Jamsapi Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 57

Summary

The taxpayer sought a review of the Chief Commissioner’s decision to assess the taxpayer for land tax with respect to the 2010, 2012 and 2013 years for rural land owned by the taxpayer (“the subject land”).  The taxpayer claimed that the dominant use of the subject land was the maintenance of horses and cattle and it was therefore entitled to an exemption under s 10AA of the Land Tax Management Act 1956 (“the Act”).

Senior Member Verick agreed with the Chief Commissioner’s submission that the taxpayer had failed to discharge its onus of proof. Senior Member Verick noted that the notional carrying capacity, when compared with the claimed use, led to the logical conclusion that the primary production use was not sufficiently substantial to prevail over the proposition that the land was unused.

Background

The taxpayer claimed that all of the subject land was used for the maintenance of horses for the purposes of breeding and training, during the relevant years. The taxpayer claimed in its land tax objections and applications for exemption that during the relevant period:

• The land was purchased for the establishment of a horse breeding facility for harness ponies;
• At the time of purchase of the land (2007), Mr Hazzard agisted cattle on the subject land, and that continued periodically, depending upon the drought;
• “Harness pony” mares had been maintained on the subject land since 2009;
• For the financial year 2009-2010 it was claimed 8 head of cattle were sold, but there were no sales of horses;
• The subject land was used as a horse breeding and training facility for the ultimate sale of horses and their produce; however, there was no natural increase in the number of horses held on the land, and there had been no sales of horses.

It was agreed that the land was “rural land” for the purposes of s.10AA(4) of the Act.  The issue was whether the dominant use of the subject land was the maintenance of animals for the purpose of selling them or their natural increase or bodily produce under s.10AA(3)(b) of the Act.  The only evidence relied upon by the taxpayer was an affidavit of Mr Barry Anstee and his oral evidence.  In the affidavit Mr Anstee stated that:

• the subject land comprises 49.875 hectares with the only improvements being boundary and paddock fencing, two dams and cattle yards;
• all of the subject land had been used for the primary production use during the relevant tax years and no part of the subject land was unused; and
• the dominant use of the subject land had been primary production during the relevant tax years.

At the hearing an additional claim was made by Mr Anstee that the ponies were being trained for coach driving.

The Chief Commissioner claimed that the subject land was substantially unused. The Chief Commissioner filed an expert statement by Geoff Mills, Senior Ranger, working with the then Cumberland Livestock Health and Pest Authority.  Mr Mills’ evidence was that the notional carrying capacity of the land was 46 400kg steers, 35 cows & 35 horses.

Decision

Senior Member Verick referred to Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867 (“Leda’) in which Gzell J set out at paragraphs 69-76 of his decision the principles to be considered in determining “dominant use”.  His Honour stated in that passage that dominant in its ordinary meaning connotes the ruling, prevailing or most influential use.

Senior Member Verick had regard to the principles regarding unused land and dominant use.  He cited a passage from Roden J in Saville v Commissioner of Land Tax (1980) 12 ATR 7, which Gzell J also cited with approval in Leda, that the use must be “sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land”.  Senior Member Verick also referred to the decision of Helsham J in Greenville Pty Ltd v Commissioner of Land Tax (1977) 7 ATR 278 and concluded that the cases make it clear that the “dominant use” of land is not necessarily to be determined by reference to the sole physical activity conducted on the land.  The non-use of part of the land is a relevant factor when only some part is being used for a primary production activity.

Senior Member Verick agreed with the Chief Commissioner’s submission that the taxpayer had failed to discharge its onus of proof. Senior Member Verick noted that Mr Anstee’s evidence was unsubstantiated and found that, even if the evidence had been accepted, the application would fail. The notional carrying capacity, when compared with the claimed use, led to the logical conclusion that it was not sufficiently substantial to prevail over the proposition that the land was unused land in the relevant tax years.

Orders

The Taxpayer’s application was dismissed and the assessments were affirmed.

Link to decision

Jamsapi Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 57