|Date of judgement||13 April 2017|
|Judge(s)||Senior Member N S Isenberg|
|Court or Tribunal||New South Wales Civil and Administrative Tribunal|
REVENUE LAW – land tax – onus - primary production exemption – competing uses - dominant use – cultivation for the purpose of sale – rural land – s.10AA(3) Land Tax Management Act 1956
Spedding Estates Pty Ltd (“the Taxpayer”) sought a review of land tax assessments issued by the Chief Commissioner of State Revenue for the 2013 and 2014 land tax years (“the Relevant Period”) in respect of seven contiguous lots of land at Carool in New South Wales (“the Property”). The Taxpayer claimed
two of the lots (Lot 3 and Lot 4) were exempt from land tax under the primary production exemption pursuant to s.10AA of the Land Tax Management Act 1956 (“the Act”). The 2 lots have a total area of approximately 26.66 hectares (approximately 266,594 m2). Lot 3 comprises 25.73 hectares; Lot 4 comprises approximately 0.93 hectares. The other 5 Lots were not in issue. The property is zoned “rural landscape” and is therefore “rural land”. Villas used for short term accommodation were located on the 5 Lots not in issue in the proceedings.
The Taxpayer carried on a multifaceted business on the property with three main focuses: primary production, short term accommodation and a restaurant. A substantial feature of the business on the property involved its use as a location for wedding ceremonies, receptions and associated purposes. The Taxpayer also grew a variety of crops including olives, grapes, nuts, citrus fruits, mangoes, peach, guava, bush lemons, coffee, avocados, mulberries, prickly pear cactus fruits, timber and fodder and maintained some chickens. The Taxpayer’s evidence indicated that the main use to which the produce of the cultivation on Lot 3 and Lot 4 was put accorded with the ‘paddock to plate’ philosophy. That philosophy is that produce is not produced for sale to third parties, but it is produced to enhance the service provided by the restaurant.1
The main issue for determination by the Tribunal was whether, during the relevant years, the dominant use of the land was for primary production, i.e. whether the dominant use of the land was for “cultivation, for the purpose of selling the produce of the cultivation” and therefore exempt from land tax under s.10AA(3) of the Act.
The Tribunal applied the test in Sonter v Commissioner of Land Tax (NSW)2 that “all circumstances bearing on the degree, extent and intensity of the land uses are to be considered”. Applying this test the Tribunal determined that the dominant use of the land was
not primary production for the following reasons:
“that the Taxpayer confus[ed] the ordinary meaning of ‘primary production’ which involves the act “of bringing into existence” live plants or products, …with the statutory definition in s 10AA(3) …[which] includes a purpose of sale of the plants or products without the occurrence of further production
processes. Those further processes are described…as converting “(an agricultural commodity) into marketable form by some special process”.5
The Tribunal was “not satisfied that the … conversion of primary produce into meals (consumed by third parties), some of the constituents of which have been cultivated on the Property, is a sale of primary produce for the purpose of s 10AA(3).”6
“[T]he area of Lot 3 used in relation to wedding functions extends substantially beyond the 1 ha area initially stated to be used and beyond the bounds of the 4 ha area later conceded by the Taxpayer to be used for these purposes. It seems to me that the use of much of Lot 3 whether as a general background for the ceremony or reception, or for photograph opportunities, picnics, recreation such as use of tennis court and swimming pool, and enhancement of the wedding function experience by the consumption of locally grown produce in the restaurant plays a substantial role in the Taxpayer’s business on the Property. To that extent, I find that primary production activities on the Property are ancillary to and supportive of the wedding and associated activities.”7
The decision of the Chief Commissioner under review was affirmed.