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Australia – Stamp Duty Developments Of April 2014.

12 May, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Tax

 

Transfer Duty

 

NSW: Al-Saeed and Associates Pty Ltd ATF Al-Saeed Education and Welfare Trust v Chief Commissioner of State Revenue [2014] NSWCATAP 11

 
In Al-Saeed and Associates Pty Ltd ATF Al-Saeed Education and Welfare Trust v Chief Commissioner of State Revenue [2014] NSWCATAP 11 the Appeal Panel of the New South Wales Civil and Administrative Tribunal (Appeal Panel) dismissed the taxpayer’s appeal and affirmed the decision that a trust deed was a declaration of trust for stamp duty purposes, and subject to ad valorem duty. However, the Appeal Panel allowed the taxpayer’s appeal that the premium component of interest should be remitted.

 
Facts

 
The taxpayer acquired a property on 2 September 2011 on behalf of the “Al-Saeed & Associates Pty Ltd ATF Al-Saeed Educational and Welfare Trust”. The trust deed for the Al-Saeed Educational and Welfare Trust (Trust Deedwas executed a day earlier on 1 September 2011 and specified in Recital C that the taxpayer trustee “wishes to acquire a property on behalf of the Trust located at 1492 Camden Valley Way, Leppington NSW Auto Consol 10781/149″.

 
Duty was paid on the contract of sale on 5 December 2011. The taxpayer also applied for an exemption for charitable and benevolent bodies under section 275(3)(a) of the Duties Act 1997 (NSW) (Act) “in respect of the Trust”. The taxpayer’s exemption application was refused and ad valorem duty was assessed on the Trust Deed (with the dutiable value being that shown on the contract of sale on which duty had already been paid), plus interest.

 
The taxpayer objected to the Commissioner’s decision to refuse to grant the exemption, and the application to the Tribunal decision was for a review of the relevant notice of assessment of duty on the Trust Deed.

 
The Tribunal stated that the definition of “declaration of trust” does not restrict the reference to the identified property being placed in any particular section of the Trust Deed. The Tribunal held that the general construction of a deed requires the whole of the deed (including Recital C) to be considered. It followed that the Trust Deed was a “declaration of trust” as set out in section 8(3) of the Act. This case is an appeal of the Tribunal decision.

 
Held

 
The Appeal Panel held that the Trust Deed was properly liable to duty under section 8(3) of the Act as a declaration of trust over identified property to be vested in the future. The Appeal Panel also found that the taxpayer was entitled to remission of the premium component (as opposed to the market rate component) of the interest imposed.

 
The Appeal Panel found support from several authorities which considered it permissible to look outside the specific declaration provision of the instrument in question to determine whether there had been a declaration of trust answering the statutory definition.

 

The Appeal Panel found that where a declaration of trust is found in an instrument, and it is not expressly or impliedly quarantined (as it is not here), it is permissible to look to the whole instrument to determine whether the elements of section 8(3) are satisfied.

 
The Appeal Panel considered that section 58 levies nominal duty on a declaration of trust over unidentified property and does not apply to the Trust Deed because the relevant property was identified in the instrument.

 
In response to the taxpayer’s argument that Recital C does not describe any property that could or would, once vested, become part of the Trust Fund as described, the Appeal Panel considered that it was reasonably open to the Tribunal to find that the property, as described in Recital C would satisfy the instrument’s definition of the Trust Fund once it was vested in the trustee.

 
The Appeal Panel found the taxpayer’s original submission (that it had lodged the instrument on the understanding that it was exempt under the Act) to be a valid justification for remission of the premium component of interest. Accordingly, the Appeal Panel found that there was an error of law in this regard.

 

Administration

 

ACT: Duties (Commercial Leases) Amendment Act 2014

 
On 15 April 2014, the Duties (Commercial Leases) Amendment Bill 2014  received notification as an Act, passing through all stages of Parliament without amendment.

 
The Act amends the Duties Act 1999 (ACT) by replacing existing rules imposing duty on long-term commercial leases and franchise arrangements with a premium-based approach that imposes duty on any “premium” (ie consideration other than the rent reserved), above a certain threshold.

 
The premium threshold amount has be determined by the disallowable instrument, as the consideration paid that exceeds 25% above market rent over the term of the lease.

 
The amending Act and the disallowable instrument commenced on 29 April 2014.

 

State Budget

 

VIC: State Budget 2014/15

 
The Victorian State Budget for 2014/15 was handed down and includes the following revenue initiatives that will have implications for stamp duty purposes:

 
1. life insurance duty will be abolished from 1 July 2014;

 
2. the land transfer stamp duty concession for first home buyers will increase from 40% to 50% from 1 September 2014; and

 
3. duty on the registration and transfer of motor vehicles will be increased by AUD 0.40 per AUD 200 or part thereof from 1 July 2014. The rate of duty is expected to change in the following ways:

 

  • from 3% to 3.2% on new passenger cars below the luxury car tax threshold; 
  • from 5% to 5.2% on new passenger cars above the luxury car tax threshold; 
  • from 2.5% to 2.7% on new non-passenger cars; and
  • from 4% to 4.2% on used vehicles.

 

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For further information, please contact:

 

Geoffrey Mann, Partner, Ashurst
geoffrey.mann@ashurst.com

 

Nika Dharmadasa, Ashurst
nika.dharmadasa@ashurst.com

 

Karen Czarny, Ashurst
karen.czarny@ashurst.com

 

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