Background
Mr Craig Doyle (Mr Doyle) is the director and sole shareholder in Dinheiro Pty Ltd (herein referred to as The Applicant). The Applicant is the trustee of the Craig Doyle Fixed Trust (the Trust) which, as was found in the judgment, Mr Doyle is the sole beneficiary of. In 2013, the Trust was changed from a discretionary trust to a fixed trust.
On 2 August 2017, Mr Doyle and his wife Susan Doyle (Mrs Doyle) entered into a contract for sale for the purchase of the Property. Mr and Mrs Doyle paid duty charged on the purchase agreement.
On 23 October 2019, the Property was transferred to the Applicant rather than to Mr and Mrs Doyle. The Applicant self-assessed and paid nominal duty of $10 on the transfer of the Property on the basis that it and the original purchasers (being Mr and Mrs Doyle) were “related persons” as defined in s 18(3) of the Act.
On 23 February 2024, after an investigation, the Chief Commissioner issued a notice of assessment to the Applicant on the basis that the Applicant and the original purchasers were not related persons under s 18(3) of the Act. The assessment included a 25% penalty tax and market and premium rates of interest.
On 22 April 2024, the Applicant’s objection to the assessment was disallowed. The Applicant then commenced these proceedings in the Tribunal.
The Statutory Framework
Duties Act 1997
Section 18(3) of the Act relevantly provides that the duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $10 if the purchaser under the agreement and the transferee under the transfer were “related persons”.
The term “related persons” is defined in the dictionary to the Act as:
“related person means a person who is related to another person in accordance with any of the following provisions:
- natural persons are related persons if:
- one is the spouse or de facto partner of the other, or
- one is the parent, brother or sister of the other, or
- one is the spouse, or de facto partner, of a parent, child, brother or sister of the other,
- companies are related persons if they are related bodies corporate,
- a natural person and a private company are related persons if the natural person is a majority shareholder or director of the company or of another private company that is a related body corporate,
- a natural person and a trustee are related persons if the natural person is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee,
- a private company and a trustee are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee.”
Taxation Administration Act 1996
Generally, if a tax default occurs, a taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis, from the end of the last day for payment until the day it is paid, at the interest rate from time to time applying (s 21). A “tax default” occurs where a taxpayer fails to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay (s 3(1), definition of “tax default”). Such interest consists of a market rate component and a premium rate component (s 22). However, the Chief Commissioner may remit interest in certain circumstances (s 25).
In addition, a taxpayer may be liable to penalty tax, in respect of a tax default. Generally, the amount of penalty tax is 25% of the unpaid tax (s 27(1)). However, penalty tax will not be imposed if the Chief Commissioner is satisfied that either: (1) the taxpayer took reasonable care to comply with the relevant taxation law (s 27(3)(a)); or (2) the tax default was beyond the taxpayer’s control (s 27(3)(b)). The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount (s 33).
Submissions
The main issue before the Tribunal was whether the Applicant and the original purchasers were related persons pursuant to s 18(3) of the Duties Act. This involved consideration of the following two related issues:
- whether the Property was acquired by the Applicant in its capacity as trustee of the Trust; and
- whether both Mr and Mrs Doyle were beneficiaries of the Trust at the relevant times.
These issues were largely argued on an evidentiary basis with Mr Doyle and his accountant, Mr McNabb, giving oral evidence to supplement or explain inconsistencies in the documentary evidence about the transfer and the general financial circumstances of the Applicant and the Trust.
The Applicant also contended, if any duty was payable, that the Chief Commissioner was estopped from assessing the Applicant for duty on 100% of the value of the dutiable transaction in circumstances where it had initially indicated the assessment would be on the 50% of the transfer referable to Mrs Doyle.
In the alternative, the Applicant contended that the Tribunal should exercise its discretion to remit the penalty tax and premium rate of interest that were assessed. The Applicant adduced some oral evidence in support of this alternative contention to the effect that he had suffered a brain injury in 2014 and not been “on the ball” about the Trust’s arrangements during that time.
Decision
In relation to the first issue, the Tribunal found (at [102]) that, despite an absence of direct evidence, it was “more likely than not” that the Applicant acquired the Property in its capacity as trustee of the Trust. The Tribunal referred (at [99]) to the Applicant’s evidence as “deficient” on this issue but identified the following factors as indicative of the Applicant acquiring the property as trustee of the Trust:
- the accounts for the Trust for the 2020 financial year and the 2021 income tax return for the Trust (although incorrectly named) indicate that the Property was treated as forming part of the Trust (at [99]);
- the history of correspondence between Mr Doyle and the Chief Commissioner regarding the 2013 amendments to the Trust. In circumstances where the Trust had previously acquired real property, it would be reasonable for the Trust to follow that course in respect of this acquisition (at [100]); and
- the capacity in which the Applicant acquired the Property is one of the few matters that Mr Doyle has remained consistent on in his submissions and evidence (at [100]).
In relation to the second issue, the Tribunal found (at [106]) that Mr Doyle was a beneficiary of the Trust but (at [107]) that Mrs Doyle was not. This finding was on the basis that there was no evidence that she had ever become a “unitholder” of the Trust (at [108]). The Tribunal did not accept the Applicant’s contention that the fact that distributions had occurred to Mrs Doyle meant that she was a beneficiary (at [112]-[114]).
Accordingly, the Tribunal was satisfied (at [117]-[118]) that Mrs Doyle and the Applicant were not “related persons” for the purposes of s 18(3) of the Act and that, therefore, the nominal duty of $10 does not apply.
The Tribunal found (at [120]-[122]) that estoppel does not lie against a fiscal authority on the basis that the authority cannot be prevented from carrying out the public duties cast upon it by legislation. As such, despite the Chief Commissioner having initially indicated to the Applicant that duty would be charged against 50% of the value of the dutiable transaction, the Tribunal was satisfied that the Chief Commissioner was correct to assess duty on 100% of the value of the dutiable transaction.
Interest and Penalty
The Tribunal determined (at [124]-[132]) that it was appropriate in this case to exercise the discretion in s 25(1) of the TA Act to remit the premium component of interest to nil as well the discretion under s 33 of the TA Act to remit the penalty tax to 15%.
In finding that the penalty tax should be reduced and that the premium component of interest should be remitted in full, the Tribunal:
- found that, even though there was no medical evidence as to Mr Doyle’s alleged brain injury, he exhibited a general state of not being fully in control. This was evident from his confusion and inconsistency throughout his written correspondence, submissions and oral testimony, and advancing hypotheticals which were irrelevant to establishing what occurred as a matter of fact (at [129]);
- acknowledged that this matter has resulted in double duty. If Mr Doyle had paid full attention and received proper advice at all relevant times, it is likely that no double duty would have arisen (at [130]);
- noted that the finding that there was no transfer of units in the Trust from Mr Doyle to Mrs Doyle prior to the purchase was only on the balance of probabilities (at [130]);
- noted the broad and unfettered character of the discretion, and that an absence of reasonable care for the purpose of s 27(3)(a) does not preclude an exercise of discretion to fully or partly remit penalty tax under s 33 (at [131]); and
- noted the penal nature of the imposition of the premium component of interest (at [132]).
The Tribunal found that there was no basis on which to remit the market component of interest.
The Tribunal summarised the correct and preferable decision (at [133]) as being that:
- duty is payable as assessed;
- penalties should be remitted to 15%;
- the market rate of interest should apply, but the premium component of interest should be remitted in full.
Orders
The Tribunal ordered that the Assessment is to be remitted to the Chief Commissioner and is to be determined in adherence with the Reasons for Decision.
Read the full decision
