N & G Grima Family Trust Pty Ltd v Chief Commissioner of State Revenue

[2025] NSWCATAD 149

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

N & G Grima Family Trust Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAD 149

Hearing dates:

12 May 2025

Date of orders:

19 June 2025

Decision date:

19 June 2025

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

EA MacIntyre, Senior Member

Decision:

The assessment under review is confirmed.

Catchwords:

ADMINISTRATIVE LAW - administrative review - assessment - objection - review by Civil and Administrative Tribunal

STATE TAXES - surcharge land tax - discretionary trust – no amendment requirement - “sunset” date

CONSTRUCTION OF DEEDS - intention of parties - reasonable person - amendment - irrevocable - defined terms within operative provisions

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Duties Act 1997 (NSW)

Foreign Acquisitions and Takeovers Act 1975 (Cth)

Land Tax Act 1956 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Byrnes v Kendle [2011] HCA 26

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24

RRS Holdings Aust Pty Ltd ATF RRS Holdings Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 352

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

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

Texts Cited:

None cited

Category:

Principal judgment

Parties:

N & G Grima Family Trust Pty Ltd (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Applicant (Self-Represented)
Crown Solicitor (Respondent)

File Number(s):

2025/00046038

Publication restriction:

None

REASONS FOR DECISION

1. This is an application for review of a decision of the Chief Commissioner of State Revenue ("the Respondent") to assess surcharge land tax for land tax year 2024. The notice of assessment was issued to N & G Grima Family Trust Pty Ltd, the applicant in this matter (“Applicant”).

2. The dispute between the parties concerned whether or not a trust deed effectively prevented “foreign persons” from being beneficiaries of a trust in accordance with the requirements of s 5D of the Land Tax Act 1956 (NSW) (“LTA”). The Applicant says that the exclusion was so effective. The Respondent says it was not.

3. If the exclusion was ineffective, the liability for surcharge land tax as assessed arises. The sole question for determination in these proceedings is whether or not the provisions of the trust deed were effective to prevent “foreign persons” from being beneficiaries in accordance with s 5D of the LTA.

Background

4. The Applicant is trustee of the N & G Grima Family Trust. That trust was established under a trust deed dated 8 November 2024.

5. In its capacity as trustee, the Applicant owned land in NSW.

6. On 8 August 2024, following an investigation, the Respondent issued an assessment of surcharge land tax for the 2024 land tax year.

7. On 18 November 2024, the Applicant lodged an objection to that assessment of surcharge land tax.

8. On 29 November 2024, the Applicant amended the trust deed governing the N & G Grima Family Trust to exclude irrevocably “foreign persons” as beneficiaries. However, the amendments made were not in place as at the liability date of 31 December 2023, for the assessment in dispute.

9. On 17 January 2025, the Respondent disallowed the Applicant’s objection.

10. The Applicant on 29 January 2025 commenced these proceedings, seeking review by the Civil and Administrative Tribunal (“Tribunal”) of the Respondent’s decision disallowing its objection.

11. The hearing of the matter took place on 12 May 2025. Following the hearing, each of the parties made further written submissions on the question in issue. The Respondent’s submission contained submissions in addition to those made at the hearing. The Applicant followed with its submissions in reply.

Applicant’s rights of review

12. Where tax has been assessed, s 86 of the Taxation Administration Act 1996 (NSW) (“Administration Act”), allows rights of objection to a taxpayer dissatisfied with an assessment, including an assessment of the kind made in this matter. This is an internal review process under which the Chief Commissioner of State Revenue, the Respondent in these proceedings, must consider and determine the objection (s 91 of the Administration Act).

13. A taxpayer who is dissatisfied with the decision made upon the Respondent’s determination of an objection, may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (NSW) (“ADR Act”)of the decision of the Chief Commissioner of State Revenue.

14. These circumstances have arisen in the present matter as set out in the background above, so bringing the matter within the jurisdiction of the Tribunal.

15. The onus of proving its case lies with the Applicant (s 100(3) of the Administration Act).

16. The Tribunal, dealing with the taxpayer’s application, may do one or more of the following under s 101 of the Administration Act:

“(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.”

Consideration

17. Under s 5A of the LTA, land tax is payable in respect of “residential land” owned by a “foreign person”. That tax is called “surcharge land tax”.

18. It is not in dispute that the land the subject of the assessment in issue was “residential land” for the purposes of the LTA.

19. For a trustee to fall outside the reach of the statutory definition of a “foreign person”, s 5D requires that the trust prevent “foreign persons” from being a beneficiary in the way set out in that section. If the trust does not do this, the trustee will be taken to be a “foreign person”. Section 5D says:

“5D   Surcharge land tax—discretionary trusts

(1) The trustee of a discretionary trust is taken to be a foreign person in that capacity for the purposes of section 5A if the trust does not prevent a foreign person from being a beneficiary of the trust.

(2) If a discretionary trust prevents a foreign person from being a beneficiary of the trust, the trustee is not in that capacity a foreign person for the purposes of section 5A.

(3)  A discretionary trust is considered to prevent a foreign person from being a beneficiary of the trust if (and only if) both of the following requirements are satisfied—

(a)  no potential beneficiary of the trust is a foreign person (the no foreign beneficiary requirement),

(b)  the terms of the trust are not capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a foreign person (the no amendment requirement).

Note.

Under the transitional arrangements for this section in Schedule 2 to the Principal Act, the no amendment requirement does not apply to a trust that satisfies the no foreign beneficiary requirement immediately before the commencement of this section.

(4)  A person is a potential beneficiary of a discretionary trust if the exercise or failure to exercise a discretion under the terms of the trust can result in any property of the trust being distributed to or applied for the benefit of the person.

Note.

A potential beneficiary is not limited to persons named in the trust instrument and extends to the members of any class of persons to whom or for whose benefit trust property can be distributed or applied pursuant to the discretions of the trust.

(5)  For the removal of doubt, a person is not a potential beneficiary of a discretionary trust if the terms of the trust prevent any property of the trust from being distributed to or applied for the benefit of the person.

(6)  In this section, property includes money, and a reference to the distribution or application of property includes a reference to the payment of money”.

20. The term “foreign person” is defined in s 2A of the LTA to have the same meaning as that set out in Chapter 2A of the Duties Act 1997 (NSW) (“Duties Act”). Section 104J of the Duties Act in Chapter 2A says:

“foreign person means a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section.

foreign trustee means a person who is a foreign person because of the person’s capacity as the trustee of a trust”.

21. Under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”), a “foreign person” is defined in s 5 to include various persons, including certain individuals not “ordinarily resident in Australia”.

22. Section 104J(2) of the Duties Act makes the following modifications to the definition of “foreign person” in the FATA:

“(2)  The definition of foreign person in the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth is modified as follows—

(a)  an Australian citizen is taken to be ordinarily resident in Australia, whether or not the person is ordinarily resident in Australia under that definition,

(b) a New Zealand citizen who holds a special category visa, within the meaning of section 32 of the Migration Act 1958 of the Commonwealth, at any particular time is taken at that time to be an individual whose continued presence in Australia is not subject to any limitation as to time imposed by law”.

23. There was no dispute that the trust of which the Applicant is trustee was a “discretionary trust”. In these circumstances, the effect of the above provisions is that the Applicant, in its capacity as trustee of the N & G Grima Family Trust, is subject to surcharge land tax, only if the applicable trust deed does not prevent a “foreign person” from being a beneficiary of the trust within the meaning of s 5D.

24. Prevention of a “foreign person” being a beneficiary requires satisfaction of both the requirements of s 5D(3). These requirements are that:

1. no potential beneficiary of the trust is a foreign person (the no foreign beneficiary requirement),

2. the terms of the trust are not capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a foreign person (the no amendment requirement).

25. The Respondent accepted that the terms of the trust deed provided that no potential beneficiary of the trust was a “foreign person”. The question for determination in these proceedings is whether the “no amendment requirement” had been satisfied.

26. Determination of this question requires consideration of the relevant terms of the trust allowing and preventing amendments. The particular question is whether amendments could be made with the effect of allowing “foreign persons” to become beneficiaries.

27. Clause 1.1 of the trust deed included the following definitions:

“Beneficiaries …… excludes all Excluded Persons.”

“Excluded Person means the following (even if any of them is named or would otherwise be or be included in a class of Beneficiary):

…

(e) any “Foreign Person”.

“Foreign Person means:

…

(l) any potential Beneficiary of this Trust who would or might cause this Trust to be or become a foreign person or a foreign trust for the purposes of any other statute,

and who, by being a Beneficiary, would or might cause this Trust to be assessed to additional or increased duty or land tax (in excess of any amount which the Trust would be required to pay had the person, corporation or trust not being so classified) in respect of the acquisition or holding of any direct or indirect interest in real property to which any of the provisions above apply, but only while:

(m) the foreign person, corporation or trust continues to be so classified under the relevant provision; and

(n) the Trust acquires or holds, any direct or indirect interest in real property to which any of the provisions above apply;”.

28. Clause 3 of the trust deed provides as follows:

“3 EXCLUSION FROM BENFITS

3.1 Excluded Persons

Every Excluded Person is specifically excluded from all or any benefits under this Trust. The Trustee must not:

(a) make any determination in favour of or any distribution of Income or capital in favour of any Excluded Person;

(b) pay, distribute, apply or Set Aside any Property of the Trust (including money) to or for the benefit of any Excluded Person.

3.2 Provision not Effective

Any provision of this Deed which does or might have the effect of conferring a benefit on any person contrary to clause 3.1 will be ineffective to confer that benefit and must be read down to the extent necessary to give effect to clause 3.1.

3.3 Irrevocable

This clause 3 is irrevocable and is not capable of being amended”. 

29. The Applicant’s power to amend the trust deed is set out in cl 19.1. It provides for powers to amend the trust. However, cl 19.1(c) is expressed to prevent the Applicant from making amendments “in respect of Clause 3”.

30. The Respondent accepted that the above provisions satisfied the “no foreign beneficiary requirement”. Every “Excluded Person” was specifically excluded from all or any benefits under the trust (cl 3.1). The definition of “Excluded Person” in cl 1.1, expressly captured any “Foreign Person”. Who was a “Foreign Person” was in turn defined in cl 1.1. That definition listed certain persons falling within particular statutory provisions. These statutory provisions did not include the LTA or the Duties Act. The definition of “Foreign Person”, however, also relevantly captured “any potential Beneficiary of this Trust who would or might cause this Trust to be or become a foreign person or a foreign trust for the purposes of any other statute”. The Respondent accepted that these words captured persons who were “foreign persons” as at 31 December 2023, for the purposes of the LTA - and is correct in saying so.

31. The Respondent, however, says that the trust deed did not satisfy the “no amendment requirement”. This is because, in the Respondent’s submission, the trust deed was capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a “foreign person”.

32. The Respondent accepted that cl 3 itself was “irrevocable” and not capable of being amended because this is what cl 3.3 expressly said. However, in the Respondent’s submission, cl 3.3 did not prevent cl 1.1 from being amended by the Applicant, using its powers under cl 19 to do so. The Respondent says if cl 1.1 were changed to remove the reference to a “Foreign Person” from the definition of “Excluded Person”, the result would be that that “foreign persons” can become beneficiaries. This was because while cl 3.1 would still prevent Excluded Persons from taking any benefits under the trust, if the definition of “Excluded Person” no longer captured “foreign persons”, cl 3.1 would cease to have the effect of preventing “foreign persons” from benefiting from the trust.

33. The Respondent submitted that amendment is the “process of altering a document. Amendment involves modification. Therefore, the natural and ordinary meaning of clause 3.3 is that it prevents the change of any words in clause 3” (emphasis added). The Respondent’s submission, as I understand it, is that cl 3.3 will prevent the Applicant from changing the words contained within cl 3 but goes no further. If the Respondent is correct, the consequence is that the operation of cl 3 can be changed, despite cl 3.3, by removing from the definition of “Excluded Beneficiaries” references to “Foreign Persons”. The result would be to change the operation of cl 3 to allow “foreign persons” to take as beneficiaries of the trust.

34. The question before the Tribunal is what “amended” means as used in cl 3.3. The question in particular is whether in saying that cl 3 is “irrevocable and is not capable of being amended”, cl 3.3 only prohibits changes being made to the actual words within cl 3 or whether it goes further to prevent changes to the work that cl 3 does and its operation as a provision of the trust deed.

35. What cl 3 does requires consideration of the meaning of the words it employs. Clause 3.3 says that clause 3 is “irrevocable”. It also says that cl 3 “is not capable of being amended”. “Amend” in its ordinary sense means “to alter (a motion, bill, constitution, etc.) by due formal procedure” (The Macquarie Dictionary, Online). As such, clause 3.3 both prohibits revocation of the clause as a whole, as well as particular alterations to the clause.

36. The question is what kinds of alterations are prohibited. The context for answering that question is found in the instrument itself the subject of the prohibition, namely the trust deed. An instrument having legal effect is not simply a collection of words that are sequenced and punctuated in the way they are found in the instrument, with nothing more. Those words, as sequenced and punctuated have meaning and legal effect. That legal effect is determined by the meaning carried by the words within the instrument.

37. Where a provision in an instrument contains terms defined elsewhere in the instrument, the meaning given to those terms will be drawn from the other provisions that define the terms. The legal effect of the provision including terms so defined, will, in turn, be determined by the meaning of the words of the provision, including the terms defined elsewhere.

38. What cl 3.3 does, in my opinion, is to prevent alterations that change the operation of cl 3. Alterations of this kind to a provision in an instrument that has legal effect may be made in more than one way. Words within the provision can be added, removed or changed. Alterations to the work a provision does, can also be made in other ways, for example by adding to the instrument containing the provision a new provision that has a contrary effect to the pre-existing provision and expressing the new provision to override other provisions in the instrument. If a new overriding provision of this kind were added to the trust deed in such terms so as to try to alter the work of cl 3, the result, in my opinion, will be an alteration of a kind prohibited by cl 3.3.

39. Similarly, if the definition of “Excluded Person” and “Foreign Person” in cl 1.1 were amended to remove “foreign persons” from their ambit, such a change will also alter the operation of cl 3. The change would be significant. It would allow “foreign persons” who previously could not take from the trust, being allowed to take. Clause 3.3, in my opinion, has the purpose of preventing such an outcome and would do so.

40. The meaning of provisions in an instrument must be determined objectively and not on the basis of what the parties to the instrument may have subjectively intended. That determination needs to be made based on what “reasonable persons would have in mind in the situation of the parties” (see Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, at [20]). In “relation to trusts, as in relation to contracts, the search for "intention" is only a search for the intention as revealed in the words the parties used, amplified by facts known to both parties” (Byrnes v Kendle [2011] HCA 26, at [105]).

41. I think it is clear that what the parties intended was to prevent amendments to cl 3, however made, that could change the classes of “Excluded Persons” who were prevented from benefiting from the trust. That such persons included people who are “foreign persons” for the purposes of the LTA is clear from the words of para (l) of the definition of “Foreign Person” in cl 1.1.

42. I accept that where a trustee was attempting to comply with the conditions of s 5D of the LTA, the relevant trust deed should not be read as though it did comply with that provision, even though in its terms it does not (Watertite Investments Pty Ltd ATF Isgrove Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 274, at [62]). However, the meaning of cl 3.3, as I have found it to operate, does not depend on any inference that the trustee was trying to comply with cl 5D. The meaning of cl 3.3 is to be found in the text of the provisions and the deed as a whole. That meaning was to prevent amendments to cl 3, however made, for the reasons set out above.

29. In RRS Holdings Aust Pty Ltd ATF RRS Holdings Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 352, the Tribunal considered a case where a new clause was added to a trust deed, preventing foreign persons from benefiting from the income or capital of a trust. The new clause was not expressed to be incapable of amendment. The previous clause, however, was expressed to be “not capable of amendment”. It prevented certain trustees from being beneficiaries. The Tribunal rejected a submission that the new clause and the previous clause should be read together so as to prevent amendments to both clauses. The new clause was, as a result, found to be capable of amendment.

30. The circumstances of the present case can be distinguished from the facts of RRS Holdings. That case concerned two adjacent provisions that operated independently of one another. There was nothing in the text of the new clause to suggest or require it to be interpreted in a way that required reference to the pre-existing clause. Clause 3, on the other hand, does not operate independently of cl 1.1. The operation of cl 3 depends on the definitions found in cl 1.1. Those definitions have work to do within cl 3. That work within cl 3 was to prevent “Excluded Persons” as defined in cl 1.1, from taking.

31. For the reasons set out above, I am satisfied that cl 3.3 operates to prevent amendments to cl 3, whether by changes made to the words within cl 3 or by other amendments to the trust deed, that change the meaning and legal effect of cl 3. I accept the Applicant’s submission that cl 3.3 is effective to prevent amendments to cl 3.

32. There is, however, a further matter that goes to the determination of whether the “no amendment requirement” is satisfied. That matter is the effect of temporal limits placed by cl 1.1 on the operation of the definition of “Foreign Person” (which in turn forms a category of “Excluded Person”).

33. The categories of person who fall within the definition of “Foreign Person” are relevantly described as those falling within various categories, “who, by being a Beneficiary, would or might cause this Trust to be assessed to additional or increased duty or land tax”. However, these words have operation “only while … the foreign person, corporation or trust continues to be so classified” and the trust “acquires or holds any direct or indirect interest in real property to which any of the provisions above apply”.

34. The consequence is that once relevant real property is no longer acquired or held by the Applicant in the manner described, persons who previously were a “Foreign Person” will fall outside that definition. As a result, they will also cease to be “Excluded Persons” within paragraph (e) of the definition of “Excluded Person”.

35. The effect of this qualification is to place a temporal limit on the operation of cl 3 to the extent that it applies to “Foreign Persons”. After such time when the Applicant ceases to hold any direct or indirect interest in relevant real property, persons previously prevented from taking benefits under the trust on account of being a “foreign person”, may take.

36. The Respondent submits that once these circumstances arise, cl 19 permits amendment to cl 1.1. In the Respondent’s submission, this means that the “no amendment requirement” has not been satisfied.

37. In Waverley Investments Pty Ltd atf The Five Oaks Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 255, the Tribunal described what is required by s 5D of the LTA in the following terms:

“In my view, the question to ask at midnight on 31 December is whether the terms of the trust can ever be amended to include foreign persons as potential beneficiaries. In context, that is the natural meaning of the words ‘the terms of the trust are not capable of amendment’. In this respect there is no relevant difference between the once-only taxing point under the Duties Act, and the annual taxing points under the land tax legislation.

There is nothing untoward in the Chief Commissioner’s use of the word ‘irrevocable’: it is simply a convenient shorthand to describe the requirement in the statute.

“In summary, I accept the Chief Commissioner’s submission that the language of the ‘no amendment requirement’ is the language of capacity and future possibility. The provision looks to what is ‘capable’ of being done to ‘result in’ a particular outcome – and it is self-evident that the particular outcome, if it ever occurs, will occur at some point in the future, and necessarily after the relevant taxing point when the question (whether the terms of the trust are capable of amendment) is being addressed. That the particular outcome may occur after the land in NSW has been disposed of is irrelevant. In simple terms, s 5D(3)(a) looks to the position now, while s 5D(3)(b) looks to future possibilities”.

52. The facts of the WaverleyInvestments case are distinguishable from the facts at hand. The terms of the trust instrument in that case prevented amendment or variation of the relevant clause “for at any time when and for so long as the assets of the Trust include residential land in New South Wales”. Amendment was not prevented when trust assets did not include such land. The trust deed, on the other hand, does not expressly enable amendment of the definition of “Foreign Person” for the purposes of cl 3, when trust property ceases to include relevant real property. What it does is to place a temporal limit on the operation of the definition in the manner described above without any need to amend the trust deed.

53. The effect of the words of limitation included in the definition of “Foreign Person” is to place a time limit on how long a person remains within the definition. That time limit is not referable to a specified date or time. It depends on the occurrence of particular circumstances. The circumstances are relevant real property ceasing to be trust property. If these circumstances arise, someone who remained a “Foreign Person” ceases to be such a person.

54. The occurrence of these circumstances, in turn, changes the operation of cl 3 from that time onwards. Someone who was once an “Excluded Person” (being a “Foreign Person”), for the purposes of cl 3, will, at that point in time, cease to remain within the definition. As a result, cl 3 will no longer prevent them from taking. This alteration to cl 3 what does, occurs not by reason of an amendment to the provision pursuant to the power to amend given to the Applicant under cl 19. It is an alteration, nevertheless, resulting from a change in circumstances. It is a self- executing change.

55. Frost SM said in Waverly Investments that the “no amendment requirement” used “the language of capacity and future possibility” that “looks to what is ‘capable’ of being done to ‘result in’ a particular outcome”.  I do not think the future possibility of amendment by way of a formal amendment of the kind considered in that case should be treated any differently to the same result being achieved by means of a mechanism built into the trust deed that does not require action by the trustee.

56. The “no amendment requirement” requires that the provisions in cl 3 of the trust deed not be capable of amendment. It also requires the clause to be “irrevocable”. This is language that is absolute and unqualified. Whether an alteration to the reach of cl 3, occurs by means of exercise of the power to amend under cl 19 or by means of the self-executing mechanism set out in cl 1.1, the result is a change to the work cl 3 does.

57. I observe in passing that the effect of cl 1.1 and cl 3 is that if the Applicant were, at a future date, to dispose of the real property held subject to the trust, the consequences would be twofold. First of all, any persons who were previously “foreign persons” will no longer be prevented from taking. Secondly, the proceeds of sale of the real property will form part of the fund from which they may now take, even though they previously could not take. The result would be to allow “foreign persons” to obtain a benefit from real property previously held within a trust, without having paid the higher rates of tax applicable to them. Such an outcome does not sit easily with the statutory purpose.

58. I do not, however, rely on the matters set out at [57] above to determine the question at hand. That question is whether or not the “no amendment requirement” has been satisfied. This is a question to be determined on the basis of whether or not the meaning and effect of the words of the trust deed satisfy s 5D(3)(b). I have found, for the reasons set out at [54] - [56] above, that the “no amendment requirement” has not been satisfied. The assessment under review must, therefore, be confirmed.

Orders

1. The assessment under review is confirmed.

**********

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

Registrar

Decision last updated: 19 June 2025