Asan Construction Management Pty Ltd Atf Nikkhah Family Trust v Chief Commissioner of State Revenue

[2025] NSWCATAD 156

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Asan Construction Management Pty Ltd ATF Nikkhah Family Trust v Chief Commissioner of State Revenue [2025] NSWCATAD 156

Hearing dates:

22 April 2025

Date of orders:

30 June 2025

Decision date:

30 June 2025

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

J Sullivan, Senior Member

Decision:

(1) The assessments to surcharge land tax for the 2018, 2019, 2020, 2021 and 2022 land tax years are confirmed

Catchwords:

TAXATION – surcharge land tax – Trust not intended to include foreign beneficiaries – attempt to amend the terms of the Trust - whether deemed to be a foreign person for the purposes of s 5D of the Land Tax Act 1956 (NSW) – no discretion to relieve liability arising under the statutory provisions

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Duties Act 1997 (NSW)

Foreign Acquisitions and Takeovers Act 1975 (Cth)

Land Tax Act 1956 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184

Chloe Adolphi Pty Ltd as trustee for The Chloe Adolphi Family Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 48

Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238

Commissioner of Taxation v Ryan (2000) 201 CLR 109.

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

Feng v Chief Commissioner of State Revenue [2024] NSWCATAD 56

Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378

Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266

Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27

Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301

Watertite Investments Pty Ltd ATF Ingrove Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 274

Waverley Investments Pty Ltd atf The Five Oaks Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 255

Texts Cited:

None

Category:

Principal judgment

Parties:

Asan Construction Management Pty Ltd ATF Nikkhah Family Trust (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

P Nikkhah (Applicant)

Solicitors:
Crown Solicitor (Respondent)

File Number(s):

2024/00472735

Publication restriction:

None

REASONS FOR DECISION

1. The Applicant is Asan Construction Management Pty Ltd in its capacity as trustee for the Nikkhah Family Trust (“Trust”).

2. The Tribunal has been asked to review surcharge land tax assessments for the 2018 to 2022 land tax years, which were issued to the Applicant by the Respondent, the Chief Commissioner of State Revenue.

3. Mr Peirouz Nikkhah is a director of the trustee company. He and his father have conducted a building construction business for many years together. Mr Nikkhah represented the Applicant in these proceedings.

4. The Applicant says:

1. No surcharge land tax should have been assessed, because no person who is a beneficiary of the Trust is a “foreign person”;

2. The Trust has never paid or distributed any income or other amount to a foreign person. He and his father are both Australian citizens. They are the only ones who have received any distributions from the trust (income tax returns for all years were provided to prove this);

3. Land tax assessments were received, and paid, for all relevant years. But the Trust has been assessed again, for surcharge land tax:

1. on properties sold many years ago, before the surcharge land tax law was even introduced; and

2. despite having received land tax clearance certificates before selling the properties;

4. The Trust was never intended to include foreign beneficiaries;

5. The Respondent should accept that they had every intention to comply with the law and clearly sought to do so. They were not aware of, and had no expertise to understand, what was required to amend the Deed, and they relied on their lawyer to understand the law, and how to word the documents; and

6. This is not a case where there was ever any intention to do business with foreign persons. The Trust only ever did business in Australia, there was nothing foreign about their operations, and everything done was above board. They always thought they were doing the right thing, and understood there were no issues.

5. In short, the Applicant relied on professional advisers to ensure the Trust Deed was amended to comply with surcharge land tax obligations.

6. The Respondent says the Applicant was liable to surcharge land tax as the Trust was deemed to be a foreign person for the purposes of s 5D of the Land Tax Act 1956 (NSW) (“LTA”) because the terms of the Trust did not irrevocably prevent foreign persons from being potential beneficiaries of the Trust at the relevant date. Nor is there a discretion under the statutory provisions to waive the requirement to pay surcharge land tax as assessed.

7. No penalties or interest were imposed on the Assessments before the Tribunal.

Materials filed with the Tribunal

8. In chronological order:

1. On 19 December 2024 the Applicant filed its application to the Tribunal (A1).

2. On 29 January 2025 the Respondent filed documents required under s 58 of the Administrative Decisions Review Act 1997 (NSW) (“ADR Act”) comprising 55 tabs and 195 pages in total excluding the index (R1).

3. On 14 February 2025 the Applicant filed a bundle of documents (titled “Documents filed pursuant to Section 58”) comprising 47 “items” and 209 pages in total excluding the index (A2).

4. On 26 February 2025, the Applicant filed written submissions titled “Submission filed pursuant to Section 58 of the [ADR Act]” dated 24 February 2025 (A3);

5. On 24 March 2025, the Respondent filed:

1. written submissions dated 24 March 2025 (R2); and

2. a Tender Bundle comprising various Land Registry Services searches (R3).

6. On 7 April 2025 the Applicant filed:

1. written submissions titled “Submission for Asan Construction Management” (A4); and

2. a bundle titled “Documents in response to Response to Respondent’s Tender Bundle”, comprising 3 items and 36 pages in total excluding the index (A5).

7. On 11 April 2025 the Respondent filed:

1. A Bundle of Authorities (R4); and

2. A volume titled “Respondent’s Tribunal Book” (R5), which provide the parties’ respective evidence and submissions without duplication.

9. In these reasons, a reference to “TB” is to the Tribunal Book (R5).

Facts

Terms of the Trust

10. The Trust was established on 19 June 2015 by deed entered into on that date: TB 16 (“Original Deed”).

The Original Deed

11. Under the terms of the Original Deed:

1. the “Original Trustee” was Asan Construction Management Pty Ltd: cl 1.1;

2. the “Settlor” was Kaveh Ghazelbash; and

3. the “Appointor” was Mr Nikkhah (or his successor).

12. The Trust was a discretionary Trust. Under cl 3.1 (Distribution), the Trustee could, in each Accounting Period:

“appoint, pay, apply or set aside the whole or such part (if any) of the income of the Trust Fund of that Accounting Period to or for the benefit of or for all or such one or more exclusive of the others or other of the General Beneficiaries then living in such proportions and in such manner as the Trustee may in its absolute discretion determine:”

13. Clause 4 set out the procedure for application of the Trust Fund on the Vesting Day. Under cl 5, the Trustee could (inter alia) transfer any part of the Trust Fund to any beneficiary before the Vesting Day, or pay or apply the whole or any part of the income accrued to the benefit of any beneficiary.

14. Item 2 of the Schedule to the Deed provided that the following are “General Beneficiaries” (TB 41):

“(a)    Pirouz Nikkhah and the persons related to Pirouz Nikkhah as follows, namely:

(i)   spouse;

(ii)   children;

(iii)   children and more remote descendants of such children;

(iv)   brothers, sisters, parents, grandparents;

(v)   children and more remote descendants of brothers and sisters; and

(vi)    spouses of any of the foregoing;

(b)    any corporation or partnership of which any one or more of the foregoing beneficiaries is a member either directly or indirectly through some other entity;

(c)   the Trustee of any trust (in his capacity as such) which trust is bound to be determined not later than the Vesting Day and under which any one or more of the foregoing beneficiaries has any interest whether vested contingent or merely expectant or prospective;

(d)    such individuals corporations trusts or other entities having separate legal identity as may from time to time be nominated to be beneficiaries in accordance with the powers contained in this Trust Deed;

(e)   the trustee of any superannuation fund under which any one or more of the foregoing beneficiaries is a member;

(f)    any charity or tax exempt entity recognised as such under the Income Tax Assessment Act 1997;

EXCLUSIVE HOWEVER of the Settlor, the Settlor of any trust fund transferred to the Trustee as an addition to the Trust Fund and any person whom the Trustee determines to be excluded as a beneficiary under clause 20.”

15. Clause 20.4 of the Original Deed (TB 40) provided (my emphasis):

“The Trustee may with the consent of the Appointor at any time or times before the Vesting Day declare any individual or entity to be removed as a beneficiary or to be ineligible to become a beneficiary and such person or entity shall thereupon be excluded from any benefit under the trusts hereby created (but without prejudice to the beneficial entitlement to any amount set aside for any excluded beneficiary prior to the date of such declaration). Any such declaration shall be revocable unless expressed to be otherwise. The removal of beneficiaries may be by resolution (whether oral or in writing) deed, or deed poll.”

16. The Original Deed was executed by the Settlor, and signed by Pirouz Nikkhah as sole director and secretary of Asan Construction Management Pty Ltd (the Original Trustee) “in accordance with its Constitution”. The Constitution of that company was not before the Tribunal. No issue was raised by either party, however, that the Original Deed was validly executed.

Residential land holdings of the Applicant

17. In 2017, the Applicant purchased residential land in Mosman (“Mosman Land”). The land was subsequently subdivided, in November 2019, into three lots.

18. In December 2019, the Applicant sold Mosman Lot 2 and Mosman Lot 3.

19. In March 2020, the Applicant sold Mosman Lot 1.

20. In May 2020, the Applicant purchased residential land at Rozelle (“Rozelle Land”).

21. Accordingly, the residential land owned for each relevant land tax year (which also applies for surcharge land tax purposes) was as follows:

Land tax year	Residential land owned
2018	Mosman Land (not subdivided)
2019	Mosman Land (not subdivided):
2020	Mosman Lot 1
2021	Rozelle Land
2022	Rozelle Land

The Assessments

22. On 11 February 2021, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2018 to 2021 land tax years. The Applicant was assessed as liable for surcharge land tax for those years.

23. On 12 April 2021, Mr Nikkhah emailed the Respondent with an attachment stating “Following our telephone conversation, please find attached the required documents to assess 2021 land tax”.

24. On 12 June 2021, the Respondent emailed the Applicant to advise they had only received the front page of the Original Deed (TB 117). The email noted the introduction of surcharge land tax with retrospective effect to the 2017 land tax year and said (extract, my emphasis):

“…Revenue NSW issued several communications to customers advising of the amendment requirements, to be executed prior to 31 December 2020.

Discretionary trust deeds often give the trustee wide powers to distribute income and/or property, such as to family or other relatives of the settlor and in many cases to charities. If any one of the potential beneficiaries is a foreign person, the trustee may be liable to surcharge. Consequently, a discretionary trust may be liable for the foreign person surcharges even though none of the beneficiaries who actually receive or are likely to receive distributions of income or capital are foreign persons….

If you have amended the trust deed and the amendment was executed prior to midnight 31 December 2020 to irrevocably exclude foreign beneficiaries the trust will no longer be a ‘foreign person’ for all the tax years in question and not liable to Surcharge Land Tax….

If you have not amended your deed in order to avoid future land tax surcharge, the deed needs to meet the requirements set out in the State Revenue Legislation Further Amendment Act 2020 (the Act) to irrevocably exclude current, or future foreign beneficiaries from receiving trust distributions so surcharge will not be applicable from the 2022 tax year….”

25. On 25 June 2021, the Applicant lodged a Land Tax Variation Return declaring it was not a foreign entity.

26. On 16 September 2021, the Respondent wrote to the Applicant and advised that the Original Deed did not satisfy the requirements of s 5D of the LTA.

27. On 31 January 2022, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2022 land tax year. The Applicant was assessed as liable for surcharge land tax for that year.

28. On 6 January 2023, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2023 land tax year (that assessment is not before the Tribunal in these proceedings).

29. On 8 December 2023, the Applicant wrote to the Respondent enclosing a copy of the Variation Deed (see below for the terms of the Variation Deed).

30. On 25 January 2024, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2024 land tax year (that assessment is also not before the Tribunal in these proceedings).

31. On 25 January 2024, the Respondent advised the Applicant that the Variation Deed did not satisfy s 5D of the LTA (TB 521), because (inter alia) the “foreign person” definition did not align to the relevant requirements in the law; and the “no amendment” requirement in 5D(3)(b) had not been satisfied. The email also said (my emphasis):

“If you execute a new variation of deed please supply to allow for a review and if the amendment meets requirements as above the registration will be updated to non-foreign from the date of execution of the amendment. PLEASE note the new amendment will need to be irrevocable.

The trust remains a foreign trust and the previous assessment stands correct as issued.

If you still believe we have applied the legislation incorrectly, you have the right to lodge a formal objection…”

Terms of the Variation Deed dated16 May 2016 (TB 160)

32. The Variation Deed was titled Deed of Variation and dated 21 March 2016. It was executed by Asan Construction Management Pty Ltd ACN 605 774 374 (defined as “Trustee”) and Mr Nikhhah (defined as “Pirouz”).

33. The Preamble made it clear that the intent was to amend the Original Deed to exclude “any foreign persons” stating (inter alia):

D.   Pursuant to clause 20.4 [of the Original Deed], the trustee wishes to clarify the specific beneficiaries under the deed and expressly exclude any foreign persons.

E.   The effect of this deed is to:

(a)   document the removal and exclusion of any foreigner as a beneficiary of the Trust Deed.

34. The Operative Provisions were as follows (bold type in original):

Document the beneficiaries

1.   Pursuant to Clause 20.4 of the Trust Deed, the Trustee declares the following class of persons to be ineligible to become a beneficiary: “Includes any foreign natural person and/or anyone without Australian Citizenship”.

2.   I agree that this will be inserted into the trust Deed to be effective from the date of this Deed.

Variation of Trust Deed

3.   The Trustee and Pirouz declares that the Trust Deed is varied so that all beneficiaries will be Australian residents.

Effective date of Deed

4.   The Trust Deed is varied and this Deed becomes effective on the last day this Deed is executed by all Parties being the date of this Deed.

Rest of Trust Deed unaltered

5.   In all other respects, the terms of the Trust Deed remain unaltered.

35. A critical fact relating to this Variation Deed is that the amendments made were not expressed to be irrevocable, and nor was cl 20.4 of the Original Deed amended (set out at par 15 above). Accordingly, the amendments made were revocable (able to be later amended) under the terms of cl 20.4 of the Original Deed.

Terms of the Rectification Deed dated 30 April 2024 (TB 267)

36. Mr Nikkhah told the Tribunal that after receiving the correspondence from the Respondent saying that the Variation Deed did not satisfy the requirements to avoid surcharge land duty, he contacted Ms Vo (the lawyer who prepared the Variation Deed). She told him to get some specialist advice, so he approached another solicitor (the Solicitor) in February 2024. The Solicitor prepared the Rectification Deed, and also the objection to the Respondent and a related request for an extension of time.

37. The Respondent accepts that the Rectification Deed complied with the requirements in s 5D of the LTA. It inserted a definition of “foreign person” adopting the definition in s 104J of the Duties Act 1997 (NSW) (“Duties Act”), and inserted a new cl 32 into the trust deed, which provides that no foreign person can become a beneficiary of the Trust and the clause cannot be amended, deleted or revoked in any way.

Objection (TB 175)

38. The objection was sent to the Respondent on 16 May 2024. The objection was lodged against the surcharge land tax assessments for the 2018 to 2022 land tax years, and attached a copy of the Variation Deed and the Rectification Deed. The objection said (extract, my emphasis):

“The Taxpayer contends that the [Variation Deed] together with the Rectification Deed had satisfied the requirements of section 5D of the [LTA] and avoided liability for surcharge land tax in each of the respective years.

…

While it is accepted that the retrospective effect of the Rectification Deed can only be validated by an order of the Court, it is respectfully requested that the Taxpayer not be made to go to the additional expense to obtain the Court order. The Taxpayer is aware that Revenue NSW has accepted a number of rectification deeds without a Court order retrospectively removing liability to surcharge land tax where the parties could show a clear common intention to have done so at the earlier time.

It is contended that the Taxpayer falls within that class of taxpayer and should be entitled to be successful with this objection without the additional expense of obtaining a Court order on the basis that the Taxpayer would be successful in seeking the remedy of retrospective rectification.”

39. On 22 May 2024 the Respondent requested (inter alia) more support for the statement in the objection italicised in the paragraph above.

40. On 11 July 2024 the Solicitor replied, on behalf of the Applicant:

“7. This firm has seen correspondence from the law firm acting for LawCover stating:

‘The Commissioner has confirmed in writing that Revenue NSW will accept a deed of rectification to rectify the position prospectively but that Court ordered rectification is required to rectify the position retrospectively. The Commissioner has also confirmed in writing that Revenue NSW will not oppose any application for relief from the Court.

We anticipate filing an application shortly seeking an order for retrospective rectification in a number of sample cases. Discussions with Revenue NSW are ongoing as to whether the Commissioner will accept that all affected deeds have been retrospectively rectified once orders in those sample cases are made, or whether orders will need to be sought in respect of each trust.’

8. We acknowledge that these statements do not go as far as what we included in our objection and for that we apologise.

9. In Chloe Adolphi Pty Ltd as trustee for The Chloe Adolphi Family Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 48 J Gatland Senior Member at [58] stated:

‘With reference to the authorities considered above, the intention of the parties needs to be determined at the time of the execution of the document sought to be rectified. Such intention may be identified or proven by reference to later conduct. In any case what is required to be established is that the parties held a specific or relevant intention and that the intention has not been reflected in the document, which is sought to be rectified’.

10. Consistent with Chloe Adolphi, it is submitted that the Taxpayer could successfully seek retrospective rectification.”

Objection disallowed

41. On 31 October 2024, the Respondent granted an extension of time for the Applicant to lodge the objection under s 90(1) of the Taxation Administration Act 1996 (NSW) (“TA Act”), but the objection was disallowed (“Objection Decision”).

Application to the Tribunal (A1)

42. The Application to the Tribunal for review was filed on 13 August 2024. Under “grounds for review”, it stated:

“Nikkhah Family Trust does not have any foreign beneficiaries. The sole director of the Trust and only person involved with the Trust is an Australian Citizen. The grounds that a foreign beneficiary exists is not true. I explained this to my lawyer (attached is the correspondence). In his objection letter to Revenue NSW he decided not to include these facts.”

Jurisdiction and task of the Tribunal

43. The TA Act applies in respect of “taxation laws” which are defined in s 4 to include the LTA.

44. Section 96 of the TA Act provides that a taxpayer may apply to the Tribunal for an administrative review of a decision of the Respondent that has been the subject of an objection. The application was lodged within time. The Tribunal therefore has jurisdiction under s 96 of the TA Act, and s 9 of the ADR Act.

45. The relevant decisions on review are the assessments, and not the objection decisions: see Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28]; Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [10].

46. The Tribunal’s task is to decide what the correct and preferable decision is having regard to the material before it, including any relevant factual material and any applicable written or unwritten law: ADR Act, s 63.

47. The Applicant has the onus of proving its case: TA Act, s 100(3). That means it must prove all matters necessary for the Tribunal to answer the statutory questions in its favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36]. The standard of proof is the balance of probabilities.

48. Section 101 of the TA Act sets out the powers of the Tribunal in dealing with an application for review and provides that the Tribunal may, amongst other things, confirm or revoke the assessment, make an assessment in place of the assessment to which the application relates or remit the matter to the Respondent for determination in accordance with its finding or decision.

Relevant Legislative Provisions

49. Surcharge land tax is charged for the 2017 and subsequent land tax years on residential land owned by “foreign persons” pursuant to s 5A of the LTA.

50. Section 5D of the LTA (relevantly) provides:

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.

51. Section 2A of the LTA defines “foreign person” as having the same meaning as in Chapter 2A of the Duties Act which, in turn, defines “foreign person” as having the same meaning as in the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”) (with certain modifications which are not presently relevant).

52. Section 4 of the FATA defines “foreign person” as meaning:

…

(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…

53. That section also defines “substantial interest” as follows:

substantial interest: a person holds a substantial interestin an entity, trust or unincorporated limited partnership if:

(a)  for an entity or unincorporated limited partnership—the person holds an interest of at least 20% in the entity or partnership; or

(b)  for a trust (including a unit trust)—the person, together with any one or more associates, holds a beneficial interest in at least 20% of the income or property of the trust.

54. Section 18 of the FATA sets out rules for determining percentages of interests in entities; and s 18(3) provides, inter alia:

Discretionary trusts

18(3)  For the purposes of this Act, if, under the terms of a trust, a trustee has a power or discretion to distribute the income or property of the trust to one or more beneficiaries, each beneficiary is taken to hold a beneficial interest in the maximum percentage of income or property of the trust that the trustee may distribute to that beneficiary.

Application of the law to the facts

55. The effect of s 5D of the LTA is that the trustee of a discretionary trust will be deemed to be a foreign person for the purposes of s 5A, and liable to surcharge land tax, unless the requirements of both s 5D(3)(a) and (b) are satisfied.

Section 5D(3)

56. I have found that neither requirement in s 5D(3) was satisfied, and therefore the Applicant was deemed to be a foreign person.

5D(3)(a) – the “no foreign beneficiary requirement”

57. As submitted by the Respondent, the “no foreign beneficiary requirement” in s 5D(3)(a) requires that no potential beneficiary of the trust be a foreign person. A “potential beneficiary” is not just the named beneficiaries. A “potential beneficiary” includes any members of a class of beneficiaries if the exercise or failure to exercise a discretion under the deed can result in any property being distributed to, or applied for the benefit of, the person.

58. I acknowledge that Mr Nikkhah produced extensive documentation and submissions which confirmed the status as an Australian citizen of himself, his father, his children and other members of his family. He told the Tribunal his wife (spouse) was a permanent resident, and had applied for Australian citizenship. I accept that Mr Nikkhah and his father were Australian citizens. I therefore accept that is it likely that members of his family who could fall within the class of individual beneficiaries under the terms of the Trust were either Australian citizens or otherwise met the tests to not be “foreign persons”.

59. However, even if I found that to be the case, this is not enough for the Tribunal to conclude that the requirements of the “no foreign beneficiary” requirement in s 5D(3)(a) was satisfied.

60. This is because the amendments in the Variation Deed only referred to natural persons (including the reference to “anybody”, as it was linked to that person’s status as an “Australian citizen”). It is clear from the terms of the Original Deed extracted above that the General Beneficiaries of the Trust are not limited to natural persons. They include corporations and other entities, including charities. The Variation Deed therefore does not exclude all foreign persons from being a beneficiary under the Trust: see Watertite Investments Pty Ltd ATF Ingrove Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 274 (“Watertite”) at [61], [67]-[69].

61. Accordingly, I find that the Trust did not satisfy the “no foreign beneficiary requirement” in s 5D(3)(a) for any relevant land tax year.at any relevant taxing date.

Section 5D(3)(b) – the “no amendment requirement”

62. Even if I had found that s 5D(3)(a) was satisfied, it is clear that the Variation Deed did not entrench the variation to make it irrevocable. It was required to be stated as irrevocable under the terms of cl 20.4 of the Original Deed.

63. As a result, the changes effected by the Variation Deed did not meet the “no amendment requirement” in s 5D(3)(b).

64. I accept that the Applicant did not at any time pay any amount to a person who was a “foreign person” as defined. But that does not matter; nor does it matter that there was no existing beneficiary identified as a “foreign person” as defined at the relevant dates. As was explained below by SM Frost in Waverley Investments Pty Ltd atf The Five Oaks Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 255 at [52]-[54] (my emphasis):

“52.    … the requirement in s 5D(3)(b) is put more broadly…. 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.

53.   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.

54.   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.”

65. This position is consistent with the Respondent’s publication CPN 004 v 2 “Foreign surcharges and discretionary trusts” which includes the following statements (refer Examples 1 and 2):

“The trust has no existing foreign beneficiaries, but future spouses and children of Mark and Peter could be foreign persons. The trustee is taken to be a foreign person. To be exempt from foreign surcharges, the trust must be amended to exclude any foreign beneficiaries and the amendment must be irrevocable.

….

Although the trust has no existing foreign beneficiaries and no potential foreign beneficiaries, the trust must still be amended to exclude any future foreign potential beneficiaries and the amendment must be irrevocable.”

Rectification

66. The Respondent accepts that the Rectification Deed satisfied the requirements of s 5D with prospective effect.

67. I agree with the submissions of the Respondent that the Rectification Deed executed on 30 April 2024 also does not assist the Applicant as it does not affect the surcharge land tax assessed for the 2018 to 2022 land tax years.

68. As stated by the written submissions of the Respondent at [55], citations omitted:

“While rectification generally has retrospective effect, to the extent that a document that is rectified is to be read as if it had originally been executed in its rectified form, the retrospective alteration of parties’ rights or obligations in an instrument may be resisted where it affects accrued rights of third parties or undercuts provisions of a statute.”

No other exemption

69. At the hearing, the Applicant pointed to s 5C of the LTA, which he believed could apply to exempt the Applicant from the liability to surcharge land tax.

70. That was not a matter upon which the Respondent had provided submissions. In any event, I find that s 5C could not apply for the reason that the Assessments here are to a trust, and not to an “Australian corporation” as defined for the purpose of that section.

No discretion

71. I am sympathetic with the Applicant’s attempts to meet the requirements in s 5D, and not be liable to surcharge land tax. Neither Mr Nikkhah were lawyers. They did not understand the legal position of the trust, the trust deeds, the variation documents, or the surcharge land tax provisions in the LTA. In those circumstances, they had relied upon their advisers to draft the documents to ensure that the requirements were met to satisfy s 5D of the LTA.

72. The Applicant noted that assessments to surcharge land tax were received after the land was sold and tax clearance certificates received. But those tax clearance certificates are issued for the protection of the purchaser, and do not preclude the future assessment of surcharge land tax by the Respondent in this case.

73. I accept that no-one who ever received distributions from the Trust was a “foreign person” as defined, and that it was likely that no-one else within the description of individuals ever would have.

74. But, unfortunately for the Applicant, the Deed of Variation was deficient. And the Rectification Deed, in the absence of an order by the Supreme Court, takes effect only from its date of execution.

75. The Tribunal has no discretion under the legislation to reduce or waive the liability to surcharge land tax: Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27 at [33]. As said in Feng v Chief Commissioner of State Revenue [2024] NSWCATAD 56 at [49]:

“The Tribunal has repeatedly emphasised that the factors contributing to an applicant’s failure to satisfy a statutory requirement are irrelevant (unless, of course, the statute itself says otherwise): Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38]; Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [80]. Also, the Tribunal has no overriding discretion to waive tax that is otherwise payable: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].”

76. Accordingly, no remedy is available for the Tribunal to currently relieve the Applicant of the obligation to pay the surcharge land tax. As submitted by the Respondent, liability to surcharge land tax is created by direct operation of the LTA, and notions of fairness or “justice” do not apply when the statutory provision contains no relevant discretion: Commissioner of Taxation v Ryan (2000) 201 CLR 109.

77. The Respondent, and in review proceedings this Tribunal, is required to apply the law in accordance with its terms.

Conclusion

78. Having regard to my findings and the applicable statutory provisions, the Applicant was taken to be a “foreign person” for the purposes of s 5A of the LTA for the 2024 land tax year.

79. It follows that the correct and preferable decision is that surcharge land tax was payable by the Applicant for the 2018 to 2022 land tax years as assessed.

80. The Tribunal’s task is to review the Assessments. No penalties were included, and interest was remitted in full. I confirm that full remission under the discretions available under the TA Act were appropriate in the circumstances.

Order

81. I make the following order:

1. The assessments to surcharge land tax for the 2018, 2019, 2020, 2021 and 2022 land tax years are confirmed.

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

Registrar

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.

Registrar

Decision last updated: 30 June 2025