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Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue (NSW) [2023] NSWSC 463 – Developers’ rights under agreement held not to constitute a declaration of trust
The NSW Supreme Court has held that a ‘Development Rights Agreement’ between the taxpayer and a developer did not effect or evidence a declaration of trust over dutiable property for the purposes of the Duties Act 1997 (NSW), despite clause 16.1 of that Agreement expressly acknowledging that the developer had a beneficial and equitable interest in the project land.
The central reason for this decision was that, contrary to the Commissioner’s submissions, neither the Agreement nor any other document entered into by the parties required the taxpayer to hold the project land for the developer’s benefit. Rather:
- the documents made clear that the taxpayer held the land for its own benefit, subject to the extensive contractual rights conferred on the developer and the corresponding obligations imposed on the taxpayer – a situation which was fundamentally inconsistent with the fiduciary obligations the taxpayer would have owed the developer had it held the land on trust; and
- the developer’s beneficial and equitable interest in the project land acknowledged by the Agreement referred only to the developer’s equitable rights created under an earlier Call Option Deed.
Lakes Oil NL v Innovation and Science Australia [2023] AATA 811 – AAT confirms no R&D offset for hydrocarbon exploration activities
The AAT has ruled that a taxpayer company was not entitled to the R&D tax offset in respect of activities aimed at determining the location, se and quality of gas deposits. This was because the activities, found to involve ‘prospecting, exploring or drilling’, fell within the exemption in section 355-25(2)(b) of the ITAA 1997 and were therefore not eligible R&D activities, even if they may also have served other purposes.
Earlmist Pty Ltd as the Trustee for the Earlmist Unit Trust v FCT [2023] AATA 978 – Input tax credits denied for a property development and construction group
In a mammoth 100-page decision, the AAT has rejected claims by members of the Westpoint group of companies for over $7.2 million in input tax credits relating to five property developments undertaken by the group in tax periods prior to its collapse in 2005. The reasons as to why the Tribunal denied the relevant input tax credits varied for each development, and the facts are far too detailed to attempt to summarise here. However, any subscribers with an interest are encouraged to read the thorough and well-written decision.
WZWK v FCT [2023] AATA 872 – Benefits paid in breach of operating standards assessable as income
The AAT has held that payments made to a taxpayer by an SMSF (of which he was the sole member and director) after a company owned and operated by him terminated his employment were made in breach of the prescribed operating standards and therefore correctly included in his assessable income pursuant to section 304-10 of the ITAA 1997.
The Tribunal also:
- upheld the taxpayer’s disqualification from being eligible to act as a superannuation fund trustee, finding that he was not a fit and proper person to be a trustee as he had breached the operating standards and several other SIS Act provisions in his capacity as director of the SMSF trustee; and
- affirmed the administrative penalties imposed.
HNQH v FCT [2023] AATA 980 – Taxpayer fails to show amended assessments were excessive
The AAT has affirmed amended assessments issued by the Commissioner for the 2011-2014 income years (which increased the relevant taxpayer’s taxable income by more than $1.5 million in total) and the decision not to remit associated penalties and interest. The Tribunal decided the review application in favour of the Commissioner due to the taxpayer’s failure to produce any substantively relevant or reliable evidence to discharge his onus of proving that the amended assessments were excessive.
Appeals
The taxpayer has applied to the High Court for special leave to appeal against the decision of the NSW Court of Appeal in Chief Commissioner of State Revenue (NSW) v Godolphin Australia Pty Ltd [2023] NSWCA 44 (covered in the Birchstone Brief for the week ended 31 March 2023). |
