TRENTWOOD CORPORATION PTY LTD and COMMISSIONER OF STATE REVENUE
[2006] WASAT 196
•24 JULY 2006
TRENTWOOD CORPORATION PTY LTD and COMMISSIONER OF STATE REVENUE [2006] WASAT 196
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2006] WASAT 196 | |
| TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | CC:522/2005 | 26 JUNE 2006 | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) | 24/07/06 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Decision of Commissioner of State Revenue affirmed Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | TRENTWOOD CORPORATION PTY LTD COMMISSIONER OF STATE REVENUE |
Catchwords: | State revenue Stamp Act 1921 (WA) Whether applicant carrying on "rental business" under Pt IVB, s 112I as it applied at relevant times Turns on own facts |
Legislation: | Business Tax Review (Assessments) Act (No. 2) 2003 (No. 66 of 2003), s 85 Income Tax Assessment Act 1936 (Cth) Partnership Act 1895 (WA), s 7 Stamp Act 1921 (WA), s 112I, s 112I(1), s 112J, s 112J(3), s 112J(3a), s 112J(4), s 112JA(2), s 112K, s 112L, Part IV B Taxation Administration (Consequential Provisions) Act 2002 (WA), s 34 Taxation Administration Act 2003 (WA), s 15(3), s 26, s 26(3), s 37(2), s 40(1) |
Case References: | Commissioner of Taxation v Stone [2005] HCA 21, 215 ALR 61 Edwards (Inspector of Taxes) v Bairstow [1956] AC 14 Evans v Federal Commission of Taxation (1989) 20 ATR 922 Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261 Inglis v Federal Commissioner of Taxation (1979) 80 ATC 4001 JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39 Radnor Pty Ltd v Federal Commissioner of Taxation (1990) 21 ATR 608 Rolls v Miller (1884) 27 Ch D 71 Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1 Commissioner of Taxation v Glennan (1999) ATC 4467 Hope v Bathurst City Council 29 ALR 577 Hyteco Hiring Pty Ltd v Federal Commissioner of Taxation (1992) 23 ATR 4216 Stone v Commissioner of Taxation 2003 ATC 4584 Susan Pedley v Commissioner of Taxation [2006] AATA 108 Woods v Deputy Commissioner of Taxation (1999) ATC 5306 |
Orders | 1. The decision of the Commissioner of State Revenue is affirmed.,2. The application is dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : TRENTWOOD CORPORATION PTY LTD and COMMISSIONER OF STATE REVENUE [2006] WASAT 196 MEMBER : JUSTICE M L BARKER (PRESIDENT) HEARD : 26 JUNE 2006 DELIVERED : 24 JULY 2006 FILE NO/S : CC 522 of 2005 BETWEEN : TRENTWOOD CORPORATION PTY LTD
- Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
State revenue - Stamp Act 1921 (WA) - Whether applicant carrying on "rental business" under Pt IVB, s 112I as it applied at relevant times - Turns on own facts
Legislation:
Business Tax Review (Assessments) Act (No. 2) 2003 (No. 66 of 2003), s 85
Income Tax Assessment Act 1936 (Cth)
Partnership Act 1895 (WA), s 7
(Page 2)
Stamp Act 1921 (WA), s 112I, s 112I(1), s 112J, s 112J(3), s 112J(3a), s 112J(4), s 112JA(2), s 112K, s 112L, Part IV B
Taxation Administration (Consequential Provisions) Act 2002 (WA), s 34
Taxation Administration Act 2003 (WA), s 15(3), s 26, s 26(3), s 37(2), s 40(1)
Result:
Decision of Commissioner of State Revenue affirmed
Application dismissed
Category: B
Representation:
Counsel:
Applicant : Mr MJ McCusker AO QC and Ms S Burke
Respondent : Ms RC Panetta and Ms JM Jones
Solicitors:
Applicant : Fiocco's Lawyers
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Commissioner of Taxation v Stone [2005] HCA 21, 215 ALR 61
Edwards (Inspector of Taxes) v Bairstow [1956] AC 14
Evans v Federal Commission of Taxation (1989) 20 ATR 922
Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261
Inglis v Federal Commissioner of Taxation (1979) 80 ATC 4001
JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39
Radnor Pty Ltd v Federal Commissioner of Taxation (1990) 21 ATR 608
Rolls v Miller (1884) 27 Ch D 71
Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1
Case(s) also cited:
Commissioner of Taxation v Glennan (1999) ATC 4467
(Page 3)
Hope v Bathurst City Council 29 ALR 577
Hyteco Hiring Pty Ltd v Federal Commissioner of Taxation (1992) 23 ATR 4216
Stone v Commissioner of Taxation 2003 ATC 4584
Susan Pedley v Commissioner of Taxation [2006] AATA 108
Woods v Deputy Commissioner of Taxation (1999) ATC 5306
(Page 4)
Summary of Tribunal's decision
1 The Tribunal found that an arrangement between the applicant and a related company in relation to the use of and payment for heavy machinery and other equipment constituted the conduct of a "rental business" for the purposes of s 112I of Pt IV B of the Stamp Act 1921 (WA) as it applied at relevant times.
2 The Tribunal affirmed the Commissioner's assessment of stamp duty on the business and the imposition of penalty tax for non-payment of stamp duty and dismissed the review application.
Issues
3 The primary issue in this case is whether the respondent correctly assessed the applicant for stamp duty.
4 The primary issue turns on whether -
• the applicant was carrying on a "rental business" within the meaning of s 112I(1) of the Stamp Act 1921(WA) (Stamp Act); and
• the payments from Centurion to Trentwood constituted "payments of rent".
5 A residual issue is whether the respondent was entitled to under the former Part IVB, s 112J of the Stamp Act to "unilaterally" register Trentwood for stamp duty purposes under s 112J of the Act;
6 A further, consequential issue is whether, if the applicant's activities are dutiable, the respondent correctly imposed penalty taxes and, if so, whether the amount imposed is excessive in all the circumstances.
Facts
7 By decision dated 11 November 2004, the Commissioner of State Revenue (Commissioner) refused to uphold an objection by Trentwood Corporation Pty Ltd (Trentwood) to the levying of Trentwood of stamp duties and penalties pursuant to Stamp Act 1921 (Stamp Act). Trentwood now seeks review of that decision under s 40(1) of the Taxation Administration Act 2003 (WA).
(Page 5)
8 Trentwood is a company which, at all material times, received income from the sale and purchase and hire of heavy duty equipment.
9 Centurion Transport Corporation Pty Ltd (Centurion) is a company which, at all material times, carried on a transport business including the hiring out of plant and civil equipment together with necessary operators.
10 Both Trentwood and Centurion have the same directors.
11 In the taxation years 1998-2003 inclusive, Centurion hired equipment from Trentwood.
12 In April 2003 the Commissioner commenced an investigation to ascertain whether Trentwood was, during the relevant years, conducting a "rental business" within the meaning of s 112I of the Stamp Act, and consequently whether it was liable for stamp duty based on income earned by it during those years.
13 On 25 May 2004, the Commissioner determined that in the relevant years Trentwood had been carrying on a rental business under the Stamp Act. Presumably as part of the process of seeking to recover the stamp duties and assess them the Commissioner "registered" Trentwood as a rental business pursuant to s 112J of the Act and assessed stamp duty as applicable to Trentwood in the total sum of $104 342.76 for the period 1 July 1998 to 30 June 2003.
14 In addition, penalties were imposed upon Trentwood for each of the years for an alleged failure by Trentwood to register and therefore pay stamp duty which would otherwise have been assessed. A total amount of such penalties was $25 012.55.
15 On 22 July 2004, an objection against the assessment and penalties was made by Trentwood. The objection was disallowed by the Commissioner on the 11 November 2004.
16 Trentwood then commenced these review proceedings in the Tribunal.
17 Most of the facts and history of the matter are not in issue. Trentwood and Centurion had the same directors and were related companies during the relevant period.
18 Centurion was incorporated in 1971. Some years before 1998/1999 Centurion commenced and carried on the business, amongst others,of hiring out plant and equipment with an operator on commercial terms.
(Page 6)
19 In or about 1989, Trentwood purchased the assets of a transport business operated by the Brambles Group of Companies, which included trailers and heavy equipment. The transport business of Brambles was operated thereafter by Centurion. Trentwood purchased equipment by means of hire purchase agreements. From that time, in the relevant tax years, Trentwood hired out the equipment to Centurion.
20 The hiring took place on a regular and continuous basis for the years 1998 to 2003 with tax invoices being provided by Trentwood to Centurion during this period.
21 The arrangement involved plant and equipment with the following net values:
30 June 1999 $2 219 392
30 June 2000 $6 653 177
30 June 2001 $5 027 533.37
30 June 2002 $3 469 935
22 The revenue received by Trentwood from Centurion for the hire of the plant and equipment was as follows:
1999 $150 700
2000 $825 560
2001 $1 800 450
2002 $1 564 500
2003 $1 560 000
23 Mr Marco Cardaci gave evidence at the hearing for the applicant. At all relevant times he was a director of both companies. He stated the arrangement was put into place between Centurion and Trentwood on legal and accounting advice. The arrangement was to the effect that the hiring fees paid by Centurion to Trentwood equated to the expenses (that is, the cost) of Trentwood making such equipment available. Initially, he said, rent was less than the costs of Trentwood owning the equipment; therefore Trentwood did not make a profit. Mr Cardaci said that the arrangement was designed to operate purely on a "reimbursement" basis with the payments made by Centurion to Trentwood matching the hire purchase and loan repayments owned by Trentwood on the equipment.
24 A similar arrangement, to that concerning the acquisition of the Brambles' business took place in about 2000 when Trentwood purchased
(Page 7)
- the business assets of Mitchell Corporation. The equipment acquired by Trentwood was made available for use by Centurion on the same basis as before.
25 Mr Cardaci said that, in respect of the arrangements between Trentwood and Centurion, Trentwood did not enter into hire arrangements with members of the public or any other corporate entity.
26 Mr Cardaci was cross-examined as to this matter and in particular he was referred to the company accounts for the relevant years in which amounts were noted as income to Trentwood. In addition to amounts noted as "hire income from Centurion to Trentwood" there were other notations such as "crane hire" and "other hire" in the 2001 Profit and Loss statements. Mr Cardaci recalled a crane hire to "Walker Constructions" but little of the detail. He thought it was a "one-off" hiring of the equipment. It may have straddled the two financial years.
27 Mr Cardaci said that the arrangement between Trentwood and Centurion was brought about primarily because most of the assets owned by Centurion in or around 1998 had been acquired by Centurion before the introduction of capital gains tax. Therefore, for asset protection and estate planning purposes, legal and financial advice was sought by Trentwood and Centurion and the arrangement as it emanated was as a result of such advice.
28 In the director's report in the financial statements for the year ending 30 June 2002, the directors described the principal activity of Trentwood to be "property investment and plant hire".
The statutory framework
29 The assessment involves the taxation years 1998/1999 to 2002/2003. The Commissioner, having purported to register Trentwood as a "rental business", assessed stamp duty as payable and imposed penalty taxes in respect of the period 1 July 1998 to 30 June 2003 in his letter of 25 May 2004. In so doing, the Commissioner purported to act pursuant to the former Pt IVB of the Stamp Act.
30 The former Pt IVB - Rental Business of the Stamp Act (as amended from time to time) was replaced by Pt IVB - Hire of goods by operation of Business Tax Review (Assessment) Act (No. 2) 2003 (No. 66 of 2003) (WA) (s 85). A stamp duty liability which arose before 1 July 2003 could be exercised or enforced as a result of the Taxation Administration (Consequential Provisions) Act 2002 (WA) s 34, and in determining
(Page 8)
- whether a stamp duty liability arose before 1 July 2003, the provisions of the Stamp Act as it was at the date of the transactions applied to such transactions.
31 Thus the relevant Stamp Act provisions are:
32 Pt IVB – Rental Business s 112I Interpretation in Pt IVB:
"'registered person' means a person who is registered, or required to be registered, under this Part."
"'rental business' means the business of granting to any person rights to use any goods other than books, whether pursuant to a lease, bailment or licence or otherwise, but does not include the business of granting to any person the right to use goods in conjunction with a lease of, or licence to occupy or use, any real property."
33 Section 112J:
"Persons carrying on rental business required to be registered:
(1) …a person who receives the total amount of $2000 or more during any month in respect of any rental business carried on by him in Western Australia is required to be registered under this Part within 15 days after the end of the month that he receives that amount, whether or not he carries on any other business and whether the head office or principal place of business of that person is in Western Australia or elsewhere.
…
(3) Application for registration shall be made to the Commissioner in an approved form."
34 Section 112K required returns to be lodged with the Commissioner by registered persons in the manner specified therein and pursuant to s 112L certain amounts were specified as being required to be included in the return.
(Page 9)
Whether the respondent was carrying on a "rental business" and whether the payments were "payments of rent"
35 Trentwood contends that, having regard to the definition of "rental business" in the Stamp Act, Trentwood was not carrying on a rental business and none of the attributes of a "business" applied to the arrangement which was set up between the two companies.
36 Trentwood also says that the payments received by Trentwood from Centurion cannot be considered rental payments because they were significantly less than a proper market rental and were simply a reimbursement for costs and expenses it had incurred; that is, a full indemnity for costs and expenses incurred by Trentwood in relation to the plant and equipment.
37 The Commissioner contends that, having regard to the general law as to the meaning of the word "business" and the various indicia which have been referred to in the authorities, particular aspects of the arrangement between the companies confirm that Trentwood in fact conducted a rental business at relevant times.
38 The definition of "rental business" in the Act is not qualified in any way by the need to make a profit for the granting of the right to use any goods.
39 In order to determine whether or not a "business" is being conducted, it is necessary to view the facts and circumstances of the case as a whole and to determine whether as a "matter of general impression and degree" the taxpayer's activities can be characterised as a business: Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261.
40 Although in the end it is a matter of general impression and degree, it is relevant and helpful to examine the circumstances in the light of the various "tests" which have been suggested by the authorities. The parties are generally in agreement as to the applicability of these indicators. However, it is relevant to note that no single indicator is determinative and that all the indicators must be considered: Commissioner of Taxation v Stone (2005)215 ALR 61. The absence of any one factor will not necessarily result in the conclusion that no business is carried on: Evans v Federal Commissioner of Taxation (1989) 20 ATR 922 at 939.
41 It is also important to note that it is the extent of the activity and not the state of mind or subjective intention of the taxpayer which determines
(Page 10)
- whether a business is being carried on: Inglis v Federal Commissioner of Taxation (1979) 80 ATC 4001.
42 Finally, the fact that Trentwood may have been engaged in other business activities is not necessarily relevant to the question whether Trentwood was carrying on a rental business: Ferguson v Federal Commissioner of Taxation.
43 Each indicator will now be considered in turn.
44 Size, scale and permanency of Trentwood's rental business: The figures involved have already been noted and it is clear that there was a high value of the plant and equipment involved and the rental in relation to that plant and equipment was a considerable percentage by way of proportion of those values. Notwithstanding the submission on behalf of Trentwood, that the large value of the equipment was a necessary result of the taking over of the equipment from another business, the activity in fact involved large sums of money. The arrangements were also permanent and continuous during the relevant times.
45 Repetition and regularity of Trentwood's rental business: There was monthly invoicing by Trentwood to Centurion over a number of years and the arrangement obviously involved a continuous and permanent rental.
46 Significant commercial purpose or character: It was suggested on behalf of Trentwood that there was no significant commercial purpose and character in the arrangement as evidenced by the revenue received by Trentwood and the fact that Trentwood made a loss from its arrangement with Centurion for the 1999-2002 financial year. It was said that the arrangement was an arrangement of convenience and not a business arrangement.
47 On the other hand, as has already been noted, there was a considerable revenue earned by Trentwood from the arrangement and a considerable value in the plant and equipment being used.
48 It is also clear that Trentwood earned more income from its hire arrangement with Centurion than from any other activity. It is relevant to note that in one of the financial statements Trentwood's directors described the principal activities of Trentwood to be "property investment and plant hire". The plant and equipment involved was "an asset" which "lent" itself to commercial transactions: Edwards (Inspector of Taxes) v Bairstow [1956] AC 14 at 29 – 30.
(Page 11)
49 Having regard to the reasons put forward by Mr Cardaci, and as evidenced by the papers, the arrangement was designed to commercially assist the two entities. Notwithstanding that the payments by Centurion to Trentwood were less than a market rental for the plant and equipment, the manner in which that rental payment was calculated was arrived at deliberately so that hire charges were equal to the loan repayments and hire purchase payments of the equipment, ie there was a plain business motive involved in the calculation of the hire charges.
50 The arrangement was one by which Trentwood was used as a supplier of hire equipment to Centurion with a two-fold result, ie Trentwood would make a loss and Centurion would make a profit. It would be naïve to suggest or conclude that the result was accidental – the arrangement had a clear commercial purpose and each of the companies (with identical directors) organised its affairs to assist the other. As a corollary to this, each company was individually set up to proceed in a specific way and for a specific purpose. The arrangements had a business purpose. Indeed, on the basis of the facts set out, the arrangement could not operate without Trentwood offering and operating as a "business" as understood and explained by the authorities.
51 A purpose of profit as well as a prospect of profit: At the hearing of the application and in its further revised Statement of Issues, Facts and Contentions, the applicant placed great emphasis on the contention that the applicant did not undertake the arrangement with Centurion with a view to making a profit.
52 The burden of the contention made by senior counsel for Trentwood is that it is important that there be a profit making purpose before the taxpayer can be found to be carrying on a "business", even though the prospect of a profit is remote or slight and even if, subjectively, profit making is not the purpose.
53 A number of authorities were cited both by counsel on behalf of Trentwood and counsel on behalf of the Commissioner in relation to the profit factor.
54 In the Tribunal's view, it is not essential, for the purpose of determining whether a person is conducting a "business" for the purpose of the "rental business" expression used in s 112I of the Stamp Act in question here, that the activities said to constitute a "business" be carried on with a view to a profit. Generally speaking, the case law does not seem to demand that test and the particular statutory context here in which
(Page 12)
- the term "business" is used does not demand that outcome either. For present purposes, Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1 is as good a starting point as any. In that case, the taxpayer claimed as a deduction for income tax purposes an amount shown as a debit on a profit and loss account incurred in connection with the carrying on of two properties in Victoria. The Commissioner disallowed the profit. The High Court (Williams J) ultimately ruled that the taxpayer was entitled to a deduction for the losses suffered in respect of each farm.
55 The first thing that must be noticed about a case like Tweddle is that it has to do with income tax. Deductions may be claimed if incurred in respect of the generation of taxable income. Where an activity is operated at a loss, while there may be income there may be no profit shown from year to year, or even over a long period of time. This seems to have been the case in Tweddle.
56 It would seem to follow in these income tax circumstances that the question whether or not a loss should be seen as one relevant for income tax purposes might well depend on whether the activity was a business that had the objective of making a profit. As will be seen, this issue is also discussed by the High Court in the later decision of Commissioner of Taxation v Stone [2005] HCA 21, 215 ALR 61.
57 In other words, in an income tax setting, the question whether losses can be claimed as a deduction might always depend on a taxpayer showing that their primary intention was to earn taxable income, or in a particular context, to operate a business profitably.
58 However in more general terms, outside the context of income tax assessment, it does not necessarily follow that a "business" must always be an activity conducted for profit. The Partnership Act 1895 (WA) s 7, for example, defines a partnership as "the relation which subsists between persons carrying on a business in common with a view of profit". This definition is common to partnership legislation in the United Kingdom and Australia and New Zealand. It rather suggests that a business can be carried on without being "with a view of profit".
59 Indeed, in Tweddle's case Williams J at 5 noted that Lindley LJ in Rolls v Miller (1884) 27 Ch D 71 at 88 said that the word business "means almost anything which is an occupation, as distinguished from a pleasure – anything which is an occupation or a duty which requires attention is a business".
(Page 13)
60 Then at 6, Williams J observed by reference to authority that:
"It is not essential that a person who engages in business should do so with the motive of making a profit for himself."
61 While it might often be appropriate to say that the word "business" is used "usually to describe what a person or company does in general terms, that is, to buy and sell goods or services in an attempt to make a profit" as did Pullin J in JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39 at [38], this does not mean that a business must "always" be an activity that attempts to make a profit.
62 In Commissioner of Taxation v Stone, referred to above, the issue was whether the taxpayer sports person turned her sporting ability to account for money and in this way carried on a business. The High Court held that she had. In the joint judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ, their Honours emphasised that the relevant question was whether the receipt of money by the person was "income" for the purposes of the Income Tax Assessment Act 1936 (Cth). To this end, their Honours emphasised that although receipts from carrying on a business are often identifiable as income and although the conclusion that the receipts are income may often proceed from the conclusion that the recipient was conducting a business, enquiring into whether a recipient is conducting a business must not distract from the relevant question. The "business" question can give rise to the misleading assumption that activities associated with the receipt of sums can always be divided into separate categories. To avoid this, there must be undertaken "a wide survey and an exact scrutiny of the taxpayers' activities" when determining whether receipts form part of that taxpayers' assessable income: see [19].
63 In their joint judgment at [55], their Honours further observed:
"No doubt it is necessary to take account of the taxpayer's statement that she did not throw javelins for money. There are, however, two things to say about that statement. First, it is not to be understood as some failure by the taxpayer to recognise that success in her sport would bring financial reward. The AOC had repeatedly drawn her attention to the financial consequences of success – especially success at an Olympic Games. Continued payments under the Olympic Athlete Programmes were conditional upon maintaining or improving performances in the arena. Secondly, the state of mind or intention with which a taxpayer undertakes activities giving rise
(Page 14)
- to receipts is relevant, but it is only one fact to take into account, in deciding whether the receipts are properly to be classed as income. If a taxpayer has a view to profit, the conclusion that the taxpayer is engaged in business may easily be reached. If a taxpayer's motives are idealistic rather than mercenary, the conclusion that the taxpayer is engaged in a business may still be reached (footnote omitted). The 'wide survey and exact scrutiny' of a taxpayer's activities that must be undertaken may reveal, as it does in this case, that the taxpayer's activities constituted the carrying on of a business."
64 In the view of the Tribunal, this analysis by their Honours in the joint judgment in Commissioner of Taxation v Stone provides the appropriate understanding to the meaning to be given of the word "business" as it appears in the expression "rental business" in s 112I in question here.
65 In particular, the fact that there may not have been an intention on the behalf of Trentwood to make a profit, is not ultimately relevant; nor is the fact that a profit may not have been made at relevant points.
66 Trentwood, at the least, had a prospect of making a profit. As a matter of fact, Trentwood made a profit from its hire activities in the year ended 30 June 2003. On one occasion at least, it hired equipment to a third party, Walter Construction.
67 Whether the activity is planned, organised and carried on in a business-like manner such that it is directed at making a profit: It is clear from the documents and the evidence generally that the arrangement was the subject of detailed account rendering and book-keeping. Notwithstanding that the rental payments were perhaps less than a commercial rent, there was depreciation claimed in respect of the plant and equipment in Trentwood's profit and loss statements and schedules and the keeping of these records was clearly part of the intent to result in some benefit to each of the companies.
68 As to other indicia: It is clear that a company was involved rather than an individual: Radnor Pty Ltd v Federal Commissioner of Taxation (1990) 21 ATR 608 at 619.
69 The fact that Trentwood had no employees is not particularly relevant in this case in the Tribunal's opinion because the way in which the activities were arranged involved no necessity for employees to be employed. The arrangement involved simple and straight forward
(Page 15)
- accounting transactions and these were on a regular and almost automatic basis.
70 Finally, it is of little significance that there was no advertising by Trentwood of the arrangements or its activities.
Tribunal's findings
71 On the evidence before it, the Tribunal finds that the correct and preferable view of the arrangement between Trentwood and Centurion is that it constituted a "business". The fact that the arrangement may not have been conceived of with a view to profit is not determinative of the issue whether Trentwood conducted a "business" in the particular circumstances of this case.
72 The Tribunal also considers that the correct and preferable view is that the business was a "rental business" within the meaning of s 112I(1) of the Stamp Act. It is clear that Trentwood granted to Centurion the rights to use the plant and equipment on a regular basis. In this regard, it should be noted that plant and equipment falls within the definition of "goods" in s 112I(1) of the Stamp Act. Having regard to the purpose for which the monies were paid by Centurion to Trentwood, the manner in which they were paid and the circumstances of the arrangement as found above, the activities constituted by the arrangement was a "business" and the regular payments made by Centurion to Trentwood were "payments of rent".
Whether the respondent was entitled to "register" Trentwood for stamp duty purposes under s 112J of the Act
73 Trentwood contended in its written submission that the Commissioner had no power to register a person without receiving an application under s 112J(3). At the hearing this submission was not really pressed on either side. The written submissions of the Commissioner did not really address this issue; the Commissioner apparently taking the view that whether or not he had such power was not relevant because the applicant's liability for stamp duty arose whether it was registered or not.
74 Having regard to the provisions of the Stamp Act as it stood in the relevant years it is difficult to find any statutory basis for the Commissioner's action in purporting to register Trentwood. The registration of a person is, by virtue of s 112J(3a), to take place on the Commissioner receiving an application under s 112J(3); that is, from a person carrying on a rental business. Further, pursuant to s 112J(4):
(Page 16)
- "Where the Commissioner is satisfied that a person is not, and in the future is not likely to be, required to be registered under this Part he shall cancel the registration of that person and inform the person concerned of that cancellation and the date from which it takes effect."
75 It is also pertinent to note that the new Pt 4B, s 112JA(2) requires the Commissioner to register a "commercial hire business" (as it is now known) that has not applied for registration "if satisfied that the commercial hire business ought to be registered for the purposes of this Part". However, this provision did not apply at relevant times.
76 Notwithstanding the apparent lack of power in the Commissioner to unilaterally register Trentwood as a rental business, in the Tribunal's view this did not and does not affect the ability of the Commissioner to assess stamp duty payable by Trentwood.
Was the Commissioner entitled to assess Trentwood for stamp duty on Trentwood's rental income
77 The Tribunal has determined that Trentwood was engaged in a "rental business". The Tribunal also accepts that, notwithstanding the powers of the Act requiring Trentwood to register as a rental business, its failure to do so did not affect its liability to pay stamp duty. The Tribunal, therefore, does not accept Trentwood's contention that because Trentwood did not register itself as a rental business, it did not have any liability to pay tax stamp duty.
78 The Taxation Administration (Consequential Provisions) Act 2002 (WA) provides that the repeal of the provisions of any old Act (defined to include the Stamp Act) does not affect any duty, obligation, liability or burden of proof imposed, created or incurred prior to the repeal. The procedure for issuing a stamp duty assessment in relation to a stamp duty liability that arose before 1 July 2003 is contained in the Taxation Administration Act: Taxation Administration (Consequential Provisions) Act 2002, s 34.
79 Pursuant to s 15(3) of the Taxation Administration Act 2003 (WA):
"The Commissioner may make an official assessment on his or her own initiative, and may do so even if the taxpayer is required to make, or has made, a self-assessment."
(Page 17)
80 This being so, the Tribunal finds that in this particular case the Commissioner was entitled to make an assessment of the duty payable by the applicant, and having regard to the figures produced by the applicant, and the amounts assessed are, in the Tribunal's view, correct.
Whether the respondent correctly imposed a penalty tax
81 The respondent's power to impose a penalty tax is contained in s 26 of the Taxation Administration Act 2003. This section provides as follows:
"(1) A taxpayer is liable to pay penalty tax in the following circumstances -
[(a) deleted]
(b) where the taxpayer does not lodge an instrument in accordance with a taxation Act;
(c) where any other contravention of a taxation Act occurs and, as a result, the taxpayer -
(i) avoids or delays the payment of tax; or
(ii) avoids or delays the submission of information required for the assessment of tax;
(d) where there is a material misstatement or omission in an instrument submitted to the Commissioner by or for the taxpayer under a taxation Act;
(e) where the taxpayer fails to provide information required under a taxation Act or (intentionally or unintentionally) provides information that is incorrect, incomplete or misleading;
(f) where the taxpayer makes an underestimation to avoid, delay or reduce the payment of tax;
(g) where the taxpayer fails to pay (or underpays) tax for which the taxpayer is liable.
(2) If there are reasonable grounds for suspecting that a taxpayer is liable to pay penalty tax, the Commissioner
- may assess the amount of penalty tax payable by the taxpayer.
- (3) The amount of penalty tax payable is the amount equal to -
(a) the amount of the taxpayer's primary liability; or
(b) the amount that the taxpayer would have been liable to pay if the circumstances giving rise to the liability to penalty tax had not occurred,
as the case requires."
82 Trentwood failed to lodge statements with the Commissioner as required by s 112K of the Stamp Act and therefore the Commissioner was entitled to assess penalty tax pursuant to s 26 of the Taxation Administration Act 2003.
83 Although the Commissioner was entitled pursuant to s 26(3) of the Taxation Administration Act 2003 to assess penalty tax equal to 100% of the duty payable, in this particular case he remitted penalty tax on the basis of an "involuntary category" rather than there being a deliberate failure to register and therefore pay stamp duty, and accordingly the Commissioner assessed the penalty tax at rates less than the 100%.
84 The Tribunal considers the Commissioner's decision in respect of penalty tax in the circumstances of this case to be correct and preferable.
Conclusion and order
85 For the reasons set out above, the Tribunal would affirm the Commissioner's decision and dismisses the application.
86 The Tribunal orders:
1. The decision of the Commissioner of State Revenue is affirmed.
2. The application is dismissed.
- I certify that this and the preceding [86] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE M L BARKER, PRESIDENT
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