Civil and Administrative Tribunal New South Wales Medium Neutral Citation: White Star Developments Pty Limited v Chief Commissioner of State Revenue [2015] NSWCATAD 180 Hearing dates: 17 August 2015 Decision date: 26 August 2015 Jurisdiction: Administrative and Equal Opportunity Division Before: R Perrignon, Senior Member Decision: The respondent's decision to assess land tax in respect of the of the 2013 and 2014 tax years is confirmed. Catchwords: Land tax - taxpayer trustee for a special trust - trust formed with intention of being a fixed trust - trustee not aware that it was a special trust until it answered respondent's questionnaire during 2014 tax year - trustee then amended its trust deed to comply with requirements for a fixed trust - trustee would have done so earlier if assessment had been issued earlier - whether in the circumstances assessments for the 2013 and 2014 tax years ought be set aside. Legislation Cited: Land Tax Management Act 1956 Taxation Administration Act 1996 Cases Cited: EK Anderson Investments Pty Limited ATF Cacs Property Trust v Chief Commissioner of State Revenue [2012] NSWADT 132 Category: Principal judgment Parties: White Star Developments Pty Limited atf Moffat St Unit Trust (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: A Stafford (Respondent) Solicitors: G Butterfield (Agent for Applicant) Crown Solicitor's Office (Respondent) File Number(s): 1510033 reasons for decision 1. The taxpayer is the trustee of the Moffat Street Unit Trust, whose assets include land in New South Wales. On 18 August 2014, the Chief Commissioner of State Revenue assessed the land to land tax in respect of the 2012, 2013 and 2014 years, on the basis that the trust was a 'special trust' for the purposes of section 3A(2) of the Land Tax Management Act 1956. In the circumstances of this case, a special trust one that is not a 'fixed trust'. Fixed trusts enjoy the benefit of a tax threshold not available in respect of special trusts. 2. The trustee objected unsuccessfully to the assessments of 18 August 2014, and sought review of them by in this Tribunal. The Tribunal enjoys jurisdiction to review them: section 101, Taxation Administration Act 1996. 3. In the course of the hearing, the trustee conceded that the Moffat Street Unit Trust was at all relevant times a special trust for the purposes of section 3A, but said that the intention of the trustee had always been to form and operate a fixed trust. 4. At the hearing, the trustee was represented by its agent and accountant, Mr Butterfield. It abandoned its claim for review of the assessment in respect of the 2012 tax year, but asked that the assessments for the 2013 and 2014 tax years be set aside (presumably to be replaced by assessments on the basis of fixed trusts) because of what essentially amounted to unfairness. Its reasons were not articulated in writing, but doing its best on the basis of the oral submissions, the Tribunal understands the factual basis for that submission to be as follows. 1. The only reason the trust failed to satisfy the requirements for a fixed trust was that the trust deed did not meet the criteria in section 3A(3B). 2. At all material times, the trustee intended that the trust should be a fixed trust, both for land tax purposes and for income tax purposes. This, it said, was corroborated by its application for an ABN lodged on 29 July 2010, by its accounts prepared in respect of the tax years 2010 to 2014, and by its tax returns in respect of those years. 3. On or about 6 August 2014, it first became aware, through Mr Butterfield, that it was a special trust for the purposes of the land tax legislation, when Mr Butterfield answered a questionnaire which had been issued by the Chief Commissioner in order to assess land tax on a proper basis. 4. The trust deed was ten rectified to comply with the requirements for a fixed trust. 5. Had the Chief Commissioner issued a notice of assessment in 2012, the trustee would have been alerted earlier to the fact that the trust deed did not satisfy the requirements for a fixed trust, and would have been in a position to rectify the trust deed immediately, so as not to incur land tax in respect of the 2013 and 2014 tax years. 1. The Chief Commissioner did not dispute any of these propositions of fact, and I shall assume them to be correct. 2. On the basis of those facts, the trustee submitted that it was not appropriate that it be assessed as a special trust in respect of the 2013 and 2014 tax years. This was essentially the same argument that Mr Butterfield had put to the Chief Commissioner when he requested an internal review of the assessments by letter dated 17 December 2014: Our issue is that as only one assessment has ever been issued dated 18 August 2014, which includes 2012, 2013 and 2014 years we were not able to amend the trust deeds earlier. Our argument is that if the OSR had issued an assessment notice of the 2012 year earlier we would have been able to arrange for the trust deed to be amended earlier and therefore not incur subsequent years assessments. As our client [sic] have always believed and operated as if it was a fixed unit trust they were under the impression that they were not liable to land tax and therefore were stunned when the assessments arrived. 1. The Chief Commissioner submitted that he was under no duty to issue an assessment in 2012, or to advise the trustee that its trust deed did not satisfy the requirements of a fixed trust. Even if there were any such duties, he said the liability to pay land tax would be unaffected. 2. The sole issue for determination is whether the assessments for the 2013 and 2014 tax years ought be set aside because of the failure of the Chief Commissioner to alert the trustee in 2012 to the fact that the trust deed did not fulfil the requirements for a fixed trust, either by issuing an assessment or otherwise. Legislation 1. As it is common ground that the trust was at all relevant times a special trust, it is unnecessary to reproduce the terms of section 3A. The fact that it did not satisfy the requirements for a fixed trust, despite the trustee's intention that it do so, represents an error on the part of the trustee and/or its advisers. It was not the fault of the Chief Commissioner. 2. The nub of the trustee's argument is that the Chief Commissioner was under an obligation to assess the property to land tax earlier than he did, thus alerting the trustee to its error. The power to issue a notice of assessment is to be found in section 14 of the Taxation Administration Act 1996: 1. The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment). 2. If the Chief Commissioner has not issued a notice of assessment of the tax liability of a taxpayer, the chief Commissioner must issue the notice if a request to do so is made by the taxpayer within 5 years after the liability arose. 1. Subsection (1) prescribes no time limit for the issue of a notice of assessment. It is within the Commissioner's power to issue it within two years of the taxing date, as he did in this case on 18 August 2014, when he assessed land tax in respect of the 2012 tax year. Subsection(2) expressly contemplates the possibility that delays will occur in the issue of notices of assessment. The only time limit prescribed by the section is a limit of 5 years after a liability arises, where the taxpayer requests an assessment. The section implies that the assessment will be valid if issued within that time limit. 2. Similarly, section 9 permits the Chief Commissioner to make reassessments of tax liabilities up to five years after the initial assessment, and even later in some cases. 3. In this case, the Chief Commissioner was under no duty to issue initial notices of assessment earlier than he did. 4. The taxpayer argues that it was prejudiced because the failure to issue earlier notices of assessment would have alerted it to the fact that the trust deed did not satisfy the requirements of a fixed trust. That could only be so if the Chief Commissioner had assessed the trust as a special trust. As the taxpayer did not provide its trust deed for inspection, or disclose that it was a special trust, before 6 August 2014, it is not clear on what basis the Chief Commissioner would have assessed land tax on an earlier date in respect of the 2012 tax year. 5. If he had assessed liability on the basis of fixed trust, the trustee would have been none the wiser, but would have been exposed to a reassessment when ultimately the trust deed was provided to the Chief Commissioner. 6. The duty to disclose whether property is owned on trust, and if so whether it is a special trust, lies with the taxpayer. The Commissioner is required to assess land tax having regard to the 'returns and ... any other information in the Commissioner's possession": section 14(1). The returns are the returns which taxpayers are obliged to provide by section 12 of the LTM Act. That provides: 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. (1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that 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. (1C) 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 …. 1. Orders to provide returns in respect of the 2011, 2012 and 2013 tax years were published in the Government Gazette on 16 December 2011, 7 December 2012 and 6 December 2013 respectively. Trustees were required to state whether their trusts were special trusts. There is no evidence that the trustee in this case provided any returns, prior to answering the questionnaire on 6 August 2014. While the failure to submit returns continued, it was not possible for the Chief Commissioner to know whether the trust ought be assessed as a special or fixed trust. The obligation to make sufficient disclosure to enable the Chief Commissioner to assess the land properly lay with the taxpayer, not the Chief Commissioner. 2. In those circumstances, any delay in the issue of notices of assessment for the 2012 and 2013 tax years resulted from the trustee's failure to provide returns so as to enable the Chief Commissioner properly to assess the land to land tax. 3. Even if, contrary to the finding I have made, the Chief Commissioner was responsible for delay in issuing notices of assessment for the 2012 and 2013 tax years, it would not affect the liability to land tax, because a taxation authority cannot be estopped by conduct from fulfilling its duty to levy tax. As Block JM observed in EK Anderson Investments Pty Limited ATF Cacs Property Trust v Chief Commissioner of State Revenue [2012] NSWADT 132: 28 No 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. 29 This 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. 30 Even 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]. 31 In 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. 1. In that case, the taxpayer complained that land tax had been reassessed on the basis of a special trust, after originally having been assessed as subject to a fixed trust, thus misleading the taxpayer. That is not the case here. The assessments under review here are original assessments. The complaint is that there was some delay in issuing them. There can be no suggestion that the taxpayer was misled by any action of the Chief Commissioner, such as the issuing of a notice of assessment. To that extent, the arguments put by the taxpayer in this case are less meritorious than those in EK Anderson. Block JM concluded: 37 The 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. 38 As 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. …. 40 As 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. 1. In this case, the trustee did not fulfil its duty to provide returns. The Chief Commissioner was left to instigate his own investigation, which he did by issuing a questionnaire to the trustee on 21 July 2014. Any delay lies at the foot of the trustee itself. However, even if the delay was the fault of the Chief Commissioner, such delay does not affect the validity of the assessments ultimately made in 2014, or provide a reason for the setting aside of the notices of assessment for the 2013 and 2014 tax years, and substituting them with assessments on the basis that the trust was a fixed trust in the relevant tax years. That would be a false basis, as the parties agree that the trust was at all relevant times a special trust. It would be both inappropriate and beyond power to substitute assessments on the basis of a fixed trust for the 2013 and 2014 tax years. 2. For those reasons, noting that the application to review the assessment in respect of the 2012 tax year is abandoned, the Chief Commissioner's decision of 18 August 2014 to assess the land to land tax is respect of the 2012, 2013 and 2014 tax years is confirmed. 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 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: 26 August 2015