After the unfavourable Victorian Civil and Administrative Tribunal (VCAT) decision in Tao v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 637, Mr Tao sought leave to appeal the decision to the Victorian Supreme Court (VSC). Accordingly, the VSC considered this appeal in Tao v Commissioner of State Revenue [2025] VSC 831.
All references will be to the Duties Act 2000 (Vic) unless stated otherwise.
Section 82 of the Duties Act
Broadly, s 82 enables the Commissioner to deem a person to have made a relevant acquisition in a private landholder (including acquiring an interest in a trust or in a company) if that person acquires control over the landholder other than by a relevant acquisition. The deemed acquisition is 100%, unless the Commissioner determines a lesser percentage is appropriate.
A ‘landholder’, is an entity that holds land in Victoria worth $1 million or more.
Importantly, ‘control’, under s 82(2), is where ‘a person acquires the capacity to determine or influence the outcome of decisions about the private landholder’s financial and operating policies’. This considers both enforceable rights and actual/de facto influence.
Facts of Tao and VCAT decision
The matter involved a unit trust with Victorian land holdings exceeding $1 million. The corporate trustee had a change in control when one of the unitholders, Mr Tao, became the sole director and shareholder of the trustee company. Importantly, no units in the trust were acquired or transferred and beneficial ownership of the land did not change.
The SRO imposed landholder duty on the basis that Mr Tao acquired control over the trust as he had the ability to influence key financial and operating policy decisions. In assessing landholder duty, the SRO relied on s 82.
The outcome of the VCAT decision was that VCAT upheld the SRO’s duty assessment, albeit reducing the duty exposure from 100% to 85% to reflect that Mr Tao already owned 15% of the units in the trust.
For a detailed breakdown of the VCAT decision, see our prior article here.
Outcome of the Victorian Supreme Court decision
The VSC refused to grant leave to appeal the VCAT decision.
Interestingly, the VSC considered that it could only grant the appeal if VCAT erred in its application of the law. Further, it clarified that an appeal from VCAT would not be granted as an opportunity for re-hearing the case on its merits. The VSC provided the following:
The legislative purpose of [the appeal] is to discourage parties from challenging the correctness of a decision of the Victorian Civil and Administrative Tribunal, except where legal error is demonstrable.
The matter comes before the court solely by way of judicial review for the court to correct errors of law by the tribunal but not to examine the record of the tribunal to determine whether some different decision could have been made.
Despite denying Mr Tao’s appeal, the VSC confirmed several key points, namely:
- Section 82 of the DA stands on its own as a basis for the SRO to assess duty and is not confined to anti-avoidance scenarios or artificial arrangements.
- Landholder duty can still apply even without the transfer of any land, units or change in beneficial ownership.
- In determining whether someone has control over a particular entity, eg, a unit trust, being the sole director of its corporate trustee is sufficient, regardless of the ownership of the underlying units.
Impacts for advisers and clients
Prior to the VCAT and VSC decisions in Tao, s 82 was a relatively unknown provision and there was little consideration of duty consequences when changing directors of trustee companies.
For example, it was a common succession planning strategy in family groups to have adult children take over control of key family entities, including companies acting in trustee capacities. This is often done in connection with the parents retiring so that they can still advise their children but no longer have direct control. There are also many other reasons why people might want to change the directors of their trustee companies.
Following the VCAT decision, many in the industry were holding off making any changes in directorship in the hope that the VSC would reject VCAT’s analysis. However, now, with the VSC confirming the nature of s 82, it is critical that clients and advisers:
- review proposed appointments or removals of directors of trustee companies for s 82 DA exposure;
- assess whether any prior changes in the structure confers on anyone control over a landholder, including the ability of one or more persons to influence financial or operational decisions; and
- seek duty advice if unclear whether s 82 DA may apply.
The VSC decision also underscores the importance of considering control, not just ownership, when advising on restructures and internal governance changes.
Appeal the VSC decision
Mr Tao has applied for leave to appeal the VSC decision. However, care should still be taken if you or any of your clients manage unit trusts with corporate trustees that have land holdings in Victoria. In particular, seemingly routine governance updates, such as replacing a director could have substantial duty consequences.
Conclusion
The Supreme Court’s decision in Tao confirms that the scope of s 82 is broader than many advisers may have assumed. Changes to directors or shareholders of a trustee company may trigger duty, even where unit holdings or beneficial ownership of land remain unchanged. It also reinforces that ‘who controls’ a landholder can be just as important as ‘who owns it’, and that even routine corporate changes may have unexpected duty consequences.
Further guidance from the State Revenue Office will be important, but in the meantime, the VSC decision serves as a clear warning that control-based duty risks should not be overlooked.
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2001 (Cth).
