J.A.M. Investments Australia Pty Ltd ATF The Geokjian Unit Trust v Chief Commissioner of State Revenue  NSWADT 75
|Date of judgement||13 April 2011||Proceeding No.||106062|
|Judge(s)||Judicial Member Verick|
|Court or Tribunal||Administrative Decisions Tribunal|
|Legislation cited||Land Tax Act 1956
Land Tax Act 1958 (Vic)
Land Tax Assessment Act 1910 (Cth)
Land Tax Management Act 1956
|Catchwords||Land tax – Trust classified as a special trust or a fixed trust|
|Cases cited||CPT Custodians Pty Ltd v Chief Commissioner of State Revenue (2005) 224 CLR 98
Glenn v Federal Commissioner of Land Tax (1916) 21 CLR 490
Pearson v Commissioner of Taxation  FCAFC 111
Sahab Holdings Pty Ltd ATF Kanjian Family Trust v Chief Commissioner of State Revenue (RD)  NSWADTAP 4
The applicant sought judicial review of the Chief Commissioner of State Revenue's (the "Chief Commissioner") decision to disallow its objection to land tax reassessments issued for the 2006, 2007, 2008, 2009 and 2010 land tax years (the "reassessments") pursuant to the Land Tax Management Act 1956 ("the LTMA"). The reassessments were issued pursuant to a determination by the Chief Commissioner that the Geokjian Unit Trust was a "special trust" within s. 3A of the LTMA.
The Tribunal determined that the Trust was a special trust, and affirmed the reassessments.
The applicant is trustee of a trust known as the "Geokjian Unit Trust", which was the legal owner of the land the subject of the reassessments. The applicant submitted that at all relevant times the Geokjian Unit Trust was a "fixed trust" under s. 3A of the LTMA and was therefore entitled to the tax free threshold available to fixed trusts pursuant to the LTMA.
Although the Trust Deed did not incorporate the words in s.3A(3B) which define the “relevant criteria”, the applicant contended that the Trust Deed satisfies the relevant criteria because, under various clauses:
the beneficiaries had an indefeasible, absolutely vested, beneficial interest in possession in the trust income and are able to demand immediate payment;
as at the relevant taxing dates, the trustee did not have the power to issue any income units or any other units with voting rights, because the required permission of the majority of existing unit holders had not been granted; and
the beneficiaries were presently entitled to the capital of the trust, and could require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property.
The applicant sought a review of the Chief Commissioner’s determination that the Geokjian Unit Trust was a "special trust" pursuant to s. 3A of the LTMA and therefore was not entitled to the tax free threshold.
The Tribunal found that during the relevant period the unit holders in the Geokjian Unit Trust were not "presently entitled to the income of the Trust". The Tribunal found that the cumulative effect of certain clauses in the Trust Deed was that the unit holders were only entitled to income from the Trust Fund subject to the discretion of the Trustee. The relevant clauses of the Trust Deed which the Tribunal relied on to make this finding were:
A clause which gave the Trustee power to pay out of the income of the Trust Fund, or if insufficient out of the capital of the Trust Fund, all costs, disbursements, commissions, taxes and other property outgoings in respect of the investments of the Trust Fund.
A clause which gave the Trustee power to decide during the month of June, in its discretion, the amount (if any) of the net income of the Trust Fund which shall be distributed to the unit holders in each relevant year.
A clause which gave the Trustee a discretion to determine that all or any part of the income of the Trust Fund be accumulated in the Trust Fund, with a discretion to distribute any or all such accumulated amounts as income among the unit holders in any subsequent financial year.
The Tribunal also found that there was no provision in the Trust Deed which "specifically provides that the beneficiaries of the trust ... are presently entitled to the capital of the trust" as required by s. 3A(3B)(a) of the LTMA. Rather, the Tribunal found that the Trust Deed provided for Income Units to be issued, and that the holders of Income Units did not have any entitlement to the capital of the trust.
By finding that the unit holders were not presently entitled to either the income or capital of the Geokjian Unit Trust, the Tribunal held that the land forming part of the Trust Fund was correctly reassessed by the Chief Commissioner as being subject to a "special trust".
Accordingly, the Tribunal affirmed the reassessments.