Hoxede Pty Ltd as trustee of the Starr Family Trust v Chief Commissioner of State Revenue  NSWADT 251
|Date of judgement||4 November 2011||Proceeding No.||106012|
|Judge(s)||Judicial Member J Block|
|Court or Tribunal||Administrative Decisions Tribunal|
|Legislation cited||Land Tax Management Act 1956|
|Catchwords||Land Tax – Primary Production Exemption – Rural Land – Dominant Use Test – Significant and Substantial Purpose test – Zoning|
|Cases cited||Ball v Chief Commissioner of State Revenue  NSWADT 114
Cornish Group Pty Limited & Anor v Chief Commissioner of State Revenue  NSWADT 191
Leda Manorstead v Chief Commissioner of State Revenue  NSWSC 867
Romano v Chief Commissioner of State Revenue  NSWADT 73
St Pier v Chief Commissioner of State Revenue  NSWADT 112
Hoxede Pty Ltd as trustee of the Starr Family Trust (“the applicant”) sought a review of the decision of the Chief Commissioner of State Revenue (“Chief Commissioner”) to disallow their objection to an assessment for land tax for the 2007 to 2009 land tax years in respect of a property situated in Spring Farm (“the subject property”).
At issue in these proceedings was whether the primary production exemption under s 10AA of the Land Tax Management Act 1956 (“the Act”) should have applied in respect of the subject property. Judicial Member Block affirmed the decision of the Chief Commissioner that the primary production exemption was not available during the relevant tax years.
The subject property comprises two lots.
During the land tax years from 1995 to 2006, the applicant was assessed for land tax with respect to the subject property. In February 2007, however, the applicant sought a primary production exemption from land tax because of its cattle breeding and grazing activities. The exemption was granted.
The applicant purchased 18 cattle in December 2006. None of the cattle were sold and accordingly, no income was generated. Three were later slaughtered and consideration of $2,000 was received.
Another 35 cattle were purchased in 2009, of which 23 were sold in that year. As at June 2010, after all relevant land tax years had passed, 11 cattle and a number of goats remained on the property. Evidence before the Tribunal also suggested that, during one extended period between the 2007 and 2009 land tax years, there were no cattle on the land at all.
It was common ground that, at no time during the period under review was the subject property zoned as rural land, and the applicant incurred losses during each relevant land tax year.
The Chief Commissioner’s 2007 decision to exempt the subject property from land tax was reversed and an assessment for land tax was issued on 5 August 2009.
Issues before the Tribunal
There were essentially three main issues for determination by the Tribunal. These were:
whether the dominant use of the subject property was for primary production purposes (s.10AA(3) of the LTMA); and as the subject property was not zoned as rural land:
whether the use of the land had a significant and substantial commercial purpose or character (s.10AA(2)(a) of the LTMA); and
whether the subject property was engaged, during the relevant period, for the purpose of profit on a continuous or repetitive basis (s.10AA(2)(b) of the LTMA).
The Tribunal found that the activities on the land during the relevant land tax years did not demonstrate a significant commercial purpose or character, and this was the key element of the decision. The applicant incurred losses during each of the relevant years, with the Tribunal finding that these losses would have been even greater had it not been for “gifts” from family, such as the donation of a storage shed and other services of labour. That there was no business or breeding plan in place in respect of the cattle activities, alongside a consideration of the actual cattle activities themselves, led Judicial Member Block to conclude that the activities on the farm were more akin to that of a hobby farm, and certainly did not demonstrate a significant commercial purpose or character.
Aside from comments in relation to the losses made by the applicant, the question of whether the subject property was used for the purpose of profit on a continuous or repetitive basis was not considered at length.
As to the dominant use of the subject property, the Chief Commissioner accepted that primary production activities were taking place, but argued that there were also two other competing uses, the first being the use by electricity transmission lines, and the second being the residential use of a cottage on the property. Judicial Member Block again noted the small scale of the cattle business, and the fact it was also physically contained to a small area of the subject property, and ultimately held that it was not of sufficient scale, degree and intensity that would suggest it was the dominant purpose of the land. This was qualified, however, by an acknowledgement that the cattle activities would have been the dominant purpose, had they been organised and commercial, rather than haphazard and sporadic. Ultimately though, as the applicant failed to demonstrate that the land had a significant and substantial commercial purpose or character, it was therefore not considered necessary to consider whether the dominant use of the subject property was for primary production purposes.