Nifuno Pty Ltd atf Stephen Forbes Pension Fund v Chief Commissioner of State Revenue [2019] NSWCATOD 3

Background

On 2 January 2019 Senior Member Hamilton of the NSW Civil and Administrative Tribunal (“the Tribunal”) delivered his decision in the above proceedings, setting aside the assessment of the Chief Commissioner of State Revenue (“Chief Commissioner”).  The Crown Solicitor acted for the Chief Commissioner.

The Applicant sought a review of the decision by the Chief Commissioner to disallow a concession under section 61 of the Duties Act 1997 (“the DA”) assessing the transfer of property at 143 Balmain Road, Leichardt (“the Property”) as liable to ad valorem duty.

By way of summary of the key facts:

1. The Applicant is the trustee of a complying self-managed superannuation fund called the Skanda Constructions Pty Employee Superannuation Fund (“Fund 1”). Mr Forbes is the sole member of Fund 1.
2. The Applicant is also the trustee of a complying fund called the Stephen Forbes Pension Fund (“Fund 2”).
3. Mr Forbes is the sole director of Nifuno Pty Ltd (“the Applicant”).
4. In 2016 the Federal Government announced a number of taxation measures designed to improve the sustainability, flexibility and integrity of Australia’s superannuation system. The limit on the value of assets in a pension fund with a transfer balance cap was set at $1.6 million per pension member.
5. Mr Forbes obtained advice on the new tax reforms and by way of Deed dated 27 June 2017, the Property was transferred from the Applicant as trustee of Fund 1 to itself as trustee of Fund 2, the Property being valued at $1.3 million.

The Statutory Framework

The principal provision relied on by the Applicant was section 61 of the DA, which relevantly provides as follows:

1. “This section applies to a relevant transfer that occurs in connection with a person:
   1. ceasing to be a member of, or otherwise ceasing to be entitled to benefits in respect of, a superannuation fund that is a complying superannuation fund or was a complying superannuation fund within the period of 12 months before the transfer was made, and
   2. becoming a member of, or otherwise becoming entitled to benefits in respect of, another superannuation fund that is also a complying superannuation fund or will, in the opinion of the trustees of both funds concerned, be a complying superannuation fund within 12 months after the transfer is made.

1. 1. for the purposes of this section each of the following is a relevant transfer:
      1. a transfer of or an agreement to transfer, dutiable property from a trustee of a superannuation fund, or a custodian of the trustee, to the trustee of another superannuation fund, or to a custodian of the trustee of another superannuation fund….

2. the duty chargeable on a relevant transfer to which this section applies is ad valorem duty in accordance with this Chapter or $500.00, whichever is the lesser.” (italics added)

Submissions

The Chief Commissioner submitted that section 61(1) of the DA cannot apply because Mr Forbes remained a member entitled to benefits from Fund 1 on the basis that the words in the subsection “ceasing to be a member of, or otherwise ceasing to be entitled to benefits in respect of a superannuation fund” requires to be read as a composite expression so that the relevant member ceases to be entitled to, in effect, all benefits in respect of the superannuation fund.

The Applicant argued that the words of section 61(1) of the DA should be interpreted to apply to the situation where a member of a superannuation fund ceases to be entitled to pension benefits, and that it is not necessary that the member lose entitlement to all benefits in the superannuation fund. Further, the Applicant argued that the word “or” in section 61(1) of the DA is disjunctive, indicating that ‘or otherwise ceasing to be entitled to benefits’ refers to a different circumstance, which is not necessarily the same as, or closely analogous to, cessation of membership.

Both parties referred to the words used in the Second Reading Speech of the Minister when the forerunner to s 61 of the DA was introduced in 1991 as s 82 of the Stamp Duties Act 1920 by the Stamp Duties (Amendment Bill).

Decision

Referring back to the Second Reading Speech the Tribunal found the following:

1. The relevant provision is aimed at relieving liability for ad valorem duty on the transfer of assets between complying superannuation funds by providing for a fixed rate when superannuation funds are split or merged, including where a member transfers from one fund to another: [16].
2. The purpose of the relevant provision is to harmonise income tax concessions and other stamp duty concessions for superannuation funds, so that any inequity is remedied: [16].
3. The relevant provision is to be given a broad and expansive interpretation in relation to the transactions covered by the provision: [16].

The Tribunal held that it would be inequitable that the transaction should not be eligible for the concessional rate of duty under s 61 of the DA, as Mr Forbes is the sole member of both complying superannuation funds, and is now receiving pre-existing pension benefits from Fund 2 rather than Fund 1, as a result of the transfer of the Property: [17].

Orders

The assessment is set aside, and the matter remitted to the Chief Commissioner for assessment pursuant to s 61 of the Duties Act 1997.

Link to decision

Nifuno Pty Ltd atf Stephen Forbes Pension Fund v Chief Commissioner of State Revenue [2019] NSWCATOD 3