons as given in Grima. Those reasons are persuasive, and it is irrelevant that there is no discussion of a severance clause like cl 31 in Grima because, as outlined at par 89 above, the Tribunal is not satisfied that cl 31 has any operation in this case.
5. For all the reasons set out above, the Tribunal is not satisfied that the Applicant has discharged their onus of proving that the Assessment is incorrect.
6. The orders of the Tribunal will be:

(1) The Land Tax Assessment Notice issued by the Chief Commissioner of State Revenue on 2 September 2024 is confirmed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.