Numo Pty Ltd v Commissioner of State Revenue
[2016] VSC 274
•3 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST
S CI 2015 05965
S CI 2015 05963
S CI 2016 01696
S CI 2016 01697
S CI 2016 01698
S CI 2016 01699
S CI 2016 01700
S CI 2016 01687
S CI 2016 01689
S CI 2016 01690
S CI 2016 01692
S CI 2016 01693
BETWEEN:
| HAYZY PTY LTD (ACN 101 721 224) ARMTREE PTY LTD (ACN 007 174 594) PELICAN INN PTY LTD (ACN 139 799 312) JPKELLYCO PTY LTD (ACN 122 621 621) | Plaintiffs |
| v | |
| COMMISSIONER OF STATE REVENUE | Defendant |
AND BETWEEN:
| NUMO PTY LTD (ACN 087 500 856) | First Plaintiff |
| LASTFOR PTY LTD (ACN 093 119 138) | Second Plaintiff |
| v | |
| COMMISSIONER OF STATE REVENUE | Defendant |
---
JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 May 2016 |
DATE OF JUDGMENT: | 3 June 2016 |
CASE MAY BE CITED AS: | Numo Pty Ltd v Commissioner of State Revenue |
MEDIUM NEUTRAL CITATION: | [2016] VSC 274 |
---
TAXATION – Grouping of related corporations – Nature of power of Commissioner with respect to the treatment of related corporations as a single corporation – Extent to which such powers might be characterised as retrospective – Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365 – Kalomel Nominees Pty Ltd v Commissioner of State Taxation [2012] SASC 10 – Tadcaster Sorrento v Commissioner of State Revenue [2015] VCAT 611 – Land Tax Act 2005, ss 7, 8, 36(1), 47-49 and 50.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr T. Grace | Arnold Bloch Liebler |
| For the Defendants | Mr C. Horan QC with Ms C. Pierce | Commissioner of State Revenue |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 2
Land Tax Act provisions................................................................................................................... 5
Power conferred by s 50 of the Act.................................................................................................. 9
Jurisdictional matters....................................................................................................................... 33
Conclusions and orders.................................................................................................................. 34
HIS HONOUR:
Introduction
By Originating Motions, dated 20 November 2015, the Plaintiffs in each proceeding seek relief, in substance, by way of judicial review of assessments for land tax under the Land Tax Act 2005 (“the Act”) for the 2011 to 2015 tax years (“the Assessments”). By objection proceedings, filed subsequently, pursuant to r 7.05 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008, the Plaintiffs also challenge the Assessments.
The Assessments were issued jointly to Numo Pty Ltd and Lastfor Pty Ltd (“the Numo Group”) and to Hayzy Pty Ltd, Armtree Pty Ltd, Pelican Inn Pty Ltd and JPKellyCo Pty Ltd (“the Hayzy Group”), based on decisions by the Commissioner under s 50 of the Act to treat each of those groups of related corporations as a single corporation for the purposes of the Act.
The Plaintiffs seek to challenge the Assessments on the ground that s 50 of the Act does not authorise the Commissioner “to retroactively group related corporations”, that is to “fix a date prior to the date of the determination as the date from which the corporations may be grouped”, or “to issue assessments for years prior to the date of the determination”.[1]
[1]Originating Motion, para 19; and, relevantly similarly, in the objection proceedings, Notice of Objection Against Assessment of Land Tax under s 95 of the Taxation Administration Act 1997, paragraph 2.
On the basis of the Plaintiffs’ contentions with respect to the proper construction of s 50 of the Act, they contend that the Assessments are vitiated by jurisdictional error and are therefore not an “assessment” for the purposes of the Taxation Administration Act 1997 (“the TAA”) and, consequently, may be reviewed by the Court for jurisdictional error.
The Commissioner, on the other hand, whilst agreeing that the central question in these proceedings is whether the Assessments are valid for the purposes of the Act and the TAA, contends that this gives rise to two issues:
(a)first, does this Court have jurisdiction to consider the ground of review raised by the Plaintiffs other than in proceedings under Part 10 of the TAA (and does that ground of review go to the validity of the Assessments); and
(b)secondly, if the Court does have jurisdiction to consider the ground of review (i.e. if that ground of review does go to the validity of the Assessments), does s 50 of the Act on its proper construction authorise the Commissioner to exercise the power to group related corporations in respect of a tax year after 31 December immediately preceding that tax year, and to issue an assessment based on that decision or determination?
Having regard to these jurisdictional issues, these proceedings were brought by means of the Originating Motions seeking declaratory relief in favour of the Plaintiffs, to the effect that the Assessments are nullities and have no legal force or effect, and a consequential order quashing the Commissioner’s “purported determination” under s 50 of the Act, together with the objection proceedings; proceedings by way of judicial review. In terms of relief, the Plaintiffs seek relief on the basis of either species of originating processes, depending upon the Court’s finding with respect to jurisdiction, and the Commissioner seeks dismissal of the judicial review proceedings and also of the Originating Motions seeking declaratory relief. Consequently, regardless of jurisdictional findings, the critical issue in these proceedings is the proper construction and operation of s 50 of the Act.
Background
On or about 22 September 2015, following an investigation into land tax grouping, a delegate of the Commissioner determined that:
(a)the members of the Hayzy Group were related corporations under s 47(3) of the Act, based on a common controlling interest (through a majority shareholding) of John Patrick Kelly in each of the corporations, and should be grouped for land tax purposes under s 50 of the Act during periods in which they owned land; and
(b)the members of the Numo Group were related corporations under s 47(3) of the Act on the basis that Numo Pty Ltd holds 75% of the issued share capital of Lastfor Pty Ltd, and should be grouped for land tax purposes under s 50 of the Act.[2]
[2]Affidavit of John Patrick Kelly (sworn in each proceeding on 23 February 2016) Exhibits PK–2 and PK–3.
More particularly, by letter dated 22 September 2015,[3] the Commissioner advised the Plaintiffs as follows:
[3]Affidavit of John Patrick Kelly (sworn in proceeding S CI 2015 5965 on 23 February 2016) [6] Exhibit PK–3.
Based on the information currently available to the State Revenue Office (SRO), I have determined that the above corporations [being Armtree Pty Ltd, Hayzy Pty Ltd, Pelican Inn Pty Ltd and JPKellyCo Pty Ltd] are related under section 47(3) due to John Patrick Kelly’s majority shareholding in each company. After considering the information you provided the above entities have been grouped for Land Tax purposes under section 50 of the LTA during periods in which they owned land due to the following factors:
•John Patrick Kelly’s position as Director in each corporation indicates a commonality in practical control of each corporation
•The lack of additional share classes with income rights indicates that John Patrick Kelly, as majority shareholder, has the right to receive the majority of profits achieved by each corporation
•The usage of the lands owned by the corporations is common insofar as they are investment assets leased to third parties
Grouped corporations are treated as a single corporation and the land tax payable is calculated on the aggregated value of all Victorian lands held legally and beneficially by the group members as at 31 December of each preceding year.
In line with the SRO’s policy of retrospective assessments, the land tax of the above corporations has been reassessed on a group basis for the 2011 to 2015 assessment years. The previous land tax assessments issued to the individual companies have been withdrawn. The new group assessment notices are enclosed.
This letter dated 22 September 2015 also enclosed, what the Plaintiffs describe as “Purported Assessments”, as follows:[4]
(a)Land Tax Assessment Notice number 091983788 issued to Hayzy Pty Ltd for the period from 1 January 2015 to 31 December 2015;
(b)Land Tax Assessment Notice number 091983796 issued to Hayzy Pty Ltd for the period from 1 January 2014 to 31 December 2014;
(c)Land Tax Assessment Notice number 091983801 issued to Hayzy Pty Ltd for the period from 1 January 2013 to 31 December 2013;
(d)Land Tax Assessment Notice number 091983819 issued to Hayzy Pty Ltd for the period from 1 January 2012 to 31 December 2012; and
(e)Land Tax Assessment Notice number 091983827 issued to Hayzy Pty Ltd for the period from 1 January 2011 to 31 December 2011.
[4]Affidavit of John Patrick Kelly (sworn in proceeding S CI 2016 5965 on 23 February 2016) [7] Exhibit PK-4.
In any event, on 22 September 2015, the Commissioner issued the Assessments,[5] having withdrawn earlier land tax assessments that had been issued to the Plaintiffs on an individual basis for each of those years.[6] The group assessments were issued in respect of the following corporations:
[5]Affidavit of John Patrick Kelly (sworn in each proceeding on 23 February 2016) Exhibit PK–4.
[6]Affidavit of Lara Helen O’Rorke (sworn in each proceeding on 15 March 2016) Exhibit LOR–1.
Hayzy Group
Tax year Assessment No. Component Companies 2011 091983827 Hayzy, JPKelly Co 2012 091983819 Hayzy, JPKelly Co 2013 091983801 Hayzy, JPKelly Co, Pelican Inn 2014 091983796 Hayzy, JPKelly Co, Armtree 2015 091983788 Hayzy, JPKelly Co[7] [7]Defendant’s Outline of Submissions (11 April 2016) [7] refers to Pelican Inn Pty Ltd as being subject to Assessment no. 091983788; but the copy of this Assessment in evidence does not refer to Pelican Inn Pty Ltd. See Affidavit of Lara Helen O’Rorke (sworn in each proceeding on 15 March 2016) Exhibit LOR–1.
Numo Group
Tax year Assessment No. Component Companies 2011 091984247 Numo, Lastfor 2012 091984239 Numo, Lastfor 2013 091984221 Numo, Lastfor 2014 091984213 Numo, Lastfor 2015 091984205 Numo, Lastfor
Under the Assessments:
(a)the total amount of land tax assessed in respect of the Numo Group was $537,975, of which $68,862.50 remained payable; and
(b)the total amount of land tax assessed in respect of the Hayzy Group was $103,454.25, of which $38,447.10 remained payable.
On or about 19 November 2015, the Plaintiffs lodged Notices of Objection against the Assessments (“the Objections”).[8] The Plaintiffs objected to the Assessments on the principal ground that the Commissioner had no power under s 50 of the Act “to group the Taxpayers retroactively” or “to assess them for land tax retroactively”.
[8]Affidavit of John Patrick Kelly (sworn in each proceeding on 23 February 2016) Exhibit PK–5.
The grounds set out in the Originating Motions are essentially the same as the grounds of the Objections.
Land Tax Act provisions
The more relevant provisions of the Act for the purposes of these proceedings are as follows:[9]
[9](emphasis in original).
PART 2—IMPOSITION OF LAND TAX
Division 1—Imposition of land tax
7. General imposition of land tax
Land tax is imposed in respect of each year on all taxable land in Victoria.
Note
This Act also imposes land tax on transmission easements (see Division 4) and special land tax (see Division 5).
8. Who is liable for land tax?
The owner of taxable land is liable to pay land tax on the land.
9. When must land tax be paid?
The day specified in a notice of assessment of land tax must be not less than 14 days after the day the notice is served on the taxpayer.
Note
Section 14 of the Taxation Administration Act 1997 provides for notices of assessment and provides that tax is payable on or before the day specified in the notice.
Division 2—Owners of land
10. Who is the owner of land?
(1)The following persons are owners of land for the purposes of this Act—
(a)a person entitled to land for a freehold estate in possession;
(b)a person entitled to land under a lease of Crown land;
(c)a person entitled to land under a licence of Crown land if the person has a right, absolute or conditional, of acquiring the fee simple;
(d)a person who is a licensee of vested land under Part 3A of the Victorian Plantations Corporation Act 1993;
(e)a person deemed by this Act to be the owner of land.
(2)Subsection (1)(b) does not apply to a person entitled to land under a sub-lease of Crown land.
…
PART 3—ASSESSMENT OF LAND TAX
Division 2—How is land tax assessed?
36. Land tax assessed on aggregated basis
(1)Subject to this Act, a taxpayer is to be assessed for land tax on land for a tax year on the total taxable value of all taxable land of which the taxpayer was the owner at midnight on 31 December immediately preceding that tax year.
…
Division 3—Grouping of related corporations
47. What are related corporations?
(1)For the purposes of this Division, corporations are related corporations in any of the circumstances specified in this section.
(2) Corporations are related corporations if one of those corporations—
(a) controls the composition of the board of the other corporation; or
(b)is in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other corporation; or
(c)holds more than 50% of the issued share capital of the other corporation.
(3)Corporations are related corporations if the same person has, or the same persons have together, a controlling interest in each of the corporations.
Note
controlling interest is defined in section 48.(4)Corporations are related corporations if—
(a)more than 50% of the issued share capital of one of those corporations ( corporation 1 ) is held by the other corporation ( corporation 2 ) together with the shareholders of corporation 2; and
(b)the percentage of the issued share capital of corporation 2 held by shareholders of corporation 1 is more than the difference between 50% and the percentage of the issued share capital of corporation 1 held by corporation 2.
(5)Corporations are related corporations if one of those corporations is a related corporation of a corporation of which the other of those corporations is a related corporation (including a corporation that is a related corporation of the other of those corporations because of one or more other applications of this subsection).
48. What is a controlling interest in a corporation?
For the purposes of this Division, a person has, or persons have together, a “controlling interest” in a corporation if—
(a)that person, or those persons acting together, can control the composition of the board of the corporation; or
(b)that person is, or those persons acting together are, in a position to cast or control the casting of more than 50% of the maximum number of votes that might be cast at a general meeting of the corporation; or
(c)that person holds, or those persons acting together hold, more than 50% of the issued share capital of the corporation.
49. Further provisions for determining whether corporations are related corporations
(1)For the purposes of this Division—
(a)corporations may be related corporations whether or not they own land in Victoria;
(b)a reference to the issued share capital of a corporation does not include a reference to any part of it that carries no right to participate beyond a specified amount in a distribution of either profits or capital;
(c)subject to paragraphs (d) and (e), any shares held or power exercisable by a person or corporation as a trustee or nominee for another person or corporation are taken to be also held or exercisable by the other person or corporation;
(d)any shares held or power exercisable by a person or corporation by virtue of the provisions of any debentures of another corporation, or of a trust deed for securing any issue of any such debentures, must be disregarded;
(e)any shares held or power exercisable by, or by a nominee for, a person or corporation (not being held or exercisable as mentioned in paragraph (d)) are taken to be not held or exercisable by that person or corporation if—
(i)the ordinary business of that person or corporation includes the lending of money; and
(ii)the shares are held or the power is exercisable only by way of security given for the purposes of a transaction entered into in the ordinary course of business in connection with the lending of money, not being a transaction entered into with an associate of that person or corporation within the meaning of the Corporations Act;
(f)the composition of a corporation's board is taken to be controlled by a person or another corporation if the person or other corporation, by the exercise of a power exercisable whether or not with the consent or concurrence of any other person, can appoint or remove all or a majority of the members of the board.
(2)Subsection (1)(f) does not limit the circumstances in which the composition of a corporation’s board is to be taken to be controlled by a person or another corporation.
50. Grouping of related corporations
(1)The Commissioner may treat related corporations as a single corporation for the purposes of this Act.
(2)If the Commissioner does so—
(a)the Commissioner must assess the related corporations jointly for land tax; and
(b)the related corporations are jointly and severally liable for the land tax; and
(c)section 46 of the Taxation Administration Act 1997 applies accordingly.
Power conferred by s 50 of the Act
The Plaintiffs contend that s 50(1) of the Act does not confer upon the Commissioner any power to determine retrospectively or retroactively that related corporations are to be treated as “a single corporation” for a previous land tax year or years. Moreover, it is contended that s 50(2) of the Act does not confer upon the Commissioner any power to impose retrospectively or retroactively upon a company a liability different to that which the Act imposed upon that company the previous land tax year or years—being a liability that the Act imposed in and for that previous land tax year on the actual (and legal) owner of the land as at the liability date for the previous land tax year.
Additionally, the Plaintiffs contend that s 50 confers no power to change retrospectively or retroactively the basis upon which land tax liabilities were to be assessed for the relevant land for a previous land tax year and, further, confers no power on the Commissioner to reassess retrospectively or retroactively a liability as if the land were owned by a “notional” single corporation other than the actual (and legal) owner as at the liability date.
Thus, the gravamen of the Plaintiffs’ contentions is that s 50 of the Act confers a power on the Commissioner that can only be exercised prospectively.
The Commissioner, on the other hand, contends that the critical question is whether the power to group related corporations under s 50 of the Act can be exercised after the relevant date of 31 December immediately preceding the land tax year in question. It is, the Commissioner contends, in this sense that the Plaintiffs seek to characterise the operation of such a decision as “retroactive”.[10] The answer to this question, the Commissioner says, cannot turn on whether or not initial assessments have previously been issued to the Plaintiffs on an “individual” basis, nor on whether or not any such assessments have been withdrawn under s 13 of the TAA. The Commissioner has broad powers to make reassessments of the tax liability of taxpayers—under s 9 of the TAA—and cannot be estopped from exercising those powers.[11] As discussed in the reasons which follow, further inquiry as to the possible application of the “related corporations” provisions of ss 47 to 49 of the Act may provide a basis and a need for reassessment.
[10]Defendant’s Outline of Submissions (11 April 2016) [31] referring to the Plaintiffs’ Outline of Submissions (15 March 2016) [18]–[21].
[11]Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117; Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 124 [22]; AGC (Investments) Ltd v Federal Commissioner of Taxation (1991) 21 ATR 1379 at 1395-6.
As indicated, the centrality of the Plaintiffs’ submissions is that the provisions of s 50 do not contemplate, and nor do they provide for, the making of a “determination” by the Commissioner that would have retrospective effect. At the outset, in considering the Plaintiffs’ submissions in this respect, it should be observed that the word “determination” does not appear at all in the provisions of s 50. Rather, the critical provisions of sub-s 50(1) provide that the Commissioner “may treat related corporations as a single corporation” for the purposes of the Act.[12] For the reasons which follow, I am of the view that this is not a mere matter of semantics, particularly when one has regard to the provisions of the South Australian land tax legislation considered in Kalomel Nominees Pty Ltd v Commissioner of State Taxation.[13]
[12](emphasis added).
[13][2012] SASC 10 (“Kalomel Nominees”).
On this basis, the Plaintiffs contend that the direct consequence of the Commissioner “presuming” to make a “determination” with retrospective effect is that—as was the case here—a different tax liability to that imposed by the Act at the relevant time would be imposed retrospectively. Moreover, it is said that this different tax liability would be “purportedly” imposed retroactively as a result of the Commissioner’s retrospective “determination”, and not by the operation of the Act as at the earlier liability date.
More particularly, the Plaintiffs submit that the effect of the Commissioner’s “determination” and “Purported Assessments” is that the factual and legal state of affairs that existed as at midnight on 31 December 2010, 31 December 2011, 31 December 2012, 31 December 2013 and 31 December 2014 is deemed, after the event, not to have been the factual and legal state of affairs on those dates; namely, that the Plaintiffs were separate legal entities and were therefore separate taxable companies subject to the operation of the Act at those dates. Instead, it is said that these four companies would be taken to be, as a result of this retroactive “determination” by the Commissioner, to have been a “single corporation” on these earlier dates and, further to that, would be deemed to be subject to land tax as if the four companies were a “single corporation” who would, consequently be subject to tax at a higher effective rate for those prior years, at which time no such “determination” was “in force”. Such a consequence, the Plaintiffs contend—the visiting upon a taxpayer of a tax liability retroactively—can only be created by clear and unambiguous language, confirming and making demonstrably clear Parliament’s intention to impose such a retroactive tax liability.
The common law presumption against retrospective legislation was stated clearly and concisely by Dixon CJ in Maxwell v Murphy:[14]
[14](1957) 96 CLR 261 at 267. See also WBM v Chief Commissioner of Police (2012) 43 VR 446 at 462 [65]-[68].
The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to past events.
Similarly, in Fisher v Hebburn Ltd, Fullagar J said:[15]
There can be no doubt that the general rule is that an amending enactment—or, for that matter, any enactment—is prima facie to be construed as having a prospective operation only. That is to say, it is prima facie to be construed as not attaching new legal consequences to facts or events which occurred before its commencement.
Moreover, even in the case of ambiguity, the presumption applies, as indicated in Mathieson v Burton, where Gibbs J said:[16]
If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.”
[15](1960) 105 CLR 188 at 194.
[16](1971) 124 CLR 1 at 22 quoting In re Athlumney; Ex parte Wilson [1898] 2 QB 547 at 551–2.
The basis of the presumption was articulated more fully in Australian Education Union v Fairwork Australia, where French CJ, Crennan and Kiefel JJ said:[17]
In a representative democracy governed by the rule of law, it can be assumed that clear language will be used by the Parliament in enacting a statute which falsifies retroactively, existing legal rules upon which people have ordered their affairs, exercised their rights and incurred liabilities and obligations. That assumption can be viewed as an aspect of the principle of legality, which also applies the constructional assumption that Parliament will use clear language if it intends to overthrow fundamental principles, infringe principles, or depart from the general system of law.
[17](2012) 246 CLR 117 at 134–5 [30].
Clearly enough, the vice with respect to retrospective legislation, particularly retrospective tax legislation, is that it interferes with, or at least has the potential to interfere with, vested rights. Accordingly, as the High Court has observed, the presumption against retrospective statutory construction is based on “the presumption that the Legislature does not intend what is unjust”.[18] The common law rule of construction against retrospective legislation is based on the rule of law and the consideration that retrospective legislation “defeat[s] the expectations of citizens formed in reliance on the existing state of law”.[19]
[18]Australian Education Union v Fairwork Australia (2012) 246 CLR 117 at 134 [28] quoting George Hudson Limited v Australian Timber Workers’ Union (1923) 32 CLR 413 at 434.
[19]Andrew Palmer and Charles Sampford, “Retrospective Legislation in Australia—Looking Back at the 1980’s” (1994) 22 Federal Law Review 217 at 229.
In this context it is, of course, necessary to be very clear about what is properly categorised as retrospective legislation, particularly in the context of taxation legislation. Further authorities, which are discussed below, shed more light on this aspect. In any event, having considered the general position with respect to retrospectivity of legislation at common law, I turn now to consider the provisions of s 50 and related provisions of the Act in more detail.
In order to construe s 50 of the Act, it is necessary to examine the provisions of the Act and the manner in which they provide for the imposition of land tax. In broad terms, the Act provides for the imposition of land tax each year on all taxable land in Victoria, and for the manner in which owners of taxable land are assessed for land tax.[20] The scheme for taxing land under the Act is for assessment on an “aggregated basis”. This critical aspect of the land tax regime is provided for in sub-s 36(1) which, for emphasis, is now repeated:
[20]See Parts 2 and 3 of the Act.
36. Land tax assessed on aggregated basis
(1)Subject to this Act, a taxpayer is to be assessed for land tax on land for a tax year on the total taxable value of all taxable land of which the taxpayer was the owner at midnight on 31 December immediately preceding that tax year.
It follows that, by virtue of the provisions of sub-s 36(1) of the Act, the factum, the factual and legal state of affairs, upon which land tax is assessed is the ownership of taxable land at an historical point in time—namely, midnight on 31 December, immediately preceding the relevant land tax year. It is critically important in the context of the land tax machinery to focus on this critical event; an event which evokes the scene with the clock striking midnight in the town square in the film, Back to the Future, where timing was critical for Marty McFly! Midnight on 31 December is also critical in Victoria because the striking of midnight on that day does, under the Act, fix the point of assessment for land tax purposes; though the assessment of land tax pursuant to the Act is necessarily based on facts and circumstances at a past date.[21] The criteria of liability for land tax may, for example, include a determination whether land owned by a taxpayer is exempt land (and therefore not taxable land), which may require the Commissioner to form a state of satisfaction or an opinion (for example, in relation to the use or character of the land at the relevant date),[22] or even to exercise an administrative discretion.[23] Similarly with respect to the possible application of the “related corporations” provisions.[24] Clearly, those are matters requiring careful consideration after the clock strikes midnight.
[21]Compare Australian and Overseas Telecommunications Corporation Ltd v Commissioner for Land Tax (Qld) [1994] 2 Qd R 350 at 359: “[t]he factors relevant to liability are all determined by reference to the circumstances which exist at the end of the year preceding the material financial year”, and “both land ownership and whether land is exempt from taxation are to be determined at the same point of time”.
[22]See, e.g, principal place of residence (ss 53(1), 55(1)(b), 56); primary production (s 66, 67, 68 and 69), sporting and recreational land (ss 71, 72); charities (s 74); accommodation (ss 75, 76, 76A, 77).
[23]See, e.g, ss 57(3), 58(3), 59(3), 60(3) of the Act.
[24]See ss 47–49 and 50. See below [32]–[33].
Consequently, an assessment of the land tax liability of a taxpayer for a tax year would necessarily be made at some time during the relevant tax year, by reference to the facts and circumstances relating to the ownership of taxable land as at midnight on 31 December immediately preceding the tax year. There is, however, nothing in the legislation to suggest that an assessment in respect of a tax year cannot be made in a subsequent land tax year. Moreover, the Commissioner has power under s 9 of the TAA to make a reassessment of the tax liability of a taxpayer, even if an amount previously assessed as being payable has been paid, and even where the taxpayer is assessed to additional or greater tax liability.[25] These provisions of the TAA also provide that in the case of a liability to land tax under the Act, a reassessment may be made more than five years after the initial assessment.[26] Section 9 of the TAA thus supplies the machinery necessary to enable a reassessment to be made which supersedes an earlier assessment.[27]
[25]See TAA, sub-9(2).
[26]See TAA, sub-s 9(3)(c), and s 51 of the Act.
[27]Cf Plaintiffs’ Outline of Submissions (15 March 2016) [42]. See also Plaintiff’s Outline of Submissions in Reply (13 May 2016) [7]. Section 13 of the TAA also confers power to withdraw an assessment at any time within five years after the date of service of the notice of assessment.
Moving now to the operation of these provisions through the lens of these particular proceedings, it is observed by the Plaintiffs that here, the “owner” for the purposes of the Act is an expression defined in sub-s 3(1) with reference to the provisions of s 10 of the Act; which includes a provision to the effect that an owner is “a person deemed by this Act to be the owner”. The point is made by the Plaintiffs in this context that there is no similar deeming provision in s 50. However, this is not, in my view, significant for the reasons which follow. Rather, these deeming provisions to which the Plaintiffs point—which are contained in sub-s 10(1)(e)—provide an important link to the provisions and operation of the provisions of ss 47 to 49 which, in my view, have a critical impact on the proper interpretation and operation of s 50. In any event, the Plaintiffs submit, in the context of the “owner” point, that it must follow, absent such deeming provisions in s 50, that when the clock strikes midnight on 31 December, the Plaintiffs were only “owners” as separate corporate entities:[28]
[28]Plaintiffs’ Outline of Submissions (15 March 2016) [33]-[38] (emphasis in original).
33As at midnight 31 December 2010, midnight 31 December 2011, midnight 31 December 2012, midnight 31 December 2013 and midnight 31 December 2014, the First Plaintiff, Hayzy Pty Ltd, for example, was the owner of the land at 102/286-288 Maroondah Highway, Mooroolbark and, as at these same dates, the other Plaintiffs were the individual owners of the properties listed in each of the “Statement of lands” schedule enclosed with each Purported Assessment.
34Section 36 is tolerably clear: a taxpayer “is to be assessed for land tax on land for a tax year on the total taxable value of all taxable land of which the taxpayer was the owner at midnight on 31 December [of the preceding year]”. At the relevant historical dates (on 31 December 2010, 31 December 2011, 31 December 2012, 31 December 2013 and 31 December 2014), Hayzy Pty Ltd was the owner of one property only: 102/286-288 Maroondah Highway, Mooroolbark. As at those historical dates, the Act imposed a valid and correct land tax liability on Hayzy Pty Ltd—in respect of the land owned by Hayzy Pty Ltd. Furthermore, the Act imposed that liability on Hayzy Pty Ltd and on Hayzy Pty Ltd alone.
35Further, consistent with the imposition of the tax liability by the Act on each of these historical dates, notices of assessment of that land tax liability were issued to Hayzy Pty Ltd by the Commissioner in the relevant tax year—which assessments reflected, and confirmed, the imposition of the tax liabilities by reference to Hayzy Pty Ltd’s actual landholdings on 31 December of each of these five earlier years.[29] Similar assessments were issued to the other Plaintiffs in respect of land that they respectively owned on 31 December of the year immediately preceding the relevant tax year.[30]
36In the case of each Plaintiff, the Act imposed – on each of those historical dates—distinct land tax liabilities for each of the companies, and by reference to land that each company owned on those historical dates. At the time that the Act imposed the liability—which was 31 December of the year preceding the relevant tax year—each of the four Plaintiff companies owned their respective landholdings, separately in fact and in law.
37More particularly, the landholdings of the four Plaintiff companies were not, as at 31 December of each of these years (being the time that the Act imposed the tax liability on the “owner” of the land), held by some “notional entity” or by some notional “single corporation”. At the relevant dates (the liability dates), the land at 102/286-288 Maroondah Highway, Mooroolbark was in fact held by Hayzy Pty Ltd and Hayzy Pty Ltd alone (and the same for the land owned by the other Plaintiffs).
38.As stated above, the Act operates to impose separate land tax liabilities on the four Plaintiff companies—by reference to the land that each company separately “owned” at that time—and the Commissioner, each year, gave effect to the (separate) liabilities imposed by the Act on the four Plaintiff companies by issuing notices of assessment to the four Plaintiff companies.
[29]Affidavit of Lara Helen O’Rorke (sworn in each proceeding on 15 March 2016) [4(a), (c), (e), (h) and (k)].
[30]Affidavit of Lara Helen O’Rorke (sworn in each proceeding on 15 March 2016) [4(b), (d), (f), (g), (j) and (l)].
These and related submissions by the Plaintiffs as to the effect of the Commissioner exercising power under s 50 of the Act do, in my view, reflect a misapprehension with respect to the operation of the Act and the assessment process which is based on the total taxable value of all taxable land of which the taxpayer was owner as at midnight on 31 December, immediately preceding the relevant land tax year. Moreover, the Plaintiffs’ submissions do, as contended by the Commissioner rest on an incorrect premise to the effect that a decision to “group” related corporations under s 50 of the Act operates to impose different tax liabilities to those that were in fact imposed by the Act as at the relevant time and date: namely, midnight on 31 December immediately preceding the relevant tax year. In this respect, the Commissioner also submits that the tax liability imposed by the Act should properly be viewed as including the power conferred by s 50 to treat related corporations as a single corporation for the purposes of the Act. Section 36(1) of the Act is, as observed by the Commissioner, prefaced by the words “[s]ubject to this Act”, which are apt to include and accommodate for the purpose of assessment the grouping provisions contained in Division 3 of Part 3 of the Act, namely, ss 47 to 49, and then, of course, s 50, and the exercise of the powers conferred by those provisions.
Critically, in my view, is the position, as advanced in the Commissioner’s submissions, that an exercise of the power to “group” related corporations under s 50 does not impermissibly change the actual state of affairs at any earlier date. In this respect, the Commissioner points out, particularly, that the decision to “group” does not change the separate corporate status of the individual group members, and nor does it affect their individual ownership of lands.[31] Rather, the Commissioner says that the decision of the Commissioner under s 50 and the consequent assessment involves an application of existing laws to the facts and circumstances, the factual and legal state of affairs, as at the relevant time and date for the purposes of calculating land tax liabilities for any given tax year.
[31]Defendant’s Outline of Submissions (11 April 2016) [36]. Cf Plaintiffs’ Outline of Submissions (15 March 2016) [20].
In my view, the Commissioner’s submissions in this respect are correct and should be accepted as being consistent with the machinery which the provisions of the Act establish for the imposition and assessment of land tax. Reference has already been made to more relevant provisions, particularly ss 7 to 10, sub-s 36(1) and s 50 in this respect. In the present circumstances, however, I am of the opinion that the provisions of Division 3 of Part 3 of the Act, ss 47 to 50, are critical; and, particularly, when read with sub-s 36(1). The gravamen of the Plaintiffs’ argument is that the effect of s 50 is to change—and retrospectively—the factors, the factual and legal state of affairs, going to assessment of land tax as at midnight on 31 December, immediately preceding the relevant land tax year. That is, however, not the position when one considers the provisions of ss 47 to 49 of the Act, provisions to which I now turn.
Parliament, in legislating ss 47 to 49 of the Act, has provided detailed provisions which, if attracted, have the legal consequence of rendering the relevant corporations, “related corporations” for the purposes of the Act. Thus, if the provisions of ss 47 to 49 are attracted, the relevant corporations are “related corporations” for the purposes of the Act, as a matter of law—that is the factual and legal position. Clearly, given the nature of the provisions of ss 47 to 49, their provisions may be attracted from time to time, and their application as between relevant corporations may wax and wane, so to speak. An obvious “waning” as between relevant corporations is the change in shareholder ownership of a corporation which results in it ceasing to be a “related corporation” for the purposes of ss 47 to 49. Clearly, a time has to be fixed for the purpose of applying for these “related corporations” provisions; unless it was proposed to review the position constantly. This would, of course, be a practical impossibility and, in any event, would be at odds with the scheme of the Act which, under sub-s 36(1), fixes land tax assessment on an aggregate basis as at midnight on 31 December, immediately preceding the relevant land tax year.
As the Act does not provide for self-assessment as is the case in some other legislation, somebody, namely, the Commissioner, must assess liability to land tax on the basis of the provisions of the Act. Having regard to the provisions of sub-s 36(1) particularly, it follows that the assessment process must follow the critical time and date of 31 December, which is clearly the position contemplated by sub-s 36(1), and the other provisions of the Act to which reference has been made. That the assessment process is an historical process in this sense is also strongly reinforced by the provisions of ss 47 to 49 of the Act, as it will be necessary for the Commissioner to determine whether or not relevant corporations are “related corporations” under these provisions as a result of the Commissioner’s inquiries as to matters going to the application or otherwise of these provisions. There can be no suggestion, however, that in undertaking this process of inquiry and determination, the Commissioner is doing anything more than assessing the factual and legal position relevant to these provisions as at midnight on 31 December prior to the relevant land tax year. Having regard to the nature of the matters provided for in ss 47 to 49 and the Commissioner’s power to vary assessments, there is no obstacle in the Act or otherwise to the Commissioner inquiring into and determining relevant matters for the purposes of ss 47 to 49 and continuing to do so. Moreover, there is no obstacle to the Commissioner re-assessing liability to land tax on the basis of the “related corporations” provisions in years subsequent to the land tax year immediately following the critical 31 December date for assessment. In any event, for reasons discussed further in those which follow, consideration of the application of the provisions of ss 46 to 49 of the Act must be an ongoing process.
Importantly, in the present context, this analysis of the provisions of the Act demonstrates that the matters going to the liability of a taxpayer for assessment of land tax as at midnight on 31 December prior to a land tax year are fixed, cast in stone, so to speak when the clock strikes midnight that night. Nothing the Commissioner might do in terms of inquiry and determinations for the purpose of ss 47 to 49 change this position. If the Commissioner errs in inquiring and determining these matters, then other remedies are available, but that is not the issue in these proceedings. Here, the claim by the Plaintiffs is that the Commissioner has, in the exercise of powers under s 50 of the Act, changed the legal and factual state of affairs critical for the purposes of s 36(1) and the assessment of land tax liability. In the present circumstances, it is not in controversy and is accepted that the corporate plaintiffs in these proceedings were related under the provisions of Division 3 of Part 3 of the Act and, that being the case, it must be taken that, as at the relevant 31 December date or dates, this was the position under the Act. That is the historical legal and factual state of affairs which is “cast in stone”. The question is, what flows from this. The answer to this question requires further consideration of the nature and extent of the power under s 50.
A careful reading of the provisions of s 50 indicates, in my view, that its provisions confer a discretion on the Commissioner as to whether or not “related corporations” are to be treated as a “single corporation” for the purposes of the Act, which is clear from sub-s 50(1). If the Commissioner does choose to treat “related corporations” as a “single corporation”, then the provisions of sub-s 50(2) require assessment of those corporations for land tax jointly, they attract joint and several liability for land tax so assessed and the provisions of s 46 of the TAA apply.[32] The Commissioner’s discretion under s 50 is, however, dependent upon the Commissioner forming the view following inquiry that relevant corporations are “related corporations” under the provisions of ss 47 to 49 of the Act. As discussed, the Commissioner’s view as to this position, having regard to the matters provided for in these provisions, is to be determined as at the relevant 31 December date (as at midnight) and then, as part of the assessment process, the Commissioner will decide whether or not to treat relevant corporations found to be “related corporations” as a “single corporation” for the purposes of the Act; under the provisions of sub-s 50(1). Although not explored in submissions by the parties, it can be imagined that there may be some circumstances where the Commissioner would think it inappropriate to treat relevant corporations which are “related corporations” under the provisions of ss 47 to 49 as a “single corporation” for the purposes of land tax assessment. It is not, however, necessary to explore this aspect of s 50 in the present circumstances, as the Commissioner has clearly exercised the discretion in favour of treating each of the groups of various corporate entities the subject of these proceedings as a “single corporation” under these provisions.
[32]Section 46 of the Taxation Administration Act 1997 provides:
46 Contributions from joint taxpayers
Nothing in this Act prevents a person who is jointly and severally liable to pay an amount of tax and who pays the amount to the Commissioner from recovering a contribution from any other person who is liable to pay the whole or part of that amount.
Thus, to recap and reinforce an aspect of this reasoning, the effect of s 50 is not to change any aspect of the legal landscape, the factual and legal state of affairs, as at midnight on 31 December with respect to the assessment of land tax for a subsequent land tax year. Indeed, the words of sub-s 50(1) make this clear in themselves. Section 50 is only enlivened if the relevant corporations are “related corporations” under the provisions of ss 47 to 49 of the Act. These “related corporations” provisions provide objective factual and legal criteria for determining whether or not they are applicable and hence whether or not the relevant corporations are “related corporations” for the purposes of the Act. There is no discretionary power or determination or any other act of the Commissioner involved in or affecting these criteria and their application. They either apply or they do not. That is a question which can be answered as a matter of law in any particular circumstance as a result of proper inquiry in relation to the matters provided for in ss 47 to 49. It is true that, as part of the land tax assessment process, the Commissioner may exercise a discretion under s 50 to treat what are, as a matter of law “related corporations” as a “single corporation” for the purpose of land tax assessment. However, this does not in any way change the application of the assessment provisions of sub-s 36(1), nor the effect of the definition of “owner” provisions of s 10 having regard to the need to read the legislation as a coherent whole; a position which is, in my view, clearly contemplated by the legislature in the opening words of sub-s 36(1), namely, “Subject to this Act”. Viewing the provisions of the Act as a whole, these words must contemplate the operation of provisions such as ss 47 to 49—and s 50. Moreover, having regard to this overall structure and the operation of the Act, the definition of “owner” in s 10 could not be seen as limiting the operation of sub-s 36(1) of the Act, in effect, to the exclusion of the operation of ss 47 to 49 of Division 3 of Part 3 of the Act.
This, in turn, raises the question whether there is any difficulty with provisions such as s 50, which empower the Commissioner to exercise a discretion which may affect the extent of liability to land tax though, for the reasons indicated, not the primary basis of assessment; the landscape of relevant factual and legal matters upon which sub-s 36(1) of the Act operates.
As the authorities indicate, there is nothing novel in a statute providing for a tax liability to be fixed by reference to the exercise of an administrative decision-making power, including in circumstances where that power involves a discretionary element. For example, in Giris Pty Ltd v Federal Commissioner of Taxation,[33] the High Court rejected a challenge to the validity of provisions of the Income Tax Assessment Act 1936 (Cth), under which tax was payable on income of a trust estate at a special rate unless the Federal Commissioner was of the opinion “that it would be unreasonable that this section should apply in relation to that trust estate in relation to that year of income”, in which case, tax was imposed at a different rate under another section.
[33](1969) 119 CLR 365 (“Giris”).
The approach of various members of the Court in Giris is relevant in the present circumstances.
In Giris, Barwick CJ described the relevant sections as conferring on the Federal Commissioner “an authority or discretion in the nature of a dispensing power”,[34] and noted that “the Commissioner is in substance able to choose whether the trust income will be taxed at one rate rather than another”.[35] Although the provisions effectively meant that “the citizen cannot know when disposing of his affairs what the impact upon him or them the law regarding the taxation of income will make”,[36] the sections were nevertheless upheld as laws with respect to taxation on the basis that “[t]ogether they prescribe the rule to be applied in assessing the particular class of taxpayer in the year of income, though dependent upon the fact of the Commissioner’s opinion upon a matter which is itself no more than a matter of opinion”.[37] Nor did the provisions impose an “unchallengeable tax”, notwithstanding “the width of the Commissioner’s discretion and the lack of discernible criteria by reference to which the propriety of its exercise could be tested”.[38]
[34](1969) 119 CLR 365 at 371.
[35](1969) 119 CLR 365 at 372.
[36](1969) 119 CLR 365 at 372.
[37](1969) 119 CLR 365 at 373.
[38](1969) 119 CLR 365 at 374.
Kitto J, in Giris, relevantly stated that “[t]here is no need to cite authority for the general proposition that the operation of a law with respect to taxation may validly be made to depend upon the formation of an administrative opinion or satisfaction upon a question, e.g., as to the existence of a fact or circumstance, or as to the quality (e.g., the reasonableness) of a person’s conduct, or even as to the likelihood of a consequence of the operation of the law in an individual case”.[39] Menzies J said that “whether or not the section is to apply to a particular trust estate has been made to depend upon an opinion which the Commissioner may form, after the close of the year of income, and with no legislative guidance other than that he is to have regard to a medley of facts and circumstances”.[40] The enactment of such provisions “leaves, as a problem for the Commissioner to decide, retrospectively and in the light of what has happened, whether the particular provision should not apply to a particular trust estate in respect of a year that has passed”.[41]
[39](1969) 119 CLR 365 at 379.
[40](1969) 119 CLR 365 at 381.
[41](1969) 119 CLR 365 at 381 (emphasis added). These emphasised words are apposite in the present circumstances where the Commissioner, for the purpose of exercising power under s 50 of the Act, must have regard to past facts and circumstances for the purpose of assessment or amended assessment of land tax liability having regard to the relevant legal and factual landscape at the earlier 31 December date.
Finally, with respect to Giris, Windeyer J said in that case that while the Federal Commissioner’s discretion was apparently at large, he was “to be guided and controlled by the policy and purpose of the enactment”.[42] The purpose was “to enable the Commissioner to keep s 99A as an instrument to prevent avoidance of taxation by the medium of trusts, but not to use it when to do so would seem to him not in accordance with that purpose”.[43]
[42](1969) 119 CLR 365 at 384.
[43](1969) 119 CLR 365 at 384.
Moreover, the exercise of broad administrative discretions in the context of assessing tax liabilities is a common feature of statutory regimes directed at anti-avoidance, such as s 102 of the Act; provisions comparable with Part IVA of the Income Tax Assessment Act 1936 (Cth).[44]
[44]The decisions in both Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 and Commissioner of Taxation vFuturis Corporation Ltd (2008) 237 CLR 146 provide examples of income tax assessments based on such an administrative determination made after the relevant events.
The legislative history of the land grouping provisions was considered in detail by the Victorian Civil and Administrative Tribunal in Tadcaster Sorrento v Commissioner of State Revenue.[45] A most helpful and detailed history is set out in the reasons of Judge Harbison, sitting as a Vice President of Victorian Civil and Administrative Tribunal.[46] As appears from the legislative history, the early precursors of s 50 of the Act provided for mandatory grouping of related corporations “as a precautionary measure” to prevent related companies from evading the progressive nature of land tax.[47] Subsequent amendments both expanded the bases on which corporations could be regarded as related corporations, and conferred on the Commissioner a discretionary power to treat such related corporations as a “single corporation” for the purpose of assessing land tax. As was accepted by the Tribunal in Tadcaster Sorrento,[48] the purpose of the power conferred by s 50 of the Act is “to protect the aggregation principle established by the Act … by allowing the Commissioner to make an assessment as to whether a particular landholding structure ostensibly containing many different taxpayers is in fact a structure controlled by a single entity”. In that sense, the s 50 power is concerned with the avoidance of land tax, whether by intentional evasion or otherwise. The legislative purpose does not support the confinement or reading down of that power so as to preclude the Commissioner from grouping “related corporations” in respect of a previous tax year, having regard to the facts and circumstances relevant to that tax year. As discussed previously, this would, in my view, be to completely misunderstand the structure of the Act and the process of assessing land tax, fixed though it might be at midnight on 31 December preceding a relevant land tax year.
[45](Review and Regulation) [2015] VCAT 611 (“Tadcaster Sorrento”).
[46][2015] VCAT 611 at [72]–[111].
[47]See Osborn v The Commonwealth (1911) 12 CLR 321 at 370.
[48][2015] VCAT 611 at [131]–[132].
Moreover, it may be doubted whether an exercise of power by the Commissioner under s 50 of the Act to treat the Hayzy Group and the Numo Group, respectively, as a “single corporation” for the 2011 to 2015 tax years can properly be characterised as retrospective or “retroactive” in operation. On one view, and, in my opinion, the correct view, the power under s 50 is simply part of the land tax assessment process, the process of determining the extent of land ownership and the possible application of the “related corporations” provisions, for example. In other words, the Commissioner carries out the assessment process subsequent to, but fixed as to the position at an earlier 31 December date at midnight. Moreover, as indicated previously, the power of the Commissioner to re-open assessments and to re-assess tax liability is no more a matter of retrospective application of taxation legislation with respect to “related corporations” issues than with respect to the position in relation to re-assessment more generally. In any event, for the preceding reasons and those which follow, I am of the view that either the power conferred by s 50 of the Act does not attract the common law presumption against retrospectivity or, rather, manifests a contrary intention on the part of the legislature which rebuts the application of any such presumption.
The common law presumption against retrospectivity is primarily directed at the construction of statutes which change the law,[49] whether by new legislation or by amendment of existing laws,[50] as each of the cases relied upon by the Plaintiffs illustrates.[51]
[49]Maxwell v Murphy (1957) 96 CLR 261 at 267: “a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events” (emphasis added). See also Fisher v Hebburn Ltd (1960) 105 CLR 188 at 194: “the general rule is that an amending enactment—or, for that matter, any enactment—is prima face to be construed as having a prospective operation only. That is to say, it is prima facie to be construed as not attaching new legal consequences to facts or events which occurred before its commencement.”
[50]See, e.g, IOOF Holdings Limited v Commissioner of Taxation (2014) 224 FCR 535 at 541 [23].
[51]The Plaintiffs rely on the following cases: Maxwell v Murphy (1957) 96 CLR 261; Fisher v Hebburn Ltd (1960) 105 CLR 188; WBM v Chief Commissioner of Police (2012) 43 VR 446; and Australian Education Union v Fair Work Australia (2012) 246 CLR 117. See Plaintiffs’ Outline of Submissions (15 March 2016) [22], [24], [27]–[28].
In my view, and contrary to the Plaintiffs’ submissions,[52] this principle does not apply a fortiori to the exercise of an administrative power conferred by statute.[53] In the present case, the power conferred by s 50 of the Act was enacted well before the relevant tax years in respect of which the Plaintiffs have been assessed to land tax. As discussed in the preceding reasons, the exercise of the power conferred on the Commissioner by s 50 to group “related corporations” in respect of each of those tax years involves the application of taxation law to existing historical facts, the legal and factual landscape as it existed at the relevant 31 December date at midnight. It does not, however, involve an interference with any vested or accrued rights of the Plaintiffs. They are either “related corporations” at the critical 31 December date at midnight, or they are not.
[52]Plaintiffs’ Outline of Submissions (15 March 2016) [23].
[53]See, e.g, Ocsalt Pty Ltd v Minister For Mineral Resources and Energy (2012) 115 SASR 298 at 314–5 [55]–[57].
The presumption against retrospectivity is not attracted in a case where a law “merely takes account of antecedent facts and circumstances as a basis for what it prescribes for the future”.[54] The issuing of the Assessments in this case was the result of the application of existing law to historical facts, past facts; hence, for the preceding reasons and those which follow, was not a retrospective exercise of administrative, or executive, power. In any event, the presumption against retrospectivity is not necessarily engaged by the exercise of an existing administrative power or discretion, and the Plaintiffs have not identified any relevant authority for the application of the presumption in such circumstances.[55]
[54]Robertson v City of Nunawading [1973] VR 819 at 824. See also WBM v Chief Commissioner of Police (2012) 43 VR 446 at 462 [64].
[55]The Plaintiffs cite the decision of the Commonwealth Administrative Appeals Tribunal in Re Roadway Global Air International Inc and Australian Trade Commission (1996) 44 ALD 675, but this is not a decision which establishes any general or universal principle in this respect.
Thus, an assessment under the Act and the TAA is “the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case”.[56] Nevertheless, the process by which the provisions of the Act are given concrete application in the particular case includes the potential exercise of the power to treat “related corporations” as a “single corporation” for the purposes of the Act by reference to the facts and circumstances of the particular case.
[56]Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 at 252; Industrial Equity Ltd v Deputy Commissioner of Taxation (1990) 170 CLR 649 at 658. Cf Australia and New Zealand Banking Group Limited v Federal Commissioner of Taxation (2003) 203 ALR 644 at 652 [24].
Land tax assessments are invariably made by reference to facts and circumstances as at midnight on 31 December immediately preceding the relevant tax year. At the relevant date for each of the tax years in question, the law as embodied in the Act included the power to treat “related corporations” as a “single corporation”. Insofar as the power under s 50 of the Act was engaged by the facts and circumstances in respect of a given tax year, that power formed part of the law governing tax liability and does not entail any retrospective alteration to the Plaintiffs’ rights and liabilities.
As indicated previously, I am of the view that the language of sub-ss 50(1) and (2) does not alter, but rather supports, this conclusion. The Plaintiffs submit that the provisions are drafted in a “dynamic and prospective” style,[57] which is said to militate against any construction which authorises the issuing of assessments for years prior to the date of “determination”. The better view, is that, consistent with the syntax of sub-s 50(2), the section simply provides in imperative terms for the consequences which flow from an exercise by the Commissioner of the discretion to treat “related corporations” as a “single corporation” in respect of a particular tax year, which includes the provisions that the Commissioner must assess the corporations jointly for land tax and that the corporations are jointly and severally liable for “the land tax”. This position is also, in my view, reflected in the use of the present tense in the provisions of sub-s 50(2).[58] There is, in my view, nothing in the language of sub-s 50(2) to suggest that the duty to assess need be performed at any particular time—whether in the land tax year immediately following the critical 31 December date for the purposes of that tax year, or during any other subsequent land tax year.
[57]Plaintiffs’ Outline of Submissions (15 March 2016) [41].
[58]Cf Plaintiffs’ Outline of Submissions in Reply (13 May 2016) [17].
The Plaintiffs also sought to support their arguments in relation to the retrospective or retroactive operation of s 50 by reference to the grouping provisions in the Payroll Tax Act 2007 (“the Payroll Tax Act”). The provisions of this legislation are, however, not helpful, particularly as the Payroll Tax Act involves a self-assessment regime in relation to a monthly tax liability by employers or groups and also includes a discretionary power to exclude members of a group with effect from a specified date and until the determination is revoked. As is made clear from a careful consideration of Kalomel Nominees, this comparison overlooks the machinery of the Act which provides for the assessment of land tax subsequently to the critical 31 December date on the basis of historical facts and circumstances. Additionally, s 50 does not provide for any “determination” by the Commissioner and the nature of the power conferred by s 50 does not enable the Commissioner to determine and declare a position or status with respect to corporations as “related corporations” or otherwise, which could possibly constitute a relevant legal fact or circumstance pertaining or not as at the critical midnight on 31 December. Additionally, there is no basis for suggesting that the Payroll Tax Act and the Act are anything in the nature of cognate legislation and that there is little basis for thinking that the legislature enacted the provisions of s 50 on the basis of what had or had not been done with the provisions of the Payroll Tax Act.
Similarly, the Plaintiffs’ submissions with respect to other legislation, in this case s 426–55 of Schedule 1 to the Taxation Administration Act 1953 (Cth) is similarly unhelpful as an aid to the construction of s 50 of the Act.[59] The provisions of s 50 are clearly materially different to these provisions and, furthermore, these provisions were, of course, enacted by different legislatures. The Commonwealth provision relates to the revocation of endorsements which have taken effect from dates specified by the Federal Commissioner of Taxation. As has already been discussed, and is discussed further in these reasons, a decision by the Commissioner under s 50 of the Act is made in relation to a particular tax year by reference to the factual and legal state of affairs as at midnight on 31 December preceding that tax year and does not “take effect” from a particular date or remain in effect for a particular period.
[59]Cf Plaintiffs’ Outline of Submissions (15 March 2016) [43].
The decision of the South Australian Supreme Court in Kalomel Nominees was relied upon by the Plaintiffs but is, for the reasons which follow, as contended by the Commissioner, distinguishable in the present case. Moreover, it is instructive to give some detailed consideration to this decision not simply because I regard it as distinguishable and as an authority which does not support the Plaintiffs’ position, but, rather, because it illustrates the difference between the power conferred upon the Commissioner under the provisions of s 50 and the provisions in the South Australian land tax legislation. Significantly, the South Australian legislation enabled determinations which subsisted for a period of time and which, by their nature, would affect the legal and historical landscape at a critical time for land tax purposes; namely, midnight on 31 December, if such provisions were in force in Victoria.
In Kalomel Nominees, the Commissioner had granted to the appellants an exemption from land tax with effect from 30 June 2008 on the basis that the land in question constituted the principal place of residence of the second appellant, who had a 10% interest in the land. The question for determination in Kalomel Nominees was whether the land was exempt from land tax in the 2008/2009 and 2009/2010 financial years under s 5(1)(a) of the Land Tax Act 1936 (SA) on the basis that it was the principal place of residence of the second appellant.[60] The Court found that, as at midnight on the relevant dates—30 June 2008 and 30 June 2009—the land had been subject to a current principal place of residence exemption, which was not removed by the Commissioner until 29 September 2009.[61] The Court rejected an argument that s 13A of the Land Tax Act 1936 (SA) permitted the Commissioner to remove the exemption with retrospective effect.[62]
[60][2012] SASC 10, [33].
[61][2012] SASC 10, [44]–[47].
[62][2012] SASC 10, [40]–[43].
As appears from Kalomel Nominees, there were a number of salient features of the South Australian land tax legislation which were critical to the decision. First, sub-s 4(2) of the Land Tax Act 1936 (SA) provided that liability to land taxes arose at the commencement of every financial year, and s 4(3) expressly provided that the taxes for a financial year would “be calculated as at midnight on 30 June immediately preceding that financial year on the basis of circumstances then existing”.[63] Secondly, s 5(1) of the South Australian legislation provided that land was wholly exempt from land tax if proper grounds for the exemption existed and “such an exemption has been granted, and remains in force, under this section”.[64] Section 5(3) provided for an owner of land to apply for an exemption and s 5(6) provided that the Commissioner must, on exempting land wholly or partially from land tax under s 5, give notice to the owner stating, inter alia, “the day (which may be antecedent or subsequent to the date on which the exemption is granted) as from which the exemption is to be effective”. Thirdly, sub-s 5(8) of the South Australian legislation provided that, if land was exempted from land tax under s 5, and circumstances changed so that proper grounds for an exemption ceased to exist, the owner was required to inform the Commissioner and the land would cease to be exempt from land tax. As Gray J noted, the effect of this provision was that “[t]he land becomes subject to land tax, wholly or partially, from the time of the change of circumstances, regardless of whether the owner of the land fulfils his or her obligation to notify the Commissioner”.[65] Fourthly, and finally, sub-s 5(10)(a) of the South Australian legislation relevantly provided that land may be wholly exempted from land tax if the land was owned by a natural person and constituted his or her principal place of residence (whether or not he or she was the sole owner of the land).
[63](emphasis added).
[64](emphasis added).
[65][2012] SASC 10, [28] (emphasis added).
It follows that the statutory context in which the issue arose for determination in Kalomel Nominees was that an exemption from land tax depended on the grant of an exemption which remained in force at the relevant time. The exemption would remain “in force” until there was a change in circumstances by which proper grounds for the exemption ceased to exist. Further, land tax was required to be calculated on the basis of the circumstances which existed as at midnight on the 30 June immediately preceding the relevant financial year. In this context, the circumstances existing at each of the relevant dates were that the land had been granted an exemption that remained in force. Those circumstances did not change until 29 September 2009, when the exemption was removed.[66] Thus, the outcome in Kalomel Nominees turned on the particular facts and the particular statutory context. Unlike the South Australian land tax legislation considered in this case, the status of exempt land under the Act is not explicitly conditioned on the grant of an exemption that is “in force” at the relevant time for the tax year in question. While some of the provisions in Part 4 of the Act contemplate that an application will be made to the Commissioner to obtain an exemption, there is nothing to suggest that such an application must be made let alone “granted”, prior to midnight on 31 December immediately preceding the tax year. It should also be noted that the South Australian legislation considered in Kalomel Nominees did not contain any provisions in relation to the grouping of “related corporations”. The analysis of the provisions relating to the grant and removal of exemptions is not directly applicable to the exercise of the power conferred by s 50 of the Act to treat “related corporations” as a “single corporation” for land tax purposes. A decision to treat “related corporations” as a “single corporation” for the purposes of assessment under the Victorian legislation, the Act, is not analogous to the conferral of an exempt status on particular land for a specified period of time.
[66][2012] SASC 10, [44].
While it may be accepted that the assessment of land tax liability under the Act is based on the factual and legal state of affairs as at midnight on 31 December prior to the land tax year, this does not preclude the Commissioner from exercising the power conferred by s 50 after that date by reference to those facts and circumstances. Indeed, as has already been discussed and which is considered further in terms of practical consequences with respect to the Plaintiffs’ submissions, it follows that the Commissioner must consider the possible application of ss 47 to 49 of the Act and hence whether relevant corporations are “related corporations” after, but as at midnight on a preceding 31 December date. Having regard to the intent of the provisions of ss 47 to 49 of the Act, their application or otherwise must be considered as at midnight on the relevant 31 December date. Moreover, as the matters addressed in those statutory provisions are matters which might be expected to change from time to time, it cannot be the position that the Commissioner’s view as to the application or otherwise of those provisions at midnight on 31 December date could, in conformity with the provisions of the Act, particularly ss 47 to 49, be, in effect, “carried over” or continued over time so as to be relevant to and amount to some historical fact or circumstance which would affect the assessment or incidence of land tax at midnight on a later 31 December date.
The Commissioner seeks to reinforce submissions made with respect to the operation of s 50 of the Act by reference to the practical consequences which are said to flow from the construction and position advocated by the Plaintiffs. In this respect, the Commissioner submits:[67]
[67]Defendant’s Outline of Submissions (11 April 2016) [56]–[62] (emphasis in original).
56.The submissions made above regarding the proper construction of s 50 of the Act are fortified by a consideration of the implications of the construction for which the Plaintiffs contend.
57.It is central to the Plaintiffs’ case that a grouping “determination” under s 50 of the Act can only have prospective effect from the date of that determination. According to the Plaintiffs, the Commissioner has no power to specify a date prior to the date on which the determination is made as the date from which the corporations are to be grouped (i.e. treated as a single corporation for land tax purposes), because to do so would alter tax liabilities that were “fixed” as at 31 December immediately preceding the relevant tax year.
58.These contentions misconceive the operation of an exercise of power under s 50 in conjunction with process of assessing the tax liabilities in respect of a given tax year. Strictly speaking, a decision to group related corporations does not “take effect” from a particular date. Rather, such a decision may be made in relation to a particular tax year for the purposes of assessing the tax liabilities of related corporations for that tax year.
59.It would be anomalous and illogical to require the power conferred by s 50 of the Act to be exercised prior to the relevant date of 31 December immediately preceding the tax year. Any such determination might be superseded by facts and circumstances between the date on which it was made and the following 31 December. Accordingly, it would be impossible for the Commissioner properly to exercise the power under s 50 in advance of 31 December immediately prior to the tax year for which that determination was to take effect, at a time before all of the facts and circumstances relevant to the exercise of that power (including the preconditions to its exercise) were known. To suggest the contrary would be to endorse assessments which are necessarily tentative or provisional.
60.The Plaintiffs’ argument would preclude the Commissioner from exercising the power under s 50 of the Act and issuing a joint assessment to grouped corporations during the current tax year. A determination made for the purposes of s 50 could only take effect in the following tax year. For example, the s 50 determinations in the present case made on 22 September 2015 could only govern the assessment of tax liabilities for 2016 and beyond. However, as the tax liabilities for the 2016 tax year are to be assessed by reference to the ownership of taxable land as at 31 December 2015, it would be problematic to treat the question of grouping as having been fixed by a determination made several months prior to that relevant date.
61.The only logical conclusion is that, as is the case with the issue of a land tax assessment, the Act permits a decision to group related corporations to be made under s 50 of the Act after 31 December immediately preceding the tax year in question. If the decision to group can be “retroactive” to that extent, there is no reason why it cannot be made at any time in the context of an exercise of the power to make a reassessment of tax liabilities under s 9 of the TAA.
62.Accordingly, to the extent that the presumption of retrospectivity has any application to the construction of s 50 of the Act or to the exercise of the power conferred by that section, the presumption is rebutted by necessary implication from the context of the land tax assessment regime.
To a significant extent, these matters have already been addressed in the preceding reasons, and so they provide, in a sense, a useful concluding summary of the position. In any event, for the reasons I have indicated in the preceding discussions, I am of the opinion that these practical considerations raised by the Commissioner are real and significant matters which do support the view that, to the extent the presumption of retrospectivity has any application to the construction of s 50 of the Act, it is rebutted by necessary implication. Moreover, these identified practical consequences flow from the nature of the land tax regime and are not matters which can be described, as the Plaintiffs would have it, as deficiencies in or complaints “about how the Act works” which are within the power of the Commissioner to seek to rectify by amending legislation.[68]
[68]See Plaintiffs’ Outline of Submissions in Reply (13 May 2016) [23]–[26].
Jurisdictional matters
Having regard to the position I have reached in relation to the critical and substantive issue in these proceedings, namely, the proper construction and operation of s 50 of the Act, the question of jurisdiction does not arise. This is because, as indicated previously, the parties agree that all these proceedings—the Originating Motion and the objection proceedings—would be heard together on the basis that this provided, at least the possibility, that depending upon the result, jurisdictional issues would, in effect, be resolved. This has now occurred. Nevertheless, it is appropriate to make some brief comments in relation to jurisdictional matters, having regard to the extent to which they were addressed by the parties.
The Commissioner’s position with respect to jurisdiction is that the Assessments are valid and do not exceed the limits of s 17 of the TAA, which provides that a failure to comply with the taxation law does not affect the validity of an assessment. The Commissioner contends that the Plaintiffs do not allege any error of the kind that could attract this Court’s jurisdiction to grant relief notwithstanding ss 17, 96(2) and 127 of the TAA. In particular, it is said that it is not alleged that the Assessments attract the grounds identified in Federal Commissioner of Taxation v Futuris Corporation Ltd[69] as the Assessments are neither tentative nor provisional, nor do they involve any “conscious maladministration of the assessment process”.[70] Accordingly, the Commissioner submits that this Court does not have jurisdiction to consider the grounds of review relied upon by the Plaintiffs, and there is no ground capable of attracting the relief sought in the originating motions, whether an order in the nature of certiorari, a declaration, or an injunction is sought. Rather, it is contended that any mistake or error of law in the exercise of the power to treat related corporations as a single corporation under s 50 of the Act would be within jurisdiction and would not affect the validity of the Assessments. Any such mistake or error, the Commissioner contends, is capable of being addressed in review or appeal proceedings under Part 10 of the TAA. Moreover, the Commissioner contends that, in the alternative, the Court should exercise its discretion to refuse to grant relief because there is a more appropriate remedy under Part 10 of the TAA.
[69](2008) 237 CLR 146.
[70]Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at 157 [25].
In view of my opinion as to the proper construction and operation of s 50 of the Act, there is, in my view, no basis for the Plaintiffs’ submissions that the Commissioner’s exercise of power under that section constitutes anything in the nature of a jurisdictional error. Rather, in my opinion, the Commissioner has properly exercised the power under s 50 with respect to the Assessments. Accordingly, the fate of the Assessments arising out of any mistake or error in the exercise of the power conferred on the Commissioner under s 50 could only be a matter addressed in review or appeal proceedings under Part 10 of the TAA.
Conclusions and orders
For the preceding reasons, each of these proceedings will be dismissed and the parties are to bring in orders accordingly.
The question of costs is reserved and I will hear the parties further on this issue.
18
0