A recent decision of the New South Wales Administrative Decisions Tribunal (ADT) highlights:
This year, a decision of the Revenue Division of the ADT held that overriding words in a trust deed - that mirrored the provisions of section 3A(3B) of the LTMA - were sufficient to ensure that the trust was a 'fixed trust' for the purposes of section 3A(3B) (meaning the trust would have an additional land tax liability of $6,236, applying today's rate).
The decision was in Chief Commissioner of State Revenue v Sayden Pty Ltd as trustee for the Griffin Property Unit Trust (RD) NSWADTP 14 (Sayden case).
On appeal, the Appeal Panel held that the overriding words did not have that effect. The effect of the Appeal Panel's decision is that the trust will be assessed for land tax at the surcharge tax rate, and not the lower threshold tax rate.
The Appeal Panel:
Both the OSR internal reviewer and the Appeal Panel found that the trust did not meet the relevant criteria of section 3A(3B) because the trust deed contained a number of clauses that were expressly inconsistent with the overriding words.
Those clauses gave rise to the following issues:
Cleardocs and Maddocks have spent considerable time and effort in ensuring that the Cleardocs fixed unit trust deed is capable of being used to establish a trust that will qualify as a fixed trust for the purposes of the LTMA, including negotiating with three different Senior Technical Officers, Land Tax, on what the Commissioner requires of the deed.
The Cleardocs fixed unit trust deed does not give rise to most of the issues that the Appeal Panel had with the deed in the Sayden case. For example, the trustee is not conferred with the power to issue special units and the deed contains a mechanism that the unit holders can use to require the trustee to terminate the trust and distribute the net proceeds of the trust's assets to the unit holders.
However, under the Cleardocs fixed unit trust deed:
Maddocks has gone to considerable lengths to design the Cleardocs fixed unit trust as one which can create a trust that will be considered by the Commissioner to be a fixed trust for the purposes of the LTMA, including engaging in protracted negotiations on Cleardocs' behalf with the OSR. Those negotiations culminated in the OSR's approval of that deed in August 2011. However, a risk remains that an individual OSR assessor will assess a fixed unit trust as a special trust for LTMA purposes on the basis of the guidance provided by the ADT in the Sayden case, which is later in time. Additionally, the LTMA provides that the Commissioner retains a discretion to treat any trust as a 'special trust', even if it meets the requirements of section 3A(3B).
Accordingly, Maddocks' recommendation remains that all fixed unit trust deeds must be submitted to the OSR for approval before land is settled into the trust. This enables the trustee to make any specific amendments requested by the individual OSR assessor, subject to proper legal advice about the efficacy of those amendments.
For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Cleardocs help desk team.
Paul is a Special Counsel in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.
Paul's key areas of practice include:
Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.
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