Case: Sterling Guardian Pty Ltd v Commissioner of Taxation [2006] FCAFC 12 ; (2006) 149 FCR 255
Outcome: distinguished
The first instance decision in Sterling Guardian Pty Limited v Federal Commissioner of Taxation [2005] FCA 1166 per Stone J, and the Full Court decision in Sterling Guardian Pty Ltd v Commissioner of Taxation [2006] FCAFC 12 ; (2006) 149 FCR 255, did not directly consider the operation of the provisions before me, and the purchase of the land there was completed before 1 July 2000, although the relevant stratum units were not registered under the relevant legislation until 2 March 2002. The focus of the Court's attention in that case was upon the operation of s 75-5(2) of the GST Act. 27 However, before me the respondent contended as follows: In the present case the stratum units that were sold by way of the Supply Contracts did not exist at 1 July 2000, those legal interests only came into existence on the registration of a plan of subdivision after 1 July 2000. Accordingly, it could be contended that s 75-10(3) has no application to the present circumstances as the stratum units could not have been acquired (within the meaning of Item 1 in the table) or held (within the meaning of Item 3 in the table) as at 1 July 2000 as they did not exist at that time. However, it is the Respondent's position that the references in s 75-10(3) to an "interest, unit or lease" should be interpreted in accordance with the principles set out by the Federal Court at first instance in Sterling Guardian Pty Ltd v Commissioner of Taxation [2005] FCA, at [23-40] in relation to Section 75-10(2). In that case, Stone J held that, where the property was subdivided after the purchase, the acquisition cost of each unit for the purposes of s 75-10(2) was the cost of the corresponding portion of the "parent" title and it was irrelevant that the individual stratum units did not exist at the time of acquisition. Applying these principles to the present case the Respondent contends that the stratum unit is only acquired or held on 1 July 2000, if the parent freehold title was acquired or held on that date and it is not to the point that the stratum unit interests did not exist at that time. This approach appears to have been implicitly assumed by the Applicant in its submissions. 28 My view is that the initial contention posited by the respondent is correct. Whilst the respondent sought to take a different position, I must construe the provisions as I consider they are to be properly understood as a matter of law. The failure of one party to adopt a particular interpretation cannot prevent a court from adopting that interpretation if the court considers the interpretation is correct: see generally Pearce DC and Geddes RS, ' Statutory Interpretation in Australia ' (6 th ed, LexisNexis, 2006) at [1.5]. 29 The property (in the juridical sense) that was sold by way of the Supply Contracts was not the same property that was acquired or held (no matter what meaning is given to those terms). Accordingly, s 75-10(3) does not apply; the applicant did not on any view acquire or hold before 1 July 2000 the Stratum Unit which it sold, and the requirements specified in the second column of the table were therefore not met. This, in my view, is the correct way to interpret and apply s 75-10(3) and the table. 32 The margin scheme was introduced to obviate unfairness on some forms of business activity see Sterling 149 FCR at [16]. However, I cannot ignore the text of the GST Act, particularly here Div 75, and the clear wording of the operation of the provisions under consideration before me. Further, the interpretation I favour does give effect to the legislative purpose of obviating unfairness, but as confined by the words of the provisions themselves. 33 Whilst the Explanatory Memorandum to the relevant legislation talks in general terms, nowhere can the applicant demonstrate that the Explanatory Memorandum addresses the first issue before the Court. The appropriate way to consider the ambit of s 75-10(3) is to look to the text itself, keeping in mind the ordinary principles of statutory construction. 34 In my view, the table in s 75-10(3), when referring to (relevantly here) the unit acquired, refers to the corresponding 'juridical concept or intangible legal interests' referred to in s 75-5(1), namely the 'stratum unit': see Sterling 149 FCR at [21] (per Heerey, Dowsett and Conti JJ). The table specifically refers to 'the' unit. This is consistent with the approach in s 75-10(2) the margin is normally to be calculated by the comparison of the consideration for supply and acquisition in respect of the unit 'in question'. The margin scheme envisages the comparison between the same units and, for that matter, between the same interests or leases. One would readily expect this to occur so that the calculation of the margin can be determined, putting aside the identification of a date, on the basis of the acquisition and supply of the same unit, interest or lease. 35 Therefore, the margin scheme can only apply to the same property (in the juridical sense) being acquired and subsequently sold. The specific wording of s 75-10(3), of the table in s 75-10(3) and of s 75-5(2), and then the specific reference back in these provisions to the supply of the stratum unit in s 75-5(1) supports this view. 36 The applicant, in an attempt to refute the approach that the acquired property should be identical to the supplied or sold property, referred to s 75-15, which provides: Subdivided land For the purposes of section 75-10, if the freehold interest, stratum unit or long-term lease you supply relates only to part of land or premises that you acquired, the consideration for your acquisition of that part is the corresponding proportion of the consideration for the land or premises that you acquired.