Administrative Decisions Tribunal New South Wales Medium Neutral Citation: EK Anderson Investments Pty Ltd ATF Cacs Property Trust v Chief Commissioner of State Revenue [2012] NSWADT 132 Hearing dates: 28 June 2012 Decision date: 04 July 2012 Jurisdiction: Revenue Division Before: J Block, Judicial member Decision: The decision under review is affirmed Catchwords: Land tax in respect of a special trust - no estoppel against the operation of a tax statute-obligations of taxpayer to advise if land held by a special trust Legislation Cited: Land Tax Management Act 1956; Taxation Administration Act 1997 Cases Cited: Oamington Pty Ltd v Commissioner of Land Tax (1997) 98 ATC 5051; FCT v Wade (1951) 84 CLR 105 at 167; Maritime Electric Company Ltd v General Davies Ltd [1937] AC 610. ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 697; Macquarie Generation v Hodgson [2011] NSWCA 424; Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273; Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50; Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [204] NSWADTAP 19 Category: Principal judgment Parties: E K Anderson Investments Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel A Stafford (Respondent) E Anderson, (Agent for the Applicant) Crown Solicitor (Respondent) File Number(s): 126033 REasons for decision Part A. Introduction and background 1The Applicant in its capacity as the trustee of the CACS Property Trust ('the Trust") seeks the review of land tax reassessments referable to the property situated at 2 Chalmers Crescent, Mascot ("the Property") issued by the Respondent (who is usually referred to in these reasons as the "Chief Commissioner") by notice dated 8 December 2011 in respect of the land tax years 2007 to 2011 (both land tax years inclusive, and referred to as "the relevant years", and each a "relevant year", although on occasion individual land tax years are referred to by reference to the actual year). In accordance with the notice dated 8 December 2011 land tax was reassessed on the basis that the Trust was throughout the relevant years a special trust and for that reason not entitled to the tax-free threshold which had previously been allowed. 2The Tribunal had before it the documents lodged pursuant to Section 58 of the Administrative Decisions Tribunal Act; it was also furnished with detailed submissions and on which it has drawn for the purposes of these reasons. 3The Applicant was (without objection by the Chief Commissioner) represented by Mr E Anderson who is one of its directors. Mr. Anderson did not tender any sworn evidence either by himself or by anyone else. However and in the course of his submissions he made a number of statements of fact which are referred to hereafter in these reasons. 4It is relevant at the outset to note that Mr. Anderson admitted that the Trust was at all times and in particular during the relevant years a special trust as defined in the Land Tax Management Act 1956 ("the LTM Act" or "the Act") and that the Chief Commissioner was not until 28 October 2011 made aware of the existence of the Trust; (the Chief Commissioner has in fact never been furnished with a copy of the trust deed by which the Trust is constituted). The Tribunal refers in this context to Tab 13 of the Section 58 documents which contains an undated letter by Mr. Anderson addressed to an officer of the Respondent and received on 12 March 2012 reading (as to most of it) as follows: Please understand that I am not disputing the legality of the tax, I am disputing retrospective action when the assessment forms I received from you never asked the question whether the company was a trust or not. If the Land Titles Office does not supply this information and if it changes the amount of tax payable then surely at some point the question must be asked. The average taxpayer would not understand the intricacies of the legislation. If when you sent assessments you stated clearly "this assessment is made on the understanding that your property is not held by a trust, if it is, please advise immediately for reassessment" retrospective action would be justified. Otherwise one assumes that the assessment is correct. I respectfully suggest that the current system is nothing less than "entrapment". Who knows how many other innocent taxpayers are ticking time bombs. My request of review is based on equity rather than legality and I hope that it will lead to a change in the wording of future assessments as well as the cancelation in this instance of retrospective tax claims. 5It is convenient at this early juncture to include the content of the Chief Commissioner's submissions under the head of "Background" and contained (excluding footnotes noting that they have been checked and found to be correct), in clauses 7 to 16 as follows: 7. Until 28 October 2011, when a person named "Edward (Ted)" informed the Office of State Revenue (OSR) that the Property was owned by a trust each of the initial land tax assessments had identified only "EK Anderson Investments Pty Ltd" as the taxpayer. 8. OSR records indicate that this information was followed up by a telephone call to "Ted" on 3 November 2011. 9. The next day, on 4 November 2011, the Applicant submitted a form to the Office of State Revenue (OSR), signed with a declaration by "E K Anderson", who appears to be a director of the Applicant, disclosing that the Property was owned by "CACS PROPERTY TRUST". 10. The Respondent's Decision was issued on 6 December 2011 on the basis of information exchanged during the telephone call on 3 November 2011. 11. Interest was imposed under Section 21 of the TA Act on the unpaid land tax but the Chief Commissioner remitted the premium rate component of the interest under Section 25 of the TA Act (so that only the market rate component under Section 22 was levied) and remitted the penalty tax. 12. The Applicant objected to the assessments comprised in the Respondent's Decision on 18 December 2011, indicating in an attached letter that the basis of the objection was that it was "reasonable to assume [the] assessments are correct" and that the OSR had never asked whether it was held in a trust. Although "trust" was ticked in the objection form, the Applicant did not provide the trust deed requested under this checkbox in the form. 13. On 24 January 2012 the Respondent wrote to the Applicant briefly explaining the meaning of "special trust" and again requesting a copy of the trust deed and any related documents that may amend the trust. 14. On 15 February 2012 Mr. Mike Mariner, a tax agent, sent a facsimile to the OSR providing details of the trust and acknowledging that further information may be required depending on whether the information provided was sufficient. 15. That fax indicated that the Trust known as the "CACS Property Trust" corresponded to a Deed dated 20 November 1992 for which the Applicant was the trustee and that the unitholder was another trust (the EK Anderson Family Trust) with a holding of 100 units. 16. On or before 12 March 2012 a director of the Applicant sent a letter to the OSR indicating the basis of the objection was that he had not been asked whether it was a trust and that the claim was "retrospective". 17. The objection was rejected on 12 March 2012. Part B. Statements of fact by Mr. Anderson during the course of his submissions 6Mr. Anderson said that in October 2011 he rang the Office of State Revenue ("OSR") and spoke to Ms. Jean Goss. He informed her that his family discretionary trust (and which is another trust and not the Trust with which these reasons are concerned) had received a bequest of real property from his late mother. Ms. Goss replied that appropriate forms would be sent. 7Mr. Anderson went on to say that the Applicant had been paying land tax in respect of the Property for over 20 years. He said that he did not inform the Chief Commissioner as to the fact that the Property was in fact owned by the Trust or that the Trust was a special trust. He said also that he understood that there was a legislative change in 2005 and by which the concept of special trusts was first introduced into the Act. 8Mr. Anderson said that when speaking to Ms. Goss he also asked her about the Property and that she replied that it should have been treated and taxed on the basis that the Trust was a special trust, and that assessments would thereafter be issued on this basis. 9Forms were received and completed and probably early in 2012. 10Mr. Anderson said that he asked his accountant (Mr. M. Mariner) as to why he had not been informed of the regime in respect of special trusts, and that Mr. Mariner replied that when special trusts became relevant in 2005 he, Mr. Mariner, enquired of the Office of State Revenue as to the effect, and was informed that the relevant legislative alteration had no effect on trusts in respect of which there was no change in the beneficiaries. Mr. Anderson said that Mr. Mariner did not inform him of the information so elicited. The Tribunal here notes that Mr. Mariner was not called to give evidence; it notes also that Tab 15 of the Section 58 documents, which contains a file note (entitled "Print Notes") of relevant conversations and enquiries, makes no mention of any such conversation with Mr. Mariner. There is one reference to Mr. Mariner and it is dated 7 February 2012. The Print Notes in question, which need not be included in these reasons, indicate a degree of sophistication in respect of the Anderson affairs. 11Mr. Anderson went on to say that land tax had been paid as assessed and the Applicant was entitled to assume that the assessments were correct. Until his family discretionary trust inherited real property, he and the Applicant were ignorant of the legal position as regards special trusts; the objection lodged by the Applicant does not relate to future assessments but rather to past assessments and which, as he put it, were retroactive in their effect. He said that he felt trapped and that the Chief Commissioner had not exercised his powers with sufficient care. He said also that there had been only one return and that there was no need for more. He said, and repeated, that the Chief Commissioner had a moral obligation to ensure that assessments were correct. 12Mr. Anderson said that he accepted that there were legal aspects which favoured the Respondent but that the Respondent had access to land title records and accordingly the ability to check assessments, and that if the Respondent had done so the assessments would have been corrected. Part C. Relevant statutory and similar provisions 13As set out previously the term "Act' or "LTM Act" refers to the Land Tax Management Act 1956; "TA Act" refers to the Taxation Administration Act 1997. 14Section 25A of the LTM Act provides (relevantly) as follows: 25A Classification of trust as special trust (1) If land is subject to a trust, the Chief Commissioner may classify the trust as a special trust for land tax purposes: (a) on the application of the trustee of the trust, or (b) on the Chief Commissioner's own motion. (2) Without limiting subsection (1) (b), the Chief Commissioner may classify a trust as a special trust in relation to a land tax year if any information required to be provided for that land tax year in relation to the trust, the land that is the subject of the trust or the beneficiaries of the trust is not provided as required under this Act. (10) The Chief Commissioner may, despite anything to the contrary in this Section: (b) reject any application for revocation of the classification of a trust as a special trust if any information required to be provided in relation to the trust, the land that is the subject of the trust or the beneficiaries of the trust has not been provided as required under this Act or the Taxation Administration Act 1996, and (c) assess or re-assess any land tax liability for land the subject of a trust that is not a fixed trust on the basis of the trust being a special trust, including land tax liability in respect of land tax years that commenced or occurred before the trust was classified as a special trust. 15Section 12 of the Act provides (relevantly) as follows: 12. Taxpayer to furnish returns (1) The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year. (1B) A land tax return required to be furnished by a person must: (a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and (b) set out, or be accompanied by, such information as to the person's land ownership as may be required to complete the return. (1 C) If land is the subject of a trust, the land tax return must also: (a) set out, or be accompanied by, such information in relation to the trust and the beneficiaries of the trust as may be required to complete the return, and (b) state the trustee's opinion as to whether the trust is a special trust. 16The NSW Government Gazette 17 December 2010 No. 135 at 5906 included an Order of the Chief Commissioner under subsection 12(1), which relevantly provided: 1. This Order is made under Section 12(1) of the Land Tax Management Act 1956. The purpose of this Order is to advise persons who own land in New South Wales if and when they are required to lodge an initial return or a variation return in relation to the 2011 land tax year or an earlier tax year. 11. A variation return is required to be lodged by a person who receives an incorrect notice of assessment of land tax. Errors on the notice which may result in an incorrect notice of assessment of land tax may include: (a) details of land owned by the person as shown on the notice are incorrect (including but not limited to ...land shown in assessment is owned in capacity of trustee...); 12. A variation return is required if the trustee of a trust that has an interest in land has not previously advised the Chief Commissioner of the existence of the trust or if the trust is incorrectly classified as either a fixed or special trust. 13. A variation return disclosing details of the beneficiaries must be lodged by a trustee of a trust, other than a special trust, if the trustee has not previously advised the Chief Commissioner of the beneficiaries of the trust or the beneficial owners of land owned by the trust. If a trustee fails to comply with this requirement, the Chief Commissioner may assess the trust as if it were a special trust. 14. A variation return is required to be lodged by the first instalment date shown on the notice of assessment. If the notice of assessment shows that no tax is payable, the due date for lodgement of a variation return is 40 days after the "Issue Date" shown on the notice. 18. A requirement to lodge a return specified in this notice does not affect a requirement to lodge a return by an earlier date specified by the Chief Commissioner under Section 12(2) of the Act or an earlier date specified in any previous Order made under Section 12(1). 17The Applicant did not make any such disclosures by 7 March 2011, which was the first instalment due date reflected in the 2011 land tax year notice of assessment. That no such information was provided enlivens subsection 25A(2) (and also subsection (10)(b)) of the Act which make it clear the Chief Commissioner can classify the trust as a special trust if the requisite information has not been provided. 18Although the Respondent was not obliged to rely on earlier Orders because the existence of the Trust should have been disclosed by 7 March 2011, the Order under Section 12 of the Act in earlier years, while it did not contain an equivalent to paragraph 12 (as quoted in clause 15) , did nonetheless refer to the lodgement of initial returns on behalf of a trust in the following terms: 7. Where land is subject to a trust, and the trustee has not previously lodged a land tax return, the trustee must lodge an initial return on behalf of the trust. If the trustee fails to lodge a return, or fails to provide the information specified on the form about the beneficiaries of the trust, the trust may be assessed as if it were a special trust. 19The earlier Orders also contained a general requirement for variation returns (defined to be land tax returns) to be submitted if the notice of assessment is erroneous (and using the 18 December 2009 Order as an example) in the following terms: 11. A Variation Return is required to be lodged by a person who receives an incorrect notice of assessment of land tax. Errors on the notice which may result in an incorrect notice of assessment of land tax may include: (a) details of land owned by the person [which is defined in the Order to include a trust or trustee] as shown on the notice are incorrect; (b) exempt land has been incorrectly assessed as liable for land tax; (c) liable land has been incorrectly classified as exempt; (d) the calculation of tax contains errors; (e) a special trust has been incorrectly assessed as if it were a fixed trust; (f) a fixed trust has been incorrectly assessed as if it were a special trust; 20As set out in his written submissions the Respondent maintains (correctly in the view of the Tribunal) that the original assessments were incorrect in that the Applicant had never been identified as a trustee, and so that the calculations contained errors because the nature of the land ownership had not been disclosed or taken into account and the Trust (which should have been characterised as a special trust) had instead been assessed on the basis that the Applicant had full beneficial and legal ownership of land. 21Section 10 of the TA Act imposes a duty on the person liable to pay tax under a taxation law to make full disclosure of all facts and circumstances affecting liability. It reads: (1) A person who is liable to pay tax under a taxation law must, before or at the time an assessment of the tax liability is made, fully and truly disclose to the Chief Commissioner all the facts and circumstances affecting the tax liability under the relevant taxation law. Maximum penalty: 100 penalty units. (2) A defendant is not guilty of an offence under this Section if the defendant proves that the defendant reasonably relied on some other person to ensure that the requirements of this Section were satisfied. 22Although Section 10 of the TA Act is framed as an offence, offence provisions which require a person to do something or prohibit them from doing something are properly construed as imposing a duty and thus a legal compulsion to do the act. See Macquarie Generation v Hodgson [2011] NSWCA 424 at [19]-[30] per Hodgson JA (others agreeing). In the context of the TA Act as a whole, this provision makes it clear that full disclosure of all circumstances affecting tax liability is a duty of the Applicant. No onus is imposed on the Chief Commissioner to verify the accuracy of the information provided or follow up on the information held. 23Section 4 of the LTM Act provides for that Act to be read with the TA Act. The LTM Act is a "taxation law" under Section 4 of the TA Act. 24Section 9 of the TA Act gives the Chief Commissioner power to make reassessments of a tax liability of a taxpayer, which relevantly provides: 9 Reassessment (1) The Chief Commissioner may make one or more reassessments of a tax liability of a taxpayer. (2) A reassessment of a tax liability is to be made in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time. (3) The Chief Commissioner cannot make a reassessment of a tax liability more than 5 years after the initial assessment of the liability, unless: [exceptions not relied on] (4) The initial assessment of a tax liability remains the initial assessment of the liability for the purposes of this Act even if it is withdrawn under Section 13. 25Section 14(3) of the TA Act provides for Notices of Assessment to be issued on reassessment. 26In the context of land tax, the reassessment provisions must be read with Section 14(1) of the LTM Act, which provides: Subject to this Act and the Taxation Administration Act 1996, the Chief Commissioner shall from the returns and from any other information in the Commissioner's possession or from any one or both of those sources, and whether any return has been furnished or not, cause an assessment to be made of the taxable value of the land owned by any taxpayer and of the land tax payable thereon. 27It may be noted, albeit in brief, that in the context of relevant statutory provisions Mr. Anderson contended that the Act allows the Chief Commissioner to remit tax in a situation such as this; the Act does not in fact contain such a power. Part E. Estoppel 28No conduct of a revenue authority can estop the operation of a taxing statute; this principle has been applied in the context of land tax; Oamington Pty Ltd v Commissioner of Land Tax (1997) 98 ATC 5051, referring to FCT v Wade (1951) 84 CLR 105 at 167 and Maritime Electric Company Ltd v General Davies Ltd [1937] AC 610. See also ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 697 at [70]-[76] per Barrett J in a stamp duty context. 29This proposition derives from the well-established principle that a statutory body cannot by contract or representation fetter its responsibility to perform statutory duties or exercise statutory powers: Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273 at 289 per Lord Bridge. 30Even reliance on a misleading or incorrect revenue ruling (a clearer representation than the omission to ask for information alleged in this case) does not estop the Chief Commissioner from administering the law in accordance with its terms or otherwise exonerate the Applicant from liability to land tax. Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 at [33]. 31In the matter now before the Tribunal, the Chief Commissioner is required to assess land tax (s 14(1) of the LTM Act), the process for determining land tax is prescribed in the LTM Act and he is expressly authorised to make a reassessment (Section 9 of the TA Act). The Chief Commissioner cannot be estopped from doing so. Part F. Other contentions on behalf of the Chief Commissioner 32Mr. Stafford drew attention to the fact that Tab 2 (page 2) of the Section 58 documents (which relates to the 2007 year assessment) makes it clear that the rate for non-concessional companies and special trusts is calculated on the basis that there is no tax free threshold. That page also sets out what must be done by a taxpayer where assessment details are incorrect. Mr. Stafford drew attention also to Tab 1 of the Section 58 documents (also referable to the 2007 year assessment)and in particular to the opening paragraphs on page 2 which expressly relate to special trusts. 33Tabs 1 and 2 of the Section 58 documents relate, as I have noted, to the 2007 year; the Section 58 documents contain similar information and material in respect of the ensuing relevant years. It is sufficient to note that assessments issued in respect of the relevant years made reference to the fact that special trusts were treated in a particular manner. 34Mr. Stafford drew particular attention to the file notes contained in Tab 15 of the Section 58 documents and in particular to the entry dated 22 March 2005 in order to demonstrate that the Applicant's affairs were sophisticated and in particular such that a separation was sought and granted in respect of the Anderson Superannuation Fund. He drew attention also to the fact that the only entry as regards Mr. Mariner is that dated in February 2012 and that in particular that there is no mention of any advice of the nature referred to in clause 10 (implausible in the view of the Tribunal) being given to Mr. Mariner. Part G. Interest 35Premium rate interest having been waived interest has been charged at the market rate. The Applicant did not at any time make reference in submissions to interest and the Tribunal deals with it, albeit briefly, for the sake of completion. 36Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [204] NSWADTAP 19 is just one authority (among many) for the proposition that a charge of interest at market rate will not be disturbed where the Chief Commissioner was not at fault and it cannot be said that the Chief Commissioner was in any way at fault in this matter. Part H. Conclusion 37The Applicant's contention is in essence that it was not aware or was not made aware of its obligations and that the Chief Commissioner, who had access to land title records, should have assessed correctly. That contention is entirely without merit. The Chief Commissioner was never under any legal obligation to consult land title records; even if he had done so those records would not have informed him of the existence of the Trust or the fact that it was a special trust. The relevant legislation makes it clear that the Applicant was under an obligation to inform the Chief Commissioner of the fact that the Property was owned by the Trust which was a special trust and it is abundantly clear that the Applicant did not do so. 38As has been shown the Applicant was under a legal obligation to furnish correct information. The fact that the Applicant may have relied on incorrect advice might relieve it of any consequent criminal liability under Section 10 of the TA Act but that relief relates only to criminal liability. 39It will have been noted that according to the Applicant the law as regards special trusts was amended in 2005. In fact the provisions of the Act as regards special trusts were amended some years prior to 2005 but nothing turns material turns on this inaccuracy. 40As set out in these reasons it is clear that the Applicant should have paid land tax in respect of the relevant years on the basis that the Property was owned by a special trust; it is equally clear that the Applicant had an obligation in law to inform the Chief Commissioner of the true position and that it did not perform its obligations in accordance with law. 41In the circumstances the decision under review must be affirmed. ********** 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: 04 July 2012