RM Thornton Family Trust Pty Ltd ATF RM Thornton Family Trust v Chief Commissioner of State Revenue

[2025] NSWCATAD 283

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

RM Thornton Family Trust Pty Ltd ATF RM Thornton Family Trust v Chief Commissioner of State Revenue [2025] NSWCATAD 283

Hearing dates:

1 September 2025

Date of orders:

18 November 2025

Decision date:

18 November 2025

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

Dr Linda Kirk, Senior Member

Decision:

The Applicant is liable to pay surcharge land tax for the 2023 and 2024 land tax years pursuant to s 5D of the Land Tax Act 1956.

Catchwords:

TAXES AND DUTIES — Land tax – Surcharge land tax – Applicant holds land on trust – discretionary trust – whether, during the relevant land tax years, foreign persons were excluded as a beneficiary under the terms of the trust deed for the purposes of s 5D of the Land Tax Act 1956 (NSW) – no discretion to relieve liability arising under statutory 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)

Land Tax Management Act 1956 (NSW)

State Revenue Legislation Further Amendment Act 2020 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184

Commissioner of Taxation v Ryan (2000) 201 CLR 109

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

Feng v Chief Commissioner of State Revenue [2024] NSWCATAD 56

Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378

Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27 at [33].

Texts Cited:

None cited

Category:

Principal judgment

Parties:

RM Thornton Family Trust Pty Ltd ATF RM Thornton Family Trust (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Solicitors:
RM Thornton (Applicant)
Crown Solicitor (Respondent)

File Number(s):

2025/00133423

Publication restriction:

None

REASONS FOR DECISION

1. Introduction

2. On 18 September 2023, the Chief Commissioner of State Revenue (‘Respondent), issued a Land Tax Assessment Notice (‘Assessment’) for the 2023 land tax year (‘2023 Assessment’) [1] in relation to a property in Tralee, New South Wales (‘Property’) owned by the RM Thornton Family Trust Pty Ltd ATF RM Thornton Family Trust (‘Applicant’).

   1. s 58 documents, Tab 2, p.26-31.

3. On 20 November 2024, the Respondent issued a Land Tax Assessment Notice to the Applicant for the 2023 and 2024 land tax years reassessing the Applicant as liable for surcharge land tax in the amount of $43,800 (‘Reassessment’). ^[2]

   2. s 58 documents, Tab 4, p.79-85.

4. On 27 November 2024, the Applicant lodged an objection to the imposition of surcharge land tax for the 2023 land tax year in the Reassessment (‘Objection’). [3]

   3. s 58 documents, Tab 12, p.95-99.

5. On 31 January 2025, the Respondent disallowed the Objection. [4]

   4. s 58 documents, Tab 14(a), p.104.

6. Section 96 of the Taxation Administration Act 1996 (NSW) (‘TAA’) provides that a taxpayer may apply to this Tribunal for a review of a decision of the Respondent that has been the subject of an objection.

7. The Applicant seeks review by the Tribunal of the Reassessment under s 55 of the Administrative Decisions Review Act 1997 (NSW) (‘ADR Act’).

Issue for determination

8. The issue for determination is whether the Applicant is liable to surcharge land tax as it was deemed to be a “foreign person” for the purposes of s 5D of the Land Tax Act 1956 (NSW) (‘LTA’) because the RM Thornton Family Trust (‘Trust’) did not irrevocably exclude foreign persons from being potential beneficiaries of the Trust by the taxing date.

Evidence before the Tribunal

9. The Applicant filed the following materials:

1. Submissions dated 15 June 2025 (‘AS’)

2. Annexed documents A to R.

10. The Respondent relied on the following materials:

1. Documents filed pursuant to s 58 of the ADR Act on 7 May 2025 (‘s 58 documents’)

2. Tender Bundle (‘RTB’).

Relevant legislation

Jurisdiction and task of the Tribunal

11. The TAA applies in respect of “taxation laws” which are defined in s 4 to include the LTA and the LTMA.

12. Section 96 of the TAA provides that a taxpayer may apply to the Tribunal for an administrative review of a decision of the Respondent that has been the subject of an objection. The application was lodged within time. The Tribunal therefore has jurisdiction under s 96 of the TA Act, and s 9 of the ADR Act.

13. The relevant decisions on review are the assessments, and not the objection decisions: see Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28]; Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [10].

14. The Tribunal’s task is to decide what the correct and preferable decision is having regard to the material before it, including any relevant factual material and any applicable written or unwritten law: ADR Act, s 63.

15. Section 100 of the TAA provides that on an application for review the parties are not limited to the grounds of the objection. The Applicant bears the onus of proving its case on the balance of probabilities: s.100(3) TAA. The onus rests with the Applicant to establish that it is not liable for surcharge land tax, having regard to the relevant statutory criteria. The Applicant must prove all matters necessary to enable the Tribunal to answer the statutory question(s) in its favour: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36]. In the absence of such evidence, the Reassessment will prevail as correct.

16. Section 101 of the TAA sets out the powers of the Tribunal in dealing with an application for review and provides that the Tribunal may, amongst other things, confirm or revoke the assessment or other decision to which the application relates, make an assessment or other decision in place of the assessment or decision to which the application relates or remit the matter to the Respondent for determination in accordance with its finding or decision.

Surcharge land tax

17. Surcharge land tax is charged for the 2017 and subsequent land tax years on residential land owned by “foreign persons” pursuant to s 5A of the LTA. It provides:

Levy of surcharge land tax on residential land owned by foreign persons—2017 and subsequent land tax years

(1) Land tax is payable under this section in respect of residential land owned by a foreign person (surcharge land tax).

(2) In respect of the taxable value of all the residential land owned by the foreign person at midnight on 31 December in any year (commencing with 2016), surcharge land tax is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act for the period of 12 months commencing on 1 January in the next succeeding year at the rate of—

(a) in the case of all residential land owned by the foreign person at midnight on 31 December 2016—0.75% of that taxable value as assessed under the Principal Act, and

(b) in the case of all residential land owned by the foreign person at midnight on 31 December in any other year (commencing with 2017)—2% of that taxable value as assessed under the Principal Act.

(1) Surcharge land tax is payable in addition to any land tax payable in respect of the residential land under the other provisions of this Act, and is so payable even if no land tax is payable under those other provisions.

(2) The Principal Act applies to surcharge land tax in respect of residential land owned by a foreign person subject to the following—

(a) surcharge land tax is payable as if the residential land were the only land owned by the foreign person,

(b) if the residential land is also owned by a person who is not a foreign person, the taxable value of the land is to be reduced to the proportionate value of the interest in the land of the foreign person,

(c) if the foreign person is a joint owner of the residential land, the person is to be individually (and not jointly) assessed and is liable in respect of the value of the person’s proportionate interest in the land as if the person were the owner of a part of the land in proportion to the person’s interest (and accordingly section 27(2)–(4) of the Principal Act does not apply),

(d) if the Chief Commissioner is satisfied that the residential land is used for purposes other than residential purposes, the taxable value of the land is to be reduced by the apportionment factor determined in accordance with section 104ZB of the Duties Act 1997 in relation to the land,

(e) if the foreign person is the trustee of a fixed trust (within the meaning of section 3A of the Principal Act) in relation to the residential land, the person is not liable to surcharge land tax,

(f) the provisions of the Principal Act relating to the persons who are taken to be owners of the residential land apply to surcharge land tax, except that section 23 of the Principal Act does not operate to make a mortgagee in possession an owner of the land unless the mortgagor is a foreign person,

(g) the person is exempt from liability to pay surcharge land tax in respect of the land for a land tax year because the land is the principal place of residence of the foreign person (and accordingly sections 9C and 9D of the Principal Act operate to reduce the land value of the land if it is the principal place of residence of the person) only if the person is eligible for the exemption under section 5B,

(h) the tax thresholds under Division 4A of Part 7 of the Principal Act do not apply to surcharge land tax,

(i) any other modification prescribed by the regulations under the Principal Act applies to surcharge land tax.

(1) If a foreign person defaults in the payment of surcharge land tax then, without releasing the foreign person from his or her liability, the following provisions apply as long as the default continues—

(a) if the foreign person is a joint owner of the land concerned—any other joint owner (whether or not a foreign person) is, on being served with a notice by the Chief Commissioner requiring payment of the unpaid surcharge land tax, responsible for its payment and the unpaid tax may be recovered from that other joint owner as if he or she were the defaulting taxpayer,

(b) if the foreign person is a beneficiary of a trust relating to the land concerned—the trustee (whether or not a foreign person) is, on being served with a notice by the Chief Commissioner requiring payment of the unpaid surcharge land tax, responsible for its payment and the unpaid tax may be recovered from that trustee as if he or she were the defaulting taxpayer,

(c) all payments made under this subsection by that other joint owner or that trustee are taken to be made on behalf of the defaulting taxpayer,

(d) that other joint owner or that trustee may recover from the foreign person any amount paid by that other joint owner or that trustee under this subsection.

Section 5D of the LTA was introduced on 24 June 2020 by the State Revenue Legislation Further Amendment Act 2020 (NSW) (‘Amendment Act’). It sets out provisions on surcharge land tax on discretionary trusts:

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.

(1) 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.

(2) 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.

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

(4) Chapter 11A (Tax avoidance schemes) of the Duties Act 1997 applies in respect of the avoidance of surcharge land tax in connection with the operation of this section in the same way as that Chapter applies in respect of the avoidance of duty under that Act, and for that purpose—

(a) a reference in that Chapter to duty is to be read as including a reference to surcharge land tax, and

(b) a reference in that Chapter to “this Act” is to be read as a reference to the Land Tax Act 1956 and the Land Tax Management Act 1956 .”

18. Part 34 of Schedule 2 of the Land Tax Management Act 1956 (NSW) (‘LTMA’) contains savings and transitional provisions consequent on the enactment of the Amendment Act. It provides that s 5D of the LTA applies in respect of the 2017 and subsequent land tax years but provides for exemptions in certain circumstances. Clause 66 of Schedule 2 provides:

Amendments relating to discretionary trusts

(1) Section 5D of the Land Tax Act 1956 applies to the assessment of land tax liability in respect of the 2017 land tax year and subsequent land tax years.

(2) If the trustee of a discretionary trust is liable in that capacity as a foreign person for surcharge land tax in respect of the 2017, 2018, 2019 or 2020 land tax year—

(a) the trustee is exempt from that land tax if the terms of the trust have been amended, before payment of the land tax is due and before midnight on 31 December 2020, so that the trust prevents a foreign person from being a beneficiary, or

(b) if that land tax has been paid, the trustee is entitled to a refund of that land tax if the terms of the trust have been amended, before midnight on 31 December 2020, so that the trust prevents a foreign person from being a beneficiary.

(1) A trust that satisfies the no foreign beneficiary requirement under section 5D of the Land Tax Act 1956 immediately before the commencement of that section is considered for the purposes of that section to prevent a foreign person from being a beneficiary of the trust (without having to satisfy the no amendment requirement under that section).

(2) Despite section 5D of the Land Tax Act 1956, the trustee of an Australian testamentary trust is not in that capacity a foreign person for the purposes of the application of section 5A of that Act to residential land owned by a foreign person if

(a) liability for land tax is required (under clause 9 of Schedule 1A to this Act) to be assessed as if the deceased had not died and had continued to use and occupy the land as his or her principal place of residence, or

(b) any of the following apply (even if the trust does not prevent a foreign person from being a beneficiary of the trust)—

(i)   for a trust arising from a will or codicil—the will or codicil was executed on or before 31 December 2020,

(ii) for a trust arising from the administration of an intestate estate— the deceased died before, or within 2 years after, the commencement of section 5D of the Land Tax Act 1956

(iii)   for a trust resulting from an order of a court varying the application of the provisions of a will or codicil or of the rules governing the distribution of an intestate estate—the order was made on or before 31 December 2020.

(5) The Chief Commissioner may in a particular case extend the date by which payment of surcharge land tax by a trustee is due so that the trustee qualifies for exemption from that surcharge land tax under this clause if the terms of the trust have been amended before midnight on 31 December 2020 (but after the date by which payment would otherwise be due) so that the trust prevents a foreign person from being a beneficiary.

(6) In this clause—

Australian testamentary trust means a discretionary trust arising from a will or codicil or the administration of an intestate estate (or as a result of an order of a court varying the application of the provisions of a will or codicil or of the rules governing the distribution of an intestate estate) where the deceased was not a foreign person immediately before his or her death.

(7) Expressions in this clause have the same meanings as in section 5D of the Land Tax Act 1956.

19. The definition of “foreign person” is contained in s 2A of the LTA, which relevantly provides that “foreign person” has the same meaning as in Chapter 2A of the Duties Act 1997 (NSW) (‘Duties Act’).

20. Section 104J of the Duties Act (within Chapter 2A) contains the definition of “foreign person”:

Meanings of “foreign person” and “foreign trustee”

(1) In this Chapter—

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.

(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.

Note—

Section 5 of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and is therefore not a foreign person) if and only if—

21. (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time, and

(b) at that time—

(i) the individual is in Australia and the individual’s continued presence in Australia is not subject to any limitation as to time imposed by law, or

(ii) the individual is not in Australia but, immediately before the individual’s most recent departure from Australia, the individual’s continued presence in Australia was not subject to any limitation as to time imposed by law.

(3) For the purposes of charging surcharge purchaser duty on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises (or would arise but for section 53A or a concession or exemption from duty under that Chapter).

Note—

See section 12.

22. Section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (‘FATA’) defines “foreign person” as follows:

foreign person means:

(a) an individual not ordinarily resident in Australia; or

(b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

(c) a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

(d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

(e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

(f) a foreign government; or

(g) any other person, or any other person that meets the conditions, prescribed by the regulations.”

23. Section 4 of the FATA defines “substantial interest” as follows:

substantial interest: a person holds a substantial interest in an entity, trust or unincorporated limited partnership if:

(a) for an entity or unincorporated limited partnership--the person holds an interest of at least 20% in the entity or partnership; or

(b) or a trust (including a unit trust) - the person, together with any one or more associates, holds a beneficial interest in at least 20% of the income or property of the trust.

Note 1: See also sections 17 (meanings of interest and aggregate interest of a specified percentage in an entity or unincorporated limited partnership) and 18 (rules relating to determining percentages of interests in entities).

Note 2: For when a person acquires a substantial interest in an entity, see section 20.

24. Section 18 of the FATA sets out when a beneficiary in a discretionary trust is taken to hold a substantial interest:

Rules relating to determining percentages of interests in entities

Exercise of future rights

(1) Subsection (2) applies if:

(a) a person has a right that, if exercised, would result in the person holding an interest in an issued security in the entity;

and

(b) it cannot be determined at that time (from the right itself or from the circumstances existing at that time) whether the right would be exercised.

(2)    (2) For the purposes of this Act, in determining the percentage of the interests in the issued securities in the entity that the person holds, or would hold, at a particular time, assume that the right were exercised at that time.

Discretionary trusts

(3) For the purposes of this Act, if, under the terms of a trust, a trustee has a power or discretion to distribute the income or property of the trust to one or more beneficiaries, each beneficiary is taken to hold a beneficial interest in the maximum percentage of income or property of the trust that the trustee may distribute to that beneficiary.

25. Section 5 of the FATA provides when an individual who is not an Australian citizen is “ordinarily resident” in Australia:

Meaning of ordinarily resident

(1) An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if:

(a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and

(b) at that time:

(i) the individual is in Australia and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law; or

(ii) the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law.

(2) Without limiting paragraph (1)(b), an individual's continued presence in Australia is subject to a limitation as to time imposed by law if the individual is an unlawful non-citizen within the meaning of the Migration Act 1958.

Factual background

26. The Trust was settled by way of a Trust Deed on 14 April 2018 (‘Trust Deed’). ^[5]

    5. s 58 documents, Tab 3(a).

27. The Trust Deed provides that the following are beneficiaries of the Trust: ^[6]

    6. Schedule 2 of the Trust Deed: s 58 documents, Tab 3(a), p.26.

(a) Named beneficiaries: Rodney John Thornton, Michelle Naomi Thornton

(b) Classes of eligible beneficiaries:

i. The spouse of a named beneficiary;

ii. The children of a named beneficiary;

iii. The relatives of a named beneficiary;

iv. Any person who is a spouse of a beneficiary;

v. The children of any person who is a beneficiary;

vi. Companies of which any beneficiary or the trustee holds a share;

vii. Trustees of any trusts in which any of the beneficiaries has any interest;

viii. Charities, societies, authorities, institutions, churches or religious orders, corporations or entities to which a deductible distribution is made.

28. The Trust Deed provides that the Trustee has an absolute discretion to decide to distribute any part of the income of the Trust fund [7] or any part of the capital of the Trust [8] to any of the beneficiaries.

    7. Clause 3, s.58 documents, Tab 3(a), p.15.

    8. Clause 5, s.58 documents, Tab 3(a), p.18.

29. On 3 June 2022, the Applicant acquired the Property.

30. On 18 September 2023 the Respondent issued the 2023 Assessment in relation to the Property. [9]

    9. s 58 documents, Tab 2.

31. On 23 September 2023, the Applicant lodged a Land Tax Variation Return declaring it was not a foreign entity. [10]

    10. s 58 documents, Tab 3.

32. On 10 October 2023, Rodney Thornton on behalf of the Applicant contacted an officer of Service NSW in respect of the assessment for the 2023 land tax year issued on 18 September 2023. The notes of that conversation record as follows: [11]

Customer called to question/confirm recent NOA for Foreign Person Surcharge. Customer accepted liability/advised they are not a Foreign person after explanation provided. Advised customer to update their details online. Customer advised lodged return on 23/09/23, confirmed with customer the timeframe for lodgements of up to 10 weeks.

11. s 58 documents, Tab 16, p.93.

33. On 28 November 2023, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2023 land tax year, reassessing the Applicant as not liable for surcharge land tax. [12]

    12. s 58 documents, Tab 4, p.58-62.

34. On 24 January 2024, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2024 land tax year. [13] The Applicant was not assessed as liable for surcharge land tax.

    13. s 58 documents, Tab 6, p.64-67.

35. On 13 November 2024, the Applicant executed a Deed Poll of Variation that amended the Trust Deed (‘the Variation Deed’) [14] by inserting a new clause 27 that excluded foreign persons from being a beneficiary of the Trust:

    14. s 58 documents, Tab 7(b).

Amendment of the Trust Deed

The Trustee, in exercise of the Trustee’s powers contained in the Trust Deed and every other power enabling the Trustee in that capacity amends the Trust Deed by inserting a new clause into the Trust Deed as follows:

27   Foreign Persons

(a) Notwithstanding anything else express or implied in this deed:

(i) any Foreign Person is expressly and irrevocably excluded as a beneficiary of the Trust (including any discretionary object or default beneficiary of the Trust) and, notwithstanding anything else expressed or implied in this deed, the exclusion of Foreign Persons is irrevocable;

(ii) the Trustee is expressly and irrevocably prohibited from distributing any income or capital of the Trust, or otherwise providing any benefit directly or indirectly to or for the benefit of any Foreign Person;

(iii) this clause 27 is paramount and prevails over any other clause of this deed to the extent of any inconsistency;

(iv) this clause 27 is irrevocable and is not capable of being amended except in the limited circumstances outlined in this clause and notwithstanding anything else expressed or implied in this deed and for the avoidance of doubt, this deed cannot be amended in any way which will result in any Foreign Person being or becoming a beneficiary or otherwise benefitting under or in relation to the Trust; and

(b) For the purposes of this clause 27, “Foreign Person”; means:

(i) a “foreign person”; as defined in:

(A) the Duties Act 1997 (NSW) and the Land Tax Act 1956 (NSW);

…

36. On 20 November 2024, the Respondent wrote to the Applicant advising that the Variation Deed had been accepted as satisfying s 5D of the LTA from 13 November 2024, but surcharge land tax would be reassessed for the 2023 and 2024 land tax years. [15]

    15. s 58 documents, Tab 7, p.68.

37. On 20 November 2024, the Respondent issued the Reassessment to the Applicant.

38. On 22 November 2024, the Applicant lodged a Land Tax Variation Return, declaring it was not a foreign entity. [16]

    16. s 58 documents, Tab 10.

39. Also on 22 November 2024, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2024 land tax year, reassessing the Applicant as not liable for surcharge land tax. [17]

    17. s 58 documents, Tab 9.

40. On 27 November 2024, the Applicant lodged its Objection. [18]

    18. s 58 documents, Tab 12, p.95-99.

41. On 31 January 2025, the Respondent disallowed the Objection. [19]

    19. s 58 documents, Tab 14(a), p.101-104.

42. Also on 31 January 2025, the Respondent issued a Land Tax Notice of Assessment to the Applicant for the 2024 land tax year, reassessing the Applicant as liable for surcharge land tax. [20]

Submissions

20. s 58 documents, Tab 14(b), p.105-109.

Applicant

43. The Applicant contends that the surcharge land tax is ‘unjust’ because it was not notified by the NSW Government of the change in law applying to discretionary trusts effective from 24 June 2020. [21] It claims it is ‘not reasonably practicable’ for a small family trust owner to ‘be abreast of all the laws and all of the ongoing law changes that may affect the trust.’ [22]

    21. AS page 1, [1].

    22. AS page 1, [1].

44. The Applicant relies on the advice it received from the Respondent that all it was required to do ‘was to make an on-line account and then tick the box which states [it is] not a foreign beneficiary.’ When this was done, and a further phone inquiry was made, the Applicant was advised by an officer of the Respondent that ‘there was nothing else to do.’ [23] The Applicant was not advised that it needed to amend the Trust Deed. [24] If that advice had been provided, the Applicant ‘would have immediately complied’. [25]

    23. AS page 1, [2].

    24. AS page 1, [5].

    25. AS page 1 [5].

45. The Respondent subsequently made changes to the 2023 Assessment and removed the surcharge land tax, which led the Applicant ‘to believe that [it] had undertaken all that was required and also demonstrated acceptance from [the Respondent] that [the Applicant] was not a foreign entity.’ [26] The 2024 Assessment notice also excluded the surcharge land tax ‘again demonstrating acceptance that [the Applicant] was not a foreign entity and making [the Applicant] believe that [it] had undertaken all that was required to be done to ensure this was the case.’ [27]

    26. AS, page 5 [3].

    27. AS, page 5 [4].

Respondent

46. The Respondent contends that the Applicant is liable to surcharge land tax as a trustee of a discretionary trust is deemed to be a foreign person for the purposes of s 5D of the LTA, because the Trust Deed did not irrevocably exclude foreign persons from being potential beneficiaries of the Trust by the relevant taxing date. [28]

    28. Respondent’s submissions dated 21 July 2025, (‘RS’) [3].

47. The ‘no foreign beneficiary requirement’ in s 5D(3)(a) requires that no potential beneficiary of the Trust be a foreign person. The potential beneficiaries of the Trust are not limited to the named beneficiaries. The trustee has a discretion to distribute income or capital of the Trust fund to or for the benefit of the various classes of eligible beneficiaries. The broad terms of these classes are such that the potential beneficiaries may include foreign persons. [29] The Trust did not therefore satisfy the ‘no foreign beneficiary requirement’. At the relevant taxing date of 31 December 2022 (for the 2023 land tax year), the Trust Deed did not contain provisions that excluded a foreign person from being a potential beneficiary of the Trust. [30]

    29. RS, [40].

    30. RS, [42].

48. The Trust Deed was amended on 13 November 2024 to exclude foreign persons as beneficiaries when the Variation Deed was executed. Amendments to a deed cannot operate retrospectively to bind the Respondent or the change the application of a taxation law. [31] As the Trust Deed was not amended to irrevocably exclude foreign persons as beneficiaries in accordance with s 5D(3) of the LTA by midnight on 31 December 2022, the Applicant is deemed to be a foreign person and liable to surcharge land tax for the 2023 land tax year. [32]

    31. RS [44] citing Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184, Chloe Adolphi Pty Ltd as trustee for the Chloe Adolphi Family trust v Chief Commissioner of State Revenue [2024] NSWCATAD 48 at [22].

    32. RS, [44] citing Fujun Pty Ltd ATF Ni Family Trust v Chief Commissioner of State Revenue [2022] NSWCATAD 412 at [41] to [44], Cymtow Pty Ltd ATF Stanavacs Trust & ors v Chief Commissioner of State Revenue [2022] NSWCATAD 314 at [40], Axiom88 Pty Ltd ATF Axiom 88 Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 252 at [62]; Watertite Investments Pty Ltd ATF Ingrove Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 274 at [69]-[70].

49. The Respondent notes that when the Applicant acquired the Property on 3 June 2022, the surcharge land tax requirements for discretionary trusts had been in effect for two years. The Respondent made information available to the public explaining the effect of s 5D, and the need for trust deeds to be amended to comply with these requirements from 1 July 2020. [33] The Applicant’s lack of knowledge of these requirements does not affect the validity of the Reassessment. The Respondent has no obligation to notify taxpayers of the amendments to the LTA that introduced s 5D. [34] Liability to surcharge land tax is created by direct operation of the LTA. [35] The onus is on the Applicant to make necessary enquiries as to whether it is liable for surcharge land tax. [36] Any conduct or representation by the Respondent does not operate as an estoppel against the Respondent issuing an assessment in the discharge of his duty to administer a taxation law. [37]

    33. RS, [46]. See CPN 004v2, RTB, Tab 2.

    34. RS, [47] Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27 at [31] and [33]

    35. RS, [49] citing Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218; Brataniec v Chief Commissioner of State Revenue [2013] NSWADT 65 at [23].

    36. RS, [49] citing Gupta v Chief Commissioner of State Revenue [2006] NSWADT 187 at [33].

    37. RS, [49] citing BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue [2003] NSWSC 1003 at [111] per Gzell J; Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSWADT 271 at [11]-[12]; Sheedy v Chief Commissioner of State Revenue [2012] NSWADT 99 at [19]-[20]; Greenish v Chief Commissioner of State Revenue [2007] NSWADT 282 at [22]- [23], Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218 at [19]

50. The Respondent relied on the Applicant’s declaration in relation to its foreign person status for the purposes of assessing surcharge land tax. When the Respondent became aware that the Applicant was deemed to be a foreign person, he was obliged to reassess the Applicant as liable to surcharge land tax in accordance with s 5D of the LTA. [38]

    38. RS, [50].

51. The Applicant’s arguments based on fairness are not relevant to the validity of the Respondent’s surcharge land tax assessments. [39] The Respondent has no discretion based on fairness to not impose surcharge land tax. The Respondent, and in review proceedings the Tribunal, is required to administer the law in accordance with its terms. [40]

    39. RS, [51] citing Commissioner of Taxation v Ryan (2000) 201 CLR 109.

    40. RS, [52] citing Valencia v Chief Commissioner of State Revenue [2017] NSWCATAD 261 at [84].

Consideration

52. Pursuant to s 5D of the LTA, a trustee of a discretionary trust is deemed to be a foreign person for the purposes of s 5A of the LTA unless the trust prevents a foreign person from being a beneficiary of the trust. The definition of “foreign person” in s 4 of the FATA is set out at [21] above. It includes individuals not ordinarily resident in Australia, as well as corporations (or trustees of a trust) in which an individual (or two or more individuals together) not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest.

53. The ‘no foreign beneficiary requirement ‘in s 5D(3)(a) of the LTA requires that no potential beneficiary of the trust be a foreign person. As provided for by s 5D(4) of the LTA, a “potential beneficiary” of the Trust includes not just the named beneficiaries listed in [26(a)] being Rodney John Thornton and Michelle Naomi Thornton. A “potential beneficiary” includes eligible beneficiaries which include the extended family members of the named beneficiaries, and any member of the various classes of eligible beneficiaries listed in [26(b)] if the exercise or failure to exercise a discretion to distribute income or capital of the trust fund can result in any property being distributed to, or applied for the benefit of, the beneficiary (see [27] above). The broad terms of the classes of eligible beneficiary make clear that the potential beneficiaries of the Trust may include foreign persons.

54. The Applicant has not demonstrated that none of the persons and entities listed as eligible beneficiaries were foreign persons at all relevant times. ^[41] I accept the evidence of Mr Thornton that members of his family who could be potential beneficiaries under the terms of the Trust Deed are not “foreign persons”. However, it is not sufficient for the Applicant to establish that Mr Thornton and his family members are Australian citizens or that there were no distributions to any other beneficiaries. This does not satisfy the requirements of the “no foreign beneficiary requirement.” The terms of the Trust Deed extracted at [26] above show that the eligible beneficiaries are not limited to natural persons. They include companies of which any beneficiary or the trustee holds a share; trustees of any trusts in which any of the beneficiaries has any interest; and charities, societies, authorities, institutions, churches or religious orders, corporations or entities to which a deductible distribution is made. Accordingly, the Trust did not, in its original terms, satisfy the “no foreign beneficiary requirement”.

    41. See Keddas Pty Ltd ATF Kaluarachchi Family Discretionary Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 138 at [41]-[46]

55. The terms of the Trust Deed were amended to exclude foreign persons as beneficiaries when the Variation Deed was executed on 13 November 2024. The Tribunal is satisfied that the Variation Deed complies with s 5D to prevent “foreign persons” being beneficiaries of the Trust. However, the irrevocable exclusion of “foreign persons” as potential beneficiaries did not take effect until 13 November 2024. The exclusion did not apply to either the 2023 or 2024 land tax year. Amendments to a deed cannot have retrospective effect to change the application of taxation law. ^[42]

    42. Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184, Chloe Adolphi Pty Ltd as trustee for the Chloe Adolphi Family trust v Chief Commissioner of State Revenue [2024] NSWCATAD 48 at [22].

56. At the relevant taxing date of 31 December 2022 (for the 2023 land tax year) and 31 December 2023 (for the 2024 land tax year) the Trust Deed did not contain provisions that excluded a foreign person from being a beneficiary of the Trust. Pursuant to cl 66(2) of Schedule 2 of the LTMA, a trustee of a discretionary trust liable for surcharge land tax in respect of the 2023 and 2024 land tax years will be exempt if the terms of the trust have been amended before midnight on 31 December 2022 and 31 December 2023 respectively, so that the trust prevents a foreign person (as defined by s 4 of the FATA) from being a beneficiary of the trust.

52. As the Trust Deed was not amended by the relevant date of midnight on 31 December 2022 for the 2023 land tax year and midnight on 31 December 2023 for the 2024 land tax year to irrevocably exclude foreign persons as beneficiaries in accordance with s 5D(3) of the LTA, the Trust is deemed to be a foreign person and liable to surcharge land tax for the 2023 and 2024 land tax years. ^[43]

    43. Fujun Pty Ltd ATF Ni Family Trust v Chief Commissioner of State Revenue [2022] NSWCATAD 412 at [41] to [44], Cymtow Pty Ltd ATF Stanavacs Trust & ors v Chief Commissioner of State Revenue [2022] NSWCATAD 314 at [40], Axiom88 Pty Ltd ATF Axiom 88 Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 252 at [62]; Watertite Investments Pty Ltd ATF Ingrove Trust v Chief Commissioner of State Revenue [2023] NSWCATAD 274 at [69]-[70].

53. Accordingly, by virtue of s 5D of the LTA, the Applicant is taken to be a foreign person for the purposes of s 5A of the LTA and surcharge land tax is payable by the Applicant in respect of the Property for the 2023 and 2024 land tax years.

54. The Trust did not satisfy the “no foreign beneficiary requirement” in s 5D(3)(a) for any relevant land tax year at any relevant taxing date.

55. I accept that the Applicant believed it had met the requirements in s 5D and that it would not be liable to surcharge land tax. However, the Variation Deed complies with s 5D to prevent “foreign persons” being beneficiaries of the Trust only from the 2025 land tax year onwards. The legal position of the Trust as contained in the Trust Deed as amended by the Variation Deed, the application of the surcharge land tax provisions and the requirements of s 5D of the LTA were matters that required professional legal advice. The advice Mr Thornton understood he received during his call with an officer of the Respondent in October 2023 could not be relied on as an accurate assessment of the legal position of the Applicant in relation to these matters.

56. The Tribunal has no discretion under the legislation to reduce or waive the liability to surcharge land tax: Monisse v Chief Commissioner of State Revenue [2023] NSWCATAP 27 at [33]. As was stated by the Tribunal in Feng v Chief Commissioner of State Revenue [2024] NSWCATAD 56 at [49]:

The Tribunal has repeatedly emphasised that the factors contributing to an applicant’s failure to satisfy a statutory requirement are irrelevant (unless, of course, the statute itself says otherwise): Lawrence v Chief Commissioner of State Revenue [2022] NSWCATAD 266 at [38]; Song v Chief Commissioner of State Revenue [2023] NSWCATAD 301 at [80]. Also, the Tribunal has no overriding discretion to waive tax that is otherwise payable: Chu v Chief Commissioner of State Revenue [2021] NSWCATAD 238 at [30].

62. Accordingly, the Tribunal has no discretion to relieve the Applicant of the obligation to pay the surcharge land tax. Liability to surcharge land tax is created by direct operation of the LTA, and notions of fairness or “justice” have no relevance when the statutory provision contains no relevant discretion: Commissioner of Taxation v Ryan (2000) 201 CLR 109. The Respondent, and in review proceedings this Tribunal, is required to apply the law in accordance with its terms.

Conclusion

63. Having regard to my findings and the applicable statutory provisions, the Applicant was a “foreign person” for the purposes of s 5A of the LTA for the 2023 and 2024 land tax years.

64. It follows that the correct and preferable decision is that the Respondent’s Reassessment decision dated 20 November 2024 is confirmed.

Order

1. The Applicant is liable to pay surcharge land tax for the 2023 and 2024 land tax years pursuant to s 5D of the LTA.

Endnotes

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: 18 November 2025