Rawlings v Commissioner of State Revenue
[2015] QCAT 10
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- Unreported Judgment
- Rawlings v Commissioner of State Revenue[2015] QCAT 10
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Rawlings v Commissioner of State Revenue[2015] QCAT 10
Rawlings v Commissioner of State Revenue[2015] QCAT 10
CITATION: | Rawlings & Ors v Commissioner of State Revenue [2015] QCAT 10 |
PARTIES: | Edward Bayard Rawlings Polly Abigail Brown Emma Jacqueline Rawlings (Applicant) |
v | |
Commissioner of State Revenue (Respondent) |
APPLICATION NUMBER: | GAR068-14 |
MATTER TYPE: | General administrative review matters |
HEARING DATE: | On the papers |
HEARD AT: | Brisbane |
DECISION OF: | Member Allen |
DELIVERED ON: | 15 January 2015 |
DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
CATCHWORDS: | DUTY – where duty assessed on transfer of land by trustees to beneficiaries – whether transfer of two lots, one to one set of beneficiaries and the other to another set of beneficiaries constituted substantially one arrangement requiring the transactions to be aggregated- where one agreement entered by all of the parties evidencing the transactions – where lots were used separately for residential purposes. Duties Act 2001 (Qld) ss 9, 10, 30, Schedule 3 Taxation Administration Act 2001 (Qld) s 71 Attorney-General v Cohen (1937) 1 K.B. 478 Jeffrey v Commissioner of State Revenue [1980] 23 SAR 398 Old Reynella Village Pty ltd v Commissioner of State Revenue (SA) (1989) 51 SASR 378 Chief Commissioner of State revenue v pacific General Securities and Finimore Holdings Pty ltd (No. 2)(RD) [2005] NSWADTAP 54 Brianco Nominees Pty ltd v CSR [2008] VCAT 999 Camp Seabee Properties Pty Ltd v Commissioner of State Revenue [2014] QCAT 258 |
APPEARANCES:
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
- [1]The applicants are beneficiaries of the Colin Rawlings Estate Trust, which is a testamentary discretionary trust. The Trustees of the trust are William John Rawlings, Richard Allen Rawlings and Andrew Bryan Rawlings. The trust’s assets included two residential properties one located at 92 Ocean Parade, Burleigh Heads valued at $650,000.00 and the other at 96 Ocean Parade, Burleigh Heads valued at $560,000.00. The Trustees resolved to make an in specie distribution of 92 Ocean Parade to Benjamin William Rawlings, Richard Colin Rawlings and James Andrew Rawlings and of 96 Ocean Parade to the applicants.
- [2]A trust agreement dated 3 June 2013 was entered by the trustees and the beneficiaries who were receiving the distribution of the two properties setting out the transactions and terms about the payment of costs adjustment of outgoings and indemnifying the trustees in respect of any liability.
- [3]A statutory declaration was made by Richard Rawlings and Andrew Rawlings on 7 June 2013 confirming that the transferees were beneficiaries of the trust. Transfers were also prepared in respect each property to the relevant transferees.
- [4]The duty in respect of the agreement to transfer[1] 96 Ocean Parade set out in the trust agreement was calculated on the basis that section 30 of the Duties Act 2001 applied to the two transactions. The effect of this was that duty was calculated on the total value of the two properties with a credit for the duty to be paid in respect of 92 Ocean Parade. Because the rate of duty increases with the dutiable value of a transaction[2] the amount of duty payable by the applicants was greater as a result of the application of s 30 than it would have been if duty was calculated on the basis of the dutiable value being $560,000.00. In fact, the duty assessed to the applicants was greater than that assessed in respect of 96 Ocean Parade even though the dutiable value of that transaction was greater at $650,000.00.
- [5]The applicants objected against the assessment of duty on several grounds including that s 30 should not have been applied. There was also an objection against an exemption under s 124 of the Duties Act claimed about transfers, which give effect to a distribution in the estate of a deceased person, which was not granted. The decision on the initial objection determined that an exemption under s 123 of the Duties Act, which had been granted on the initial assessment, should not have been granted. The application to the Tribunal to review the decision of the Commissioner states the decision is incorrect as it applied aggregation pursuant to s 30 of the Duties Act. The Tribunal will then only review that part of the decision relating to s 30 of the Duties Act.
- [6]When reviewing a decision of the Commissioner the Tribunal must hear and decide the review of the decision by way of a reconsideration of the evidence before the Commissioner when the decision was made, unless the Tribunal considers it necessary in the interests of justice to allow new evidence[3] and decide the decision in accordance with the same law that applied in the making of the original decision[4]. The grounds on which the application are made are limited to the grounds of the relevant objection[5]. The purpose of the review is to produce the correct and preferable decision[6]. The Tribunal then stands in the shoes of the Commissioner to make the decision afresh based on the evidence before the Commissioner and applying the law as it existed at the time of the original assessment.
- [7]The Tribunal notes that applicants have been allowed to file additional evidence in the form of a statement from Andrew Rawlings and the Commissioner has made submissions in response to the statement.
- [8]Section 30 of the Duties Act applies to dutiable transactions that together form, evidence, give effect to or arise from what is, substantially 1 arrangement. It requires that for assessing duty on each of the dutiable transactions, the transactions must be aggregated and treated as a single transaction[7]. Transfer duty must be assessed on the total of the dutiable values of the transactions when the liability for transfer duty each transaction arose and apportioned between the transactions as decided by the Commissioner[8]. All relevant circumstances relating to the transaction must be taken into account in deciding whether the section applies[9]. Relevant circumstances include those set out in ss 30 (4) which are discussed below.
- [9]The relevant circumstances set out in s. 30(4) of the Duties Act with consideration of how they apply here are as follows :-
- Whether the transactions were contained in one instrument;
The parties agree that the trust agreement of 3 June 2013 sets out the agreement between the trustees and the beneficiaries for the transfer of the land. The applicants say that this was a matter of convenience and cost saving.
- Whether any of the transactions are conditional on entry into, or completion of, any of the other transactions;
The Commissioner accepts that the trust agreement does not specifically provide that the transactions are conditional on entry into or completion of each other but the fact that there is a single agreement may indicate they are conditional.
The applicants submit that the agreement did not say that it was conditional upon both transactions proceeding and given that it is an entire agreement, it cannot be inferred.
Andrew Rawlings in his statement makes it clear that separate offers were made to each of the respective sets of transferee beneficiaries and it was only after that, that in the question of how the transfer should be documented was considered. It was then on advice that one agreement was entered.
The Tribunal is satisfied that the agreement sets out that the lots will be transferred in consideration of the beneficiaries giving an indemnity and at the cost of the beneficiaries without adjustment for outgoings. There is nothing further to be done apart from the trustees effecting the transfers. There is no term of the agreement, which shows that the beneficiaries in respect of each transfer have consented to the transfer of the lot to the other beneficiaries. As it is a discretionary trust, there is also no requirement for consent. Therefore, the transactions are not conditional on the entry into or completion of another transaction.
- Whether the parties to any of the transactions are the same;
The Commissioner notes that the transferors are the same on each transfer being the trustees and acknowledges that the transferees are different as between the transfers but they are all party to the agreement.
The applicants submit that the obligations of the trustees and the transferees are completely separate in that each relate to one parcel of land.
When the Duties Act talks about a transaction it is referring to a dutiable transaction[10], this includes a transfer of dutiable property and land in Queensland is dutiable property[11]. It is not the parties to the agreement who are being considered it is the parties to the dutiable transactions and in this case, while the transferors are the same the transferees are different.
- Whether any party to a transaction is a related person of another party to any of the other transactions.
The Duties Act defines related persons in s 61 for individual to be that they are members of the same family. On that basis while the transferors are the same, the transferees between the transactions are not related parties as they are only cousins. The Commissioner considers that this shows a familial relationship between all of the individuals and that this is a relevant circumstance in that the properties have been transferred to sets of siblings who are first cousins and that the purpose is to carry out the terms of the testamentary trust.
The applicants submit that the relationship of cousins is not one, which the Duties Act is concerned with and the reality is that two lots of people who happen to be cousins will own two separate parcels of land each with its own residence.
While not strictly related in accordance with the Duties Act the fact that the parties have some family relationship as cousins is a consideration.
- The time over which the transaction took place;
The Commissioner submits that the agreement to transfer the properties as constituted by the trust agreement was the subject of one document dated and apparently executed on 3 June 2013. The transferors signed both transfers on 3 June 2013 and the signatures were witnessed by the same person. A solicitor signed both transfers on 7 June 2013 on behalf of the transferees; the date of possession for both transfers is 30 June 2013. The transfers were both lodged by Walker Pender group.
The applicants submit in the same way it was convenient for the transactions to be included in one agreement it was convenient to deal with other aspects in the same way.
- Whether, before the transactions take place, the dutiable property the subject of the transactions was used together; or dependently with one another, by the transferor or transferors;
The Commissioner submits that the properties are contiguous lots on the same registered plan. They were used as residences prior to transfer. Prior to transfer they both comprised property in the same trust, with the same beneficiaries. Both transfers show that they were transferred pursuant to the terms of the will of Colin William Joffre Rawlings, dated 22 May 2002. The Commissioner notes that prior to settlement both properties were residential.
There is then no suggestion that the properties were used together or dependently simply that they were owned by the trustees and both had residences, which presumably were separately rented.
- Whether, after the transactions take place, the dutiable property the subject of the transactions will be used together or dependently with one another, by the transferee or transferees.
Both parties confirm that the land will continue to be used for residential purposes after the transfers.
- [10]It has been said that s 30 requires that “there must be a basis for concluding that the dutiable transactions are connected in some way such that they may properly be found to, form evidence, give effect to or arise for what is, substantially one arrangement”[12]. In that case there was a common purchaser and vendor who entered contracts for the purchase of 5 industrial lots, where the contracts were in substantially the same form and were entered and settled on the same day and the use to which the lots was to be put were for investment, development and leasing. Member Howard determined that the transactions should be aggregated.
- [11]It was also noted by Member Howard that aggregation could apply where the purchasers or transferees between the transactions were different. This has been accepted in other jurisdictions where similar legislation has been applied where a connection between transactions described as a unity of purpose could be shown[13]. Interestingly in considering legislation which also sought to join transactions in the United Kingdom the Court held that where there were the same parties but property was purchased at auction there would not be aggregation[14]. While in other cases where the same purchasers have purchased lots from different vendors with the purpose of amalgamating the lots for use in commercial development they have been amalgamated[15].
- [12]The common thread in all of these cases is that the Courts have analysed the transactions from the perspective of the purchaser or transferee to determine if there is a relationship between the transactions. The fact that the transferor or vendor is the same in respect of each transaction is not a deciding factor and the intention of the transferor or vendor is not relevant.
- [13]Therefore, if a developer sold lots in a subdivision to 10 different purchasers there would be no question of amalgamation. It is only where the sale is to the same purchaser or related purchasers or the purchasers intend to use the land for some common purpose that the question of amalgamation should be raised.
- [14]The Commissioner has issued Public Ruling DA030.1 in regard to s 30. It was not considered in the Camp Seabee decision because it had been issued after the assessment was issued but this assessment was made after the date of issue so it will be considered here. The Ruling states that the aggregation of dutiable transactions arising from one arrangement is a longstanding principle, which ensures that taxpayers in similar circumstances are treated consistently and equitably regardless of how transactions may be structured or documented or the number or type of properties involved.
- [15]The Ruling notes that court cases have identified that; dutiable transactions that arise from what is substantially one arrangement should show a unity of purpose in the business being transacted. This may become apparent from the association between the parties or the level of integration between the transactions. In addition, ‘arrangement’ has a very wide meaning and can include unilateral acts. Member Howard in Camp Seabee preferred not to narrow the scope of the section to a consideration of unity of purpose and instead spoke of the transactions showing a sufficient link or connection on the basis that the Queensland legislation was wider than that in other jurisdictions.
- [16]The Ruling aggregates transactions where the vendors are related parties in two transactions negotiated at the same time by the same purchaser. In addition, where adjoining properties are purchased from separate vendors by the same purchaser and conditional on the granting of an approval or where there is an intention to redevelop but the contracts are not conditional the transactions are aggregated. However, where a developer auctions lots in a development and one purchaser acquires 6 lots with separate transfers for each lot, the transactions are not aggregated as they do not share an integral relationship. Each transaction is said to be established at the drop of the auctioneers hammer and this is said to preclude the possibility of integration and unity of purpose. This is in accordance with the decision in Attorney-General v Cohen.
- [17]Another example where aggregation is said not to occur is where the same purchaser negotiates the purchase of two units in a block of units from the same vendor. The second contract is negotiated a week after the second the contracts are not conditional, were separately negotiated and the vendor provided no discount for the purchase. There was no arrangement to purchase the units for redevelopment or otherwise use the units together after the sale.
- [18]In the two examples where aggregation did not occur, it appears to be important that although there are many common factors, the actual entry into the transactions is not subject to commonality. In one case, a purchase of one lot at an auction cannot influence whether you purchase a second or subsequent lot or the price you pay. In the other, the purchase of two lots where there are many common features but they are negotiated at different times and without reference to each other and are not to be used for a common purpose.
- [19]Here there are superficially many common features. The vendors are the same and the transferees are related as cousins, all of the parties are connected to the trust as trustee or beneficiary, the transactions are set out in the one agreement and are on the same terms, the lots are contiguous and the transfers were executed on the same day and settled on the same day.
- [20]Against this, the transactions were separately negotiated between the respective parties. There was no requirement for the transferees to each consent to the others transfer and there is no evidence of any intention for the transferees to use the properties for any common purpose. There was also no negotiation between the parties in regard to price as this was a distribution. The dutiable value of the properties was set independently by valuation and this seems akin to the process where a price is struck at an auction.
- [21]In this case, there was one agreement, which, set out two separate arrangements between the trustees and each of the separate set of beneficiaries in regard to separate lots. The transactions were not conditional on each other and the properties were not to be used for any common purpose.
- [22]The order of the Tribunal is that the transaction the subject of this application should not be aggregated under s 30 of the Duties Act 2001 (Qld) with any other transaction and it should be assessed for duty accordingly.
Footnotes
[1] Duties Act 2001 (Qld) s 9(1)(b).
[2] Duties Act 2001 (Qld) Schedule 3.
[3] Taxation Administration Act 2001 (Qld) ss 71(3)(a).
[4] Ibid ss 71(3)(b).
[5] Ibid s 71(2).
[6] Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 20(2).
[7] Duties Act 2001 (Qld) ss 30(2).
[8] Ibid s 30(5).
[9] Ibid s 30(3).
[10] Ibid s 9.
[11] Ibid s 10.
[12] Camp Seabee Properties Pty Ltd v Commissioner of State Revenue [2014] QCAT 258.
[13] Jeffrey v Commissioner of Stamps (S.A.) 80 ATC 4125 and Brianco Nominees Pty Ltd & Ors v Commissioner of State Revenue (Taxation) VCAT 999.
[14] Attorney-General v Cohen (1937) 1K.B. 478.
[15] Chief Commissioner of State Revenue v Pacific General Securities Ltd and Finimore Holdings Pty ltd (No2) (RD) [2005] NSWADTAP 54 and Old Reynella Village Pty Ltd v Commissioner of Stamps (S.A.) ATC 4916.