The vast majority of the decisions we make each year are undisputed by our customers, but there are inevitably situations where litigation is required to determine a resolution.
Congestion Levy Act 2005
Parking spaces – denial of exemption
Warwick Super Pty Ltd v CSR (Review and Regulation) [2016] VCAT 354
The Commissioner assessed 32 parking spaces in a car park located in Collingwood as leviable and the taxpayer argued that they were exempt under Part 4 of the Congestion Levy Act 2005 (the Act).
The taxpayers submitted that the predominant reason for originally building the car park was to provide safe car parking for its female staff.
On 4 March 2016, the Tribunal’s Senior Member Robert Davis delivered written reasons for his decision, upholding the Commissioner’s assessment of the 32 parking spaces as none of them fell within any of the categories of exempt parking spaces under Part 4 of the Act. However, the Tribunal acknowledged that providing parking spaces for the safety of the taxpayer’s female employees was commendable.
Duties Act 2000
Consideration of "economic entitlement" provisions
BPG Caulfield v CSR [2016] VSC 172
The Commissioner assessed the taxpayer for duty under the “economic entitlement” provisions in s81 of the Duties Act 2000 (the Act).
BPG had entered into a development agreement with the Melbourne Racing Club to develop one of its lands. As part of that agreement, BPG also acquired the rights to share in the proceeds of that development.
The Commissioner argued that BPG had effectively acquired an economic entitlement in the Melbourne Racing Club for purposes of s81.
BPG disputed its assessment. It argued that on a proper construction, the specific words in s81 – which referred to “the landholdings of the private landholder”, required one to acquire an economic entitlement pertaining to all the landholdings of the landholder rather just a landholding or some of the landholdings of the landholder.
On 22 April 2016, the Supreme Court accepted BPG’s preferred construction on the basis that it more closely aligned with the context of the provisions.
Exemptions considered – s34 and s36
Pascu & Ors v CSR (Review and Regulation) [2016] VCAT 668
The taxpayer subdivided and developed land in Port Melbourne as part of a joint venture. Six of the resulting lots were transferred to the joint venturers, the taxpayers. The Commissioner assessed these transfers as dutiable, however, the taxpayers claimed exemptions from duty pursuant to ss. 34 and 36 of the Act.
By order dated 29 April 2016, the Tribunal upheld the Commissioner’s assessments.
The Tribunal found that s34 of the Act did not apply as the taxpayers did not provide the purchase money for the property, but had provided loans to the joint venture company.
In addition, the Tribunal found the Joint Venture Agreement executed in 2007, upon which the taxpayers relied as establishing a fixed trust over the property, had been terminated. A new trust over the property, with different beneficiaries or membership, was created by a subsequent Joint Venture Agreement in respect of the property executed in 2009. No duty had been paid on the 2009 agreement, and it followed accordingly the exemption in s36 was unavailable.
Duties – valuation of commercial lease
Mazza v CSR (Review and Regulation) [2015] VCAT 1190
The Commissioner assessed the taxpayer to duty over a transfer of lease of commercial property in Mildura. The sole issue was the dutiable value of the lease.
The Commissioner relied on a valuation supplied by the Valuer-General which valued the unencumbered value of the land that was subject to the lease at $300,000, in accordance with the statutory requirement in s20(3)(b) of the Act. On the other hand, the taxpayers relied on a valuation that valued their interest under the lease at $230,000.
By order dated 3 August 2015, the Tribunal confirmed the Commissioner’s assessment, ultimately accepting the Valuer-General’s valuation as it was the only evidence before the Tribunal of the unencumbered value of the land that was subject to the lease.
First Home Owner Grant Act 2000
Student accommodation – planning overlays and the residence requirement
Bishop v CSR (Review and Regulation) [2016] VCAT 239
The applicant for the First Home Owner Grant (FHOG) was a student that had purchased accommodation in a building known as “Uni-Lodge”. The planning overlay for this building required the accommodation to be occupied by a current student. At the time of purchase the applicant had up to 12 months left of his studies, however, he subsequently graduated earlier than expected. As a consequence he vacated the premises prior to having occupied the property for even six months.
On 22 February 2016 the Tribunal’s Senior Member Davis provided written reasons that the applicant did not occupy the property as his principal place of residence for a continuous period of at least six months, as required by s12 of the First Home Owner Grant Act 2000 (the Act). The Tribunal affirmed the Commissioner’s decision to recall the grant but reduced the penalty of $2600 to $1500 because it felt that the Commissioner was on notice at the time of approving the application for the FHOG that the applicant may not have been able to meet the inherent requirements of the Act.
Growth Areas Infrastructure Charge – Planning and Environment Act 1987
Excluded subdivision – consideration of “purpose”
Frontlink Pty Ltd v CSR [2016] VSC 25
A developer owned land in Clyde North and was in the process of undertaking successive subdivisions, with the ultimate aim of residential development. The relevant subdivision for the litigation concerned the Arterial Road Widening (Plan J). Later subdivisions were planned for a gas easement and residential development. The Commissioner assessed on the basis that when regard was had to all of the subdivisions that were to take place, Plan J was not solely for the purposes of providing land for transport infrastructure. As a consequence, it was not exempt under s201RF(b) of the Planning and Environment Act 1987 (the Act).
Section 201RF(b) of the Act (“excluded subdivisions of land”) provides:
For the purposes of this Part, a subdivision of land is an excluded subdivision of land if –
(b) the purpose of the subdivision is solely to provide land for transport infrastructure or any other public purpose;
The taxpayer disputed the Commissioner’s construction of the provision. The Commissioner was successful at VCAT. The taxpayer appealed that decision to the Supreme Court.
On 11 February 2016, Justice Croft of the Victorian Supreme Court held in favour of the taxpayer. Croft J held that Senior Member Davis of VCAT had erred in his interpretation of the word “purpose” in s201RF(b) of the Act. Croft J held that, properly construed, “purpose” referred to the “most immediate and proximate purpose” of the subdivision and that the purpose of this subdivision was to provide land for transport infrastructure. This was therefore an excluded subdivision and did not trigger the taxpayer’s liability to pay the GAIC levy.
Land Tax Act 2005
Primary production land – definition of “greater Melbourne”
CSR v EHL Burgess Properties Pty Ltd [2015] VSCA 269
The taxpayer was assessed for land tax for the 2013 land tax year on five properties which, on the Commissioner’s view, straddled the “greater Melbourne” boundary defined in s64(1) of the Land Tax Act 2005.
The taxpayer contended that because the City of Whittlesea, and the shires of Kilmore and Bulla, had been abolished in 1994, the “municipal districts” of those abolished cities and shires listed in the Third Schedule of the Melbourne and Metropolitan Board of Works Act 1958 had no relevant meaning and were incapable of being applied as legislation. The taxpayer contended that the result was that no land that lay within the municipal district of an abolished city or shire was within “greater Melbourne”.
The Commissioner contended the areas of the “municipal districts” of the City of Whittlesea, and the shires of Kilmore and Bulla were ascertainable as matters of historical fact, notwithstanding those cities and shires had been abolished, and were inside “greater Melbourne”.
The taxpayer requested the Commissioner to treat the objection as an appeal to the Supreme Court of Victoria. At first instance, the primary judge (Croft J) allowed the taxpayer’s appeal. The Commissioner appealed the decision to the Court of Appeal.
On 29 September 2015, the Court of Appeal of Victoria handed down its decision in favour of the Commissioner. The Court of Appeal confirmed the Commissioner's interpretation of “greater Melbourne” for the purposes of s64(1) of the Land Tax Act 2005 (up until 18 June 2014, when the legislation was amended).
Primary production land – consideration of term “business”
Mould v CSR [2015] VSCA 285
The Commissioner had assessed to land tax various lands held by the taxpayer (a trustee of an estate), which included a large rural land and a portfolio of 26 residential properties that were being rented. The taxpayer contended that the rural land should be exempt as primary production land pursuant to s67 of the Land Tax Act 2005 (the Act).
The matter was first heard by Ginnane J of the Supreme Court, who found in favour of the Commissioner. On appeal to the Court of Appeal the sole issue for determination was whether the primary production exemption in s67 applied to the rural land, which turned on whether the renting of the portfolio of 26 residential properties constituted a business for the purposes of s67(2)(c)(i) of the Act. If it did, the primary production exemption in s67 was not be available as under s67(2)(c)(i) (as it stood at the relevant time) the primary production had to be the sole business of the trust.
On 27 October 2015 the Court of Appeal decided in favour of the Commissioner, upholding the assessments.
Their Honours went on to confirm that “business” in s67 of the Act bears its ordinary, general meaning, and that determining the existence of a business in that sense required consideration of the indicia most recently revisited by the High Court in Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 (Spriggs) (at [84] and [199]).
Having examined the taxpayer’s activity in the present matter against the indicia in Spriggs, Warren CJ and Digby AJA concluded that the taxpayer was engaged in a business of leasing its extensive residential portfolio. As a result, the primary production land exemption did not apply.
Related corporations – discretion to group
Numo Pty Ltd v CSR [2016] VSC 274
Assessments for land tax were issued to the taxpayers (who were related corporations) on a grouped basis. Generally, land tax is assessed by reference to land owned by a taxpayer as at midnight 31 December in the year proceeding the land tax year. However, and in respect of taxpayers who are corporations, s50 of the Land Tax Act 2005 (the Act) provides the Commissioner has discretion to group corporations that are related corporations. If the Commissioner does so, he is to assess them as a single corporation.
The Supreme Court considered whether in order to assess a group of related corporations as a single corporation pursuant to s50(2) of the Act that there was a condition precedent. That condition being, there be a determination by the Commissioner under s50(1) of the Act that he will exercise his discretion to group in force as at midnight on 31 December in the year preceding the land tax year.
On 3 June 2016 the Court upheld the land tax assessments. Croft J held there is no requirement for a determination to group related corporations to be in place as at midnight on 31 December in order to assess the related corporations as a single corporation. Croft J confirmed the Commissioner has the power to issue assessments for land tax based on facts as they exist at midnight on 31 December.
In addition, the Court provided some favourable comments to the effect that challenges to assessments should be brought under the Taxation Administration Act 1997 and not directly in the Supreme Court as the taxpayers also attempted to do in this instance.
Payroll Tax Acts 1971 and 2007
Sole/whole or dominant purpose a charitable purpose
Law Institute of Victoria Ltd v CSR [2015] VSC 604
The taxpayer applied for a refund of payroll tax on the basis that it was a non-profit organisation, having as its sole/whole or dominant purpose a charitable purpose under s48 of the Payroll Tax Act 2007 (the Act).
The Commissioner denied the taxpayer’s request as he was not satisfied s48 of the Act applied.
The taxpayers initiated proceedings before the Supreme Court.
On 27 October 2015, the Supreme Court upheld the Commissioner's decisions on the basis that the taxpayer did not have as its sole/whole or dominant purpose a charitable purpose within the meaning of s48 of the Act.
Related businesses – discretion to de-group
Terick Pty Ltd v CSR (Review and Regulation) [2015] VCAT 1901
The Commissioner assessed the taxpayer as part of a group of four businesses. The taxpayer requested the Commissioner exercise his discretion under s 79 of the Payroll Tax Act 2007 (the Act) to exclude it from the group on the basis that its business was independent and not connected with the other businesses.
The taxpayer’s operations included road construction, repair, sealing, inspections and maintenance. The other three businesses were also related to road works.
On 13 August 2014 the Tribunal confirmed the Commissioner’s decision to refuse to de-group the taxpayer from the other businesses, concluding that the degree of control and dependence on the other businesses was sufficient to mean that the taxpayer did not come within the meaning of s79 of the Act.
Taxation Administration Act 1997
Reopening of a review of an assessment
Martin v CSR (Review and Regulation) [2015] VCAT 1287
The taxpayer had been issued with a duty assessment following an investigation into a development where a number of people were considered to have incorrectly claimed the off-the-plan duty exemption contained in the Duties Act 2000. The taxpayer’s matter was set for hearing, jointly with the other related proceedings. The Tribunal upheld the assessments against all parties to the proceedings, including the taxpayer, despite her absence during the hearing. The taxpayer subsequently requested the Tribunal reopen her review application over her assessment under s111 (2) of the Taxation Administration Act 1997.
On 18 August 2015 the Tribunal refused the taxpayer’s request on the basis that she failed to show “good cause” to justify a reopening. Firstly, she did not give sufficient reasons for her non-attendance at the substantive hearing. Secondly, it held that the merits of her case did not justify further consideration of her application.