Kameel Pty Ltd V Commissioner of State Revenue 2016 VSCA 83

Summary of Judgment

Kameel Pty Ltd v Commissioner of State Revenue [2016] VSCA 83

2 May 2016

Today the Court of Appeal allowed an appeal which addressed the issue of when a purchaser under a contract of sale of land is deemed to be the owner of land for the purposes of the assessment of land tax under the Land Tax Act 2005 (‘the Act’).

The issue arose in circumstances in which Kameel Pty Ltd (‘Kameel’) entered into a contract to sell land, which it intended to sub-divide, to Yassmin Pty Ltd (‘Yassmin’). Before the balance of the purchase price was paid, Yassmin entered into early occupation of the land to construct a restaurant pursuant to a separate heads of agreement with Kameel. The restaurant was constructed and leased to a third party. The contract of sale was eventually terminated with the balance of the purchase price unpaid. The Commissioner of State Revenue assessed Kameel as being liable to pay land tax for the 2010, 2011, and 2012 years. Kameel objected on the basis that Yassmin, as the purchaser, had taken possession of the land and that it was therefore deemed to be an owner of the land. If Kameel was correct, this would have the effect of reducing Kameel’s liability for land tax.

The Court of Appeal held that the issue of whether Yassmin was in ‘possession’ of the land for the purposes of s 15(1) of the Act requires an application of the two-limbed test laid down by the High Court of Australia in Highlands Ltd v Deputy Federal Commissioner of Taxation (SA) (1931) 47 CLR 191, namely, that a buyer will have taken possession of land when that buyer has de facto possession and when it is in that position in intended execution of an agreement for sale of the land. There was a dispute between the parties as to what was required by the second limb of that test.

The Court held that in determining whether the second limb of that test has been satisfied it is unnecessary for there to be an express contractual right to early possession. It held, by majority, that one should ask whether the conclusion that the purchaser has taken possession is consistent with the parties’ contractual arrangements for the sale of the land, as they have evolved.

The Court held that, applying this test, Yassmin had taken possession of the land within the meaning of s 15(1) of the Act from the date on which the plan of subdivision was registered. Alternatively, the relevant date was the date of the Certificate of Practical Completion. Both dates occurred before the relevant assessment dates.

NOTE: This summary is necessarily incomplete. It is not intended as a substitute for the Court’s reasons or to be used in any later consideration of the Court’s reasons. The only authoritative pronouncement of the Court’s reasons and conclusions is that contained in the published reasons for judgment.