|Date of judgement||09 July 2013|
|Judge(s)||M Hole, Judicial Member|
|Court or Tribunal||Administrative Decisions Tribunal, Revenue Division|
‘declaration of trust’ as defined in s 8(3) of the Duties Act 1997
The Taxpayer sought a review of the Chief Commissioner’s assessment of ad valorem transfer duty plus market rate and premium rate interest on a trust deed executed by the Taxpayer on 1 September 2011 (“the Trust Deed”) on the basis that it included a declaration of trust. The Trust Deed established the Al-Saeed Educational and Welfare Trust.
The taxpayer argued that the deed is only liable to nominal duty on the basis that it contains a declaration of trust over $100 cash (the settlement sum), which is not dutiable property under s.11 of the Act. The Chief Commissioner argued that the Trust Deed contains a ‘declaration of trust’ over the Property referred to in Recital C
The Tribunal confirmed the assessment on the basis that the definition of ‘declaration of trust’ in s.8(3) of the Duties Act leads to the conclusion that the Trust Deed contains a ‘declaration of trust’ over Property for the purposes of the Act.
The Chief Commissioner assessed ad valorem transfer duty as payable on the Trust Deed on the basis that it contained a declaration of trust that satisfied the statutory definition of ‘declaration of trust’ in the Duties Act 1997 (“the Act”)
The Trust Deed was executed by the Taxpayer on 1 September 2011. The Trust Deed provided, amongst other things, the following details:
“... the Trustee shall hold the settlement sum and all monies and property both real and personal which may hereafter be given to the Trust for the general purpose of the Trust... UPON TRUST to apply them in establishing and maintaining in perpetuity, in accordance with the terms of this Deed for promoting the study of education and for the welfare of the general public and all matters relating thereto.” (clause 1); and
The specified property referred to in Recital C (“the Property”) was acquired by the Taxpayer by way of a contract of sale entered into on 2 September 2011 ie one day after the Taxpayer had entered into the Trust Deed. The purchaser in the contract was described as ‘Al-Saeed & Associates Pty Ltd atf Al-Saeed Educational and Welfare Trust’.
On 5 December 2011, the Taxpayer’s solicitor applied to the Chief Commissioner for the grant of the ‘charitable and benevolent bodies’ exemption in favour of the Trust Deed pursuant to s.275(3)(a) of the Act.
On 6 January 2012, the Chief Commissioner advised the Taxpayer by letter that the application had been rejected and the Trust Deed would be assessed with ad valorem transfer duty on the basis that the Trust Deed contained a declaration of trust. The Chief Commissioner indicated that the duty payable on the Trust Deed would be calculated by reference to the purchase price for the Property shown on the contract of sale. The Assessment accompanied the Chief Commissioner’s letter to the Taxpayer.
The Taxpayer lodged an objection with the Chief Commissioner on 28 February 2012. The objection was disallowed by the Chief Commissioner, and the Taxpayer sought a review of the Assessment by the ADT.
The parties agreed that the review application could be considered on the papers and both parties provided comprehensive written submissions and further submissions in reply.
The key issue for the ADT’s consideration was whether Recital C could properly be read with clause 1 of the Trust Deed with the result that the Trust Deed contained a declaration of trust over the Property that satisfied the statutory definition of ‘declaration of trust’ in the Act.
The Taxpayer made an initial submission that the Assessment should be revoked on the basis that it is mathematically incorrect, being $20 less than assessed.
The Taxpayer’s primary submission was that the Trust Deed is not liable to ad valorem transfer duty as a declaration of trust over the Property. Rather, it is only liable to nominal duty on the basis that the Trust Deed contains a declaration of trust over $100 cash (the settlement sum), which is not dutiable property under s.11 of the Act.
The Taxpayer argued that cl.1 is the only provision of the Trust Deed that satisfies the definition of “declaration of trust” under s.8(3) of the Act as it is the only provision to mention the relevant charitable purposes for which the trust is created. Therefore, the trust is only created over the settlement sum which is the only identified property in cl.1 which was held by the Trustee on the date the Trust Deed was signed. Furthermore, it was argued that Recital C does not declare that the property is to be held in trust as it does not specifically mention the “purpose or purposes” for which the property is held in trust and therefore fails to satisfy the definition of ‘declaration of trust’ in s.8(3). Rather, Recital C refers to property that is to be given (in the future) to the already existing trust.
The Taxpayer relied on para.8(c) of Revenue Ruling No. DUT 31 which provides that the Chief Commissioner does not consider a liability to duty as a “declaration of trust” to arise when the relevant instrument refers to a named trust. This was used to support the argument that a “declaration of trust” refers to the creation of a trust, not to subjecting property to the terms of an existing trust.
The Chief Commissioner’s case was that the Trust Deed, in its proper construction, contains a ‘declaration of trust’ (as defined by s.8(3) of the Act) over the Property referred to in Recital C for the purposes of s.8(1)(b)(ii) of the Act.
The Chief Commissioner did not rely solely on Recital C, nor submit that Recital C in and of itself comprises a “declaration of trust”. Rather, the Chief Commissioner submitted that the Trust Deed contains a “declaration of trust” over the Property. It was argued that Recital C may be looked at as part of the surrounding circumstances when interpreting cl.1 for the purposes of identifying the “property” which is “to be vested” in the Trustee.
It was further submitted by the Chief Commissioner that it is settled law that the relevant question is not whether a particular trust deed is, in the ordinary sense of the term, a declaration of trust, but rather, whether it satisfies the statutory definition of a “declaration of trust” in the Act. Thus it was argued that the Taxpayer’s repeated focus on whether a trust is or was created at law and the time at which it was created was misplaced.
The Chief Commissioner also submitted that in the s.8(3) definition of “declaration of trust”, the restricting words, “mentioned in the declaration” do not appear after the words “any identified property” in the text of the definition. This supports an interpretation that it is sufficient that the “identified property” be mentioned or identified in the instrument which contains the definition, as opposed to being identified or mentioned in the declaration itself. This argument was supported by case law such as Chief Commissioner of State Revenue v Platinum Investment (2011) 80 NSWLR 240 and DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431.
Judicial Member Hole after considering both parties’ submissions made the following comments:
The provisions of Revenue Ruling DUT 031 are not relevant as that Revenue Ruling refers to declarations contained in agreements for sale. This same proposition was included in a letter from the Chief Commissioner to the Taxpayer’s solicitor dated 29 June 2012.
The Tribunal does not accept the Taxpayer’s submission that the Assessment should be revoked because of a mathematical error of $20. Had the Taxpayer advised the Chief Commissioner of this error following the Assessment, the Chief Commissioner could have adjusted the Assessment.
The Taxpayer has not discharged its onus of proof with regard to providing reasoning to revoke the market component of interest or the premium rate of interest. Thus the imposition of the interest components is confirmed.
The statutory definition of ‘declaration of trust’ in s.8(3) of the Act does not restrict the reference to the identified property being placed in any particular titled section of the Trust Deed. The general construction of a deed requires that all parts of the deed be considered, and the omission of Recital C from the construction of the deed would result in the deed not being construed as a declaration of trust pursuant to the Act.
The definition of ‘declaration of trust’ in s.8(3) and as considered in various cases leads to the conclusion that the Trust Deed contains a ‘declaration of trust’ over Property for the purposes of the Act.
Judicial Member Hole confirmed the Chief Commissioner’s Assessment and the market and premium interest components included in the Assessment.