|Date of judgement||16 February 2018|
|Judge(s)||Senior Member Higgins|
|Court or Tribunal||Administrative and Equal Opportunity Division|
TAXES AND DUTIES – Land Tax – whether Taxpayer had discharged his onus that the land was exempt from land tax – whether the Taxpayer has proven that, during the relevant land tax years, the land was used for primary production (i.e. forestry) and whether that use had a significant and substantial purpose or character and engaged in for the purpose of profit on a continuous or repetitive basis (s 10AA(3)(a) and (2) of the Land Tax Management Act 1956
The Taxpayer sought a review of the Chief Commissioner’s land tax assessments for the 2012 to 2016 land tax years (“the Assessments”) on land that is co-owned by the Taxpayer at 54 Duesbury Road, Dalmeny (“the Land”). The Land, which is 64.57 hectares in area, is timbered and has been managed by the Taxpayer since 1980.
The key facts are:
As the Land was not zoned wholly “rural”, the Tribunal was required to determine whether both the “dominant use test” and the “commerciality test” were satisfied under ss. 10AA(2) and (3) of the Land Tax Management Act 1956 (“LTMA”) during the 2012 to 2016 land tax years. In particular:
The Tribunal was also required to have regard to whether the Taxpayer had existing use rights to conduct a forestry operation following the re-zoning of the Land in 2012, in accordance with ss. 4.65 and 4.66 of the Environmental Planning and Assessment Act 1979 (formerly ss. 106 and 107).
The Taxpayer argued that the primary production use of the Land is the cultivation of native forest for the purpose of harvesting and selling the wood products from the forest. He submitted that his existing use rights were retained under ss. 4.65 and 4.66 of the Environmental Planning and Assessment Act and were unaffected by the re-zoning of the Land in 2012. The Taxpayer did not file any direct evidence, but rather, relied on material given to the Chief Commissioner with the objection and in submissions in the proceedings.
The Chief Commissioner contended that the Taxpayer failed to establish that cultivation activities were undertaken for the purpose of harvesting and selling the trees on the Land, submitting that:
As such, the Chief Commissioner submitted that the material before the Tribunal was insufficient to discharge the onus of proving both the dominant use and the commerciality tests.
The parties jointly retained a forestry expert, Mr Nick Cameron, who provided an expert report to the Tribunal.
The Tribunal accepted Mr Cameron’s evidence that as at September 2016, 89% of the Land, albeit relatively small in size, was forested and suitable to be commercially exploited through the harvesting of trees and selling the tree products therefrom, within the next 10 to 50 years. Further, the Tribunal accepted that there was evidence of recognised, though minimal, forestry activities on the Land, which included timber assessment, forest protection, roading and harvesting (from mid-1970’s, 1988 and 1996):  – . The Tribunal also accepted that forestry is a long-term activity and that trees need not be sold and harvested every year: .
Having regard to all the evidence, the Tribunal was satisfied that the dominant use of the Land for the 2012 to 2016 land tax years was the cultivation of native forest for the purpose of harvesting and selling the wood products from the forest (at ). In particular, the Tribunal held that the same dominant use of the Land continued after the re-zoning of the Land in 2012 because the evidence established that the Taxpayer continued to manage the forest in the same manner as previously. The Tribunal was not persuaded that the Taxpayer abandoned existing use rights as a result of the re-zoning and the subsequent listing of the Land for sale:  – .
In relation to the commerciality test, the Tribunal held that the primary production use of the Land did not have a significant and substantial commercial purpose or character during the relevant land tax years as set out in s 10AA(2) of the LTMA (at ). The Tribunal found that the zoning changes and the Taxpayer’s listing of the Land for sale for low density residential development evidenced that the existing dominant use of the Land for forestry did not have a significant and substantial commercial purpose or character (at ). The Tribunal held that the commercial purpose or character of that (proposed) sale continues to be of greater significance and substance than the Taxpayer’s dominant use of the Land for primary production.
The Tribunal also considered the second limb of the commerciality test (s. 10AA(2)(b)) in the event it was wrong in relation to s. 10AA(2)(a). It was noted that Mr Cameron’s evidence provided little, if any, assistance to the Taxpayer in regard to the commerciality test (at  and ). Mr Cameron’s evidence estimated the net timber sales revenues to range between $36,250 and $156,600, depending on the intensity and area of harvesting, over a 30 year period (at ). SM Higgins also noted that the listing of the Land for sale was inconsistent with the primary production use being engaged in for the purpose of profit. Accordingly, the Tribunal held that the Taxpayer failed to demonstrate that the primary production use of the Land was engaged in for the purpose of profit during the relevant land tax years (at ).
As the Taxpayer failed to meet the commerciality test, the Tribunal held that he failed to establish the Land was exempt from land tax during the relevant tax years.
The Assessment made on 2 March 2016 is confirmed.