Background
On 19 September 2016, the Applicant made a declaration of trust over a residential property it intended to purchase. On 30 September 2016, the Applicant entered into a contract to purchase the land as trustee of the nominated trust. On 11 October 2016, the Applicant lodged the contract with the Chief Commissioner of State Revenue (Chief Commissioner) for stamping, and paid ad valorem duty totalling $38,260 on the basis that the declaration of trust and the purchase of the property were one transaction and s. 18(1) would apply to grant it relief from double duty .
On 3 April 2019 the Applicant lodged the trust deed with the Chief Commissioner, who then assessed duty on the declaration of trust. The Applicant applied to the Tribunal for an administrative review of the assessment.
Issues
The sale or transfer of dutiable property and a declaration of trust over dutiable property are each dutiable transactions on which duty is charged: (8(1)(a)(b)(i) and (ii)).
Section 11 of the Duties Act 1997 (NSW) provides that dutiable property includes “land in New South Wales” (s. 11(1)(a)).
Under s. 8(3), a declaration of trust is “any declaration … that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons … mentioned in the declaration …”.
Section 9(1) provides that the duty charged on a declaration of trust over dutiable property is to be charged as if each such dutiable transaction were a transfer of dutiable property.
Duty is payable by the transferee (the person declaring the trust) on the declaration of trust: s. 9(2) and s. 13.
Section 18(1) provides that:
“If a dutiable transaction is effected by more than one instrument, one instrument is to be stamped with the duty payable on the dutiable transaction and each other instrument is chargeable with duty of $50”.
Submissions
The Applicant submitted that the declaration of trust and the purchase of the property were one transaction and that s. 18(1) would apply to grant it relief from double duty. The Applicant also argued that duty is payable only on transfers and that the declaration of trust does not amount to, or involve, any transfer (at [12]).
The Chief Commissioner submitted that Chapter 2.1 of the trust deed, by which the Applicant declared its intention to acquire the property “as bare trustee for the sole benefit of the Beneficiary”, satisfies the definition of “declaration of trust” under s. 8(3) (at [22]).
A declaration of trust over dutiable property is a dutiable transaction pursuant to s. 8(1)(b)(ii), as is an agreement for the sale or transfer of dutiable property (s. 8(1)(b)(i)). The Chief Commissioner argued that section 18 is not applicable because there is not one dutiable transaction, but two separate dutiable transactions, and each is to be charged with duty (at [22](d)).
The Chief Commissioner also submitted that for the purposes of charging duty, the duty charged on a declaration of trust over dutiable property is to be charged as if it was a transfer of dutiable property, consistent with s. 9(1) (at [18]).
Decision
The Tribunal noted that s. 18(1) may be applicable in circumstances where:
- an agreement for sale comprised several individual instruments which, taken as a whole, gave rise to a single agreement; or
- the creation of a trust over the property had been effected by several individual documents which, taken as a whole, amounted to a declaration of trust.
The Tribunal determined that section 18(1) is not appliable in this case. The Tribunal referred to Tzovaras v Chief Commissioner of State Revenue [2020] NSWCATAD 265, approving application of its reasoning that each of the agreement to purchase the land and the declaration of trust is a complete and self-contained instrument. Therefore there is not a single dutiable transaction effected by multiple documents, but two dutiable transactions, each of which is given effect to by a discrete instrument (at [26]). The fact that there is an overarching commercial objective (the acquisition of the Property with a view to its being beneficially owned), does not mean that the agreement and the declaration of trust automatically cease to be distinct dutiable transactions.
Orders
The duties assessment in respect of the declaration of trust is confirmed.
Link to the decision
