HJA Holdings Pty Ltd and Ors & Act Revenue Office (Administrative Review) - [2011] ACAT 91

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

HJA HOLDINGS PTY LTD and ORS & ACT REVENUE OFFICE (Administrative Review) [2011] ACAT 91

AT 53, 54, 55, 56, 58 of 2010
AT 75, 76, 77, 78, 79, 80, 81, 82 of 2011
Catchwords: ADMINISTRATIVE REVIEW – assessment of payroll tax – whether applicants members of a group pursuant to the Taxation Administration Act 1999 – discretionary trust – disclaimer of interest under a discretionary trust – effect of disclaimer – whether the interest may be disclaimed retrospectively– whether a beneficiary may reject a gift – difference between disclaiming a vested interest under a trust and disclaiming a discretionary beneficiary interest – the Commissioner’s power to ungroup pursuant to s3Q of the Payroll Tax Act 1987 – retrospective application of s3Q – presumption against retrospective operation of a law and the displacement of the presumption – application of pre-amendment Acts to the Applicants’ payroll tax liability
List of Legislation: Income Tax Assessment Act 1936 (Cth), s.97
Legislation Act 2001, ss.10, 12, 13, 43, 44, 73, 75, 75A, 75B, 76 and 139
Payroll Tax Act 1987, ss.3Q, 6, 10-12, 16, 79 and 100
Plant Diseases Act 2002, s.5
Taxation Administration Act 1999, ss.112, 113, 114, 115, and 116

List of Cases: Australian Communist Party v The Commonwealth [1959] 83 CLR 1
Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509
Broomhead (Vic) Pty Ltd (In liquidation) v J. W.Broomhead Pty Ltd & Ors [1985] V.R. 891
Byrne v Commissioner for ACT Revenue
[2010] ACAT 9
Chang v Laidlaw Shire Council (2007) 234 CLR 1

Commissioner for ACT Revenue v Dataflex Pty Ltd and ACT Civil Administrative Tribunal [2011] ACTCA 14
Commissioner of Stamps (Queensland) v Weinholt
(1915) 20 CLR 531

Commissioner of Taxation of the Commonwealth of Australia v Ramsden [2005] FCAFC 39,
(2005) ATC 4126
Federal Commissioner of Taxation v Cornell
(1946) 73 CLR 394
Federal Commissioner of Taxation v Vegners
(1989) 89 ATC 5274; (1991) 91 ATC 4213
FCT v Cornell (1946) 73 CLR 394

Gartside v Inland Revenue Commissioners
[1968] AC 553
George Hudson Ltd v The Australian Timber Workers Union (1923) 32 CLR 413

In re Gulbenkian’s Settlements (No. 2) v Stephens & Anor [1970] 1 Ch. 408
John Burke Limited v Insurance Commissioner
[1963] Qd R 587
Kennon v Spry (2008) 238 CLR 366

Lennon v Gibson and Howes Ltd [1919] AC 709
Marshall’s Township Syndicate Limited v Johannesburg Consolidated Investments Co Limited [1920] AC 420
Maxwell v Murphy (1957) 96 CLR 261
Nguyen v FC of T 99 ATC 2211; (1999) 42 ATR 1030; [1999] AATA 228
Perpetual Trustee (Australia) Limited v Valuer General (1999) 102 LGERA 324
Plewa v Chief Adjudication Officer [1995] 1 AC 249

Polyukhovich v the Commonwealth
(1990) 172 CLR 501
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

Tantau v McFarlane [2010] NSWSC 224
Worrall v Commercial Banking Co of Sydney Ltd (1917) 24 CLR 28
X30 (1990) ATC 287 at 294-5

List of Texts/Papers: Bickford P, ‘Disclaimer in the taxation context’
(2004) 38(9) Taxation in Australia, 489
Crago N, ‘Principles of Disclaimer of Gifts’,
(1999) 28 University of Western Australia Law
Review 65
Krawitz A, ‘Disclaimer in the context of taxation of trusts in Australia’ (2006) 13 eLawJ 1
Gleeson SC, J, ‘Spry’s case: exploring the limits of discretionary trusts’ (2010) 84 ALJ 177

Pearce D C, & Geddes R S, Statutory Interpretation in Australia (7^th ed, 2011)
Pearce D C & Argument S, Delegated Legislation in Australia (3^rd ed, 2005)

Tribunal: Professor P. Spender, Presidential Member
Mr C Chenoweth, Member

Date of Orders:  29 November 2011
Date of Reasons for Decision:       29 November 2011
AUSTRALIAN CAPITAL TERRITORY  )
CIVIL & ADMINISTRATIVE TRIBUNAL           )

RE:HJA HOLDINGS PTY LTD
Applicant - AT10/53

KONSTANTINOU DEVELOPMENTS PTY LTD
Applicant – AT10/54

TECHNOLOGY WAREHOUSE AUSTRALIA PTY LTD
Applicant – AT10/55

FSF (HOLDINGS) PTY LTD
Applicant – AT10/56

KONSTANTINOU HOLDINGS
PTY LTD
Applicant – AT10/57

ADVANCE PROJECT DEVELOPMENTS PTY LTD
Applicant – AT10/58

TECHNOLOGY WAREHOUSE AUSTRALIA PTY LTD
Applicant – AT 11/75
HJA HOLDINGS PTY LTD
Applicant – AT 11/76
THE CLUB GROUP PTY LTD
Applicant – AT 11/77
VOLOCITY INTERNET PTY LTD
Applicant – At 11/78
ADVANCE PROPERTY DEVELOPMENTS PTY LTD
Applicant – AT 11/79
SPORTS CENTRES MANAGEMENT AUSTRALIA PTY LTD
Applicant – At 11/80
KONSTANTINOU HOLDINGS PTY LTD
Applicant – AT 11/81
FSF (HOLDINGS) PTY LTD
Applicant – AT 11/82

AND:ACT REVENUE OFFICE
Respondent –
AT10/53-58

AT 11/75-82

TRIBUNAL: Professor P. Spender, Presidential Member
Mr C Chenoweth, Member

DATE:29 November 2011
ORDER

The Tribunal has conducted a hearing and determined the answers to two questions asked by the parties as follows:
Question 1

Did the disclaimers signed by the beneficiaries of the S & F Konstantinou Family Trust on 23 May 2011 mean that the beneficiaries’ entitlements under that trust are disclaimed ab initio with the effect that subsection 115(6) of the Taxation Administration Act1999 (ACT) has no application?
Answer: No
Question 2

Can section 3Q of the Payroll Tax Act 1987 (ACT) be applied to allow the Commissioner to make a determination that the businesses carried on by certain Applicants in the financial years ending 30 June 2001 to 30 June 2005 were carried on independently and not connected with the business carried on by other member of the alleged group/s?
Answer: Yes
It is ordered that:

The matters are to be listed for further directions at 4.30pm on 8 December 2011.

………………………………..
Professor P. Spender
Presidential Member
For and on behalf of the Tribunal

REASONS FOR DECISION

This decision concerns five applications for review filed on 19 July 2010 (AT 10/53- AT 10/58) by HJ Holdings Pty Ltd, ("HJA Holdings") Konstantinou Developments Pty Ltd ("Konstantinou Developments"), Technology Warehouse Australia Pty Ltd ("Technology Warehouse"), FSF (Holdings) Pty Ltd, ("FSF"), Konstantinou Holdings Pty Ltd ("Konstantinou Holdings’), Advance Project Developments Pty Ltd ("Advance Project Developments") and a further seven applications for review filed on 15 August 2011 (AT11/75-AT11/82). The various companies in the group were sometimes colloquially referred to as the Konstantinou Group or the "K Group".
The applications for review involve decisions by the Respondent (referred to hereafter as "the Respondent" or "the Commissioner") on 21 June 2010.

The decisions of the Respondent were to uphold earlier assessments, dated 28 November 2006, over the objections of the Applicants, dated 20 December 2006, in respect of the following:
a.      The assessment of payroll tax levied on HJA Holdings and Technology Warehouse from 1 July 2000 to 30 June 2005. In those assessments HJA Holdings and Technology Warehouse were grouped with other companies of the Konstantinou Group.
HJA Holdings was assessed as liable for payroll tax of $43,401.90, penalties at 90% i.e. $39,061.71 and interest of $10,962.65. Technology Warehouse was assessed for payroll tax of $23,414.06, penalties at 90% i.e. $21,072.66 and interest of $5,544.30.[1]
b.     The assessment of payroll tax of $627.22 levied on Konstantinou Developments, with interest of $89.05 and a penalty of $564.50.[2]
c.      The assessment of payroll tax levied on FSF of $13,349.85, penalties at 90% i.e. $12,014.86 and interest of $4,350.85.[3]
d.     The assessment of payroll tax of $30,528.37 levied on Konstantinou Holdings with interest of $8,036.3 and penalty tax at 90% i.e. $27,475.53.[4]
e.      The assessment of payroll tax of $38,831.46 levied on Advance Project Developments with penalties at 90% i.e.$34,948.32 and interest of $10,525.65.[5]

[1] T7 at page T19 (in particular, page T21)
[2] T8 at page T40 (in particular, page T42)
[3] T9 at page T56 (in particular, page T58)
[4] T 10 at page T 74 (in particular, page T76)
[5] T 11 at page T94 (in particular, page T96)
The assessments arose out of an investigation conducted by the Respondent.
Although the original assessments did not set out the reasons why the Applicants were considered to be members of the group, those reasons are exemplified by a letter sent by the Respondent to the Applicant's solicitor,

Mr Tsirimokos, dated 10 May 2007, which stated as follows:
In grouping HJA Holdings Pty Ltd, the following facts were taken into account.
The Company's shareholders and directors are common to another
15 entities within the K Group and therefore, in accordance with
section 115 of the Act, the Company is a member of a group.
In addition, the circumstances regarding 'shared office services' were also considered. Based on the limited information provided by the Company in response to both formal and informal requests for information, a group situation in accordance with section 114 of the Act was determined. [6]
[6] T 57 at page T311
In this quote, the Respondent is referring to the Taxation Administration Act 1999 (“TAA”), the provisions of which will be discussed below.
The applications for review proceeded to hearing on 29 June to 3 July 2011. The Applicants were represented in the hearing by Mr Walker of Counsel and the Respondent/Commissioner was represented by Mr McCarthy of Counsel. Mr Konstantinou gave evidence. A timetable for written submissions was made, which was supplemented by oral submissions given by Counsel on behalf of the parties on 26 August 2011. It was agreed by the parties at the conclusion of the resumed hearing on 26 August 2011 that an interim decision should be delivered by the Tribunal on the following two questions:

1. Did the disclaimers signed by the beneficiaries of the S & F Konstantinou Family Trust on 23 May 2011 mean that the beneficiaries’ entitlements under that trust are disclaimed ab initio with the effect that subsection 115(6) of the Taxation Administration Act 1999 (ACT) has no application?
2. Can section 3Q of the Payroll Tax Act 1987 (ACT) (“PTA”) be applied to allow the Commissioner to make a determination that the businesses carried on by certain Applicants in the financial years ending 30 June 2001 to 30 June 2005 were carried on independently and not connected with the business carried on by other member of the alleged group/s?

Relevant Legislation

The proceedings concern payroll tax assessments for the financial years ending 30 June 2001 to 30 June 2005. The legislation that is relevant to the assessments is the Payroll Tax Act 1987 (ACT)[7] ("PTA") and the Taxation Administration Act 1999 (ACT)[8] ("TAA").

[7] Republication numbers 6B, 14 and 33
[8] Republication numbers 1C and 12
Although there were minor changes to the payroll tax legislation during the relevant years, unless otherwise indicated, the changes were not relevant to the applications for review, therefore the legislation that was operative as at 30 June 2005 will primarily be referred to in these reasons for decision.
Section 6 of the PTA provided at the relevant time:

6 Payroll tax liability
(1) Tax is payable by an employer in respect of wages to which
this Act applies because of section 5 that are paid or payable by the employer on or after the commencement date.
(2) If, in respect of wages paid in relation to the performance of
work, payroll tax is paid by an employment agent, no other person shall be liable to payroll tax in respect of that payment.

Section 16 of the PTA provided that if the sum of all taxable wages exceeded a determined amount, the employer was to, within seven days of the end of the month (section 16(2)(b)), lodge a return in relation to that month. Interim tax was payable under sections 10-12 of the PTA.
Section 113 of the TAA provided that corporations constitute a "primary group" if they are related corporations within the meaning of the Corporations Act 2001 (Cth). Section 114 provides that two persons that have an agreement under which employees are shared constitute a "primary group".
The Respondent primarily relied on a further method of grouping set out in section 115 as follows:
115 Primary groups of commonly controlled businesses
(1) If a person or set of persons has a controlling interest in each of 2 businesses, the persons who carry on those businesses constitute a primary group.
(2) For this section, a person or set of persons has a controlling interest in a business if—
(a) for 1 person—the person is the sole owner (whether or not as trustee) of the business; or
(b) for a set of persons—the persons are together the exclusive owners (whether or not as trustees) of the business; or
(c) for a business carried on by a corporation—
(i) the person or each of the set of persons is a director of the corporation and the person or set of persons is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation; or
(ii) a director or set of directors of the corporation that is entitled to exercise more than 50% of the voting power at meetings of the corporation is under an obligation, whether formal or informal, to act in accordance with the direction, instructions or wishes of that person or set of persons; or
(d) for a business carried on by a corporation that has a share capital—that person or set of persons can, directly or indirectly, exercise, control the exercise of, or substantially influence the exercise of, more than 50% of the voting power attached to the voting shares issued by the corporation; or
...
(3) If—
(a) 2 corporations are related to each other within the meaning of the Corporations Act; and
(b) 1 of the corporations has a controlling interest in the business;
the other corporation has a controlling interest in the business.
(4) If—
(a) a person or set of persons has a controlling interest in a business; and
(b) a person or set of persons who carry on the business has a controlling interest in another business;
the person or set of persons referred to in paragraph (a) has a controlling interest in that other business.
(5) If—
(a) a person or set of persons is the beneficiary of a trust in relation to more than 50% of the value of the interests in the trust; and
(b) the trustee has a controlling interest in a business of the trust;
the person or set of persons has a controlling interest in the business.

(6) A person who may benefit from a discretionary trust as a result of the exercise of a power of discretion by the trustee or another person, or by the trustee and another person, is deemed, for subsection (5), to be a beneficiary in relation to more than 50% of the value of the interests in the trust.
...
116 Smaller primary groups are subsumed under larger groups
If a person is a member of 2 or more primary groups, the members of all the groups together constitute a primary group.

Commissioner’s Power to Exclude Persons from the Group

At the relevant time, i.e. 2000-2005, the Commissioner’s power (or at least one of the powers) to exclude persons from the group was expressed in section 112 TAA.
112 Membership of groups
(1) For a tax law, a group is constituted by all the persons forming a primary group that is not a part of any larger primary group, apart from persons in relation to whom a determination under subsection (2) is in force.
(2) The commissioner may, in writing, determine that a person who would, apart from the determination, be a member of a group arising under section 114 is not a member of the group if the commissioner is satisfied that the person has continuously carried on business, and will continue to carry on business, substantially independently of the other members of the group.
(3) In determining, for subsection (2), whether a person carries on business substantially independently of the other member or members of a group, the commissioner shall have regard to the nature and degree of ownership or control of the business of each member of the group, the nature of each of those businesses and any other matter that the commissioner considers relevant.
Section 3Q was introduced into the PTA by the Payroll Tax Amendment Act 2008 (ACT) which commenced on 1 July 2008. The provision is in the following terms:
3Q Exclusion from groups
(1) The commissioner may determine that a person who would, but for the determination, be a member of a group is not a member of the group.
(2) The commissioner may make a determination under subsection (1) only if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the commissioner considers relevant, that a business carried on by the person is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of the group.
(3) The commissioner must not exclude a person from a group if the person is a corporation that, because of the Corporations Act, section 50 (Related bodies corporate) is related to another corporation that is a member of the group.
(4) This section extends to a group made up because of section 3L (Smaller groups included in larger groups).
(5) The commissioner may revoke a determination that applies to a person if satisfied that the circumstances in which the determination was made do not apply to the person.
(6) A determination under this section may provide for its commencement on or before the determination’s notification day.
Note This subsection provides express authority for a determination to commence on or before its notification day (see Legislation Act, s 73 (2) (d)).
(7) A determination under this section is a notifiable instrument.
Note 1 A notifiable instrument must be notified under the Legislation Act.
Note 2 Power to make a statutory instrument includes power to amend or repeal the instrument (see Legislation Act, s 46).

QUESTION 1 -- DISCLAIMER

Background

The companies within the alleged payroll tax group have been grouped on various bases. One is that they are "eligible beneficiaries" under the trust, of which Konstantinou Holdings Pty Ltd is trustee. As the trust is a discretionary trust, sections 115(5) and 115(6) TAA are said to operate.[9]

[9] Paragraph 21 of the Applicants’ Submissions dated 26 July 2011
A Trust Deed ("the Trust") was executed on 13 August 1996.[10] The settlor was William Allen and Konstantinou Holdings was appointed trustee. Spiros Konstantinou was defined to be the Custodian under Clause 3.2 of the Deed. Harry and Spiros Konstantinou were appointed directors of the trustee on 2 August 1996.[11]

[10] T88 at page T558 ff
[11] Exhibit R4, table B page 2
Clause 22 of the Trust[12] names or specifies certain beneficiaries, relevantly for the present application, Spiros Konstantinou, Fedra Konstantinou, children of Spiros, brothers of Spiros, (which includes Stamatios Konstantinou) and
(f) any corporation wherever incorporated or resident in which any of the persons named or described in paragraphs (a), (b), (c), (d) or (e) of this Clause is a director or secretary or a least one share in which is beneficially owned by any of the persons named or described in paragraphs (a), (b), (c), (d) or (e) of this clause …

[12] T documents page 585
FSF and Advance Project Developments are included as beneficiaries of the Trust by virtue of clause 22 because Stamatios, a beneficiary of the Trust, holds shares in these companies.
In evidence before the Tribunal, Harry Konstantinou indicated that by 2000 he had knowledge as to the potential beneficiaries of the Trust.[13] However, he gave evidence that he did not know that the Trust had payroll tax implications until the Respondent first relied upon subsections 115(5) - (6) of the TAA in arriving at the decision which is the subject of review in these proceedings.[14]
[13] Transcript 30 June 2011, 99 [5]
[14] Transcript page 71.26-43

Mr Konstantinou gave evidence that the Trust was established when some partnerships that his father had been involved in were dissolved in 1996.[15] He and his two brothers were young at that time, aged between 18 and 21 years.[16] When giving evidence, Mr Konstantinou stated that distributions under the Trust generally went to his father and mother annually or every second year although he was not able to recall the details.[17] He further stated that no distributions were made to him or his two brothers.[18] There was a distribution made to the Club Group Pty Ltd in 2006, amounting to $1,896,000,[19] however, to his knowledge no other company had received a distribution from the Trust, including FSF or Advance Project Developments.[20]

[15] Transcript page 57.18-20
[16] Transcript page 68.38-43
[17] Transcript at page 69.6-13
[18] Transcript at page 69.15-16
[19] Transcript at pages 69.19-21, and 202.18-19
[20] Transcript page 69

Documents were tendered by the Applicants in the form of an email chain providing equivocal evidence as to when the brothers became aware that they were beneficiaries under the Trust.[21] In the circumstances, the Tribunal places no weight upon these documents. A further document was tendered into evidence which is an email dated 24 November 2010 from the accountant acting for the Applicants indicating the distributions that were made "between 2005 to date".[22] The email states as follows:
[21] Exhibits A7 and A8
[22] Exhibit A6

The profit distributions (accounting) between 2005 to date are as follows:

2005: $1,171,796 to Spiros & Fedra Konstantinou
2006: $1,896,659 to The Club Group Pty Ltd
2007: No profit distribution
2008: No profit distribution
2009: No profit distribution
2010: Financial statements not yet prepared.

Relevant Clauses of the Trust Deed

The Trust Deed is entitled “Discretionary Trust Deed S & F Konstantinou Family Trust”.[23]
[23] T88 at page T558

Clause 5 is entitled “INCOME” and contains the following relevant subclauses:

5.1 Application for Maintenance, Education, Benefit or Advancement of Eligible Beneficiaries
The Trustee shall stand possessed of the Trust Fund UPON TRUST until the Perpetuity Date to apply so much of the income (if any) thereof in any year as the Trustee shall think fit for the maintenance, education, benefit or advancement in life of all or such one or more to the exclusion of the others or other of the Eligible Beneficiaries and if more than one in such shares and in such manner generally as the Trustee shall at any time or times before the end of that year determine, and/or;
5.2 Distribution Amongst Eligible Beneficiaries in Trustee’s Discretion
The Trustee shall stand possessed of the Trust Fund UPON TRUST until the Perpetuity Date to pay so much of the said income then remaining as the Trustee shall think fit to all or such one or more to the exclusion of the others or other of the Eligible Beneficiaries and if more than one in such shares and in such manner generally as the Trustee shall at any time or times before the end of that year determine.

5.3 Accumulation
The Trustee shall have the power to accumulate during such period (terminating no later than the Perpetuity Date and in any event being no longer than the Accumulation Period (if any)) as the Trustee shall at any time or times before the end of the year determine, so much of the income (if any) of the Trust Fund in any year as the Trustee shall think fit by investing the same and the resultant income thereof in any of the investments hereinafter authorised and to hold all accumulations of income so made as an accretion to the capital of the Trust Fund PROVIDED THAT should any accumulation of income pursuant to these presents be or become invalid or inoperative as to the whole or any part of the income of any year, then the foregoing provisions of this Clause shall mutatis mutandis apply to such income or part thereof in respect of which the accumulation is invalid or inoperative.

5.4 Trustee’s Determination Irrevocable
Any determination made pursuant to Clauses 5.1, 5.2 and 5.3 shall be irrevocable with respect to the income of the year to which the determination relates.

11.6 Trustee’s Discretion Absolute and Uncontro1led
Subject to Clause 15.1 and 15.2 hereof, every discretion, power or right conferred on or vested in the Trustee or any other person shall be an absolute and uncontrolled discretion, power or right and may be exercised without the approval of the Settlor, the Custodian, any Eligible Beneficiary, or any other person. [24]
[24] T88 at page T565

Clause 15.1 required that no benefit in any part of the Trust Fund or income thereof should pass or accrue to Prohibited Persons, a term which is defined in Clause 3.2 to mean the Settlor, the Trustee, and any Trust, which if appointed an Eligible Beneficiary, would infringe the rule against perpetuities.
Clause 15.2(a) stated that the Trustee shall, before exercising any discretion or authority conferred on it by the provisions of the Trust Deed shall obtain the written consent of the Custodian to the exercise of such power, discretion or authority and the manner and extent to which it proposes to exercise that power, discretion or authority. The consent of the Custodian was deemed if the Custodian failed to notify the Trustee within 30 days after the Trustee has given the Custodian written notice of its proposal to exercise any power, discretion or authority. Pursuant to Clause 15.2(b), the Custodian may waive all or any of the consent requirements in Clause 15.2(a) at any time.
Clause 16 allowed the Trustee at any time before the Perpetuity Date “to revocably or irrevocably declare that any person shall cease to be an Eligible Beneficiary ... in respect of the whole or part of the Trust Fund or the income thereof and the Trustee shall thereupon be prohibited from exercising in favour of such person ... any power or discretion conferred on it under this Trust Deed.”
Clause 18 permits the Trust Deed to be varied, stating as follows:

The Trustee may revocably or irrevocably renounce, release, revoke, alter, vary or add to all or any of the trusts, powers and provisions herein declared concerning the Trust Fund or the income thereof for such purposes and in such manner as such person may from time to time think fit. Any such renunciation, release, revocation, alteration, variation or addition, may in like manner be renounced, released, revoked, altered, varied or added to PROVIDED THAT no benefit, or interest (whether direct or indirect, absolute, contingent or presumptive) in any part of the trust of the Trust Fund or any income thereof by virtue of such renunciation, release, revocation, alteration, variation or addition, pass or accrue to any Prohibited Person and PROVIDED FURTHER that the said power shall not be exercised so as to result in any infringement of the rule against perpetuities or to render any accumulation of income invalid and PROVIDED FURTHER that no renunciation, release, revocation, alteration, variation or addition; shall have the effect of prejudicing in any way of prejudicing in any way whatsoever the interest of any Eligible Beneficiary in any part of the Trust Fund or income thereof to which such Eligible Beneficiary has become absolutely entitled pursuant to this Deed.

Clause 22 defined the Eligible Beneficiaries under the Trust as follows:
“For the purposes of paragraph (i) of the definition of Eligible Beneficiaries in Clause 3.2 Eligible Beneficiaries means:
(a) SPIROS KONSTANTINOU;
(b) FEDRA KONSTANTINOU;
(c) any future spouse of SPIROS KONSTANTINOU or of
FEDRA KONSTANTINOU;
(d) the child or grandchild or remoter issue of SPIROS
KONSTANTINOU or of FEDRA KONSTANTINOU;
(e) the parent, brother, sister, nephew or niece of SPIROS
KONSTANTINOU or of FEDRA KONSTANTINOU;
(f) any corporation wherever incorporated or resident in which any of the persons named or described in paragraphs (a), (b), (c), (d) and (e) of this Clause is a Director or Secretary or at least one share in which is beneficially owned by any of the persons named or described in paragraphs (a), (b), (c), (d) and (e) of this Clause or held by the trustees of any trust or settlement under which any of the persons named or described in paragraphs (a), (b), (c), (d) and (e) of this Clause has any interest (whether absolute or contingent and whether liable to be defeated by the exercise of any power of appointment or revocation or be diminished by the increase of the class to which such person belongs) whether or not such corporation, trust or settlement is in existence at the date hereof; and
(g) the trustee (in its capacity as such trustee) of any trust or settlement whether formed in Australia or elsewhere in which any of the persons named or described in paragraphs (a), (b), (c), (d) and (e) of this Clause has an interest whether absolute or contingent and whether liable to be defeated by the exercise of any power of appointment or revocation or to be diminished by the increase of the class to which such person belongs and whether or not such trust or settlement is in existence at the date hereof;
AND for the purpose of this clause nephew, niece, child, grandchild or other remoter issue means any such person born before the Perpetuity Date. “
During oral submissions, Mr Walker described the effect of clause 22 as nominating certain beneficiaries by class and relationships, rather than by name, and naming as potential discretionary beneficiaries any company in which the beneficiary owns a share. Mr Walker submitted that this provision "has really stirred everything up" and argued that the application of subsection 115(6) of the TAA to this provision has the potential to group BHP or the Commonwealth Bank or Telstra with the Applicants for payroll tax purposes. The end result, in the submission of the Applicants, is that every one of those discretionary beneficiaries is deemed by virtue of subsection 115(6) TAA to have a controlling interest in the business of the trust, and they have a controlling interest in the business and to the extent that they have a controlling interest in other businesses, it becomes something of a spider's web and which all begins to rapidly cross link.[25]

The Disclaimers

[25] Transcript at page 33

On 23 May 2011, deeds of disclaimer were executed by John, Angelo and Stamatios Konstantinou and all the companies within the alleged payroll tax grouping.[26] The list of disclaimers is at Annexure J of Exhibit A2 as follows:
[26] Annexure J Exhibit A2, Amended Statement of Harry Konstantinou dated 24 May 2011.

John Konstantinou
Angelo Konstantinou
Stamatios Konstantinou
Advance Project Developments Pty Limited
The Club Group Pty Limited
The Club Group Management Pty Limited
Club Team Pty Limited
Club Swim Pty Limited
Club Pink Pty Limited
Club Lime Pty Limited
Club Blue Pty Limited
Gungahlin Golf Investments Pty Limited
F.S.F. (Holdings) Pty Limited
HJA Holdings Pty Limited
Konstantinou Developments Pty Limited
Sports Centres Australia Pty Limited
Sport Centre Management Australia Pty Limited
Technology Warehouse Australia Pty Limited
WASVI Pty Limited

Relevantly, the disclaimers were all in the following form:

OPERATIVE PARTS
I disclaim absolutely:
a.Entitlement to any discretionary distribution of income of the Trust.
b.Entitlement to any discretionary distribution of the Initial Sum or any other capital of the Trust Fund.

Deed of Variation of the Trust

A deed of variation of trust (“Deed of Variation”) was also executed on

23 May 2011. The parties to this were Konstantinou Holdings and Spiros Konstantinou.[27]

[27] Annexure J Exhibit A2
The operative provisions of the Deed of Variation are:
Variation of the Trust Deed
1.The Trustee declares that the Trust Deed is varied as follows:

a. Clause 22(d) is amended to read as follows:
"(d) The child or grandchild or remoter issue of Spiros Konstantinou or of Fedra Konstantinou, other than Angelo Konstantinou and John Konstantinou”.
b.   Clause 22(e) is amended to read as follows:
"(e) The parent, brother (other than Stamatias Konstantinou), sister, nephew or niece of Spiros Konstantinou or of Fedra Konstantinou."
c.   Clause 22(f) is deleted and replaced with ''The Club Group Pty Ltd in 2006".
d.   For avoidance of doubt, clause 18 is amended by including after the words "the Trustee may" the following words:
''prospectively or retrospectively".’
…
Effective Date of Deed
3.    The Trust Deed is varied as specified above from 30 June 2000 and in
the event of invalidity, on the last day this Deed is executed by all parties being the date of this Deed.
…
Exclusion of Eligible Beneficiaries
5.Pursuant to Clause 16 of the Deed, the Trustee declares the following ceased to be Eligible Beneficiaries from 30 June 2000 onwards:

a. Stamatios Konstantinou
b. Angelo Konstantinou
c. John Konstantinou
e. The following corporations:
i. Konstantinou Developments Pty Limited.
ii. Sports Centres Australia Pty Limited.
iii. Sport Centre Management Australia Pty Limited.
iv. Gungahlin Golf Investments Pty Limited.
v. The Club Group Pty Limited (other than in 2006).
vi. Do It Media Pty Limited
vii. WASVI Pty Limited.
viii. HJA Holdings Pty Limited.
ix. F.S.F. (Holdings) Pty Limited.
x. Advance Project Developments Pty   Limited.
xi. The Club Group Management Pty Limited.
xii. Club Blue Pty Limited.
xiii. Club Lime Pty Limited.
xiv. Club Team Pty Limited.
xv. Club Swim Pty Limited.
xvi. Club Pink Pty Limited.
xvii. Technology Warehouse Australia Pty Limited.
xviii. Konstantinou Holdings Pty Limited.

The Parties' Contentions about the Effect of the Disclaimer

The Applicants contend that the disclaimers signed on 23 May 2011 were effective to disclaim the beneficiaries’ entitlement under the Trust ab initio with the effect that subsection 115(6) of the TAA has no application. The Applicants rely upon the law relating to gifts, in particular that the donee of a gift, including beneficiaries of a distribution under a discretionary trust, may disclaim their interests on the ground that one cannot be compelled to accept a gift.[28]
[28] Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 401 (also 402); see paragraph 25 of Applicants' Submissions dated 26 July 2011
The Applicants primarily rely upon two cases in particular to support this argument. The first is In re Gulbenkian’s Settlements (No. 2) v Stephens & Anor[29] (“Gulbenkian”); the second is Commissioner of Taxation of the Commonwealth of Australia v Ramsden[30] ("Ramsden"). It was argued that Gulbenkian stands for the proposition that a beneficiary under a discretionary trust may prospectively disclaim his or her interest under the trust and that the Gulbenkian principle has been extended by the Full Federal Court in Ramsden, which the Applicants rely upon to contend that the disclaimer in the present case may operate retrospectively and therefore nullified the effect of a purported grouping in the financial years ending 30 June 2001 to 30 June 2005 pursuant to subsections 115(5) and 115(6) of the TAA. In particular, the applicants rely upon the following statement by the court in Ramsden:

Until disclaimer, a beneficiary’s entitlement to income under a trust is operative for the purposes of s 97 of ITAA from the moment it arises notwithstanding that the beneficiary has no knowledge of it (Federal Commissioner of Taxation v Vegners (1989) 89 ATC 5274; (1991) 91 ATC 4213 at 4215). A beneficiary may disclaim an entitlement on its coming to his or her knowledge. At law an effective disclaimer operates retrospectively, and not merely from the time of disclaimer.[31]
[29] [1970] 1 Ch. 408
[30] [2005] FCAFC 39, (2005) ATC 4126
[31] [2005] FCAFC 39, (2005) ATC 4126 at [30]

The Applicants submit that the retrospective operation of a disclaimer is the logical consequence of it not being possible to force property on a person and that it is only a presumption that a person is prepared to accept a gift.
Although the Respondent accepts many of the principles of law relied upon by the Applicants in their submissions on this issue, it says that those principles are not relevant to the issues arising in the proceedings. The Respondent argues that subsections 115(5) and (6) TAA concern the existence of factual circumstances, namely the existence of a discretionary trust and the persons who may benefit, and the legal consequence (mainly grouping) that arise if those factual circumstances exist. The Respondent contends that the Applicants accept that a discretionary trust existed at all times during the relevant years and that Spiros, Stamatios, John, and Angelo and Harry Konstantinou were potential beneficiaries under the Trust. Therefore, pursuant to subsections 115(5) and (6) TAA, each of the beneficiaries or any combination of them has or have a controlling interest in the business of the Trust. It follows therefore that a single primary group existed.
The Respondent argues that the cases upon which the Applicants rely do not change those facts or the legal result in the present case. The Commissioner does not dispute that, following Ramsden, a taxpayer or the intended recipient of a gift may refuse the gift and so, as a logical extension of that right, retrospectively disclaim receipt of a gift upon learning of that intended gift or entitlement. In Ramsden, the court was concerned with the question whether money unknowingly received by the taxpayer (or which the taxpayer was entitled to receive) could be treated as income in hands of the taxpayer and the Court held that it could not if the taxpayer disclaimed the receipt of the entitlement upon it coming to his or her knowledge.
The Respondent submits that that issue dealt with in Ramsden has no relevance to the issues in the present proceedings. Here there is no suggestion of money received or even an entitlement to receive. The issue is one of the status of the people and companies named as beneficiaries in the deed at the time when the grouping provisions applied: the question of whether a benefit or distribution was actually received is a separate issue. The relevant subsections of the TAA are only concerned with whether, during the relevant period, a person is or was a beneficiary (including a potential beneficiary) of a discretionary trust, irrespective of whether any benefit was received or intended. Therefore the Respondent considers that the critical issue is the status of the relevant persons and entities at the relevant time, in particular, their status as a "person who may benefit from a discretionary trust as a result of the exercise of a power of discretion by the trustee" pursuant to subsection 115(6) TAA. The Respondent contends that none of the cases relied upon by the Applicants suggests otherwise.

CONSIDERATION OF THE ISSUES REGARDING QUESTION 1

The Applicants’ argument is premised on the legal concept that a person cannot be required to accept the gift of property unwillingly.[32] The general principle is that, unless and until a beneficiary has assented to a gift, it may be rejected. The rejection of the gift is called a disclaimer. The law, however, presumes a donee’s assent until disclaimer, therefore the disclaimer must be unequivocal and timely.[33] Provided that a disclaimer fulfils the aforementioned criteria, it may be used to disclaim a gift once a beneficiary becomes aware that the gift as onerous consequences, including taxation consequences.[34]

[32]    Crago N, ‘Principles of Disclaimer of Gifts’, (1999) 28 University of Western Australia Law Review 65 at 65-66, citing Latham J in FCT v Cornell (1946) 73 CLR 394 at 401
[33]    Crago N, ‘Principles of Disclaimer of Gifts’, (1999) 28 University of Western Australia Law Review 65; Bickford P, ‘Disclaimer in the taxation context’ (2004) 38(9) Taxation in Australia, 489 at 491;
[34]    Tantau v McFarlane [2010] NSWSC 224
In considering the Applicants' contentions, the critical questions that arise are:

A. what is the nature of the gift that was given by the Trust and;
B. if the applicants successfully disclaimed the gift, did the disclaimer

operate retrospectively, so as to apply during the financial years ending 30 June 2001 to 30 June 2005?

In Gulbenkian, a settlement was made in 1929 whereby the settlor directed the trustees during the lifetime of N, at their absolute discretion, to pay or apply all or any part of the income of the settled property to or for the maintenance, support or benefit of all or any one or more of a specified class which included N. Until 1957 the trustees paid the greater part of the income to N, but they then began to accumulate the income as doubts arose as to whether the trusts were void for uncertainty. After proceedings were commenced by N in 1958, they were compromised by an agreement under which, for valuable consideration, N renounced, inter alia, all rights to income under the settlements ("the Lisbon agreement”). In 1961 the trustees took out summonses to determine the validity of the trusts, and the House of Lords declared on 31 October 1968 that the trusts were valid and the summonses were therefore restored for directions in the Chancery Division as to the exercise of the discretion both in relation to the accumulated income and the future income.

It was held by the Chancery Division that, as a result of the Lisbon agreement, N was no longer the object of the trustees’ discretion. Plowman J accepted the argument put by N that the duty of the trustees under the power contained in the relevant clauses of the settlements is a duty owed to each object of the power to consider whether or not to exercise their discretion in his or her favour and “there is no reason at all why an object of that power should not release the trustees from that duty quoad hunc, and if he does so he thereupon ceases to be an object of the power."[35] His Honour then stated that it appeared to be in conformity with general principle that no one can be compelled to accept a gift against his wish and similarly he should equally be free to refuse to accept the exercise of the power which the donor has conferred on the trustees to make a gift in his favour.[36]

[35] [1970] 1 Ch. 408 at page 418
[36] [1970] 1 Ch. 408 at page 418
Importantly for the present case, N ceased to be the object of the discretionary trust from the date of the Lisbon agreement i.e. from the date of the disclaimer and it was from that date that it was no longer competent for the trustees to exercise their discretion in favour of N either directly or indirectly.[37] Therefore, the disclaimer only operated prospectively and Plowman J found that the trustees’ discretion was still exercisable for the period that preceded the disclaimer, i.e. the date of the Lisbon agreement. In other words, N retained his status as a beneficiary under the trust until the date of the disclaimer.

[37] [1970] 1 Ch. 408 at page 418
Therefore the Tribunal agrees with the Applicants' argument that, pursuant to Gulbenkian, a beneficiary under a discretionary trust may prospectively disclaim his or her interest under the trust. However, nothing said in Gulbenkian would support an argument that the beneficiary under the trusts had no entitlement to income or other benefits or powers under the deeds prior to the date of the Lisbon agreement.
The Full Federal Court in Ramsden had to consider this question in the context of section 97 of the Income Tax Assessment Act 1936 (Cth). That provision states as follows:

Where a beneficiary of a trust estate who is not under any legal disability is presently entitled to a share of the income of the trust estate –
(a) the assessable income of the beneficiary shall include –

(i) so much of the share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

(ii) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia; …

In Ramsden, in the year ended 30 June 1996, the trustee of a discretionary trust resolved to distribute $429,000 of the income of the trust for that year to A. However, A was not named as a beneficiary of the trust and did not qualify to be named as a beneficiary of the trust. Clause 3(e) of the trust deed provided that the trustee was to hold so much of the net income of the trust for the year of income as had not been the subject of an effective distribution for the benefit of certain specified beneficiaries of the trust equally. This provision is known as a “taker in default” clause. [38]

[38] [2005] FCAFC 39, (2005) ATC 4126 at [33], [34], [37]; Krawitz A, Disclaimer in the context of taxation of trusts in Australia, page, (2006) 13 eLawJ 1 at 1
The taxpayers were both general and specified beneficiaries under the trust and the Commissioner issued amended assessments for each of $107,250, being one quarter of the $429,000 in each of their assessable incomes for the 1996 year. The taxpayers lodged objections to the assessment in September 2000, which eventually led to proceedings in the Federal Court. During 2002-2003 the taxpayers entered into deeds of disclaimer disclaiming any interest in the income of the trust for the year ended the 30 June 1996, except in the amount that had been paid to them all for their benefit.
It was held by Full Federal Court that a specified beneficiary could disclaim the interest acquired under clause 3(e) of the trust deed. As described in the Applicants’ submissions, up until the property is disclaimed the beneficiaries’ entitlement to the income is operative and therefore the taxpayer was "presently entitled" to the income and therefore liable to pay tax, but the beneficiary may disclaim and the disclaimer operates retrospectively, not merely from the time of the disclaimer.[39]

[39] Applicants’ Submissions dated 26 July 2011 at [29]
Relying upon the authority of Gulbenkian, there is little doubt that the interests of the beneficiaries under the Trust may be disclaimed prospectively. However, in the present case in order to deflect the operation of subsections 115(5) and (6) TAA, the Applicants must establish that the disclaimers operated retrospectively, not just to avoid the gift but also to change their status as beneficiaries with effect from the earlier time. Therefore Ramsden must apply to the present case.
However, the Tribunal considers that Ramsden is distinguishable. In that case although the Full Court held that the taxpayers had failed to disclaim their entitlements within a reasonable period and the disclaimers were therefore ineffective, the comments about the nature of the interest said to constitute a gift which was purportedly disclaimed by the deeds made in 2002 to 2003 are relevant to the present case. A disclaimer only operates in relation to the gift disclaimed.[40] Importantly, the characterisation of the gift was critical to the reasoning of the court.

[40] [2005] FCAFC 39, (2005) ATC 4126 at [31]
The subject matter of the gift in Ramsden which gave rise to the “present entitlement to income” in that case was the interest under Clause 3(e), which was characterised by the Full Court as a vested interest. As stated by the Full Court:
A person taking an interest under cl 3(e) is a taker in default of appointment. A taker in default of appointment is ordinarily regarded as having a vested interest in the property to be taken, though liable to be divested by an exercise of the trustee's power to appoint elsewhere: Hardingham & Baxt Discretionary Trusts (2nd Ed). The interest although vested, is defeasible. As takers of the Trust Fund on the Vesting Day in default of any appointment by the Trustee, the Specified Beneficiaries also have a vested defeasible interest in the corpus of the Trust (cl 4(a)).[41]
[41] [2005] FCAFC 39, (2005) ATC 4126 at [37]
Moreover, the interest which the respondents in Ramsden acquired in income by virtue of clause 3 (e) was assignable. Accordingly a specified beneficiary could disclaim the interest acquired in the income of the trust pursuant to Clause 3(e).[42]
[42] [2005] FCAFC 39, (2005) ATC 4126 at [39] and [40]

Further, the interest held by the respondents in Ramsden under clause 3(e) was a vested interest in the trust income for the duration of the trust and the relevant gift was made by virtue of the execution of the deed in 1981 rather than as a result of the subsequent exercise by the trustee of the discretion is created by the deed.

The Full Court in Ramsden was careful to differentiate between the interest held by the respondents as takers in default under the contested clause3(e) and the "interest" that a beneficiary may have had as a discretionary object under clauses 3(b) and 4 of the deed. The Court stated:

35 No entitlement to income or other property passes to a Specified Beneficiary under cl 3(b)(i) or 4 of the Deed unless and until the Trustee exercises its discretion in favour of that beneficiary. Until appointment, a Specified Beneficiary has only a hope that the Trustee’s discretion will be exercised in his or her favour, and a right to apply to a court to secure due administration of the Trust. The Trustee’s discretion to appoint under cl 3(b)(i) arises in relation to each Accounting Period. Each exercise of the discretion for an Accounting Period results in a gift to the person in whose favour the discretion is exercised. Different persons may take in different Accounting Periods.
36 When, and if, a gift is made under cl 3(b)(i) or 4, it is consistent with principle that the Specified Beneficiary should be entitled to accept or reject the subject matter of that gift, because a person cannot be forced to accept a gift of property unwillingly. The subject matter of a gift under cl 3(b)(i) is the net income of the trust for a particular Accounting Period. The subject matter of a gift made under cl 4 on the vesting day is the corpus of the Trust Fund.

The nature of the rights held by beneficiary under a discretionary trust has been the subject of significant judicial and academic commentary. Chief Justice French in Kennon v Spry[43] commented that the term "discretionary trust" has “no fixed meaning and is used to describe particular features of certain express trusts. Absent an obligation on the part of the trustee to apply any of the income or capital of the trust to any of the beneficiaries at any time it answered the description "purely discretionary"”.[44] His Honour commented in relation to the discretionary trust that was the subject of the proceedings before him that "absent a specific application of Trust capital or income to one of the objects of the trust, there was no equitable interest in its assets held by anyone.”[45]

[43] (2008) 238 CLR 366 at 386
[44] Kennon v Spry (2008) 238 CLR 366 at 386 [47], citing Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 234
[45] Kennon v Spry (2008) 238 CLR 366 at 386 [49]
Similarly, Young Croft and Smith[46] refer to French J’s (as he then was) conclusions in Australian Securities and Investments Commission v Carey (No 6),[47] that, “notwithstanding that beneficiaries under a ... discretionary trust have some rights, such as the right to have the trust duly and properly administered, generally a beneficiary of a discretionary trust, who is at arm's length from the trustee, only has an expectancy or a mere possibility of a distribution. This is not an equitable interest which constitutes "property" as defined in the Corporations Act 2001 (Cth) section 9.”

[46] PW Young, C Croft and M Smith, On Equity, (2009) at page 429
[47] (2006) 153 FCR 509 at [21]
Lord Reid observed in Gartside v Inland Revenue Commissioners[48] that the rights of a beneficiary under a discretionary trust comprise no more than the following:

1. a right to prevent misappropriation of the capital;
2. a right to require the trustees to exercise bona fide their discretion as to whether and if so to whom income shall be distributed; and
3. a right to take and enjoy whatever part of the income the trustees choose to give.

[48] [1968] AC 553 at 602, quoted in Bickford P, ‘Disclaimer in the taxation context’ (2004) 38(9) Taxation in Australia, 489 at 491

The interest under Clause 3(e) in Ramsden was a vested interest in trust income for the duration of the trust, which is distinguishable from the interest that a discretionary beneficiary has under a discretionary trust i.e. clauses 3(b) and 4 of the Ramsden trust deed, which are comparable to Clauses 5.1, 5.2 and 5.3 of the Trust Deed currently under consideration. There is no equivalent to the Ramsden Clause 3(e) in the present case. Disclaimer by a discretionary object operates as and when each exercise of the discretion is offered in favour of the object.[49] This is confirmed by the comments of the Full Court in Ramsden at paragraph [35] which are set out above.

[49] Gleeson SC, J, "Spry’s case: exploring the limits of discretionary trusts" (2010) 84 ALJ 177 at 187
Although the Full Court in Ramsden gave consideration to the operation of Gulbenkian, it considered that Gulbenkian was not determinative of the issue which arose in the appeal in that case.[50] Although by analogy the disclaimer in Gulbenkian may have had an effect of prospectively altering the operation of subsections 115(5) and (6) TAA, the nature of the interest in Ramsden is distinguishable from the present case because it constituted a vested though defeasible interest in a beneficiary which arose from the commencement of the deed and was therefore, in the absence of acquiescence, able to be disclaimed in its entirety. The rights conferred upon the beneficiaries under the present Trust are not vested and only arise from time to time upon the exercise of the discretion by the trustee.

[50] At paragraphs 48-49
Therefore the subject matter of the gift that may be disclaimed in relation to the present Trust is the income that is or may be applied or paid to the beneficiary or held by the trustee under clauses 5.1, 5.2 and 5.3 of the Trust pursuant to the unfettered discretion conferred upon the trustee under clause 11.6. Clauses 5.1 and 5.2 contemplate that the trustee shall exercise the discretion before the end of each year and clause 5.4 says that any determination made pursuant to clauses 5.1, 5.2 and 5.3 shall be irrevocable with respect to the income of the year to which the determination relates.
On this reasoning, the retrospective operation of the disclaimer would only operate for the relevant year, presumably in this case the year to 30 June 2011, which for income tax purposes means that the default beneficiaries would not have been presently entitled to receive the income of the trust for the year in question.[51]

[51] Bickford P, ‘Disclaimer in the taxation context’ (2004) 38(9) Taxation in Australia, 489 at 489

See also Broomhead (Vic) Pty Ltd (In liquidation) v J. W.Broomhead Pty Ltd & Ors [1985] V.R. 891; Nguyen v FC of T 99 ATC 2211; (1999) 42 ATR 1030; [1999] AATA 228; Krawitz A, ‘Disclaimer in the context of taxation of trusts in Australia’ (2006) 13 eLawJ 1 and X30 (1990) ATC 287 at 294-5

As regards the operation of subsections 115(5) and 115 (6) of the TAA in the present matters, as stated above, the Trust Deed was amended by the Deed of Variation between the Trustee and the Settlor dated 23 May 2011. On the same day, 19 deeds of disclaimer were executed by potential beneficiaries of the Trust. The deeds of disclaimer by John, Angelo and Stamatios Konstantinou each provided in their operative clauses that the potential beneficiary disclaimed both any “entitlement to any discretionary distribution of income in the Trust” and “any entitlement to any discretionary distribution of the Initial Sum or any other capital of the Trust Fund”. In the case of the others, there was simply a disclaimer of “any entitlements under the Deed”. With respect to the deed for The Club Group Pty Ltd the disclaimer excluded distributions in 2006. These deeds did not purport to take effect retrospectively. On the face of them, they take effect on the date of execution.

The Deed of Variation purported to exercise the power of variation contained in clause 18 of the Trust Deed. That clause did not give any power to make retrospective variations. The Deed of Variation sought to overcome this by including a provision that clause 18 was amended to insert in clause 18 the words “prospectively or retrospectively”. The deed also provided that it took effect “from 30 June 2000 and in the event of invalidity on the last day this Deed is executed by all parties being the date of this Deed.” The deed then provided that the persons and companies that had executed the deeds of disclaimer ceased to be Eligible Beneficiaries from 30 June 2000 onwards.

In so far as the Deed of Variation relied upon the retrospective effect of the disclaimers and a particular interpretation of Ramsden's case to defeat a potential payroll tax liability under subsections 115(5) and (6) of the TAA during the period 2001 to 2005, the Tribunal finds that it was ineffective to do so. As noted above, the disclaimers did not purport to have retrospective effect. The Deed of Variation purported to change retrospectively not just the distribution or entitlement to income or capital under the Trust Deed, but status of an entity as a matter of historical fact. While at all times up to 22 May 2011, the parties who executed the disclaimer were potential beneficiaries under the Trust Deed, their own decisions the following day to execute the documents is said to have so changed history as to avoid the legal consequences that applied the day before. In the absence of an alternative explanation for the legitimate retroactive operation of the Deed of Variation, the Tribunal finds that the disclaimers and the Deed of Variation were ineffective to nullify the legal rights inherent in the status of relevant persons as discretionary beneficiaries so as to negate the effect of subsections 115(5) and (6) of the TAA during 2001 to 2005.
The Tribunal therefore determines that the answer to the first question is "no".

QUESTION 2 - THE RETROSPECTIVE APPLICATION OF SECTION 3Q

Section 3Q is extracted earlier in this decision, but the relevant, and contentious, subsection is subsection 3Q(6) which states as follows:

“(6) A determination under this section may provide for its
commencement on or before the determination’s notification
day.”

The Applicants submitted that section 3Q of the PTA may be relied upon by the Commissioner, and in turn by the Tribunal, to allow a determination to be made that a person is not a member of the group and that this determination may have retrospective effect in the sense that it can provide for its commencement as at a date in the past, specifically the beginning of the relevant period 1 July 2000.

This part of the Tribunal's decision will focus upon the question of whether section 3Q may operate retrospectively in the sense described above. By consent, the separate, but related, questions as to whether a section 3Q determination should be made on the facts of this case and whether the Tribunal has power to make such a determination will, if necessary, be the subject of a subsequent decision.

Although this question has been characterised as a question about the retrospective operation of section 3Q, and in particular section 3Q(6), the parties agree that this provision does not operate retrospectively so as to interfere with accrued rights. The question is whether section 3Q authorises a determination to be made which may have retrospective effect.

In interpreting subsection 3Q(6), the Tribunal must have regard to section 73(2)(d) of the Legislation Act 2001 (ACT) ("Legislation Act"). This provision states:
(2) A legislative instrument commences—

(a) on the day after its notification day; or

(b) if an Act or the instrument provides for a later date or time of commencement—on that date or at that time; or

(c) if an Act provides for an earlier date or time of commencement—on that date or at that time; or

(d) if the instrument, under authority given by an Act, provides for an earlier date or time—on that date or at that time.
The determination is a notifiable instrument, which is defined under section 10 of the Legislation Act and falls within the meaning of "legislative instrument" and "statutory instrument" under sections 12 and 13 of the Legislation Act.
Pursuant to section 44(1)(b) of the Legislation Act, if an Act authorises the making of a statutory instrument, the power authorises the statutory instrument to be made in relation to any matter that is necessary or convenient for carrying out or giving effect to the authorising law.
Also relevant are sections 75A, 75B and 76 of the Legislation Act, which deal with the retrospective operation of Acts and legislative instruments, as follows:

75A Meaning of commences retrospectively
(1) An Act or legislative instrument commences retrospectively if it commences on a day or at a time earlier than the day after its notification day.

75B Retrospective commencement requires clear indication
(1) A law must not be taken to provide for the law (or another law) to commence retrospectively unless the law clearly indicates that it is to commence retrospectively.

76 Non–prejudicial provision may commence retrospectively
(1) A statutory instrument may provide that a non-prejudicial provision of the instrument commences retrospectively.
(2) Unless this subsection is displaced by, or under authority given by, an Act, a statutory instrument cannot provide that a prejudicial provision of the instrument commences retrospectively.

Example
The Locust Damage Compensation Determination 2003 (a hypothetical disallowable instrument) sets out (among other things) the people who are eligible for compensation under a compensation fund. Previously, there was no restriction on who was eligible. The determination provides that it is taken to have commenced on 1 July 2003, but it is not notified until 15 August 2003. There is nothing in the Act under which the determination is made (or any other Act) that authorises the retrospective commencement.
The provision of the determination that limits who can apply for compensation is a prejudicial provision (ie it adversely affects some people’s right to receive compensation) and cannot commence retrospectively. Instead, it would commence on the day after the determination’s notification day (see s 73 (3)).
(3) This section is a determinative provision.
…
(4) In this section:
non-prejudicial provision means a provision that is not a prejudicial provision.
prejudicial provision means a provision that operates to the disadvantage of a person (other than the Territory or a territory authority or instrumentality) by—
(a) adversely affecting the person’s rights; or
(b) imposing liabilities on the person

In deciding this question, the Tribunal must also be guided by section 139 of the Legislation Act. It states:

139 Interpretation best achieving Act’s purpose
(1) In working out the meaning of an Act, the interpretation that would best achieve the purpose of the Act is to be preferred to any other interpretation.
(2) This section applies whether or not the Act’s purpose is expressly stated in the Act. …

The Parties' Contentions about the Retrospective Application of Section 3Q

The Applicants pointed to the text of section 3Q to argue that subsection 3Q(6) states that the determination may be made under that section and provides for its commencement on or before the determination's notification day. There is no qualification on this power and it is clear that the section empowers the Commissioner to exclude a person from a group from a date which is earlier than the date when the determination is made. There is no reason that the Commissioner and, by corollary, the Tribunal could not make a determination which stated that the determination commences in 2000.
The Applicants also relied upon the legislative context to contend that the Commissioner would have power to make a determination which states that it commences in 2000. The Applicants' submissions stated that the history and context surrounding the introduction of section 3Q support the contention that the section authorises the retrospective determination. The Payroll Tax Amendment Act 2008 which introduced section 3Q was part of a national scheme to harmonise payroll tax in general and payroll tax grouping provisions in particular. The national scheme was agreed to by State and Territory Treasurers on 29 March 2007[52] and a protocol which recorded this agreement was signed by all the commissioners, including the ACT Commissioner on 11 July 2008.[53]

[52] Paragraph 72 of the Applicants' Submissions dated 26 July 2011
[53] Paragraph 72 of the Applicants' Submissions dated 26 July 2011
Previously the power to de-group for payroll tax purposes in the ACT was confined to situations involving common employees under section 114 of the TAA. The power to do so was conferred by section 112 of the TAA. In other jurisdictions, the power to de-group was broader and the relevant Commissioner had discretion to de-group entities that had been grouped under provisions that are analogous to subsections 115(5) and (6) of the TAA.[54] The Applicants assert that other states have long had retrospective exclusion provisions and harmonisation of the ACT context means that ACT would have the same power to exclude from a group as exists in other states and territories.

[54] See the table at paragraph [74] of the Applicants' Submissions dated 26 July 2011 and the Applicants’ Authorities at tabs 21 to 24 and Applicants’ Supplementary Authorities at tabs 4,5,9 - 16
The Applicants further contend that their interpretation is supported by the transitional provisions in section 100 of the PTA. This provision states as follows:

100 Transitional
(1) This section applies to a liability to pay tax under the pre-amendment Acts.
(2) The pre-amendment Acts continue to apply to—
(a) the liability; and
(b) anything done to satisfy the liability.
(3) In this section:
pre-amendment Acts means each of the following Acts as in force at any time before the commencement of the Payroll Tax Amendment Act 2008:

(a) the Payroll Tax Act 1987;

(b) the Taxation Administration Act 1999.

(4) Subsection (1) and subsection (2) are laws to which the Legislation Act, section 88 (Repeal does not end effect of transitional laws etc) applies.
(5) This section expires 5 years after the day it commences.

The Applicants attempted to deflect the operation of the transitional provisions by stating that the drafting of the legislation indicates that the grouping provisions are separate to the liability provisions therefore the transitional provisions could not apply to grouping, which goes to status rather than liability.
Conversely, the Respondent contended that the Applicants' payroll tax liability must be determined according to the law in force in the relevant years. Section 3Q was introduced into the PTA by the Payroll Tax Amendment Act 2008 which commenced on 1 July 2008. This Act has no application for assessing payroll tax liability in relation to periods - including the relevant years - when it did not exist and was not in force. Rather subsection 112(2) of the TAA was in force and should be applied for the purpose of determining the ambit of the Commissioner's discretion to exclude a person from a group. The Respondent considers that this position is confirmed by the transitional provisions in section 100 of the PTA which indicate that the "pre-amendment Acts" are in force at any time before the commencement of the Payroll Tax Amendment Act 2008.
Moreover, the Respondent alleges that it is illogical and artificial to characterise grouping as a feature that does not go to liability where grouping can (and does this case) directly determine the liability of an employer. It is also illogical and contrary to the ordinary meaning of the words "a liability to pay tax" to exclude the provisions that have to be applied for the purposes of determining the liability and this is emphasised by subsection 100(2)(b) of the PTA which causes the pre-amendment Acts to continue apply to "anything done to satisfy the liability”. Finally the Respondent says that the Tribunal should give the words in section 100 of the PTA their ordinary meaning so that any provisions of the pre-amendment Acts that are relevant for the purpose of determining the taxpayer’s liability to pay payroll tax or anything done to satisfy that liability remain operative at all times whilst they were in force meaning "at any time before the commencement of the Payroll Tax Amendment Act 2008".
As an alternative to the argument about retrospectivity that was put by the Applicants, the Respondent considers that section 3Q(6) of the PTA allows a determination to address the time lags between the date that a determination is made and a later date upon which the determination appears in the Legislation Register.
The Respondent suggests that in some cases section 3Q might be available in the financial year to exclude a person from a group prior to the making of the determination. However, in no case did the retrospectivity provision enable or empower the Commissioner to make a determination under section 3Q that was operative prior to the date when the power to make the determination existed i.e. prior to 1 July 2008.

Importantly, in the Applicants’ reply, it was argued that even if the Respondent's submission about the operation of the transitional provisions was accepted, it doesn't lead to the conclusion that section 3Q does not apply in this case. The continued application of the pre-amendment Acts is not inconsistent with the addition of a further power to retrospectively exclude from the group in the form of section 3Q of the PTA.

CONSIDERATION OF THE ISSUES REGARDING QUESTION 2

Retrospectivity – General Law

It is axiomatic that legislation will be presumed to not operate retrospectively.[55] Dixon CJ summarised the approach of the courts in this regard in Maxwell v Murphy.[56]However, as stated by Pearce and Geddes, "the approach adopted by the courts is but an assumption and can be displaced if there is clear evidence that the legislature intended the legislation to have a retrospective operation."[57]

[55] Pearce D C, & Geddes R S, Statutory Interpretation in Australia (7^th ed, 2011) [10.1]
[56] (1957) 96 CLR 261 at 267
[57] Pearce D C & Argument S, Delegated Legislation in Australia (3^rd ed, 2005), page 384
The Applicants argued that the presumption against retrospectivity is based on fairness, relying upon statements of Isaacs J in George Hudson Ltd v The Australian Timber Workers Union[58] and Kirby J in Chang v Laidlaw Shire Council[59] quoting Lord Woolf in Plewa v Chief Adjudication Officer[60] who stated:
Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather, it may well be a matter of degree - the greater the unfairness, the more it is to be expected that Parliament will make clear that it is intended.

[58] (1923) 32 CLR 413 at 434
[59] (2007) 234 CLR 1 at 26
[60] [1995] 1 AC 249 at 257
The Respondent contends that the presumption is particularly strong in tax legislation. The Commissioner and taxpayers are entitled to assess tax liability and arrange their affairs, respectively, according to the legislation existing that at the time the liability arises. In this respect, the Respondent relies upon Commissioner of Stamps (Queensland) v Weinholt[61] (“Weinholt”) and Perpetual Trustee (Australia) Limited v Valuer General [62] (“Perpetual Trustee”) Whilst this statement is commonly made in the case law regarding the operation of revenue legislation, it may be that the presumption is particularly strong because taxpayers organise their affairs on the basis of existing revenue legislation and a retrospective operation would commonly give rise to prejudice or unfairness. Weinholt and Perpetual Trustee exemplify the operation of the general principle. In both cases the retrospective operation of the legislation would have increased the tax burden of the respective applicants.

[61] (1915) 20 CLR 531 at 541
[62] (1999) 102 LGERA 324
The Applicants drew the Tribunal's attention to the discussion by Pearce and Geddes of these two cases in Statutory Interpretation in Australia. The authors stated:
There is, in general, no reason why any different approach should be followed in determining whether a tax Act is to operate retrospectively than is applicable to other legislation. However, the fact that taxpayers will have organised their affairs to comply with existing legislation strengthens the argument that the legislative intention to remove existing rights should appear clearly.[63]

Application of the Provisions of the Legislation Act

[63] Pearce D C, & Geddes R S, Statutory Interpretation in Australia (7^th ed, 2011) [9.40]

It is clear that subsection 3Q(6) prima facie operates retrospectively because it falls within this definition of "retrospectively" under section 75A of the Legislation Act i.e. subsection 3Q(6) confers the power for a determination to commence on or before the determination’s notification day. Therefore, pursuant to section 75A of the Legislation Act it may commence a day or at a time earlier than the day after its notification day.

Pursuant to section 75B of the Legislation Act subsection 3Q(6) also clearly indicates that it is to commence retrospectively. The Respondent does not deny that subsection 3Q(6) may allow a determination to have some retrospective operation, however argues that the capacity was conferred to address (primarily) time lags between the date that the determination is made and a later date upon which the determination appears in the Legislation Register. The Respondent further submits that in some cases it might have been available to exclude a person from a group in a financial year prior to the making of the determination.

Section 76 of the Legislation Act allows a non-prejudicial provision to commence retrospectively. The meaning of "non-prejudicial" is derived from the correlative definition of “prejudicial provision” which means a provision that operates to the disadvantage of a person by, for example, adversely affecting the person's right or imposing liabilities. Importantly, the Territory or a territory authority or instrumentality is excluded from the categories of persons who may suffer a disadvantage as a consequence of a prejudicial provision.

Subsection 3Q(6) is potentially a beneficial provision for taxpayers because it allows the Commissioner to de-group businesses for payroll tax purposes which have been grouped by the operation of legislative provisions set out above. The grouping under the legislation potentially increases revenue payable to the Territory but a de-grouping under subsection 3Q(6) may reduce the taxpayers liability for payroll tax. Therefore, at the threshold, section 76 permits subsection 3Q(6) to operate retrospectively because the only prejudice suffered under that provision is prejudice to the Territory in the form of potentially diminished revenue which does not count for the purpose of that provision.

The Transitional Provisions of the PTA

The transitional provisions in section 100 of the PTA are important to consider in the context of a holistic interpretation of the PTA, which is required by Project Blue Sky Inc v Australian Broadcasting Authority[64] and section 139 of the Legislation Act. As stated above, the Respondent argues that the pre-amendment Act, including section 112 of the TAA, must continue to operate to determine the grouping of the Applicants in the years 2000 to 2005. Also as stated above, the Applicants argue that the grouping provisions are separate to the liability provisions therefore the transitional provisions could not apply to grouping, which goes to status rather than liability.
[64] [1998] HCA 28; (1998) 194 CLR 355

The Tribunal is not persuaded by this aspect of the Applicants’ argument and accepts the Respondent's argument that grouping can (and thus in this case does) directly determine the liability of an employer, therefore section 100 operates to preserve the application of the pre-amendment Acts to the Applicants' liability to pay payroll tax, including the exercise of the power under section 112 of the TAA to issue a determination to de-group in circumstances of common employment under section 114 of the TAA.

However, the continuing operation of the pre-amendment Acts does not preclude the concurrent operation of the additional powers conferred upon the Commissioner under section 3Q. The Tribunal therefore accepts the Applicants’ argument that, in this case, the continued application of the pre-amendment Acts is not inconsistent with the addition of a further power to retrospectively exclude from the group in the form of section 3Q.[65]

The History and Context Surrounding the Introduction of Section 3Q

[65] Applicants' Submissions in Reply dated 24 August 2011 at paragraph 85

The Applicants urged the Tribunal to consider the context of the passage of the Payroll Tax Amendment Act 2008 and in particular the intergovernmental agreement which, the Applicants argued, was relevant to the passage of the Act and supports an interpretation that section 3Q has retrospective effect so as to harmonise the ACT's payroll tax laws with those of other state and territory jurisdictions.
The Tribunal is mindful of the words of warning issued by the ACT Court of Appeal in Commissioner for ACT Revenue v Dataflex Pty Ltd and ACT Civil Administrative Tribunal[66] (“Dataflex’) when considering whether the approaches of other jurisdictions are relevant to the interpretation of s32 of the TAA. Their Honours stated:
This is not a case of uniform legislation, like the Corporations Law, where the same words appear in the statutes of the various Australian jurisdictions. There are other examples of legislation enacted across the country where the objects are the same, but the statutory language used to achieve them is different ... .[67]

[66] [2011] ACTCA 14

[67] [2011] ACTCA 14 at [35]

The Court of Appeal in Dataflex concluded that “the approaches taken by other jurisdictions are irrelevant.”[68] In this respect the Tribunal notes the Second Reading Speech of the Treasurer, Mr Stanhope, where he stated in relation to another provision of the Payroll Tax Amendment Bill 2007 that "there is no intention for the ACT to harmonise in this case ".[69]
[68] [2011] ACTCA 14 at [36]
[69] Legislative Assembly of the ACT, Hansard, page 4020 (6 December 2007)

More fundamentally, the Tribunal considers that, pursuant to section 141 of the Legislation Act, it is not necessary for the Tribunal to consider this material, because it is able to rely on the ordinary meaning of section 3Q read in the context of the PTA as a whole.

In particular, and consistent with the Tribunal's conclusions about the operation of sections 75A and 75B of the Legislation Act, the Tribunal does not accept the argument made by the Respondent there is no statement in section 3Q to the effect that is intended to operate with retrospective effect and consequently the presumption against retrospective operation is not displaced. Rather, section 3Q explicitly states that a determination may provide for its commencement on or before the determination’s notification day. That explicit statement, in combination with the nature of the provision (being non-prejudicial), is sufficient to displace the presumption against retrospectivity.[70]

Would a determination under subsection 3Q(6) in this case be invalid because it precedes the commencement of the authorising law?

[70] Polyukhovich v the Commonwealth (1990) 172 CLR 501

As stated above, the Respondent does not contend that section 3Q has no retrospective operation rather that its retrospectivity is limited by reference to a particular date. In particular, the Respondent argues that section 3Q cannot be regarded as part of the operative law for the purpose of assessing payroll tax liability in the period prior to the commencement of the Payroll Tax Amendment Act 2008 on 1 July 2008.

This contention was the subject of separate submissions when the Tribunal requested the Respondent to provide authorities in support of paragraph 52 of the Respondent's submissions filed on 19 August 2011. That paragraph stated as follows:

However, in no case did the retrospectivity provision enable or empower the Commissioner to make a determination under section 3Q that was operative prior to the date when the power to make the determination existed (i.e. prior to 1 July 2008).

Although the Tribunal was provided with very thoughtful submissions by the Respondent and the Applicants on this point, the authorities referred to by the Respondent did not assist the determination of this issue. In particular, the Respondent relied upon Mitchell v Bailey[71] as authority for this proposition. That case, at page 378, does emphasise the importance of focusing upon and giving effect to the literal words chosen by the legislature, however in this case the literal words expressly refer to the retrospective operation of the determination.
[71] (2008) 168 FCR 370 at 378

As a general proposition, the Respondent’s argument raises the question as to whether a determination which operates in a period prior to the commencement of an authorising Act could be invalid as going beyond the power conferred by the authorising Act itself. This is a variation on the familiar theme of "a stream cannot rise higher than its source."[72] This is a significant argument, because it raises the question whether an interpretation of subsection 3Q(6) which gave it retrospective operation would lead to questions about the validity of the potential determination and whether it therefore was necessary and convenient to give effect to the authorising law under the test in the general law, which is to some extent codified in section 44 of the Legislation Act. Such an interpretation might not be permissible because the instrument cannot exceed the power given under the authorising law and would be read down pursuant to section 43 of the Legislation Act.
[72] See Byrne v Commissioner for ACT Revenue [2010] ACAT 9 at [7] citing Australian Communist Party v The Commonwealth [1951] 83 CLR 1 at 258 per Fullagar J
However in this case, the legislation itself confers the power to make a notifiable instrument which has retrospective operation. The Tribunal requested the Respondent to search for any similar provisions in ACT legislation. This material was considered by the Tribunal to work out the meaning of subsection 3Q(6) in accordance with the in pari materia principle[73] in order the find the interpretation that best achieves the purpose of the Act in accordance with section 139 of the Legislation Act.
[73] This principle allows reference to be made to similar statutes within the same jurisdiction in ascertaining the meaning of an act before the court or tribunal, see Pearce DC and Geddes RS Statutory Interpretation in Australia 92011) at page 101 [3.36] citing Lennon v Gibson and Howes Ltd [1919] AC 709 at 711-712

Although comparable provisions were found in the Animal Diseases Act 2005 and the Plant Diseases Act 2002, each comparable provision was accompanied by a provision which made it clear that the declaration or determination did not operate retrospectively. See, for example, section 5 of the Plant Diseases Act 2002:
(4) A declaration under this section may provide for its commencement on or before the declaration’s notification day.
(5) However—
(a) a declaration may not provide for a commencement date or time that would result in the declaration commencing before it is made; ...
It is also appropriate for the Tribunal to consider prior statutory provisions dealing with the same subject matter in order to interpret a statutory provision. As stated by Pearce and Geddes, "the intention here is that the [tribunal] will have regard to the history of the legislative scheme in order to enable it to work out what the legislation was intended to achieve."[74]
[74] Pearce D C, & Geddes R S, Statutory Interpretation in Australia (7^th ed, 2011) , page 95 at

Notably, section 79(6) of the current Payroll Tax Act 2011, which succeeded the PTA, is in the same terms as section 3Q and has no limitation on its retrospectivity that is comparable to subsection 5(5) of the Plant Diseases Act. Similarly, the power to de-group under the predecessor to section 3Q was in section 112 of the TAA. Although, as stated above, the ambit of the power to de-group was narrower than that conferred by section 3Q, the provision (in a similar way to section 3Q) contemplated some retrospective operation of the power to make a determination in subsection 112(5).

The relevant subsections in the versions of the TAA that operated during the period 2000-2005 were as follows:
(5) A determination takes effect—

(a) on the date when notice under subsection (4) is given to the person excluded from the group; or
(b) if another date of effect (including an earlier date) is specified in the notice—on that other date.

There is no provision in the language of subsection 112(5) of the TAA that limits its retrospectivity by operating in similar way to subsection 5(5) of the Plant Diseases Act.
The principles that apply to retrospectivity of legislation also apply to delegated legislation and, as stated by Pearce and Argument "if it is plain that is intended to have such operation, the court will treat it as valid and enforce it accordingly".[75] This approach has been adopted for example in Marshall’s Township Syndicate Limited v Johannesburg Consolidated Investment Co Limited[76] and Worrall v Commercial Banking Co of Sydney Ltd.[77]
[75] Pearce D C & Argument S, Delegated Legislation in Australia (3^rd ed, 2005), page 384, [31.2]
[76] [1920] AC 420
[77] (1917) 24 CLR 28
At first glance, the Respondent's argument appears to be similar to the situation contemplated by section 81 of the Legislation Act, where delegated legislation is made in anticipation of the commencement of an Act, particularly when an Act is not to come into effect immediately after it is passed but it confers a power to make appointments or make instruments that would be "necessary or expedient" for the purpose of bringing the Act into operation at the date of commencement. Maxwell on the Interpretation of Statutes, (12th ed., 1969) makes it clear that section 81 and its predecessors required that any instrument made under the power shall not, “unless the contrary intention appears in the Act, or the contrary is necessary for bringing the Act into operation, come into operation until the Act comes into operation.”[78]

[78] Maxwell on the Interpretation of Statutes, (12th ed., 1969) page 15
However, in circumstances where the power to make an appointment or statutory instrument, or to do anything else, is given by a law that has been notified but not commenced, subsection 81(4) of the Legislation Act deems the authorising law to be in force at the time of the exercise of the power. The operation of subsection 81(4) is, at most, a tenuous analogy to the current situation, but the operation of that provision demonstrates that, in certain circumstances, delegated legislation can operate before the Act commences.

In the current situation, the power to make a determination under section 3Q is conferred by legislation which has not, as regards these proceedings, yet been exercised. The power to make the determination came into effect on the day that the legislation commenced i.e. 1 July 2008. It is not seriously contested by the Respondent that the Commissioner would have had power to make a determination to de-group on 3 July 2008 which would have had retrospective operation to the financial year concluding 30 June 2008. This is clear from the Respondent's concession that the Commissioner may exercise the determination power so as to apply to the previous financial year. Once the legislation is found to have retrospective operation, and there is no provision that limits the ambit of the retrospective operation, such as section 5(5) of the Plant Diseases Act, then the interpretation urged by the Applicants in these proceedings must apply.

The Tribunal therefore concludes that the answer to the second question is "yes".

………………………………..
Professor Peta Spender
Presidential Member
For and on behalf of the Tribunal

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A
FILE NO:AT 53, 54, 55, 56, 58 of 2010 &
AT 75, 76, 77, 78, 79, 80, 81, 82 of 2011

APPLICANTS: HJA HOLDINGS PTY LTD

KONSTANTINOU DEVELOPMENTS PTY LTD
TECHNOLOGY WAREHOUSE AUSTRALIA PTY LTD
FSF (HOLDINGS) PTY LTD

KONSTANTINOU HOLDINGS PTY LTD
ADVANCE PROJECT DEVELOPMENTS PTY LTD
TECHNOLOGY WAREHOUSE AUSTRALIA PTY LTD
HJA HOLDINGS PTY LTD
THE CLUB GROUP PTY LTD
VELOCITY INTERNET PTY LTD
ADVANCE PROPERTY DEVELOPMENTS PTY LTD
SPORTS CENTRES MANAGEMENT AUSTRALIA P/L
KONSTANTINOU HOLDINGS PTY LTD
FSF (HOLDINGS) PTY LTD

RESPONDENT: ACT REVENUE OFFICE, DEPARTMENT OF TREASURY

COUNSEL APPEARING: APPLICANT: Mr Walker,

RESPONDENT: Mr McCarthy

SOLICITORS: APPLICANT: Meyer Vandenberg Solicitor

RESPONDENT: ACT Government Solicitor

OTHER: APPLICANT:

RESPONDENT:
TRIBUNAL MEMBER/S: Professor Peta Spender, Presidential Member
Mr C.G Chenoweth, Member

DATE/S OF HEARING: 29/06/11 – 3/07/11 & 26/08/11 PLACE: CANBERRA

DATE/S OF DECISION: 29/11/11 PLACE: CANBERRA

PART B

RECOMMENDATION:

FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )

COMMENTS:

[3.31], citing John Burke Limited v Insurance Commissioner [1963] Qd R 587