A taxpayer has been unsuccessful before the Victorian Civil and Administrative Tribunal in a matter concerning the land rich provisions under the Duties Act 2000 (Vic).

The background facts were complex. Among other things, the Tribunal heard moneys were given by a sister to her brother and the taxpayer company was incorporated to purchase an investment property. It also heard that on 22 May 2008, the taxpayer was nominated as purchaser of the land.

The Commissioner determined that the taxpayer was a land rich company as at 22 May 2008 and that subsequent to that time 74% of the shares in the taxpayer company were transferred: 48% to the sister and 26% to the brother’s daughter. It was common ground that the brother initially held all the shares in the taxpayer company but after the transfer held 26% of the shares. A key issue before the Tribunal was whether the shares transferred to the sister and the daughter were transferred before or after the taxpayer became land rich on 22 May 2018.

The taxpayer argued that this was not the case where the parties intended for the taxpayer company to acquire the property with the brother as the shareholder and later determined that the sister and daughter should obtain an interest in the company. Rather, it was contended that the parties always intended for the taxpayer company to buy an investment property and for the sister, brother and his daughter, to hold the shares in the taxpayer company.

The Tribunal was of the view that the taxpayer had failed to discharge the onus of proving its case. A key issue was the state of the evidence led by the taxpayer.

  • It was unclear at what time it was contemplated that the sister and the daughter would become shareholders in the taxpayer.
  • The Tribunal said it was impossible for it to conclude that duty would be paid twice if the land rich provisions were applied to the transaction of 74% of the shareholding.
  • The Tribunal concluded that, as at the date the applicant company was nominated as the purchaser of the land, namely 22 May 2008, neither the sister nor the daughter were shareholders in the taxpayer.
  • It also concluded that the sister did not acquire an interest by way of constructive trust in the taxpayer or an interest in the land by way of a resulting trust.

It also held that the discretion, in to the former s85(2) of the Duties Act 2000 (Vic), should not be exercised. Accordingly, the Commissioner’s decision was affirmed.

(Master Solutions Australia Pty Ltd v Comr of State Revenue [2016] VCAT 1356, Victorian Civil and Administrative Tribunal, Davis SM, 18 August 2016.)