1735 Pty Ltd v Chief Commissioner of State Revenue; and Sheep Station Pty Ltd v Chief Commissioner of State Revenue [2020] NSWCATAD 186

Background

In 2014 the Applicants agreed to licence part of the Applicant’s land to a grazier who conducted a business of cattle farming, to allow him to graze his cattle and grow and cultivate crops to feed the cattle.

The applicants disputed:

1. Land tax assessment notices issued to 1735 Pty Ltd and Sheep Station Pty Ltd for the 2016 and 2017 land tax years in respect of land in Perricoota Rd Moama;
2. land tax assessment notices issued to 1735 Pty Ltd as trustee for the Bares Family Trust for the 2015, 2016, 2017 and 2018 land tax years in respect of land in Perricoota Rd Moama.

The Chief Commissioner’s investigations revealed development plans and works on part of the land for a residential development known as Waterfront Moama,[1] a water recreational fun park known as Aqua Island,[2] various marketing and sporting events and a quarry.[3]

The issue

The initial issue was whether the applicants satisfied the primary production land tax exemption in s. 10AA(1) and (3)(a) of the Land Tax Management Act 1956 (“LTMA”).As the subject land was zoned rural land, the specific question was whether the dominant use of the land was for the maintenance of animals…for the purpose of selling them or their natural increase or bodily produce”[4].

At the end of the hearing, the Applicants confirmed they no longer required the Tribunal to review:

1. the Land Tax Assessment Notice issued to the Applicants for the 2015 and 2016 Tax Years; and
2. the Land Tax Assessment Notice issued to 1735 Pty Ltd ATF Bares Family Trust for the 2017 and 2018 Tax Years, except to the extent it assessed land tax on Lot 11.

Submissions

The applicants submitted that the standard of evidence required for the taxpayers to discharge their onus of proof concerning the “dominant use” test in s. 10AA did not require “intricate details about which lot or paddock was used at a particular point in time” but merely evidence from farmers’ about the ongoing use of land for grazing.[5] The applicants provided no evidence as to how often and how many cattle were moved to or from the Lot 11 in 2017 and 2018.[6] The Tribunal noted that the applicants’ evidence did not differentiate between the use of the subject land and the use of the agistee’s own adjacent land for the grazing activity.[7]

The applicants relied on Tribunal authorities that the intensity of the use of the land can be objectively determined by comparing the maximum carrying capacity with the number of cattle actually grazed on the land. The Tribunal acknowledged this was an accepted approach.[8] However, the Tribunal did not accept the applicants’ evidence on the intensity of the use of Lot 11, primarily because the applicant relied on evidence of grazing occurring on other land used in conjunction with Lot 11, in attempting to demonstrate the intensity of use of Lot 11.

Additionally, the Tribunal held that the carrying capacity of Lot 11 is not itself evidence of the number of cattle which were actually maintained on Lot 11 throughout the relevant period.[9]

The Chief Commissioner submitted that the failure to call the sole director of one of the applicants to give evidence should lead to the Jones v Dunkel inference to be drawn. The Tribunal found that if the director had given evidence, that evidence may have assisted the Applicants to prove their case and their failure to do so did not assist the applicants to discharge their onus of proof.[10]

Decision

The Tribunal was not satisfied on the balance of probability that the dominant use of Lot 11 was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce in accordance with s.10AA(3) of the LTMA.

Orders

The decision under review was affirmed.

The Tribunal made further orders if the Chief Commissioner wished to lodge a costs application, as foreshadowed during the hearing.

https://www.caselaw.nsw.gov.au/decision/1736ed3a4debe70dcc71aa9e

Footnotes

1. ^ Paragraph 91 of the decision. All paragraph references are to the decision, unless noted otherwise.
2. ^ Paragraph 80.
3. ^ Paragraph 80.
4. ^ Paragraph 34.
5. ^ Paragraph 43.
6. ^ Paragraph 41.
7. ^ Paragraph 51.
8. ^ Paragraph 52.
9. ^ Paragraph 65.
10. ^ Paragraph 75.