Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Fanous v Chief Commissioner of State Revenue [2019] NSWCATAD 64 Hearing dates: 28 November 2018 Date of orders: 17 April 2019 Decision date: 17 April 2019 Jurisdiction: Administrative and Equal Opportunity Division Before: S Higgins, Senior Member Decision: The respondent's 2016 and 2017 assessments for land tax are confirmed. Catchwords: TAXES and DUTIES – land tax Legislation Cited: Duties Act 1996 (NSW) Land Tax Management Act 1956 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184 Category: Principal judgment Parties: Thomas Fanous ATF Fanous Unit Trust (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: E Graham of counsel for the Respondent Solicitors G Tanous, as agent for the Applicant Office of the NSW Crown Solicitor for the Respondent File Number(s): 2018/231166 Publication restriction: Nil reasons for decision Introduction 1. The applicant, Thomas Fanous as trustee for the Thomas Fanous Unit Trust, is the owner of land located at 37 Woodcourt Street, Ambarvale, in the State of New South Wales (the Land) and seeks review of the 2016 and the 2017 Land Tax Assessments of the respondent, the Chief Commissioner of State Revenue. Each Assessment was based on the full value of the Land, because the respondent had determined that the Thomas Fanous Unit Trust (the Trust) was not a 'fixed trust', but a 'special trust' within the meaning of s 3A of the Land Tax Management Act 1956 (NSW) (LTM Act). That is, the applicant was not given the benefit of the land tax threshold (s 62TBA of the LTM Act) for the relevant land tax years and was assessed on the full value of the Land. 2. The applicant seeks review of each Assessment on the grounds that two Trust Deeds had been prepared in July 2015 and that the 'incorrect' Trust Deed was mistakenly lodged for stamping with the office of the respondent in August 2015. Mr George Fanous (Mr G Fanous), an accountant and the father of the applicant, represented the applicant in these proceedings. He contends that upon the presentation of the 'correct' Trust Deed, the 2016 and 2017 Assessments should have been varied so as to give the applicant the benefit of the land tax threshold. 3. It is the respondent's contention that there is no basis to vary the Assessments, as they accorded with the provisions of the LTM Act and the terms of the stamped Trust Deed at the time the applicant became liable for land tax on the Land for the relevant land tax years. 4. For the reasons that follow, I agree with the contentions of the respondent and on this basis I find that each Assessment should be confirmed. Relevant legislation 1. Under the provisions of the LTM Act, land tax is charged on land (other than land that is exempt under that Act) owned by a taxpayer at midnight on 31 December immediately preceding the year for which it is levied: see LTM Act, ss 7 and 8. A 'year' is defined to mean the period of 12 months commencing on 1 January. 2. Section 3A of the LTM Act is in the following terms: 3A Special trust—meaning (1) For the purposes of this Act, a trust is a special trust if: (a) the trust property includes land, and (b) the trustee of the trust is the owner of the legal estate in the land, and (c) the trust is not a fixed trust. (2) For the purposes of this section, a trust is a fixed trust if the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes (disregarding section 25 (3)). (3) For the purpose of determining whether a trust is a fixed trust under this section, any equitable interest of the trustee as trustee of the trust is to be disregarded. (3A) If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is the subject of the trust and, accordingly, the trust is taken to be a fixed trust. Note. Under section 25, owners of an equitable estate or interest in land are liable in respect of land tax as if they were legal owners of the land. Owners of an equitable estate in land are treated as secondary taxpayers. (3B) For the purposes of this section, the relevant criteria are as follows: (a) the trust deed specifically provides that the beneficiaries of the trust: (i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and (ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property, (b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed, (c) if the trust is a unit trust: (i) there must be only one class of units issued, and (ii) the proportion of trust capital to which a unit holder is entitled on a winding up or surrender of units must be fixed and must be the same as the proportion of income of the trust to which the unit holder is entitled. 1. Section 100(3) of the Taxation Administration Act 1996 (NSW) provides that in this application, the onus is on the applicant to prove his case. The material before the Tribunal 1. The applicant did not file any evidence, but relied on the material filed by the respondent which included copies of the Trust Deeds and the communications between the office of the respondent and Mr G Fanous. The material filed by the respondent included the s 58 documents. 2. The respondent also filed a chronology of events and written submissions. 3. Mr G Fanous made oral submissions at the hearing. The evidence 1. On 31 July 2015, a Trust Deed was lodged, on behalf of the applicant, with the office of the respondent for stamping in regard to duty payable under the Duties Act 1997 (NSW). This Trust Deed was stamped 24 August 2015 (2015 Trust Deed). 2. The front page of the 2015 Trust Deed stated that it was a 'Unit Trust Deed' supplied by the firm of Mr G Fanous. Clause 1 of the Deed set out its purpose including when it commenced. In this case it stated that the Trust commenced on 7 July 2015 and would end on the vesting day. 3. The applicant purchased the Land in September 2015. 4. On 14 July 2016, the respondent wrote to the applicant to advise him of potential land tax liabilities. It was noted: The tax is calculated on the combined value of all taxable land or interest in land you own. The general land tax threshold for 2016 is $482.000. For land held in trust, only FIXED trusts are entitled to this threshold. 1. The respondent went on to explain that if the applicant believed that his trust was a 'fixed trust' he must meet the relevant criteria contained in s 3A(3B) of the LTM Act to be entitled to the threshold. If the applicant believed that his Trust was a 'fixed trust' the respondent requested that he provide a copy of the Trust Deed and any amendments thereto, a certified copy of the Unit Register for his Trust, the percentage interest held by each unit holder and the last known address for each unit holder if not shown in the Unit Register. 2. The applicant responded to this request on 9 August 2016. In the pro-forma Trust Register Form, the applicant ticked the box on the second page to say that he had provided a copy of the Trust Deed, a 'fixed trust', and a copy of the unit trust register. The Trust Deed that was provided with the pro-forma Trust Register Form was the August 2015 Trust Deed. 3. On 18 August 2016, the respondent wrote to the applicant's father, Mr G Fanous, who the applicant had identified as the contact person in the pro-forma Trust Register Form. Attached to the letter was the respondent's Notice of Assessment for the 2016 land tax year in regard to the Land. In his letter of 18 August 2016, the respondent said that the Trust Deed that had been provided was a 'special trust' and did not meet the relevant criteria in s 3A(3B) of the LTM Act – in particular: The deed does not specifically provide that the Unit holders are presently entitled to the capital of the trust. Clause 46 allows present entitlement to income in the financial year and should not be restricted. The trustee discretion in regards to redemption of units, Unit holders are unable to wind up the trust. 1. In his letter the respondent also said: If you would like the trust to be considered a fixed trust for future tax years the deed needs to be amended to meet the relevant criteria. Inserting the relevant criteria into a Deed of Amendment, prefaced by the word single ' notwithstanding' or a similar word or phrase to remove any doubt, will be sufficient. A draft copy can be sent for review. 1. On 25 August 2016, Mr G Fanous wrote to the respondent in which he said: … [please] find copy of the Trust Deed for your Review. Once you have completed your review please kindly return the Deed back to our office. Thank you and we look forward to your reply. 1. The Trust Deed attached to the letter of Mr G Fanous was in the same format, with largely similar terms, to the 2015 Trust Deed. The Deed was not stamped and its commencement date was also 7 July 2015. The title page of the Deed described it as a 'Fixed Unit Trust Deed'. The only other significant change in this Deed was cl 46 which gave each unit holder a present entitlement to their share of income and assets of the trust fund and also gave each unit holder an immediate an indefeasible vested interest in their share of income and capital. 2. The respondent replied to Mr G Fanous' letter on 2 September 2016. In that reply, the respondent said the following: A land tax assessment was issued 15 August 2016 based on the supplied copy of the stamped trust deed for Thomas Fanous Unit Trust. In a conversation you said that the incorrect trust deed was supplied. I have requested you supply the correct deed and a 'statutory declaration' confirming the information and why the change of trust deed. The deed you have supplied on the 31 August 2016 is not as\ stamped deed and you have not supplied the "statutory declaration' as requested. To enable me to accept the Thomas Fanous Unit Trust deed supplied to replace the first supplied Thomas Fanous Unit Trust deed, I require a stamped copy of the deed you wish to use for the trust property and a 'statutory declaration' explaining the change of trust deed. … The assessment issued on the 15 August 2016 is correct as stands and will not be reissued. … 1. On 12 January 2017 the respondent issued a land tax assessment for the 2017 land tax year in respect of the Land. That assessment was also issued on the basis of the full value of the Land for the 2017 land tax year. 2. On 15 February 2017, Mr G Fanous, lodged with the respondent, for stamping, a statutory declaration of the applicant dated 14 February 2017, a copy of the same Trust Deed forwarded to the respondent on 25 August 2016 and a cheque, dated the same day as the statutory declaration, for the sum of $500 payable to the office of the respondent for duties payable under the Duties Act 1997. In his statutory declaration, the applicant said that: 1. the attached 'is correct deed for Thomas Fanous Unit Trust'; and 2. 'the attached Deed is a fixed unit trust Deed'. 1. On 21 February 2017, following a telephone call from Mr G Fanous that morning, the respondent wrote to him. In that letter the respondent acknowledged the material Mr G Fanous had lodged, on 15 February 2017, for assessment of duty. The respondent went on to advise that, in light of Mr G Fanous having advised that there were two trust deeds for the trust, he was requested to provide the following information was required before any assessment could be made: 1. a complete copy of the unit register for the Unit Trust 2. the other trust deed that you disclosed to the OSR. This must be the original; and 3. a complete copy of the register of the Trust. 1. On 23 February 2017, Mr G Fanous wrote a response to the respondent. Attached to the letter was a complete copy of the Register for the Trust and the 'Stamped Deed for the Wrong Unit Trust'. In his letter Mr G Fanous said: Please note copy of the Register for the Wrong Unit Trust was previously provided to the Office of State Revenue, please check previous records. 1. On 26 April 2017, the respondent wrote to Mr G Fanous in regard to the duty payable on the unstamped Trust Deed he had lodged on 15 February 2017. In that letter, the respondent noted that as the Trust Deed declared a trust over property in NSW, none of which was dutiable property, it is liable to duty of $500. The respondent went on to say: A liability for duty on a Declaration of Trust arises when the declaration is made: section 9(2)(c) of the Duties Act. Section 17 of the Duties Act provides that duty is to be paid within three months after the liability to pay duty arise otherwise a tax default occurs. 'If a tax default occurs, the taxpayer is liable to pay interest … … As the liability to duty arose on 7 July 2015, duty was payable by 7 October 2015. As duty of $500 was not paid until 20 February 2017, a tax default occurred. 1. Attached to the letter of the respondent was a Duties Notice of Assessment requiring the payment of $69 in interest for the late payment of the duty. Mr G Fanous subsequently paid this amount and on 9 May 2017 the respondent stamped the Trust Deed that was described as the 'Fixed Unit Trust Deed' (2017 Trust Deed). 2. On 27 November 2017, Mr G Fanous, on behalf of the applicant, lodged an objection to the respondent's 2016 and 2017 Land Tax Assessment for the Land. On 23 May 2018, the respondent disallowed the objections. Consideration 1. Based on the contentions of Mr G Fanous, the issues are whether: 1. two Trust Deeds, each with a commencement date of 7 July 2015, were prepared at the same time in 2015. The only difference between each Deed was that one created a special trust (described by Mr G Fanous as the 'incorrect' Trust Deed) and the other created a fixed trust (described by Mr Fanous as the 'correct' Trust Deed); 2. the 'incorrect' Trust Deed was mistakenly lodged for stamping in July 2015; and 3. with the stamping of the 'correct' Trust Deed on 9 May 2017, the respondent had the power to retrospectively vary each Assessment on the basis of the Trust being a fixed trust. This variation, Mr F Fanous contended was consistent with the respondent's decision to charge interest on the stamp duty that was payable on the 'correct' Trust Deed. 1. I agree with the respondent that on the material before the Tribunal there is considerable doubt that two Trust Deeds were in fact prepared in July 2015, as asserted by Mr G Fanous. While the terms of both Deeds are largely the same, cl 46 of each Deed differs. It is this clause that was determinative of whether the Deed was a special or fixed trust. Each Deed has a typed commencement date of 7 July 2015 and is signed by the applicant. However, the date on which the applicant signed each Deed is not specified. Nor has the applicant put on any evidence in these proceedings to say that both Deeds were prepared at the same time and the Deed submitted to the respondent for stamping in July 2015 was the 'incorrect' Deed and had been lodged by mistake. In my opinion, the applicant's statutory declaration of 17 February 2017, to which the 'correct' Deed was attached, does not go so far. It merely states that it is the 'correct' Deed. 2. Had there been two Trust Deeds prepared and one was 'correct' and the other was 'incorrect', one would have expected the applicant to have realised the mistake when a copy of the Deed was provided to the respondent in August 2016. 3. In any event, I agree with the respondent that on the proper construct of ss 7 and 8 of the LTM Act, when the applicant's liability for land tax on the Land first arose on 1 January 2016, the respondent was required to assess that liability, as at that date, based on the information provided to him relevant to the capacity on which the applicant held the Land on trust as at midnight on 31 December 2015: see Taxation Administration Act, s 11. In that respect, on the information provided to the respondent, the operative trust deed, was the 2015 stamped Trust Deed. 4. On 1 January 2017, when the applicant's liability arose for the 2017 land tax year, the operative trust deed was the same. However, there was a change in respect of the applicant's liability for the 2018 land tax year, because the operative trust deed as at midnight on 31 December 2017, was the May 2017 stamped Trust Deed. 5. There does not seem to be any disagreement that the respondent's assessments for each year (2016 to 2018), were duly made on the facts, as they existed at the time each year the applicant became liable for land tax. 6. What Mr G Fanous seeks is a variation of the 2016 and 2017 assessments based on the commencement date of the May 2017 stamped Trust Deed, which was the same as that of the 2015 stamped Trust Deed (i.e. 7 July 2015). 7. Section 9 of the Taxation Administration Act 1996 gives the respondent the power to make a re-assessment of liability in specified circumstances. Mr G Fanous has not contended that a re-assessment should be made under this section, and appropriately so as the applicant's objection to the 2016 and 2017 assessments were disallowed. 8. Mr G Fanous contends that the respondent regularly varies his assessments based on additional information and this was such a case, where the May 2017 stamped Trust Deed, as accepted by the respondent, had a commencement date of 7 July 2015. 9. In my view, Mr G Fanous' contention is misconceived. While the 2017 Trust Deed had a commencement date of 7 July 2015, it did not become operative for the purposes of the LTM Act until it was stamped. As was pointed out by the respondent in his correspondence with Mr Fanous, it is the stamping of the Deed which makes it operative for the purposes of assessing land tax: see also Duties Act, s 304. Having sent the earlier deed for stamping in July 2015, Mr G Fanous was arguably also aware of this. 10. Nevertheless, Mr G Fanous in effect seeks the retrospective applicant of the 2017 stamped Trust Deed to the 2016 and 2017 assessments. In my opinion, a retrospective application of the 2017 stamped Trust Deed would be inconsistent with the provisions of the LTM Act and the Taxation Administration Act. To allow such a retrospective operation would also undermine operation of the land tax legislative scheme: see Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184, at [43], [147] and [148]. Mr G Fanous has not pointed to any provisions in that legislative scheme which would indicate otherwise. 11. Finally, I find no inconsistency with the respondent having assessed that interest was payable on the duty owing on the Trust Deed presented for stamping in 2017. That assessment was made under the Duties Act and was based entirely on what was contained on the face of the Deed, including its commencement date of 7 July 2015: see Duties Act, ss 8 and 9. This date had no bearing on the applicant's liability for land tax for the 2016 and 2017 land tax years. 12. Accordingly, I find that the applicant has failed to discharge his onus. Conclusion and orders 1. For the reasons set out above, I find that the 2016 and 2017 land tax assessments of the respondent in regard to the Land is the correct and preferred decision and should be confirmed and I order accordingly. Order 1. The respondent's 2016 and 2017 assessments for land tax are 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: 17 April 2019