Krcmar Holding Pty Limited v Chief Commissioner of State Revenue
[2015] NSWCATAD 54
•26 March 2015
|
New South Wales |
Case Name: | Krcmar Holding Pty Limited v Chief Commissioner of State Revenue |
Medium Neutral Citation: | [2015] NSWCATAD 54 |
Hearing Date(s): | 20 November 2014 |
Decision Date: | 26 March 2015 |
Jurisdiction: | Administrative and Equal Opportunity Division |
Before: | P Wass, Senior Member |
Decision: | Assessments for the land tax years 2009, 2010 and 2014 are confirmed in accordance with s.101(1)(a) Taxation Administration Act 1996 (NSW). |
Catchwords: | Fixed trust – special trust – land tax – hardship. |
Legislation Cited: | Taxation Administration Act 1996 (NSW) |
Cases Cited: | Dynset Pty Limited v. Commissioner of State Revenue [2008] NSWADT 245 |
Category: | Principal judgment |
Parties: | Krcmar Holdings Pty Limited (Applicant) |
Representation: | Counsel: |
File Number(s): | 1410364 |
REASONS FOR DECISION
Introduction
By an Administrative Review Application form filed in the Tribunal on 13 July 2014, the Applicant seeks a review of a decision of the Respondent on 12 May 2014 to disallow the Applicant’s objections to the assessment of land tax in respect of the 2009, 2010 and 2014 years on the grounds that the decision is a “harsh and inequitable retrospective decision in assessing a unit trust as a special trust in relation to land since disposed of due to a power created by a single clause buried deep in a trust deed that was never used”.
The Respondent had decided that the information required to assess the Applicant’s unit trust correctly had not been provided at the time of the initial land tax assessments and, as such the assessments were required to be reissued.
The Respondent also held that, although the Applicant had executed a deed of amendment, classifying the trust as a fixed trust, it was not executed before 31 December 2013 and, as such only took effect from the 2015 land tax year onwards.
Background
On 10 May 2004 the Applicant was registered as a proprietary company limited by shares.
On 12 May 2004, the Applicant, as trustee, executed a deed of trust (the Krcmar Holding Unit Trust) (“the Trust”). The beneficiaries under the trust were various unit holders, Rudolph Krcmar, Miljana Krcmar, Michael Krcmar and Mariajanna Krcmar.
On about 8 July 2004, a property at Revesby (“the Revesby property”) was transferred to the Applicant. The transfer was registered on 28 July 2004.
In 2009 and 2010 respectively, the Respondent issued to the Applicant land tax notices of assessment for the property for the 2009 and 2010 years. These assessments are not the subject of review in these proceedings.
On 2 July 2010, the Applicant entered into a contract for sale of the Revesby property. The Revesby property was transferred on 19 October 2010.
On 26 August 2010, the Applicant entered into a contract for the purchase of a property at Peakhurst (“the Peakhurst property”). The contract expressly provided that the Applicant entered into it as trustee for the trust. Settlement of the purchase of the Peakhurst property occurred on 11 October 2010 and was registered on 4 November 2010.
In 2011, 2012, and 2013 respectively, the Respondent issued land tax assessment notices for the 2011, 2012 and 2013 years. These assessments are also not the subject of review in these proceedings.
On 2 July 2013, the Respondent informed the Applicant of the requirement to pay additional land tax if the subject properties are subject to a “special trust” under the Land Tax Management Act 1956 (NSW) (“LTMA”) and on 12 August 2013, notices of assessment (reassessments) were issued by the Respondent for the 2009 to 2013 tax years in the sum of $32,984.90 on the basis that during that time the properties were subject to a “special trust” being the trust the subject of the proceedings.
On 8 January 2014, the Applicant amended the Trust so that it could be classed as a “fixed trust” under the Act.
On 30 January 2014, the Respondent issued a notice of assessment for the 2014 land tax year in the sum of $13,600, also on the basis that the Peakhurst property was subject to a “special trust” under the Act.
On 6 March 2014 the Applicant lodged an objection to the assessments for the 2009, 2010 and 2014 land tax years.
On 12 May 2014 the Respondent determined the objection, wholly disallowing it. On 5 June 2014, the respondent approved a request by the Applicant to pay the outstanding land tax via instalments.
On 15 September 2014 the Respondent exercised its discretion to extend time to the Applicant to lodge its objection in respect of the 2009 and 2010 land tax years, until 6 March 2014, thus extending the period under section 89 of the LTMA to the date the objection was lodged.
The Applicant’s Case
The Applicant does not argue that the Trust Deed prior to the amendment made in 8 January 2014 was on its face a special trust, thus exposing it to the stated liability for land tax in the relevant years, but rather that, despite the terms of the Trust Deed, there was no intention on the part of the parties to it to exercise the discretion to make distributions and the like and as such it was, in substance although not in form, not a special trust, but rather a fixed trust and that it is harsh and inequitable to treat it as a special trust.
The Applicant points to the following matters in support of this contention:
(1)All units applied for and allocated to the unit holders were “general units”;
(2)The Applicant has already paid significant sums in land tax which provides the Applicant’s “good intention” in making payments to the Respondent;
(3)In July 2014 the Respondent drew attention to a 2005 High Court decision concerning unit trusts and submits that this as a “concession” by the Respondent of a “changed interpretation concerning unit holders and unit trusts”.
(4)At the time of this “concession”, a number of deeds were updated to provide (as the Applicant’s trust deed ultimately provided) that it was a fixed and not a special trust; and
(5)Although, the “updated clause” was inadvertently not added to the Applicant’s trust deed until January 2014, had the Applicant “completed the administrative task” at the time of amending the deed, there would be no liability to the land tax in question.
The Applicant contends that it never used the discretionary power and as there was no intention to use the “offending clauses” on the Trust deed, that is to exercise any discretion, and had it been amended in the “concessionary window” provided by the Respondent there would be no liability, it is inequitable to levy the land tax on the basis of a special trust.
The Applicant also contends that the requirement to pay the land tax is harsh on the trustee as the relevant property was sold in 2010 and the funds disbursed.
The Respondent’s Case
Mr Mescher, counsel for the Respondent, relying particularly on Dynset Pty Limited v. Commissioner of State Revenue [2008] NSWADT 245, GTN Developments v. Chief Commissioner of State Revenue [2007] NSWADT, Sayden Pty Limited v. Chief Commissioner of State Revenue [2013] NSWCA 111 and Valastar Pty Limited v. Chief Commisser of State Revenue, contends that clauses in the Trust Deed, giving extensive powers and discretions to deal with the trust fund, has the effect that the trust is not a “fixed trust”. The Applicant does not contend otherwise. Nor does the Applicant contend that it is held to be a fixed trust, then liability for the relevant tax years arises.
The Respondent also notes that whilst the Applicant claims hardship in this matter, there has been no hardship application made to the Respondent.
Decision
There is no issue that at all relevant times, on the face of the Trust Deed, the Trust was a not a fixed trust.
There is no discretion on the Respondent in those circumstances to forego the assessment of the relevant land tax other than by way of determination of a hardship application, which is an internal matter for the Respondent. No such application has been made. There is evidence that the Applicant has a significant liability to pay the land tax and that an application has been made and allowed for payment of the tax by instalments. That is not sufficient in any event to prove hardship in the relevant sense. Determining the question of hardship is a matter for the Respondent and not for this Tribunal.
Orders
Accordingly, the Tribunal makes the following orders:
(1)Assessments dated 12 August 2013 (in respect of the 2009 and 2010 land tax years) are confirmed in accordance with section 101(1)(a) Taxation Administration Act.
(2)Assessment dated 30 January 2014 (in respect of the 2014 land tax year) is confirmed in accordance with section 101(1)(a) Taxation Administration Act
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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