White Star Developments Pty Limited v Chief Commissioner of State Revenue [2015] NSWCATAD 180

Date of judgement 26 August 2015 Proceeding No. 1510033
Judge(s) R Perrignon, Senior Member
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Land Tax Management Act 1956

Taxation Administration Act 1996
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 Chief Commissioner'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
Cases cited EK Anderson Investments Pty Limited ATF Cacs Property Trust v Chief Commissioner of State Revenue [2012] NSWADT 132

Background

On 21 July 2014 the Chief Commissioner issued a questionnaire to White Star Developments Pty Ltd as the “Trustee” of the Moffat Street Unit Trust (the “Trust”). The questionnaire was returned on 6 August 2014 and on 18 August 2014 the Chief Commissioner assessed land owned by the Trustee in respect of the 2012, 2013 and 2014 years. The basis of the assessment was that the Trust was a special trust for the purposes of s 3A(2) of the Taxation Administration Act 1996 (”TAA”). The trust deed was subsequently amended to comply with the requirements of a fixed trust.

The Trustee unsuccessfully objected to the assessments and then sought review by the Tribunal. During the hearing before the Tribunal, the Trustee abandoned its claim for review of the assessment in respect of the 2012 tax year.

Given it was common ground that the trust was at all relevant times a special trust, the main issue for determination at the hearing was whether the assessments for the 2013 and 2014 tax years ought be set aside as the Chief Commissioner had not alerted the Applicant in 2012 to the fact that the trust deed did not fulfil the requirements for a fixed trust.

Submissions

The Trustee contended it had always intended the Trust to operate as a fixed trust. If the Chief Commissioner had issued an assessment notice for the 2012 tax year earlier, the Trustee would have been able to arrange for the trust deed to be amended earlier, thereby not incurring liability for the subsequent years. The Trustee contended the Chief Commissioner was under an obligation to assess the property for land tax earlier than he did in order to alert the Trustee to the error. The Trustee concluded it was not appropriate for the trust to be assessed as a special trust in respect of the 2013 and 2014 tax years.

The Chief Commissioner submitted he was under no duty to issue an assessment in 2012, nor to advise the Trustee that the trust deed did not satisfy the requirements of a fixed trust.

Statutory Framework

The Tribunal noted s 14 of the TAA which states:

    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.

    Subsection 14(1) does not prescribe a time limit for the issue of a notice of assessment. Additionally, subsection 14(2) contemplates the possibility that delays may occur in the issue of assessments. The only time limit prescribed by section 14 is a limit of 5 years after a liability arises, where the Taxpayer requests a notice of assessment. The section implies the assessment will be valid if issued within that time.

    S 9 of the TAA also permitted the Chief Commissioner to make reassessments of tax liabilities up to five years after the initial assessment, and later in some cases. In this case, the Chief Commissioner was under no duty to issue initial notices of assessment earlier than he did.

    The Trustee argued it was prejudiced by the failure to issue earlier notices of assessment which would have alerted it to the fact the deed did not satisfy the requirements of a fixed trust, but as the Trustee did not provide its trust deed nor disclose it was a special trust before 6 August 2015, it was not clear on what basis the Chief Commissioner would have assessed land tax any earlier.

    The Senior Member cited s 14(1) which requires the Chief Commissioner to assess land tax having regard to the “returns and…any other information in the Chief Commissioner’s possession”. The duty to disclose lies with the Taxpayer. The onus is further confirmed by s 12(1) of the Land Tax Management Act 1956 (“LTMA”) which allows the Chief Commissioner to request land tax returns from all persons or a specified class of persons for specified years, including a Trustee of land that is the subject of a trust.

    Decision

    The Tribunal noted it was an error on the part of the Trustee that the trust deed did not satisfy the requirements of a fixed trust despite the Trustee’s intention.

    The Tribunal cited s 14 of the TAA in noting that the Chief Commissioner was under no duty to issue initial notices of assessment earlier than he did.

    The Tribunal also cited s 12 of the LTMA and noted the obligation to make sufficient disclosure to enable the Chief Commissioner to assess the land properly lay with the Trustee. Orders to provide returns in respect of the 2011, 2012 and 2013 tax years were published by the Chief Commissioner 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 was no evidence the Trustee provided any returns prior to answering the Chief Commissioner’s questionnaire on 6 August 2014. As such, it was not possible for the Chief Commissioner to know whether or not the trust ought to be assessed as a fixed or special trust.

    Furthermore the Tribunal reasoned that even if the Chief Commissioner had caused the delay in issuing notices of assessment for the relevant tax years, it would not have affected the Trust’s liability to pay land tax. The Tribunal cited the observations of Block JM in EK Anderson Investments Pty Limited ATF Cacs Property Trust v Chief Commissioner of State Revenue [2012] NSWADT 132 that “no conduct of a revenue authority can estop the operation of a taxing statute…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”.

    The Tribunal concluded any delay in the issue of notices of assessment for the relevant tax years was a result of the Trustee’s own failure to provide returns to enable the Chief Commissioner to properly assess the land for land tax. As such, the Chief Commissioner’s decision of 18 August 2014 to assess the land for land tax in respect of the 2012, 2013 and 2014 years was confirmed.

    Link to decision

    White Star Developments Pty Limited v Chief Commissioner of State Revenue [2015] NSWCATAD 180

    Last updated: 18 May 2016