|Date of judgement||02 May 2012|
|Judge(s)||Judge K P O'Connor, DO President|
M Hole, Judicial Member
C Bennett, Non-judicial Member
|Court or Tribunal||Administrative Decisions Tribunal Appeal Panel|
REVENUE - Land Tax - Tax-free threshold for 'fixed trust' - Tribunal held applicable - Appeal - Amendment to deed mirroring statutory criteria insufficient in circumstances - Held criteria for fixed trust not satisfied - Appeal allowed - Land Tax Management Act 1956, s 3A(3B)
The taxpayer held taxable land upon trust. The question before the Appeal Panel was whether the trust was a "fixed trust" within the meaning of the Land Tax Management Act 1956. If the trust was not a fixed trust it would be a "special trust" and the benefit of the tax-free threshold would not be claimable.
In order to be a "fixed trust" the trust had to satisfy the "relevant criteria" which were set forth in section 3A(3B) of the Act.
The taxpayer was successful at first instance before the Tribunal.
The Appeal Panel allowed the appeal of the Chief Commissioner and held that the relevant criteria were not satisfied.
The applicant, Sayden Pty Ltd was the legal owner of land which would ordinarily attract land tax. This land was held as trustee for the Griffin Family Trust. On 23 November 2010 the applicant granted to itself a life estate in the land which was to be held as trustee for the Griffin Property Unit Trust. The life estate was to be measured by the lives of two individuals.
On 11 December 2010 the trust deed was amended by the inclusion of a new clause 2(c), which read as follows:
"2(c) Notwithstanding any other provision of this Deed, the Trustee hereby admits that the Registered Holders:
are presently entitled to a fixed proportion of any distribution of income or capital of the trust, made by the Trustee, based on the proportion of income or capital units which each person owned in the Trust; and
are presently entitled to all of the income and capital of the Trust, subject to the payment of the expenses properly incurred by the Trustee in the authorized administration of the Trust; and
may require the Trustee to wind up the Trust and distribute either the land or the net proceeds of the sale of the land; and
the Trustee shall not remove, restrict or otherwise affect by the exercise of any discretion, or by a failure to exercise any discretion, paragraphs (i), (ii) and (iii) of this sub-clause."
The question was whether the inclusion of this new clause had the effect of converting the trust from a special trust to a fixed trust, as those terms are comprehended by section 3A of the Land Tax Management Act 1956 ("the Act"). If it did have that effect, the trust would be entitled to the land tax threshold.
The “relevant criteria”
In order to be a fixed trust the trust must satisfy the relevant criteria, set out in section 3A as follows:
The amendment to the trust deed reproduced to a significant degree the language of section 3A.
In the Tribunal's view it was:
"correct in a matter such as this to apply the practical and purposive approach for which the Applicant contends and not the detached and literal approach favoured by the Respondent. ..
Quoting from Jacobs' Law of Trusts 7th ed. to support his view that the "practical and purposive approach" was the correct one to take, the Tribunal concluded:
"The (Chief Commissioner) contends ... that it is not sufficient in an amending deed simply to mirror the words of the statute and that more is required. I do not agree; it is my view that a deed which mirrors the statute is sufficient to achieve (the) result sought. To hold otherwise would require a technical approach which would not constitute the correct and preferable decision. It follows that the decision under review should be set aside and the assessment ... altered so as to allow the threshold…" (see Sayden Pty Limited v Chief Commissioner of State Revenue  NSWADT 288 at para 16).
The Appeal Panel determined that, other than in instances of very simply expressed instruments, more would be required than mere recitation of the relevant criteria as a term of the deed. It observed, at :
"The "relevant criteria" form a set of benchmarks, standards or tests against which the specific provisions of a trust deed are to be assessed. Compliance with or adherence to a standard is intended, as we interpret the words, ordinarily to be measured by reference to the specific provisions and machinery of the trust deed."
In other words, the trust deed on its terms had to satisfy the relevant criteria. Merely asserting, in the body of the deed, that it did so, would not be sufficient.
The Appeal Panel at  agreed with the Chief Commissioner that the following clauses in the deed were inconsistent with the full vesting of a present entitlement in the beneficiaries of the trust which clause 2(c) purports to grant unless the introductory words 'Notwithstanding any other provision of this deed' can be said, in effect, to repeal these clauses:
In relation to the meaning of the words “notwithstanding any other provision”, the Appeal Panel stated at :
“…in our view neither those directly affected by the instrument's terms nor decision makers such as the (Chief Commissioner) should be left to speculate on which terms stand or fall as a consequence of the words 'notwithstanding any other provision' of the instrument. These words do not offer sufficient certainty as to which parts of the remainder of the instrument remain operative.”