AUTHORS

Liam Telford
Liam Telford
Director, Tax Technical
Image of Sam Mohammad, Partner at RSM Brisbane, leading the National indirect tax practice. Specialises in GST, duty, payroll tax, and fuel tax credits for property, government, mining, and infrastructure sectors, including ASX-listed developers and multinational companies.
Sam Mohammad
Partner
Mira Brewster
Mira Brewster
State Tax Specialist

Two recent decisions by the New South Wales Civil and Administrative Tribunal (NCAT) which have left a taxpayer liable for unexpected land tax and duty liabilities, underscore the importance of obtaining professional state taxes advice in respect of such matters. 

Those decisions and their respective implications are considered, in turn, below. 

Background 

The following facts are common to the land tax and stamp duty cases, both of which involved the same taxpayer: 

  • Hildard Pty Ltd was registered on 7 September 2016;
  • Two separate declarations of trust were made by Hildard Pty Ltd over a residential property it intended to purchase (the “Hildard Trust”) – one dated 15 September 2016 and the other dated 17 September 2016;
  • The former declaration of trust described a discretionary trust, whereas the latter described a fixed trust. The step-son of Hildard Pty Ltd’s only director and shareholder was nominated as the sole beneficiary under the latter;
  • On 30 September 2016, Hildard Pty Ltd entered into a contract to purchase the land as trustee of a discretionary/family trust;
  • On 11 October 2016, the purchase contract was lodged with the Chief Commissioner of State Revenue for stamping, with ad valorem duty of $38,260 paid thereon;
  • In April 2019, after initially furnishing a copy of the declaration of trust dated 15 September 2016 to an officer of the Chief Commissioner of State Revenue, the declaration of trust dated 17 September 2016 was lodged with the Chief Commissioner of State Revenue alongside a request for the imposition of concessional fixed duty pursuant to section 55(1)(a) of the Duties Act 1997 (NSW) the ‘apparent and real purchaser provision’. 
  • Ultimately, the Chief Commissioner of State Revenue:
    • rejected the request for the imposition of concessional fixed duty of $50.00 and instead imposed ad valorem duty on the declaration of trust; and
    • assessed Hildard Pty Ltd as trustee of the Hildard Trust to land tax for the 2021 land tax year on the basis that the Hildard Trust was a special trust (i.e., not a fixed trust), and the land tax principal place of residence exemption could not be applied.   

Duty Decisionhildard_duties

Hildard Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCATAD 5 (the “Duty Decision”)1 was decided on 9 January, with Senior Member S E Frost confirming the Chief Commissioner’s duty assessment in respect of the declaration of trust.

Having abandoned its claim under section 55, the applicant submitted to NCAT that the declaration of trust and purchase of the property in September 2016 were one transaction and that sub-section 18(1), the wording of which is repeated below, therefore applied to preclude double ad valorem duty:

18 No double duty

(1) If a dutiable transaction is effected by more than one instrument, one instrument is to be stamped with the duty payable on the dutiable transaction and each other instrument is chargeable with duty of $50.

Citing the earlier NCAT decision in Tzovaras v Chief Commissioner of State Revenue [2020] NSWCATAD 265, which concerned substantially similar facts, Senior Member S E Frost, rejected the applicant’s submission. Senior Member S E Frost concluded that subsection 18(1) had no application as in the taxpayer’s circumstances there were two separate dutiable transactions – a declaration of trust over dutiable property, and an agreement for the sale or transfer of dutiable property.

Land Tax Decision

Hildard Pty Ltd ATF Hildard Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 247 (the “Land Tax Decision”)2  was decided on 15 September 2023. In the Land Tax Decision, Senior Member S Dunn confirmed the Chief Commissioner of State Revenue’s land tax assessment, holding, inter alia, that:

  • Pursuant to the New South Wales Supreme Court decision in Reliance Financial Services Pty Ltd v Baddock [2002] NSWSC 857, the applicant was not entitled to the benefit of the legal effect of the declaration of trust dated 17 September 2016 unless and until it is stamped;
  • The foregoing meant the applicant was unable to establish that the Hildard Trust is a fixed trust, which would entitle it to the land tax threshold (cf. ‘special trusts’, which do not receive the land tax threshold); and
  • As the relevant property was owned by a company, there was no legal basis for the applicant’s other contention that the principal place of residence exemption should apply, and neither is it open to NCAT to decide by reference to equitability. 

Takeaways

In both cases, the applicant was represented by the trustee company’s sole director and shareholder, including in connection with antecedent communication with the Chief Commissioner of State Revenue. 

The applicant’s inadvertent provision to the Chief Commissioner of State Revenue of the incorrect declaration of trust, its failure to have the correct declaration of trust stamped prior to its appeal to NCAT, and conduct of both cases without due regard to relevant legislation and juridical authorities underscored how inimical self-representation or the failure to seek professional state taxes advice can be. 

“UPDATE as at 8 November 2023: The Land Tax Decision has been appealed to the NCAT Appeal Panel.”
 

For more information

RSM Australia has a team of state tax experts who can assist clients regarding such matters. Please contact Mira Brewster or Sam Mohammad for more information in this regard. 

1Hildard Pty Ltd v Chief Commissioner of State Revenue - NSW Caselaw

2Hildard Pty Ltd ATF Hildard Trust v Chief Commissioner of State Revenue - NSW Caselaw

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