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 illustrate some of the types of cases conducted in 2022–23.
Taxation Administration Act 1997 (TAA)
Right of review of appeal
Vicinity Funds v Commissioner of State Revenue [2022] HCASL 220
Background
The taxpayers had objected to assessments to duty issued by the Commissioner. Before their determination, the taxpayers requested the Commissioner treat them as appeals to be set down for hearing in the Supreme Court pursuant to s106(1)(b) of the TAA. The Commissioner complied with this request.
Once the notices of determinations were finalised, and after the matters had already been set down, the taxpayers requested that the matters be referred to the Victorian and Civil Administrative Tribunal (the Tribunal) for review under s106(1)(a) of the TAA. The Commissioner declined to do so on the basis that the election under s106 can only be exercised once.
The taxpayers applied to the Supreme Court for a direction that the Commissioner make the referral to the Tribunal.
On 22 October 2021, the Supreme Court handed down judgment in favour of the Commissioner.
The taxpayers filed an application for leave to appeal the decision to the Court of Appeal.
On 24 August 2022, the Court of Appeal granted the taxpayers’ application for leave to appeal, but then dismissed the appeal, holding that s106(1) of the TAA does not confer upon a taxpayer 2 distinct entitlements to pursue an appeal to the Supreme Court and a review in the Tribunal in relation to an objection. Rather, once a taxpayer has elected a forum in which to pursue an appeal or review, s106(1) of the TAA, construed by reference to its text, context and purpose, is spent and s106(3) of the TAA does not permit or require the Commissioner to refer a matter concerning the same objection to a second forum.
The taxpayer applied for special leave to appeal the Court of Appeal’s decision to the High Court.
Decision
On 15 December 2022, the High Court dismissed the taxpayers’ application for special leave with costs awarded to the Commissioner, holding that the taxpayers’ application concerned the interpretation of a procedural provision in a Victorian taxing statute and raised no question of interpretive principle. Further, the Court of Appeal’s decision was not attended by doubt.
Duties Act 2000 (Duties Act)
Foreign purchaser additional duty
Nguyen v Commissioner of State Revenue (Review and Regulation) [2023] VCAT 694
Background
In 2017 and 2018, the taxpayer, Mr Nguyen, and his then business partner, Mr Dinh, acquired 3 lands. Following an investigation, the transfers were assessed to foreign purchaser additional duty (FPAD) under s28A(2) of the Duties Act. Under s28A, FPAD applies to the transfer of properties to foreign purchasers, even when they are transferred to 2 people jointly and one of those is an Australian citizen or permanent resident.
Issue
The case turned on whether Mr Dinh was a ‘foreign purchaser’ within the meaning of s3(1) of the Duties Act at the time of the transfers. That is, whether he was the holder of a permanent visa within the meaning of s30(1) of the Migration Act 1958 (Cth) (Migration Act) at the time of the transfers.
The Commissioner submitted that, at the time of the transfers, Mr Dinh held a Bridging Visa A (subclass 010) and later a Bridging Visa B (subclass 020) at the relevant times which were not permanent visas within the meaning of section 30(1) of the Migration Act.
Decision
On 30 May 2023, the Tribunal dismissed the taxpayer’s application (save for the variation of the reassessments to reflect the Commissioner’s proposal to not claim penalty tax and interest).
In written reasons dated 21 June 2023, the Tribunal confirmed that Mr Dinh’s visa status at the relevant times meant that he was a ‘foreign purchaser’ within the meaning of the Duties Act and FPAD was payable by the taxpayer and Mr Dinh on Mr Dinh’s 50% share of the 3 properties they owned jointly. The taxpayer was jointly and severally liable for the whole amount of reassessed FPAD.
Land Tax Act 2005 (LTA)
Primary place of residence
Petroulis v Commissioner of State Revenue (Review and Regulation) [2022] VCAT 1054
Background
In March 2020, the taxpayers let a property in Bentleigh East for a 12-month period and rented another property within a particular school zone in order to enrol their daughter in their preferred secondary school.
Issue
Whether the taxpayers’ absence from the Bentleigh East property between March 2020 and March 2021 was temporary within the meaning of s56 of the LTA and, whether they satisfied the condition in s56(5) of the LTA that a person has not let the subject property for 6 months or more in the preceding calendar year.
The taxpayers did not dispute that the Bentleigh East property was let for approximately 9 months during the 2020 calendar year. However, they contended that there should be a discretion to apply the exemption on the basis that they wished to return to the Bentleigh East property within the 6-month period and would have done so if not for COVID-19 related restrictions imposed on them as landlords under the Residential Tenancies Act 1997 (RTA).
The Commissioner submitted, among other things, that there is no discretion to vary the operation of s56(5) of the LTA.
Decision
By written reasons dated 9 September 2022, the Tribunal confirmed the Commissioner’s assessment of land tax for the 2021 land tax year and agreed that there is no discretion to vary the operation of s56(5) of the LTA.
The Tribunal also referred to its decision in Pitard and Others v Commissioner of State Revenue [2019] VCAT 1074 to confirm that the Tribunal cannot exercise any discretion on review about whether to assess a person to tax under the Taxation Administration Act 1997.
Primary production land
Lavender Rain Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2022] VCAT 1264
Background
The taxpayer owned land in Donnybrook (the Land) from 1991, on which a family home was built and cattle were bred.
In 2014, the taxpayer and the owners of the neighbouring lands entered into a Development Agreement (DA) with a developer to develop their collective properties pursuant to a Precinct Structure Plan (PSP). The PSP was approved in February 2016 and the DA became unconditional on or around November 2017. The Land, as a result, fell within an urban zone for land tax purposes from the 2017 land tax year onwards.
The Land was assessed for land tax for the 2017–2019 land tax years.
The taxpayer objected to the assessments on the basis that the Land should be exempt from land tax under s67 of the Land Tax Act 2005 (LTA2005), the exemption for land in an urban zone used solely or primarily for the business of primary production.
The Commissioner subsequently accepted that for the 2017–2019 land tax years, the Land was used solely or primarily for a business of primary production and Mr Worn Senior and Mrs Worn (who owned more than 60% of the shares in the company during that time) were normally engaged in a substantially full-time capacity in that business.
The Commissioner contended, however, that the exemption did not apply because the principal business and main undertaking of the taxpayer was not the business of primary production. This is due to the company also receiving income relating to consultancy services and the operation of a ski competition, as well as the entry by the taxpayer (and the owners of neighbouring properties) into a development agreement with a developer for the development of the property and surrounding properties.
Decision
The Tribunal found for the Commissioner, confirming the assessments and broadly finding that the taxpayer was carrying on a:
- business of primary production during the relevant land tax years
- business of providing consulting services for the 2017 and 2018 land tax years
- ski competition business for the 2017 and 2018 land tax years
- land development business during each of the relevant land tax years.
The Tribunal found that based on gross income, the most significant business was the consulting services business for the 2017 and 2018 land tax years, and the land development business for the 2019 land tax year. For the 2017–2019 land tax years, based on labour employed, the most significant business was the primary production business, and based on capital employed, the most significant business was the property development business. As the taxpayer’s most significant business varied depending on the basis on which these businesses were examined, it could not be said that the primary production business was the taxpayer’s principal business for any of the relevant land tax years.
Mintfield v Commissioner of State Revenue VSC 317
Background
The taxpayer was the owner of land in Armstrong Creek, acquired in September 2015.
The Commissioner issued land tax assessments to the taxpayer for the 2016 and 2017 land tax years.
On 16 June 2022, the Tribunal (see decision in Mintfield Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2022] VCAT 671) found the land was entitled to the exemption under s68 of the LTA in respect of the 2016 land tax year, but not the 2017 land tax year. The taxpayer was dissatisfied with this outcome and sought leave to appeal the Tribunal decision to the Supreme Court.
Supreme Court decision
On 9 July 2023, Justice Croft refused the taxpayer leave to appeal the matter. In his reasons, His Honour found that the taxpayer had not established any proper basis upon which leave to appeal should be granted. Further, even if leave to appeal was granted, the appeal would have been “bound to fail” and “did not have any real prospects of success”.
This decision reaffirmed that appeals under s148 of the VCAT Act are:
(a) limited to questions of law
(b) it is not open to the Court to entertain further debate as to the merits of the Tribunal’s decision on the facts.
The Court also decided that s68 of the LTA requires a taxpayer to prepare the land for a targeted type of primary production set out in s64 of the Act. It does not permit a taxpayer to ‘generally’ prepare the land for ‘any type’ of primary production.