Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229

Date of judgement 6 November 2015 Proceeding No. 1410479
Judge(s) NS Isenberg
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Administrative Decisions Review Act 1997

Land Tax Management Act 1956

Taxation Administration Act 1996
Catchwords REVENUE LAW - land tax - primary production exemption - dominant use – maintenance of animals - s 10AA Land Tax Management Act 1956
Cases cited 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

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

Background

The Applicant sought review of the Chief Commissioner’s land tax assessment requiring the Applicant to pay land tax in respect of land at Thirlmere (the “Property”) for the 2011, 2012 and 2013 tax years (the “relevant period”).

The Property comprised approximately 22 acres of rural land. Improvements to the Property included a relatively basic residence which is fenced off from the rest of the Property, a large dam, a number of stables and sheds, a roundhouse with a sand floor for exercising horses, stallion yards, stables, a wooden race for livestock, and fencing.

The Applicant had owned the Property since the 1970s. From 21 July 2006 until late December 2011, the Property was leased to tenants (the “first tenants”) pursuant to a commercial lease (the “first lease”). From 21 May 2012, the Property was leased to Ms Remington and her partner by commercial lease (the “Remington lease”). Both leases provided that the Property shall be used for primary production.

On 2 September 2013, the Applicant applied for a primary production exemption from land tax for the Property, which was disallowed. On 1 November 2013, the Chief Commissioner issued a Land Tax Assessment Notice in respect of the Property for the relevant period which did not provide for any exemption. The Applicant objected to the Assessment and the objection was disallowed.

The Applicant applied to the Tribunal for a review of the disallowance of his objection, claiming that the dominant use of the Property in respect of each land tax year during the relevant period was the maintenance of horses for the purpose of selling them or their natural increase or bodily produce.

The Statutory Framework

Section 7 of the Land Tax Management Act 1956 (the “Act”) provides that land tax shall be levied and paid on all land in NSW other than land which the Act exempts from taxation.

Section 10AA(1) of the Act provides that land zoned rural that is used for primary production is exempt from land tax. In these proceedings, it was not in dispute that, at all relevant times, the Property was rural land for the purpose of s 10AA.

Under s 10AA(3)(b) of the Act, “land used for primary production” includes land the “dominant use of which is for the maintenance of animals…for the purpose of selling them or their natural increase or bodily produce.”

Decision

The issue for the Tribunal to consider was whether the Property was entitled to the primary production exemption for the relevant period.

The Applicant submitted that, while he received rent from leasing the Property, the Property was occupied and used by Ms Remington for the purpose of raising horses.[1]

The Chief Commissioner, citing Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 at 69 and Thomason v Chief Executive, Department of Lands (1994-95) 15 QLCR 286 at 303, contended that in order to determine “dominant use”, regard had to be had to the “main, chief or paramount”[2] use of the land based on weighing all the competing uses against each other in terms of “the nature and intensity of the uses, the surface area over which they extend, and the time, labour and cost of conducting them as well as the income generated.”[3] Accordingly, the Chief Commissioner submitted that the rental use formed the dominant use of the Property.

With respect to the 2011 and 2012 land tax years, the Tribunal found that, while there was evidence that from June 2010 until December 2011 the first lease provided for the first tenants to use the Property for primary production, there was no evidence that the Applicant or the first tenants or any other person actually used the Property for primary production during the term of the first lease or during the period between the end of the first lease and the start of the Remington lease.[4] Therefore, the Tribunal concluded that it was not satisfied on the balance of probability that the Property was entitled to primary production exemption under s10AA(3) in respect of the 2011 and 2012 land tax years.[5]

With regards to the 2013 tax year, the Tribunal considered the Chief Commissioner’s submission concerning insufficient evidence of Ms Remington’s horse breeding business, including, the minimal number of documents regarding the sale and purchase of horses, lack of profit and loss statements, business activity statements, tax returns, and tax invoices or receipts in support of aspects of her business.[6] However, the Tribunal ultimately had regard to unchallenged evidence of Ms Remington that the horses were rotated throughout the pastures and that the degree, extent and intensity of the use of the land for grazing and breeding was the maximum that the Property would allow.[7]

Accordingly, the Tribunal held that, on the balance of probability, the Property was, throughout the period of the Remington lease, used for the maintenance of horses for the purpose of selling them or their natural increase or bodily produce. Therefore, the Property was entitled to the primary production exemption under s10AA(3) in respect of the 2013 tax year.[8]

Orders

  1. The assessments under review in respect of the 2011 and 2012 land tax years are affirmed.

  2. The Applicant is entitled to the exemption sought in respect of the 2013 land tax year and the assessment issued in respect of that year is set aside.

Link to decision

Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229

Footnotes

  1. [1] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [14]
  2. [2] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [18]
  3. [3] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [18]
  4. [4] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [34]
  5. [5] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [35]
  6. [6] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [51]
  7. [7] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [55]-[56]
  8. [8] Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229 at [66]
Last updated: 18 May 2016