The vast majority of the decisions we make each year are undisputed by our customers, but inevitably there are situations where litigation is required to resolve an issue. The following case summaries, by revenue line, illustrate some of the types of cases conducted in 2020–21.
Duties Act 2000 (Duties Act)
Gulliman Pty Ltd v Commissioner of State Revenue (Review & Regulation)  VCAT 804
In February 2014, the taxpayer purchased a property under contract of sale for $500,000. As part of that transfer, the taxpayer also agreed to discharge the vendor from an obligation to pay to it a sum of $605,000 secured under a mortgage. At settlement, the taxpayer only paid duty based on the stated consideration of $500,000.
Following an investigation, the Commissioner formed the view that the consideration for the transfer was in fact $1,105,000 and issued an assessment for penalty at 25% and market interest.
On 24 July 2020 the Tribunal delivered its decision in favour of the Commissioner, confirming the assessment, finding the extinguishment of the debt constituted consideration for the transfer. The Tribunal also held there was no basis to reduce penalty tax or interest as it was not satisfied that reasonable care had been taken.
Duties, loan advance interest, default interest and consideration
Commissioner of State Revenue v 1043 Melton Highway Pty Ltd  VSC 820
The taxpayer was nominated as the substitute purchaser of a property in Plumpton under a contract of sale of land (Original Contract), which was subsequently varied by two Deeds of Variation. In addition to the stated purchase price, the taxpayer was obliged to pay amounts of interest on moneys owing under the contract up to the date of settlement (referred to as Default Interest and Loan Advance Interest).
In September 2018, the Commissioner issued a reassessment of additional duty on the transfer of land on the basis of the stated consideration, the sum of the ‘loan advance interest’ and the ‘default interest’ payments deciding those payments formed part of the consideration for the transfer of the property and were therefore dutiable under s 20(1)(a) of the Duties Act 2000.
On 1 April 2020, the Tribunal decided in favour of the Commissioner as to the Loan Advance Interest, but not the Default Interest. The Commissioner appealed and the taxpayer cross appealed the decision to the Supreme Court of Victoria.
On 9 December 2020, Kennedy J decided in favour of the Commissioner on appeal from the Tribunal. The Court held the Tribunal had correctly concluded that the ‘loan advance interest’ payments formed part of the consideration which moved the transfer of the property because the vendors were not prepared to transfer the property in the absence of receipt of the loan advances before the settlement. The Court also held the Tribunal should have held that the ‘default interest’ payments also formed part of the consideration which moved the transfer of the property because in the absence of those payments the vendors would have terminated the contract.
Duties, unencumbered value greater than consideration
Seeby Pty Ltd v Commissioner of State Revenue (Review & Regulation)  VCAT 180
A former petrol station in Balaclava was developed into an apartment complex. The taxpayer stated that the consideration for the purchase was $850,000 and paid duty on that amount.
The property was purchased as part of an ‘asset swap’ in which the taxpayer sold to BP Refinery (Bulwer Island) Pty Ltd (BP) two petrol stations and BP sold to the taxpayer two petrol stations.
The key issue was the correct dutiable value of one of the petrol stations acquired.
In February 2018, following an investigation and obtaining a valuation of $5 million (plus GST) from the Valuer-General’s nominated value, the Commissioner determined that the dutiable value of that petrol station was $5 million (plus GST) and not the consideration of $850,000 on which the taxpayer paid duty. The Commissioner therefore issued a reassessment for the additional duty and imposed a 90% penalty for concealment, concluding that the taxpayer had taken deliberate steps to prevent the Commissioner from becoming aware of the nature and extent of the tax default. The taxpayer objected relying on a $2.1 million valuation by its valuer. The two valuers used different valuation methodology.
On 4 March 2021, the Tribunal delivered a decision substantially in favour of the Commissioner, accepting the methodology used by the Commissioner’s valuer and that the unencumbered value of the property was $5.5 million, inclusive of GST. As the taxpayer provided a valuation soon after the investigation started the Tribunal found there was no concealment and that the taxpayer neither hindered nor prevented the Commissioner from ascertaining the extent of the tax default. However, the Tribunal did conclude that there was an intentional disregard of a taxation law justifying the imposition of a 70% penalty.
Duties and First Home Owner Grant
Hijazi v Commissioner of State Revenue (Review & Regulation)  VCAT 1000
In September 2013, the applicant purchased a property for which he applied for and received a grant under the First Home Owner Grant Act 2000 and duties benefits under the Duties Act 2000.
In February 2018, after an investigation, the Commissioner determined the applicant had not occupied the property as his principal place of residence (PPR) during the relevant period and issued notices reversing his decision to pay the grant, requiring its repayment, and imposing a penalty of $700 (10% of the $7,000 grant). The Commissioner also determined that the applicant was not entitled to the duties PPR concession nor the first home buyer duty reduction and issued an assessment for additional duty and a penalty of 20% of the additional duty amount.
On 10 September 2020, the Tribunal decided in favour of the Commissioner, concluding that the applicant’s evidence should not be given much weight since, in many respects his evidence was not credible. The objective evidence strongly favoured a conclusion that the property was a tenanted investment property and that the applicant continued to live with or close to his now ex-wife and their children in another property. The Tribunal determined the applicant had not satisfied the residence requirement with respect to the property and therefore confirmed the duty assessment, the decision to reverse the grant and the penalty.
Land Tax Act 2005 (Land Tax Act)
Land tax, trust surcharge
Caveo Communications Pty Ltd as trustee for the Caveo Communications Hybrid Unit Trust v Commissioner of State Revenue (Review & Regulation)  VCAT 792
The Commissioner assessed the taxpayer for land tax at the surcharge rate on pre-2006 land held under a unit trust for the period 2011 to 2016. After an objection and disallowance, pursuant to the taxpayer’s request the matters were referred to the Tribunal. The proceedings for the 2011 to 2015 land tax years were struck out for non-payment of the filing fees with a right to reinstatement. On 11 February 2019, the Tribunal decided the land tax assessment for the 2016 tax year in favour of the Commissioner, upholding that assessment at the surcharge rate (Caveo Communications Pty Ltd atf Caveo Communications Hybrid Unit Trust v CSR  VCAT 202).
On 24 May 2019, after the Tribunal reinstated the proceeding for the 2011 land tax year upon payment of the filing fee by the taxpayer. In this proceeding, the taxpayer sought to call evidence to show that it was likely that the relevant nomination notice was sent to the Commissioner in 2006, such that the general land tax rate applied. The Commissioner submitted that the taxpayer had not identified any new evidence or legal argument to differentiate the 2011 tax year from the 2016 tax year that had previously been considered at a contested hearing. Therefore, the Commissioner brought an application for the taxpayer’s case to be dismissed pursuant to s 75(1)(b) of the Victorian Civil and Administrative Tribunal Act 1998 for abuse of process.
On 9 July 2020 the Tribunal decided in favour of the Commissioner by dismissing the proceeding. The Tribunal was satisfied that for the taxpayer to litigate the issue in the proceeding would be an abuse of process.
Land tax, caravan park exemption (moveable dwellings)
Lifestyle Investments 1 Pty Ltd & Others v Commissioner of State Revenue  VSCA 107
This matter considered whether lands at Wollert in Melbourne and Bell Park in Geelong should be wholly exempt under section 77 of the Land Tax Act as land used as a registered caravan park. The lands were registered as caravan parks by the respective local councils, despite parts of the lands being still under development. The Commissioner contended this did not meet the requirements of the word “use” in section 77 of the Land Tax Act and determined that only certain portions of the lands should be exempted, based on the level of completion/substantial completion.
On 20 June 2019, the Tribunal found in favour of the Commissioner and accepted the Commissioner’s submission that only 47% of the Bell Park land and 51% of the Wollert land were exempt under section 77(1) of the Land Tax Act as being ‘used as a registered caravan park.’ The taxpayers appealed the decision to the Supreme Court.
On 14 July 2020, Nichols J allowed the taxpayers’ appeal and remitted the matter to the Tribunal for a re-hearing to make additional findings of fact necessary to dispense of the matter. The taxpayers filed an application for leave to appeal to the Court of Appeal broadly contending that if the council registration covered 100% of the land, the land should be 100% exempt under 77(1) of the Land Tax Act. The Commissioner filed a cross-application, also seeking leave to appeal to the Court of Appeal.
On 30 April 2021, a majority of the Court of Appeal (Ferguson CJ and Tate JA) delivered judgment in favour of the Commissioner, concluding that the taxpayers had not discharged their onus of proof that the land was used in a manner that attracted a full exemption under section 77(1) of the Land Tax Act. The Court of Appeal dismissed the taxpayers’ appeal and allowed the Commissioner’s cross appeal.
The majority affirmed the Commissioner’s proportionate exemptions for the lands and held that the exemption does not apply where, as at 31 December, an area of land had not been cleared or otherwise prepared for movable dwellings by the completion of necessary civil works relative to the type of caravan park in issue.
Land tax, student accommodation by a charitable institution
The University of Melbourne v Commissioner of State Revenue  VSC 156
The subject land in this matter was leased by a university to a commercial enterprise, who constructed and operated a student accommodation on the land for the university. There was no dispute that the university was a charitable institution, that the commercial enterprise was not, and that the provision of student accommodation was a charitable purpose.
The issue was whether, for the 2019 land tax year, the land was exempt under s 74(1)(a) of the Land Tax Act 2005 on the basis that it was ‘used by a charitable institution exclusively for charitable purposes’. The Commissioner contended that the exemption could not apply because it required the charitable institution to be the exclusive user of the land, but the active physical user here was the commercial enterprise. The university submitted that the exemption was satisfied because it was using the land – by granting a lease of it to the commercial enterprise, and that use was exclusively for its charitable purposes.
On 1 April 2021, the Supreme Court delivered judgement in favour of the university. Osborne J concluded that the s 74(1)(a) applied to the land as the university was using the land and that use was exclusively referrable to its charitable purposes.
Land tax, trust surcharge
Skutari Group Pty Ltd as trustee for the G & F Wealth Strategies Trust v Commissioner of State Revenue (Review & Regulation)  VCAT 628
The taxpayer objected to 2013-2017 land tax assessments issued at the trust surcharge rates on the ground that it had lodged a principal place of residence beneficiary nomination (PPR Nomination) for a property.
On 11 June 2021 the Tribunal decided in favour of the Commissioner confirming the land tax assessments. The Tribunal held that as no PPR Nomination was lodged in relation to the property until July 2018, such nomination only took effect from 2018 (the land tax year that the nomination was lodged in due to section 46H(4)(a) of the Land Tax Act). The Tribunal also confirmed the Commissioner’s position that there is no discretion in the Land Tax Act or otherwise for the Commissioner (nor the Tribunal on review) to treat the PPR Nomination made in July 2018 as if it was made at some earlier date.
Land tax, Primary production land and land being prepared for primary production
Prestige Land Property Pty Ltd v Commissioner of State Revenue (Review & Regulation)  VCAT 515
The Commissioner assessed land owned by the taxpayer for the 2019 land tax year. The taxpayer had leased the land for two years to a share farmer at a rental of only $100 per year. The taxpayer objected to the assessment on the basis that it was used primarily for the purposes of primary production and therefore should be exempt under section 66 of the Land Tax Act or that it was being prepared for primary production and therefore should be exempt under section 68 of the Land Tax Act.
The taxpayer contended that the primary production on the land was cropping for barley or alternatively that weed spraying in September 2018 was preparing the land for primary production. It was a condition of the lease that the lessee conduct primary production on the land so that the taxpayer could obtain a land tax exemption.
On 24 May 2021, the Tribunal delivered its decision in favour of the Commissioner and confirmed the assessment, holding the land was not exempt under section 66 of the Land Tax Act because the weed spraying was not a primary production activity. It was not undertaken as part of any cultivation, or for the purposes of selling the produce of cultivation, but rather for the lessee to decide if the land was in a fit state for cropping. The weed spraying was undertaken prior to entering into the lease at which point the lessee was uncertain about the viability of sowing a crop and had not made any commitment to cultivating the land.
The land was also not held to be exempt under section 68 of the Land Tax Act because when the weed spraying occurred, there was no certainty cultivation would take place on the land as it depended on it succeeding in controlling the weeds. In addition, the Tribunal found the invoice rendered by the lessee for the weed spraying objectively pointed to some other purpose and it could not be satisfied that it was undertaken in preparing the land for use primarily for primary production by way of cultivation.
Payroll Tax Act 2007 (PTX Act)
Payroll tax grouping
Chief Investments Pty Ltd v Commissioner of State Revenue (Review & Regulation)  VCAT 541
These proceedings related to three payroll tax assessments issued to the taxpayer for the 2016 to 2018 financial years. The Commissioner had assessed the taxpayer as part of a group for this period with another company. Both companies operated hair dressing salons under the same name, albeit from different locations.
At all relevant times, one man was the sole director and shareholder of the taxpayer. He was also the second company’s:
- sole director from its incorporation until February 2017, and
- sole shareholder from its incorporation until June 2019.
Further, the taxpayer’s representative conceded in closing submissions that the entities were “family companies” run by the director of the taxpayer and his wife.
The taxpayer objected to the assessments on the grounds that the companies should not be grouped and, alternatively, that the Commissioner should exercise his discretion to de-group.
On 27 May 2021, the Tribunal delivered its decision in favour of the Commissioner, confirming the assessments on the basis that the two companies constituted a group under section 72 of the Payroll Tax Act. The Tribunal noted the lack of supporting evidence led by the taxpayer and accepted the accuracy of the information about the shareholders as recorded by ASIC.
The Tribunal also declined to exercise the discretion under section 79 to de-group the two companies. The Tribunal held that all the documentary evidence pointed to director of the taxpayer being in charge of both businesses, notwithstanding that they were owned by different companies. In those circumstances, Member Tang was not satisfied that the two businesses were carried on independently and were not connected.