Victorian Land Tax and Trust Classification: Lessons from R.C. Land Management Pty Ltd v Commissioner of State Revenue
The Victorian Supreme Court decision in R.C. Land Management Pty Ltd v Commissioner of State Revenue [2026] VSC 49 is important authority on the operation of trust provisions contained in the Land Tax Act 2005 (Vic) (LTA) and the circumstances in which land held by a common trustee may be assessed for the purposes of land tax.
In reaching its decision, the Court rejected several attempts by the Commissioner of State Revenue (Commissioner) to aggregate land held by the trustee of two separate discretionary trusts by characterising existing arrangements between those trusts as a ‘unit trust scheme’ or a fixed trust. In doing so, the Court reinforced that trust relationships and classifications must be established by legal substance, rather than by administrative inference.
Background
The decision concerned eight parcels of land held by R.C. Management Pty Ltd (Company) as trustee for two separate discretionary trusts.
The taxpayer’s position was that each trust held a 50% interest in each parcel of land, and the trusts should be assessed separately under the Victorian land tax regime. The Commissioner instead sought to assess the land on an aggregated basis, resulting in a significantly higher land tax liability for the taxpayer.
In this instance, the acquisition and transfer documents relating to acquisition of the land contained inconsistencies regarding the capacity in which the land was held, which led to the argument that the land was held in alternative trust structures. The Commissioner relied on those documents and accounting records to contend that the true legal arrangement differed from the trust structure asserted by the taxpayer.
Land Tax Assessment
After an investigation, the Commissioner issued notices of assessment for land tax across multiple years to the Company “on behalf of” the trusts “for land held in joint ownership”; affectively aggregating the land holdings between the two trusts. The Commissioner contended that:
the arrangement operated as a ‘unit trust scheme’ in which the two discretionary trusts effectively held units;
alternatively, it constituted a fixed trust arrangement as each trust had a fixed entitlement to 50% of the relevant land; or
the land should be assessed on a joint basis between the two trusts.
The Company objected on the basis that the land was held in two separate and distinct trusts and that separate assessments were required.
Key Issues
The main consideration was whether the Commissioner could look beyond the express trust arrangements and infer the existence of another form of trust structure in order to reach a different land tax consequence.
The LTA contains specific provisions in relation the varying classifications of trusts, which affect:
whether land tax surcharge rates apply;
the ability to nominate a beneficiary;
aggregation outcomes; and
the manner in which assessments are issued.
The Courts Decision
The Court rejected the Commissioners attempts to characterise the arrangements between the trusts as a ‘unit trust scheme’, finding that the legal elements required to establish a unit trust (or fixed trust) did not exist.
The Court reviewed the trust deeds, accounting records and income tax returns of the trusts, finding that there was no written evidence of any intention to create a third trust. If a separate unit trust had have existed, the accounts of the discretionary trusts would ordinarily have reflected ownership of units in that trust. Instead, the records reflected ownership of the properties themselves. Therefore, the Commissioner could not simply rely on inferences or assumptions to create a trust relationship, where that relationship is not supported by governing documents or a clear intention of creation.
Noting the above, the Court also rejected the Commissioner’s argument that a joint land tax assessment should be issued.
Key Takeaways
The decision is significant as it demonstrates the limits on the Commissioner’s ability to recharacterise trust arrangements for the purposes of land tax.
While the Court accepted that the provisions of the LTA are technical and the classification of trusts can materially affect the assessment outcome, those provisions cannot be applied by assuming the existence of legal relationships which have not been created. This highlights that the mere existence of a common trustee between multiple trusts does not alone justify aggregation for the purposes of land tax.
While the taxpayer in this decision succeeded, the decision illustrates how inconsistent records may provide the Commissioner with the basis to challenge the characterisation of an existing trust arrangement. In circumstances where multiple trusts are involved in property development with a common trustee, maintaining clear evidence of the capacity in which assets are held is critical.
For more information, please contact:
Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal
Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal
This article was prepared with the assistance of Philippa Duniam, Law Clerk.
