Rafael v Chief Commissioner of State Revenue [2021] NSWCATAD 218

Background

The Applicant sought review of a duties notice of assessment issued by the Chief Commissioner in respect of a transfer (“the Transfer”) of a 49.5% interest in the title to a residential property at Vaucluse (“the Vaucluse property”).  The Transfer was from one of the two joint registered proprietors, Mr Shahaf, to the other registered proprietor, his brother Mr Rafael (“the Applicant”).

The Applicant lodged his application for review more than 60 days after the issue of the Chief Commissioner’s decision to disallow his objection, and required the Tribunal’s approval under s.99(1) of the Taxation Administration Act 1996 to lodge his application.

The key legal issue in this proceeding was whether the duty concession in s. 55 of the Duties Act 1997 applied in respect of the Transfer, on the basis that the apparent purchaser concession should be available as contended by the Applicant.

The key facts in this matter were:

1. Mr Shahaf and the Applicant became the registered proprietors of the Vaucluse property as joint tenants by way of a purchase that completed on 6 May 2015;
2. by the Transfer on 14 November 2019, Mr Shahaf purported to transfer 99% of his 50% interest (that is, 49.5% of the full title) to the Applicant;
3. the result of the Transfer was that title in the Vaucluse property was held as to 99.5% by the Applicant and as to the remaining 0.5% by Mr Shahaf; and
4. it was the transfer of a 49.5% interest in the Vaucluse Property from Mr Shahaf to the Applicant which was the subject of the assessment in dispute in this proceeding.

The statutory framework

Section 55 of the Duties Act 1997 provided (in part):

55 Property vested in an apparent purchaser

(1) Duty of $50 is chargeable in respect of:

(b) a transfer of dutiable property from an apparent purchaser to the real purchaser if:

1. the dutiable property is property, or part of property, vested in the apparent purchaser upon trust for the real purchaser, and
2. the real purchaser provided the money for the purchase of the dutiable property and for any improvements made to the dutiable property after the purchase.

(1A) For the purposes of subsection (1), money provided by a person other than the real purchaser is taken to have been provided by the real purchaser if the Chief Commissioner is satisfied that the money was provided as a loan and has been or will be repaid by the real purchaser.

The two key issues were:

1. whether the Vaucluse Property was vested in Mr Shahaf upon trust for the Applicant (within s. 55(1)(b)(i)) (“the Trust Issue”); and
2. whether Mr Rafael provided the whole of the money representing the purchase money of that dutiable property (within s. 55(1)(b)(ii)) (“the Purchase Money Issue”).

Submissions

The Applicant submitted that:

the Vaucluse Property had been vested in an apparent purchaser (his brother Mr Shahaf) upon trust for the real purchaser (the Applicant); and

the source of all money for the purchase had been provided by the Applicant, including moneys provided as a loan (which he submitted had either been repaid, or would be repaid, by him).

The Chief Commissioner submitted that the s.  55 concession was not be available to the Applicant because the Applicant had not satisfied either of the conditions required under s. 55(1)(b).

Decision

Senior Member Currie found that the duties notice of assessment should be affirmed, on the basis that he was not satisfied the s. 55 concession applied to the Transfer.

The Tribunal found, in relation to the Purchase Money Issue:

1. the Applicant had failed to satisfy the onus which he bore to establish that he as the real purchaser had provided the money for the transfer to him of the dutiable property, including by reference to s 55(1A). In relation to that sub-section, the Applicant had not established that any part of the purchase money which had been provided to him as a loan had been or would be repaid by him;
2. a component of the deposit (an amount of $83,000) was not “provided as a loan” within s. 55(1A) as contended for by the Applicant, because:
   1. the availability of that amount resulted from an unauthorised use by the Applicant of an account owned by his brother Mr Shahaf (ie Mr Shahaf, as the putative lender, was not aware that he was lending anything and was not aware that the money had left his account); and
   2. b. the fact that the Applicant had some sort of authorisation to operate that account, and that there was clearly an informal arrangement for family support between the brothers, does not change that result, and does not constitute a “loan” from the account holder; and
3. the Applicant had not established that the $83,000 amount, or ay interest, would be repaid by him.

The Tribunal also found that the Applicant’s case had failed in respect of the Trust Issue, for the following reasons:

1. the leading texts and Harvey v Chief Commissioner of State Revenue [2021] NSWCATAD 63 at [47] had established that “the question of whether the person in the position of Mr Rafael (as real purchaser) acquired a beneficial interest in the property depends upon the intention of the person in the position of his brother Mr Shahaf (as apparent purchaser)” (at [73]);
2. a rebuttable presumption arises that the dutiable property (the 49.5% share in the title to the Vaucluse property which was the subject of the Transfer) was to be held by Mr Shahaf on a resulting trust for the Applicant;
3. the Tribunal accepted the Chief Commissioner’s submission that the actual intention of the purported apparent purchaser was relevant to rebut the presumption; and
4. the Applicant had not persuaded the Tribunal that there was such an intention, accepting the following submissions from the Chief Commissioner in this regard:
   1. the retention by Mr Shahaf of a registered legal interest in the Vaucluse property, albeit one of only 0.5%, is quite inconsistent with his holding of any part of the property on resulting trust for the Applicant;
   2. the availability to the Applicant of a significant asset at the time the original purchase of the property completed on 6 May 2015 tells against the existence of a “clear intention” that Mr Shahaf was to hold his interest on resulting trust for the Applicant when assessed on an objective basis; and
   3. the existence and purpose of a loan agreement entered in 2021 between Mr Shahaf and the Applicant tells against there being any clear intention that Mr Shahaf was to hold his interest on resulting trust, because that loan agreement gives Mr Shahaf as apparent purchaser some influence in determining the timing of a sale of the Vaucluse property, and also purports to give him an interest in the proceeds of that sale. That is totally inconsistent with the position and the obligations of a trustee of a resulting trust necessary for the purposes of s. 55(1)(b).

Orders

1. The Applicant be allowed to file his application for a review of the Chief Commissioner’s decision after the period prescribed by s 99(1) of the Taxation Administration Act 1996 (NSW).
2. The Chief Commissioner’s decision under review is confirmed.

Link to decision

https://www.caselaw.nsw.gov.au/decision/17ae0c16ff3665f5c7c52f07