Australia: Queensland Commissioner of State Revenue loses attempt to broaden definition of land in Duties Act

Clayton Utz Insights

Key Points:

The Sojitz case should strike a death knell for the Commissioner's attempts to sweep personal "interests" in land, such as licences, into the existing duty net.

A recent case dealing with now-defunct land rich duty has broader implications for taxpayers. Although various changes to the Duties Act 2001 (Qld) make the technical point decided by the case irrelevant, the reasoning of the Court means that recent efforts by the Commissioner to bring personal licences within the duty net cannot succeed (Sojitz Coal Resources v Commissioner of State Revenue [2015] QSC 9).

Shares in a mining company are acquired

The taxpayer acquired 51% of the issued shares in Minerva Coal Pty Ltd in late 2010. The Commissioner issued the taxpayer with an assessment for land rich duty. Sojitz objected to the assessment on the basis that Minerva was not a land rich corporation.

Minerva would only be a land rich corporation in accordance with the Act if the mining leases were included within the value of its land-holdings. "Land" has its own unexceptional definition in the Act.

However, the definition of "interest" in the Acts Interpretation Act 1954 (AIA), in relation to land and other property, read:

  1. a legal or equitable estate in the land or other property; or
  2. a right, power or privilege over, or in relation to, the land or other property.

Minerva's interests in its mining leases were clearly not within paragraph (a), but the question was whether they fell within paragraph (b), assuming that this AIA provision was applicable at all.

"Interest in land"

The Court considered the ordinary meaning of interest in land, referring to cases such as Stow v Mineral Holdings (Australia) Pty Ltd and The Queen v Toohey; Ex parte Meneling Station Pty Ltd, where it was found that such an interest was proprietary in nature. The Court also noted the dictionary definition of "interest in land" which was expressed as:

"A property right in land. Technically, the term includes an 'estate', but it is often used in contradistinction to 'estate', as in the common phrase 'estate or interest in land'."

Unless the AIA definition of interest applied, the expression "interest in land" would include any interest of a proprietary nature in land (including an estate). This would exclude a mining lease, because these are neither an estate in land nor another proprietary interest in the land.

Use of the expression "interest" and "interest in land"

The taxpayers argued that the AIA should not apply to the interpretation of the Act, largely based upon the use of the word "interest". It was said that rather than being used in isolation it was used within the expression "interest in land". The use of the words "in land" were being used to describe the interest, which would be negated by the application of the AIA, opening the definition to any interest in relation to land.

The Court considered two cases on this point:

CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue

The issue was whether a right to charge a toll to road users on a tunnel was an interest in land under the corresponding provisions of the NSW Duties Act. The Commissioner argued that regard should be had to the Roads Act in which an interest in land was defined as "an estate, interest, right or power... in or over or in connection with the land". The Court rejected this submission, stating that a right to impose a levy on motorists was a right in connection with land, but not an interest "in" land.

Sorrento Medical Service Pty Ltd v Chief Executive, DTMR

The case asked whether the holder of a contractual licence to park cars was entitled to claim compensation upon the resumption of that land. The relevant provision of the Acquisition of Land Act stated that the interest of every person entitled to the whole or any part of the land shall have a right to claim compensation. The judges in the majority noted that of importance was the fact that the phrase was not expressed as an interest "in" land, and as such was wide enough (using the AIA definition) to include the taxpayer's circumstances.

Accordingly, if the AIA definition was applied in this case it would change the meaning of the words in the Act.

Not a land rich corporation

The Court found that Minerva was not a land rich corporation, as the mining leases did not form part of its land-holdings.

It was noted that the AIA definition of "interest" could not be applied as its use in the Act was specific and unambiguous in a way which qualified the words "in land". To apply this definition would be to defeat the purpose of the provision, by importing wider subject matter into an interest in land. The Court also stated that applying the AIA could result in absurd or unreasonable consequences for companies whose assets could not realistically be described as land holdings in any ordinary sense.

This case is consistent with the WA case of Commissioner of State Revenue v Westnet Rail Holdings No 1 Pty Ltd [2013] WASCA 110 and the more recent decision of Commissioner of State Revenue v Abbotts Exploration Pty Ltd [2014] WASCA 211.

Applicability to current Duties Act

The current Duties Act replaces the terms "land rich duty" with "landholder duty" and "land rich corporation" with "landholder", together with other changes around the treatment of mining tenements.

Accordingly the case is of little direct relevance, but it should strike a death knell for the Commissioner's attempts to sweep personal "interests" in land, such as licences, into the existing duty net. This is equally true for a direct transfer of such an "interest", or for the application of landholder duty to the acquisition of an ownership interest in a landholder.

This case means that taxpayers and their advisers drafting documents dealings in personal rights over land need no longer consider the potentially vexing issue of whether duty applies, and the lodgement requirements that might be breached by a failure to lodge.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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