|Date of judgement||10 September 2015|
|Judge(s)||A Verick, Senior Member|
|Court or Tribunal||NSW Civil and Administrative Tribunal|
STATE REVENUE – Land Tax – Whether land consists of separate ‘parcels of land’ for purposes of Land Tax Management Act 1956 – Part of the land used for ‘compost farming’ – Whether used for cultivation – Primary Production Exemption - Land Tax Management Act 1956, s 10AA(3)(a)
Christies Sands Pty Ltd v City of Tea Tree Gully (1975) 37 LGRA 325
Colonial Sugar Refining Co Ltd v The Valuer General (1939) 5 The Valuer 472
Knowles v Salford Corp  1 CH 328
The Chief Commissioner had issued a Land Tax Assessment (the “Assessment”) to the Taxpayer for the 2010 to 2014 land tax years. The subject land was located at Browns Creek Road, Blayney, New South Wales (the “Land”). The Land consisted of two separate parts with their own postal codes, but were treated by the Valuer-General as one parcel of land for valuation purposes in the relevant tax years. The Taxpayer conducts “compost farming” on the Land.
The Taxpayer objected to the Assessment, on the basis that the Land was exempt under s 10AA(3)(a) of the Land Tax Management Act 1956 (the “Act”) due to its use for composting activities, which the Taxpayer claimed was a primary production activity. The Taxpayer submitted that the Chief Commissioner ought to have treated the Land as consisting of two or three parcels of land and allowed the exemption to the parcel of land where the composting activities were carried out during the relevant years.
The two key issues for determination were:
The Taxpayer submitted that the Land comprised of two separate parcels of land for a number of reasons, including that both parcels had separate legal titles, separate postal identities and separate physical characters. The Taxpayer contended that the scheme of the Act is “…land tax is levied on ‘parcels of land’ rather than land per se”.1
The Chief Commissioner contended that the Tribunal did not have the necessary “jurisdiction and/or power to deal with the issue of whether the Land comprised two or more ‘parcels’”. Moreover, the Chief Commissioner claimed the Tribunal could not make its own assessment in place of the original assessment nor could it revoke the assessment or remit the matter for re-assessment as the relevant “parcels” of land do not have a taxable value.2
The Tribunal agreed with the Chief Commissioner’s submissions, acknowledging that the Chief Commissioner does not have legislative power to “dissect” a parcel of land as submitted by the Taxpayer. In citing ss 3AL(1), 7 and 9 of the Land Tax Act1956, the Tribunal noted that “land tax is imposed on the taxable value of land” and that the taxable value is “calculated on the basis of the value entered in the Register kept by the Valuer General”.3
The Taxpayer filed an affidavit from a composting expert as to the activity of cultivation and sale of compost on the Land. The Taxpayer referred to this evidence in its submissions and stated that “the present s 10AA(1) looks to the use of the land – it does not require cultivation of the land”. The Taxpayer then submitted that making compost on the Land comprised ‘cultivation’ under the Act.
The Chief Commissioner contended that the Taxpayer did not cite any authority in support of the proposition the Land was used for cultivation. The word ‘cultivation’ is not defined in the Act, and the Chief Commissioner cited cases such as Beach Estate Pty Limited v Commissioner of Land Tax (NSW) (1979) 79 ATC 4032; (1979) ATR 451 (“Safety Beach”) and Favello Pty Ltd v Chief Commissioner of State Revenue  NSWCATAD 47 (“Favello”) which provide guidance as to its meaning. The Chief Commissioner contended that the Taxpayer applied processes to organic matter rather than to the Land itself and as such, the making of compost was not ‘cultivation’ under the Act.
The Tribunal agreed with the Chief Commissioner’s submissions that the Taxpayer’s definition of ‘cultivation’ must be rejected. The Tribunal cited the Safety Beach case in concluding that the idea conveyed by “cultivation” is the improvement of the land for the purpose of selling the produce of the improved land”.
Senior Member Verick stated:
“I do not think any activity on land involving cultivation without sown crops, plants or trees can satisfy the requirements of ‘cultivation’ for the purposes of the exemption provided to primary producers under s 10AA(3)(a)”.4
The Tribunal confirmed the assessments for the land tax years 2010 to 2014.