Jurisdiction - Australia
Australia – November 2014 Stamp Duty Developments.

11 December, 2014


Legal News & Analysis – Asia Pacific – Australia – Tax


Transfer Duty


NSW Stamp Duty Assessments Set Aside: Knezevic V Chief Commissioner Of State Revenue [2014] NSWCATAD 183 


The NSW Civil and Administrative Tribunal (Tribunal) in Knezevic v Chief Commissioner of State Revenue [2014] NSWCATAD 183 has set aside a stamp duty assessment and remitted the matter to the Commissioner of State Revenue to issue an assessment to the taxpayers based on a calculation where the relevant ad valorem rates of stamp duty are applied to 50% of the applicable purchase price.


Mr Knezevic and Mrs Knezevic as husband and wife owned a property as tenants in common. The marriage broke down and the property was sold as part of the division of the matrimonial assets. Mr Knezevic and another party (Taxpayers) were the successful purchasers as tenants in common in equal shares. Stamp duty of AUD 25,930 (calculated by applying ad valorem stamp duty rates to 50% of the purchase price) was paid in respect of the purchase of the property, being AUD 1,352,000, on the basis that the exemption in section 68(1) of the Duties Act 1997 (NSW) (Duties Act) applied to exempt the transfer of matrimonial property to the husband.

On 6 December 2013, the Office of State Revenue issued a Duties Notice of Assessment (the Assessment) requiring a further AUD 33,940 in stamp duty to be paid. The Taxpayers then sought a review, seeking an assessment calculated on 50% of the purchase price.

The issue before the Tribunal was whether the exemption in section 68(1) applied.


The Tribunal was satisfied that the interest in the matrimonial property held prior to the dissolution of marriage, was transferred to a party to the marriage. The Tribunal concluded that prior to the sale of the property, Mr Knezevic and Mrs Knezevic held separate and individual titles to the land, and after the acquisition, the Taxpayers held separate and individual titles to the property. Notwithstanding there was one contract and one transfer, Mr Knezevic acquired a separate and individual title. Accordingly section 68 of the Duties Act applied and to that extent no duty was chargeable.



NSW Stamp Duty Assessment Affirmed: Bottle Tower Investments Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 172 


The NSW Civil and Administrative Tribunal (Tribunal) in Bottle Tower Investments Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 172 has affirmed a stamp duty assessment in relation to the payment of duty on a deed.


In mid-2009, Mr McCullagh transferred a property at its then value, jointly owned by himself and his wife to the company of which Mr McCullagh was the sole director (Taxpayer). Mr McCullagh decided that if the purchase price of the property was to increase within the two years of purchase, the Taxpayer would pay Mr McCullagh and Mrs McCullagh the increase in value up to AUD 1m (Oral Agreement). Stamp duty of AUD 276,490 was paid in respect of the purchase of the property, being AUD 4.8m.

In June 2011, Mr McCullagh contacted his accountants and informed them that the Taxpayer may have to pay an additional amount to himself and Mrs McCullagh based on the increased value of the property. A Deed setting out the details of the Oral Agreement was signed by the Taxpayer and Mr and Mrs McCullagh. The Deed stated that the property had a value of $6.5 million.

The Deed, along with a cheque for AUD 70k which accounted for the duty payable on the increased value of the property, was sent to the Chief Commissioner. Subsequently the Deed was also stamped with duty in the amount of AUD 346,490. The Taxpayer objected to the assessment on the grounds that it was not a transfer of dutiable property, but the Chief Commissioner disallowed the objection, stating that the true consideration for the transfer in 2009 was the purchase price of AUD 5.88m.


The Tribunal found that the consideration for the dutiable transaction consisted of two limbs of a single transaction and thus both the amount in the transfer and the Oral Agreement moved the transfer of the property. Accordingly the total consideration for the dutiable transaction was AUD 5.8m. Although the vendors had done everything required to transfer the property, the Taxpayer had a contingent obligation to pay them an additional AUD 1m subject to a relevant change in the value of the property within the agreed period.

Further, the Tribunal recognised that at the time of stamping the transfer, the Chief Commissioner was unaware of all the relevant facts and circumstances surrounding the 2009 transaction to enable him to determine the relevant duty payable in respect of the dutiable transaction. Accordingly, the Tribunal accepted that by stamping the Deed for duty of AUD 346,490, this was a reassessment.

Appeal Update: Commissioner Of State Revenue V Lend Lease Development Pty Ltd [2014] HCA 51

The High Court in Commissioner of State Revenue v Lend Lease Development Pty Ltd [2014] HCA 51 has heard the Commissioner’s appeal against the Victorian Court of Appeal decision in Lend Lease Development Pty Ltd v Commissioner of State Revenue [2013] VSCA 207, and decided in the Commissioner’s favour.

The High Court held that the Commissioner of State Revenue was entitled to assess duty to be charged on transfers of land by reference not only to payments made under specified land sale contracts, but also to payments made under the development agreement between VicUrban and Lend Lease Development Pty Ltd, one of the taxpayers (together referred to as Lend Lease) (Development Agreement).

The appeals to the High Court turned on one statutory question, posed by section 20(1)(a) of the Duties Act 2000 (Vic): what was the consideration for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration)?

Lend Lease submitted that the only amount property brought to duty as consideration for the transfer of the relevant land was in each case the amount of the Stage Land Payment (ie, the amounts under each individual Land Sale Contract). The Commissioner submitted that the consideration was in each case more than this amount, and was the total of several sums which the Development Agreement obliged Lend Lease to pay to VicUrban or equivalent amounts.


In the relevant cases, the High Court held there was little, if anything, to be gained by deciding whether there was more than one “matter” or “transaction”. Chief attention was to be given to Lend Lease’s submission, and the Court of Appeal’s conclusion, that the consideration for the transfers was only the Stage Land Payment. Contrary to the holding of the Court of Appeal, and Lend Lease’s argument, it is not relevant to observe that the land was undeveloped when it was transferred to Lend Lease. Also, the High Court stated that Lend Lease’s presupposition that multiple interrelated obligations in the Development Agreement must be divided between the transfer of the land and other obligations described as ongoing development of the land and its ultimate realisation, assumes the answer to the ultimate statutory question (ie, it assumes that the payments for ongoing development and ultimate realisation formed no part of the consideration moving the transfers).

Referring to Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd, the High Court stated that the statutory criterion of consideration for the transaction, looks, as relevant to that case, to what was received by the vendors so as to move the transfers to the purchaser as stipulated in the agreement.

The High Court held that the consideration which moved the transfer by VicUrban to Lend Lease was the performance, by Lend Lease, of the several promises recorded in the development agreement, in consequence of which VicUrban would receive the total of the several amounts set out in the application agreement. It was only in return for the promised payment of that total sum, by the various steps recorded in the applicable agreement, that VicUrban was willing to transfer to Lend Lease the land.

Their Honours held that the Court of Appeal was right to describe the transaction that VicUrban and Lend Lease made as “single, integrated and indivisible”, not just because the transaction was recorded in a single set of transactions documents, but because the rights and obligations provided for in those documents were interlocked. The provisions surrounding default demonstrated that there was only one bargain between the parties, not two or more bargains, and more than that, the provisions made for the consequences of default in the Development Agreement indicated that the promised performance of all of the stipulations for payment occasioned by the transfer was what moved the transfer. Note that any failure by Lend Lease to pay money to VicUrban, whether under the Development Agreement or under a Land Sale Contract, was a “Material Default”. If on account of Lend Lease’s breach, VicUrban Urban became entitled to terminate the Development Agreement, it was entitled to terminate in relation to all future Stages and any Stage which had transferred to Land Lease on which “Commencement of Development” had not occurred (the latter of which had to be retransferred to VicUrban, to be resold, with resale amounts to be applied in part to reimbursing Lend Lease for the aggregate of all sums actually outlaid by Lend Lease, including external infrastructure and gasworks site remediation contributions).

Commissioner of State Revenue v Hazel Holdings Pty Ltd [2014] WASCA 203

The Court of Appeal in Commissioner of State Revenue v Hazel Holdings Pty Ltd [2014] WASCA 203 dismissed the Commissioner’s appeal and found that the lots should be valued on the basis that the land was bought in a single transaction and not as if each had been purchased separately.


Sky City Blue Pty Ltd (Sky City) acquired two lots of land, which was purchased for the purpose of subdivision and sale as individual residential lots. The necessary approvals were obtained and the land was subdivided into 46 lots. In the latter part of 2011, it was agreed that Hazel Holdings would acquire a parcel of 32 vacant lots which formed part of a residential subdivision.

Advice was obtained from a valuer, as to the market value of the 32 lots if sold in one transaction. As a result of that advice, Hazel Holdings entered into a single contract to acquire the 32 lots for a price of AUD 2,133,344. On the same day, the contract was lodged for the assessment of duty. The transaction was effected by a single contract, and by a single transfer document. The Commissioner assessed the transaction for duty on the basis that the dutiable value of the land was AUD 3,885,000, being the aggregate sum that would have been paid by 32 separate purchasers, without allowing for any of the marketing, holding or other costs that would have been incurred in order to procure 32 separate transactions. Hazel Holdings objected to the assessment, but the Commissioner disallowed the objection.

In the first instance, the Tribunal set aside the Commissioner’s assessment, and arrived at its own assessment of the dutiable value of the land on the basis that it was bought and sold in a single transaction. The Tribunal concluded that the provisions made it clear that the ordinary principles of valuation are to be applied to the assessment of unencumbered value.

The Commissioner appealed to the Court of Appeal, arguing that the Tribunal erred in adopting the “sale in one line” method of valuation when it should have valued the land by reference to the aggregate sum which could have been achieved by the separate sale of all 32 lots without reduction for the costs inevitably incurred achieving the sale of those lots to 32 separate purchases. The Commissioner contended that such an approach was required by the ordinary principles of valuation and having regard to the use of the land that would best enhance its commercial value.


The Court of Appeal dismissed the Commissioner’s appeal and found that the lots should be valued on the basis that the land was bought in a single transaction. The Court considered that the appropriate valuation method was the “sale in one line” method, which was endorsed by the valuers. Therefore, the dutiable value of the land assessed by the Commissioner was not a value which would have ever been paid by a purchaser, or which could have ever been achieved by a vendor at the time liability for duty on the transaction arose.

The Court held that the Commissioner’s assertion that the highest and best use of the land was for sale as individual lots was misconceived and in fact only reinforced the decision of the Tribunal. The Court held that because, as a matter of fact, there was no market for the sale of 32 lots to separate purchasers at the time when the liability to duty arose, the use identified by the Commissioner as the highest and best use at the time of the dutiable transaction was the use to which the land would be put by the hypothetical purchaser over the years following its acquisition – namely, reselling the land in separate lots to separate purchasers.

Accordingly, the Commissioner’s appeal against the Tribunal’s decision was dismissed.


Landholder/Land-Rich Duty

VIC Land Rich Provisions: Denison Funds Management Ltd v Commissioner of State Revenue (Review and Regulation) [2014] VCAT 1385

The Tribunal in Denison Funds Management Ltd v Commissioner of State Revenue (Review and Regulation) [2014] VCAT 1385 has confirmed the Commissioner’s assessment that the taxpayer is liable under section 89E of the Duties Act 2000 (Vic) (Duties Act) regarding the imposition of duty on acquisitions in public unit trust schemes in circumstances where they become private unit trust schemes. The Tribunal also found that the penalty imposed on the taxpayer should be remitted in full.


The proceeding was referred to the Tribunal by the Commissioner at the request of the taxpayer. The matter before the Tribunal was an assessment dated 25 February 2011 in the amount of AUD 5,177,868.38 comprising duty of AUD 3,751,100, penalty of AUD 937,775 and interest of AUD 488,993.38. Subsequent to the assessment, the taxpayer (who was acting in its capacity as Trustee for the Viento Diversified Property Fund (DPF)) objected to the Commissioner, who disallowed the objection.

The assessment treated the taxpayer’s acquisition of all the units in three public unit trust schemes, known as the First Enterprise Property Syndicate (FEP Syndicate), the WRF V3 Property Syndicate (V3 Syndicate) and the WRF 925 Property Syndicate (925 Syndicate) (together the Syndicates), as “relevant acquisitions” on the basis of section 89E of the Duties Act, which deems each Syndicate to be a “private unit trust scheme” immediately prior to the acquisition of the units, such that a liability to land-rich duty is imposed on the “relevant acquisitions”. Note that the trustee/responsible entity as relevant of the top entity in all four Syndicates was Viento Property Limited.

The issues in the proceedings included the following:

1. whether the FEP Syndicate was a land rich landholder at the relevant time of the acquisition bv Viento of 100% of the units in FEP Syndicate, and the other issues listed below if so;
2. whether the acquisitions should have been exempt under the just and reasonable discretion in section 85(2) of the Duties Act;
3. alternatively, whether the acquisitions could have been partially exempt under section 85(2) to the extent there was no change in underlying beneficial ownership of Victorian land; and
4. whether the Commissioner erred in not remitting the penalty tax in full or in part.


The Tribunal found that FEP Syndicate was a land rich landholder at the time of the acquisition by Viento of 100% of the units in the FEP Syndicate, as it was entitled to landholdings through “linked entities” on a “winding up” of linked entities. Notably, the Tribunal held that the taxpayer’s view of a ‘winding up’ is a view that would be applicable to a winding-up conducted pursuant to the Corporations Act 2000 (Cth), which the Tribunal stated would appear to be a mis-construction of the Duties Act, which does not limit the form of winding-up to an external administration. The Tribunal held that it was not permissible to go to a document such as a trust deed which in fact limits the “winding up” to an actual “winding up” under the Corporations Act 2001 (Cth). It was permissible to consider any vesting of property in a beneficiary to determine if an entity was a landholder through linked entities. As FEP Syndicate was a land-rich landholder, the provisions of section 89E of the Duties Act applied to the acquisition by Viento of 100% of the units in the FEP Syndicate.

Additionally, the Tribunal held that each of the acquisitions should not have been treated as exempt, in full, under section 85(2) of the Duties Act as the Commissioner should not have been satisfied that it would not be just and reasonable to apply section 89E to those acquisitions. In this regard, the Tribunal held that whether or not there is a change in beneficial ownership is a relevant factor to take into account, and that the relevant transactions should not be categorised as “mergers” as the taxpayer suggested, but rather “sales” or “takeovers” as described by the Commissioner (ie, a 100% change in ownership, meaning a substantial change in beneficial ownership).

Further, the Tribunal held that each of the acquisitions should not have been treated as partially exempt under section 85(2), as it was clear from the nature of the transactions that they were made for a common purpose (ie, to roll 3 Syndicates into one), and to dis-aggregate under section 85(2) would be contrary to the reality of the transaction.

Penalties were not payable under section 30(3) of the Taxation Administration Act 1997 (Vic), the taxpayer being found to have taken reasonable care. The taxpayer sought and received legal advice, in which the solicitors failed to address section 89E and therefore failed to advise on difficulties that that particular section would have on the proposal.




SA: Stamp Duties (Off-The-Plan Apartments) Amendment Bill 2014 (SA)

The Stamp Duties (Off-The-Plan Apartments) Amendment Bill 2014 (SA) has been passed by the South Australian House of Assembly without amendment and has moved to the Legislative Council.

The Bill proposes to amend section 71DB of the Stamp Duties Act 1923 (SA) to extend the stamp duty concession for apartments bought off-the-plan to include the inner metropolitan area. The concession will cover qualifying apartments in Areas A and B as defined in the Bill.

The amendment will be taken to have come into operation on 28 October 2013, with the extended off-the-plan stamp duty concession applying to eligible off-the-plan contracts entered into between 28 October 2013 and 30 June 2016 (inclusive) located within a defined inner metropolitan area and to sites contiguous to that area.


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