Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Fujun Pty Ltd ATF Ni Family Trust v Chief Commissioner of State Revenue [2022] NSWCATAD 412 Hearing dates: 6 October 2022 and on the papers Date of orders: 22 December 2022 Decision date: 22 December 2022 Jurisdiction: Administrative and Equal Opportunity Division Before: NS Isenberg RFD, Senior Member Decision: The decision under review is affirmed Catchwords: MERITS REVIEW – STATE TAXES – surcharge land tax – onus – claimed retrospective effect of amendments to trust deed. Legislation Cited: Administrative Decisions Review Act 1997 (NSW) Civil and Administrative Tribunal Act 2013 (NSW) Duties Act 1997 (NSW) Foreign Acquisitions and Takeovers Act 1975 (Cth) Land Tax Act 1956 (NSW) Land Tax Management Act 1956 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 Cymtow Pty Ltd as trustee for Stanavacs Trust; Lanlex No 127 Pty Ltd as trustee for TBH Family Trust; Cybir Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAD 314 Texts Cited: None cited Category: Principal judgment Parties: Fujun Pty Ltd ATF Ni Family Trust (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Solicitors: Self-represented (Applicant) Crown Solicitor (Respondent) File Number(s): 2022/00140607 Publication restriction: No restriction reasons for decision Background 1. These proceedings concern a dispute between Fujun Pty Ltd ATF Ni Family Trust (Fujun or Applicant) (Trust) and the Chief Commissioner of State Revenue (Chief Commissioner or Respondent) as to Fujun's liability to pay surcharge land tax (Surcharge Tax or surcharge land tax) for the 2018 to 2021 land tax years inclusive (Tax Years). 2. In summary, the Chief Commissioner issued a Land Tax Assessment Notice to Fujun on 11 February 2021 in respect of a parcel of land at Laverton in the state of New South Wales (Land). The amount payable under the notice, including Surcharge Tax, was $25,603.90 if paid by 23 March 2021 and $25,993.90 if paid in specified instalments by 24 May 2021. If payment was not made in accordance with the notice, interest would be added to the amount payable. 3. Fujun denied it was liable to pay the whole amount referred to in the notice. Communications as to relevant liability took place between the parties over several months. Agreement between the parties was not reached and on 23 September 2021 the Chief Commissioner issued a further Land Tax Assessment Notice (Assessment) to Fujun in respect of the Land for the Tax Years. The Assessment calculated land tax and Surcharge Tax as well as interest, remission on interest and certain discounts. 4. Fujun's accountant sent an objection (Objection) dated 20 October 2021 to Revenue NSW on behalf of Fujun in respect of the Assessment. 5. On 14 March 2022 the Chief Commissioner issued a Notice of Determination (Determination) to Fujun's accountant disallowing the Objection and, on 16 May 2022, the Tribunal received an Administrative review application form signed on 12 May 2022 by Mr Ni on behalf of Fujun, requesting that the Tribunal review the Determination on the grounds annexed to the form (Application). 6. The deed establishing the Trust (Deed) is dated 26 June 2017. A copy of the Deed is at pages 25 to 48 of the s 58 documents. Fujun has produced two documents which purportedly varied the Deed. Those documents are respectively a "Deed of Variation" dated 4 March 2021 a copy of which is at pages 15 to 21 of the s 58 documents (March Variation Deed) and a "Deed of Variation" dated 19 November 2021 a copy of which is at pages 117 to 122 of the s 58 documents (November Variation Deed). 7. The Objection refers to details of the grounds of objection in Appendix 1. Page 68 of the s 58 documents is headed Appendix 1, sub-headed "Grounds of Objection" and comprises numbered paragraphs 1.1 to 1.8 including: 1.4 Section 5D(3) of the Act provides that a discretionary trust is considered to prevent a foreign person from being a beneficiary of the trust if (and only if) both of the following requirements are satisfied: 1.4.I no potential beneficiary of the trust is a foreign person (the no foreign beneficiary requirement); and 1.4.2 the terms of the trust are not capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a foreign person (the no amendment requirement). 1 .5 Section 5D(5) provides that for the removal of doubt, a person is not a potential beneficiary of a discretionary trust if the terms of the trust prevent any property of the trust from being distributed to or applied for the benefit of the person. 1 .6 In this regard, both requirements are satisfied in respect of the Trust meaning the Trust is not taken to be a foreign person for the purposes of section 5A of the Act. That is: 1.6.1 all named beneficiaries are not foreign persons … 1.6.2 the trustee of the Trust is irrevocably prevented from adding any further named beneficiaries that are foreign persons — we refer to schedule 1, clause 5 and 6 the Deed of Variation; and 1 .6.3 all other potential beneficiaries of the Trust are irrevocably prevented from benefiting from the Trust for so long as they constitute foreign persons — we refer to schedule 1, clauses 2 to 6 of the Deed of Variation. 1.7 There are therefore no potential beneficiaries of the Trust that are foreign persons and the trustee of the Trust is irrevocably prevented from adding named beneficiaries that are foreign persons or amending the clauses that prevent potential beneficiaries from benefiting from the Trust for so long as they are foreign persons. 1.8 As the Trust satisfies the requirements in section 5D(3) of the Act, it is taken not to be a foreign person and the surcharge imposed by section 5A of the Act does not therefore apply. 1. There is no dispute that the land the subject of the Assessment is a residential property, situated in Lavington NSW, owned at all relevant dates by Fujun as trustee of the Trust. 2. Fujun requested that, for several reasons set out in written communications to the Chief Commissioner and the Tribunal, including that it has complied with changed law, the Tribunal be "lenient on the surcharge fee" that was charged in respect of the 2018 to 2021 tax years. For the reasons set out below, the Tribunal finds that Fujun has not complied with the changed law. The role of the Tribunal 1. The Tribunal was established by the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act). The objects of the CAT Act include enabling the Tribunal to review and determine appeals against decisions made by certain persons and bodies; enabling the Tribunal to resolve the real issues in proceedings justly, quickly, cheaply and with as little formality as possible; and ensuring that the Tribunal's processes are open and transparent (ss 3(b)(ii) and (iii), 3(d) and 3(f)). Jurisdiction of the Tribunal 1. Section 28 of the CAT Act provides "The Tribunal has such jurisdiction and functions as may be conferred or imposed on it by or under this Act or any other legislation." 2. There is no dispute that the Tribunal is empowered to review the Assessment (ss 9 and 55 of the ADR Act and s 96 of the Taxation Administration Act 1996 (NSW) (TA Act)). Section 63 of the ADR Act requires the Tribunal, in determining an application concerning an administratively reviewable decision (such as the Assessment), to decide what the correct and preferable decision is having regard to the material then before it including any relevant factual material and any applicable written or unwritten law, and authorises the Tribunal to affirm, vary or set aside the administratively reviewable decision. If the Tribunal sets aside that decision the Tribunal is to make a decision in substitution for that decision or remit the matter for reconsideration by the administrator who made the decision. The decision the subject of review by the Tribunal. 1. The Application sought a review of the Determination which disallowed Fujun's Objection to the Assessment. In Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 the Court of Appeal said at [28]: … the right of review under s 97 is given by reference to the operative decision of the Chief Commissioner and not to a ruling made on an objection. Although the existence of an objection is a necessary precondition to the power of review by the Court, and it is the taxpayer's dissatisfaction with the determination of the objection which provides standing to seek review, it is the initial decision which is the subject matter of the review. 1. Section 96 of the TA Act provides the jurisdictional power of administrative review by the Tribunal. That power is commensurate with the Supreme Court's jurisdictional power in s 97. 2. There is no dispute that while Fujun was dissatisfied with the disallowance of its Objection, it is the Assessment, not the disallowance of the objection to the Assessment, which is the subject of review by the Tribunal in these proceedings. The parties dealt with the Application in these proceedings on the basis that the Tribunal was reviewing the Assessment rather than the Determination. I find that the Application be varied accordingly. Onus of proof Submissions as to onus by the Chief Commissioner 1. At [31] to [33] the Chief Commissioner submitted: 31. The Applicant bears the onus of proving its case on the balance of probabilities: s. 100(3) Taxation Administration Act 1996 ("TA Act'). 32. In respect of the nature of the onus of proof, in Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, the High Court approved the following statement of principle from the decision of Mason J in Gauci v Federal Commissioner of Taxation [1975] 135 CLR 81 at p.89 as correctly stating the law (at 624): "The Act does not place any onus on the Chief Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s.190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail." 33. To that extent, the onus rests with the Applicant to establish that it is entitled to an exemption from surcharge land tax, having regard to the relevant statutory criteria. The Applicant must prove all matters necessary to enable the Tribunal to answer the statutory question(s) in its favour. In the absence of that evidence the Assessment will prevail as correct, as the starting point is that there is no entitlement to an exemption. Findings as to onus 1. Section 100(3) of the TA Act provides that Fujun has the onus of proving its case in a review by the Tribunal. 2. In order to be successful, Fujun must prove its case to the Tribunal on the "balance of probabilities" Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 at [104]. 3. I accept the submissions by the Chief Commissioner, which are supported by the authorities listed above, 4. I observe that Fujun made no submissions in relation to the relevant onus in the proceedings. In its written submissions Fujun has confused the past and present tenses as to when the Variation Deeds took effect so to preclude foreign persons being or becoming beneficiaries of the Trust at any relevant date(s). 5. The Tribunal's findings as to Fujun's submissions are detailed below at [35] to [55]. Material before the Tribunal Fujun Pty Ltd ATF Ni Family Trust's documents and oral representations 1. Fujun relies on: 1. The Application, and a bundle of unpaginated and unindexed documents attached thereto, filed with the Tribunal on 16 May 2022. The Application was signed by Mr Fu Lu Ni (Mr Ni), who orally informed the Tribunal, at the commencement of the hearing on 6 October 2022, that he is a director of Fujun Pty Ltd and is orally authorised to represent Fujun in these proceedings. I observe that certain documents in the bundle forming part of the Application are in the form of submissions while others are apparently intended to be evidence tendered on behalf of Fujun. Some of the documents are referred to below. 2. An email from Mr Ni to the Tribunal, dated 23 July 2022. The 2 substantive paragraphs in the email appear to be submissions (AS) and state: We are law-abiding citizens only because we are not familiar with the statutes here. When we find that the provisions of the family trust must be changed, we promptly change the deed at once, but the reason why it exceeds the time limit is actually in the following unforeseen circumstances 1) We do not receive any notification from the authorities regarding the change of the ordinance. Although your organization said that a notification was sent in October 2020, we did not receive it 2) When we purchased this property, the relevant lawyers did not inform us of the change in this Act. 3) We are living in Victoria and we are not familiar with the laws of NSW. In short, we are law-abiding citizens, we are all Australian citizens and do not intend to put any possible foreign person in the family trust and this is the first time that we have encountered such a special change in the law. We have indeed complied with the law that has been changed. Important regulations for foreigners in family trusts, please be particularly lenient on the surcharge fee that we did not change the deed according to the time limit. Many thanks for your kind consideration. 1. Brief oral submissions made by Mr Ni during the hearing. The Respondent's documents and oral representations 1. The Chief Commissioner relied on: 1. An indexed and paginated bundle of 124 pages of documents, filed 31 May 2022 pursuant to s 58 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act) (s 58 documents) and an additional two pages of documents, marked pages 125 and 126, styled Supplementary Documents also filed pursuant to s 58 of the ADR Act. 2. Written submissions dated and filed on 15 August 2022 (RS). 1. Annexure A to RS is a letter from the Crown Solicitor's Office (CSO) dated 26 July 2022 to Fujun. This letter sets out the Chief Commissioner's understanding of the Application and why, in the opinion of the Chief Commissioner, Fujun has poor prospects of success (in these proceedings). The letter invites Fujun to consider seeking legal advice concerning this matter and withdrawing the Application. 2. Annexure B to RS is the Chief Commissioner's Practice Note 004 and CPN 004 V2, concerning" Foreign surcharges and discretionary trusts". 1. An indexed bundle of authorities comprising 216 numbered pages containing extracts from Commonwealth and New South Wales legislation and Judgments / Reasons from several decisions by Courts / Tribunals, filed 13 September 2022. On 5 October 2022 the Respondent filed a decision of this Tribunal in Cymtow Pty Ltd as trustee for Stanavacs Trust; Lanlex No 127 Pty Ltd as trustee for TBH Family Trust; Cybir Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAD 314 (Cymtow). I note that the decision in Cymtow was handed down on 26 September 2022 and Mr Ni did not object to the late filing of that decision. 2. Oral representations made to the Tribunal by Ms H Morgan, Solicitor. 1. All references to written submissions of the Chief Commissioner are to numbered paragraphs of RS unless stated to the contrary. Substantive law 1. I observe Fujun did not dispute the accuracy of legislative excerpts included in RS. 2. Accordingly, there is no dispute that at all relevant dates, from and including the 2017 land tax year, Surcharge Tax is levied and payable on residential land owned by foreign persons (s 5A Land Tax Act 1956 (NSW) (LT Act)). Section 5A(3) of the LT Act provides that Surcharge Tax is payable in respect of residential land, in addition to any other land tax payable in respect of that land, and is payable even if no land tax is payable under other provisions. 3. There is no dispute that references in the LT Act to the "Principal Act" are to the Land Tax Management Act 1956 (NSW) (LTMA): s 1 of the LT Act. 4. Section 5A LT Act relevantly provides: 5A Levy of surcharge land tax on residential land owned by foreign persons—2017 and subsequent land tax years (1) Land tax is payable under this section in respect of residential land owned by a foreign person (surcharge land tax). (2) In respect of the taxable value of all the residential land owned by the foreign person at midnight on 31 December in any year (commencing with 2016), surcharge land tax is to be charged, levied, collected and paid under the provisions of the Principal Act and in the manner prescribed under that Act for the period of 12 months commencing on 1 January in the next succeeding year at the rate of— (a) in the case of all residential land owned by the foreign person at midnight on 31 December 2016—0.75% of that taxable value as assessed under the Principal Act, and (b) in the case of all residential land owned by the foreign person at midnight on 31 December in the years 2017–2021—2% of that taxable value as assessed under the Principal Act, and (c) in the case of all residential land owned by the foreign person at midnight on 31 December in any other year, commencing with 2022—4% of that taxable value as assessed under the Principal Act. (3) Surcharge land tax is payable in addition to any land tax payable in respect of the residential land under the other provisions of this Act, and is so payable even if no land tax is payable under those other provisions. (4) The Principal Act applies to surcharge land tax in respect of residential land owned by a foreign person subject to the following— (a) surcharge land tax is payable as if the residential land were the only land owned by the foreign person, (b) if the residential land is also owned by a person who is not a foreign person, the taxable value of the land is to be reduced to the proportionate value of the interest in the land of the foreign person, (c) if the foreign person is a joint owner of the residential land, the person is to be individually (and not jointly) assessed and is liable in respect of the value of the person's proportionate interest in the land as if the person were the owner of a part of the land in proportion to the person's interest (and accordingly section 27 (2)–(4) of the Principal Act does not apply), (d) if the Chief Commissioner is satisfied that the residential land is used for purposes other than residential purposes, the taxable value of the land is to be reduced by the apportionment factor determined in accordance with section 104ZB of the Duties Act 1997 in relation to the land, (e) if the foreign person is the trustee of a fixed trust (within the meaning of section 3A of the Principal Act) in relation to the residential land, the person is not liable to surcharge land tax, (f) the provisions of the Principal Act relating to the persons who are taken to be owners of the residential land apply to surcharge land tax, except that section 23 of the Principal Act does not operate to make a mortgagee in possession an owner of the land unless the mortgagor is a foreign person, (g) the person is exempt from liability to pay surcharge land tax in respect of the land for a land tax year because the land is the principal place of residence of the foreign person (and accordingly sections 9C and 9D of the Principal Act operate to reduce the land value of the land if it is the principal place of residence of the person) only if the person is eligible for the exemption under section 5B, (h) the tax thresholds under Division 4A of Part 7 of the Principal Act do not apply to surcharge land tax, (i) any other modification prescribed by the regulations under the Principal Act applies to surcharge land tax. (5) If a foreign person defaults in the payment of surcharge land tax then, without releasing the foreign person from his or her liability, the following provisions apply as long as the default continues— (a) if the foreign person is a joint owner of the land concerned—any other joint owner (whether or not a foreign person) is, on being served with a notice by the Chief Commissioner requiring payment of the unpaid surcharge land tax, responsible for its payment and the unpaid tax may be recovered from that other joint owner as if he or she were the defaulting taxpayer, (b) if the foreign person is a beneficiary of a trust relating to the land concerned—the trustee (whether or not a foreign person) is, on being served with a notice by the Chief Commissioner requiring payment of the unpaid surcharge land tax, responsible for its payment and the unpaid tax may be recovered from that trustee as if he or she were the defaulting taxpayer, (c) all payments made under this subsection by that other joint owner or that trustee are taken to be made on behalf of the defaulting taxpayer, (d) that other joint owner or that trustee may recover from the foreign person any amount paid by that other joint owner or that trustee under this subsection. (6) (Repealed) 1. Section 5D of the LT Act relevantly provides: 5D Surcharge land tax- discretionary trusts (1) The trustee of a discretionary trust is taken to be a foreign person in that capacity for the purposes of section 5A if the trust does not prevent a foreign person from being a beneficiary of the trust. (2) If a discretionary trust prevents a foreign person from being a beneficiary of the trust, the trustee is not in that capacity a foreign person for the purposes of section 5A. (3) A discretionary trust is considered to prevent a foreign person from being a beneficiary of the trust if (and only if) both of the following requirements are satisfied-- (a) no potential beneficiary of the trust is a foreign person (the "no foreign beneficiary requirement"), (b) the terms of the trust are not capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a foreign person (the "no amendment requirement"). Note : … Under the transitional arrangements for this section in Schedule 2 to the Principal Act, the no amendment requirement does not apply to a trust that satisfies the no foreign beneficiary requirement immediately before the commencement of this section. (4) A person is a "potential beneficiary" of a discretionary trust if the exercise or failure to exercise a discretion under the terms of the trust can result in any property of the trust being distributed to or applied for the benefit of the person. Note: A potential beneficiary is not limited to persons named in the trust instrument and extends to the members of any class of persons to whom or for whose benefit trust property can be distributed or applied pursuant to the discretions of the trust. (5) For the removal of doubt, a person is not a potential beneficiary of a discretionary trust if the terms of the trust prevent any property of the trust from being distributed to or applied for the benefit of the person. (6) In this section, "property" includes money, and a reference to the distribution or application of property includes a reference to the payment of money. LTM Act cl 66 Sched 2 1. At [23] the Respondent submitted: 23. Pursuant to the savings and transitional provisions in Schedule 2 to the Land Tax Management Act 1956 ("LTMA"), s.5D applies to the 2017 to 2021 land tax years. Clause 66 of Schedule 2 to the LTMA provides … 66 Amendments relating to discretionary trusts (1) Section 5D of the Land Tax Act 1956 applies to the assessment of land tax liability in respect of the 2017 land tax year and subsequent land tax years. (2) If the trustee of a discretionary trust is liable in that capacity as a foreign person for surcharge land tax in respect of the 2017, 2018, 2019 or 2020 land tax year— (a) the trustee is exempt from that land tax if the terms of the trust have been amended, before payment of the land tax is due and before midnight on 31 December 2020, so that the trust prevents a foreign person from being a beneficiary, or (b) if that land tax has been paid, the trustee is entitled to a refund of that land tax if the terms of the trust have been amended, before midnight on 31 December 2020, so that the trust prevents a foreign person from being a beneficiary. (3) A trust that satisfies the no foreign beneficiary requirement under section 5D of the Land Tax Act 1956 immediately before the commencement of that section is considered for the purposes of that section to prevent a foreign person from being a beneficiary of the trust (without having to satisfy the no amendment requirement under that section). (4) Despite section 5D of the Land Tax Act 1956, the trustee of an Australian testamentary trust is not in that capacity a foreign person for the purposes of the application of section 5A of that Act to residential land owned by a foreign person if— (a) liability for land tax is required (under clause 9 of Schedule 1A to this Act) to be assessed as if the deceased had not died and had continued to use and occupy the land as his or her principal place of residence, or (b) any of the following apply (even if the trust does not prevent a foreign person from being a beneficiary of the trust)— (i) for a trust arising from a will or codicil—the will or codicil was executed on or before 31 December 2020, (ii) for a trust arising from the administration of an intestate estate—the deceased died before, or within 2 years after, the commencement of section 5D of the Land Tax Act 1956, (iii) for a trust resulting from an order of a court varying the application of the provisions of a will or codicil or of the rules governing the distribution of an intestate estate—the order was made on or before 31 December 2020. (5) The Chief Commissioner may in a particular case extend the date by which payment of surcharge land tax by a trustee is due so that the trustee qualifies for exemption from that surcharge land tax under this clause if the terms of the trust have been amended before midnight on 31 December 2020 (but after the date by which payment would otherwise be due) so that the trust prevents a foreign person from being a beneficiary. (6) In this clause— Australian testamentary trust means a discretionary trust arising from a will or codicil or the administration of an intestate estate (or as a result of an order of a court varying the application of the provisions of a will or codicil or of the rules governing the distribution of an intestate estate) where the deceased was not a foreign person immediately before his or her death. (7) Expressions in this clause have the same meanings as in section 5D of the Land Tax Act 1956. 1. RS submitted: 24. The definition of "foreign person" is contained in s.2A of the LTA, which relevantly provides that foreign person has the same meaning as in Chapter 2A of the Duties Act 1997. 25. Section 104I of the Duties Act 1997 (within Chapter 2A) defines residential land as follows: "residential land means any of the following and does not include any land used for primary production— (a) a parcel of land on which there are one or more dwellings, or a parcel of land on which there is a building or buildings under construction that, when completed, will constitute one or more dwellings, (b) a strata lot, if it is lawfully occupied as a separate dwelling, or suitable for lawful occupation as a separate dwelling, (c) a utility lot (within the meaning of the Strata Schemes Management Act 2013), if its use is restricted to the owner or occupier of a strata lot referred to in paragraph (b), (d) a land use entitlement, if it entitles the holder of the land use entitlement to occupy a building, or part of a building, as a separate dwelling, (e) a parcel of vacant land (including any land that the Chief Commissioner is satisfied is substantially vacant) that is zoned or otherwise designated for use under an environmental planning instrument (within the meaning of the Environmental Planning and Assessment Act 1979) for residential purposes or principally for residential purposes." 26. Section 104J of the Duties Act (within Chapter 2A) contains the definition of foreign person. Section 104J provides: "104J Meanings of "foreign person" and "foreign trustee" (1) In this Chapter— foreign person means a person who is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth, as modified by this section. foreign trustee means a person who is a foreign person because of the person's capacity as the trustee of a trust. (2) The definition of foreign person in the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth is modified as follows— (a) an Australian citizen is taken to be ordinarily resident in Australia, whether or not the person is ordinarily resident in Australia under that definition, (b) a New Zealand citizen who holds a special category visa, within the meaning of section 32 of the Migration Act 19580f the Commonwealth, at any particular time is taken at that time to be an individual whose continued presence in Australia is not subject to any limitation as to time imposed by law. Note— Section 5 of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth provides that an individual who is not an Australian citizen is ordinarily resident in Australia at a particular time (and is therefore not a foreign person) if and only if— (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time, and (b) at that time— (i) the individual is in Australia and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law, (ii) the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law. (3) For the purposes of charging surcharge purchaser duty on a surcharge duty transaction, a person is taken to be a foreign person if the person is a foreign person when a liability for duty charged by Chapter 2 on the transaction arises (or would arise but for section 53A or a concession or exemption from duty under that Chapter). Note— See section 12." 27. Section 4 of the Foreign Acquisitions and Takeovers Act 1975 ("FATA") defines foreign person as follows: (a) "an individual not ordinarily resident in Australia; or (b) a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or (c) a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or (d) the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or (e) the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or (f) a foreign government; or (g) any other person, or any other person that meets the conditions, prescribed by the regulations." 28. Section 4 of the FATA defines substantial interest as follows: "a person holds a substantia/ interest in an entity, trust or unincorporated limited partnership if: (a) for an entity or unincorporated limited partnership--the person holds an interest of at least 20% in the entity or partnership; or (b) for a trust (including a unit trust)-the person, together with any one or more associates, holds a beneficial interest in at least 20% of the income or property of the trust. Note 1: See also sections 17 (meanings of interest and aggregate interest of a specified percentage in an entity or unincorporated limited partnership) and 18 (rules relating to determining percentages of interests in entities). Note 2: For when a person acquires a substantial interest in an entity, see section 20." 29. Section 18 of the FATA sets out when a beneficiary in a discretionary trust is taken to hold a substantial interest. Section 18 provides: "Rules relating to determining percentages of interests in entities Exercise of future rights (1) Subsection (2) applies if: (a) a person has a right that, if exercised, would result in the person holding an interest in an issued security in the entity; and (b) it cannot be determined at that time (from the right itself or from the circumstances existing at that time) whether the right would be exercised. (2) For the purposes of this Act, in determining the percentage of the interests in the issued securities in the entity that the person holds, or would hold, at a particular time, assume that the right were exercised at that time. Discretionary trusts (3) For the purposes of this Act, if, under the terms of a trust, a trustee has a power or discretion to distribute the income or property of the trust to one or more beneficiaries, each beneficiary is taken to hold a beneficial interest in the maximum percentage of income or property of the trust that the trustee may distribute to that beneficiary." 30. Section 5 of the FATA provides when an individual who is not an Australian citizen is ordinarily resident in Australia. Section 5 provides: "Meaning of ordinarily resident (1) An individual who is not an Australian citizen is ordinarily resident in Australia at a particular time if and only if: (a) the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and (b) at that time: (i) the individual is in Australia and the individual's continued presence in Australia is not subject to any limitation as to time imposed by law; or (ii) the individual is not in Australia but, immediately before the individual's most recent departure from Australia, the individual's continued presence in Australia was not subject to any limitation as to time imposed by law. (2) Without limiting paragraph (l)(b), an individual's continued presence in Australia is subject to a limitation as to time imposed by law if the individual is an unlawful non-citizen within the meaning of the Migration Act 1958. Fujun's submissions 1. The Objection: 1. conceded that the Applicant held the Land as the trustee of a discretionary trust. 2. submitted: 1. "the Trust is not a 'foreign person' on the basis that [the Trust] "does prevent foreign persons from being a beneficiary of the Trust". (Discretionary Trust submission) 2. The Trust satisfies the two requirements of s 5D(3) of the LT Act, namely that no potential beneficiary of the Trust is a foreign person and the terms of the Trust are not capable of amendment so as to result in a foreign person becoming a potential beneficiary of the Trust. (Discretionary Trust submission) 1. Fujun submitted by email on 23 July: 1. When Fujun became aware that the Trust deed "must be changed" the deed was changed "at once". However, Fujun also concedes that the [statutory] "time limit" was exceeded. 2. The time limit for the change was exceeded because: 1. Fujun was not informed by "the authorities" that the law had changed and Fujun did not receive a notification which the Respondent said had been sent to it in October 2020. (Legal advice submission) 2. When Fujun purchased the land, the relevant lawyers did not inform Fujun of the change to the law. (Legal advice submission) 3. Mr Ni (and possibly his wife who is also a director of Fujun) live in Victoria and are not familiar with NSW law. (Knowledge of relevant law submission) 1. Mr Ni and his wife: 1. Do not intend to "to put any possible person in" [the Trust]. I understand this to mean there is no intention that any beneficiary of the Trust, who is a "foreign person" as defined, is to receive any relevant benefit from the Trust. (No intention submission) 2. Have not previously "encountered such a special change" in the law. (Knowledge of relevant law submission) 3. Have effectively complied with the change in the law. (Compliance with change in law submission) 1. The Respondent submitted, briefly at [2], that the Applicant's case is that: 2. … the Applicant is not required to pay surcharge land tax as the Applicant was not aware of the amendments to the Land Tax Act 1956 ("LTA") in respect of surcharge land tax for discretionary trusts, none of the beneficiaries are foreign persons and the trust deed has been amended to exclude foreign persons from being a beneficiary. … Consideration and findings concerning Fujun's submissions Discretionary Trust submissions 1. There is no dispute that, prior to the dates on which either or both of the Variation Deeds took effect, foreign persons were not excluded from being beneficiaries of the Trust under the Deed and this defect pursuant to the amended legislation was remedied so that the Deed complied with the amended legislation. Fujun submitted that in this regard Fujun relies on the March Variation Deed executed 4 March 2021 and the November Variation Deed executed 19 November 2021. 2. Fujun submitted that the Variation Deeds ensured that no potential beneficiary was a foreign person and the Deed could not be varied to cause any foreign person to be such a beneficiary. Effective date of amendment(s) to the Trust Deed 1. There is no dispute that Fujun submitted that the Trust Deed was amended, by either or both of the Variation Deeds, to exclude foreign persons as beneficiaries of the Trust and there were no foreign beneficiaries of the Trust. 2. The Chief Commissioner's submissions from [38] to [53] include submissions that the Trust, as amended by the Variation Deeds, did not prevent foreign persons being beneficiaries of the Trust at all relevant dates. 3. The question is 'What were the relevant dates?'. 4. I observe that both Variation Deeds provide: 1. at clause 1 "The trust's current deed is varied by this deed, with effect from the effective date …"; and 2. at clause 8 "Deed means this deed of variation" and "Effective Date" is defined to mean "the date of execution of this deed". 1. I find that, without reliance on legislation to the contrary, the Variation Deeds expressly provide that they did not take effect prior to 4 March 2021, the date of execution of the March Variation Deed, which was the first Variation Deed to be executed. 2. I find that Fujun has not provided to the Tribunal any evidence or relevant legislation or judicial / tribunal authority to the contrary. I also find that the Chief Commissioner relied on excerpts from the LTM Act, the LT Act and extracted decisions of several courts and tribunals detailed at footnotes "27" to "33" in RS in formulating his submissions to the contrary of Fujun's submissions. 3. I observe that s 5A of the LT Act provides that, subject to specific exceptions, Surcharge Tax is payable in respect of all residential land owned by a foreign person at midnight on 31 December in any year commencing with 2016 for the 12 month period commencing on 1 January in the next succeeding year whether or not other land tax is levied against relevant land. 4. Having regard to legislation outlined above and the onus on Fujun to prove its case on the balance of probabilities, I reject the above submission by Fujun as to foreign persons, as defined, being prevented from being potential beneficiaries of the Trust at all relevant dates. Legal advice submissions 1. Whether or not Fujun was advised by its lawyers or any other person as to relevant changes to land tax legislation, the onus to prove that any such lack of advice exempts Fujun from an obligation to comply with land tax surcharge obligations, rests with Fujun. There is no evidence as to what advice was sought by Fujun from its lawyers at any time nor as to what advice was provided. Without any relevant evidence I make no findings as to the advice, if any, which was provided to Fujun by its lawyers at any relevant date. 2. There is a submission at RS [9] that the Chief Commissioner provided a letter on 12 October 2020 to Fujun (Revenue NSW letter) advising of legislative changes applying to Surcharge Tax and discretionary trusts and requesting that Fujun provide to the Chief Commissioner a new declaration and a copy of an amending trust deed to irrevocably exclude foreign persons before 31 December 2020. The Chief Commissioner has attached a copy of the Revenue NSW letter at pages 125 and 126 of the s 58 documents. Fujun denies receiving such a letter but does not deny that it is addressed to the same address as were the initial notice of assessment dated 11 February 2021 and the Assessment which Fujun acknowledged receiving. 3. I make no findings as to whether the Revenue NSW letter was received by Fujun. However, Fujun has provided no evidence or authority to the effect that the Chief Commissioner was under any duty to provide any such letter or other relevant advice to Fujun and that in default of Fujun's receipt of such letter or advice, Fujun was excused from paying Surcharge Tax. 4. Fujun has provided no evidence and no authority to the Tribunal in support of its submissions regarding the relevance of its purported non-receipt of the Revenue NSW letter. Having regard to the onus lying on Fujun, Fujun's submission is rejected. Knowledge of relevant law submissions 1. Fujun submitted (through its representative Mr Ni) that both Mr Ni and his wife are directors of Fujun Pty Ltd, they live in Victoria, and are not familiar with NSW law. Fujun also submitted that neither Mr Ni nor his wife had previously experienced any such change in law as the imposition of Surcharge Tax. 2. Fujun has provided no evidence as to the extent of familiarity of either Mr Ni or his wife to NSW law nor any authority to the effect that any such lack of familiarity and / or lack of experience with previous changes in law, entitle Fujun to claim an exemption from impositions of NSW taxation law on residential (or other) land situated within NSW. 3. In so far as the onus lies on Fujun to prove its case and Fujun has not supported these submissions with both probative evidence and relevant authority, the submissions are rejected. No intention submission 1. Fujun submitted that there was no intention for any 'foreign person' beneficiary of the Trust to receive any relevant benefit from the Tribunal. 2. Fujun has provided no evidence as to both a relevant non-intention and an authority to the effect that such a lack of intention entitles Fujun to claim an exemption from impositions of NSW taxation law on residential (or other) land situated within NSW. 3. In so far as the onus lies on Fujun to prove its case and Fujun has not supported this submission with both probative evidence and relevant authority, the submission is rejected. Compliance with change in law submission 1. This submission is dealt with above under the heading "Effective date of amendment(s) to the Trust Deed". I reject the submission as having no basis in fact or law. Overview of Fujun's case 1. The role of the Tribunal, as noted above, is to decide what the correct and preferable decision is having regard to the material then before it, including any relevant factual material and any applicable written or unwritten law. To find in favour of Fujun, Fujun is required to produce to the Tribunal specific, relevant, probative evidence and legal authority, not merely generalised submissions and documents which are not relevant to specific legislation. Consideration 1. I have considered Fujun's submissions (together with Fujun's supporting evidence and authorities (to the extent that any were provided to the Tribunal) and the submissions, evidence and authorities of the Respondent. 2. My above observations specifically addressed Fujun's submissions. I note that Fujun repeated the same substantive submissions on several occasions, sometimes using slightly different wording. I have dealt with such repeated submissions once only and not repeated my observations and findings on each occasion the same substantive submission was made. 3. I observe that on 21 June 2022 the Tribunal ordered, amongst other matters, that the Chief Commissioner provide to Fujun and the Tribunal his submissions by 16 August 2022 and ordered that Fujun provide evidence or submissions in reply by 30 August. Relevant submissions were provided to the Tribunal by the Chief Commissioner on 15 August 2022, and Mr Ni did not indicate that they were not provided to Fujun on or about the same date. So far as the Tribunal is aware, and notwithstanding Fujun's obligation to prove its case, Fujun provided no evidence or submissions in reply to either the Tribunal or the Chief Commissioner. Findings and decision 1. Having regard to my above findings, I am not satisfied on the balance of probability on the material before me that Fujun has satisfied its onus. Accordingly, the correct and preferable decision of the Tribunal is that the decision of the Chief Commissioner under review is affirmed. Orders and directions 1. The decision under review is affirmed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar Amendments 24 January 2023 - Dates in Paragraphs 35 and 41 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 January 2023