Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Zhuang v Chief Commissioner of State Revenue [2013] NSWADT 103 Hearing dates: 4 December 2012 and 15 March 2013 Decision date: 13 May 2013 Jurisdiction: Revenue Division Before: NS Isenberg, Judicial Member Decision: The decision under review is confirmed. Catchwords: Meaning of ' in conformity with' and 'related person'; sections 18, 50, 50A and 64C of the Duties Act; whether a completed agreement or transfer can be cancelled; administrative estoppel. Legislation Cited: Administrative Decisions Tribunal Act 1997 Duties Act 1997 Interpretation Act 1987 State Revenue Legislation Amendment Act 2012 Taxation Administration Act 1996 Cases Cited: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 Kuo v Chief Commissioner of State Revenue [2011] NSWADT 299 Lake Victoria Ltd v Commissioner of Stamp Duties (1949) 49 SR (NSW) 262 Sharpe -v- Chief Commissioner of State Revenue [2002] NSWADT 6 revised - 05/02/2002 Stature Pty Ltd -v- Chief Commissioner of State Revenue [2002] NSWADT 271 Vickery v Woods(1951) 85 CLR 336 Warner v Chief Commissioner of State Revenue [2011] NSWADT 212 Category: Principal judgment Parties: Bo Zhuang, Jiazhen Yang and Jizheng Zhuang (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Counsel J Mitchell (Respondent) AustLeg & Co (Agent, applicant) on 4 December 2012 and B Zhuang (Applicant in person ) on 15 March 2013 Crown Solicitors Office (Respondent) File Number(s): 126078 reasons for decision Introduction 1On 17 December 2009 two of the Applicants, Bo Zhuang and Jiazhen Yang ("the Purchasers"), entered into an off the plan contract for the sale of land ("the Agreement") as purchasers. The vendors in the Agreement were two companies ("the Vendors"). The property the subject of the Agreement ("the Property") was a lot in an unregistered strata plan at Homebush Bay in New South Wales. 2After exchanging contracts the Purchasers decided to include Bo Zhuang's father, Jizheng Zhuang as a purchaser. AustLeg & Co, the conveyancers acting for the Purchasers ("AustLeg") sent a letter signed by the Purchasers to the Vendors. The letter enclosed a transfer form and contained a direction to the effect that the transferee for the purposes of the Agreement would be "Bo Zhuang (as to a 30% share), Jiazhen Yang (as to a 50% share) and Jizheng Zhuang (as to the remaining 20% share)". 3On 21 June 2011 AustLeg, apparently in response to a letter from the Office of State Revenue ("OSR") sent a facsimile to the OSR enclosing a copy of: i) the front page of the Agreement (showing a consideration of $535,000) stamped at $9,782.50 with the marking "Trans No. 6197555" and "Asst details s49A, s87. TS"; ii) an undated Transfer form ("Transfer No 1") signed only by Zhen Sun as "transferee's licensed conveyancer" in respect of property described as "Lot 75 in an unregistered strata plan of part of 3/270113, 8/270113, 9/270113, 10/270113, 11/270113 & 12/270113 being of" (sic); the Vendors were named as Transferor; consideration of $535,000; transferring an estate in fee simple; stamped at $10 and marked "Asst details s18(3)" Trans No. 6197599; iii) a statutory declaration made by Bo Zhuang on 11 March 2011 declaring: "I declares that Mr Jizheng Zhuang is my father and I agree to transfer 20% shares on [the Property] to him"; and iv) notarized documents relevantly asserting that Zhuang Bo's father is Zhuang Jizheng (the "Paternity Documents"). 4AustLeg had stamped the Agreement and Transfer No 1 as an approved person purportedly in accordance with the Electronic Duties Return service and Directions. 5On 16 September 2011 the Applicants were registered as owners of the Property as tenants in common with Bo Zhuang holding 30%, Jiazhen Yang 50% and Jizheng Zhuang 20%. 6On 10 and 11 November 2011 the OSR sent facsimiles to AustLeg advising that an audit was being undertaken in relation to the subject transaction and requesting certain information. On 16 November 2011 AustLeg replied by facsimile enclosing further copies of the front page of the Agreement and the Paternity Documents and a stamped Transfer form ("Transfer No 2"). Transfer No 1 and Transfer No 2 were substantially similar except that in Transfer No 2 the property was described as "75/SP85580" and the only signature was that of Jia Jia Sun as "transferee's licensed conveyancer". 7It was Transfer No 2 (the registered transfer) also stamped by AustLeg, that had been registered on the title on 16 September 2011. 8In response to further communications with the OSR AustLeg informed the OSR that Bo Zhuang and Jizheng Zhuang were married, they were the purchasers named in the Agreement and that later Bo Zhuang had transferred a 20% interest in the Property to his father Jizheng Zhuang. 9The Chief Commissioner informed AustLeg that the s18(3) concession did not apply and on 30 November 2011 issued a Notice of Assessment to the Applicants for $20,712.95 ("the First Assessment") in respect of the registered transfer (comprising $19,565.00 stamp duty (calculated on the original purchase price of $535,000) plus $1,157.95 interest less $10.00 credit). 10The Applicants objected to the First Assessment. In response the Chief Commissioner reviewed the matter and by letter dated 16 April 2012 (the "April 2012 Decision") informed the Applicants that the original stamping of $9,782.50 was concessional under the NSW Housing Construction Acceleration Planning Scheme; disallowed the objection; enclosed an Application for NSW Home Builders Bonus and advised that the Applicants that if they returned that completed Application within 21 days to prevent the imposition of interest, the (registered) transfer would be stamped for $14,673.75 with a 25% reduction of duty. 11The Applicants seek a review of the April 2012 Decision. Issues 12The issue to be determined is the amount of duty payable in relation to the registered transfer. The Respondent submits the correct duty is calculated on an ad valorem basis subject to the NSW Home Builders Bonus ("HBB") concession, if applicable. The Applicants submit there should be nominal $10.00 duty either because the transfer is in conformity with the Agreement or because the purchaser under the Agreement and the transferee under the transfer are related persons. In the alternative the Applicants submit duty should be calculated on 20% of the consideration as the transfer involves only a 20% interest in the Property moving from Bo Zhuang to his father. Relevant legislation 13The Applicants have the onus of proving their case: s 100(3) of the Tax Administration Act 1996. "100 Provisions relating to applications for review (3) The applicant has the onus of proving the applicant's case in an application for review." 14The Duties Act 1997 imposes stamp duty and provides exemptions and concessions in certain circumstances. Provisions imposing duty in relation to the purchase of the Property are found in the following sections: "8 Imposition of duty on certain transactions concerning dutiable property (1) This Chapter charges duty on: (a) a transfer of dutiable property, and (b) the following transactions: (i) an agreement for the sale or transfer of dutiable property, ... (2) Such a transfer or transaction is a dutiable transaction for the purposes of this Act. 9 Imposition of duty on dutiable transactions that are not transfers (1) The duty charged by this Chapter on a dutiable transaction referred to in section 8 (1) (b) is to be charged as if each such dutiable transaction were a transfer of dutiable property. 11 What is "dutiable property"? (1) "Dutiable property" is any of the following: (a) land in New South Wales," Undisputed facts 15On 17 December 2009 Bo Zhuang and Jiazhen Yang entered into the Agreement to buy the Property. They subsequently wanted Bo Zhuang's father Jizheng Zhuang to be a part purchaser. 16In accordance with the Agreement Bo Zhuang and Jiazhen Yang provided a transfer form and direction to the Vendors to the effect that the ultimate purchasers of the Property would be Bo Zhuang as to 30%, Jiazhen Yang as to 50% and Jizheng Zhuang as to 20%. 17The Vendors signed the transfer presented to them by Bo Zhuang and Jiazhen Yang. The Agreement was completed and the transfer in favour of the Applicants was registered on about 16 September 2011. The Applicants' submissions 18In their objection to the First Assessment the Applicants submitted: They relied on advice from an officer of the Chief Commissioner to the effect that if Bo Zhuang transferred some of his share of the Property to his father then s18 would apply and the transfer would be exempt from duty. The registered transfer was prepared in accordance with that advice. The real transaction was a transfer of a 20% interest from Bo Zhuang to a related person in accordance with s18(3). If there was no compliance with s18(3) the consideration was 20% of the purchase price, not the whole price. A technical error had occurred which could be corrected so that the transferor would be Bo Zhuang and the transferee, a related person would acquire a 20% interest; and The First Assessment is causing the Applicants and AustLeg financial hardship. 19In their application to the Tribunal for review of the April 2012 Decision the Applicants submitted, in addition to the grounds of their objection: The Vendors are transferring the Property to two different parties, the Purchasers and the Applicants. This cannot occur and as the Property was registered in the name of the Applicants, the Agreement (to sell to the Purchasers) is void. Section 18 is intended to avoid the imposition of double duty and the Chief Commissioner is acting contrary to the purpose of the section; and The Tribunal should have regard to a change in law which expanded the definition of related person to include 'in laws'. The Respondent's submissions 20In summary the Respondent's submissions are: 1) The Agreement and registered transfer are each subject to ad valorem duty as the registered transfer was not in conformity with the Agreement; 2) The Purchasers and the transferees named in the signed transfers were not related persons at any relevant date; 3) The registered transfer transferred the whole legal fee simple, not 20%, to the transferees; 4) Whether or not incorrect advice was provided by the OSR, the Chief Commissioner must apply the law as properly interpreted, there being no relevant doctrine of administrative estoppel; 5) The Chief Commissioner cannot reverse a completed transaction; 6) A change in law in the definition of 'related person' which took effect from 11 April 2012 does not have retrospective effect in relation to a document dated 16 March 2011; and 7) If the Appellants believe that the imposition of double duty has caused any unreasonable hardship they may apply for relief to the Hardship Review Board (which they have not done). Consideration 21The effect of sections 8 and 9(1) of the Duties Act is that each of "a transfer of dutiable property" and "an agreement for the sale of dutiable property" are dutiable transactions and "duty ...is to be charged as if each such dutiable transaction were a transfer of dutiable property". The Property is land in New South Wales and is "dutiable property" (s11 of the Duties Act). 22Accordingly, unless a concession or exemption applies, ad valorem duty is chargeable on each of the Agreement and the registered transfer. 23Section 18 of the Duties Act is named "No double duty" and provides relief from duty in certain circumstances. These circumstances have altered over time with changes in the Duties Act. The Applicants submit that the Chief Commissioner is acting contrary to the legislation in imposing 'double duty'. However, in order for the Applicants to obtain the benefit of a concession or exemption, the facts must fall within prescribed circumstances. 24During the proceedings the parties made reference to proposed transfers from Bo Zhuang to his father and from the Vendors to Bo Zhuang and Jiazhen Yang. No such transfers were produced to the Tribunal and there is no evidence that they were created, signed and took effect. They are not the subject of these proceedings, which are concerned with the duty chargeable on the registered transfer. 25The Applicants submit that the Agreement is void and rely on section 50 of the Duties Act which provides that a cancelled agreement is not liable to duty. The Chief Commissioner submits that the Agreement was affirmed and completed in accordance with its terms and that the concessional duty assessed and paid in respect of the Agreement is correct. 26The Applicants submit that the reason the Agreement is void is that the registered transfer resulted in the Property being registered in the names of the three Applicants, rather than the two purchasers named in the Agreement. However, the evidence is that Bo Zhuang and Jiazhen Yang served on the Vendors a transfer nominating the Applicants as transferees and directing that the transfer be signed by the Vendors. This was in accordance with clause 4.3 of the Agreement. The transfer was signed by the Vendors, the Agreement was completed and the transfer registered. Section 50 only applies to an agreement which is "rescinded, annulled or otherwise terminated without completion" (s50(2)). I find that the Agreement is neither void nor cancelled and the s50 relief does not apply. 27Section 50A of the Duties Act provides that a transfer is not liable for duty if it has been cancelled or abandoned "and the dutiable property has not been transferred to the transferee". However Transfer No 2 was registered and ownership of the Property was transferred to the transferees. I find that s50A cannot be relied on by the Applicants. 28Section 18(2) also provides relief from double duty in certain circumstances: "(2) The duty chargeable in respect of a transfer of dutiable property made in conformity with an agreement for the sale or transfer of the dutiable property is $10 if the duty chargeable in respect of the agreement has been paid." The duty on the Agreement has been paid. Is the transfer "in conformity" with the Agreement? 29The issue of whether a transfer was in conformity with a duly stamped agreement has been previously considered in this Tribunal, including in Sharpe -v- Chief Commissioner of State Revenue [2002] NSWADT 6 revised - 05/02/200, Warner v Chief Commissioner of State Revenue [2011] NSWADT 212 and Kuo v Chief Commissioner of State Revenue [2011] NSWADT 299. In Warner Block JM said: "7 In accordance with section 18 of the Duties Act duty on the Transfer is $10, if it is made in conformity with the Contract. The Transfer will not be in conformity with the Contract unless the persons named in the Transfer are the same as the persons named in the Contract. Lake Victoria Ltd v Commissioner of Stamp Duties (1949) 49 SR (NSW) 262 at 265 per Jordan CJ; Vickery v Woods(1951) 85 CLR 336 at 343-4 per Dixon J; Sharpe v Chief Commissioner of State Revenue [2002] NSWADT 6 at [27]-[29]... 8 It is clear that the persons named in the Contract are not the same as the persons named in the Transfer and so that Section 18(2) of the Duties Act does not apply." 30In Kuo Hole JM said at [14]: "In this case the purchasers named in the contract are different persons to the transferees named in the transfer. ... accordingly the transfer was not made to the purchasers named in the contract, it is not in conformity with the contract and therefore section 18(2) of the Duties Act1997 does not apply." 31The purchasers named in the Agreement are the Purchasers (Bo Zhuang and Jiazhen Yang). The transferees named in the registered transfer are the Applicants (Bo Zhuang, Jiazhen Yang and Jizheng Zhuang). The Purchasers are not identical with the Applicants. Accordingly I find that the transfer is not in conformity with the Agreement and s18(2) does not apply. 32Section 18(3) provides a concession in respect of a transfer not made in conformity with an agreement if each of four conditions is satisfied. There is no dispute that the first three conditions have been satisfied. The relevant fourth condition, s18(3)(d)(i) is: "(d) at the time the agreement was entered into, and at the completion or settlement of the agreement: (i) the purchaser under the agreement and the transferee under the transfer are related persons.." 33Related persons were defined in the Dictionary to the Duties Act at the relevant time as follows: "related person means a person who is related to another person in accordance with any of the following provisions: (a) natural persons are related persons if: (i) one is the spouse or de facto partner of the other, or (ii) the relationship between them is that of parent and child, brothers, sisters, or brother and sister" 34Jizheng Zhuang and Bo Zhuang were related persons being parent and child. Bo Zhuang and Jiazhen Yang were related persons being spouses of each other. However Jizheng Zhuang and Jiazhen Yang, being respectively father-in-law and daughter-in-law, were not related persons for the purpose of s18(3) at the relevant date. 35As Block JM stated in Warner: "10 Section 18(3)(d) of the Duties Act refers to "the purchaser" and "the transferee" in the singular form. 11 Section 8(b) of the Interpretation Act 1987 relevantly provides: a reference to a word or expression in the singular form includes a reference to the word or expression in the plural form, 12 It is clear that section 8(b) of the Interpretation Act will apply to section 18(3)(d) of the Duties Act, except insofar as the contrary intention appears in the Duties Act: section 5(2) Interpretation Act 1987. There is nothing in the Duties Act which evidences an intention that the word "purchaser" should not include purchasers and the word "transferee" should not include transferees. It follows that the phrase "the purchaser " as it appears in section 18(3)(d) of the Duties Act includes the purchasers and the phrase the transferee includes the transferees." 36It is not sufficient if some purchasers are related to some transferees. All purchasers in the Agreement must be related persons of all transferees in the registered transfer in order for the s18(3) concession to apply. I find that this was not the case and the concession does not apply. 37The Applicants requested that the Tribunal take into account in its deliberations certain legislative changes which occurred after completion of the transaction. There are two relevant changes. 38The first legislative change is a redefinition of "related person" in the Dictionary to the Duties Act. The amended wording provides that persons in the relationship of father-in-law and daughter-in-law are related persons for the purpose of s18(3). 39The second legislative change is the insertion in the Duties Act of s64C "Transfers made in partial conformity with agreements". This section varies the all-or-nothing basis which imposes double duty on a transfer of dutiable property not in conformity with an agreement for the same property. Section 64C allows a proportionate concession to the extent that the transfer is in conformity with the relevant agreement. 40Both the redefinition of "related person" and s64C were introduced by the State Revenue Legislation Amendment Act 2012 and took effect from 11 April 2012. I find that the legislative changes referred to do not apply to the transfer registered on 16 September 2011. 41The Applicants stated that the registered transfer was prepared in reliance on advice from the OSR namely "If the Transfer is from the Husband (Bo Zhuang) to his father then Section 18(3) of the duty act applies" (paragraph VI of the Applicants' undated written submissions received by the Tribunal on 28 November 2012). At paragraph 7 the Applicants submitted that the registered transfer was "drafted and stamped by the purchasers based on the information provided over the phone from the Office of State Revenue". 42The evidence submitted to the Tribunal as to the OSR advice is a statutory declaration by Zhen Sun, who worked as a conveyancer in AustLeg & Co, from December 2009 to March 2011. Zhen Sun did not attend before the Tribunal for cross examination and limited weight can be given to the declaration. However, what is the effect if the advice was given and relied on as submitted? 43The Chief Commissioner submits that "no conduct on the part of the Chief Commissioner could operate as an estoppel against the operation of the Duties Act: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117 per Kitto J" (written submissions dated 14 November 2012). 44Wade and other High Court decisions were cited in this Tribunal in Stature Pty Ltd -v- Chief Commissioner of State Revenue [2002] NSWADT 271 at [11] and [12] where Verick JM said: "It is well established that the doctrine of estoppel cannot be invoked by a taxpayer so as to prevent the Commonwealth Commissioner of taxation assessing tax pursuant to the statutory duty so to do.... The accepted view is, therefore, clearly that no conduct on the part of revenue can operate as an estoppel against an obligation imposed by revenue legislation to assess for the correct amount of tax subject, of course, to any specific statutory provisions which prevent the revenue from exercising its statutory duties." 45I find that even if the Applicants received and relied on advice as alleged, that does not stop the Chief Commissioner assessing the registered transfer for duty in accordance with the Duties Act. 46The Applicants submitted that the real transaction was a transfer of a 20% interest in the Property from Bo Zhuang to his father. No transfer from Bo Zhuang to his father was produced to the Tribunal. I find that the transfer the subject of these proceedings transferred a fee simple in the whole of the dutiable property to the Applicants. 47The Applicants also submitted that a technical error had been made by their conveyancers while acting as agent for the OSR in operating under the electronic Duty Return Scheme. Accordingly "it was a mistake made by the administration body of the Office of State Revenue not the Applicants". If the Applicants had not received advice from the OSR the registered transfer would not have been drafted as it was and the Purchasers would have been the transferees. (paragraphs 7 - 10 of the Applicants' submissions). 48These proceedings deal with documents brought into existence and signed, not documents which may, but were not, brought into existence and produced to the Tribunal. Even if the conveyancers were the agent of the Chief Commissioner for the purpose of assessing the transfer for duty, which is denied by the Chief Commissioner, for the reasons expressed in paragraphs 43 and 44 above the Chief Commissioner is not estopped from reassessing duty on the registered transfer in accordance with the Duties Act. 49The Applicants claim that the April 2012 Decision is unfair and unjust. In response to a similar submission by a taxpayer in Stature Pty Ltd, Verick JM said at [10] "It is fairly basic to say that "moral and ethical grounds" have very little role in construing revenue statutory provisions... The Chief Commissioner acted quite properly within the statutory framework of the law." I find that the Chief Commissioner is exercising a statutory responsibility in relation to the collection of revenue in accordance with the Duties Act. All taxpayers are subject to the legislation which provides exemptions and concessions should certain circumstances apply. It is not unfair or unjust for the Applicants to be subject to the same statutory imposts as other taxpayers. 50The Applicants further submitted that the April 2012 Decision is causing both the Applicants and AustLeg financial hardship. Sections 106A - 106D of the Taxation Administration Act 1996 provide a statutory regime enabling taxpayers to seek relief in the event of hardship. No evidence was presented to the Tribunal that any application has been made for such relief. I find that it is not appropriate for this Tribunal in these proceedings to make a determination in relation to a hypothetical application under those sections. Decision 51The correct and preferable decision, having regard to the material before the Tribunal and the above findings, is to confirm the decision to which the review relates. Orders 52The decision under review is confirmed. ********** 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: 13 May 2013