The impact of this case on ATO policy is discussed in Decision Impact Statement: Commissioner of Taxation v Landcom (VID 315 of 2022).

Landcom v FC of T

Judges:
Thawley J

Court:
Federal Court of Australia

MEDIA NEUTRAL CITATION: [2022] FCA 510

Judgment date: 9 May 2022

Thawley J:

INTRODUCTION

1. The applicant ( Landcom ) purchases, sells and develops real property. Landcom is a State owned corporation pursuant to s 20A of and Schedule 5 to the State Owned Corporations Act 1989 (NSW). It was established by s 5(1) of the Landcom Corporation Act 2001 (NSW) (the Landcom Act ). It was common ground that Landcom is a State for the purposes both of s 114 of the Constitution and the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act ) - see:
Deputy Commissioner of Taxation v State Bank of New South Wales [1992] HCA 6; (1992) 174 CLR 219;
SGH Ltd v Commissioner of Taxation [2002] HCA 18; (2002) 210 CLR 51.

2. Landcom applied for a private ruling from the respondent (the Commissioner ) about the operation of Item 4 in the table to s 75-10(3) of the GST Act with respect to an identified "scheme", namely Landcom's proposed sale of certain land. The Commissioner's opinion, expressed in the ruling, was unfavourable to Landcom. Landcom objected against the ruling under s 359-60(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) ( TAA 1953 ). The Commissioner disallowed the objection. Landcom then instituted these proceedings, being an "appeal" against the objection decision in the original jurisdiction of the Court under s 14ZZ(1)(a)(ii) of the TAA 1953.

3. Despite the Commissioner having apparently issued a private ruling and having apparently made an objection decision, the Commissioner contended that he was not authorised to do either of those things. It was submitted that these things had been done as a matter of mere "courtesy" to provide guidance to Landcom. The Commissioner did not adduce evidence in support of these contentions. Nothing that occurred at the time suggests that the Commissioner considered he was not authorised to make the private ruling or make the objection decision.

4. The Commissioner contended that this Court had no jurisdiction to entertain the appeal, there being no "matter" which could be the subject of the Court's jurisdiction, because the dispute between Landcom and the Commissioner as to the correct operation of the GST Act could not give rise to the determination of any immediate right or liability and was merely hypothetical. At the heart of this contention is the fact that s 114 of the Constitution prohibits the Commonwealth imposing "any tax on property of any kind belonging to a State".

5. The proceedings were listed for hearing both on the question of jurisdiction and on the underlying issue which would require determination if the Court were to conclude that it did have jurisdiction.

6. For the reasons which follow: (a) the Court has jurisdiction; and (b) the opinion expressed by the Commissioner about the scheme as identified by the Commissioner in his ruling was wrong. Landcom's appeal must therefore be allowed.

7. These reasons are structured as follows:

(1) first, the relevant background facts are summarised;
(2) secondly, the background relevant to the jurisdictional issue is explained;
(3) thirdly, the legislative context relevant to the (notional) GST issue is explained as is the legislative context relevant to the private ruling regime;
(4) fourthly, the question whether this Court has jurisdiction is addressed; and
(5) finally, the correctness of the Commissioner's opinion, as expressed in his ruling, is addressed.

BACKGROUND FACTS

8. The central facts are as follows. Landcom was the registered proprietor of a freehold interest in a number of lots of land which it intended to sell. Each lot was described in a separate Certificate of Title. The various lots were grouped together for the purposes of preparing two contracts of sale:

• Twelve lots were grouped into " Property B1 " and were the subject of Contract B1 .
• Four lots (Lots L, M, N and P (the Lots )) were grouped into " Property B2 " and were the subject of Contract B2 . Lot P was separated from Lots L, M and N by a train line. Lot P was connected to Lot N by a private access road that was part of Lot P and which lead through a tunnel under the rail line.

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The lots have been held by the State of New South Wales since before 1 July 2000, when the GST was introduced. The lots were previously owned by the New South Wales Land and Housing Corporation ( LAHC ). On 1 January 2002, the lots were transferred from LAHC to Landcom pursuant to an order of the Minister made under s 17 of the Landcom Act.

10. A number of the lots had been used for the purpose of farming activities, although these activities had ceased a number of decades before Landcom became the owner of the lots. The lots have also been subject to other human interventions. Lot M, for example, had an aero club for remote control plane enthusiasts, including a runway and a clubhouse.

11. The lots were to be sold to enable a developer to build residential premises, effectively creating a new suburb. The lots were marketed for sale by expression of interest or competitive tender process. The lots were promoted as a single piece of land as part of the same transaction, on the basis that a single buyer would purchase all of the lots.

12. By a put and call option agreement dated 5 November 2015 (as amended), Landcom granted an option to the purchaser, and the purchaser granted Landcom an option to require the purchaser, to purchase the lots comprising Property B1 on the terms of Contract B1, and to purchase the lots comprising Property B2 on the terms of Contract B2. Clause 36.3 of the contract of sale provided that the parties agreed that the "margin scheme" would be applied to work out the GST payable on any taxable supply of property under the contract.

13. On 26 February 2020, Landcom sent a letter to the Commissioner stating that Landcom applied for a private binding ruling pursuant to s 359-10(1) of Sch 1 to the TAA 1953. The ruling application concerned the operation of Item 4 in the table in s 75-10(3) of the GST Act. This section is located within Div 75 of the GST Act. Where it applies, Div 75 allows use of a "margin scheme" to bring taxable supplies of freehold interests in land, stratum units and long-term leases within the GST system. GST is calculated only on the "margin" for the supply. Item 4 applies if the following circumstances apply to the supply:

The supplier is the Commonwealth, a State or a Territory and has held the interest, unit or lease since before 1 July 2000, and there were no improvements on the land or premises in question as at 1 July 2000.

14. If those circumstances apply, and an "approved valuation" as at the day specified in the table has been made, then the "margin" for the supply is the amount by which the consideration for the supply exceeds the valuation: s 75-10(3). The relevant valuation time for Item 4 is the date of supply. Typically, therefore, where Item 4 applies, there will be no margin because the consideration paid on the date of supply would ordinarily be the market value such that there will not be any "margin".

15. The question of significance for Landcom was the operation of Div 75 in circumstances where four freehold interests in land were sold in one contract: for the purposes of the application of Div 75, was there one supply of all of the lots the subject of Contract B2 or single supplies of each of Lots L, M, N and P? If the sale of Property B2 was a single supply for Div 75 purposes, then any improvement on any one of the lots would be sufficient to take the supply of all of the land outside of the exception provided by Item 4; any improvement on one lot would 'taint' all of the lots. If the transaction involved separate supplies of individual freehold interests in land, then some of the lots might fall within the exception and some might not.

16. The questions about which the Commissioner's opinion was sought by the private ruling application addressed only one aspect of Item 4 in the table to s 75-10(3) - namely, whether the sale of the freehold interests was to be treated as a single "supply". Once that matter is addressed, it would be necessary to determine whether there were improvements on the land or premises the subject of the relevant supply or supplies as at 1 July 2000. Landcom requested that the Commissioner not consider whether there were improvements on the land and that matter was not ruled upon.

17. The Commissioner responded to the application for the private ruling on 27 July 2020. The Commissioner issued to Landcom a signed document which stated that it was a

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private ruling. Nothing in the document indicated it was anything other than a private ruling. The first page of the ruling stated that Landcom had "60 days (longer in some cases) to object to the private ruling if you disagree with it".

18. Counsel for the Commissioner described this document as a "purported" private ruling or a "notional" private ruling; it was said to have been furnished to Landcom only as a "courtesy". Nothing in the document suggested any such thing. It was said that the Commissioner has taken the view, in this and other situations involving State entities, that he will issue a "notional" private ruling when requested to do so, even though the document purporting to be a "private ruling", and stating that it is a "private ruling", is not (according to the Commissioner) in fact a private ruling at all. There was no evidence that the Commissioner communicated this position to any entity to which a "purported" private ruling was given. The Commissioner has adopted this position notwithstanding that Item 5 in s 350-10 of Sch 1 to the TAA 1953 (which replaced s 357-100) provides that the production of a private ruling is conclusive evidence that the ruling was properly made. When this was raised in argument, the Commissioner submitted that the conclusive evidence provision cannot apply to a document which, although purporting to be and issued as if it were a private ruling, is not in fact a private ruling.

19. For the sake of simplicity, I will refer to the document the Commissioner issued on 27 July 2020 as "the ruling" noting that its status as a private ruling under the TAA 1953 is contentious.

20. The ruling the Commissioner issued set out the third and fourth questions asked by Landcom (being the two questions which relate to Property B2) and the Commissioner's answers as follows:

Question 3

For the purposes of working out whether the circumstances specified in the second column of item 4 of the table in subsection 75-10(3) of the GST Act apply, will the sale of the freehold interests in the Lots comprising Property B2 pursuant to Contract B2 be a single supply?

Answer

Yes. Item 4 of the table in subsection 75-10(3) of the GST Act requires identification of the land that is the subject matter of the supply. For item 4 purposes, the supplies of the freehold interests in the Lots comprising Property B2 pursuant to Contract B2 is a single supply of land as the subject matter of the supply is the totality of Property B2.

Question 4

For the purposes of working out whether the circumstances specified in the second column of item 4 of the table in subsection 75-10(3) of the GST Act apply, will the sale of the freehold interest in each Lot comprising Property B2 pursuant to Contract B2 be a single supply?

Answer

No. Item 4 of the table in subsection 75-10(3) of the GST Act requires identification of the land that is the subject matter of the supply. For item 4 purposes, the supplies of the freehold interests in the Lots comprising Property B2 pursuant to Contract B2 is a single supply of land as the subject matter of the supply is the totality of Property B2.

21. Landcom did not object to the Commissioner's rulings on the first two questions asked by Landcom relating to Property B1. In this regard, Landcom observed that Contract B1 had settled and GST returns had been lodged with respect to the supply or supplies before Landcom objected.

22. On 24 August 2020, Landcom lodged an objection to the private ruling. Consistently with his approach as to the status of the ruling, the Commissioner contended in these proceedings that this was a "purported" objection only.

23. By an objection decision dated 24 February 2021, the Commissioner disallowed Landcom's objection. The Commissioner submitted this was a "purported" objection decision. The status of the objection decision as unauthorised, or as notional or purported, was not discernible from the content of it.

24. Landcom lodged an "appeal" to this Court against the objection decision under s

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14ZZ of the TAA 1953, seeking to invoke the Court's original jurisdiction to hear and determine an appeal against an objection decision. The relief sought was that the objection decision be set aside and the Commissioner rule on questions 3 and 4 by answering "No" and "Yes", respectively.

25. At the first case management hearing, the Commissioner submitted that there was no "matter" to invoke this Court's jurisdiction and that the question of jurisdiction should be heard and determined first. Taking into account that little if any evidence was required in the proceedings, and that all issues could likely be fully argued in a day, the proceedings were listed for hearing on both the question of jurisdiction and the underlying issue which would require determination if the Court concluded that it did have jurisdiction.

BACKGROUND TO THE JURISDICTIONAL ISSUE

GST cannot be and is not imposed on property of States (Landcom)

26. Section 114 of the Constitution prohibits the Commonwealth imposing "any tax on property of any kind belonging to a State". The prohibition in s 114 of the Constitution is reflected in s 5(1) of the A New Tax System (Goods and Services Tax Imposition-General) Act 1999 (Cth) ( General Imposition Act ), s 3(1) of which imposes liability for GST. Section 5 provides:

5 Act does not impose a tax on property of a State

(1) This Act does not impose a tax on property of any kind belonging to a State.

(2) Property of any kind belonging to a State has the same meaning as in section 114 of the Constitution.

27. As Perram J explained in
TT-Line Company Pty Ltd v Federal Commissioner of Taxation [2009] FCAFC 178; (2009) 181 FCR 400 at [66] the prohibition in s 114 of the Constitution posed a problem because, unless the States and the Commonwealth also operated within the GST system, that system could not work in the desired way:

… [The] prohibition [in s 114 of the Constitution] made impossible the imposition by the Commonwealth upon the States of a tax on supplies of the kind contemplated in the legislation introducing the GST. At least in relation to the provision of supplies of property, the interposition of a State at any point along the supply chain would have disrupted the process of [input tax] credits upon which the system depends. The introduction of the GST could not practically proceed therefore unless the States voluntarily agreed to subject themselves to it …

28. The difficulty to which Perram J referred is as follows. GST is a value added system of consumption tax. It is generally payable at each stage of commercial dealings on the making of "supplies". An entity which acquires goods or services as a result of a "taxable supply" made to it (the "recipient" of the supply) is allowed an "input tax credit" for the GST paid on "creditable acquisitions". Div 11 of the GST Act defines the concept of "creditable acquisitions" and includes a requirement that the acquirer of the goods and services made the acquisition in the course of carrying on an enterprise and not as a consumer: s 11-15 of the GST Act.

29. Although the acquirer (the recipient of the supply) pays GST as part of the consideration for the supply, it is the supplier who is liable to pay GST to the Commissioner on the supplies it makes: s 9-40 of the GST Act.

30. The system of input tax credits seeks to ensure that, although GST is a multi-stage tax, tax is only payable by each supplier in a chain on the value added by that supplier, and that it is the consumer who ultimately bears the burden of the tax. This latter object is achieved because consumers (people who, or entities which, do not make creditable acquisitions in the course of carrying on an enterprise) cannot claim input tax credits in respect of the GST paid when acquiring goods or services.

31. Because Landcom cannot be made liable to GST on a supply of "property" within the meaning of s 114 of the Constitution, it cannot include GST in the consideration for the supply of the property. The recipient of the supply (the acquirer of the property) can claim an input tax credit in respect of any "creditable acquisition" the entity makes - see: ss 11-5 and 11-20 of the GST Act. The amount of the input tax credit for

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a "creditable acquisition" is an amount equal to the GST payable on the supply of the thing acquired (unless it is "partly creditable"): s 11-25 of the GST Act. Absent some solution, the recipient of a supply of "property" from a State would not be able to claim an input tax credit because "GST was not payable on the supply of" the property: s 11-25 of the GST Act.

32. In order for the GST system to work as intended, there were at least two issues which it was desirable to, and which were, addressed:

(1) First, the States and Territories (and the Commonwealth) agreed to participate in the GST system "as if they were subject to the GST legislation" and pay GST voluntarily, by making "notional" payments of GST.
(2) Secondly, for the purposes of the recipient of a supply from a State or Territory or the Commonwealth:
- (a) the supplies either had to fall within the concept of a "taxable supply" or be treated as a "taxable supply"; and
- (b) the amount of GST for which the State, Territory or Commonwealth is notionally liable on the supply had to be treated as the amount of GST payable on the supply.

33. These two matters are expanded upon next.

The States and the Commonwealth voluntarily pay "notional GST"

34. In June 1999, the Commonwealth and the various States and Territories entered into the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (the First Intergovernmental Agreement ). Clause 17 provided that the parties (and local government and their statutory corporations and authorities) intended to operate as if they were subject to the GST legislation:

The Parties intend that the Commonwealth, States, Territories and local government and their statutory corporations and authorities will operate as if they were subject to the GST legislation. They will be entitled to register, will pay GST or make voluntary or notional payments where necessary and will be entitled to claim input tax credits in the same way as non-Government organisations. All such payments will be included in GST revenue.

35. The First Intergovernmental Agreement was replaced in December 2008 by an agreement between the Commonwealth, the States and the Territories entitled "Intergovernmental Agreement on Federal Financial Relations" (the Second Intergovernmental Agreement ). Clause A28 of Schedule A is in the same terms as clause 17 of the First Intergovernmental Agreement.

36. It was not contentious that the First and Second Intergovernmental Agreements contain statements of political intent and do not contain terms from which it should be concluded that either agreement creates legal rights or obligations - see, for example, in the context of other intergovernmental agreements:
South Australia v Commonwealth [1962] HCA 10; (1962) 108 CLR 130 at 149, 152, 153; and
Bob Brown Foundation Inc v Commonwealth of Australia [2021] FCAFC 5; (2021) 283 FCR 225 at [48]-[49].

37. The various States and Territories enacted legislation to implement the First Intergovernmental Agreement. Relevantly for present purposes, New South Wales enacted the Intergovernmental Agreement Implementation (GST) Act 2000 (NSW) ( NSW Implementation Act ).

38. The First Intergovernmental Agreement is defined in s 3 of the NSW Implementation Act and set out in Schedule 1 to the Act. Section 4 of the NSW Implementation Act adopts the language of "intention" found in cl 17 of the First Intergovernmental Agreement. It provides:

4 Intergovernmental Agreement

(1) A copy of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations is set out in Schedule 1.

(2) It is the intention of the State to comply with, and give effect to, the Intergovernmental Agreement.

39. Section 5 of the NSW Implementation Act provides:

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5 Payment of GST equivalents by State entities

A State entity may pay to the Commissioner of Taxation amounts representing amounts that would have been payable for GST if:

(a) the imposition of that GST were not prevented by section 114 of the Commonwealth Constitution, and

(b) section 5 of each of the GST Imposition Acts had not been enacted,

and may do things of a kind that it would be necessary or expedient for it to do if it were liable for that GST.

40. The phrase "GST Imposition Acts" is defined in s 3 in the following way:

"GST Imposition Acts" means the following Acts of the Commonwealth:

A New Tax System (Goods and Services Tax Imposition-Customs) Act 1999

A New Tax System (Goods and Services Tax Imposition-Excise) Act 1999

A New Tax System (Goods and Services Tax Imposition-General) Act 1999

41. The A New Tax System (Goods and Services Tax Imposition - Excise) Act 1999 (Cth) and the A New Tax System (Goods and Services Tax Imposition - Customs) Act 1999 (Cth) separately impose the GST to the extent it is a "duty of excise" or a "duty of customs", respectively, within the meaning of s 55 of the Constitution.

42. The end result is that the States and Territories have voluntarily subjected themselves to "notional GST", albeit their agreement to pay "notional GST" does not give rise to any legal liability to pay and is not capable of enforcement by the Commonwealth by reason of s 114 of the Constitution and s 5 of the General Imposition Act.

43. It was not contentious that the provisions of the NSW Implementation Act do not create any obligations, enforceable by the Commissioner, to pay notional GST or any other notional tax.

44. The Commonwealth also pays "notional GST". Section 177-1(1) of the GST Act, again adopting the language of "intention" found in the Intergovernmental Agreements, provides that the Commonwealth is not liable for GST but intends to be notionally liable to pay GST and notionally entitled to input tax credits:

(1) The Commonwealth and *untaxable Commonwealth entities are not liable to pay GST payable under this Act. However, it is the Parliament's intention that the Commonwealth and untaxable Commonwealth entities should:
- (a) be notionally liable to pay GST payable under this Act; and
- (b) be notionally entitled to input tax credits arising under this Act; and
- (c) notionally have *adjustments arising under this Act.

45. The notional GST voluntarily paid by the States, Territories and the Commonwealth is calculated in accordance with the GST Act which expressly contemplates the participation of the States, Territories and the Commonwealth in the GST system. The GST Act contains provisions which enable calculation of the amount of "notional GST" which may be included in the consideration for a supply of property and which the States, Territories and Commonwealth intend voluntarily to pay to the Commissioner. Some of these provisions are expressly directed to the States, Territories and the Commonwealth, but the general provisions of the GST Act also apply.

46. The "notional GST" voluntarily paid to the Commissioner is also an integer in the calculation of GST revenue granted to the States under the Federal Financial Relations Act 2009 (Cth) ( FFRA ). The FFRA replaced parts of the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 (Cth). Under the FFRA each State is entitled to the payment of a grant using a formula calculated with reference to "GST revenue". Under s 6, "GST revenue" relevantly includes:

… the payments made to the Commissioner of Taxation representing amounts of GST that would have been payable if the Constitution did not prevent tax from being imposed on property of any kind belonging to a State and section 5 of the GST Imposition Acts had not been enacted …

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For recipients, the "notional GST" included in the consideration for a supply is deemed to the GST payable on a taxable supply

47. The problem for acquirers of "property" (the recipients of supplies) from a State is resolved by s 177-3 of the GST Act which applies the GST law to the acquirer as if the supply had been a "taxable supply" and the amount of GST for which the State was notionally liable was the amount of GST payable on the supply to the acquirer. Section 177-3 provides:

If:

(a) an *Australian government agency, other than the Commonwealth or an *untaxable Commonwealth entity, makes a supply to another entity; and

(b) the agency is not liable for GST on the supply, but an amount relating to the agency's notional liability for GST on the supply is included in the *consideration for the supply;

the *GST law applies in relation to the other entity as if:

(c) the supply were a *taxable supply to that entity; and

(d) the amount of GST for which the agency is notionally liable on the supply is the amount of GST payable on the supply.

48. An "*Australian government agency", referred to in s 177-3(a), includes a State and an authority of a State - see: s 195-1 of the GST Act; s 995-1 of the Income Tax Assessment Act 1997 (Cth) ( ITAA 1997 ).

49. The deeming of a supply to be a "taxable supply" is only necessary if the supply is not otherwise a "taxable supply". As will be mentioned later, the parties were agreed that the supply or supplies the subject of these proceedings would fall within the definition of a "taxable supply" within the meaning of s 9-5 of the GST Act, even though the supplies would not in fact be taxable. A supply can be a "taxable supply" even if GST cannot be or is not imposed in relation to the supply.

50. An equivalent provision exists to address supplies by the Commonwealth in respect of which it is notionally liable to pay GST. Section 177-1(4) of the GST Act provides:

(4) If the Commonwealth or an *untaxable Commonwealth entity is notionally liable to pay GST for a supply made to another entity (other than the Commonwealth or an untaxable Commonwealth entity), the *GST law applies in relation to the other entity as if:
- (a) the supply were a *taxable supply to that entity; and
- (b) the amount of GST for which the Commonwealth or an untaxable Commonwealth entity is notionally liable for the supply is treated as the amount of GST payable for the supply.

51. In summary, so far as concerns acquirers of property from a State, the difficulty posed by s 114 of the Constitution to the intended operation of the GST system has been avoided by:

(1) ensuring that, if a supply were not otherwise a "taxable supply" within the meaning of the definition in s 9-5 of the GST Act, the relevant supply would be treated as if it were a "taxable supply": s 177-1(3)(c); s 177-1(4)(a); and
(2) treating the "notional GST" included in the consideration for the supply as if it were the GST payable on the supply: s 177-1(3)(d); s 177-1(4)(b).

52. Whilst the State's liability for GST is "notional" in the sense that GST cannot be imposed on the State, the consequences for the acquirer are not in any way notional. It is not possible to determine the correct operation of the GST Act to the acquirer of property from a State without determining the correct operation of the GST Act with respect to the State's notional GST liability. It is necessary to determine "the amount of GST for which the [State] agency is notionally liable" in order to identify the "the amount of GST payable on the supply" for the purposes of ascertaining the legal consequences to the acquirer: s 177-3(d) of the GST Act.

53. Likewise, it is necessary to determine the amount of GST for which the Commonwealth "is notionally liable" in order to determine the amount which "is treated as the amount of GST payable for the supply" for the purposes of ascertaining the GST consequences to an

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acquirer from the Commonwealth: s 177-1(4)(b) of the GST Act.

54. Assuming the acquirer of a supply from the State or Commonwealth is otherwise entitled to input tax credits, the acquirer would lawfully claim input tax credits because the supply either is a "taxable supply" or is deemed to be a "taxable supply" and the notional GST is treated as GST on the supply. To the extent the acquirer's dealings give rise to a GST liability any such liability is a "tax-related liability" enforceable as a debt due to the Commonwealth, payable to the Commissioner: ss 250-10(2) (Item 5) and 255-5 of Sch 1 to the TAA 1953.

Landcom's participation in the GST system

55. Landcom is an "entity" within the meaning of s 184-1(1)(b) of the GST Act as a body corporate and within s 184-1(1)(d) as part of a body politic. The activities carried on by Landcom fall within the definition of "enterprise" within the meaning of s 9-20(1)(g) of the GST Act. As an "entity" that carries on an "enterprise", Landcom is entitled to register for GST within Subdivision 25-A of the GST Act. Landcom is registered for GST.

56. As an entity registered for GST, Landcom is required to give the Commissioner GST returns for each tax period: s 31-5 of the GST Act. Section 31-5 provides:

Who must give GST returns

(1) If you are *registered or *required to be registered, you must give to the Commissioner a *GST return for each tax period.

(2) You must give the return whether or not:

(a) your *net amount for the tax period is zero; or

(b) you are liable for the GST on any *taxable supplies that are attributable to the tax period.

57. The parties were agreed that a supply or supplies by Landcom of Property B2 would be a "taxable supply" within the meaning of s 9-1 of the GST Act. This is because (see [66] below):

(1) the supply was or would be for consideration - see: s 9-5(a) of the GST Act;
(2) the supply was or would be made in the course or furtherance of an enterprise carried on by Landcom - see: s 9-5(b) of the GST Act;
(3) the relevant land is located in Australia, meaning that the supply was or would be "connected with the indirect tax zone", as that term is defined in s 9-25(4) - see: s 9-5(c) of the GST Act;
(4) Landcom is registered for GST - see: s 9-5(d) of the GST Act; and
(5) the sale would not be "GST-free", as that term is explained in s 9-30(1) and Div 38 of the GST Act, and would not be "input taxed" as that term is explained s 9-30(2) and Div 40 of the GST Act - see: the tail to s 9-5 of the GST Act.

58. Landcom has provided GST returns in which it does not distinguish between GST which it is required by the relevant taxation laws to pay and notional GST which it pays voluntarily. There is no suggestion in the evidence that the Commissioner has, in the performance of his duties of administration, raised any difficulty with this approach. Landcom has not included notional GST in a GST return in respect of the supply of any land the subject of Contract B2.

59. As noted above, the GST Act contemplates Landcom's participation in the GST system not only as an entity liable for GST in relation to certain supplies, but also as an entity which might: (a) include a notional liability for GST in the consideration for supplies it makes; and (b) voluntarily pay to the Commissioner notional GST in relation to those supplies.

60. As also noted above, the notional liability for GST which Landcom might include in the consideration for its supplies affects other participants in the GST system. The notional GST included by Landcom in the consideration for a supply is treated as GST payable on a taxable supply by the recipient of the supply (the acquirer). The recipient of the supply can therefore claim an input tax credit for the notional GST, assuming the relevant conditions for claiming input tax credits are met.

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LEGISLATIVE CONTEXT

GST and the "margin scheme"

61. The GST was introduced on 1 July 2000. The terms of the legislation and the context reveal that it was intended only to tax value added after 30 June 2000.

62. Chapter 1 of the GST Act is entitled "Introduction". Chapter 2 of the GST Act is entitled "The basic rules". Chapter 4 is entitled "The special rules".

63. Within Ch 1, s 2-15 provides:

2-15 The special rules (Chapter 4)

Chapter 4 has special rules which, in particular cases, have the effect of modifying the basic rules in Chapter 2.

Note: There is a checklist of special rules at the end of Chapter 2 (in Part 2-8).

64. Within Ch 2, s 9-99 provides:

9-99 Special rules relating to the amount of GST on taxable supplies

Chapter 4 contains special rules relating to the amount of GST on taxable supplies, as follows:

Checklist of special rules

Item For this case … See:

… … …

5 Sale of freehold interests etc. Division 75

65. The reference in the note to s 2-15 to a "checklist of special rules" is a reference to s 37-1 in Part 2-8. This relevantly includes:

Part 2-8-Checklist of special rules

Division 37-Checklist of special rules

37-1 Checklist of special rules

The provisions set out in the table contain special rules relating to the matters indicated.

Checklist of special rules

Item For this case … See:

… … …

28 Sale of freehold interests etc. Division 75

66. The basic rules in Ch 2 include the following. GST is payable on "taxable supplies": s 7-1(1). A "taxable supply" is defined in s 9-5 to mean, inter alia, "a supply for consideration". Section 9-5 provides:

9-5 Taxable supplies

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

67. "Supply" is defined in s 9-10(1) to mean "any form of supply whatsoever". Section 9-10(2)(d), which does not limit subsection (1), provides that a "supply" includes "a grant, assignment or surrender of real property".

68. "Real property" is defined in s 195-1 of the GST Act. It provides:

real property includes:

(a) any interest in or right over land;

(b) a personal right to call for or be granted any interest in or right over land; or

(c) a licence to occupy land or any other contractual right exercisable over or in relation to land.

69. Section 9-10(2)(h) provides that a supply can include "any combination of any 2 or more of the matters referred to in paragraphs (a) to (g)". Section 9-80 contemplates that a supply (referred to as the "actual supply") can be partly a "taxable supply" and partly a supply

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that is GST-free or input taxed. That is, a supply can itself be made of multiple supplies.

70. Chapter 4 begins with Division 45 which is in the following terms:

Chapter 4 - The special rules

Division 45-Introduction

45-1 What this Chapter is about

This Chapter sets out the special rules for the GST. The special rules apply only in particular circumstances, and are generally quite limited in their scope.
The special rules modify the application of the basic rules for the GST in Chapter 2.

Note 1: The special rules that modify each group of basic rules in Chapter 2 are specifically identified in tables located at the end of the Divisions and Subdivisions in Chapter 2. In addition, a checklist of special rules is set out in Part 2-8.

Note 2: This section is an explanatory section.

71. The first of the "special rules" in Ch 4 is contained in Div 75 which provides for a "margin scheme". Section 75-1 provides:

Division 75 - Sale of freehold interests etc.

75-1 What this Division is about

This Division allows you to use a margin scheme to bring within the GST system your taxable supplies of freehold interests in land, of stratum units and of long-term leases.

72. The Div 75 margin scheme is only available for specific types of supplies of "real property", namely those supplies made in the ways referred to in s 75-5(1):

75-5 Applying the margin scheme

(1) The *margin scheme applies in working out the amount of GST on a *taxable supply of *real property that you make by:

(a) selling a freehold interest in land; or

(b) selling a *stratum unit; or

(c) granting or selling a *long-term lease;

if you and the *recipient of the supply have agreed in writing that the margin scheme is to apply.

73. A "freehold interest in land" is not defined. It was common ground that each Certificate of Title gives rise to a separate freehold interest land.

74. The margin scheme is intended to ameliorate what might otherwise be regarded as an undesirable operation of the GST Act on certain business activities. Two "unfairnesses" were identified by the Full Court in
Brady King Pty Ltd v Federal Commissioner of Taxation [2008] FCAFC 118; (2008) 168 FCR 558 at [8] and [9]:

[8] The Margin Scheme is directed towards developers. Commonly developers acquire land from private owners. Those owners are not liable for GST on the supply of land to the developer because the supply is not made in the course or furtherance of an enterprise and the owners are not registered or required to be registered under the GST Act. Because the owners are not liable for GST on their supply, application of the general scheme of the GST Act would mean that the developer, as acquirer, would not be entitled to any input tax credit on the acquisition of the land. The developer would have to pay GST on the whole value of the developed property that it supplied to the ultimate purchasers.

[9] Another potential unfairness would arise if the property the subject of supply were acquired by the taxpayer before 1 July 2000. It is a fundamental feature of the GST regime that it only taxes value added after 30 June 2000. Hence Div 75 provides an optional basis for taxpayers supplying real estate of a kind referred to in s 75-5(1)(a), s 75-5(1)(b) or s 75-5(1)(c). They can elect to pay GST on the "margin" as defined in s 75-10(2).

75. It is the second "unfairness" which is of particular relevance in these proceedings. An example of how this was addressed is furnished by s 75-10(3) which was intended to "ensure that GST is only payable on the value added after the commencement of the GST system" - see: Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 ( GST Explanatory Memorandum ) at [6.100].

76. Section 75-10(3) of the GST Act includes:

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75-10 The amount of GST on taxable supplies

(1) If a *taxable supply of *real property is under the *margin scheme, the amount of GST on the supply is 1/11 of the *margin for the supply.

(2) Subject to subsection (3) and section 75-11, the margin for the supply is the amount by which the *consideration for the supply exceeds the consideration for your acquisition of the interest, unit or lease in question.

(3) Subject to section 75-11, if:

(a) the circumstances specified in an item in the second column of the table in this subsection apply to the supply; and

(b) an *approved valuation of the freehold interest, *stratum unit or long-term lease, as at the day specified in the corresponding item in the third column of the table, has been made;

the margin for the supply is the amount by which the *consideration for the supply exceeds that valuation of the interest, unit or lease.

Use of valuations to work out margins

Item When valuations may be used Days when valuations are to be made

1 The supplier acquired the interest, unit or lease before 1 July 2000 and items 2, 3 and 4 do not apply 1 July 2000

2 The supplier acquired the interest, unit or lease before 1 July 2000, but does not become *registered or *required to be registered until after 1 July 2000. The date of effect of your registration, or the day on which you applied for registration (if it is earlier).

2A The supplier acquired the interest, unit or lease on or after 1 July 2000, but the supply to the supplier:
(a) was *GST-free under subsection 38-445(1A); and
(b) related to a supply before 1 July 2000, by way of lease, that would have been GST-free under section 38-450 had it been made on or after 1 July 2000. 1 July 2000

3 The supplier is * registered or * required to be registered and has held the interest, unit or lease since before 1 July 2000, and there were improvements on the land or premises in question as at 1 July 2000. 1 July 2000

4 The supplier is the Commonwealth, a State or a Territory and has held the interest, unit or lease since before 1 July 2000, and there were no improvements on the land or premises in question as at 1 July 2000. The day on which the *taxable supply takes place

(3A) If:

(a) the circumstances specified in item 4 in the second column of the table in subsection (3) apply to the supply; and

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(b) there are improvements on the land or premises in question on the day on which the *taxable supply takes place;

the valuation is to be made as if there are no improvements on the land or premises on that day.

77. Where taxpayers register for GST at 1 July 2000 and hold real property at that date, the "margin" is the amount by which the sale price for the freehold interest in the land exceeds the value of that interest as at 1 July 2000: item 1. For taxpayers that register for GST after 1 July 2000, the margin is calculated by reference to the value as at registration rather than as at 1 July 2000: item 2.

78. Where the supplier of an interest specified in s 75-5(1) (including a freehold interest) is the Commonwealth, a State or a Territory, and the interest has been held since before 1 July 2000, and there were no improvements on the land as at 1 July 2000, then the margin is the amount by which the sale price for the freehold interest in the land exceeds the value of that interest as at the day of the supply: item 4. The GST Explanatory Memorandum at [6.108] explained that the effect of the provision "is that the value of the land is not subject to GST (that is, it is consistent with subdivision [38-L] [later 38-N] which provides that the sale of unimproved land held by an Australian government agency will be GST-free)".

79. The evident intent is that GST is imposed only on the value of any improvements made to the land after 1 July 2000 and not on the value of the land as at 1 July 2000 or any increase in value in that land not attributable to improvements.

80. Item 4 operates in conjunction with s 38-445 which provides that a supply by a State of a freehold interest in land on which there are no improvements is GST-free:

Subdivision 38-N-Grants of land by governments

38-445 Grants of freehold and similar interests by governments

(1) A supply by the Commonwealth, a State or a Territory of land on which there are no improvements is GST-free if:

(a) the supply is of a freehold interest in the land; or

(b) the supply is by way of *long-term lease.

81. Sections 75-10(2) and (3) are subject to s 75-11. Section 75-11 contains special rules applicable where a freehold interest is acquired in particular circumstances, none of which are applicable in the present case.

82. An entity which calculates its margin under one of the items in s 75-10(3) of the GST Act is required to hold an "approved valuation" of the relevant interest as at the day specified in the relevant item: s 75-10(3)(b).

83. Section 75-35 of the GST Act provides that the Commissioner may, by legislative instrument, determine in writing the requirements for making valuations for the purposes of the Division. As discussed further below, the Commissioner has issued legislative instruments which prescribe the valuation methods that must be used where the supplier is a State and Item 4 in the table to s 75-10(3) applies.

Private binding rulings

84. Chapter 5 of Sch 1 to the TAA 1953 is entitled "Administration". Part 5-1 is entitled "The Australian Taxation Office". It includes "Division 356 - General administration of tax laws". Subdivision 356-A, comprising s 356-5, provides that "[t]he Commissioner has the general administration of each indirect tax law".

85. Part 5-5 of Sch 1 is entitled "Rulings". Division 357, within Part 5-5, is entitled "Object and common rules". Subdivision 357-A, entitled "Object of this Part", comprises s 357-5 which includes:

357-5 Object of this part

(1) The object of this Part is to provide a way for you to find out the Commissioner's view about how certain laws administered by the Commissioner apply to you so that the risks to you of uncertainty when you are self assessing or working out your tax obligations or entitlements are reduced.

(2) This object is achieved by:

(a) making advice in the form of rulings by the Commissioner available on a wide

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range of matters and to many taxpayers; and

(b) ensuring that the Commissioner provides rulings in a timely manner; and

(c) enabling the Commissioner to obtain, and make rulings based on, relevant information; and

(d) protecting you from increases in tax and from penalties and interest where you rely on rulings; and

(e) protecting you from decreases in entitlements where you rely on rulings; and

(f) limiting the ways the Commissioner can alter rulings to your detriment; and

(g) giving you protection from interest charges where you rely on other advice from the Commissioner, or on the Commissioner's general administrative practice.

86. Subdivision 357-B provides for common rules applicable to public rulings, private rulings and oral rulings: s 357-50. Section 357-55 includes:

357-55 The provisions that are relevant for rulings

Provisions of Acts and regulations of which the Commissioner has the general administration are relevant for rulings if the provisions are about any of the following:

(a) *tax;

…

(fb) *indirect tax;

…

(g) the administration or collection of those taxes, levies and duties;

…

(j) a *net amount, or the administration of a net amount;

(ja) an *assessed net amount, or the collection or payment of an assessed net amount; …

87. An "indirect tax" (referred to in s 35755(fb)) is defined in s 995-5(1) of the ITAA 1997 to include GST and "indirect tax law" means the "GST law" which has the meaning given by s 195-1 of the GST Act. "GST law" is defined by s 195-1 in the following way:

GST law means:

(a) this Act; and

(b) any Act that imposes GST; and

(c) the A New Tax System (Goods and Services Tax Transition) Act 1999; and

(d) the Taxation Administration Act 1953, so far as it relates to any Act covered by paragraphs (a) to (c); and

(e) any other Act, so far as it relates to any Act covered by paragraphs (a) to (d) (or to so much of that Act as is covered); and

(f) regulations under any Act, so far as they relate to any Act covered by paragraphs (a) to (e) (or to so much of that Act as is covered).

88. The terms "net amount" and "assessed net amount" (referred to in s 357-55(j) and (ja)) are defined in s 995-1 of the ITAA 1997 by reference to the relevant definition in the GST Act. Section 195-1 of the GST Act defines "net amount" by reference to s 17-5, with adjustments if applicable. Section 17-5(1) provides, in summary, that the "net amount" for a tax period is all of the GST included in supplies for the tax period, less input tax credits to which the supplier is entitled. It provides:

(1) The net amount for a tax period applying to you is worked out using the following formula:

GST - Input tax credits

where:

GST is the sum of all of the GST for which you are liable on the *taxable supplies that are attributable to the tax period.

input tax credits is the sum of all of the input tax credits to which you are entitled for the *creditable acquisitions and *creditable importations that are attributable to the tax period.

Note 1: For the basic rules on what is attributable to a particular period, see Division 29.

Note 2: For further rules if you have excess GST for the period, see Division 142.

89.

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The term "assessed net amount" is defined in s 195-1 of the GST Act as "the net amount assessed for the tax period".

90. Section 357-60 of Sch 1 to the TAA 1953 provides:

357-60 When rulings are binding on the Commissioner

(1) Subject to subsection (5), a ruling binds the Commissioner in relation to you (whether or not you are aware of the ruling) if:

(a) the ruling applies to you; and

(b) you rely on the ruling by acting (or omitting to act) in accordance with the ruling.

91. As mentioned above, Item 5 in s 350-10 of Sch 1 to the TAA 1953 (which replaced s 357-100) provides that the production of a private ruling is conclusive evidence that the ruling was properly made.

92. Division 358 of Sch 1 to the TAA 1953 is entitled, and deals with, "Public rulings". Division 359 of Sch 1 to the TAA 1953 is entitled "Private rulings". The Guide to Division 359 provides:

Guide to Division 359

359-1 What this Division is about

A private ruling is an expression of the Commissioner's opinion of the way in which a relevant provision applies, or would apply, to you in relation to a specified scheme. Private rulings are usually made on application by you, our agent or your legal personal representative.
The Commissioner must make the ruling applied for, except in certain cases. If you are entitled to receive a ruling, you can object if the Commissioner takes too long to make it.
The Commissioner must record the ruling in writing and give a copy of it to you. The ruling must include certain details.
If you are dissatisfied with the ruling, you may object to it.

Note: Division 357 has some common rules that affect private rulings.

93. Although "Guides" form part of the relevant acts, the use to which they may be put is restricted - see: s 950-100 and 950-150 of the ITAA 1997.

94. Section 359-5 of Sch 1 to the TAA 1953 provides:

359-5 Private rulings

(1) The Commissioner may, on application, make a written ruling on the way in which the Commissioner considers a relevant provision applies or would apply to you in relation to a specified *scheme. Such a ruling is called a private ruling .
Note: Section 357-55 specifies the relevant provisions.

(2) A *private ruling may cover any matter involved in the application of the provision.

95. As the language of the Guide in s 359-1 confirms, a private ruling has the character of an opinion given by the Commissioner on a particular question, namely the way in which relevant tax legislation applies or would apply to a person in respect of a scheme:
Commissioner of Taxation v McMahon [1997] FCA 1087; (1997) 79 FCR 127 at 140 (Beaumont J);
Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231 at [12] (Logan J);
Commissioner of Taxation v Eichmann [2019] FCA 2155 at [22] (Derrington J). A ruling might be sought in relation to events which have occurred or which are yet to occur, or both.

DOES THE COURT HAVE JURISDICTION?

Summary of Commissioner's principal submissions

96. The Commissioner submitted that the Court does not have jurisdiction to hear Landcom's appeal because "Landcom is 'a State' and … cannot be liable to GST on the sale of property, which means that the Commissioner's opinion, expressed in the purported private ruling, is not relevant to any liability to Commonwealth taxation". In the Commissioner's view, the ruling was no more than a "courtesy" to provide guidance to Landcom and it could not have the status of a "private ruling" for the purposes of Division 359 of Sch 1 to the TAA 1953, which in turn meant that Landcom did not have any objection rights under Part IVC of the TAA 1953 and, consequently, s 14ZZ

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and associated provisions of the TAA 1953 were not properly engaged so as to confer jurisdiction on the Court to hear and determine Landcom's "purported" Part IVC appeal.

97. The Commissioner observed that the Constitution confines the federal jurisdiction that can be conferred on any court to jurisdiction in respect of the "matters" enumerated in ss 75 and 76 of the Constitution. A "matter" must exist in order for there to be a justiciable controversy. The Commissioner submitted that Landcom's purported appeal does not involve a controversy about any legal rights and liabilities under Commonwealth law, which means that there is no "matter" of the kind necessary to enliven the Federal Court's jurisdiction.

98. The Commissioner observed that the Constitution prevents a court from exercising federal jurisdiction to "determine abstract questions of law without the right or duty of any body or person being involved":
In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257 at 267 ( Re Judiciary ). The distinction between a purely abstract (or hypothetical) question and one that involves a "matter", is that a "matter" must involve a real justiciable controversy as to some immediate right, duty or liability to be established by the determination of the Court: Re Judiciary at 265. The Commissioner referred also to:
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Limited [2000] HCA 11; (2000) 200 CLR 591 at [43], [48]-[49] (Gaudron J); [104] (Gummow J); [147] (Kirby J); [183]-[184] (Hayne J);
Abebe v The Commonwealth [1999] HCA 14; (1999) 197 CLR 510 at [31] (Gleeson CJ and McHugh J); [118] (Gaudron J); In
Re McBain; Ex parte Catholic Bishops Conference [2002] HCA 16; (2002) 209 CLR 372 at [3]-[6] (Gleeson CJ); [242] (Hayne J).

99. The Commissioner submitted that it is "clear that the Commissioner can only give a ruling about 'GST' where the GST is payable and imposed". The Commissioner noted that the concepts of "net amount" and "assessed net amount", referred to in s 357-55(j) and (ja) of Sch 1 to the TAA 1953, hinged upon GST for which a person is "liable" on a "taxable supply" - see [88] above. He submitted that the combined effect of s 357-55 and s 359-5 of Sch 1 to the TAA 1953 is that the Commissioner can only give a private ruling about the operation or effect of the GST law where the person or entity seeking the ruling is or can be subject to a liability to pay GST. The Commissioner submitted that this limitation on the private ruling system is consistent with the object of the ruling system, which is expressed in s 357-5(1) of Sch 1 to the TAA 1953 in the following way (Commissioner's emphasis):

The object of this Part is to provide a way for you to find out the Commissioner's view about how certain laws administered by the Commissioner apply to you so that the risks to you of uncertainty when you are self assessing or working out your tax obligations or entitlements are reduced.

100. The Commissioner submitted that the limitation is also consistent with the protection offered by a valid private ruling, which is that the Commissioner is bound to apply the ruling when assessing the relevant taxpayer: s 357-60 of Sch 1 to the TAA 1953. The Commissioner submitted that this protection is of no utility to an entity to the extent that the entity cannot be assessed by the Commissioner, because the entity is not subject to Commonwealth taxation in respect of a particular transaction.

101. The Commissioner submitted:

It is clear that the object and policy underpinning the private ruling regime is to give taxpayers certainty about the way in which the Commissioner will apply laws which he administers and which impose some form of obligation or confer some form of entitlement on the taxpayer.

The purpose of the regime is not to obtain the Commissioner's views on how particular provisions of taxation laws could hypothetically apply to the taxpayer if the taxpayer could be subject to the relevant tax liability. Nor is the purpose of the regime to give a taxpayer guidance about the way in which a State law, giving effect to a political agreement about a notional tax on State property and which is not administered by the Commissioner, will or may apply to the taxpayer.

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It follows that, where s 359-5(1) uses the phrase "applies or would apply to you" in the context of the relevant provision, it is referring to the application of the relevant provision in a way that affects a present or future obligation or entitlement under a law administered by the Commissioner. Because [Landcom] is a State and is not subject to tax (including GST) on its property, s 75-10(3) of the GST Act is not a relevant provision that "applies or would apply to" [Landcom] in a manner that allows the Commissioner to issue a private ruling to [Landcom].

102. The Commissioner accepted that private rulings are not limited to rulings concerning the private ruling applicant's tax liability:
CTC Resources NL v Commissioner of Taxation (1994) 48 FCR 397 at 423 (Hill J). He submitted, however, that it does not follow that the Commissioner can give a legally effective private ruling about the application of a provision of a taxation law where that provision does not impose on the ruling applicant any liability to tax or confer on the ruling applicant any entitlement arising under a law administered by the Commissioner. While a private ruling does not necessarily have to be about a tax liability, the private ruling must be about the way in which the relevant provision of the taxation law applies or affects an obligation or entitlement of the applicant under the relevant taxation law administered by the Commissioner, for example: whether that is an obligation to lodge a document with the Commissioner, an obligation to pay income tax, an obligation to keep records, an obligation to pay GST or an entitlement to one of the listed grants, benefits or credits.

103. The Commissioner submitted that there is nothing in the judgment of Hill J in CTC Resources which supports the contention that the Commissioner can give a private ruling about how a provision of a tax law operates, where that provision imposes no obligation or confers no entitlement on the private ruling applicant and where the ruling has no bearing on how the Commissioner will apply or administer the tax law to the applicant.

104. The Commissioner did not accept that he administered notional GST. However, somewhat funambulistically, he ultimately accepted that he provided assistance and guidance to State entities about notional GST to facilitate the implementation of the Intergovernmental Agreements. The Commissioner's position was that he has a role, and probably the central role, in administering notional GST in this sense, but that he does not administer notional GST under the TAA 1953 or the GST Act.

105. The Commissioner submitted, in this regard, that there was no provision in either the GST Act or the TAA 1953 which authorises the Commissioner to: (a) make an assessment of notional GST; (b) impose liability to pay notional GST; or (c) issue a ruling about notional GST.

106. The Commissioner also submitted that Landcom was not "dissatisfied" with the private ruling or the objection decision with the result that the appeal to this Court is "incompetent" - see: s 359-60(1) of Sch 1; s 14ZZ of the TAA 1953. According to the Commissioner, even if the ruling was a valid private ruling, a person or entity not subject to the administration of the tax laws mentioned in the private ruling, and against whom a private ruling is not capable of having any legal effect, cannot be "dissatisfied" with an unfavourable objection decision for the purposes of s 14ZZ(1) of the TAA 1953, referring to CTC Resources at 408E-F (Gummow J) and 432D-F (Hill J);
Sanctuary Australasia Pty Ltd v Commissioner of Taxation [2013] AATA 371; (2013) 92 ATR 207;
BAC Holdings Limited v Commissioner of Taxation [2020] FCA 413. The Commissioner submitted that, in order for a person to be "dissatisfied", the relevant decision must be capable of having legal effect upon that person. According to the Commissioner, s 14ZZ of the TAA 1953 was therefore not properly engaged so as to confer jurisdiction on the Court to hear Landcom's appeal.

Summary of Landcom's principal submissions

107. Landcom contended that the Court had jurisdiction on two bases.

108. First, Landcom submitted that the Commissioner has power to issue assessments of notional GST and that these assessments create real and enforceable liabilities. Landcom

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observed that it includes notional GST in its GST returns (Business Activity Statements ( BASs )), albeit that has not yet occurred with respect to any supply under Contract B2. Landcom includes notional GST in its self-assessment of the relevant "assessable amount" as if it were liable to pay notional GST. According to Landcom, this 'self-assessment' of an assessable amount is treated by s 155-15(1) of Sch 1 to the TAA 1953 as having been made by the Commissioner under s 155-5 and creates real tax liabilities which can be enforced by the Commissioner. These assessments are the same assessments that allow the Commissioner to recover the GST payable on taxable supplies which are not supplies of "property" within the meaning of s 114 of the Constitution. There is no separate assessment of notional GST. Landcom submitted it could object against an assessment which included notional GST and choose not to rely upon s 114 of the Constitution or s 5 of the Imposition Act; and it could challenge excessiveness on the question of the correct operation of Item 4 in the table to s 75-10(3) of the GST Act. It follows, according to Landcom, that a ruling has utility and that the present dispute is not relevantly hypothetical.

109. Secondly, irrespective of whether there can be an assessment of notional GST, s 14ZZ of the TAA 1953 creates a substantive right in a taxpayer dissatisfied with an objection decision to seek relief from the Court, including in the form of an order varying the objection decision: s 14ZZP of the TAA 1953. Section 14ZZQ of the TAA 1953 enjoins the Commissioner to take action necessary to give effect to the Court's decision.

110. Landcom submitted it was within the judicial competence of the Commonwealth to adjudicate upon the correctness of a private ruling issued by its executive branch pursuant to a statutory process established for that purpose.

111. Landcom submitted that the conferral by s 14ZZ of the TAA 1953 of a right on the taxpayer dissatisfied with an objection decision in relation to a private ruling to seek an order from the Court is incidental to, or in furtherance of, the private ruling scheme and therefore gives rise to a "matter" for the purposes of ss 75 to 77 of the Constitution, referring to
The King v Commonwealth Court of Conciliation and Arbitration; ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 at 155 (Latham CJ) and at 165-166 and 168 (Dixon J). Landcom submitted that the justiciable subject matter is the application of the law to a defined scheme. The controversy arises in the context of a legislative scheme pursuant to which a taxpayer may challenge the opinion of the officer charged with the administration of the law. Landcom referred also to s 78 of the Constitution and
Maguire v Simpson [1977] HCA 63; (1977) 139 CLR 362 at 370 (Barwick CJ).

112. Landcom submitted that it had applied for a private ruling on the way in which the Commissioner considered Item 4 in the table to s 75-10(3) would apply to Landcom in relation to the proposed sale of land described in the ruling application. The application was expressed to be made pursuant to s 359-10(1) of Sch 1 to the TAA 1953. Landcom asked for a ruling on a "matter involved in the application of the [provision]" (see: s 359-5(2)) namely how Item 4 would apply to the sale of freehold interests in land owned by Landcom (relevantly referred to as the four Certificates of Title comprising "Property B2"). The Commissioner has general administration over specific provisions of Acts for ruling purposes if the provisions are "about" any of the taxes listed in that section, which include "indirect tax": s 357-55(fb) of Sch 1 to the TAA 1953. Section 75-10(3) of the GST Act is a provision "about" indirect tax within the meaning of s 357-55 of Sch 1 to the TAA 1953 and is, therefore, a "relevant provision" for the purposes of s 359-5 of Sch 1 to the TAA 1953.

113. Landcom contended it was "dissatisfied" with the ruling and with the objection decision and denied that its Part IVC appeal was incompetent.

Further submissions

114. After the hearing on 8 September 2021, the Court requested further submissions considered to be relevant, in particular, to Landcom's first argument.

115. The first question raised was whether the parties were agreed that any supply by Landcom of the relevant land fell or would fall

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within the definition of "taxable supply" in s 9-5 of the GST Act. The parties were agreed that such supplies would be "taxable supplies". This view should be accepted. The word "taxable" in the phrase "taxable supply" does not, in context, give a meaning to the phrase "taxable supply" beyond the definition in s 9-5 - see:
Commissioner of Taxation v Auctus Resources Pty Ltd [2021] FCAFC 39; (2021) 284 FCR 294 at [59] to [69]. Further, Division 75 of the GST Act only applies to "taxable supplies" (see s 75-5(1)) and Item 4 in the table to s 75-10(3) makes clear that a supply of a freehold interest in land by a State is intended to fall within the concept of "taxable supply" to which s 75-5(1) refers.

116. The second question raised was whether Landcom, being registered for GST, would be required to include any such supply in the relevant GST return by reason of the supply being a "taxable supply" having regard to s 31-5(2)(b) of the GST Act, which requires a GST return to be given "whether or not … you are liable for the GST on any *taxable supplies that are attributable to the tax period" - see: [56] above.

117. Division 31 of the GST Act requires that GST returns "must be in the *approved form": s 31-15(1). Section 195-1 defines "approved form" by reference to s 388-50(1) of Sch 1 to the TAA 1953 which provides that an approved form is one that is approved by the Commissioner and that meets certain other requirements set out in s 388-50(1) of Sch 1 to the TAA 1953. The Commissioner has approved a number of paper and virtual forms for GST returns. Virtual forms can be put to one side. There are different paper forms tailored to entities with monthly, quarterly and annual tax periods and there are variations for entities that report just GST and those that report GST and Pay As You Go ( PAYG ) withholding and PAYG instalment obligations. An example of an "approved form" is that at Annexure "A" to these reasons which is a GST return for an entity making a monthly lodgement that reports both GST and PAYG obligations. Under the heading "Goods and Services tax (GST)", label G1 refers to "Total sales". The forms direct the entity to report GST on sales at label 1A, headed "GST on sales", and to report GST on purchases (input tax credits) at Label 1B, headed "GST on purchases".

118. Landcom submitted that:

(1) it is required to report (at label G1) all supplies made by it that are attributable to a monthly tax period. This includes supplies that are GST-free, input taxed and taxable (including supplies for which "notional" GST may have been payable).
(2) it could, but was not required to, report amounts of "notional" GST in its GST return. The reporting of those amounts in label 1A of the GST return facilitates the payment of notional GST pursuant to s 5 of the Implementation Act, but there was no requirement under the GST Law for Landcom to include those amounts in label 1A of its GST return;
(3) amounts included by Landcom in label 1A of its GST return, including amounts on account of "notional GST", form part of Landcom's "net amount" for the tax period. Upon lodgement of the GST return, the Commissioner is treated as having made an assessment of that net amount: s 155-15 of Sch 1 to the TAA 1953. Further, Landcom submitted:
- (a) the validity of that assessment is not affected by non-compliance with the provisions of the TAA 1953 or of any other taxation law: s 155-90 of Sch 1; and
- (b) Landcom may object to the assessment under Part IVC of the TAA 1953: s 155-90 of Sch 1.

119. The Commissioner submitted that a GST return does not require the reporting of supplies to which notional GST applies. The Commissioner submitted that "[t]he ultimate function of the GST return is to provide the basis on which an assessment of GST for the relevant tax period is made" which is done by calculating the "net amount" for the entity for the relevant tax period. The Commissioner contended that, because "GST" is defined as the amount "for which you are liable", the "net amount" represents the amount of GST that is capable of being imposed as a liability under the Imposition Act. "GST" does not, expressly or impliedly, include an amount of "notional GST". The Commissioner submitted that

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it follows that Landcom is not required to report the sale of land in its GST return.

120. The obligation in s 31-5 to give a GST return is an obligation to report in the approved form. As the Commissioner submitted, the "ultimate function" of the GST return is to identify the basis on which an assessment of GST is made. However, information provided on a GST return is also used for other purposes, including compliance purposes. A discrepancy between total supplies and GST payable might, for example, lead to inquiry by the ATO as to the reasons for the discrepancy.

121. It is not strictly necessary to resolve whether Landcom is required to report supplies of the land the subject of Contract B2 at label G1, but I prefer the view that it is so required. The forms, read in the context of the legislative scheme, including in particular ss 9-5, 31-5(2)(b), Div 75, ss 177-3(b) and 177-4 of the GST Act, suggest that an entity registered for GST should report all "taxable supplies" whether or not those supplies give rise to any liability to pay GST.

122. It is also not strictly necessary to resolve whether a State is required to report notional GST at label A1 "GST on sales". Whilst the description of the label is apt to cover "notional" GST, both parties agreed that there was no obligation to report notional GST.

Consideration

Landcom's first argument

123. As noted above, Landcom submitted that the Commissioner has power to issue assessments of notional GST and that these assessments create real and enforceable liabilities.

124. Section 155-5 of Sch 1 to the TAA 1953 includes:

155-5 Commissioner may make assessment

(1) The Commissioner may at any time make an assessment of an *assessable amount (including an assessment that the amount is nil).

Note 1: For amendment of assessments, see Subdivision 155-B.

Note 2: An assessment can be reviewed: see Subdivision 155-C.

(2) Each of the following is an assessable amount :

(a) a *net amount;

…

(c) an amount of *indirect tax not included in an amount covered by another paragraph of this subsection;

125. Section 155-15 of Sch 1to the TAA 1953 provides for "self-assessment" and includes:

155-15 Self-assessment

(1) The Commissioner is treated as having made an assessment under section 155-5 of an *assessable amount mentioned in an item of the following table, if the document mentioned in the item is given to the recipient mentioned in the item:

Selfassessed amounts

Item Column 1
Assessable amount Column 2
Recipient Column 3
Document

1 your *net amount for a *tax period the Commissioner your *GST return for the tax period

2 …

126. As mentioned earlier, Landcom calculated its net amount (GST less input tax credits - see: [88] above) on the basis that it was liable for GST on taxable supplies of property, that is, as if s 5 of the General Imposition Act did not apply. It did not distinguish in its BASs between GST for which it is liable and GST which it pays voluntarily under the NSW Implementation Act.

127. As noted earlier, Landcom submitted that the BASs lodged by it are treated by the Commissioner as assessments of Landcom's net amount for the relevant tax period. So far as the evidence discloses, the Commissioner has

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never raised an issue about Landcom voluntarily paying notional GST by this mechanism.

128. Landcom referred also to ss 155-85 and 155-90 contained in Subdivision 155-C of Sch 1 to the TAA 1953 (presently irrelevant note to s 155-90 omitted):

Subdivision 155-C-Validity and review of assessments

…

155-85 Validity of assessment

The validity of any assessment of an *assessable amount is not affected by non-compliance with the provisions of this Act or of any other *taxation law.

155-90 Review of assessments

You may object, in the manner set out in Part IVC of this Act, against an assessment of an *assessable amount of yours if you are dissatisfied with the assessment.

129. Two matters were ultimately not contentious:

(1) As an entity registered for GST, Landcom is required to lodge a GST return whether or not it was "liable for the GST on any *taxable supplies that are attributable to the tax period": s 31-5(2)(b) of the GST Act.
(2) If Landcom includes an amount of notional GST in a GST return:
- (a) the Commissioner is treated as having made an assessment under section 155-5 of the *assessable amount (being the net amount), which includes the notional GST which Landcom reported: s 155-15(1) of Sch 1 to the TAA 1953;
- (b) the validity of the assessment is not affected by any non-compliance with a taxation law: s 155-85 of Sch 1 to the TAA 1953;
- (c) Landcom could object against the assessment if dissatisfied with it: s 155-90 of Sch 1 to the TAA 1953.

130. In
Commissioner of Taxation v Futuris Corporation [2008] HCA 32; (2008) 237 CLR 146 at [25], the High Court recognised two situations in which a purported assessment might not answer the description of an "assessment" for the purposes of the conclusive evidence provision in s 175 of the Income Tax Assessment Act 1936 (Cth), the first being where the assessment is "tentative or provisional" and the second where there has been "conscious maladministration of the assessment process".

131. The Commissioner submitted that the possibility cannot be excluded that the prohibition in s 114 of the Constitution could be seen as founding a third exception to conclusive evidence provisions. Landcom submitted that the prohibition in s 114 of the Constitution could only be a matter going to excessiveness: if a taxpayer discharged its onus of establishing that s 114 of the Constitution applied, there would be a compelling argument that the assessment was excessive. This would require the relevant taxpayer to prove that, within the meaning of s 114 of the Constitution: (a) the taxpayer was a "State"; and (b) the GST in the assessment was a "tax on property".

132. This question does not require determination. Even if relief under s 39B of the Judiciary Act 1903 (Cth) were available, that does not deny that a State which had included an amount of notional GST in a return would be able to object to the assessment which the Commissioner would be taken to have made. The State could then seek review in the Tribunal or appeal to this Court in accordance with Part IVC of the TAA 1953.

133. If the State brought a Part IVC review in the Tribunal : The Tribunal would presumably find the assessment excessive because of s 114 of the Constitution assuming the entity discharged its onus of establishing that it was a "State" and that the GST in the assessment was a "tax on property" within the meaning of s 114 of the Constitution. I n
McAndrew v Federal Commissioner of Taxation [1956] HCA 62; (1957) 98 CLR 263 at 282-3, Taylor J stated:

[T]here is no reason for thinking that an assessment, made in the purported but not justifiable exercise of a statutory power, may not properly be described as excessive; it purports to impose a specified liability and, upon appeal, the claim of the appellant is that he is not liable to pay any part of it. Whether the particular ground upon which he seeks to escape or reduce the liability merely touches the accuracy of the

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assessment or assails its validity as an assessment, he is, in the words of s 185, "dissatisfied with" the assessment because it purports to impose upon him a liability in excess of that to which he may lawfully be subjected and I can see no reason why, in either case, his complaint may not be accurately described as a complaint that his assessment is excessive.

134. This passage was set out with approval in
Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614 at 621-2 (Brennan J). The first part of it was approved in
FJ Bloemen Pty Ltd v Federal Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360 at 375 (Mason and Wilson JJ, with whom Stephen and Aickin JJ agreed). Taylor J's observations are also supported by the reasoning in McAndrew at 269-271 (Dixon CJ, McTiernan and Webb JJ) and at 275 (Kitto J); and in Dalco at 631-2 (Toohey J); and in
Binetter v Commissioner of Taxation [2016] FCAFC 163; (2016) 249 FCR 534 at [91] and [92] (Perram and Davies JJ).

135. Whilst the Tribunal does not have power to determine validity of the assessment, or declare invalidity of an assessment, the Tribunal has jurisdiction to determine excessiveness of that which purports to be an assessment even if the validity of the underlying assessment is a matter in dispute:
Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd [1979] FCA 21; (1979) 24 ALR 307;
Kennedy v Administrative Appeals Tribunal [2008] FCAFC 124; (2008) 168 FCR 566 at [13] and [22] (French, Tamberlin and Mansfield JJ). This conclusion:

(a) is implicit in the reasoning of the plurality in Futuris at [10] and [48] and express in the reasoning of Kirby J at [156(3)]. The High Court held that Futuris should have been denied relief under s 39B of the Judiciary Act on the discretionary ground that satisfactory alternative remedies were available under Part IVC. This necessarily involves a conclusion that those remedies were available notwithstanding that the validity of the assessment was a matter in dispute. See also: Futuris at [24].
(b) is not denied by the decision of the Full Court in
Gashi v Commissioner of Taxation [2013] FCAFC 30; (2013) 209 FCR 301 at [41]-[43] (Bennett, Edmonds and Gordon JJ). Gashi recognises that neither the Court nor the Tribunal has jurisdiction under Part IVC to determine if assessments are "invalid", because Part IVC operates on the assumption that there is an "assessment". The decision does not deny that the Tribunal has jurisdiction to determine excessiveness of an assessment which is arguably invalid because of the potential application of s 114 of the Constitution. If it did, it would be inconsistent with Futuris and Kennedy.

136. If the State brought a Part IVC appeal to the Federal Court : the Court could reach the conclusion that the assessments were excessive because of s 114 of the Constitution: McAndrew. Further, if the proceedings were coupled with s 39B Judiciary Act proceedings, the Court would have the power to declare the assessment invalid. A conclusion of invalidity, upon which the exercise of that power would depend, would require consideration of whether Futuris was intended to state exhaustively the circumstances in which an assessment might not be an "assessment" within the meaning of a conclusive evidence provision. It is unnecessary to express a view on that topic or the question whether the assessment would be held to be invalid.

137. The Commissioner emphasised that Landcom has not included notional GST in respect of any supply of property under Contract B2 in a GST return and submitted that there was therefore no issue other than a hypothetical one. It is true that the evidence did not reveal that Landcom had included notional GST in respect of a supply of land the subject of Contract B2 in a GST return. On the other hand:

• the evidence demonstrates that Landcom includes notional GST in its GST returns. The Commissioner has not apparently raised any issue with this and did not adduce any evidence to suggest that he has in place some other procedure for receiving voluntary payments of notional GST, calculated correctly in accordance with the GST Act;
• it did not appear to be in dispute that GST returns had been lodged with respect to the

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supply or supplies of property the subject of Contract B1 which was also the subject of the private ruling application and subsequent ruling;
• it is to be inferred that Landcom wishes to include notional GST in its GST returns in respect of the supply or supplies of property the subject of Contract B2. It is to be inferred that Landcom wishes to pay notional GST: (a) voluntarily to the Commissioner, lawfully under the NSW Implementation Act and in performance of the non-legally binding promises made in the Intergovernmental Agreements; and (b) in an amount calculated in accordance with the correct construction of Item 4 in the table to s 75-10(3) of the GST Act which expressly applies to Landcom's supply or supplies;
• there is no evidence to suggest that the Commissioner does not wish to receive notional GST: (a) in accordance with the Intergovernmental Agreements and the GST Act and pursuant to his duties of administration; and (b) by the mechanism currently adopted by Landcom, there not apparently being any alternative.

138. The voluntary inclusion by Landcom of notional GST in a GST return will result in an assessment which gives rise to a debt to the Commonwealth which is enforceable by the Commissioner unless a finding of invalidity is made by a Court of competent jurisdiction. Landcom could object to such an assessment.

139. As is explained above and in further detail in relation to Landcom's second argument, Landcom has a real interest in knowing how much notional GST to include, voluntarily, in its GST return. It is common practice to obtain the Commissioner's views via a private ruling before engaging in a proposed course of action ("scheme"). That is one of the purposes of the private ruling system. In this statutory context, the fact that the event has not occurred (at least with respect to a supply or supplies under Contract B2) does not make the issue "hypothetical" in a way which results in there being no "matter" or justiciable issue.

140. The statutory scheme being one which enables a taxpayer to obtain an advisory opinion in advance of taking a step or entering into a scheme is underscored by s 14ZVA of the TAA 1953 which operates to limit Landcom's right of objection against a future assessment to a right to object on grounds that neither were, nor could have been, grounds for the objection against the ruling.

141. The Commissioner's private ruling and objection decision were not "purported" or undertaken as a matter of mere courtesy. They were each authorised by, and made in accordance with, the statutory scheme. Landcom has exercised its right to appeal to this Court under Part IVC of the TAA 1953.

142. The Court has jurisdiction to hear and determine Landcom's appeal.

Landcom's second argument

143. For the reasons which follow, the Court has jurisdiction even if a self-assessment which includes notional GST does not give rise to a legally enforceable debt in the way just described.

The jurisdiction of the Federal Court

144. This Court's jurisdiction derives from Commonwealth laws made pursuant to the power conferred by s 77(i) of the Constitution:

77 Power to define jurisdiction

With respect to any of the matters mentioned in the last two sections the Parliament may make laws:

(i) defining the jurisdiction of any federal court other than the High Court; …

145. The "matters" with respect to which those laws may confer jurisdiction are the matters specified in ss 75 and 76 of the Constitution:

75 Original jurisdiction of High Court

In all matters:

(i) arising under any treaty;

(ii) affecting consuls or other representatives of other countries;

(iii) in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party;

(iv) between States, or between residents of different States, or between a State and a resident of another State;

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(v) in which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth;

the High Court shall have original jurisdiction.

76 Additional original jurisdiction

The Parliament may make laws conferring original jurisdiction on the High Court in any matter:

(i) arising under this Constitution, or involving its interpretation;

(ii) arising under any laws made by the Parliament;

(iii) of Admiralty and maritime jurisdiction;

(iv) relating to the same subject-matter claimed under the laws of different States.

146. Commonwealth judicial power is exercisable in relation to these "matters" of original jurisdiction. The Parliament may make laws conferring rights to proceed against the Commonwealth or a State in respect of matters within the limits of judicial power. Section 78 of the Constitution provides:

78 Proceedings against Commonwealth or State

The Parliament may make laws conferring rights to proceed against the Commonwealth or a State in respect of matters within the limits of the judicial power.

147. It follows from the foregoing that federal jurisdiction, namely the authority to exercise the judicial power of the Commonwealth, requires the existence of a "matter". A "matter" must involve a real justiciable controversy, between interested parties, capable of being resolved by an exercise of Commonwealth judicial power. If the issue is purely abstract or hypothetical it will not give rise to a "matter". There must be "some immediate right, duty or liability to be established by the determination of the Court": Re Judiciary at 265.

148. Re Judiciary concerned the validity of Part XII of the Judiciary Act which purported to confer jurisdiction on the High Court "to hear and determine", conclusively and without any right of appeal, any question of law as to the validity of Commonwealth legislation referred to it by the Governor-General. The effect was to allow the Governor-General to seek an advisory opinion on the constitutional validity of any Commonwealth law. The majority (Higgins J dissenting) concluded Part XII was invalid.

149. The High Court stated in Re Judiciary at 266-7 that the legislature:

cannot authorize this Court to make a declaration of the law divorced from any attempt to administer that law … we can find nothing in Chapter III of the Constitution to lend colour to the view that Parliament can confer power or jurisdiction upon the High Court to determine abstract questions of law without the right or duty of any body or person being involved.

150. After setting out this passage, the majority in
Mellifont v Attorney General for the State of Queensland [1991] HCA 53; (1991) 173 CLR 289 at 303 stated:

The passage contains two critical concepts. One is the notion of an abstract question of law not involving the right or duty of any body or person; the second is the making of a declaration of law divorced, or dissociated from any attempt to administer it.

151. Neither of these concepts applies in the present case.

152. The fact that GST cannot be and is not imposed on Landcom in respect of the relevant supply or supplies does not have the consequence that there is no "matter" or transform the dispute between Landcom and the Commissioner into one which is hypothetical.

153. There are three circumstances in particular which establish the existence of a "matter":

(a) Item 4 in the table to s 75-10(3) of the GST Act expressly applies to Landcom;
(b) the TAA 1953 gives Landcom a right to seek a ruling about how a provision of the GST Act applies to Landcom or would apply to Landcom if it were to take identified steps; and
(c) Landcom was "dissatisfied" with the ruling which it was given.

154. Before saying something more about each of those matters, it should be observed that: (a) the GST Act contemplates Landcom's participation in the GST system; and (b) the Commissioner has a duty to administer

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the GST Act, the terms of which expressly address notional GST. The Commissioner's duties include duties of collection of GST, including notional GST.

Landcom's participation in the GST system and the Commissioner's duties

155. The Commissioner has the general administration of each indirect tax law which includes the GST Act and the TAA 1953 (including the private ruling provisions) so far as it relates to the GST Act. Notional GST is a concept expressly dealt with in the GST Act which the Commissioner administers.

156. Even in respect of supplies on which tax cannot be imposed by reason of s 114 of the Constitution and s 5 of the General Imposition Act, the GST Act contemplates that Landcom will, and entitles Landcom to, participate in the GST system established by that Act. The GST Act expressly contemplates that Landcom will include notional GST in the consideration for certain supplies: s 177-3(b) of the GST Act. Indeed, s 177-3(b) can only be understood as authorising the inclusion of notional GST by Landcom in the consideration it charges for relevant supplies.

157. The calculation of the amount of notional GST Landcom is authorised or permitted to include in the consideration for a supply is expressly dealt with by the GST Act, including s 38-445(1) and Item 4 in the table to s 75-10(3). Concepts such as "GST on the supply", "taxable supply" and "margin" are affected by s 38-445(1) and Item 4 and have legal effect for the purposes of calculating GST which would be payable if it were not for s 114 of the Constitution and s 5 of the relevant Imposition Act.

158. Economically, the statutory scheme contemplates Landcom participating in the collection of GST, being one of the Commissioner's central duties, even if Landcom's participation in this way cannot be legally enforced. The GST Act contemplates that the States will: (a) receive from third parties amounts in respect of notional GST, the notional GST being treated as real GST for those third parties; and (b) voluntarily pay those amounts to the Commissioner. The liability to pay GST payable on a taxable supply falls on the supplier, not the recipient: s 9-40 of the GST Act. Notwithstanding that GST is not imposed on Landcom and its liability to pay notional GST is not legally enforceable (at least if it is not voluntarily included in a GST return), the Commissioner's duty of administration (and collection), requires him to pursue voluntary payment of notional GST included in the consideration for a supply where such an amount has not been paid over to the Commissioner. It does not matter that the Commissioner might not be able to enforce payment of notional GST. The Commissioner acts lawfully in receiving payments of notional GST and in seeking to have notional GST included in the consideration for a supply paid to him, irrespective of whether he can legally enforce such payment.

159. As to the Commissioner's nuanced position that he does not administer notional GST under the GST Act, and that he does not have power to issue a ruling in respect of notional GST (neither of which propositions is accepted), it should be observed that the Commissioner has published public rulings dealing with the operation of the GST Act with respect to the supply of real property by "a State", including public rulings expressly dealing with aspects of the operation of Item 4 in the table to s 75-10(3) of the GST Act. Those rulings were issued in the proper administration of the indirect tax laws by the Commissioner. The rulings include:

• GSTR 2006/6: "Goods and services tax: improvements on land for the purposes of Subdivision 38-N and Division 75".
• GSTR 2015/2: "Goods and services tax: development lease arrangements with government agencies".

160. It may be accepted, as the Commissioner submitted, that these rulings do not apply only to the supply of property by a State because they also express the Commissioner's view on the application of laws which might impose enforceable obligations on taxpayers such as the recipients of supplies of property from a State. However, the rulings underscore both that the GST Act contemplates the participation of the States by inclusion of notional GST in the consideration they charge for a supply and that the expression of the Commissioner's opinions about the

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operation of those laws, through rulings, are part of his administration of the indirect tax laws generally and the GST Act in particular.

161. The Commissioner has also issued legislative instruments which prescribe the valuation methods that must be used where the supplier is a State and the elements of Item 4 in the table to s 75-10(3) are engaged: A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2005/3 , paragraphs 11, 13; A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2009/1, paragraphs 13(6), 15; A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination 2020 MSV 2020/1 paragraphs 6(6), 7. By way of example, paragraphs 11 and 13 of MSV 2005/3 provide:

11. However, if:
- (a) the interest, unit or lease has been supplied by the Commonwealth, a State or a Territory; and
- (b) the supplier has held the interest, unit or lease since before 1 July 2000; and
- (c) there were no improvements on the land or premises in question as at 1 July 2000; and
- (d) there are improvements on the land or premises in question on the day on which the taxable supply takes place,
the valuation must be a valuation, made in writing by a professional valuer determining the market value of the interest, unit or lease, that is not contrary to professional standards recognised in Australia for the making of real property valuations, as if no improvements had been made at the date of the supply.
…
13. Method 2 is not available if:
- (a) the interest, unit or lease has been supplied by the Commonwealth, a State or Territory; and
- (b) the supplier has held the interest, unit or lease since before 1 July 2000; and
- (c) there were no improvements on the land or premises in question as at 1 July 2000; and
- (d) there are improvements on the land or premises in question on the day on which the taxable supply takes place.

162. Again, this emphasises the Commissioner's administration of notional GST.

163. The private ruling regime is designed to enable a taxpayer to find out how laws administered by the Commissioner apply to the taxpayer in relation to schemes which have been entered into or how those laws would apply to a scheme which the taxpayer proposes to enter into. Provisions of Acts "of which the Commissioner has the general administration are relevant for rulings if the provisions are about": "tax", "indirect tax", "the administration or collection of those taxes …", "a net amount, or the administration of a net amount", "an assessed net amount, or the collection or payment of an assessed net amount": s 357-55 (a), (f), (g), (j) and (ja) of Sch 1 to the TAA 1953.

Item 4 in the table to s 75-10(3) expressly applies to Landcom

164. The Commissioner submitted that:

(a) Item 4 in the table to s 75-10(3) does not "apply" (see s 357-5(1) and s 359-5(1) of Sch 1 to the TAA 1953) to Landcom because Landcom is not subject to GST;
(b) he "cannot issue a private ruling … about how the GST Act notionally applies to a taxpayer, who is not, and cannot be, liable to GST in respect of a particular transaction".

165. These submissions should be rejected. Item 4 expressly applies to Landcom. The GST Act does not "notionally apply" to Landcom. It expressly applies to Landcom. Contrary to the Commissioner's submission, in its application to the facts of this case, the private ruling regime does not contain an implicit limitation that the Commissioner is not authorised to issue a ruling in respect of a provision which expressly "applies" (s 359-5(1) of Sch 1 to the TAA 1953) to a taxpayer on the basis that a liability for tax cannot be imposed on that taxpayer.

Landcom has a right to seek a ruling about how a provision of the GST Act applies

166.

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Landcom had a legal entitlement under the TAA 1953 to seek a private ruling in relation to the operation of the GST Act with respect to a scheme which it proposed to carry out, including one in respect of which it might include notional GST in the consideration for a supply. Landcom was registered for GST, its activities and the scheme in respect of which it sought a ruling fell within the operation of the GST Act, and the private ruling regime contains a statutory mechanism for Landom to obtain an advisory opinion from the Commissioner "about" how Item 4 of the table to s 75-10(3) "applies".

167. Item 4 in the table to s 75-10(3) was an indirect tax law "administered by the Commissioner [which] appl[ied] to [Landcom]", even if the notional GST which Landcom wished to pay to the Commissioner would be paid by it voluntarily: s 357-5(1) of Sch 1 to the TAA 1953; see also s 359-5(1) of Sch 1.

168. The application of the law to Landcom is not denied by the fact that GST cannot be imposed on Landcom - see, in an analogous context:
Totalizator Agency Board v Commissioner of Taxation (Cth) (1996) 69 FCR 311 at 313G to 314D (Hill J, with whom Tamberlin and Sundberg JJ relevantly agreed).

169. The Commissioner has power to give a ruling about how the GST Act "applies" to Landcom, it being a taxpayer which the GST Act contemplates might include notional GST in the consideration it charges for a supply.

170. The Commissioner was obliged to issue a ruling in accordance with his obligations under the TAA 1953 (there not being any contended applicable exception to the obligation to make a ruling) and his obligations to administer the GST Act.

Landcom was "dissatisfied"

171. Landcom's immediate right, given to it by s 14ZZ of the TAA, is to appeal from an objection decision if "dissatisfied" with it, and challenge the Commissioner's opinion about the operation of the relevant laws, which he expressed in the ruling. As Gummow J stated in CTC Resources at 405E:

[T]he provision is one of that class identified by Dixon J in
R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 165-166, as both dealing with substantive legal relations and giving jurisdiction under s 77 of the Constitution to a federal court with reference to them.

172. In
R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 at 155, after referring to a number of authorities, Latham CJ said:

These cases adopt and apply the principle that it is within the power of the Commonwealth Parliament, when legislating upon a subject matter within its constitutional competence, to provide that a court may make orders which are incidental to carrying into effect the legislative scheme, and that a proceeding to obtain such an order is a matter arising under the Federal law. A right is created by the provision that a court may make an order, and such a provision also gives jurisdiction to the court to make the order. The fact that the court may not be bound to make an order, but may exercise a discretion, does not alter the effect of such a provision.

173. Dixon J referred at 165-166 to the statutory device of creating both a substantive right and a remedy "in the same breath". His Honour said at 168:

Legislation in the form under discussion must, of course, fall within one of the subjects of the legislative power of the Federal Parliament in s 51 or s 52. But, assuming the law is one with respect to one or other of the enumerated powers and that it also defines the jurisdiction of a Federal court with respect to a justiciable subject matter, why should not an application to obtain the benefit of the provision be a matter arising under that very law? …Why should not the legislation thus conferring power upon the court perform the two functions of giving rise to the "matter" and conferring jurisdiction over it?

174. Contrary to the Commissioner's submission, Landcom is, within the meaning of s 14ZZ of the TAA 1953, "dissatisfied" with the objection decision (and was "dissatisfied" with the ruling). Landcom's

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"dissatisfaction" establishes its "standing" as an entity affected by the decision. The consequences to Landcom are not relevantly hypothetical.

175. In CTC Resources at 408, Gummow J concluded that the applicant had not engaged the jurisdiction of the Court under s 14ZZ because "the ruling and the disallowance of CTC's objection to it, would be in relation to circumstances that had not occurred and could never happen", the relevant year having passed without the "scheme" being implemented. Gummow J said:

In my view, if regard is had to the context in which s 14ZZ appears, in its operation upon the jurisdiction of this Court, then the "dissatisfaction" of the person initiating the proceeding is of the following nature. It is a dissatisfaction with the absence of a favourable decision upon the objection which would, if now rectified by the Court, place the party in the position for the administration of the taxation laws which should have applied if the ruling had been made by the Commissioner in the terms sought. A mere curiosity or interest in having a formal ruling by the Commissioner for some collateral commercial purpose of the applicant is not sufficient to amount to "dissatisfaction" in the relevant sense.

176. Landcom is not merely "curious". Landcom is relevantly affected by the objection decision in the context of tax laws administered by the Commissioner:

• The GST Act contemplates that Landcom may include an amount of GST for which it is notionally liable in the consideration it charges the recipient of the supply: s 177-3(b) of the GST Act.
• It is to be inferred that Landcom wishes voluntarily to pay notional GST to the Commissioner, calculated correctly in accordance with the GST Act. The GST Act does not impose a liability on Landcom to pay notional GST to the Commissioner, and the Commissioner has no legally enforceable right to require notional GST to be paid, but Landcom can voluntarily pay over notional GST and the GST Act is predicated on this occurring.
• The Commissioner is lawfully entitled to accept voluntary payments of notional GST. Indeed, the Commissioner is bound to accept the voluntary payment in discharge of his duties of administration, including his duty to collect notional GST.
• Landcom's ability to make payments of notional GST to the Commissioner, lawfully in accordance with s 5 of the NSW Implementation Act, depends upon whether such GST would be payable under the GST Act absent s 114 of the Constitution and s 5 of the General Imposition Act and the amount it might lawfully pay in accordance with the NSW Implementation Act is determined by the correct application of the GST Act to Landcom's activities.
• There is a controversy between Landcom and the Commissioner about how a provision which expressly applies to Landcom is to be construed or how it applies to the facts articulated in the private ruling application. The controversy may not strictly be a controversy about a GST liability; but it is a controversy about how the GST Act applies to Landcom. Landcom disagrees with the answer given by the Commissioner to questions posed in Landcom's ruling application about how the GST Act applies.
• Landcom's Part IVC appeal will place Landcom in the position where it will know how much notional GST it will pay voluntarily to the Commissioner, lawfully in accordance with the NSW Implementation Act.

177. In CTC Resources, Hill J stated at 432B-C:

The Commissioner's power to rule depends, in the case of a proposed arrangement, upon there being a person to whom the relevant tax law "would apply … in relation to" the arrangement: s 14ZAF of the Act. That section and s 14ZAG make it clear that there is no power in the Commissioner to rule in respect of the taxation consequences of a transaction to some hypothetical person. The right of objection is, by s 14ZAZA of the Act, conferred upon a "rulee" who is "dissatisfied". A "rulee" must, by force of the definition of that expression in s 14ZAA(1), be a person to whom the tax law is capable of applying.

178.

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Item 4 of the table to s 75-10(3) of the GST Act is not only "capable of applying" to Landcom, it did apply to Landcom in respect of the scheme identified. Justice Hill's reference in this passage to "taxation consequences", which was emphasised by the Commissioner in submissions, must be read in context. In CTC, the purpose of seeking the ruling was to obtain the Commissioner's opinion about the taxation consequences in respect of a scheme which could never be entered into. His Honour stated: at 432E-F:

In my opinion a person will only be "dissatisfied" in the relevant sense if that person is a person to whom the "ruling" is still capable of having legal effect. In the case of a ruling relating to a proposed arrangement, that means that the arrangement must be one which, if entered into, will fall within the ruling. If the ruling relates to a year of income which has passed before the appeal is instituted (or perhaps before the appeal has been heard) so that the ruling cannot affect the taxation liability of a putative appellant, that person, no matter how discontented, will not be a "person dissatisfied".

179. In the present case, Landcom sought a ruling as to how a provision administered by the Commissioner applied to Landcom. As noted above, Item 4 in the table to s 75-10(3) of the GST Act applied to specify what Landcom could include as notional GST in the consideration for its supply. The fact that GST was not imposed on Landcom, and the Commissioner would not be able to enforce payment by Landcom of notional GST, does not mean that the GST Act did not apply to Landcom or that it was not affected by the Commissioner's objection decision or that the ruling was not about "indirect tax".

180. It might be noted that Commissioner did not deny the ability of the acquirer of the supply or supplies the subject of these proceedings from being able to seek a ruling as to the proper application of Item 4 of the table to s 75-10(3) of the GST Act to Landcom.

181. The Commissioner's position was that those to whom supplies of State property were made could seek a private ruling but the State supplier could not. However, a State supplier of property also has an interest in knowing the Commissioner's opinion with respect to the correct operation of the GST Act in respect of its supplies. Both contracting parties have an interest in knowing the correct amount of notional GST.

182. Although the position adopted by the Commissioner in this case might have justified Landcom in simply paying over voluntarily the amount Landcom considered to be correct, Landcom has sought to give effect to the non-legally binding promises made by the State of NSW to pay notional GST voluntarily and has responsibly sought to resolve the dispute. Even if his position in this case causes one to wonder, the Commissioner presumably wishes to receive the notional GST which the GST Act contemplates will be voluntarily paid to him, and which he is lawfully entitled to receive (if not bound to pursue) in accordance with his obligation to administer the indirect tax laws. Ultimately, through the Commissioner, the Commonwealth will receive an amount of notional GST. The quantum will depend on the outcome of this appeal.

183. These are all real consequences which inform Landcom's "dissatisfaction" with the Commissioner's objection decision. They tell against the dispute being hypothetical. Landcom's "dissatisfaction" establishes a part of the constitutional requirement for there to be a "matter". Landcom's "dissatisfaction" is at least part of what gives it standing, standing being "subsumed within the constitutional requirement of a 'matter'"- see:
Plaintiff S10/2011 v Minister for Immigration and Citizenship [2012] HCA 31; 246 CLR 636 at [68] (Gummow, Hayne, Crennan and Bell JJ), referring to
Pape v Federal Commissioner of Taxation [2009] HCA 23; (2009) 238 CLR 1 at [50]-[51], [152], [272]-[273]; see also:
Hobart International Airport Pty Ltd v Clarence City Council; Australia Pacific Airports (Launceston) Pty Ltd v Northern Midlands Council[2022] HCA 5 at [31] (Kiefel CJ, Keane and Gordon JJ); at [49] (Gageler and Gleeson JJ); at [79] (Edelman and Steward JJ). As Gummow J observed in CTC Resources at 405, s 14ZZ of the TAA 1953 is "designed to specify a 'matter' within the meaning of Ch III of the Constitution".

184.

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For these reasons, there is a "matter" and this Court has jurisdiction to resolve the Part IVC appeal. The fact that GST cannot be and is not imposed on Landcom in respect of the relevant supply or supplies does not have the consequence that there is no "matter" or that the dispute is hypothetical. If one were to analyse the "matter" by reference to the three components of the identification of a "matter" referred to by Gaudron and Gummow JJ in Re McBain:

(1) the subject matter for determination is the correct application of Item 4 of the table to s 75-10(3) of the GST Act to the scheme set out in the ruling;
(2) the relevant underlying right can be viewed as Landcom's right to appeal from an objection decision concerning a ruling on the correct application of Item 4 or its right to a ruling on the correct operation of Item 4 or a right to an order varying the objection decision;
(3) the controversy between the parties is that the Commissioner takes a different view as to the correct operation of Item 4 to that taken by Landcom.

Conclusion on jurisdiction

185. For those reasons, this Court has jurisdiction to hear and determine the Part IVC appeal.

THE PRIVATE RULING / GST ISSUES

The role of the Court

186. The role of the Court in an appeal under Part IVC of the TAA 1953 against an objection decision (or deemed objection decision) made in respect of an objection to a private ruling may be summarised as follows:

(1) A person who is "dissatisfied" with the objection decision may appeal to the Court against that objection decision: s 14ZZ of the TAA 1953. An "objection decision" has the meaning given in s 14ZY(2): s 2(1) of the TAA 1953.
(2) In the appeal, the appellant has the burden of proving that the "taxation decision" the subject of the objection decision should not have been made or should have been made differently: s 14ZZO(b)(ii) of the TAA 1953; Cooperative Bulk Handling
Ltd v Commissioner of Taxation [2010] FCA 508; (2010) 79 ATR 582 at [12]. Section 14ZQ of the TAA 1953 defines a "taxation decision" to mean "the assessment, determination, notice or decision against which a taxation objection may be, or has been, made". The taxation decision in the present appeal is the private ruling.
(3) The Court's role is limited to reviewing the correctness of the Commissioner's opinion, expressed in the private ruling, about the arrangement or scheme as identified by the Commissioner in the private ruling:
Commissioner of Taxation v Eichmann [2019] FCA 2155 at [21]-[22]; approved on appeal in
Eichmann v Commissioner of Taxation [2020] FCAFC 155; (2020) 280 FCR 10 at [16].
(4) The onus is on the taxpayer to satisfy the Court that the Commissioner's opinion on the application of the law to the facts and circumstances specified in the private ruling is incorrect: Bulk Handling at [13].
(5) In reviewing the Commissioner's opinion on the application of the law to the specified facts and circumstances, the only material to which the Court can have regard is the ruling and documents identified in the description of the facts and circumstances which were either provided by the taxpayer or were used by the Commissioner: Bulk Handling at [16].

Summary of Landcom's principal submissions

187. Landcom's principal submission was that s 75-5(1)(a) of the GST Act provides separate treatment for any taxable supply of real property made by selling a freehold interest in land. Even if it is possible for a supply of multiple freehold interests to be a single supply under the basic rules, s 75-5(1)(a) (contained in the special rules) focusses upon and treats separately each supply made by selling "a freehold interest in land". This is evident from the balance of the provisions in Div 75 of the GST Act, including ss (2) and (3) of s 75-5. When introduced, s 75-5(2) referred to "the freehold interest", being a reference to s 75-5(1). It now refers to the supplier's acquisition of the "entire freehold interest", a phrase introduced to deal with situations where the freehold title which was sold (the

ATC 25494

subject of s 75-5(1)(a)) arose from the amalgamation of two or more freehold titles (discussed further below). Section 75-5(3) addresses supplies which are "ineligible for the margin scheme" and again focusses attention on "the interest", namely the supply of the freehold interest referred to in s 75-5(1)(a). Landcom submitted that s 75-10 also focusses on the supply of the freehold interest. It does not matter to the operation of the special rules that the supply of the particular freehold interest to which the provisions are directed might be part of a larger supply for the purposes of the basic rules.

Summary of Commissioner's principal submissions

188. The Commissioner submitted that the logical and necessary starting point is identification of "the supply". The nature of "the supply" will affect whether and how the items in the table in s 75-10(3) apply because s 75-10(3) only applies if "the circumstances specified in an item in the second column of the table in this subsection apply to the supply": s 75-10(3)(a) (Commissioner's emphasis).

189. Item 4 of the table in s 75-10(3) raises the question whether there were improvements on the "land or premises in question" as at 1 July 2000. According to the Commissioner, given that the circumstances in Item 4 have to apply to "the supply", the term "land or premises in question" refers to whatever has been supplied. According to the Commissioner this is to be understood as a reference to the "tangible land that has been supplied".

190. The Commissioner submitted:

(1) if the sale of the four Lots is "the supply", then the question whether there were improvements as at 1 July 2000 needs to be answered in the context of the "land or premises" which is the subject of that supply - namely, all four Lots together; and
(2) if the sale of each Lot constitutes a separate supply, then the question whether there were improvements as at 1 July 2000 needs to be answered in the context of each supply, meaning each separate Lot would need to be examined on a stand-alone basis to see if that Lot had improvements.

191. The Commissioner submitted that "the supply" was the sale of all four Lots, namely the entirety of the freehold interests making up what is referred to as Property B2.

192. The Commissioner submitted that the "substance and commercial reality" was that the four Lots were to be sold in a single transaction with an indivisible purchase price to one purchaser, as a development site for a new suburb. The Commissioner relied in particular on the following matters:

• the transaction was advertised and promoted on the basis that a single buyer would purchase the land to develop a new suburb on the land;
• Property B2 was to be sold under a single contract of sale with a specified single price payable for the entirety of Property B2;
• the terms of Contract B2 do not differentiate between the four Lots. The purchase price is not apportioned between the four Lots;
• Property B2 was to be sold to a single purchaser;
• Lots L, M and N are contiguous. Lot P is separated by a railway line but is connected to Lot N via a private access road.

Consideration

193. The logical starting point for the application of Div 75 of the GST Act is s 75-5(1). Relevantly for present purposes, the question is whether there has been a "taxable supply" made "by selling a freehold interest in land". Contrary to the Commissioner's submission, s 75-10(3)(a) does not indicate that the identification of "the supply" under s 9-5 is the necessary starting point for the purpose of determining the application of Div 75.

194. The better construction of s 75-5(1)(a) is that it contains a special rule applicable where there has been a supply by selling a particular freehold interest in land and the supplier and recipient have agreed that the margin scheme is to apply. Where that has occurred, the margin is calculated by reference to the particular freehold interest which was sold. It applies whether or not that particular supply, made by selling a freehold interest in land, is part of a larger supply. This construction better accords with the ordinary meaning of the language employed in s 75-5(1) and Div 75 as a whole.

195.

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Item 4 in the table to s 75-10(3) applies where:

The supplier is the Commonwealth, a State or a Territory and has held the interest, unit or lease since before 1 July 2000, and there were no improvements on the land or premises in question as at 1 July 2000.

196. The reference to "the interest" in Item 4 is a reference to the particular freehold interest referred to in s 75-5(1)(a);
Sterling Guardian Pty Ltd v Commissioner of Taxation [2006] FCAFC 12; (2006) 149 FCR 255 at [21] (Heerey, Dowsett and Conti JJ). Contrary to the Commissioner's submission, the reference to "the land … in question" is a reference to the land to which the particular freehold interest relates, not to the "tangible land that has been supplied".

197. It does not matter whether the the contract of sale, namely Contract B2, is properly characterised for the purposes of s 9-5 of the GST Act as giving rise to a single "taxable supply" of four freehold interests in land or four taxable supplies of freehold interests in land. In either case, the margin scheme is to be applied to each freehold interest in land sold because, for the purposes of s 75-5(1)(a), there has been a supply of each freehold interest by selling each freehold interest in land. To the extent this should be regarded as modifying the "basic rules" (which must in any event be read in the context of the GST Act as a whole, including the "special rules") so much is expressly contemplated by the statutory regime: s 2-15; see also: ss 9-99 and 37-1 of the GST Act. The GST Act contemplates that a single supply might be made up of several supplies attracting differing treatment - see, for example: s 9-80.

198. Individual treatment of the relevant real property interests supplied in the manner described in s 75-5(1) better conforms to the object to which Div 75 is directed, that object being ascertained by reference to the language employed and the statutory context. The object of Div 75 is informed by the introduction of the GST on 1 July 2000 and the desire to "ensure that GST is only payable on the value added after the commencement of the GST system". The object behind Item 4, evident in part from the singular treatment of freehold interests in s 75-5(1), is that the value of the land is not subject to GST, consistently with s 38-445, and that GST is imposed only on the value of any improvements made to the land after 1 July 2000. The language of Div 75 does not evince any intention that this treatment should be lost, inconsistently with the object of only taxing value after 1 July 2000, simply because of the circumstance that multiple supplies of freehold interests occurred in the one transaction and there had been an improvement to one of the freehold interests forming part of the transaction.

199. The Commissioner submitted, by reference to s 23(b) of the Acts Interpretation Act 1901 (Cth), that the reference in s 75-5(1)(a) to "a freehold interest in land" could be interpreted as "freehold interests in land". If this were correct, it would also be necessary to read s 75-5(1) of the GST Act in that way when construing or applying s 75-16(1) and to read the references in s 75-16(1) to "the interest" as meaning "the interests". Section 75-16 of the GST Act provides:

75-16 Margins for supplies of real property acquired through several acquisitions

(1) If:

(a) you make a *taxable supply of *real property under the *margin scheme; and

(b) the interest, unit or lease in question is one that you acquired through 2 or more acquisitions ( partial acquisitions ); and

(c) one or more of the following provisions (a margin provision ) applies in relation to such a partial acquisition, or would so apply if the partial acquisition had been an acquisition of the whole of the interest, unit or lease:

(i) section 75-10;

(ii) subsection 75-11(1), (2), (2A), (2B), (3), (4), (5), (6) or (7);
the margin provision applies, in working out the margin for the supply you make, only to the extent that the supply is connected to the partial acquisition.

ATC 25496

(2) The acquisition of a margin provision in relation to one of the partial acquisitions does not prevent that margin provision or a different margin provision applying in relation to another of the partial acquisitions.

200. Section 75-16 provides a regime for dealing with margins for supplies of real property acquired through several acquisitions. The Explanatory Memorandum to the Tax Laws Amendment (2008 Measures No 5) Bill 2008 (Cth) ( 2008 Explanatory Memorandum ) explained at [1.50] and [1.51]:

Calculating the margin for the supply of real property acquired through several acquisitions

1.50 There may be circumstances where more than one of the following provisions applies to the calculation of the margin for the taxable supply of real property; section 75-10 and subsections 75-11(1) to (7). This may occur where there have been several acquisitions of real property which may later be combined or amalgamated.

1.51 New section 75-16 specifies that where real property has been acquired through two or more acquisitions (partial acquisitions) the calculation of the margin under a particular provision is determined only to the extent that the supply is connected to the partial acquisition. [Schedule 1, item 9]

Example 1.7: The margin for supply of real property acquired through several acquisitions

Bob acquired an interest as a GST-free supply of farmland. Bob acquired a second interest from an unregistered vender. The two interests are merged as part of a development and sold under the margin scheme.

Section 75-16 provides that the calculation of the margin under subsection 75-11(5) should only apply to the extent that the interest was acquired pursuant to the GST-free supply of farmland.

201. Where the particular freehold interest in land supplied was acquired through two or more previous acquisitions and the margin scheme would operate differently with respect to those underlying interests, the provision looks to the partial acquisitions in order to determine the application of the margin scheme. Section 75-16 confirms that the margin scheme is intended to apply individually to freehold interests whether or not those interests later form part of a single supply for the purposes of s 9-5. The reference in s 75-16(1)(b) and (c) to "the interest" is a reference to the interest referred to in s 75-5(1)(a), namely "a freehold interest in land". The provision is not drafted in a way which suggests it was intended to apply to a single supply of multiple freehold titles. The 2008 Explanatory Memorandum does not suggest such an object.

202. The Commissioner submitted that the operation of s 75-22 was consistent with the Commissioner's view that a sale of multiple freehold interests can be a single supply. Section 75-22 provides for an "increasing adjustment" where there is "a taxable supply of real property under the margin scheme" and part of what is being supplied was acquired in a way that was ineligible for the margin scheme.

203. The terms of s 75-22 are not directly inconsistent with the Commissioner's view, but the provision is not a strong contextual matter in favour of his view. The operation of s75-5, s 75-16 and 75-22 in relation to a freehold interest in land is, in simple terms, as follows. If a particular freehold interest in land was acquired through two or more acquisitions (and amalgamated into one), and that freehold interest is sold, then:

• by reason of s 75-5(2), the margin scheme will not apply if the "entire" freehold interest was acquired through a supply that was ineligible for the margin scheme;
• if a part of the freehold interest was acquired through a supply that was ineligible for the margin scheme, the margin scheme may still apply to the sale of the freehold interest;
• s 75-16 allows the margin scheme calculation methodologies set out in s 75-10 and s 75-11(1)-(7) to be applied individually in respect of each original freehold interest which was eligible for the margin scheme; and
• s 75-22 imposes an increasing adjustment if any of the original freehold interests were ineligible for the margin scheme.

204.

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Properly construed, s 75-22 also favours a construction of Div 75, in its application to sales of freehold interests in land, that the legislature should be presumed to have intended to mean what it said in s 75-5(1)(a), contemplating individual treatment under the margin scheme of "a freehold interest in land" whether or not it was sold under a contract in which other freehold interests were also sold.

205. As Landcom submitted by reference to
Saga Holidays Ltd v Commissioner of Taxation [2006] FCAFC 191; (2006) 156 FCR 256 at [44], the policy and context of the margin scheme set out in Div 75 (as part of the "special rules") is different from the context of the general provisions contained in the "basic rules". The focus of Div 75, in so far as it applies to selling freehold interests in land, is on the sale of individual interests in land.

206. It may be accepted as the Commissioner submitted that, for the purposes of s 9-5, a practical common-sense approach should be taken to the question of whether there is a single supply and to the characterisation of that supply, having regard to relevant contractual terms and commercial reality - see, for example:
Commissioner of Taxation v Luxottica Retail Australia Pty Ltd [2011] FCAFC 20; (2011) 191 FCR 561 at [15];
ATS Pacific Pty Ltd v Federal Commissioner of Taxation [2014] FCAFC 33; (2014) 219 FCR 302 at [43]. The recognition that the GST is a practical business tax, which informs that approach in relation to the characterisation of the relevant supply for the purposes of the "basic rules", also informs the construction of Div 75, contained in the "special rules". Division 75 was introduced in part to address the position of developers who (amongst other things) acquire and dispose of freehold interests in land. Div 75 relevantly focusses attention on "a freehold interest in land". The individual treatment of freehold interests under Div 75 is practical and commercial and accords with common-sense. The Commissioner's construction of Div 75, which involves reading the singular as plural, introduces complexity and uncertainty. It gives rise to differing results depending on the manner in which freehold titles were sold and facilitates the imposition of GST on value added before 1 July 2000 where this result was not obviously intended.

CONCLUSION

207. The questions which the Commissioner was asked in the private ruling application were:

Question 3

For the purposes of working out whether the circumstances specified in the second column of item 4 of the table in subsection 75-10(3) of the GST Act apply, will the sale of the freehold interests in the Lots comprising Property B2 pursuant to Contract B2 be a single supply?

Question 4

For the purposes of working out whether the circumstances specified in the second column of item 4 of the table in subsection 75-10(3) of the GST Act apply, will the sale of the freehold interest in each Lot comprising Property B2 pursuant to Contract B2 be a single supply?

208. The Commissioner should have answered "No" to Question 3 and "Yes" to Question 4.

209. The appeal should be allowed. The parties should confer with a view to agreeing appropriate orders to give effect to these reasons and, if possible, appropriate orders in respect of costs.

ATC 25498

THE COURT ORDERS THAT:

1. The appeal be allowed.
2. The parties confer with a view to agreeing and submitting agreed orders to give effect to these reasons, and as to costs, within 7 days.
3. If agreement is not reached, the parties approach the Associate to Thawley J within 8 days to have the matter relisted for argument in respect of appropriate orders.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE "A"

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Checklist of special rules
Item	For this case …	See:
…	…	…
5	Sale of freehold interests etc.	Division 75

Use of valuations to work out margins
Item	When valuations may be used	Days when valuations are to be made
1	The supplier acquired the interest, unit or lease before 1 July 2000 and items 2, 3 and 4 do not apply	1 July 2000
2	The supplier acquired the interest, unit or lease before 1 July 2000, but does not become registered or required to be registered until after 1 July 2000.	The date of effect of your registration, or the day on which you applied for registration (if it is earlier).
2A	The supplier acquired the interest, unit or lease on or after 1 July 2000, but the supply to the supplier: (a) was *GST-free under subsection 38-445(1A); and (b) related to a supply before 1 July 2000, by way of lease, that would have been GST-free under section 38-450 had it been made on or after 1 July 2000.	1 July 2000
3	The supplier is * registered or * required to be registered and has held the interest, unit or lease since before 1 July 2000, and there were improvements on the land or premises in question as at 1 July 2000.	1 July 2000
4	The supplier is the Commonwealth, a State or a Territory and has held the interest, unit or lease since before 1 July 2000, and there were no improvements on the land or premises in question as at 1 July 2000.	The day on which the *taxable supply takes place

Selfassessed amounts
Item	Column 1 Assessable amount	Column 2 Recipient	Column 3 Document
1	your net amount for a tax period	the Commissioner	your *GST return for the tax period
2	…