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Sorensen v Commissioner of State Revenue[2020] QCAT 7

Sorensen v Commissioner of State Revenue[2020] QCAT 7

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

 

CITATION:

Sorensen & Ors v Commissioner of State Revenue [2020] QCAT 7

PARTIES:

brent sorensen

ante rados

cameron DAVID walsh

 

(applicants)

 

v

 

the Commissioner of State Revenue

 

(respondent)

APPLICATION NO/S:

GAR342-18; GAR343-28; GAR344-18

MATTER TYPE:

General administrative review matters

DELIVERED ON:

14 January 2020

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Member Kanowski

ORDER:

The decision of the Commissioner of State Revenue on objection on 2 August 2018 is confirmed.

CATCHWORDS:

TAXES AND DUTIES – STAMP DUTIES – EXEMPTIONS – CONVEYANCE OR TRANSFER ON SALE OF REAL PROPERTY – QUEENSLAND – where transfer from company to individual upon surrender of shares granting right of occupancy – whether community title schemes exemption applies

TAXES AND DUTIES – STAMP DUTIES – ASSESSMENT AND AMOUNT PAYABLE INCLUDING FINES – GENERALLY – QUEENSLAND – where five simultaneous transfers – where one transferor and three transferees – whether transactions to be aggregated

Duties Act 2001 (Qld), s 30, s 133

Radiology Partners Pty Ltd ACN 165 655 883 as Trustee for the Radiology Partners Unit Trust v Commissioner of State Revenue (Qld) [2019] QSC 192

Rawlings & Ors v Commissioner of State Revenue [2015] QCAT 10

Wakefield & Ors v Commissioner of State Revenue [2019] QSC 85

REPRESENTATION:

 

Applicant:

AG Edwards Solicitors

Respondent:

B Tyler-Whiteman

APPEARANCES:

This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’).

REASONS FOR DECISION

Introduction

  1. [1]
    This review concerns the amount of transfer duty, if any, payable on the transfer of the lots in a newly-built townhouse complex. There are five townhouses in the complex.
  2. [2]
    The townhouses are numbered 1 to 5. Pre-subdivision, they were generally referred to as units or specified lots. Post-subdivision, they are generally referred to as lots.
  3. [3]
    The transfers were dated 19 July 2016, and were registered in the titles registry on 1 September 2016. The transferor in each instance was the company which built the complex: 97 Holberton Street Pty Ltd (‘the company’). Lots 1 and 2 were transferred to Mr Sorensen; lot 3 to Mr Walsh; and lots 4 and 5 to Mr Rados.
  4. [4]
    It is not necessary to set out the history of the assessments and reassessments of transfer duty. Suffice it to say that in an objection decision dated 2 August 2018, the review officer for the Commissioner of State Revenue (‘Commissioner’) confirmed the Commissioner’s decisions that:
    1. (a)
      the transfers were not eligible for the ‘community title schemes exemption’ in section 133 of the Duties Act 2001 (Qld) (‘Duties Act’); and
    2. (b)
      the five transactions must be aggregated under section 30 of the Duties Act in order to calculate the amount of duty for each transfer.
  5. [5]
    The applicants applied to the Tribunal for a review on 2 October 2018, contending firstly that the community title schemes exemption applies, such that no duty is payable. Secondly, if duty is payable, then the transactions should not be aggregated.
  6. [6]
    The matter has been decided on the papers, with written submissions having been filed by the applicants on 30 January 2019 and 26 June 2019, and by the Commissioner on 15 January 2019 and 22 July 2019. The Commissioner has provided a bundle of documents (page-numbered 1 to 967), and there is an affidavit of Mr Sorensen dated 11 March 2019 which has been allowed as new evidence under section 71(3) of the Taxation Administration Act 2001 (Qld) (‘Taxation Administration Act’).
  7. [7]
    The Tribunal’s role in a review is to reach the correct and preferable decision, after conducting a fresh hearing on the merits.[1] The applicants bear the onus of proving their cases.[2]

Background

  1. [8]
    The following matters are not in dispute.
  2. [9]
    The company was incorporated in July 2013 to carry out a townhouse development. According to the parties’ submissions, the shareholders were the three applicants. (I note, though, that a version of the shareholders agreement shows Wilma Pritchard, rather than Mr Walsh, as a shareholder. It seems, however, that Mr Walsh was substituted at an early stage.) In September 2013, the company purchased the land. Development approval was obtained in April 2014. It appears that ‘practical completion’ of the construction was reached sometime between April and June 2016.
  3. [10]
    On 13 July 2016 the land was subdivided into the five lots and common property, as a community titles scheme.
  4. [11]
    On 19 July 2016 five contracts of sale were signed for the transfer of the lots from the company to the individuals: lots 1 and 2 to Mr Sorensen, lot 3 to Mr Walsh, and lots 4 and 5 to Mr Rados. In each instance, the consideration given by the individual was the surrender by the individual of the redeemable preference shares, relating to the particular lot, that he held in the company.
  5. [12]
    On the same date, the five transfers were executed. The transfers were registered on 1 September 2016, such that Mr Sorensen became the registered proprietor of lots 1 and 2, and so on.
  6. [13]
    Each of the lots were then rented out to tenants, with the leases starting on various dates between 26 September 2016 and 1 December 2016.

Occupation before the leases

  1. [14]
    There is no suggestion that anyone slept in the lots or otherwise used them as people ordinarily use an occupied home at any time before the leases took effect. The applicants have not provided detailed evidence of how the lots were used in the period between completion of construction and leasing out. In their objections, each applicant spoke merely of having ‘personally’ used his lot or lots ‘for the purpose of quiet enjoyment and for the undertaking of household duties such as cleaning and tidying, regular inspection and maintenance’. Mr Sorensen says in his affidavit that, in effect, each property was used for residential purposes ‘at all times’: prior to completion of the properties the applicants prepared them for rent to third parties; they maintained the properties; and they attended the properties for the purposes of ensuring they were rented to third parties.[3]
  2. [15]
    Mr Sorensen has produced copies of emails showing that the applicants communicated with each other and real estate agencies at various times from June 2015 to July 2016 about their intention to promptly rent out the properties. These included enquiries with agencies about likely rental returns and management fees. There were discussions amongst the applicants about the amount of rent they intended to seek. An email in July 2016 discussed the advantages of having professional photographs taken of the lots, for marketing purposes, while the lots were new and before tenants moved in.
  3. [16]
    That evidence serves to confirm, and I accept, that it was always the intention of the applicants to use the lots as rental properties.
  4. [17]
    None of this suggests actual occupation of the lots for living purposes before the tenants moved in. Further, there is evidence of very low levels of electricity consumption in the period before the leases: levels not consistent with ordinary household use.
  5. [18]
    While I have no reason to doubt that the applicants visited their lots at times, I find that nobody occupied any of the lots as their home earlier than when the leases to tenants took effect, on various dates from 26 September 2016.

The community title schemes exemption: section 133

  1. [19]
    Section 133 of the Duties Act says:

133 Exemption—community titles schemes

(1) Subject to subsection (2), transfer duty is not imposed on a transfer, or agreement for the transfer, of a lot that, under the Body Corporate and Community Management Act 1997, is a lot included in a community titles scheme if—

(a) the transferor is a corporation (the transferor corporation); and

(b) under that Act, the transferor corporation is the original owner for the scheme; and

(c) the transferee held shares in the transferor corporation that were surrendered to obtain the transfer of the lot from the transferor corporation; and

(d) the separate area that the lot comprises corresponds with the separate area the transferee had a right to occupy immediately before surrendering the transferee’s shares; and

(e) the separate area that the lot comprises has been used for residential purposes immediately before the transferee surrendered the transferee’s shares and will, after registration of the plan and the transfer of the lot to the transferee, be used for residential purposes.

(2) Subsection (1) applies to the transfer or agreement for the transfer of a lot by a transferor corporation on or after the commencement day only if—

(a) before the commencement day—

(i) shares were issued by the transferor corporation; and

(ii) the corporation’s constitution provided, and on and from the commencement day continues to provide, that a person who holds the shares has the right to occupy the separate area mentioned in subsection (1)(d); or

(b) before the commencement day, the transferee entered into an agreement with the transferor corporation under which—

(i) the transferee is entitled to purchase the shares mentioned in subsection (1)(c) from the transferor corporation; and

(ii) because of the purchase of the shares, the transferee has the right to occupy the separate area mentioned in subsection (1)(d).

(3) In this section—

commencement day means the day this section commences.

  1. [20]
    The commencement day was 12 June 2014.

Does the exemption apply?

  1. [21]
    While there is controversy over whether section 133(1)(e) is satisfied, there is no dispute that paragraphs (a) to (d) in section 133(1) are satisfied.
  2. [22]
    In particular, each lot is included in a community titles scheme. The transferor is a corporation: the company. The company was the original owner of the scheme. In respect of each lot, an applicant held shares in the company that he surrendered to obtain the transfer of the lot from the company. The separate area that each lot comprises corresponds with the separate area that the relevant applicant had a right to occupy immediately before surrendering the shares.
  3. [23]
    The right to occupy arose under the company’s constitution, which incorporated the shareholders agreement. The constitution provided for classes of redeemable preference shares, with each class relating to a particular lot. The shareholders agreement was between the shareholders, the project manager (who was Mr Sorensen) and the company. The agreement set out the arrangement under which the company would build the complex, subdivide, and then transfer each lot to the holder of the relevant class of redeemable preference shares. In these documents, ‘designated lot’ was defined (in summary) as a lot in the proposed strata plan which the relevant shareholder is entitled to occupy for residential purposes following practical completion. A recital in the shareholders agreement said that the land must be used for residential purposes only. Further, the body of the agreement said that a shareholder’s redeemable preference shares ‘shall allow a Shareholder, following Practical Completion, the right to occupy as a residence their Designated Lot …’.[4] Another clause required each shareholder to execute and return within five business days a contract for the purchase of the relevant designated lot in the form provided by the company.
  4. [24]
    Further, there is no dispute that section 133(2)(a) of the Duties Act is satisfied: before and after 12 June 2014, the company’s constitution has provided that the holding of particular shares gives the shareholder the right to occupy a ‘separate area’ corresponding to one of the eventual lots.
  5. [25]
    The dispute is about whether section 133(1)(e) is satisfied. The applicants argue that it is. The Commissioner argues that it is not, on the basis that the separate area that each lot comprises was not used for residential purposes immediately before the surrender of the relevant shares: the redeemable preference shares.
  6. [26]
    Exactly when those shares were surrendered is not known. It must have been after the contracts were signed on 19 July 2016. The Commissioner contends that in the absence of specific evidence, the date of surrender should be assumed to be the date of settlement of the contracts: 19 August 2016. This is appropriate, in my view. The applicants have not suggested any alternative approach. Accordingly, I find that the shares were surrendered on 19 August 2016.
  7. [27]
    The applicants argue that the separate area that each lot comprises was used for residential purposes immediately prior to the surrender.
  8. [28]
    The applicants point to their right as shareholders to occupy a lot (or lots) for residential purposes following practical completion, which was before the surrender of shares. Further, they note that on 21 June 2016 they each entered into a residential licence agreement (or agreements) with the company: each licence being for a unit corresponding to the lot that would result from subdivision. Each agreement was stated to give the relevant applicant a licence to occupy the unit for ‘personal accommodation’ until the unit was acquired by the licensee or, if there was no transfer, during two periods up to 16 October 2017.
  9. [29]
    The applicants also point to the fact that electricity was connected separately to each unit from 9 or 10 June 2019. Each connection was in the name of the relevant applicant. They were billed as residential consumers.
  10. [30]
    The applicants also point to some matters which, in my view, are less compelling.
  11. [31]
    First, they note that CBRE valuation reports of 28 June 2016 list the current use of each unit as ‘residential’. However, as the Commissioner notes, attached photographs show the units as unoccupied. Whether the valuer in using the term ‘residential’ was referring to current or intended use, or merely to the type of building, is not known.
  12. [32]
    Second, the applicants submit that the certificate of classification by a building certifier dated 21 June 2016 ‘verifies that the individual properties were handed over to the Applicants for residential occupation as Townhouses’.[5] This seems to me to perhaps overstate the position. The certificate was issued to the company as owner of the land. It classifies the building as ‘Townhouses’, but it does not address the question of how the applicants were to use the townhouses.
  13. [33]
    Third, the applicants point to the parallels between section 133 of the Duties Act and 258B of the Corporations Act 2001 (Cth). Section 258B permits a company to transfer an interest in land to a shareholder in exchange for a right to occupy that the shareholder had held under the company’s constitution. Section 140 of the same Act provides that each member of a company and the company itself are contractually bound to each other to observe and perform the constitution. The applicants submit that the constitution of the company is of the type catered for in section 258B. The applicants argue, in effect, that therefore as shareholders they were locked into the arrangement prior to 21 June 2014 (the commencement date for section 133 of the Duties Act) and so they deserve the protection intended by section 133(2)(b) of the Duties Act. However, in my view it is clear that section 133(2) operates as a limiting provision to the exemption afforded by section 133(1). While it is appropriate to read section 133 as a whole, section 133(2)(b) does not in my view shed any particular light on the meaning of section 133(1)(e).
  14. [34]
    Nonetheless, the applicants have pointed to various factors, as discussed above, which support their position that the units were being used for residential purposes immediately before the share surrender on 19 August 2016.
  15. [35]
    The applicants do not contend that they, or any other persons, occupied any of the lots as a residence prior to the leases. However, they argue that a lot can be used for residential purposes without being physically occupied. If occupation was essential, they submit, Parliament could have instead used the term ‘occupied’ just as the Commonwealth Parliament has done in defining ‘residential premises’ in the goods and services tax legislation.[6]
  16. [36]
    Further, the applicants submit that ‘used’ and ‘residential purposes’ should not be narrowly interpreted. Dictionary definitions show the potential breadth of these terms. ‘Use’ is broader than ‘occupy’. ‘Residential purposes’ connotes that the purpose of a lot is residential rather than, for example, commercial or industrial.
  17. [37]
    The Commissioner, however, submits that actual use or physical occupation of a lot is required to satisfy the term ‘has been used’ in section 133(1)(e). The Commissioner notes that while section 133(1)(d) refers to the ‘right to occupy’, section 133(1)(e) imposes an additional requirement that the lot has been used for residential purposes. Section 133(1)(e), the Commissioner, contends, is directed to continuity of residential use.
  18. [38]
    The Commissioner says that no Public Ruling has been issued on section 133, but points to a land tax ruling as instructive: LTA000.1.2 – The Land Tax Exemption for a Home. That Ruling comments on section 36 of the Land Tax Act 2010 (Qld) which says that ‘land is used as the home, of a person … if … that land, and no other land, has been continuously used by the person for residential purposes’ for a particular period. The Ruling says:[7]

The term ‘used’ in this context refers to actual use and not simply an intention to use. For land to be used it must be actually used, not contemplated or intended to be used or be merely suitable for use. …

  1. [39]
    In my view, a place might properly be described, in some circumstances, as being used for residential purposes even if unoccupied. For example, an apartment that has been rented out might fairly be described as still being used for residential purposes after the tenant vacates and while the owner is searching for a new tenant, particularly if the interval between tenancies is not unusually long. There is an expectation of ongoing residential use, as distinct from, say, industrial use. The residential purpose has not been abandoned. Similarly, a person who builds an apartment with the intention of renting it out might fairly be described as using the apartment for residential purposes even before a tenant moves in, while the owner is searching for a tenant or, for example, while the owner is furnishing the apartment to attract potential tenants.
  2. [40]
    The position with the applicants, however, is somewhat different.
  3. [41]
    The emphasis in the constitution of the company and in the licence agreements to residential use even prior to subdivision and transfer must be viewed somewhat sceptically. This is because it is quite apparent that the chosen legal framework was designed to take advantage of the community title schemes exemption. If there was any lingering doubt about this from a reading of the constitutional and licence documents, it would be dispelled by the special conditions in the contracts of sale that the ‘Settlement date shall be 3 days from the date that the ruling from the Office of State Revenue for the Application for assessment of nil duty is received’.[8]
  4. [42]
    The connection of electricity in the applicants’ names prior to the transfer is consistent with preparation for renting-out, for example by enabling good photographs to be taken for use in rental marketing. It might also assist with any modifications that might seem desirable or repairs that were needed, and so on. It is equally consistent, however, with an effort to add to the impression of residential use by the applicants. In my view, both motivations could well have been involved. In all of the circumstances, I consider that the latter motivation is likely to have been the predominant one.
  5. [43]
    Further, while it is apparent from the email exchanges during the construction period that the applicants were keen to have the townhouses rented out promptly, it is noteworthy that none were rented out until after the transfers to individual ownership. Renting them out earlier would have added complexities to both the leasing arrangements and the income tax arrangements. The company’s constitutional documents vested discretion in the company about whether and when to proceed with subdivision and transfer, but it is apparent from the Recitals in the shareholders agreement that the mutual understanding and intention was that these steps would promptly follow the completion of construction. The final recital in the shareholders agreement indicated that after the transfers, the company would be wound up.
  6. [44]
    In my view, an inescapable inference from the circumstances as a whole is that none of the applicants ever intended to rent out, or personally occupy as a home, their townhouse/s before the transfer from company to individual ownership. I find accordingly. It follows that prior to the surrender of the shares, which occurred at the time of the transfer, the applicants did not use the townhouses for residential purposes. The use would more accurately be described as being for holding purposes.
  7. [45]
    Accordingly, section 133(1)(e) is not satisfied. The exemption does not apply.

The aggregation provision: section 30

  1. [46]
    Section 30 says:

30 Aggregation of dutiable transactions

  1. (1)
    This section applies to dutiable transactions that together form, evidence, give effect to or arise from what is, substantially 1 arrangement.
  1. (2)
    For assessing transfer duty on each of the dutiable transactions, the transactions must be aggregated and treated as a single dutiable transaction.

Example for subsection (2)—

A conducts a business of manufacturing bullbars. A agrees to sell the business to B as a going concern for $50,000,000. The property included in the agreement comprises land, plant and equipment, goodwill and the business name.

The land is dutiable property being land in Queensland and each of the other assets are dutiable property being Queensland business assets.

The agreement, so far as it relates to the sale of the land, is a dutiable transaction being an agreement to transfer land in Queensland and, so far as it relates to the agreement to sell each of the business assets, is a dutiable transaction being an agreement to transfer dutiable property that is a Queensland business asset. Accordingly, there are 4 dutiable transactions under the agreement.

Because the dutiable transactions together form 1 arrangement, they must be aggregated under this section for imposing transfer duty.

  1. (3)
    For subsection (1), all relevant circumstances relating to the dutiable transactions must be taken into account in deciding whether they together form, evidence, give effect to or arise from what is, substantially 1 arrangement.
  1. (4)
    For subsection (3), relevant circumstances include the following—
  1. (a)
    whether the transactions are contained in 1 instrument;
  1. (b)
    whether any of the transactions are conditional on entry into, or completion of, any of the other transactions;
  1. (c)
    whether the parties to any of the transactions are the same;
  1. (d)
    whether any party to a transaction is a related person of another party to any of the other transactions;
  1. (e)
    the time over which the transactions take place;
  1. (f)
    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;
  1. (g)
    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.
  1. (5)
    Transfer duty imposed on the dutiable transaction aggregated under this section must—
  1. (a)
    be assessed on the total of the dutiable values of the transactions when the liability for transfer duty for each of the transactions arose; and
  1. (b)
    be apportioned between the transactions as decided by the commissioner.

Example for subsection (5)—

Under 4 agreements between a builder and a developer, the builder agrees to purchase 4 lots of land from the developer for $100,000 each. The lots are dutiable property being land in Queensland and each of the agreements is a dutiable transaction being an agreement to transfer land in Queensland.

Even though the sale of the 4 lots was negotiated at the same time, the agreements were signed on different dates over a 10 month period, had different settlement dates and were not conditional on each other.

Under section 24 (Rates of transfer duty) and schedule 3 (Rates of duty on dutiable transactions and relevant acquisitions for landholder and corporate trustee duty), the agreements for lots 1 to 3 have been separately stamped for $2,350 transfer duty. When the agreement for lot 4 is lodged for stamping, the commissioner decides this section applies because the transactions together formed 1 arrangement.

Accordingly, the transactions must be aggregated under this section for imposing transfer duty and the duty apportioned between them.

Under subsection (5)(a), the total of the dutiable values of the dutiable transactions on which transfer duty is imposed is $400,000, being the value of each of the lots when the liability for transfer duty arose for each of the transactions, regardless of a variation in the values since the liability arose.

Under section 24 and schedule 3, transfer duty imposed on the aggregated transaction is $12,475.

If the commissioner decides to apportion the transfer duty equally between the dutiable transactions, the amount of transfer duty payable is $3,118.75 for each transaction.

Under the Administration Act, part 3, the commissioner will make a reassessment for the transactions for lots 1 to 3. The assessment notice must state the matters mentioned in section 26(2) of that Act.

  1. [47]
    In Public Ruling DA030.1.2 Transfer Duty – Aggregation of Dutiable Transactions, the Commissioner expressed the opinion that transactions arising from what is substantially one arrangement should show a unity of purpose in the business being transacted. Such unity may, it was said, become apparent from an association between the parties or from the level of integration between the transactions.[9] 

Does aggregation apply?

  1. [48]
    The Commissioner notes that before the property was subdivided, the whole of the property including the units that became the lots had been used for the common purpose of property development. The contracts were executed as required by the company’s constitution. The seller in each instance was the company. There were three distinct transferees. The five contracts were all executed on the same date. The same solicitor was used by the seller and the purchasers. The contracts contained similar conditions. Settlement dates were identical. The transfer documents were all executed on the same date. In the Commissioner’s view, these factors tend toward a conclusion that the five transfers must be aggregated.
  2. [49]
    On the other hand, the Commissioner acknowledges that some factors tend against aggregation: the transactions were in separate instruments; were not dependent on each other; and the properties were to be used separately after the transfers. Further, the three applicants are not ‘related persons’ as defined in section 61 of the Duties Act.
  3. [50]
    On balance, however, the Commissioner submits that aggregation is appropriate as it reflects a unity of purpose in the transactions.
  4. [51]
    The applicants submit that aggregation is not appropriate. They rely on the factors mentioned above tending against aggregation. Further, they contend that the lots were not used together before the transfers: they were each subject to separate agreements signed on 21 June 2016 affording occupancy rights to the individual shareholders.
  5. [52]
    The parties have referred to a number of cases where aggregation provisions have been considered. Many of these were helpfully synthesised by the Supreme Court of Queensland in Wakefield & Ors v Commissioner of State Revenue[10] (‘Wakefield’). The analysis in Wakefield was endorsed in an even more recent case decided in the Supreme Court of Queensland: Radiology Partners Pty Ltd ACN 165 655 883 as Trustee for the Radiology Partners Unit Trust v Commissioner of State Revenue (Qld)[11] (‘Radiology Partners’).
  6. [53]
    In Wakefield, the Court observed that the purpose of section 30 is:[12]

… to ensure 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.

  1. [54]
    Further, there must be some unifying factor to bring the transactions within the section.[13] The unifying factor may be the objective of one or both parties, or ‘some other relationship, connection or interdependence between the transactions’.[14] ‘Arrangement’ connotes a plan, ‘with a purpose or objective of some kind’.[15]
  2. [55]
    Wakefield had some factual similarity to the present case. It involved simultaneous transfers to several persons of parcels of land that had recently been subdivided from one farm. There were five transfers executed on the one day: four of them to each of the transferor’s four children and one to a grandchild. There were factors tending toward aggregation (such as the simultaneous timing and the use of the same solicitor for all parties) and some factors tending against (such as the fact that there was no intention that the transferred properties would be used together). The Court also noted, as one of the factors indicating a lack of unity of purpose, that ‘there is no evidence of any agreement involving the transferees’.[16]
  3. [56]
    The Court observed that if the transfers had instead been made to five strangers on the same day, there would be no question of section 30 applying: in the absence of any ‘unifying factor’ there would be no basis for aggregation.[17] The Court considered there was no rationale for treating the transferee family members differently, and so held that the transactions were not to be aggregated.
  4. [57]
    A similar result had been reached in another case with broadly similar facts: Rawlings & Ors v Commissioner of State Revenue.[18]
  5. [58]
    A different result was reached in Radiology Partners. That case involving a number of simultaneous transactions concerning units in a unit trust. There were factors pointing for and against aggregation, but the Court regarded the transactions as giving effect to an overall mutual plan to expand and reconfigure the trust. The Court considered that aggregation was appropriate. The Court commented about the arrangement (footnotes omitted):[19]

These matters go beyond casual coincidence. On the present state of the evidence there is an “integral and not merely fortuitous” relationship between the redemptions and acquisitions ….

  1. [59]
    A similar observation could be made about the transfers from the company to the applicants in the present case. The transfers to the applicants was one of the final steps in a carefully-documented plan – agreed to by the company and the applicants in the shareholders agreement – to build the complex, subdivide it, transfer the lots to the applicants, and then wind up the company.
  2. [60]
    There are factors that tend against aggregation: most notably the fact that each lot was to be used separately after the transfer. There are also some that point, though not conclusively, the other way, such as the transfers occurring simultaneously. However, when it is appreciated that the transfers occurred as a step in the overall plan set out in the shareholders agreement, it is apparent that the transfers arose from and gave effect to what is substantially one arrangement. At that phase, the arrangement was to transfer the lots to the applicants so that they could rent them out and the final stage of the development project, which was the wind-up of the company, could occur.
  3. [61]
    Accordingly, aggregation is appropriate.

Conclusion

  1. [62]
    As the Tribunal has reached the same conclusions on how sections 30 and 133 apply, the appropriate outcome is to confirm the decision of the Commissioner on objection.

Footnotes

[1]QCAT Act, s 20.

[2]Taxation Administration Act, s 73.

[3]Mr Sorensen’s affidavit, [16].

[4]Bundle of documents, [273].

[5]Applicants’ submissions filed 26 June 2019, [32].

[6]A New Tax System (Goods and Services Tax) Act 1999 (Cth), s 195-1.

[7]Paragraph 27.

[8]For example at bundle of documents, 390.

[9]Paragraph 6.

[10][2019] QSC 85.

[11]  [2019] QSC 192.

[12]  [2019] QSC 85, [48].

[13]  Ibid [53].

[14]  Ibid.

[15]  Ibid.

[16]  Ibid [61].

[17]  Ibid [67].

[18]  [2015] QCAT 10.

[19]  Radiology Partners, [114].

Close

Editorial Notes

  • Published Case Name:

    Sorensen & Ors v Commissioner of State Revenue

  • Shortened Case Name:

    Sorensen v Commissioner of State Revenue

  • MNC:

    [2020] QCAT 7

  • Court:

    QCAT

  • Judge(s):

    Member Kanowski

  • Date:

    14 Jan 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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