| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : GRAFTON and COMMISSIONER OF STATE REVENUE [2011] WASAT 180 MEMBER : JUDGE T SHARP (DEPUTY PRESIDENT) HEARD : 16 SEPTEMBER 2011 DELIVERED : 10 NOVEMBER 2011 FILE NO/S : CC 84 of 2011 BETWEEN : ROSS LESLIE GRAFTON Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords: Assessment of duty - Aggregation of dutiable transactions - Substantially one arrangement Legislation: Duties Act 2008 (WA), s 37, s 37(1), s 37(2)
Income Tax Assessment Act 1936 (Cth), s 260
South Australian Stamp Act 1923 (SA), s 66ab
Stamp Act 1921 (WA), s 74AF
(Page 2)
Result: Decision of the Commissioner of State Revenue is affirmed
The applicant's application is dismissed Category: B
Representation: Counsel:
Applicant : Self-Represented
Respondent : Ms R Panetta
Solicitors:
Applicant : N/A
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Bellinz Pty Ltd v Commissioner of Taxation (1998) 84 FCR 154
Federal Commissioner of Taxation v Newton (1957) 96 CLR 577
Federal Commissioner of Taxation v Wade (1951) 84 CLR 105
Jeffrey v Commissioner of Stamps (1980) 23 SASR 398
Khoury v Chief Commissioner of State Revenue [2010] NSWADT 13
Old Reynella Village Pty Ltd v Commissioner of Stamps (SA) (1989) 51 SASA 378
(Page 3)
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision 1 The applicant, his wife, his sister and his brotherinlaw, through three family trusts, acquired three blocks of land in Riverton with a view to demolishing any buildings on those blocks and developing residential units for the use or otherwise for the benefit of their family members. The contract for the purchase of the first block was conditional on the purchasers acquiring the second and third blocks. 2 The purchasers submitted the three contracts to the Commissioner of State Revenue for assessment of duty and the Commissioner, applying s 37 of the Duties Act 2008 (WA) aggregated them as a single dutiable transaction. 3 The applicant lodged an objection to this assessment and the Commissioner disallowed that objection. The applicant then sought a review by the Tribunal of the Commissioner's decision. 4 The Tribunal considered the relevant legislation and concluded that the transactions formed, in substance, one arrangement. The Tribunal therefore upheld the Commissioner's decision and dismissed the application.
Facts 5 The facts in this matter have been drawn from a Statement of Facts agreed between the parties.
92 Parklands Square, Riverton (Lot 92) 6 On 17 June 2010, Ross and Anne Marie Grafton as trustee for the Ross L Grafton Family Trust, Shane and Karen Jones as trustee for the Shane and Karen Jones Family Trust and Certos Pty Ltd as trustee for the Grafton Family Trust No 1 (Purchasers) entered into a contract for the purchase and sale of Lot 92. 7 The relevant interests of the Purchasers in Lot 92 were as follows:
(Page 4)
The vendor of Lot 92 was Robert Anthony Saunders of 92ParklandSquare, Riverton. The purchase price for Lot 92 was $705,000, paid in cash and the deposit paid was $20,000. The settlement date was to be 'within 60 days of acceptance'. The sale was subject to the following conditions:
(1)The offer is subject to the Purchasers securing 88 and 90 Parklands Square, Riverton. (2) This offer remains open until 5:00 pm Thursday 17 June 2010. (3) The Purchasers warrant that the current brick and tile dwelling will be demolished within 6 months of Purchase Date to make way for redevelopment. (4) This offer is accepted by the Vendor provided the contracts for 88and 90 Parkland Square Riverton are signed and completed prior to 5:00 pm 2nd July 2010. After this date, this contract will be null & void. The vendor wishes to be notified in writing within 15hours of this time and date. 8 Settlement occurred on 30 August 2010. At the time of settlement, Lot 92 contained a residence. Lot 92 was advertised separately from any other property.
88 Parklands Square, Riverton (Lot 88) 9 On 1 July 2010, the Purchasers entered into a contract for the purchase of Lot 88. The relevant interests of the Purchasers in Lot 88 were as follows: 10 The vendors of Lot 88 were Braden David Meers, Kim John Meers and Pamela Faye Meers of 20 Patterson Street, Wongan Hills. The purchase price of Lot 88 was $685,000, paid in cash and the deposit paid was $10,000. The settlement date was to be 'on or before 30 August 2010'. There were no special conditions for the purchase of Lot 88 and the purchase was not subject to finance. 11 Settlement occurred on 30 August 2010. Lot 88 was vacant land at all relevant times. (Page 5)
90 Parklands Square, Riverton (Lot 90) 12 Also on 1 July 2010, the Purchasers entered into a contract for the purchase and sale of Lot 90. The relevant interests of the purchasers in Lot 90 were as follows: 13 The vendors of Lot 90 were Braden David Meers and Sandra Jane Meers of 20 Patterson Street, Wongan Hills. 14 The purchase price of Lot 90 was $685,000, paid in cash and the deposit paid was $10,000. The settlement date was to be 'on or before 30 August 2010'. It was a condition of sale that 'The purchasers warrant that the current brick & tile dwelling will be demolished within 6 months of Purchase Date to make way for redevelopment'. There were no other conditions of sale. 15 Settlement occurred on 30 August 2010. At the time of settlement, Lot 90 contained a residence.
The properties generally 16 Lots 88, 90 and 92 Parklands Square, Riverton are contiguous lots. The Lots were purchased for the purpose of redevelopment. Lots 88, 90 and 92 were each individually priced. 17 Lot 88 and Lot 90 were advertised together 'to be sold as one parcel of land' and were offered for sale by 'expressions of interest from $675,000 per block'. 18 The vendor's agent for each of Lot 88, 90 and 92 was Alan Hutchinson of Morgan Real Estate
Assessments, objections and application for review 19 Each of the contracts for the purchase of Lots 92, 90 and 88 (Contracts) were lodged 'overthecounter' at the respondent's office on 5 August 2010. An officer of the respondent assessed the Contracts as being substantially one arrangement under s 37 of the Duties Act 2008 (WA) (Duties Act) and duty was charged on the aggregated sum of the dutiable value of the Contracts (Assessment). (Page 6)
20 The applicant objected to the Assessment on 30 September 2010 and the respondent disallowed the applicant's objection on 25 November 2010.
Commissioner's Practice 21 At the relevant time, the document entitled Commissioner's Practice D.A. 4.0 set out the respondent's practice in administering s 37 of the Duties Act. Historically, Commissioner's Practice SD 12.0 set out the respondent's practice in relation to s 74AF of the Stamp Act 1921 (WA). This practice was in operation between 21 October 2003 and 24 November 2005.
Section 37 of the Duties Act 22 Section 37(1) of the Duties Act provides that as follows: Dutiable transactions relating to separate items of dutiable property that together form, evidence, give effect to or arise from what is, substantially one arrangement are to be aggregated and treated as a single dutiable transaction. 23 Section 37(2) provides that: … unless the Commissioner is satisfied to the contrary, dutiable transactions relating to separate items of dutiable property together form, evidence, give effect to or arise from what is, substantially one arrangement if - (a) the transactions have taken place within 12 months; and (b) in respect of each of the transactions, the person liable to pay duty is the same person (whether that person is the only person liable to pay duty or is liable to pay duty with the same or different persons).
Issues 24 The parties agree that the issue before the Tribunal is whether the respondent was correct in treating the Contracts as a single dutiable transaction and charging duty on the aggregated sum of the dutiable value of the Contracts. Central to this issue is whether the Contracts together form, evidence, give effect to or arise from what is substantially one arrangement. 25 In the present case, the Contracts were entered into within a few days of each other. Further, the Purchasers in each Contract were the same parties. Therefore, under s 37(2), unless the respondent is satisfied to the contrary, the Contracts are presumed to arise from substantially one (Page 7)
arrangement. The respondent was not given any information to suggest that the Contracts do not arise from substantially one arrangement. 26 It follows that the applicant bears the onus to establish that the dutiable transactions together did not form, evidence, given effect to or arise from substantially one arrangement; see Khoury v Chief Commissioner of State Revenue [2010] NSWADT 13 (Khoury) at [27].
Substantially one arrangement 27 The word 'arrangement' has traditionally been given a broader interpretation in the Courts than the word 'contract'. It does not, for example, need to be in writing. The meaning of the word 'arrangement' in s 260 of the Income Tax Assessment Act 1936 (Cth) was considered by the High Court in Federal Commissioner of Taxation v Newton(1957) 96 CLR 577. Williams J said at 630: 'Contract' is a technical word and implies an agreement enforceable by law but the words 'agreement' and 'arrangement'… are apt to describe bargains of a looser kind. 28 In Khoury, the New South Wales Administrative Decisions Tribunal was asked to consider whether there was 'substantially one arrangement' under the New South Wales aggregation provisions. In that case,the applicants purchased 12 contiguous units in a commercial development. Each unit was purchased through a separate contract, entered into over the course of a week. A few months later, a thirteenth unit from the same development was purchased. The issue before the Tribunal there was, whether the contracts for the purchase of the units formed 'substantially one arrangement' under the relevant legislation. 29 In Khoury, the Tribunal there considered the South Australian Supreme Court cases of Jeffrey v Commissioner of Stamps (SA)(1980) 23 SASR 398 (Jeffrey)and Old Reynella Village Pty Ltd v Commissioner of Stamps(SA)(1989) 51 SASA 378 (Old Reynella). Although these cases concern s 66ab of the South Australian Stamp Act 1923 (SA), which requires there to be 'substantially one transaction or one series of transactions', the Tribunal in Khouryfound that the general principles which were applied in those cases should be applied to determine the nature of the relevant transaction under the NSW legislation, namely, whether there was 'substantially one arrangement'. The relevant parts of the New South Wales aggregation provisions are largely the same as the Western Australian aggregation provisions contained in s 37 of the Duties Act. (Page 8)
30 In Jeffrey,two adjoining parcels of land were sold by their common owner to two different purchasers, a mother and a son, in separate agreements for sale and purchase. One of the agreements was conditional upon the satisfaction of some special conditions in the other. The agreements provided for the same nominal deposit and for settlement on the same day. In determining whether or not there was substantially one transaction or series of transactions, the Supreme Court (at 405), focussed on the use of the word 'one' in the statute, and said: It points to some essential unity, some 'oneness', some unifying factor that brings the several transactions within the section. … [I]t will be necessary to find a relationship or connection or interdependence between the transaction that gives to them the essential unity at which section 66ab is directed. 31 To determine whether or not there was an interdependence between transactions that gave them this essential unity, the Court looked to the substance of the transaction. It was found that the transactions did have the essential unity at which s 66ab was aimed (at 407). Factors which demonstrated this included: (a) the properties were adjoining; (b) the properties had been held in common ownership; (c) the contracts were identical in form except for the special conditions; (d) the contracts were obviously prepared by the same agent, probably on the same day; (e) each contract provided for the same nominal deposit; (f) settlement for each contract occurred on the same day; (g) the purchasers were related (mother and son); (h) one contract was conditional upon the other; and (i) the mother financed the son's contract. 32 The principles in Jeffrey were applied in OldReynella to the acquisition of 17 contiguous properties from different owners for the purpose of building a shopping centre. In that case, it was found that an essential unity existed because the connection between each of the 17 individual contracts was integral and not fortuitous (at 382). Central to (Page 9)
this decision was the fact that the properties were all used for the construction of a shopping centre. 33 In Khourythe Tribunal applied the principles enunciated in Jeffrey and OldReynella, finding that the dutiable transactions together formed, evidenced and gave effect to what was substantially one arrangement because of 'unifying factors' which were not "fortuitous ones" (at [28]). These factors included that the 13 units were part of a single development, the parties were related and that the same solicitor acted in each transfer. It did not matter that the arrangement itself was not reduced to writing (at [29]). The arrangement was inferred from all the circumstances and from them the only inference that could have been properly made was that there was an arrangement to sell the units to another entity owned and controlled by the family.
The arrangement in this case 34 In the present case the Purchasers entered into a contract for the purchase of Lot 92 on 17 June 2010. This contract was conditional upon the Purchasers securing Lot 88 and Lot 92, but it was also subject to a condition inserted, presumably by the vendor, that 'contracts for [Lots 88 and 90] are completed prior to 5 pm 2nd July 2010'. After that date, the contract for Lot 92 was 'null and void'. The contract was also subject to the condition that the Purchaser would demolish the current dwelling to make way for redevelopment. As we have observed earlier in these reasons, the agent for the seller of Lot 92 was Alan Hutchinson. 35 About two weeks later, on 1 July 2010, the Purchasers entered into the contracts for the purchase of Lot 88 and Lot 90. These lots had been advertised together 'to be sold as one parcel of land' by Mr Hutchinson, who also acted as agent in these sales. Both properties were purchased for the same sum, $685,000 each. 36 Lot 88 was vacant land. The contract for the purchase of Lot 90 was conditional upon the dwelling being demolished to make way for redevelopment. 37 Settlement for all properties occurred together on 30 August 2010.
The applicant's submissions 38 The applicant accepts that the Purchasers' contract to purchase Lot 92 was subject to acquiring Lots 88 and 90, but says that the Purchasers, to achieve their purpose, only needed to acquire Lots 88 and 90 or Lots 90 and 92. The applicant says that the Purchasers would have proceeded (Page 10)
with the purchase of Lot 92, even if they had only acquired Lot 90. He points out that the vendors of each lot were different (although he concedes that Lots 88 and 90 had one common owner). He also points out that the purchase of each of the three lots was negotiated separately. 39 The applicant then submits that the arrangement was not made for the purpose of minimising duty payable, the relevance of this being that the word 'arrangement' suggests to him that he is being viewed as having devised a scheme with the various vendors of the lots to avoid paying duty. Presumably this is why he produced to the Tribunal a statement from the agent of the vendors of the three properties, saying that the applicant was not in any way involved in any direct negotiations with any of the vendors. 40 The applicant is also troubled by the background words in Commissioner's Practice D.A. 4.0 which describes s 37 of the Duties Act as being an 'antiavoidance' measure. The applicant has stressed to the Tribunal that he made full disclosure to the Commissioner about every aspect of the various transactions and therefore does not accept that 'antiavoidance measures' should apply.
The Tribunal's findings and conclusion 41 The Tribunal considers that Khoury, Jeffrey and Old Reynella illustrate the proper approach to the application of s 37 of the Duties Act. 42 The Tribunal also considers that the word 'substantially' in s 37 of the Duties Act is an important qualification to the words 'one arrangement'; see Brianco Nominees Pty Ltd & Ors v Commissioner of State Revenue (Taxation) [2008] VCAT 999. 43 In this case: a) the propertites are adjoining; b) the contract for Lot 92 was conditional on the Purchasers succeeding in acquiring Lots 90 and 88; c) the Purchasers in respect of each lot are the same; d) settlement of the purchase of each lot took place on the same day and; (Page 11)
e) the Purchasers acknowledge that the lots were purchased for the purpose of constructing residential units across the three lots. 44 The Tribunal does not consider it relevant that the Purchasers could have achieved their purposes by purchasing only two of the three lots. They purchased Lot 92 subject to the acquisition of the other lots. The applicant's contention that the Purchasers would have proceeded with the purchase of Lot 92, even if they did not acquire Lot 88, does not sit comfortably with the condition in the offer for Lot 92 that the vendor would regard the contract as null and void if contracts for Lots 88 and 90 were not completed prior to 2 July 2010. On its face, that condition does not appear to be capable of being waived by the Purchasers. 45 In the present case, the circumstances surrounding the Contracts demonstrate an essential unity or 'oneness' between the Contracts. The unity is that the properties were purchased contemporaneously to make way for a redevelopment of home units for the benefit of the Purchasers' family. 46 This is unaffected by the fact that the vendors were different in respect of each lot or that each purchase was negotiated separately. 47 Turning to the applicant's contention that 'antiavoidance measures' should not be applied in the absence of any intent to avoid duty, there is no suggestion that s 37 only applies when the arrangement is made for the purpose of minimising a duty payable. In Khoury, the applicants argued that the relevant New South Wales Revenue Rulings provided exhaustive examples of when the aggregation provisions would apply. The Tribunal in that case found the examples given did not limit the circumstances in which an aggregated assessment will be made. 48 Further, the Tribunal in that case made it clear that Revenue Rulings do not override the statutory provisions or otherwise act as estoppel against the Commissioner's statutory duty to administer the Act in accordance with the law; see Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 [31] and Bellinz Pty Ltd v Commissioner of Taxation (1998) 84 FCR 154. 49 In the view of the Tribunal, it does not matter that the arrangement was not made for the purpose of minimising duty payable. In none of the cases set out above was it found that the arrangement had been entered into for the purpose of reducing duty. (Page 12)
50 The Tribunal finds that the respondent was entitled to make the assessment in this matter based on all the relevant facts and information. 51 For the reasons set out above, the application of MrRossLeslieGrafton to set aside the Commissioner of State Revenue's decision to dismiss his objection to the assessment of duty is refused.
Orders 52 The Tribunal orders: 1. The applicant's application is dismissed. |