Merristock v Commissioner of State Revenue: Primary Production Land Tax Exemption and Discretionary Trusts
In the case of Merristock Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 53, the Victorian Civil and Administrative Tribunal (VCAT) has upheld an appeal against the State Revenue Office (SRO) in its determination that land owned by the taxpayer was not eligible for the primary production land tax exemption.
Background
In this case, the taxpayer had objected to the SRO’s decision to issue two land tax assessments in respect of four properties for the 2020 and 2021 land tax years. The taxpayer contended that the assessment should be set aside as they were entitled to the primary production exemption contained in section 67 of the Land Tax Act 2005 (Act). The land in question was urban zoned and located inside Greater Melbourne, hence the stringent requirements of section 67 and 67B of the Act were applicable.
The Decision
While the SRO had accepted that most requirements under the Act had been met, it disputed the satisfaction of the “Beneficial Owner Condition”. This condition requires that all of a land-owning company’s shares are to be “beneficially owned” by natural persons. In this case, 20% of the respective shares were held by persons acting as trustee of a discretionary trust and as such, the SRO contended that those shares were not “beneficially owned” by natural persons.
In a setback to the SRO, the Tribunal ruled in favour of the taxpayer, resulting in the relevant properties being declared ‘exempt land’ for the purposes of the primary production land tax exemption.
The Tribunal determined that that shares were beneficially owned by the natural persons due to the following:
Beneficially owned (as contrasted with beneficially held) could include where shares were held by trustees of a trust; and
Where shares are held by a discretionary trust then the trustees are legal and beneficial owners of the shares.
This decision holds significant importance and requires careful consideration from companies that own urban zoned land in Greater Melbourne. If you have any questions, please contact:
Alasdair Woodford
Principal Lawyer
T: 03 5225 5217| M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Associate
T: 03 5226 8504
E: jflanagan@ha.legal
Ben Smith
Lawyer
T: 03 5225 5262
E: bsmith@ha.legal
