|Date of judgement||10 November 2014|
|Judge(s)||Barrett JA at ; Leeming JA at ; White J at |
|Court or Tribunal||Supreme Court of New South Wales, Court of Appeal|
TAXES AND DUTIES - land tax - exemptions - where appeal lay from Appeal Panel of Administrative Decisions Tribunal on a question of law - whether rural land exempt from taxation as land the dominant use of which was for primary production - Land Tax Management Act 1956 (NSW) s 10AA(1) - where land subject to different uses - whether appropriate to treat portions of land used for different uses separately and apart - whether Tribunal required to have regard to subjective purpose and intention of users of land in determining whether dominant use of land was for primary production
Brown v Commissioner of Land Tax (NSW) (1977) 7 ATR 642
Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24
The Taxpayers sought a review of the Chief Commissioner’s land tax assessments for the 2007 to 2011 tax years on the basis that the dominant use of the property, which had a rural zoning, was primary production, as required for exemption under s 10AA(3) of the Land Tax Management Act.
The Court of Appeal dismissed the appeal on the basis that the issue of whether the dominant use of the land was primary production for the relevant years was a question of fact and not of law. In so far as the questions raised in the Court of Appeal were questions of law, no error was shown.
The Taxpayers, Gustavo Ferella and Nida Ferella, had sought review of the Chief Commissioner’s Land Tax assessments of the property at 6 Alan Street, Box Hill (“the Property”) for the 2007 to 2011 tax years. A small portion of the land (approximately 5%) was fenced off from the remainder and contained a residence which was let out to a tenant by the taxpayers. The remainder of the land was said to be used for primary production.
At first instance before the Administrative Decisions Tribunal, the Tribunal (Block JM) found that it was not possible to conclude that the Property, during the relevant years, was used for the dominant purpose of thoroughbred horse breeding. The Tribunal found that only a small number of horses were ever present on the taxpayers' land and that any primary production activity was altogether minimal. The Tribunal determined that the horses constituted nothing more than a hobby, and the land’s dominant use in the relevant years was as an investment property earning income from the letting of a house on the property.
The Taxpayers then brought an appeal on questions of law to the Administrative Decisions Tribunal Appeal Panel. The Taxpayers asserted that Judicial Member Block’s reasoning in finding that the “horses constituted nothing more than a hobby” was erroneous. As such, this argument did not raise any questions of law, but instead challenged the findings of fact. The Appeal Panel rejected the argument and the challenges to the findings of fact.
The Taxpayers then appealed to the Supreme Court of New South Wales Court of Appeal (“NSWCA”). The decision of the NSWCA is summarised as follows:
The appeal was originally brought under s.101(1)(a) of the Supreme Court Act 1970 (NSW) but the Taxpayers conceded that it should have been pursuant to s.119 of the Administrative Decisions Tribunal Act 1997 (NSW) on the basis of a “question of law”.
The amended grounds of the appeal were:
Leeming JA held it was generally necessary for an appellant who invokes s 119 to frame one or more questions which amount to “questions of law”. The procedural history of this appeal emphasised the importance, at the outset, of squarely facing up to this requirement. The Taxpayers, when reminded by the Court of the limited scope of the appeal they had brought, framed the questions:
“Did the Appeal Panel err at law” … in making, or failing to make, certain findings, or in upholding the decision at first instance?
However, by merely asking whether the Appeal Panel erred in law in doing something or failing to do something, the Taxpayers did not circumvent the statutory limitation on the scope of the appeal. As such, the matters raised by the Taxpayers in their amended grounds of appeal amounted to challenges to evaluative fact-finding which on no view could amount to a question of law.
White J, with whom Barrett JA and Leeming JA agreed, held that the issue of whether the dominant use of the land was for primary production activities for the relevant years was a question of fact and not of law. In so far as the questions raised in the Court of Appeal were questions of law, no error was shown. The appeal was therefore dismissed with costs for the reasons summarised below:
The first question of law asserted in the appeal was that the rental property use ought to have been treated separately and apart from the balance of the land available for the purposes of the primary production activity. The Judicial Member of the Tribunal considered the parcel of the land as a whole notwithstanding that different parts of the land were used for different purposes. The Judicial Member applied Leda Manorstead v Chief Commissioner of State Revenue  NSWSC 867, also adopting a passage of the judgment from the Land Appeal Court of Queensland in Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286. The Judicial Member, in following the line of reasoning in these cases, concluded it was not appropriate to treat the rental property use as separate and apart; it must be weighed against the alleged thoroughbred horse breeding use to decide which use was dominant or prevailing during the relevant years. This approach was entirely orthodox and in accordance with binding authority.
It was asserted on behalf of the Taxpayers that the Tribunal and the Appeal Panel had concluded the intensity of the use of the land available for primary production activity was determinative of the dominant use of the land. If so, it would have been an error of law. However, neither the Judicial Member nor the Appeal Panel had committed any such error.
The Taxpayers submitted that the Tribunal was required to take into account the subjective purpose and intention of the Taxpayers and the relevant users of the land to conduct a horse breeding activity for the relevant years. They relied on the decision of Roden J in Saville v Commissioner of Land Tax (1980) 12 ATR 7 which concerned s 10(1) and 3(1) of the Land Tax Management Act 1956 (NSW). In Saville, Roden J stated that intention can and should be looked at as one of the factors that could assist in determining whether the actual use of land is sufficient to give the land the required “character”. White J referred to the judgment of Helsham CJ in Eq in Greenville Pty Ltd v Commissioner of Land Tax NSW (177) 7 ATR 278 wherein his Honour said that “whether land is being used for primary production… must be decided by an objective test… it is not to be tested by the intention of the owner”.
White J stated that Saville was not authority for the proposition that the subjective purpose or intention of the user or land is a mandatory consideration in determining whether a use of land for the purposes of primary production is the dominant use. As such, there was no error in the Judicial Member’s and the Appeal Panel’s deciding objectively whether the asserted use of the land for primary production was the dominant use of the land considered as a whole. White J did, however, note that Judicial Member Block did consider the evidence of Mr Angelo Ferella (son of the Taxpayers) as to the purpose and intention in using the land for horse breeding. Having done so, Judicial Member Block had concluded that the horse breeding activities constituted nothing more than a hobby.
The Court of Appeal held that no error of law arose on this appeal and the appeal was dismissed with costs awarded to the Chief Commissioner.