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 2019-20.
Duties Act 2000 (Duties Act)
Exemption — deceased estates
Greenaway v CSR (Review and Regulation)  VCAT 549
The matter concerned whether or not s42 of the Duties Act applied to exempt the transfer of a property from a deceased estate. By a Deed of Family Arrangement, the taxpayer became entitled to his father’s estate on paying $40,000 to his mother.
On 6 May 2020, the Tribunal decided in favour of the Commissioner that, in the absence of any court order, a transfer of a property from a deceased estate to a person who was not entitled to the estate under the laws of intestacy cannot satisfy the requirements of the exemption in s42 of the Duties Act.
Sub-sales — land development; discretion to issue assessments
Pitard and Others v CSR (Review and Regulation)  VCAT 1074
The matter considered 35 separate transactions assessed for duty under the sub-sale provisions in Part 4A of Chapter 2 of the Duties Act on the basis of land development. The taxpayers accepted that the sub-sale provisions were applicable, but contended that the Tribunal should exercise the discretion in s8 of the Taxation Administration Act 1997 (TAA) not to assess their tax liability because there was no profit element to the transfers between the related parties.
On 18 July 2019, the Tribunal decided in favour of the Commissioner. It confirmed that s8 of the TAA included the discretion not to make an assessment of a tax liability. However, the Tribunal was not vested with that discretion in a review proceeding under Part 10 of the TAA. In any event, the Tribunal would have declined to exercise it, even if the absence of profit and commerciality was accepted as a relevant consideration, due to the countervailing considerations, namely [122-123]:
“…in this case, there were 35 transactions over a two and a half year period. The applicants or their conveyancer should have been put on notice by the Form 6A and the explanatory notes to that document. Despite this, they entered into a further 34 transactions after the lodgement of the first of those forms.
Moreover, there was no voluntary disclosure of the error by the applicants to the Commissioner. Rather, the issue was discovered in the course of an investigation by the Commissioner.”
Exemption — transfers to and from a trustee or nominee
MD Commercial Pty Ltd and AJ Commercial Pty Ltd v CSR  VSCA 295
This matter concerned the assessment to duty of the transfer of land at Pakenham from two brothers to MD Commercial Pty Ltd and AJ Commercial Pty Ltd (Trustees) respectively, as trustees of separate trusts.
Each trust was established by a deed which provided that the beneficiary in each case was the relevant brother. It also provided that the deed could not be varied to confer any share or benefit on any person other than the beneficiary. Apart from that, the Trustee was empowered to develop, subdivide and sell the property to third parties at the direction or written consent of the beneficiary. There was no dispute that the property was subsequently developed, subdivided and parts of it sold by the Trustees.
The issue was whether or not the exemption in s35 of the Duties Act applied to exempt the original transfers from the brothers to the Trustees. At first instance, and on appeal, VCAT and the Supreme Court held in favour of the Commissioner. The taxpayer subsequently sought leave to appeal to the Court of Appeal.
On 13 December 2019, the Court of Appeal decided the matter in favour of the taxpayers. Broadly, their Honours drew a distinction between transfers to trustees where there are present obligations to develop, subdivide and sell the property on the one hand, and transfers where such obligations are made subject to the direction of beneficiaries on the other.
There was no dispute that the first category of transfers fell outside the scope of the exemption in s35 of the Duties Act. But their Honours concluded that the second category of transfers, which encompassed the transfers in this matter, could qualify for the exemption in s35.
Land Tax Act 2005 (Land Tax Act)
Exemption — primary production land, definition of ‘greater Melbourne’
Australian Investment and Development Pty Ltd v CSR (Review and Regulation)  HCASL 293
The taxpayer claimed that the land was exempt under s65 of the Land Tax Act (land outside greater Melbourne). However, the Commissioner claimed that the issue was whether the land was exempt under s67 (as land in an urban zone in greater Melbourne).
The Supreme Court upheld the assessments and the taxpayer appealed the decision to the Court of Appeal. The Court of Appeal unanimously applied its own decision in Commissioner of State Revenue v Burgess Properties Pty Ltd  VSCA 269 and rejected the taxpayer’s argument that ‘greater Melbourne’ did not include councils that had ceased to exist by 1 July 2007 when the Melbourne and Metropolitan Board of Works Act 1958 was repealed, such that the land was not in greater Melbourne. The taxpayer subsequently applied for special leave to appeal to the High Court.
On 11 September 2019, the High Court of Australia refused the taxpayer’s special leave application because there ‘was no reason to doubt the correctness of the decision of the Court of Appeal’.
Exemption — principal place of residence; use and occupation for entire six month period
Bansal v CSR (Review and Regulation)  VCAT 1451
The applicant contended that the disputed land was exempt from land tax for the 2016 tax year because it was his principal place of residence (PPR) between 1 December 2015 to 31 January 2016 (a period less than six months) and he had not claimed any other land as his PPR for the 2016 year.
On 18 September 2019, the Tribunal decided in favour of the Commissioner and agreed with the Commissioner’s interpretation of s54(1)(a) and s54(2)(a) of the Land Tax Act. That is, in deciding whether or not land is a person’s PPR for a particular land tax year, those sections require an assessment of the use and occupation of the land for the entire six month period from 1 July to 31 December of the preceding year. Applying this, because the applicant was required to use and occupy the disputed land as his PPR continuously from 1 July 2015 to 31 December 2015 (i.e. for the entire six months) he did not qualify for the PPR exemption for the 2016 year.
Exemption — principal place of residence — contiguous land
Fang v CSR (Review and Regulation)  VCAT 1983
The taxpayer acquired land as a sole proprietor. Neighbouring land was owned by her husband and was used by the taxpayer as her principal place of residence (PPR). The Commissioner assessed land tax on the first mentioned land for 2016-2018. The taxpayer argued the ‘contiguous land’ exemption in s54(3) of the Land Tax Act applied.
On 13 December 2019, the Tribunal decided in favour of the Commissioner and agreed with the Commissioner that the taxpayer was neither the ‘owner’ of the adjoining land nor did she have any equitable interest because of any resulting or constructive trust. The former land was vacant and it did not physically enhance the adjoining land. Even if the taxpayer was able to establish such a trust, unless there was an order of a court or tribunal making a finding of a trust, the ownership requirements of the PPR exemption could not be satisfied.
Exemption — principal place of residence — contiguous land
Pitt v CSR  VSC 362
The taxpayer owned her principal place of residence (PPR) and two other properties (the Disputed Land) separated from her PPR by common property and a third property (the Connecting Property), which was owned by a company of which the taxpayer was the sole shareholder. These properties formed part of a residential development that had a focus on ‘sustainability and community-centred living’.
Relevantly, the Commissioner assessed the Disputed Lands for land tax for the 2014 to 2018 tax years. The taxpayer objected on the ground that the ‘contiguous land’ exemption in s54(3) of the Land Tax Act applied.
The Tribunal found in favour of the Commissioner. While the Tribunal found that the taxpayer had an implied licence that made it possible for her to move across and around the Connecting Property to access the Disputed Lands, the Tribunal also found that the Disputed Lands were not used ‘solely for the private benefit and enjoyment’ of the taxpayer pursuant to s54(3)(c) as the taxpayer’s evidence showed that the other residents of the development were granted ‘free and unrestricted access’ to the Disputed Lands. The taxpayer sought leave from the Supreme Court of Victoria to appeal against the Tribunal’s decision.
On 19 June 2020, the Supreme Court dismissed the appeal in favour of the Commissioner, holding that it was open for the Tribunal on the evidence to make a finding that the ‘contiguous land’ exemption did not apply because the taxpayer did not satisfy s54(3)(c) as the Disputed Lands were not ‘used solely’ for the ‘private benefit and enjoyment’ of the taxpayer.
Exemption — land being prepared for primary production
Portbury Development Co Pty Ltd v CSR (Review and Regulation)  VCAT 631
The taxpayer objected to reassessments of land tax for the 2015 and 2016 land tax years on the basis that the disputed lands were exempt under s68 of the Land Tax Act as they were being prepared for primary production.
On 10 June 2020, the Tribunal found in favour of the Commissioner and confirmed the reassessments. The Tribunal held that the taxpayer did not discharge its onus of proving that the disputed lands were being prepared for primary production during the 12 or 24 month period under s68(1)(a), and any works undertaken on the disputed lands could be seen to be consistent with getting the disputed lands ready for sale.
Payroll Tax Act 2007 (Payroll Tax Act)
Payroll tax grouping
CBS Admin Pty Ltd v CSR (Review and Regulation)  VCAT 1737
The Commissioner issued payroll tax assessments grouping nine companies for six financial years from 2009-10 to 2014-15. The taxpayer objected to the grouping of three of those companies — two on the basis that they did not conduct a ‘business’ within the meaning of s67 of the Payroll Tax Act, and the remaining one on the basis that the discretion in s79 of the Payroll Tax Act ought to be exercised because it was carried on independently and unconnected with the business of each member of the group.
On 6 November 2019, the Tribunal confirmed the grouping of two of the three companies. The first was confirmed on the basis that it carried on a business. The second was confirmed on the basis that it was not carried on independently of and unconnected with the business of each member of the group.
Optical Superstore Pty Ltd v CSR  HCASL 16
The taxpayers operated pursuant to licence agreements with Optical Superstore Pty Ltd as trustee for the OS Management S Trust (Optical Superstore). ‘Tenancy agreements’ were entered into between Optical Superstore and optometrists with ‘rental’ payable based on the time they provided their services at the relevant taxpayers’ stores. The Commissioner classified the ‘tenancy agreements’ as ‘relevant contracts’ and issued payroll tax re-assessments for six financial years.
At first instant, the Tribunal (The Optical Superstore Pty Ltd as Trustee for OS Management S Trust & Ors v Commissioner of State Revenue (Review and Regulation)  VCAT 169) found, in summary, that the agreements between the Optical Superstore and optometrists were relevant contracts but the amounts paid to them were not ‘paid or payable for or in relation to the performance of work relating to a relevant contract’ because those amounts were paid to the optometrists from an express trust.
The Commissioner sought leave of the Supreme Court and appealed the specific finding of the Tribunal that those payments were not “paid or payable for or in relation to the performance of work” relating to a relevant contract. The Supreme Court (Commissioner of State Revenue v The Optical Superstore Pty Ltd as Trustee for OS Management S Trust and Ors  VSC 525) dismissed the Commissioner’s appeal against the Tribunal’s decision that the fees charged by optometrists to patients held on express trust could not constitute an amount ‘paid or payable’ for or in relation to the performance of work relating to a relevant contract. However, if it is, then it would be “for or in relation to the performance of work relating to a relevant contract”.
On the Commissioner’s further leave application and appeal, the Court of Appeal (Commissioner of State Revenue v The Optical Superstore Pty Ltd as Trustee for OS Management S Trust and Ors  VSCA 197), in a unanimous judgement, allowed the Commissioner’s appeal and held that the ordinary meaning of ‘payment’ embraced a payment of money to a person beneficially entitled to that money.
On 12 February 2020, the High Court of Australia refused the taxpayers’ special leave application because the decision of the Court of Appeal was ‘not attended by sufficient doubt’.