On 28 August 2025, Hmelnitsky J of the Supreme Court of NSW delivered judgment in Big Ben Holdings Pty Limited v Chief Commissioner of State Revenue [2025] NSWSC 984.
This case concerned the eligibility of a transaction for corporate reconstruction relief under Chapter 11, Part 1 of the Duties Act 1997 (NSW) (Duties Act). The transaction involved the sale of 100% of the interests in land held by tenants in common, where the purchaser was a wholly owned subsidiary of one of the three co-owners.
The taxpayer subsidiary sought relief solely in respect of the sale of its parent company's interest. The Chief Commissioner determined that the transaction was not eligible, and duty was assessed in full.
Hmelnitsky J remitted the matter for determination by the Chief Commissioner, having found for the taxpayer on both grounds. The key findings in the judgment were:
- the sale of interests in land held by tenants in common will generate a separate dutiable transaction in respect of the transfer of each interest, even if the co-owners sell their interests together, under a single contract.
- in respect of the requirement in s 273B(1)(b)(ii) that a corporate reconstruction transaction be for the purpose of changing the holding of assets within a corporate group, it is sufficient that this purpose be one of several purposes of such a transaction. The purpose can be made out through evidence of a preference that the asset(s) be held by the transferee under the relevant transaction.
Factual Background
- The plaintiff (Taxpayer) was the wholly owned subsidiary of SRI Corporation Pty Ltd (SRI). The Taxpayer is the head company of a tax consolidated group (TBG).
- SRI and two unrelated third parties (Philcant and Dudley) were the owners as tenants in common in equal shares of land near Newcastle (Land). The Land was leased by a member of TBG (BCPL) (Lease), on which it operated a rail loop transporting coal from the Bloomfield Colliery (Mine) (an open cut coal mine) (operated by BPCL) to the Great Northern Railway.
- It was resolved by TBG that they should acquire the entirety of the Land, which would ensure security of the transport of coal (as the Mine would continue to operate beyond the term of the Lease, which had no further options to renew).
- In January 2024, SRI, Philcant and Dudley entered into a contract to sell their respective interests in the Land to the Taxpayer subject to the existing leases for $30 million 'in equal share to each vendor' (Contract).
- The contract was completed in October 2024, and the transfer was lodged following the payment of duty in the aggregate amount of $1,633,065.
Statutory Framework
At the time, s 273B(2)of the Duties Act provided a full exemption from duty for corporate reconstruction transactions (defined in s 273C) which were undertaken for the purposes of changing the holding of assets within a 'corporate group' and not undertaken for a purpose of avoiding or reducing duty, or for the sole or dominant purpose of avoiding or reducing a tax liability (as required by s 273B(1)(b)-(c)) (CR Exemption).1
Engagement with Revenue NSW
The Taxpayer contended that its acquisition of SRI's one-third interest in the Land was eligible for the CR Exemption, and that duty was therefore only chargeable on the $20 million paid to Philcant and Dudley.
There was no doubt that the Taxpayer and SRI were members of the same corporate group within the meaning of s 273E of the Duties Act.
The Chief Commissioner took the following views:
Corporate Reconstruction Transaction
- The Contract represented a single dutiable transaction, being the sale by the vendors of the whole of the fee simple in the Land (citing Brennan J in Nullagine Investments Pty Ltd v The Western Australian Club Incorporated (1993) 177 CLR 635; [1999] HCA 45 (Nullagine) at 644 as authority for the proposition that a sale by all co-owners of land of their respective proportional interests in that land is a sale by them of a single interest (being the freehold estate)).
- As the Contract involved Philcant and Dudley (not members of the corporate group), the Chief Commissioner was satisfied that the transaction was not a 'corporate reconstruction transaction' (being a transaction between members of a corporate group).
Purpose of Transaction
- The transaction was not undertaken for the purposes of 'changing the holding of assets within a corporate group' (as required by s 273B(1)(b)(ii)), but rather for the purpose of acquiring Philcant and Dudley's interests in the Land, and obtaining the commercial benefits associated with that acquisition.
As such, the Chief Commissioner concluded that the Taxpayer could not claim the CR Exemption in respect of its acquisition of SRI's interest in the Land.
NSWSC Decision
The Taxpayer brought proceedings challenging the correctness of the Chief Commissioner's reasoning on both issues.
Hmelnitsky J found for the Taxpayer on each issue:
Corporate Reconstruction Transaction
- His Honour rejected that Brennan J's comments in Nullagine at 643-645 supported the Chief Commissioner's position, concluding that his Honour's point was that each co-owner owns on their own behalf an estate in fee simple in a share in a parcel of land, and that, taken together with the other co-owners, these separate estates exhaust the rights of ownership in the whole. It does not follow, however, that they are an estate in fee simple in the whole. As such, each tenant in common has a separate and individual title, and can sell only its own separate share ([42]-[42]).
- The effect of the passage relied on by the Chief Commissioner is merely that when all co-owners sell their separate interests to a single purchaser, the single purchaser takes a single estate in fee simple. The case is not authority for the proposition that co-owners acting in concert are capable of disposing of the fee simple in the whole of the land ([43]).
- As such, the Contract reflects the transfer of three separate estates in the Land, including the transfer of SRI's one-third interest to its wholly owned subsidiary, the Taxpayer. There is therefore no difficult in identifying three separate dutiable transactions, each to be brought to duty on its own terms; in the case of SRI's agreement to transfer its interest, the transaction was between itself and its wholly-owned subsidiary, and was therefore a corporate reconstruction transaction ([44]-[46]).
Purpose of Transaction
- The Chief Commissioner argued that the purpose of the transaction could be determined by reference to either the 'series' of transactions (which included the acquisition of the interests in the land held by Philcant and Dudley) or to the 'agreement as a whole' (which showed that the purpose was to unwind the co-ownership of the land) ([47]-[48]).
- Hmelnitsky J rejected the characterisation of the three dutiable transactions as a 'series' of transactions, given that they had occurred pursuant to a single agreement ([50]).
- While his Honour acknowledged that a purpose of the transaction was to secure for TBG the interests of Dudley and Philcant in the Land, he noted that it was also a purpose of the transaction that the interest in the fee simple ultimately be held by the Taxpayer, with contemporaneous documents evidencing a preference for the Land to be held by the Taxpayer rather than SRI. This was sufficient to establish the 'purpose' requirement at s 273B(1)(b)(ii), notwithstanding the existence of other purposes ([51]-[55]).
Hmelnitsky J revoked the relevant Assessment, and remitted the matter to the Chief Commissioner to be determined in accordance with his Honour's decision.
Takeaways from Decision
A few conclusions emerge from this decision:
- In cases of tenants in common, the sale of those interests will generate a separate dutiable transaction in respect of the transfer of each co-ownership interest, even if the co-owners sell their interests together, under a single contract.
- In respect of the requirement at s 273B(1)(b), which requires (for corporate reconstruction relief) that the transaction be undertaken for the purpose of either (i) changing the structure of a group, or (ii) changing the holding of assets within a group:
- It is sufficient to establish the sub-s (1)(b)(ii) purpose if there is evidence that there was a preference for the transferee of an asset to be the owner of that asset (see [51]-[55]).
- This purpose does not need to be the sole or primary purpose of the transaction, and sub-s (1)(b) is fulfilled if it is "a" purpose (see [51], [55]).
The decision also highlights the importance of obtaining advice and considering the appropriate Revenue engagement strategy, including the ability to obtain a private ruling before implementing a transaction. All Australian States and Territories have an exemption or concession regime for transactions between members of a corporate group. The requirements vary between jurisdictions and should be considered in detail ahead of any restructure.
Footnote
1. Note: the CR Exemption is no longer a full exemption from duty; per s 273B(3), corporate reconstruction transactions are eligible for a 90% reduction in duty in NSW.
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