Baynes v Chief Commissioner of State Revenue [2020] NSWCATAD 106
Background
The proceedings concerned the Chief Commissioner’s decision to not apply a concessional rate of duty pursuant to s. 55 of the Duties Act 1997 (NSW) (“the Act”) to a transfer of a property in Balmain (“the Property”) from the applicant’s daughter to the applicant. The applicant had intended her daughter to purchase the Property as an apparent purchaser, with the applicant as the real purchaser. The key facts were:
- Since 1998, the applicant had lent more than $4,500,000 to businesses operated by her husband and to the trustee of a family trust (“the Trust”) in order to support her husband’s businesses.
- From around 2015, the company which owned the businesses and the trustee of the Trust began making repayments to the applicant.
- On 30 January 2015, the applicant transferred $225,000 to her daughter, which was used by her daughter to pay the deposit for the purchase of the Property.
- In February 2015, the applicant’s daughter, as purchaser, exchanged contracts for the sale of the Property. The purchase price was $2,225,000. Following settlement adjustments, the purchase price became $2,236,112.40. Duty in the amount of $107,865 was assessed and paid.
- On 25 February 2015, Argyle Solicitors provided a letter of advice (“Argyle Advice”) to the applicant and her husband. The Argyle Advice provided advice and comments in relation to the requirements the proposed apparent purchaser arrangement that would satisfy s. 55 of the Act.
- In April 2015, the purchase of the Property was completed. The money for the purchase of the Property came from four sources:
- The deposit of $225,000, provided by the applicant;
- $200,000 from the Trust;
- $815,871.28 (being the total of $50,000, $763,423.20 and $2,448.08) from a joint account in the names of the applicant and her husband (“Joint Account”); and
- $999,750 by AMP Bank Limited as a loan to the applicant’s daughter (“the Loan”).
- It was common ground that the amount of $763,423.20 paid from the Joint Account included at least some money from the $884,000 deposited into the Joint Account by the applicant’s husband on 10 April 2015. The applicant’s husband received this money as inheritance from the estate of his mother.
- In order to make repayments to the Loan, the applicant’s daughter opened an offset deposit account (“Offset Account”), from which all loan repayments would be made to the Loan Account.
- Between 27 December 2017 and 3 January 2018, the applicant’s husband transferred $535,000 to the Offset Account, being further amounts of inheritance from the estate of his mother.
- On 1 June 2018, a transfer of $899,523 was made from the Offset Account to the Loan Account, with the notation “Payout loan”. It was common ground that part of this sum came from the $535,000 that the applicant’s husband had deposited.
- On 27 September 2018, the applicant’s daughter and the applicant executed a transfer form for the transfer of the Property from the applicant’s daughter to the applicant. The transfer form was then lodged with the Chief Commissioner, along with a letter requesting that duty be assessed at the concessional rate provided for by s. 55 of the Act.
- The Chief Commissioner refused the concessional duty sought, on the basis that the requirements of s. 55 of the Act had not been met. The Chief Commissioner issued a Notice of Assessment (“Assessment”) for ad valorem duty to be paid on the transfer in the amount of $128,440. That amount was promptly paid, on 11 October 2018.
- On 28 November, the applicant lodged an objection to the Assessment (“the Objection”), which was disallowed by the Chief Commissioner on 25 January 2019.
Issue
The main issue in dispute was whether the Applicant was entitled to a concessional rate of duty upon the transfer of the Property from the applicant’s daughter, as apparent purchaser, to the applicant, as real purchaser, by reason of the operation of s. 55 of the Act.
Decision
The Tribunal found that, prima facie, the applicant did not provide all the money for the purchase of the Property, as part of the $763,423.20 paid towards the purchase price from the Joint Account consisted of funds deposited by the applicant’s husband, and part of the loan repayment of $899,523 on 1 June 2018 consisted of funds that the applicant’s husband had deposited into the Offset Account.
To rebut this, the applicant would need to successfully demonstrate that the deposits made by her husband into the Joint Account and the Offset Account were gifts to her. However, after evaluating the evidence, the Tribunal was not persuaded that this rebuttal was made out.
The Tribunal’s consideration of the relevant evidence is summarised as follows:
- Solicitor’s Advice ([52]-[55]):
The applicant claimed that she had followed this advice in purchasing the property. However, the Tribunal found that the manner in which the Property was purchased was not the manner contemplated in the Advice (that the applicant would provide funds for the deposit and that the balance of the purchase price would be borrowed as a loan, which the applicant would provide an indemnity and undertaking for).
Further, the Advice did not refer to the husband’s inheritance being gifted to the applicant for use in paying for the Property. Rather, it had included as a “background fact” that the applicant and her husband would receive an inheritance which would allow them to purchase the Property.
- No contemporaneous evidence of a gift ([56]):
There was no contemporaneous evidence or document that pointed to the money transferred by the applicant’s husband being made as a gift to the applicant.
- Provision of purchase funds ([57]-[63]):
Multiple parts of the Objection prepared by the applicant and her husband referred to the purchase funds having been provided by the applicant and her husband jointly. The Tribunal considered that these references were inconsistent with the proposition that the purchase funds were provided solely by the applicant or that the husband had made a gift to the applicant. Other statements in the objection were found to be only consistent with an acknowledgement that the funds used to pay for the purchase of the Property did not come solely from the applicant.
- Application ([64]-[65]):
The application to the Tribunal repeated the assertion that the purchase funds came from both the applicant and her husband. The application also did not refer to a gift having been made.
- Affidavit and cross-examination evidence ([66]-[68]):
The affidavit evidence of the applicant and her husband was imprecise, at best, as to the making of a gift. There was no reference to how the gift was created or any writing or words capable of founding the assertion that a gift had been made.
- Accountant’s evidence ([69]):
The applicant’s accountant during the relevant period merely provided evidence of the loans made by the applicant to her husband’s businesses, but did not refer to the making of a gift.
Tribunal’s conclusion
Taking into account these matters, the Tribunal concluded that the gift was not the subject of a written record and therefore could only have been made orally (at [72]). The Tribunal noted the serious difficulties a party faces when trying to prove that a gift has been made orally and the need for precise evidence of the relevant conversation. Given the imprecise nature of the applicant’s evidence and various inconsistent positions in documents prepared by the applicant, the Tribunal concluded that it could not be satisfied that a gift had ever been made (at [75]).
Consequently, the Tribunal held that the prima facie position, being that the applicant did not provide all the moneys for the purchase of the Property, could not be rebutted and the requirements of s. 55 could not be made out.
Orders
The Chief Commissioner’s decision was affirmed.
https://www.caselaw.nsw.gov.au/decision/5e979601e4b0d927f74aeddd