Vowles Properties Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 73

Date of judgement 04 June 2014 Proceeding No. 1360045
Judge(s) NS Isenberg, Senior Member
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Civil and Administrative Tribunal Act 2013

Land Tax Management Act 1956

Taxation Administration Act 1996 ("TA Act")
Catchwords Land tax - primary production exemption - dominant use - significant and substantial commercial purpose - s10AA Land Tax Management Act 1956 (“the Act”).
Cases cited Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue (RD) [2012] NSWADTAP 25;

B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481;

Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183;

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25;

Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278;

Leda Manorstead v Chief Commissioner [2010] NSWSC 867;

Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366;

Saville v Commissioner of Land Tax (1980) 12 ATR 7

Summary

The Taxpayer sought a review of the Chief Commissioner’s decision to assess the Taxpayer for land tax for the 2009-12 land tax years (“the Relevant Years”), on land which the Taxpayer claimed was exempt because it was used for primary production. 

In relation to Lot 4 and Lot 5 DP 1124225 (the “Disputed Land”), the Tribunal decided that the Taxpayer derived no income from carrying on primary production activity because the agistment and husbandry activities were substantially in support of the saleyard operation conducted on Lot 5 and the adjoining Conceded Land.  Therefore, the primary production activities carried out on the Disputed Land did not have a significant, substantial or commercial purpose or character under s.10AA(2) of the Land Tax Management Act 1956 (“the LTM Act”).

The Tribunal was not satisfied that it was more likely than not that the dominant use of the Disputed Land was for primary production in accordance with s 10AA(3) of the LTM Act.  The decision of the Chief Commissioner to assess the land was affirmed.

Taxpayer’s submissions

During the hearing the Taxpayer conceded that Lots 1-4 DP 73528 (the “Conceded Land”) were liable.  The Taxpayer also conceded that during the Relevant Years the zoning of the Disputed Land was commercial light industrial, not “rural”, “rural residential” or “non-urban”, and therefore the commerciality tests in S10AA(2) applied.

In relation to the Disputed Land, the Taxpayer claimed that Lot 4 was used for holding, pasturing and crutching sheep, and the greater part of lot 5 was used as a feedlot for the maintenance of cattle. 

The Taxpayer claimed that “it is the use of the greater proportion of the Land for the maintenance of animals, which brings, the totality of the property within the exemption provided under s10AA(3)(b)”. The Taxpayer also claimed that the Land, in conjunction with other nearby land, some owned by the Taxpayer and some owned by another company associated with the Taxpayer, was used to carry and breed livestock and accordingly, the Land was used for primary production. The Taxpayer submitted that “what is described by the Respondent as the commerciality test under s. 10AA(2) of the LTM Act, was hair splitting and not common sense, and that zoning the Land other than rural ignored the use of the Land.”

Chief Commissioner’s submissions

The Chief Commissioner submitted, in relation to the Disputed Land, that:

  1. the Taxpayer carries the onus of proof; and

  2. the Land is not zoned “rural land” under s 10AA(4) of the Act; and

  3. therefore the Taxpayer must show that the land is used for primary production, and that use satisfies both the “dominant use” test and the commerciality and profit tests.

The Chief Commissioner submitted that if there was a dominant use of the Disputed Land, it was that of a saleyard for sheep and cattle, which did not come within the meaning of land used for primary production in s.10AA(3)(b) of the LTM Act (maintenance of animals etc). 

In the alternative, the Chief Commissioner argued that the Disputed Land was not used, as most of it was vacant for the majority of the Relevant Years. 

The Chief Commissioner also submitted that the Taxpayer had not satisfied the commerciality and profitability tests in s.10AA(2) of the LTM Act.

Decision

The Tribunal accepted that s.10AA(2) of the LTM Act applied to the Disputed Land for the Relevant Years and therefore the Taxpayer must satisfy each of the following criteria or “limbs”:

  1. the land must be used for primary production (S.10AA(4));

  2. the dominant use must be for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce (s10AA(3)(b));

  3. that dominant use must have a significant and substantial commercial purpose or character (s.10AA(2)(a)); and

  4. that dominant use must be engaged in for the purpose of profit on a continuous or repetitive basis (s.10AA(2)(b)).

The Tribunal accepted that during the Relevant Years some grazing of livestock, mainly sheep, occurred on Lot 4 however there was no evidence as to the number of sheep held in each land tax year during the Relevant Years or as to how long they were held for. 

The Tribunal concluded that the Taxpayer’s evidence conveyed the impression that to the extent Lot 4 was physically used, its use was substantially in support of the livestock saleyards operation carried on at Lot 5 and on the Conceded Land.

The Tribunal found, having regard to the limited evidence concerning the extent to which Lot 4 was used for maintenance of livestock, separate from its use as a transit holding area in conjunction with the saleyards operation, it was not satisfied on the balance of probabilities that there was a dominant primary production use of the Land which satisfied s.10AA(3)(b) of the LTM Act (maintenance of animals etc).

The Tribunal was not satisfied that the Taxpayer’s evidence supported the submission that the greater proportion of Lot 5 was used for the maintenance of animals.

Further, the Tribunal was not satisfied that occasional grazing of sheep on unidentified parts of Lot 5, together with holding cattle in feed lots was the dominant use of the Land, or that holding of cattle on Lot 5 was not predominantly conducted in support of the saleyard business, which was also conducted on the adjoining Conceded Land.

The Tribunal decided that the Taxpayer derived no income from carrying on any primary production activity on the Disputed Land, because the agistment and husbandry activities were substantially in support of the saleyard operation conducted on Lot 5 and the adjoining Conceded Land.

Therefore, the primary production activities carried out on the Disputed Land did not have a significant, substantial or commercial purpose or character.

The Tribunal was not satisfied that it was more likely than not, that the dominant use of the Land during the Relevant Years was for primary production in accordance with s 10AA(3) of the LTM Act.

Orders

The decision of the Chief Commissioner of State Revenue under review was affirmed.

Link to decision

Vowles Properties Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 73

Last updated: 18 May 2016