The state tribunal ruled to remit the penalty tax from 20 per cent to five per cent for a trust, which owns the land where a Healesville service station is located, if the reassessments were not set aside.
The case was presided over by Victorian Civil and Administrative Tribunal (VCAT) senior member Reynah Tang AM.
In the decision, Mr Tang said the tribunal is not in a position to determine the quantum of tax payable in the event the registered proprietors are assessed.
“It is appropriate to set aside the reassessments and remit them to the commissioner for reconsideration,” the VCAT decision reads.
Effie Caloutas and John Caloutas and their two sons, Nick Caloutas and Peter Caloutas, are the trustees of a discretionary trust known as the Caloutas Family Trust (CFT) established in October 1995.
CFT has operated various businesses and owned various properties including 366-368 Maroondah Highway, Healesville where Ampol Foodary Healesville is located.
The trustees of CFT had paid land tax for three of their properties, including the Healesville property, at individual land tax rates for the 2014, 2015 and 2016 land tax years.
After they hired a new accountant, they discovered the underpayment of land tax, and started paying the land tax at trust surcharge rates, which is four times higher than the individual land tax rates.
In March 2018, the Commissioner of State Revenue noticed the underpayment of land tax for prior years as the CFT was reporting rental income for its three properties in the trust rather than in the names of the registered proprietors of those properties.
This was contrary to the way in which the trustees had previously been assessed for land tax purposes.
On 21 January 2019, the commissioner reassessed the trustees’ land tax liabilities for the 2014, 2015 and 2016 land tax years to include land tax, at the higher rates applicable to land held by trust, on the additional three properties.
The reassessments also included penalty tax, imposed at a rate of 20 per cent for each land tax year although there was a further reassessment in respect of the 2014 land tax year to remit the penalty tax for that year in full on 16 July 2021.
While Mr Nick Caloutas, who represented the trustees at the hearing, accepted that the trust had recorded rental income relating to all three properties in its tax returns, he claimed it was a result of an error made by a former accountant for the family.
He also pointed out the language barrier and lack of financial acumen his parents had as they were Greek immigrants to Australia and he contended that the penalty tax should be remitted because the trustees had done nothing wrong.
Mr Nick Caloutas submitted that the new accountant’s letter should be given weight as it had been acted on, in terms of rectification of the trust’s tax returns for the 2017 and 2018 financial years, suggesting that it was not possible to go back further.
The commissioner contended that the reassessments ought to be confirmed because the trustees have not discharged their onus of proof to establish that they did not own the properties in their capacity as trustees of the trust.
Further, the commissioner submitted there was no basis to remit the penalty tax because there was no evidence that the trustees took reasonable care or that the relevant defaults arose from circumstances beyond their control.
“In all the circumstances, if the reassessments were not set aside, I would have exercised the discretion in section 35 to remit the penalty tax from 20 per cent to five per cent,” the VCAT decision reads.
