|Date of judgement||15 December 2011|
|Judge(s)||Judicial Member Hole|
|Court or Tribunal||Administrative Decisions Tribunal, Revenue Division|
Double duty – transfer in conformity
On 15 December 2011, Judicial Member Hole confirmed the decision of the Chief Commissioner of State Revenue (the Chief Commissioner) to re-assess Ms Kuo (the daughter) and Mr Monk (the son- in-law) (together referred to as “the taxpayers”) for duty on the transfer of a strata title unit.
Judicial Member Hole agreed that the transfer was not in conformity with the contract, and the concession under section 18(3)(i) did not apply because at the time the agreement was entered into, and at the completion or settlement, not all of the purchasers under the agreement and the transferees were related persons.
On 4 April 2010, the taxpayers, along with the daughter’s parents, entered into a contract for the purchase of a unit. It was intended that the daughter’s parents would live in the unit, and as such, on the title the father and mother were described as joint tenants as to a 95/100th share as tenant in common with the taxpayers (the son-in-law and daughter) as joint tenants as to a 5/100th share. Stamp duty was paid on this contract at the ad valorem rate.
After entering into this contract, the father and mother decided that they did not wish to proceed with the purchase, and would instead transfer their interest in the unit to the daughter. On 16 April 2010 a transfer was stamped, and nominal duty of $10 was self-assessed and paid, disclosing the daughter as to 975/1000th share as tenant in common with the son-in-law as to 25/1000th.
Pursuant to section 18(3)(d)(i) of the Duties Act 1997 (the Act), duty payable for the transfer of dutiable property not made in conformity with the agreement for sale is $10, if the transferee and the beneficiary are related persons.
On 12 July 2010 the Chief Commissioner re-assessed the duty on the transfer as $16,640, instead of $10, on the basis that the son-in-law was not a related person of the father and mother. On objection by the taxpayers, the amount of duty re-assessed by the Chief Commissioner was reduced to $15,582.50.
The taxpayers sought to argue before the Tribunal that the transfer was in conformity with the contract, and that the contract for sale was not one transaction but rather, four separate contracts for transfer of property, which could be dealt with as discrete interests, in spite of the joint tenancy. This effectively meant that the mother could transfer her share to the daughter, and the father could transfer his share to the daughter, and as they were related persons, this would fulfil the requirement of section 18(3)(d)(i) of the Act.
The Chief Commissioner asserted that the purchasers were the father and mother as well as the taxpayers, but the transfer was only to the taxpayers. Therefore, the transfer was not in conformity with the contract. If the transfer and contract are not in conformity, section 18(3) of the Act is then to be considered. The Chief Commissioner asserted that the section did not allow an exemption from duty where ‘some’ or even the ‘majority’ of purchasers and transferees were related persons. The section required all purchasers and transferees to be related in order for the exemption to be available. In these proceedings, as the son-in-law was not related to the mother and the father, the taxpayers could not succeed.
The Tribunal agreed with the Chief Commissioner’s contention that the transfer was not in conformity with the contract and noted that, had it been, the issue under appeal would not have arisen, and there would have been no need to consider whether the parties were related under section 18(3) of the Act.
As the contract was not in conformity, however, it became necessary to consider section 18(3), and specifically, to consider each of the four subsections (a), (b), (c) and (d), which are cumulative considerations, not alternatives. Each of these four subsections needed to be satisfied in order for the duty on the transfer to be assessed at $10, and for the applicants to ultimately succeed.
The Tribunal was satisfied that the taxpayers met the requirements of subsections (a), (b) and (c). The Tribunal also acknowledged that subsection 3(d)(ii) did not apply. As such, the question to be considered was whether, ‘at the time the agreement was entered into, and at the completion or settlement of the agreement the purchaser under the agreement and the transferee under the transfer [were] related persons’. As the son-in-law was not a related person to the mother and father as defined in the Dictionary, section 18(3)(d)(i) cannot be applied. Further, as there was no provision in the Act which would allow the provision to be applied to some or a majority of purchasers, to construe it in such a way was contrary to the intention of the Act. Therefore, section 18(3)(i) did not apply.