Lesdos v Commissioner of State Revenue (Corrected) (Review and Regulation) [2015] VCAT 173
This matter involved the taxpayer’s acquisition of a 50 per cent interest in a company, which in turn owned a building in Melbourne’s CBD. The Commissioner assessed the transaction for duty pursuant to the land rich provisions of the Act, and imposed penalty tax and market interest pursuant to the Taxation Administration Act 1997 (the TAA).
There were four issues in dispute before the Tribunal; all were decided in the Commissioner’s favour.
The principal issue was the date on which the taxpayer acquired its interest in the property, as this was relevant to the question of whether the company was “land rich” when the acquisition took place. The Tribunal found that the interest was acquired on 4 August 2011, after the call option was exercised pursuant to a Put and Call Option Deed and the purchase price had been paid on completion or settlement of the Share Sale Agreement. At which point in time there was no dispute that the company was “land rich”.
The second issue was in respect of a leave application under s109 of the TAA. A week before the hearing, the taxpayer foreshadowed that it would seek leave to argue a further ground pursuant to s85(2) of the Act (“the just and reasonable exemption”). Then, just a day before the hearing, the taxpayer served the Commissioner with its supplementary contentions and evidentiary materials in support of this ground.
The Commissioner contested the leave application. The Tribunal refused the taxpayer’s request for leave having regard to the following three factors: the taxpayer’s arguments on s85 were “misconceived and have no prospect of success”; the taxpayer failed to provide an adequate explanation for its delay in seeking leave; and the discretion in s85 is reposed in the Commissioner and in the ordinary case, it is desirable that the exercise of that discretion should be considered in the first instance by the Commissioner (rather than by the Tribunal in the context of review proceedings).
The third issue was in respect of the imposition of penalty tax, for failure to take reasonable care and the impact of a taxpayer seeking “advice”. The taxpayer had sought advice from a firm of accountants on the transaction. The Tribunal held in the circumstances that it had not taken reasonable care and it confirmed that the imposition of penalty was appropriate. The Tribunal distinguished the “accounting” advice received in this matter from the type of advice received by the taxpayers in the revenue cases of Snowy Hydro (2012) VSCA 145 and Challenger (2010) VSC 464 which were matters where advice had been sought from lawyers.
The fourth issue was the imposition of market interest, which the Tribunal confirmed was appropriate as its function is simply to compensate the revenue for being deprived through no fault of its own of the use of the funds.
