In Rubino Investments, the appeal panel of the NSW Civil and Administrative Tribunal (Tribunal) dismissed the Taxpayer’s application to appeal a decision by the Chief Commissioner of State Revenue (Commissioner) imposing the full rate of stamp duty on the transfer of two properties in New South Wales under the Duties Act 1997 (NSW) (Act).
Taxpayers should be mindful of the fact that where they are seeking to rely on the concessional treatment of transfers of dutiable property from one trustee to another, the relevant trust must have already been in existence prior to the first trustee obtaining legal title. Furthermore, the beneficial ownership of the trust property must not change as a result of the transfer such that the trust would be taken to be a different trust for the purposes of section 54(3) of the Act.
This case also confirms that there must be a clear nexus between the transfer and the remedying of fraudulent conduct for the transfer to be exempt from stamp duty under section 65(24)(a) of the Act. It is not enough that some other unrelated instance of fraud has occurred in relation to the dutiable property.
By way of background, the Rubino family had previously been involved in litigation concerning the properties, during which they unsuccessfully claimed that the initial transfer of the properties to the previous legal owner, Pineview Property Holdings Pty Ltd (Pineview), was fraudulent.
Following the conclusion of the previous litigation, the properties had been transferred to a newly formed trust estate, Rubino Investments Pty Ltd as trustee for the Rubino Family Trust (Trust). As a result of this transfer, the Taxpayer had been assessed on the unencumbered value of the properties under the Act. However, the Taxpayer claimed that the transfers should be exempt from stamp duty, or subject to nominal duty only, on the basis that:
section 54(3) of the Act provides that a nominal duty of $50 is chargeable in respect of transfers taking place as a consequence of the appointment of a new trustee or alternatively, section 65(24)(a) of the Act provides that a transfer is exempt from stamp duty where the transfer is made to rectify the consequences of fraudulent conduct.
The Tribunal accepted the Commissioner’s submissions on both issues, finding that:
section 54(3) of the Act was not applicable as it required that the relevant trust be already in existence prior to the transfer to which a new trustee is appointed taking place, and that the beneficial ownership of the trust property must be unchanging throughout the transaction, so that the trust could be accurately described as one, continuing trust (rather than two separate trusts) the Taxpayer had failed to discharge the burden of proof in showing that the Trust was the same trust and that the beneficial ownership of the trust property was unchanged and under section 65(24)(a) of the Act, the transfer was not made to rectify the consequences of fraudulent conduct, as Justice White had explicitly stated in the previous litigation, that the transfer of the properties to Pineview was not fraudulent.
The Tribunal, therefore, dismissed the appeal.