In Fagridas v Commissioner of State Revenue [2018] VSC 145, the Supreme Court of Victoria refused leave for the taxpayers to appeal against a Victorian Civil and Administrative Appeals Tribunal (VCAT) decision in relation to a stamp duty assessment on a transfer of land from the trustee of a discretionary trust to beneficiaries.

The trustee defaulted under the terms of a mortgage it gave over the land. By exercising the statutory power of sale, the mortgagee sold the land for $1.9 million. Pursuant to a nomination clause, the named purchaser under the contract of sale nominated the beneficiaries of the discretionary trust as purchasers under the contract. The beneficiaries, as nominated purchasers, paid the consideration under the contract, the mortgagee transferred the land to the beneficiaries, and the transfer to them was registered with the mortgage having been discharged.

The beneficiaries paid stamp duty on the transaction as assessed by the Commissioner of State Revenue (Commissioner).

However, having done so, the beneficiaries objected to the assessment on the following grounds:

  • The beneficiaries claimed that what had occurred was simply that the trustee distributed an asset of the trust to them directly, independently of any sale for which there had been consideration paid. They maintained, in effect, the payment of $1.9 million to the mortgagee was merely a refinancing of the trustee’s mortgage and
  • The transfer of land was exempt from duty under section 36A of the Duties Act 2000 (Vic) (Duties Act) as an in-specie distribution from the trustee to beneficiaries of a discretionary trust.

The Commissioner reviewed the facts and determined that the beneficiaries did not receive the land in their capacity as beneficiaries of the trust, rather the land was transferred to the beneficiaries in their capacity as nominated purchasers under a contract of sale. Under section 36A of the Duties Act, the Commissioner also needs to be satisfied that the transfer is not part of a sale or other arrangement under which there exists any consideration for the transfer. The Commissioner held that this requirement had not been satisfied as the beneficiaries purchased the land from the mortgagee for $1.9 million. VCAT upheld the Commissioner’s decision to deny the exemption from duty.

The Supreme Court of Victoria refused leave to appeal against the VCAT decision as the appeal is confined to a question of law and the beneficiaries had not outlined any grounds in the proposed notice of appeal that established any proper basis for challenging VCAT’s decision.