Brightwater wins stamp duty appeal

Residential care provider Brightwater Care Group has joined a small group of businesses that have managed to overturn tax rulings by the state government’s Office of State Revenue.

The State Administrative Tribunal ruled that Brightwater should not have to pay land tax on a vacant parcel of land in Inglewood.

The tribunal, established last year, provides a cost-effective forum to challenge rulings by the OSR and other government agencies.

Previously, disgruntled taxpayers had to take court action if they wanted to contest a ruling.

The tribunal has ruled on more than a dozen matters, with recent appeals evenly divided between success and failure.

Failed appeals have been initiated by several prominent companies, including LionOre Mining Australia, Centurion Transport, former Wesfi owner Amatek, and Westpac Custodian Nominees.

Failure of the appeals has, in most cases, left these companies with large tax bills.

LionOre contested the stamp duty payable on its purchase of the Bulong nickel assets.

It accepted that duty was payable on the $15 million purchase price but challenged the assessment of duty on a further $7 million payment, which was only payable if the Bulong plant was recommissioned.

The $7 million has not been paid because the plant has not been recommissioned.

Nevertheless, the tribunal supported the OSR’s ruling that the $7 million “was not a mere expectancy but part of the consideration” and therefore duty was payable on the full $22 million.

Guildford transport firm Centurion Transport was another company left with a large tax bill after failing in an appeal to the tribunal.

The OSR ruled that Centurion subsidiary Trentwood, which rented equipment to Centurion, had been carrying on a rental business and was therefore liable to pay stamp duty.

The tribunal upheld this ruling, resulting in Trentwood having to pay $104,342 in stamp duty and $25,012 in penalties.

Two other rulings allowed the OSR to levy stamp duty on the transfer of shares, which ordinarily would have been exempt.

In one case, Amatek transferred shares in timber company Wesfi at a time when the shares were suspended from trading on the ASX.

On this basis, the tribunal agreed that the shares were not ‘listed’ and therefore the transfer was subject to duty of $783,096. Amatek also had to pay penalty tax of $156,619.

A similar case involved Westpac Custodian Nominees, which had to pay stamp duty on the transfer of shares in construction company Multiplex.

The tribunal concluded that Multiplex’s stapled securities, comprising shares in the company and units in the Multiplex Property Trust, were listed on the ASX but the shares were not and therefore upheld the OSR’s ruling.

Ernst & Young tax principal Celia Searle said the tribunal performed a valuable review function, but many people in the profession were con-cerned that OSR would take unfavour-able rulings to the Court of Appeal.

Ms Searle said this could be very expensive and may undermine the rationale of the tribunal.

The Brightwater case arose after the not-for-profit group was levied about $40,000 in land tax for 2004-05 and 2005-06 for a property it owned in Inglewood.

The property originally housed a special care facility, which was demolished in 2001 and has remained vacant since then.

On this basis, the OSR ruled the land was subject to land tax.

However, the tribunal accepted that Brightwater, represented by law firm Allens Arthur Robinson on a pro bono basis, has been planning to redevelop the land and therefore it was being used for a public charitable or benevolent purpose.

Brightwater chief executive Penny Flett said the group was very pleased with the decision.

“We had a legitimate case which we took to the tribunal, and in this instance we had a favourable outcome,” Dr Flett said. “Brightwater is planning a development on the land, which will benefit many people living in the community.”