VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
administrative DIVISION
REVIEW AND REGULATION LIST	
vcat reference NoS. Z867/2022 & Z868/2022	
CATCHWORDS	
Review and Regulation List – Land Tax Act 2005, ss 67 and 67B – Construction of the term ‘beneficially owned’ in context of primary production exemption – Who beneficially owns shares registered in the name of natural persons as trustees of a family discretionary trust – Shares beneficially owned by trustee – Concessions as to ability of trustees to otherwise satisfy requirements of s 67B – Assessments of land tax set aside.	

APPLICANT	Merristock Pty Ltd (ACN 004 939 851)	
RESPONDENT	Commissioner of State Revenue	
WHERE HELD	Melbourne	
BEFORE	R Tang AM, Senior Member	
HEARING TYPE	Hearing	
DATE OF HEARING	24 April 2024	
DATE OF ORDER and reasons	6 June 2024	
CITATION	Merristock Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 535	

OrderS
Under s 50(2)(c) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), the land tax assessments issued to the applicant for the 2020 and 2021 land tax years are set aside and substituted with a decision that the properties the subject of the assessments are exempt from land tax under s 67(1) of the Land Tax Act 2005 (Vic).

R Tang, AM
Senior Member			

APPEARANCES:		
For Applicant	Mr D Williams KC and Mr D Morgan of Counsel	
For Respondent	Ms M Baker KC and Ms C Pierce of Counsel	

Reasons
1	By referrals made at its request, Merristock Pty Ltd (‘Merristock’) seeks review of two land tax assessments issued to it in respect of four properties located in Beveridge and Wallan (‘Relevant Properties’) for the 2020 and 2021 land tax years (‘Assessments’).  
2	Merristock contends that the Assessments should be set aside because (in respect of both years) it is entitled to the primary production exemption found in section 67(1) of the Land Tax Act 2005 (Vic) (‘LT Act’).  This is said to be the case on the basis that: 
•	the Relevant Properties, which are located in greater Melbourne and partly in an urban zone, are used solely or primarily for the business of primary production (‘Farming Use Condition’); and
•	as a proprietary company, which does not act in the capacity as trustee of a trust, it meets the ownership requirements set out in section 67B (‘Ownership Requirements’). 
3	In the latter respect, the Ownership Requirements are that:
•	the company carries on the business of primary production as its principal business (‘Principal Business Condition’);
•	‘all the company’s shares are beneficially owned by natural persons’ (‘Beneficial Owner Condition’); and 
•	where no dividends were distributed by the company during the relevant period (as in this case), 50% or more of the shares are beneficially held by a person or persons normally engaged (or whose relatives are normally engaged) in a substantially full-time capacity in the business of primary production (‘Beneficial Owner Farming Requirement’).
4	The Commissioner accepts that: 
•	the Farming Use Condition is satisfied; 
•	the Principal Business Conditions is satisfied; and 
•	Ms Catherine (Kate) Looker is engaged in a substantially full-time capacity in the business of primary production, such that the Beneficial Owner Farming Requirement will be satisfied so long as she and/or her relatives beneficially own 50% or more of the shares in Merristock.  
5	Accordingly, the (only) issue in dispute is the satisfaction of the Beneficial Owner Condition.  In particular, while the Commissioner accepts that 80% of the shares in Merristock are owned by natural persons, the dispute between the parties centres on the beneficial ownership of a 20% interest in Merristock which is held by Ms Clare and Ms Fiona Looker (‘DLC Trustees’) in their capacity as trustees of the David Looker Childrens Trust (‘DLC Trust’).  The issue turns on a matter of statutory construction as to the meaning of ‘beneficial owner’.      
6	For the reasons which follow, I consider that in applying the Beneficial Owner Condition to shares in a company held by the trustee(s) of a trust, it is necessary to consider whether the underlying beneficiaries of that trust can be regarded as beneficial owners.  If not, the beneficial owner of the shares is the trustee(s) of the trust.
7	In this case, the terms of the DLC Trust do not give any ‘beneficiary’ of that trust an equitable or other interest in the Merristock shares sufficient to make that person a beneficial owner of the shares.  It follows that the DLC Trustees are the beneficial owners of the shares they hold in Merristock and, as they (and all other shareholders) are natural persons, the Beneficial Owner Condition is satisfied. 
8	Further, as Ms Kate Looker owns or is the relative of each of the natural person owners of the shares in Merristock – and it is accepted she is normally engaged in a substantially full-time capacity in the business of primary production – it follows that: 
•	the Beneficial Owner Farming Condition is also satisfied; 
•	the Relevant Properties are exempt from land tax under section 67(1); and
•	the Assessments must be set aside.
Outline of legislative framework
9	Land tax is imposed on all ‘taxable land’ in Victoria of which a person is the owner as at 31 December of the year preceding the relevant land tax year, i.e. 31 December 2019 and 31 December 2020 for the 2020 and 2021 land tax years.  
10	Taxable land is defined as ‘land that is not exempt land’.
11	Division 2 of Part 4 of the LT Act provides that certain land used for primary production purposes is exempt land, although the availability of any exemption depends on the location of the land and how it is owned and used.
12	As the Relevant Properties are located (wholly or partly) in an urban zone in greater Melbourne, the relevant exemption is found in section 67(1).  It provides that such land is exempt if the Farming Use Condition is met and the owner of the land meets certain ownership requirements, which depend on the type of owner as follows:
Type of owner	Ownership requirements in:	
Natural person, not acting in the capacity as trustee of a trust to which the land is subject	LT Act, s 67A	
Proprietary company, not acting in the capacity as trustee of a trust to which the land is subject	LT Act, s 67B.	
Trustee of a superannuation trust to which the land is subject	LT Act, s 67C	
Trustee of a discretionary trust to which the land is subject	LT Act, s 67D	
Trustee of a unit trust scheme or any other form of trust to which the land is subject 	LT Act, s 67E	

13	Merristock is a proprietary company and it holds the Relevant Properties in its own right (rather than as trustee of any trust).
14	So far as relevant, section 67B provides:
(1)	For the purposes of section 67(1)(b)(ii), the requirements for an owner that is a proprietary company (not acting in the capacity as trustee of a trust to which the land is subject) are that—
(a)	the company carries on the business of primary production referred to in section 67(1)(a)(iii); and
(b)	the principal business of the company is that business; and
(c)	all the company's shares are beneficially owned by natural persons; and
(d)	the company meets the requirements in subsection (2) in relation to the distribution of dividends.
(2)	For the purposes of subsection (1)(d), the requirements are that—
	…
(b)	if no dividends were distributed during the relevant period, ordinary shares representing 50% or more of the issued share capital of the company have been beneficially owned for the relevant period by a person or persons—
(i)	normally engaged in a substantially full-time capacity in the business of primary production referred to in section 67(1)(a)(iii); or 
(ii)	whose relative or relatives were normally engaged in a substantially full-time capacity in the business of primary production referred to in section 67(1)(a)(iii).
15	As already mentioned, the sole issue in dispute is the meaning of ‘beneficially owned’ for the purposes of section 67B(1)(c) (which would also apply to section 67B(2)(b)).  
16	Before turning to the interpretation of that phrase, it is necessary to briefly address the ownership of the shares in Merristock.
Ownership of Merristock
17	Merristock was incorporated on 23 June 1972.
18	At the relevant times (i.e. at 31 December 2019 and 31 December 2020: see [9]), Merristock’s shares were held as follows:
Shareholder	Number	Percentage	
Ms Kate Looker	9,600	20%	
Ms Prudence (‘Prue’) Looker	9,600	20%	
The Executor of the Estate of the late Jean Leslyn Looker (‘Estate’), being Ms Kate and Ms Prue Looker	19,200	40%	
Ms Clare and Ms Fiona Looker, who hold the shares jointly as trustees of the DLC Trust	9,600	20%	
Total	48,000	100%	

19	In terms of the relationship between the shareholders:
•	Kate and Prue Looker are sisters.  
•	Jean Looker was their mother, who passed away in July 1998. Under her will, Jean Looker appointed her daughters as executrices and trustees of her Estate, and bequeathed her shares in Merristock to them in equal shares.
•	David Looker was their brother (who also passed away before the relevant land tax years).  Clare and Fiona are his two daughters.
20	The Commissioner accepts that the shares that Ms Kate and Ms Prue Looker hold as executrices and/or trustees of the Estate are beneficially owned by them.  However, he contends that the shares held by Ms Clare and Ms Fiona Looker as trustees of the DLC Trust do not meet the requirement for the shares to be ‘beneficially owned’ by natural persons because they hold the shares subject to the terms of a discretionary trust and it is not permissible to look through the trust to its underlying beneficiaries (which, in any event, potentially includes entities that are not natural persons).
21	The DLC Trust was established by a Deed of Settlement made on 30 June 1998 between David Hughes (as settlor) and Rekool Nominees Pty Ltd (as the original trustee) (‘Trust Deed’).  Ms Clare and Ms Fiona Looker became the trustees and registered holders of 20% of the shares in Merristock on 12 April 2019.
22	As is common in discretionary trusts established for the benefit of a family, the trustee(s) of the DLC Trust are given broad powers as to the distribution of income, including:
•	to pay, apply or set aside the net income of the Trust ‘to or for the Capital Beneficiary and/or the Income Beneficiaries living or in existence at the time of the determination’ and to do so ‘in such proportions and in such manner as they in their absolute discretion shall think fit’; and
•	to accumulate any income and later resort to such accumulations ‘as if it or they were income’.
23	Certain capital beneficiaries are identified in the schedule to the Trust Deed, being Claire Looker, Fiona Looker, Richard William Edward Looker, Geoffrey Oliver Thomas Looker and Guy Robert Andrew Looker ‘as tenants in common in equal shares’. 
24	No income beneficiaries are specifically identified in the schedule to the Trust Deed, but that term is defined in clause 1(b) to include:
•	the capital beneficiaries; 
•	relatives of the capital beneficiaries;
•	the trustees of any trust or settlement (defined as an ‘eligible trust’) under which a capital beneficiary ‘has any interest whether absolute or contingent and whether liable to be defeated by the exercise of any power or appointment’;
•	any corporation (defined as an ‘eligible corporation’) of which ‘at least one share in which is owned by any [capital beneficiary] or by the trustees of an eligible trust’; and
•	any other legal entity where ‘at least one share or other interest (whether present or contingent) in which is owned or held by any [capital beneficiary] or by the Trustees of an eligible trust or by an eligible corporation’.
25	If the trustee(s) of the DLC Trust fail to deal with all of the income of the trust estate before the end of an accounting period, the remainder is held for the capital beneficiaries then living (or their children).
26	Similarly, the trustee(s) of the DLC Trust have a broad discretion with respect to capital of the DLC Trust, including ‘to raise any sum or sums [out of the capital of the Trust Fund] and pay the same in addition to any entitlement to income … of the Income Beneficiaries’.
27	Any capital which has not been dealt with before the vesting day, is then held for the capital beneficiaries then living (or their children).
28	The DLC Trust was originally intended to vest upon the youngest capital beneficiary attaining the age of 25 (or dying under that age), which would have been 23 August 2012.  However, by Deed of Variation of the David Looker Childrens Trust made on 17 August 2012, the vesting date was varied to 25 February 2056.
Interpretation of Beneficial Owner Condition
29	As the Commissioner’ submits, the process of statutory interpretation requires the Tribunal to consider the text of the provision in light of its context and purpose.  That process applies equally in a state tax context and in the interpretation of the phrase ‘beneficially owned’. 
Merristock’s contentions
30	Merristock submits that the expression beneficially owned ‘allows one to go behind the fact of the register’ and ‘[look] to the person for whose benefit the registered owner holds them’.  This submission is based on the High Court’s decision in Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (‘Linter Textiles’) which drew a distinction between the phrases ‘beneficially held’ and ‘beneficially owned’ in the context of federal taxation legislation dealing with the carrying forward of tax losses.  In that regard, the plurality observed that ‘[w]hen used in relation to [shares in] companies, “hold” normally refers to legal ownership established by reference to the register of members’.  However, the Court observed that: 
(a) 	the relevant tax legislation had been amended to replace the reference to shares being ‘beneficially held’ with ‘beneficially owned’ following the Court’s decision in Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation (in which it had been held that shares registered in the name of a mortgagee were not ‘beneficially held’ by the mortgagor); and
(b)	the ‘change evidently was made to assist the taxpayer, by allowing the taxpayer to go beyond the face of the share register’.
31	Merristock contends: 
[t]here is no reason to suppose that Parliament was not aware of the important and well-established distinction between “beneficially owned” and “beneficially held”, and deliberately chose the former.  Such a choice is consistent with the scheme of the [LT Act] and with the s 67 exemption in particular.  The purpose of the exemption is to help genuine primary producers running a business on their own land.  This purpose is better met by looking not to who is the registered owner of land, but to who has the benefit of it.
Commissioner’s contentions
32	After referring to the principles of statutory construction, the Commissioner submits that – given the specific statutory context – the decision in Linter Textiles ‘does not assist’, observing that it is: 
fraught to rely on authorities concerned with the construction and application of a particular statutory provision [i.e. the loss carry forward rules in federal tax legislation] in order to elucidate the meaning of words in a different statute [i.e. the primary production exemption in the LT Act].
33	In this regard, the Commissioner also points to the High Court’s comment in Linter Textiles that the phrase beneficially owned was ‘to be construed in context and must reflect the purposes of the section in which it occurs’.
34	The Commissioner contends that there are ‘significant contextual aspects’ of the primary production exemption provisions which ‘supports an underlying premise that the concepts of “owner” and “ownership” … focus on legal ownership’.  In this regard, the Commissioner points to:
•	Section 67(2)(a) which provides that an owner of land for the purposes of section 67 does not include a beneficiary of a trust’.
•	Section 67B(2)(a), which sets out the Beneficial Owner Farming Requirement in circumstances where the land-owning company has paid dividends, and ‘is clearly directed to … “the holders” of the shares (as the persons to whom the dividends are distributed)’.
•	The requirement in sections 67C, 67D and 67E for the relevant beneficiaries to be natural persons, at least one of whom is normally engaged in primary production in a substantially full-time capacity, noting that ‘there can be no suggestion that [those provisions] can be satisfied by reference to the ultimate beneficiaries’.
35	The Commissioner submits that this ‘narrow focus’ is consistent with: 
•	the purpose of the provisions as explained in Lotus Oaks Pty Ltd atf Bozzo Family Trust v Commissioner of State (‘Lotus Oaks’): i.e., to ‘discourage land speculation and land banking of urban zoned land in greater Melbourne’; and
•	Garde J’s observation in that case that (based on the legislative history and the progressive narrowing of the exemption) ‘the provisions should be construed relatively strictly [as] it was not the intention of Parliament to exempt all persons carrying on farming activities from land tax’.
36	The Commissioner further submits that his interpretation is supported by the legislative history, including the ‘distinction between ownership requirements applicable to companies and corporate trustees respectively, and a narrowing of the exemption criteria’.
37	The Commissioner concludes by suggesting that: 
In the context of Subdiv 4 of Div 2 of Pt 4 of the Act – in which there is a focus on the legal owner, and specific (and limited) provision is made in relation to beneficiaries of trusts – references to shares being “beneficially owned” … are properly construed as meaning legal and beneficial ownership of the shares’.
The substantive concept is that shares must be owned beneficially. 
The word “beneficially” operates to qualify ownership, that is, by excluding the case of ownership for the benefit of others.
The person or persons who beneficially own shares in a non-trustee proprietary company are not identified by “looking through” any trusts or sub-trusts on which the shares are held to ascertain the ultimate beneficiaries or persons for whose benefit the shares are held.
38	In the alternative, the Commissioner contends that:
as the [DLC Trust] is a discretionary trust, the capital and income beneficiaries of that trust do not have a vested interest in any of the trust assets prior to a determination being made by the trustee or until the Vesting Day, and therefore the shares in [Merristock] that are held by the [DLC Trustees] cannot be regarded as “beneficially owned” by the beneficiaries of that Trust.
Merristock’s reply
39	In its reply submissions, Merristock contends that the Commissioner ‘overlooks [an] important rule of statutory construction’, namely that ‘where words have been used which have acquired a legal meaning it will be taken, prima facie, that the legislature has intended to use them with that meaning unless a contrary intention clearly appears from the context’.
Analysis
40	To enliven the section 67 exemption from land tax, it is necessary that all of the shares in the company which owns the land ‘are beneficially owned by natural persons’.  
41	The expression ‘beneficially owned’ is not defined anywhere in the LT Act, however it is evident that it is a legal concept drawn from trust law.  In this regard, as the High Court observed in Linter Textiles, ‘[t]he term “beneficial” is usually employed in trust law as a cognate of [i.e. it is related to the word] “beneficiary” [and] identifies those persons for whose benefit the trustee of a private trust … is bound to administer the trust property’.  Accordingly, in the hypothetical example ‘[w]here A holds [the property] Blackacre on a bare trust for B [i.e. A has no active duties except to transfer the property to B or as B directs], it may accurately be said that B is the beneficial owner’ of that property. 
42	In Linter Textiles, the High Court went on to contrast the phrase ‘beneficially owned’ with ‘beneficially held’, observing that in Dalgety Downs it was held that shares registered in the name of X, as mortgagee from Y, were not “held” by Y for the purposes of the then carry forward loss provisions.  This was because the word ‘beneficially’:
serves more naturally the purpose of excluding the case of a holding for the benefit of others than the purpose of so broadening the meaning of the word ‘held’ beyond the particular significance which it normally has in relation to shares as to make it equivalent to ‘owned’ in the most general sense of that word.
43	In Linter Textiles, the High Court observed that the replacement of the phrase ‘beneficially held’ with the phrase ‘beneficially owned’ was a ‘change evidently … made to assist the taxpayer, by allowing the taxpayer to go beyond the face of the share register’. 
44	Of course, the legislative history of the primary production exemption from land tax differs from the carry forward loss provisions under federal income tax legislation and requires separate consideration.  At my request, following the hearing, the Commissioner provided an outline and a bundle of material concerning this legislative history, although it has proven necessary for me to examine some other changes to the relevant provisions over time to fully understand the context. 
45	Land tax was first imposed in Victoria in 1877, apparently as a means to break up large land holdings.  
46	In 1910, Victoria introduced legislation to impose land tax on the unimproved value of land (and abolish the pre-existing regime).  At the time, there was no primary production exemption as such, but there was a concession in terms of Victorian income tax in respect of ‘income from live stock[,] wool[,] meat[,] milk[,] diary produce[,] fruit[,] grain[,] fodder and other crops arising or accruing from any land to the owner’, subject to the value of the relevant land not exceeding £5,000.  
47	The legislation included a provision dealing with the situation where land was held on trust.  It provided that the ‘owner of any equitable estate or interest in land’ was to be assessed and liable to land tax ‘as if the estate or interest so owned by him was legal’, but subject to a deduction of any tax paid by the legal owner on that land.  For its part, the trustee was required to:
make returns and be assessed and liable in respect of the tax as if he were beneficially entitled to such land, save that when he is the owner of different lands in severalty in trust for different beneficial owners … the tax so payable by him shall be separately calculated and assessed in respect of each of those lands ; and save also that when a trustee is also the beneficial owner of other land, he shall be separately assessed in respect of that land, and of the land of which he is trustee …
48	As with most other Victorian legislation, the land tax legislation was consolidated in 1958 as the Land Tax Act 1958 (Vic).  By that time, the income tax concession had been removed and, it was instead provided that no land tax would apply to ‘land or lands used for primary production’ (irrespective of its ownership or location) unless the unimproved value of the land exceeded £3,000.  The phrase ‘land or lands used for primary production’ was defined to mean: 
land or lands used primarily for – 
(a) 	the cultivation thereof for the purpose of selling the produce of such cultivation; or 
(b) 	the maintenance of animals or poultry thereon for the purpose of selling them or their natural increase or bodily produce; or
(c) 	the keeping of bees thereon for the purpose of selling their honey.  
49	The provisions dealing with land held on trust were retained but moved to sections 51 and 52.
50	It was not until 1973 that a distinction was sought to be drawn between the primary production exemption available for land within and outside an urban zone.  Land wholly outside the metropolitan area or wholly outside an urban zone remained exempt provided that it was used for primary production.  However, for land wholly or partly in the metropolitan area and wholly or partly in an urban zone, an exemption was only available if it was:
used solely or primarily by the owner for the business of primary production if—
(i)	the owner of the land is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land or in the case of a proprietary company the principal business of the company is primary production of a type carried on on the land; and
(ii)	the owner is a natural person or a proprietary company incorporated under the Companies Act 1961 in which all the shares are beneficially owned by natural persons;
51	That the amendment referred to shares in the land owning company being ‘beneficially owned’ by natural persons, rather than requiring they be ‘beneficially held’ by a natural person is significant in that the amendment was made some 21 years after the High Court’s decision in Dalgety Downs, where the meaning of ‘beneficially held’ was established.  That the legislature did not adopt the latter term suggests it intended something different to be conveyed by the reference to the ‘beneficial ownership’ of shares.
52	So far as relevant, there were only relatively minor changes in the legislative scheme between 1973 and 2004.  However, in 2005, three relevant things happened:
•	on 26 April 2005, the High Court handed down its decision in Linter Textiles; 
•	on 28 September 20005, the High Court handed down its decision in CPT Custodian Pty Ltd v Commissioner of State Revenue (‘CPT’); and
•	on 29 November 2005, Royal Assent was given to the LT Act, which modernised the land tax legislation and to the Duties and Land Tax Acts (Amendment) Act 2005 (Vic) which, among other things, introduce ‘a new regime for imposing land tax on land held on trust’.  Both pieces of legislation commenced operation on 1 January 2006.
53	As already noted, in Linter Textiles, the High Court held that (at least in the context of the carry forward loss provisions in federal tax legislation) the phrase ‘beneficially owned’ allowed reference to the underlying beneficial owners (by contradistinction to the narrower historical phrase of ‘beneficially held’).
54	In CPT, the High Court was called on to consider whether the sole unitholder of a unit trust was the ‘owner’ of land for the purposes of the Land Tax Act 1958 (Vic) (in the context of apparent agreement that sections 51 and 52 were not themselves charging provisions).  The High Court held that the unitholder was not the owner of the land.  In reaching that conclusion, the High Court made certain observations that are relevant to this proceeding.    
55	First, the High Court referenced certain comments of the then Chief Justice in an earlier decision, as being:
a prescient rejection of a “dogma” that, where ownership is vested in a trustee, equitable ownership must necessarily be vested in someone else because it is an essential attribute of a trust that it confers upon individuals a complex of beneficial legal relations which may be called ownership.  The current state of authority, exemplified by [Linter Textiles], bears [the rejection of that dogma] out …  
56	Second, the Court cautioned against making ‘a priori assumptions as to the nature of unit trusts under the general law and principles of equity’, which ‘would not assist and would be apt to mislead’.  
57	It is apparent that the Victorian parliament took account of these decisions in modernising the land tax legislation.  
58	Relevantly, sections 51 and 52 of the Land Tax Act 1958 (Vic) were effectively repealed and replaced by provisions generally imposing a surcharge rate of land tax on persons and companies holding land ‘as trustee of a trust’ as if it were the only land owned by the trustee, other than a limited range of trusts for which a ‘look-through approach’ was adopted.   
59	However, in re-enacting the primary production exemption for urban land (i.e. section 9(1)(ha) of the Land Tax Act 1958 (Vic) was re-enacted as section 67), the parliament chose to retain the original language.  In particular, in the case of land owned by a proprietary company, there remained the requirement that ‘all the shares [in the company] are beneficially owned by natural persons’.   
60	This is another strong indication that the Parliament: 
•	intended there to be a difference between the concepts of ‘beneficial ownership’ of shares (on the one hand) and the treatment of land which is itself subject to a trust (on the other); and 
•	intended (or at least accepted) that the High Court’s interpretation of the ‘beneficial ownership’ in Linter Textiles would apply.
61	The current form of the primary production exemption was implemented as part of a range of amendments in 2019.  
62	Relevantly, in enacting the new form of section 67, together with sections 67A to 67E, different requirements were established in respect of land held on trust (and in turn depending on the nature of the trust) as compared to land held by a natural person or company ‘not acting in the capacity as trustee of a trust to which the land is subject’.  
63	It is evident that, in adopting the latter formulation, Parliament sought to avoid any doubt as to which requirements would need to be satisfied where land was held on trust, and avoid any debate as to whether the beneficiaries of the trust could be regarded as being beneficial owners of the land.
64	The Commissioner has referred to section 67B(2)(a) (see [34], second dot point) which, arguably, supports a contrary interpretation.  Where ‘the [land owning] company [has] distribute[d] dividends [in the preceding 3 years]’, that section requires that the dividends have been ‘distributed to all the holders of the issued share capital of the company in proportion to their respective paid up shareholdings’ and that ‘50% or more of the dividends were distributed’ to a person who (or whose relative(s) were) normally engaged in a substantially full-time capacity in the business of primary production.  
65	The focus on the person to whom dividends are distributed tends to suggest that the ‘beneficial owner’ is the registered holder of the shares because, of course, a company would (ordinarily) distribute dividends to the registered holder(s) of its shares.
66	On the other hand, section 67B(2)(a) could still operate effectively in a trust scenario as the question would be whether the trustee(s) of the shares (or their relatives), as recipient of any dividends, are natural persons normally engaged in a substantially full-time capacity in the business of primary production.  As it happens, and for the reasons explored below, that is the same question that arises in this case under section 67B(2)(b).       
67	The Commissioner also pointed to section 67(2)(a) in support of its narrower interpretation of beneficially owned (see [34], first bullet point).  The section provides that a reference in section 67(1) to ‘the owner of land does not include a reference to … a beneficiary of a trust … to which the land is subject’.  However, it seems to me that this provision has limited effect (in light of the decision in CPT) and perhaps is confined to bare trust situations.  
68	Turning to purpose, it is clear from the historical context that land used for primary production purposes has always received concessional treatment, although the exact nature of the concession and the limitations as to its availability have varied over time.  
69	Consistent with Garde J’s observations in Lotus Oaks (see [35]), it is apparent that the changes which have been made to the primary production exemption in more recent times have been designed to ensure there is genuine farming being carried on (as opposed to land banking) and, in the case of land within an urban zone in Greater Melbourne, that the farming is being carried on by relevant persons associated with the owner of the land.  
70	However, I do not consider it to be inconsistent with that purpose to interpret section 67B on the basis that it allows reference to be made to the farming activities of: 
•	any beneficiaries of a trust who can be said to beneficially own the shares in the land-owning company; 
•	the trustee(s) who hold the shares (if there is no other beneficial owner); or
•	the relatives of the trustees or underlying beneficial owners.
71	By contrast, it would seem inconsistent with that purpose if the only reason the primary production exemption was denied was because the shares are held on trust, even though the trustee(s) are natural persons who hold the shares for the members of a family which includes one or more persons genuinely carry on farming activities on the land.
72	For these reasons, I reject the Commissioner’s submission that the Beneficial Owner Condition in section 67B(1)(a) is not met in circumstance where shares are held subject to a trust.  Rather, it is necessary to consider who the ‘beneficial owner’ of the trust’s shares is. 
Ms Clare and Ms Fiona Looker are the beneficial owners of 20% of Merristock
73	As previously indicated (see [5] and [20]), the Commissioner accepts that 80% of the shares in Merristock are owned by natural persons and it is only the 20% interest in Merristock registered in the name of Ms Clare and Ms Fiona Looker in issue.  When considering whether that 20% is beneficially owned by the beneficiaries of the DLC Trust, it is important to bear in mind the High Court’s observations in CPT (see [55]–[56]).
74	In that regard, the decision in CPT establishes that there will only be a dichotomy between the legal and beneficial ownership of property held on trust if the ‘beneficiaries’ have an interest in the underlying assets of that trust.  
75	As submitted by the Commissioner (see [38]), the terms of the DLC Trust are such that any entitlements that the beneficiaries have are defeasible (i.e. could be lost) by the trustees’ exercise of their discretions to appoint income or capital to one or more of those persons (or entities) to the exclusion of others (or to accumulate any income) (see [22]).  
76	In those circumstances, I do not consider that any beneficiary identified in the Trust Deed has a beneficial or other interest in the assets of the DLC Trust, other than right of due administration.  Such an interest falls well short of anything that could be regarded as beneficial ownership.
77	It follows, in my view, that Ms Clare and Ms Fiona Looker are the (legal and beneficial) owners of the 20% interest in Merristock that they hold as trustees of the DLC Trust.
Requirements of section 67(1) and 67B are satisfied
78	It is common ground that the Relevant Properties comprise one parcel that is wholly or partly in greater Melbourne and wholly or partly in an urban zone (see [2]), satisfying two of the pre-conditions (in section 67(1)(a)(i) and (ii)) for the exemption.
79	As already noted (at [4]), the Commissioner accepts that:
•	the Relevant Properties are used ‘solely or primarily for the business of primary production’ satisfying the Farming Use Condition; and
•	Merristock carries on the business of primary production as its principal business, satisfying the Principal Business Condition.
80	At the hearing, the Commissioner made certain concessions, which he subsequently confirmed in an email dated 3 May 2024, namely:
[i]f the expression “beneficially owned’ … is construed as referring to an indefeasible interest in the shares that is vested in possession without any additional requirement that the shares not be held on behalf of or for the benefit of any other person, then the Respondent accepts that where the shares are held on trust, the trustee of that trust is a natural person , and there is no other object of the trust who can be described as the “beneficial owner” of the shares, then the trustee is the legal and beneficial owner of the shares held on trust. … Thus on that construction, if neither the Capital Beneficiaries nor the Income Beneficiaries of the [DLC] Trust were beneficial owners of the trust fund (including the [Merristock] shares) at the relevant dates, then the requirements of s 67B(1)(c) and 67B(2)(b) could be satisfied by reference to Claire Olivia Ruth Looker and Fiona Cecilia Anne Looker as joint trustees of the [DLC] Trust.
81	Having regard to: 
•	my interpretation of the phrase ‘beneficially owned’; 
•	my analysis of the Trust Deed and the conclusion that Ms Clare and Ms Fiona Looker are the (legal and beneficial) owners of the Merristock shares held by them as trustees of the DLC Trust; and
•	the Commissioner’s concession in respect of the shares held by Ms Kate and Ms Prue Looker as executrices and/or trustees of the Estate (see [20]),
it follows that all of the shares in Merristock are ‘beneficially owned by natural persons’, satisfying the Beneficial Owner Condition in section 67B(1)(c).
82	In the course of the investigation and objection process, Ms Kate Looker provided information as to nature and extent of her farming activities on or relating to the Relevant Properties.  The Commissioner has not sought to challenge that she is ‘normally engaged in a substantially full-time capacity in the business of primary production’.  Accordingly, and as she beneficially owns or is a relative of the beneficial owners of all of the shares in Merristock, I accept that the Beneficial Owner Farming Condition in section 67B(2)(b) is also satisfied.  
83	For these reasons, I am satisfied the Relevant Properties are ‘exempt land’ and will set aside the Assessments. 

R Tang, AM
Senior Member