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Date of judgement | 18 June 2015 |
Proceeding number | 1410582 |
Judge(s) | A Verick, Senior Member |
Court or Tribunal | NSW Civil and Administrative Tribunal |
STATE REVENUE – Land Tax – Liability of trustee - Whether a fixed trust or a special trust – No present entitlement to income or capital of the Trust – Requirements for fixed trust not satisfied – Land Tax Management Act, s 3A
The principle question for determination in the proceedings was whether the TECH 1 Pty Ltd ATF ROVI Investments Unit Trust (“the Trust”) was a “fixed” or “special” trust as defined in the Land Tax Management Act 1956 (“the Act”). The Chief Commissioner had reassessed the Trust from a “fixed” to a “special” trust on 24 April 2014. This resulted in the Trust no longer being entitled to a tax free threshold in respect of a property held by the Trust, and being charged land tax under the Land Tax Act 1956 on the full value of the property.
In order to determine whether the Trust was a “fixed” or “special” Trust, the Tribunal had to determine three issues:
Senior Member Verick relied on the High Court’s enunciation of the meaning of the concept “present entitlement to income” in Harmer v Commissioner of Taxation 1, which was relied upon by His Honour Gzell J in Sayden Pty Ltd v Chief commissioner of State Revenue 2 (“Sayden’s case”):
“a beneficiary is 'presently entitled' to a share of the income of the Trust estate if, but only if: (a) the beneficiary has an interest in the income which is both vested in interest and vested in possession; and (b) the beneficiary has a present legal right to demand and receive payment of the income, whether or not the precise entitlement can be ascertained before the end of the relevant year of income and whether or not the Trustee has the funds available for immediate payment."
The Tribunal held that the unit holders of the Trust did not have an interest in the income of the Trust which was both vested in interest and vested in possession in the relevant land tax years as required by the criteria set out in s. 3A(3B)(a)(i) of the Act. The Tribunal held this on two grounds, as advanced by the Chief Commissioner, namely:
The Tribunal relied upon the definition of present entitlement to Trust capital as enunciated by Gzell J in Sayden’s case 3:
"By contrast, present entitlement to capital is novel. Presumably it means an interest in the Trust property vested in interest and in possession in that there is no other interest in the property that precedes it, together with a present legal right to demand division of the Trust property or its proceeds among the beneficiaries.
Any interest of the Trustee under its right to indemnity is not relevant in this context because s 3A(3) of the Management Act requires any equitable interest of the Trustee to be disregarded."
The Tribunal accepted the Chief Commissioner’s submissions that the Trust Deed did not specifically provide the Unit Holders with a present entitlement to the capital of the Trust for the following reasons:
As the Tribunal found that the Trust failed to satisfy the relevant criteria as set out in s.3A(3B)(a)(i) and (ii) of the Act, it became unnecessary in this matter for the Tribunal to consider the issue required by s. 3A(3B)(b).
As the Trust failed to satisfy the relevant criteria as set out in s. 3A(3B)(a)(i) and (ii) of the Act, the Trust was held to be a special trust and the reassessments of the Chief Commissioner of State Revenue were affirmed.