SOUTHSIDE AUTOS (1981) PTY LTD and COMMISSIONER OF STATE REVENUE - [2011] WASAT 55

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: DEVELOPMENT & RESOURCES

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION: SOUTHSIDE AUTOS (1981) PTY LTD and COMMISSIONER OF STATE REVENUE [2011] WASAT 55

MEMBER: JUDGE J ECKERT (DEPUTY PRESIDENT)

HEARD: 21-23 APRIL 2009
5 MAY 2009

DELIVERED : 6 APRIL 2011

FILE NO/S: DR 30 of 2006

BETWEEN: SOUTHSIDE AUTOS (1981) PTY LTD
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Stamp duty - Motor vehicle transfers - Exemption for contracts for purchase of demonstrator or display - Scheme to hire out vehicles for purpose of demonstration - Arrangement approved by Commissioner of State Revenue - Whether scheme operated in accordance with approved arrangement - Market value of vehicles for purposes of stamp duty

Legislation:

Stamp Act 1921 (WA), s 76C, s 76C(6), s 76C(7), Pt IIIC
Stamp Amendment Act 2003 (No 2 of 2003) (WA)
State Administrative Tribunal Act 2004 (WA), s 24, s 27(1), s 27(2)
Taxation Administration (Consequential Provisions) Act 2002 (WA)
Taxation Administration Act 2003 (WA), s 15, s 16, s 17, s 26(1)(e), s 26(1)(g)

Result:

The application is dismissed

Category: B

Representation:

Counsel:

Applicant: Mr DR Williams QC and Mr SK Grimley
Respondent: Mr AJ Sefton and Ms TS Cole

Solicitors:

Applicant: Ernst & Young
Respondent: State Solicitor for Western Australia

Case(s) referred to in decision(s):

ACC v Universal Music Australia Pty Ltd 2001 FCA 1800
Cheng v Commissioner of State Revenue 2008 WASAT 8052
Commissioner of State Revenue v Serana Pty Ltd 2008 WASCA 82
Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation 1980 (49 FLR) 183
Pinesales Pty Ltd v Commissioner of State Revenue 2006 WASAT 202
Southside Autos (1981) Pty Ltd v Commissioner of State Revenue [2008] WASCA 208

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant is a motor vehicle dealer which instituted a program pursuant to which new vehicles were licensed, and then hired to members of the public, following which they were eventually sold.
The applicant claimed an exemption from the stamp duty which would ordinarily be payable on the issue of each vehicle license, on the basis that the vehicle was being licensed for the purpose of demonstration to prospective purchasers.
Pursuant to a selfregulation scheme operated by the relevant government department an exemption was initially granted in each case, but the Commissioner of State Revenue subsequently issued a reassessment and duty was levied in many cases.
The Tribunal found duty was payable in those cases, the applicant's purpose in licensing vehicles not being as claimed by it.

Introduction

These proceedings relate to a reviewable decision made by the Commissioner of State Revenue (Commissioner) being a stamp duty assessment issued by the Commissioner to Southside Autos (1981) Pty Ltd (Southside).
Southside filed an application with the Tribunal, dated 20 January 2006, filed on 30 January 2006 seeking review of the Commissioner's decision to issue an assessment notice dated 28 January 2005 (assessment).
In its application Southside claimed that the assessment was not validly issued and that it was not liable to duty under Pt IIIC of the Stamp Act 1921 (WA) (Stamp Act). Southside expressed the view in the application that the Commissioner should have issued a nil assessment in terms of a previous ruling that the Commissioner had given. Southside also claimed that the market value of the motor vehicles, the subject of the assessment, was incorrectly stated. Southside also alleged that penalties imposed by the Commissioner were excessive.

History

On 3 June 1997 Arthur Andersen (Arthur Andersen) wrote to the Commissioner on behalf of Southside, seeking 'confirmation of the exemption of stamp duty on the transfer of motor vehicle licenses' based on the facts discussed below.
Background
Southside is currently considering a variation to its current method of demonstrating new motor vehicles and the subsequent disposal of new motor vehicles which it acquires from Mitsubishi. The proposal is as follows:
•     Southside will acquire new motor vehicles from Mitsubishi as it would normally do for resale.
•     Southside proposes to make some cars available to prospective buyers for hire for a maximum period of three months.
•     Either during the three months period or at the end of the three months the hirer of the motor vehicle can acquire that car for a predetermined market value price.
•     If the hirer of the vehicle does not proceed with the acquisition the vehicle will become part of the trading stock of Southside and the vehicle will be sold as a demonstration vehicle.
•     The vehicle once it has been hired for a period will not be rehired to the public, it will automatically be reinstated as trading stock of Southside.
Arthur Andersen went on to express the view that Southside could claim a stamp duty exemption pursuant to s 76C(6)(b) of the Stamp Act, as it was a dealer using the arrangement as a way of selling new motor vehicles.
In a written reply dated 24 June 1997, it was said on behalf of the Commissioner:
I refer to your letter dated 3 June 1997 and Mr Downe's telephone conversation with Mr Maynard.
It is confirmed that the exemption contained in section 76C(6) of the Stamp Act would apply to the issue of the initial licence for a motor vehicle in the circumstances where in the course of endeavouring to sell it, it is hired to a prospective purchaser for a period of up to three months.
Although the Arthur Andersen letter referred to the transfer of vehicles it is common ground that what was meant was the grant of an initial license.
It is also common ground that the arrangement proposed had already been put into operation, under the name the 'DriveAWhile Program' (Program).
Following the Commissioner's positive response, and on 15 July 1997, Arthur Andersen sought a refund of stamp duty on those vehicles which had already been licensed, and on 28 November 1997 the Commissioner refunded an amount of $67,356.
Southside, in common with other dealers, was able to generate motor vehicle licenses itself under an administrative arrangement with the department of planning and infrastructure, previously the Department of Transport (DPI), the arrangement being known as the 'Dealer Network Registration Scheme' (DNRS).
Under that arrangement Southside also completed an application and a certificate entitled 'Form S13 Dealer's Certificate Section 76C(7) Stamp Duty 1921' and duly forwarded them to the DPI.
In the certificate, signed by an employee of Southside, there was a declaration that the subject vehicle would be used for demonstration.
The obligation to collect duty, if payable, fell on the licensing authority.
In March 1999, another dealer sought a directive in relation to the payment of stamp duty on the transfer of vehicles to its rental division, and after a visit by officers of the Commissioner the dealer was given a written advice in similar terms to that given to Southside here.
In 1999 an officer of the Commissioner conducted an audit of the Program.
In 2002 a further audit began.
It was that audit which eventually led to the assessment being issued by the Commissioner, on 28 January 2005, pursuant to the Taxation Administration Act 2003 (WA) (TAA Act) s 15.
Following that Ernst & Young (E & Y) lodged an objection on behalf of Southside, by letter dated 25 February 2005.
On 1 December 2005 the Commissioner advised E & Y that the objection was disallowed.
The Commissioner's assessment related to a period between 1 July 1998 and 30 June 2003.
During that period Southside had licensed for the Program a total of 927 vehicles, but the assessment related to only 673 of those vehicles, and was for a total of $718,770.90 being stamp duty of $552,901.90 and a penalty of $165,869.
Following the commencement of these proceedings the Tribunal conducted a hearing to consider some preliminary issues.
The findings made at that hearing were then the subject of an appeal by Southside to the Court of Appeal (Appeal).
On 10 October 2008 that Court delivered its reasons on the appeal: Southside Autos (1981) Pty Ltd v Commissioner of State Revenue [2008] WASCA 208 (Southside).
The decision of the Court has significance in relation to a number of issues before the Tribunal.

Legal framework

During the relevant period, Southside's obligation to pay stamp duty on motor vehicles licensed by it fell to be determined by the provisions of the Stamp Act.
However on 1 July 2003, the provisions of the Stamp Act were largely superseded by the Stamp Amendment Act 2003 (WA) and the administration provisions formerly found there were replaced by those in the TAA Act, whilst the transitional provisions applicable became those in the Taxation Administration (Consequential Provisions) Act 2002 (WA) (CPA Act).
The findings on appeal have relevance in relation to these provisions.
In relation to the issue of the license in each case in respect of a vehicle under the Program, the Court found on appeal that when an exemption from duty was sought and dealt with under s 76C(6) of the Stamp Act, the licensing authority made a decision or determination, and hence an assessment under that Act as to the payment of duty.
As Southside had been appointed an agent of the licensing authority under the DNRS, the effect of the issue of a license by Southside was that the licensing authority had made an assessment that duty was not payable through its agent. Southside: Buss JA [126] [128].
It followed that the assessment issued in 2005 by the Commissioner was a 'reassessment' under s 16 of the TAA Act, and was therefore subject to the restrictions set out there and in s 17.
Those provisions read:
16.Reassessments
(1)The Commissioner must make a reassessment
(a)if specifically required to do so under a taxation Act;
(b)if specifically required to do so under a direction given in the course of review proceedings; or
(c)if a taxation Act provides for a rebate or refund of tax in particular circumstances, and the circumstances were not taken into account when the previous assessment was made.
(2)Subject to subsection (5), the Commissioner may also make a reassessment -
(a)on his or her own initiative, if it appears that a previous assessment is or may be incorrect for any reason; or
(b)on the application of the taxpayer.
(3)A reassessment may be made whether or not any amount of tax has been paid on the previous assessment.
(4)A reassessment may consolidate 2 or more separate assessments into a single assessment.
(5)If an assessment is based on a particular interpretation of the applicable law or a particular practice of the Commissioner that was generally applied to assessments of that kind when the assessment was made, then the Commissioner cannot make a reassessment based on the ground that the interpretation or practice is or was erroneous.
17.Time limits on reassessments
(1)A taxpayer is not entitled to apply for a reassessment more than 5 years after the original assessment was made.
(2)The Commissioner may make a reassessment at any time after the previous assessment was made if -
(a)the Commissioner has been directed, in the course of review proceedings, to make the reassessment; or
(b)there are reasonable grounds for suspecting that there has been an evasion of tax, or that the previous assessment was made on the basis of false or misleading information.
(3)The Commissioner may make a reassessment of the amount of pay-roll tax payable on an original assessment that was made in or in relation to any of the 5 financial years that precede the financial year in which the reassessment is made.
(4)However, in any other circumstances the Commissioner may only make a reassessment within 5 years after the date of the original assessment or on an application made within 5 years after the date of the original assessment.

Evidence

Richard Dawe is a principal compliance officer with the Office of State Revenue.
In 1999 he completed a compliance report after a visit to Southside to check on the payment of stamp duty.
Mr Dawe said he was given a copy of the Arthur Anderson letter by Southside, confirmed that the conditions set out there were being followed, and no action was taken.
Ms Richelle Preisser is a senior policy analyst in the State Treasury and Finance Department.
In 2002 she was a senior investigations officer with the Commissioner and in November of that year commenced an audit of the Program, producing in the following month an audit report and compliance reports.
Ms Preisser said that as a result of her investigations she formed the view that the Program was a separate rental business operated by Southside.
She then conducted further investigations, which included a visit to Southside in July 2003 with another officer, Mr Fahey, and after further investigations and correspondence with Southside representatives issued a further compliance report, in December 2004, following which the Commissioner's assessment was issued, on 28 January 2005.
In her initial compliance report Ms Preisser set out the details of 12 vehicle rentals, which she later said she thought had been chosen at random.
Ms Preisser said information as to whether a vehicle was later purchased in her report came solely from licensing records.
Information as to the purchase of vehicles had been sought from the Southside throughout the investigation, Ms Preisser said, but had never been forthcoming.
She could not recall, she said, whether specific information was sought in relation to the 12 vehicle rentals particularised.
A notice to produce relevant records was issued, Ms Preisser said, and rental agreements and rental postal sheets were provided.
Worksheets were prepared by her and others, she said, with a view to determination in each case whether a vehicle fell within the Commissioner's ruling, based on six criteria taken from the ruling.
Ms Preisser said it was considered at that stage that the Program did not then fall within the exemption provisions, but given the existence of the ruling it was decided to exempt apparently compliant vehicles from any assessment.
Mr Tierney, Southside's relevant employee, was told on 9 July 2003 that stamp duty may have been payable on vehicles in the Program, she said, and in June 2004 was advised, together with Ernest & Young that the assessment was to proceed.
Mr Jim Demiris is a senior investigations officer of the Commissioner, who at the time of giving evidence was on extended leave and in private employment.
In the course of the investigation into the Program Mr Demiris said he contacted three hirers, including a Ms Jones from the Australian Medical Association (AMA), to seek particulars of the rental in each case.
The first private hirer lived interstate and said that she hired the vehicle to visit relatives here, and had done so on other occasions, he said, and the other hirer said he hired vehicles from the Program for business use, and had done so over a course of years.
Mr Demiris said he obtained information for the worksheets and assisted in their preparation.
Mr Anthoney Fahey, is a principal compliance officer with the Commissioner, and was the responsible person in relation to the 2002 audit of the Program by the Commissioner.
As part of that audit lists of all vehicles registered to Southside were obtained, he said, which included information as to which were to be hired.
Mr Fahey said that after a visit with Ms Preisser to Southside's premises on 9 July 2003, and a conversation there with Mr Tierney, various documents were provided, some of which were utilised to prepare the worksheets.
Although he and other officers of the Commissioner concluded the Program as conducted was outside the scope of Southside's original proposal, Mr Fahey said it was decided to exclude from the audit vehicles the use of which might arguably have fallen within the proposal, and the Commissioner's response to it, notwithstanding doubts about the correctness of that response.
The assessment that issued to Southside used as market value in some cases, the 'National Fleet' price, with factory rebates added back, of a vehicle as a fair representation of that value, he said, or where not available the dealer's purchase price of a base model and tax.
In the absence of that information, Mr Fahey said the Red Book was relied on.
The recommended prices in that Book were utilised for the 1998 1999 year, to the extent that wholesale prices were not available, he said, and for subsequent years to 2001 2002 wholesale prices plus tax were used.
Mr Fahey said that invoices were not available for the 2002 2003 year, and market value was calculated by use of the National Fleet price plus factory rebate in each case.
In relation to penalty tax, he said the practice of the Commissioner was to generally levy a penalty of 30% of the stamp duty payable when a motor vehicle dealer was audited and found liable to pay duty.
Evidence of the dealer network registration scheme was also adduced by the Commissioner.
The worksheets or schedules prepared for the audit, which encompass vehicles licensed between 10 September 1997 and 18 June 2003, were put before the Tribunal and are voluminous, and available in the event further scrutiny is required, and it is not necessary to set out a detailed analysis of the same.
Suffice it to say that many vehicles were hired out more than once, many for a total period well in excess of three months, many people hired more than one vehicle, and there were many hirers with interstate or overseas licenses.
There was also a significant number of nonMitsubishi vehicles involved, and a gradual increase in the number of vehicles parked for the purpose of delivery at the airport.
The Commissioner also called as witnesses or put into evidence statements of several people who dealt with the Program.
Ms Noelle Jones, is the Director of Health and Community Services at the AMA.
Ms Jones said her responsibilities included the recruitment, orientation and placement of overseas doctors who wished to work in Western Australia.
Those doctors were contracted by the AMA for up to 12 months, she said, and about 25% eventually settled in Australia.
Remuneration packages for doctors could include the use of a vehicle, and generally that was organised by the AMA through the Program, she said, and many hire requirements were for short periods of one to two weeks.
Ms Jones said the AMA also both hired and purchased vehicles for its own staff.
In the past the AMA had utilised various vehicle rental companies, she said, but in 1997, and after research into other rental providers, decided to try the Program.
That was for a number of reasons, Ms Jones said, those being that vehicles would be delivered to and collected from anywhere in the metropolitan area, including Perth airport, that new or nearnew vehicles were hired, and that the rates of hire were very attractive.
Ms Jones said she met with Mr Tierney several times to discuss terms, and it was agreed AMA members would receive the corporate rate, in consideration of the AMA marketing the Program to its members.
No mention of demonstration with subsequent sale was mentioned by Mr Tierney, in relation to hire by doctors or the AMA itself, she said, and after 1997 the AMA used the Program for both short and longer term rentals, the latter being for up to three years with a periodic change of vehicles.
Ms Jones said that she or a colleague would arrange a rental for a doctor, and if the vehicle was left at an arranged place there would be no communication between the doctor and the Program.
The AMA had not purchased any vehicles from Southside, so far as she was aware, Ms Jones said, nor had they been approached so to do.
Mr Christopher Thomas stated that in 1997, after seeing a newspaper advertisement for the Program, he spoke to Mr Tierney by telephone.

He said that in that conversation he informed Mr Tierney that he 'had done the maths' and had determined that the hire of a vehicle was more cost effective than purchase.
Thereafter, and over a period of two or more years, he hired a series of vehicles from Southside, each for three months, Mr Thomas said, there being contact with Mr Tierney shortly before the end of each period, and there being no discussion about purchase.
He said he then moved to New South Wales.
Mr Trevor Boucher is a former Commissioner of the Australian Taxation Office, resident in Canberra.
He said that in December 2002 he came to Perth to spend Christmas with his children, and whilst here drove a vehicle rented through the Program by his daughter.
That vehicle was collected from the Program's premises, and involved only the production of licenses and credit card details, Mr Boucher said, and there was no other discussion.
On two subsequent occasions when he visited Perth he arranged a vehicle through the Program, he said, and on each occasion collected the vehicle from and returned it to Perth airport.
Mr Alan Hinge is also a resident of the ACT, and is a public servant.
He said that in 2002 he worked as a consultant in educational services, and as a result travelled frequently to cities around the country.
In September of that year he said he came to Perth for eight days, and rented a Toyota Corolla, which he believed was done online.
Mr Ian Strath resides in Melbourne.
He said that he too came to Perth to spend Christmas with his family in 2002, and hired via email a Toyota Corolla, which he collected from the airport and later returned it there.
Mr Shane Hinniver is also a resident of Victoria and came to Perth in July 2002 to watch a sporting team.
A vehicle was rented online through the Program, Mr Hinniver said, and collection and return both took place at Perth airport.
Ms Louise Boyd lives in Victoria but the majority of her family live in Western Australia and she visits them almost every year.
Before she came to Perth in 2002, Ms Boyd said she hired a vehicle via email through the Program and both collected it from and returned it to Perth airport.
Ms Boyd said she undertook the same exercise in the following year.
There was never any discussion of purchase, nor was information beyond her name, contact, license and credit card details sought, she said.
Mr Ross Swadling lives in New South Wales but came to Western Australia to play in a hockey tournament in 2002.
After an internet search he said he made an online booking for the hire of a Mitsubishi Lancer from the Program, and provided the usual details for that.
The vehicle was then collected from and returned to Perth airport, Mr Swadling said, and he had no recall of any other discussion, although he agreed it was possible credit card details were provided over the telephone.
Southside both produced evidence and called a number of witnesses.
Mr Paul Davies was the dealer principal of Southside between 1998 and 2001, having commenced employment there after the Program began, which he said was run on a day to day basis by Southside's financial controller, Mr Tierney.
Southside's market share in its prime marketing area (PMA) had been unsatisfactory and the only objective of the Program was to sell more Mitsubishi vehicles, Mr Davies said, it simply being one of many strategies adopted to that end, and Southside was not in the vehicle rental business in any sense.
In his opinion, the 'prime objective' in relation to the inducement of a sale was to have a potential customer drive a new vehicle, he said, and there were many ways to achieve that, the Program being one of them.
Mr Davies said Mitsubishi were favourable to the Program as it would lead to increased sales and enhance brand recognition, and it was agreed it there would be a three month hiring period for each vehicle.
Discounts were provided by Mitsubishi on vehicles to be used in the Program, he said.
The vehicle sales industry was intensely competitive and profit and survival depended on sales volumes, so that all the energy and resources of a dealer were devoted to selling vehicles, he said.
Had the Program not contributed to increased sales it would have been immediately closed, Mr Davies said.
In relation to the Commissioner's audit of the Program, if there was a conversion rate of two immediate sales from 12 hirers interviewed that was good, Mr Davies said, and while it was likely to have been higher as sales frequently occurred much later, whilst relationships such as those with the AMA and the Western Australian Football Commission also led to new vehicle sales.
That most hirers interviewed had not had an intention to buy a new vehicle at the time of hiring 'would be correct', he said, but 'the proposition that the definition of a prospective purchaser … is restricted only to people who declare that they intend to buy a new vehicle before they drive the vehicle is unfounded … and does not take into account the complex sales and purchasing processes and human dynamics that exist in retailing new motor vehicles'.
Skipper Mitsubishi was a nearby dealer with a much higher public profile than Southside, Mr Davies said, and a range of sales measures was required as a result, including the Program.
He said hirers were selected for the Program carefully with the use of strict criteria for a prospective purchaser, and tourists and others without potential to purchase a vehicle 'were always rejected'.
Arrangements were also made with corporate customers, he said.
Those included, Mr Davies said, Kvaener, who transferred engineers from around the world to Perth, many of whom bought vehicles after involvement in the Program, in some cases two vehicles, and the AMA, and vehicles were sold to doctors in circumstances where they had been brought to Australia.
Rental rates charged were below those levied by vehicle rental companies, Mr Davies said, and the success of the Program was measured only by the overall sales performance of the dealership.
In crossexamination Mr Davies said he was unaware whether there was a specific business plan document for the Program.
It would not have been reasonably possible to log sales attributable to the Program, he said, and for results Southside looked to market share, an increase there, in his view, being a result of the Program's operation.
There was also a Pay Less Rent a Car program (Pay Less) trialled by Southside, which would have been Mr Tierney's idea, he said, and that involved Daihatsu Charade vehicles.
Mr Davies agreed that 'a byproduct' of and part of the business case for the Program was an increase in the numbers of available vehicles and an increase in the options for sale, and that was one of the objects of setting it up.
One aspect of the Program was to target a group such as the AMA, and a vehicle would be hired to someone within that group regardless of the person's personal circumstances, he said.
Mr Davies was shown an advertisement for the Program in the 1998 Yellow Pages directory which made reference to periods of hire of three, six, nine and 12 months, with an option to purchase.
He said 'you will have to check with Neville. I am sure he would have done some for three months and then tried to sell them the car'.
Mr Tierney dealt with most of the Program's customers, Mr Davies said, and he trusted him and was sure he would have told prospective hirers that the vehicles were for sale.
Mr Robert Branchi was the managing director of Automotive Holdings Group Limited (AHG) during relevant times, and until November 2005, when the company was publicly listed. At the time of giving evidence he was Chairman of AHG, as it then was.
Mr Branchi also spoke of the concern of Mitsubishi with Southside's poor sales performance and the effect of Skipper Mitsubishi on that, in relation to the introduction of the Program.
The sole purpose of the Program was, he said, to increase sales of Mitsubishi vehicles through the demonstration of new vehicles to prospective purchasers on a short term basis, demonstration being one of the best and most consistent ways to sell.
It had been his opinion, Mr Branchi said, that the program should be successful as it would increase exposure to Mitsubishi vehicles, but a critical factor was the need to properly execute it, in that prospective purchasers had to be targeted, whilst the vehicles had to be maintained in pristine condition for sale.
He said he discussed the Program with the then Dealer Principal, and Mr Tony Carter, and Mr Tierney, who was responsible for promoting it, and vehicles were to be hired to customers carefully selected on the basis of Southside's potential to sell new vehicles to them.
AHG had previously operated a vehicle rental business without success and did not wish to enter another one, Mr Branchi said, and such an operation was in his opinion not compatible with a vehicle dealership.
The purchase of a vehicle might start with a demonstration, even where the customer did not actually seek a purchase at the time, he said.
The business plan for the Program had been put to the AHG board and approved, Mr Branchi said, and Mitsubishi were consulted and expressed support, with a stipulation the vehicles be in the Program for at least three months, so as to get adequate market exposure.
The making of a profit from vehicle hire was not the 'main driving reason' behind the Program, he said, but AHG did not go into it to make a loss.
Mr Branchi said that internal profit and loss figures in relation to the Program were seen by him.
In relation to documents produced which set out figures for the Program for 'June 03' he said he was unaware as to the meaning of internal rental income.
Although the documents recorded a net profit of $104,219, with a profit of $133,893 for the previous year there were other costs not set out, Mr Branchi said, including internal interest and administration costs.
It was left to Southside to decide which people were selected to hire vehicles, and also the form of advertising, Mr Branchi agreed.
Pay Less was not known to him, he said.
Vehicles other than those manufactured by Mitsubishi were offered in the Program to get people to come to Southside, Mr Branchi said, and the idea was to build a relationship with people in the hope that they would return.
Mr Neville Tierney was employed by Southside from April 1989 until 2006 as its financial controller as well as having sole day to day control of the Program.
He was also a licensed vehicle salesman.
On advice from Mitsubishi of an unsatisfactory market share, and in the light of various disadvantages which confronted Southside, Mr Tierney said consideration was given to alternative forms of marketing, including a new plan that had experienced some success in the United Kingdom, and on which the Program was subsequently based.
He said the strategy behind the Program was to target corporate and private customers who were likely to buy a vehicle in the future, but who might not ordinarily know of or seek out a Mitsubishi vehicle.
People and companies were to be 'proactively' selected, Mr Tierney said, advertisements would not be placed in the media, and enquiries from prospective hirers would be screened 'to select people who fit our criteria as prospective purchasers'.
The plan was approved by the AHG board on the basis that it was not to be operated as a vehicle hire business, he said, and for various reasons the way in which the Program was undertaken could be distinguished from such a business.
Mr Tierney said those included daily hire rates, about $25 per day less than those of vehicle rental companies, the scale of the operation, and the way vehicles were treated, those being part of Southside's trading stock, and having with them a flyer which stated the vehicle was for sale, and hire fees could be set off against the purchase price, whilst the cost of the Program exceeded income.
Target customers were less than half of total enquiries, he said, and he constantly turned people away, particularly those identified as tourists, but also those who might put a vehicle at some risk.
To be acceptable, customers needed 'solid financial backing' through personal and credit card checks, which established an ability to buy a new vehicle in due course, Mr Tierney said.
The criteria for prospective purchasers also included people who came to Western Australia from interstate or overseas to begin a new job, he said, where there would likely be a delay before a new vehicle was bought, so that an extended hire period was called for.
Amongst corporate entities targeted were business brokers, Mr Tierney said, and the Program became the preferred supplier to the 'locum division' of the AMA, doctors being brought in from overseas for locum duties in this state.
He said that other overseas people who met the criteria were Singaporeans, as many had children at university or owned a residence here.
Overseas visitors 'had to pass the test' however, Mr Tierney said, and would be asked the purpose of their visit and local destination, as would visitors from the eastern states.
He said that on occasion a vehicle would be left at the airport for a qualified hirer.
Following the introduction of the Program Mr Tierney said new vehicle sales increased from an 8% market share to about 10%.
In crossexamination Mr Tierney said he could not recall any business document which detailed the Program.
Every vehicle purchased from Mitsubishi for the Program was subject to a specific vehicle rebate, he agreed, and the object was to have the Program at least cover costs, and if possible be profitable.
Perhaps 120 vehicles were required each year by Southside for the Program, he said.
In relation to Pay Less, Mr Tierney said initially that was a business Southside registered but never used, but then accepted that was not the case, on being shown vehicle rental documents which bore the relevant name.
His evidence then was that he recalled that he put forward a proposal to commence a separate 'stand alone', vehicle rental company, but that was rejected.
However, he had pre-empted the decision, Mr Tierney said, and had printed documents and had booked some advertisements.
On being shown a document from Southside's accountants which referred to Pay Less as a marketing strategy of Southside, following the 2002 audit, and Yellow Pages advertisements from 1999 2003 for such an entity, he eventually agreed the name was utilised.
Mr Tierney said he also recalled 'Best for Less Car Rental' (Best for Less) as a pilot venture, run by him privately from his house for a short period, with his wife as operator, and then shut down.
On being shown a 2003 Yellow Pages advertisement for Best for Less which provided as a free call telephone booking number the Program's telephone number, together with its fax number, and email and website details, Mr Tierney said he was unable to recollect it very well, but the advertisement must have been used to obtain customers for the Program.
Mr Tierney agreed that a recognised benefit of the Program was to make more demonstrator vehicles available for sale, and that the rental income was necessary to permit that to occur.
A selection of nonMitsubishi vehicles was available so Southside could demonstrate those, he said.
The Program website reference to the availability of vehicles for those in Perth on an extended vacation was correct, Mr Tierney said, as was the reference to the availability of drop off and pick up within the metropolitan area, although that was not encouraged, and only a small percentage of vehicles were left at the airport for collection and subsequent drop off there.
Mr Tierney said he usually dropped a vehicle off, and in some cases spoke to the hirer to make sure he was conversant with the controls of the same, but would not indicate that it was for sale.
A booking could be made online, he said, and if telephone contact was required that might be with him or Southside's receptionist.
The online booking form did not seek details beyond that in a standard vehicle hire agreement, Mr Tierney agreed.
Vehicles within the Program could be used by Southside's sales staff to drive home, were loaned to customers, and were available for general use within the dealership, he said.
Hire periods of up to 12 months were advertised, Mr Tierney said, but in practice where that was sought a three month contract would be made out and then rolled over.
He denied that was an attempt to evade the ruling of the Commissioner.
Mr Tierney agreed that most vehicles were not returned to trading stock after a single hiring.
He said a vehicle remained on average in the Program for perhaps five or six months, with the majority having an odometer reading of under 10,000 kilometres.
In relation to the Program's corporate clients Mr Tierney said no distinction was drawn between people coming to Western Australia for longer term contracts and others.
He agreed that people contacted the Program because of a wish to hire a vehicle, rather than being in the market to acquire one.
In relation to the evidence of the Program's customers he agreed their intention had been to hire a vehicle and that many others had a similar intention.
He said he had a recollection of some of the customers, and there were things which would have caused him to view them as prospective purchasers.
There were also inaccuracies in their accounts, Mr Tierney said, and there was no online credit card payment facility.
On being shown Program material of early 2004 which made reference to the existence of such a facility he said it might have been later that such details could not be provided online.
Mr Tiernery also joined an issue with the evidence of Ms Preisser and said that Southside was not given an opportunity to address the concerns later raised.
In relation to market value he said that the National Fleet price plus an added rebate was well in excess of market value, as was recommended retail price.
Mr Tierney denied that he was ever asked to provide details of sales made through the Program.
In relation to Program profit and the reports put forward, he said that administration and rent costs ought to be included, as had been done in a document prepared by him, and if that occurred the result would be a loss for each year.
That document had been prepared for submission to the Commissioner and had not included any internal rental income, he agreed, but said that reflected the correct position as internal income was not actually generated.
Mr Tierney agreed that the reports which disclosed a net profit would have been prepared under his supervision, in order to reflect the profitability of the Program.
It was the accounting policy of Southside not to apportion administrative expenses, he said, and he disagreed those would have existed irrespective of the Program.
Internal rental income was merely a 'recharge' to other departments for their use of Program vehicles, he said, and the internal rental figures in the reports would have been inflated, and were probably double the actual figures.
Southside also called an experienced member of the motor trade, Mr Robert Allen, for him to express an opinion as to the nature of the Program, and about various other matters.
Mr Allen said he owned interests in a number of vehicle dealerships, including two in which Mr Paul Davies also had an interest.
Based he said on what he was told, Mr Allen said that in his opinion the Program was a legitimate and innovative sales program.
The information on the Southside website, as it was in December 2002, ought also to be set out:
Company Profile
Drive A While is a Western Australian owned company specialising in corporate and long term rental and leasing. We are small enough to provide a flexible and personalised service but large enough to provide high quality new cars when required. If you are visiting Perth on an employment contract or an extended vacation then we can offer the best for less.
üThe best in cars
üThe best in service
üFor less in dollars
What an equation!
We only rent current model new cards with low kilometres. Drop off and pick up within the metro area is free as are the use of baby /booster seats and street directories. Our corporate hire service is second to none and can be tailored to your specific requirements. In all cases meeting your expectations at a considerably cost saving.
üCompare us with the rest and you will soon see why we offer the best for less.

Following the conclusion of the oral evidence, counsel for the Commissioner tendered some AHG board minutes for various dates between February 1996 and May 2003, with some annexures, it being said those minutes had only then been provided, by the former owner.
The minutes deal with various entities then operated by AHG, or Shemapel, as the entity was previously known.
With the initial minutes is a chart entitled 'Metro Market Share Mitsubishi', which depicts Southside as having a market share of between 10 and 20% for the years between 1986 and 1995.
A subsequent chart with the minutes of November 1998, indicated that there had been improvement to that time.
In the minutes of 28 February 1996 it was noted that Southside's operation had been rated as ineffective by Mitsubishi, as had six of eight Perth Mitsubishi dealers.
The minutes of 15 November 1996 then disclose however that the Board was informed that management had improved the factory rating to effective.
There is no further reference to Southside's rating.
There is no reference to the Program in the minutes tendered.

Appeal

The appeal is a hearing de novo, the purpose of which is to determine 'the correct and preferable decision' SAT Act s 27(1) and s 27(2).
During the hearing a question was raised as to the onus of proof.
The Commissioner referred to the observations of Buss JA in Commissioner of State Revenue v Serana Pty Ltd 2008 WASCA 82 at [106], [166] and [171] (Serana) in which his Honour suggested that given the particular statutory framework there was an onus of proof on a taxpayer to establish that an assessment of the Commissioner was incorrect.
Reference was also made to Cheng v Commissioner of State Revenue 2008 WASAT 8052 where Barker J briefly discussed Serana.
Counsel for the Commissioner submitted that effect of Barker J's remarks was to express a view that in Serana, Buss JA had referred to an evidential rather than a legal onus.
Given the circumstances here, I do not consider it is necessary to reach any conclusion in relation to these matters, and I will proceed on the basis that there is no legal onus of proof on either party.
It is however the case, as Barker J pointed out in Pinesales Pty Ltd v Commissioner of State Revenue 2006 WASAT 202 at [43] [46] that the absence of a formal onus does not preclude there being a practical onus on one or other party.

Stamp Act

The relevant passage s 76C(6) states:
No duty is chargeable under this Act
(a)in the case of a transfer to a dealer, if that transfer has been obtained by the dealer for the purpose of the resale to another person by the dealer of the motor vehicle to which that transfer relates, and for no other purpose, and that resale is in the ordinary course of the business of the dealer; or
(b)in the case of a licence issued to a person who carries on the business of selling motor vehicles, if that licence has been obtained by that person for the purpose of
(i)selling the motor vehicle to which that licence relates to another person in the ordinary course of that business; or
(ii)demonstrating the motor vehicle referred to in subparagraph (i) to prospective purchasers thereof,
and for no other purpose.
(6a)A transfer of a licence for a motor vehicle under a testamentary instrument or upon an intestacy to a person who is entitled to that vehicle in terms of that instrument or upon that intestacy
(a)shall be charged with duty under item 6 of the Second Schedule; and
(b)is not subject to the requirements of subsection (8).
(7)A person applying for -
(a)the transfer of a licence referred to in subsection (6)(a); or
(b)the issue of a licence referred to in subsection (6)(b),
shall, before the transfer or issue of the licence, certify in such form as the Commissioner requires that, if the licence is issued or transferred to the person, the motor vehicle in respect of which the application is made will, while the person is the holder of the licence, be used for the purpose specified in the certification, being one of the purposes referred to in that subsection, and for no other purpose except a minor incidental purpose.
Southside made a number of submissions as to the operation of the section.
It was submitted the reference to purpose was a reference to the subjective purpose of the dealer at the time the certificate which accompanied the application for the license was made.
Further, it was said, some aspects of the test, such as who might be a prospective purchaser, could only be left for the dealer to decide.
The reason for that, Southside submitted, was that it involved the exercise of a judgment based on an application of industry knowledge to information that could only be gleaned from a dealer's appreciation of the presentation of the person who wished to drive a vehicle, whether for hire or otherwise.
Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation 1980 (49 FLR) 183 was cited in support of those propositions.
On the other hand the Commissioner submitted the test was objective.
In relation to that question, on one view the number of prospective purchases could be said to be limited only by the population at the relevant time.
A better view however would seem to be that Parliament intended to limit the scope and extent of the exemption in some way.
As with many questions which involve fact it is perhaps one of degree.
Evidence as to the vehicle buying habits of the public is relevant, in my view.
At the end of the day, the question in any case is however one for the Tribunal to determine, in the light of the evidence and having regard to the statutory provision.
It was pointed out by the Commissioner that in most cases the best evidence of subjective purpose will be objective effect ACC v Universal Music Australia Pty Ltd 2001 FCA 1800 at [469]; (2001) 201 ALR 502 at [606].
As the reasons which appear below show, this is really such a case, and it is not necessary for me to attempt any precise definition of who is a prospective purchaser.
It is enough to say that I do not accept the view put forward by Southside that a person might be regarded as being in the relevant category although he or she had no intention of, or interest in, making a purchase of a vehicle, but believed the transaction to be merely a shortterm hire.
Amongst other things, the term 'demonstrating' is relevant in that regard.

Issues

The parties were agreed that there were potentially five main issues for the Tribunal to determine. Those were:

Whether the exemption provided in the Stamp Act applied to vehicles utilised by Southside in the Program between 1 July 1998 and 30 June 2003, on the basis that Southside licensed the vehicle in each case for the purpose of demonstrating it to prospective purchasers thereof, and for no other purpose

On any consideration of this question the Tribunal is entitled to consider evidence of subsequent events for the purpose of discovering the true position at the time of execution. That includes evidence as to the actual use of the vehicles: Southside at [217] [218].
Southside sought to support its claim that vehicles licensed pursuant to the Program were exempt from duty through the evidence of, in particular Messrs Branchi Davies and Tierney.
The assertions in that evidence as to the purpose and operation of the Program were largely unsupported by any documentary evidence, beyond that obtained by the Commissioner in the course of the audit.
By way of example, the claim by Mr Branchi that the AHG Board had discussed and endorsed the Program failed to find expression in any minutes of the company that were put forward.
Southside sought to address the absence of records in its written closing submissions.
Those submissions included the following:
Further documentary evidence in the new car sale records of the Applicant and on other systems as to specific sales was difficult to place before the Tribunal given the difficulty in identifying the purchasing entity or person … and a lack of resources. Further, the evidence of sales was not regarded as relevant to the purpose of licensing the vehicle for demonstration to prospective purchasers and was not requested by the Respondent in the relevant Notice to Produce, nor is the request evidence from any other documents placed before the Tribunal.
Submissions made as to time seemingly overlook the fact that the assessment was received in 2005 after an audit that had begun in 2002, and in circumstances where Southside was on notice in July 2003.
Whilst Southside's business records would not have recorded all of the matters the subject of inquiry, it is the case, in my view, that the evidentiary material thrown up by the Commissioner was such that one might reasonably expect Southside to include in its response at least some evidentiary material based on records.
Given the absence of documentary support for many of the assertions made by its witnesses, in particular, those relating to sales evidence, I consider I am entitled to have regard to that absence on a consideration of that evidence.
There is, apart from Southside's witnesses, some evidence as to the intended initial operation of the Program.
That is to be found in the letter of Arthur Andersen of 3 June 1997 to the Commissioner.
The features of the proposal were said at that time to be a normal acquisition of vehicles through Mitsubishi, a maximum hire period of three months with no further hire after the initial period, the right in a hirer to purchase for a predetermined price, and an automatic reinstatement of the vehicle to trading stock at the end of the period.
It was of course on the strength of that proposal that the Commissioner expressed a view that the exemption would apply.
In fact, the acquisition of vehicles for the Program was treated, by Mitsubishi at least, as a consumer sale, and at special prices, while nonMitsubishi vehicles were also obtained and hired out. Further, it was generally a requirement by Mitsubishi that the hire be for at least three months, while there was no predetermined price, and no restriction on rehiring, with that occurring in many instances.
The operation of the Program thus differed substantially from the Arthur Andersen proposal.
It is clear from the evidence that the Program was at the outset largely entrusted to Mr Tierney, and that was also the case with its operation.
His evidence is therefore of central significance.
I consider that evidence was in many respects unsatisfactory, having regard to such things as his obvious and persistent attempts at reconstruction in relation to the history of the other vehicle hire business names, the material in the Program website and directories, and the disconformity between his account and the other evidence relating to the operation of the Program, including that of the vehicle hirers who gave evidence as to the methods observed by them, and the pattern of hire revealed in the worksheets.
It is plain in my view that the procedures Mr Tierney said were in place were, in many cases at least, not utilised.
Rather, people were able to, and did, hire vehicles in an unexceptional way with no attempt being made to ascertain whether they were, or might be, prospective purchasers, or indeed to inform them the vehicles were for sale, beyond the provision of a flyer in the glove box, assuming that existed.
The evidence of Ms Jones of the AMA is also pertinent in that regard.
That lack of reliability in the evidence of Mr Tierney, coupled with the absence of written records, is such as to foreclose any attempt at assessment of the extent to which hiring might have resulted in sales.
The assertion that the introduction of the Program resulted in significantly increased sales is therefore not one I would accept, insofar as it relies on former hirers as being the major driver of sales, as opposed to such things as an increased availability of 'demonstration' vehicles and changed circumstances.
The evidence of sales patterns is, I would add, is in itself less than clear.
Mr Branchi's evidence as to the inception and operation of the Program, including that as to the internal financial reports, is also not something on which I would rely, given the real state of affairs, and in all the circumstances.
Neither would I rely on that of Mr Davies.
Clearly, the evidence before the Tribunal of the manner of hiring of vehicles does not encompass all those the subject of the assessment.
However, the evidence in my view is such as to cast an evidential burden on Southside to show that in particular other cases the Program was conducted in a different manner, and given the above, including the absence of relevant documents and the unsatisfactory oral evidence, Southside has failed to discharge that burden.
It is not necessary for me to make a particular finding as to all of the precise aims of the Program, as it was operated.
Southside was desirous of increasing its market share, and the Program was a method of assisting in that respect in various ways.
Mitsubishi, apart from sharing that aim, wished, I would find on the evidence, to increase the presence of its vehicles on the road, and was prepared to offer incentives for that to occur, and the receipt of those incentives by Southside was a further relevant factor.
Another product of the Program was to be an increased supply of demonstrator vehicles, so called, (many of the vehicles were in fact exhire vehicles), there being a market for such.
It was also intended that the Program would make a profit, from rental income.
I should add that Southside's evidence is unsatisfactory as to the real state of affairs in that regard.
All of the above aims can be said to have informed the decision to license a vehicle in each case.
In circumstances where in many cases the scope of any hire was not to be restricted in the manner asserted by Mr Tierney and Southside, there was a likelihood, known to Southside, that the hire would be to someone who was not in any real sense a prospective purchaser, being a tourist or a shortterm visitor, and given the broad marketing aims, and given that rental income was to be an intrinsic part of the scheme, it cannot be said that the license in any case was obtained for the purpose of demonstrating the vehicle to a prospective purchaser, and for no other purpose.
Duty was therefore chargeable on the issue of the license.

Market value of the vehicles for the purpose of a determination of stamp duty

I accept the evidence put forward by the Commissioner as to market value, including that of Mr Fahey, in the absence of other reliable evidence. I would adopt the Commissioner's submissions in respect thereto.
The value adopted in each case in the assessment ought therefore stand.

Whether each original assessment was based on a particular interpretation of the applicable law, or a particular practice of the Commissioner generally applied to assessments of that kind, and the 2005 reassessments made on the basis that such particular interpretational practice was later considered erroneous

Southside argued that the Commissioner's letter of 24 June 1997 stood alone, and without reference to the material in the letter of 3 June 1997 from Arthur Andersen which preceded it.
On a consideration of the correspondence, and having regard to the circumstances, I do not share that view.
In any event, the scenario set forth in the letter of the Commissioner does not conform with Southside's Program as I have found it to be, and hence with the purpose for which a license was obtained in each case.
Similarly, the fact that the Commissioner gave a similar advice to another dealer does not alter the position here.
Although it was suggested by Mr Davies that the 1999 audit carried out by Mr Dawe was accompanied by a detailed examination of documents and followed by an assurance to Southside of compliance, I would not find that to be the case.
Southside is therefore not able to rely on that audit as a basis for not paying stamp duty otherwise payable.
Similarly, I would not find that anything occurred at the time of the November 2002 audit or thereafter which would assist Southside.

Whether, to the extent that a reassessment was made more than five years after the original assessment, the Commissioner had reasonable grounds for suspicion that the first assessment was made on the basis of false and misleading information, as provided

In the Tribunal's view, and given the history of the matter and the above findings, the Commissioner did have reasonable grounds for suspicion.

Whether Southside was liable to a penalty, and if so whether the imposition of a penalty equivalent to 30% of the primary liability was the correct and preferable decision

The relevant provisions are s 26(1)(e) and s 26(1)(g) of the Taxation and Administration Act 2003 (WA),and it is the case that Southside provided incorrect and misleading information at the time of licensing in each case and as a result failed to pay the duty for which it was liable.
The penalty of 30% was in accordance with that provided for in a practice statement issued by the Commissioner where disclosure was involuntary, rather than either voluntary or following evasion.
In my opinion that categorisation is not unfair to Southside, and the submission made by it of full cooperation unsustainable.
The Tribunal has in the past adopted a penalty where the Commissioner has in place a policy or practice.
There would appear no valid reason why that ought not occur here, and given the Tribunal's findings the imposition of a 30% penalty is not at all unfair to Southside.

Conclusion

For the above reasons Southside's application should be dismissed.

Orders

1. The assessment notice dated 28 January 2005 is affirmed.
2. The application is dismissed.

I certify that this and the preceding [278] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE J ECKERT, DEPUTY PRESIDENT