Tao v Commissioner: control, directors and landholder duty in Victoria

By Dev on 30/09/2025 in Announcements, Corporate trustees, Investments, SMSF cases & decisions, Taxation, Trustee education

The recent Victorian Civil and Administrative Tribunal (VCAT) decision in Tao v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 637 (Tao) illustrates that a person can incur duty when they acquire control of a landholder (eg, including a change in the directorship and/or shareholding of a trustee company). This can occur even without a change in the beneficial ownership of the landholder.

Investors who have control over/interest in landholders and advisers should be aware that even the restructuring of trustee companies may unintentionally give rise to duty under s 82 of the Duties Act 2000 (Vic) (Duties Act).

All legislative references will be to the Duties Act unless otherwise specified.

Facts of Tao:

In 2011, the parties established the WCT Unit Trust (Unit Trust) with 66 William Road Pty Ltd as the trustee (Trustee). Initially with Mr Constantinou was the sole shareholder, director, and secretary of the Trustee.

Units in the Unit Trust were issued to following three entities:

50 units — Maclaw No. 547 Pty Ltd as trustee for The Mountain Highway Unit Trust.
25 units — Fredco Incorporated Limited as trustee for Nomsec No. 1 Limited.
25 units — Amber Investments Pty Ltd (Mr Tao held 60% of the shares in this company).

The Unit Trust held land in Victoria with a value exceeding $1 million, meaning it was a landholder for the purposes of s 71(1).

During the period that Mr Constantinou was the sole director and shareholder of the Trustee, there was a loan in place in relation to real estate owned by the Unit Trust.

In early 2014, Mr Tao acquired the shares in the Trustee and also became its sole director. However, importantly, neither Amber Investments Pty Ltd nor Mr Tao acquired any further units in the Unit Trust.

After Mr Tao’s appointment as a director, the Trustee defaulted on its loan. Mr Tao negotiated on behalf of the Trustee with the bank including requesting an extension of the loan and considering its available options. Nevertheless, the property ultimately was sold to repay the loan.

In 2019 the State Revenue Office issued an assessment of AU$199,650, plus penalties and interest to Mr Tao. This was on the basis that Mr Tao had made a ‘relevant acquisition’ under s 82 when he acquired control of the Unit Trust on becoming the sole director/shareholder of the Trustee.

Section 82 of the Duties Act

Broadly, s 82 enables the Commissioner to deem a person to have made a relevant acquisition in a private landholder (including a trust or company) if that person acquires control over the landholder other than by a relevant acquisition already dutiable. The deemed acquisition is 100%, unless the Commissioner determines a lesser percentage is appropriate.
Importantly, ‘control’, under s 82(2), is where ‘a person acquires the capacity to determine or influence the outcome of decisions about the private landholder’s financial and operating policies’. This takes into account both enforceable rights and actual/de facto influence.

VCAT’s Decision

VCAT provided that to answer the question as to whether Mr Tao acquired control of the Unit trust, the following must be considered:

[5] …

(a) whether Mr Tao acquired the ‘capacity to determine or influence the outcome of decisions about the [WCT Unit Trust’s] financial and operating policies’; and

(b) if so, whether this is sufficient to engage the provision or if (as contended by Mr Tao) it is also necessary that Mr Tao obtained an interest in the WCT Unit Trust which is equivalent to a beneficial interest (which in turn involves a question of statutory construction).

VCAT upheld the Commissioner’s assessment, holding:

Acquisition of control: On Mr Tao’s appointment as sole director and shareholder of the Trustee, he acquired not just theoretical capacity but practical ability to influence or determine financial and operating policies of the Unit Trust. Evidence included his dealing with the Unit Trust’s loan and strategic decision-making concerning refinancing. Further, even though he consulted with former associates, their rights (including the power to remove the Trustee) were never exercised:

[79] While … the two other unit holders … could have used the power … to remove [the Trustee] as trustee … the fact is that they never did so.

No need for a beneficial interest: VCAT held that it was not necessary for Mr Tao to have also obtained a beneficial interest in the Unit Trust for s 82 to apply:

[96] Turning to the context, it is important to recognise that section 82 only applies where there is no relevant acquisition under sections 79 … or 81 … This, of itself, suggests that section 82 is not intended to be linked to any beneficial or synthetic interest in the trust.

Reduction in deemed acquisition: The assessment was reduced from 100% to 85% to account for a pre-existing indirect economic interest held by Mr Tao through Amber Investments (which held 25% of the units in the Unit Trust), reflecting that Mr Tao had 60% of the shares in Amber.Duty payable was reduced accordingly to approximately $169,702.50 and the penalties/interest were revised downwards as well.

This decision highlights the potential risks in making changes to the directorship or trusteeship of landholder entities.

Practical lessons for advisers and investors

Any corporate trustee appointments should be carefully reviewed before making changes.
Where there is a change in directorship of a trustee company of a landholder or a company that is a landholder, assess the ‘control’ risk under s 82:
- Does the directorship (or shareholding) confer capacity to determine or influence the financial or operating policy?
- Is the person acting in a strategic role (eg, negotiating loan terms or financial restructures)?
- Are there rights (in the trust deed) that might limit or remove such control? If so, have they been or might they be exercised?
It is important to document decision-making carefully, including keeping evidence of consultations, with unit holders.
Seek advice early to limit exposure to potential duty.

Conclusion

Tao is an important VCAT decision in Victoria that showcases that changing a trustee’s directorship/shares can amount to a ‘relevant acquisition’ of a landholder and thus, trigger duty. This can occur even when the underlying beneficial ownership of the trust/company landholder does not change.

Investors who seek to gain control over or influence potential landholders should be aware of the potential duty implications where there is a change in control of a company which is a landholder entity. It is important to understand not just ‘who owns what’ but also ‘who decides what’. Expert advice should be sought before there is change in the control of a landholder entity to mitigate unexpected duty outcomes.

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