|Date of judgement||25 February 2019|
|Judge(s)||Emeritus Professor G D Walker, Senior Member|
|Court or Tribunal||NSW Civil and Administrative Tribunal|
Land Tax, Primary Production Exemption
Saville v Commissioner of Land Tax (1980) 12 ATR 7
Thomason v Chief Executive, Department of Lands (1994 – 1995) 15 QLCR 286
These proceedings concerned a review of the Chief Commissioner’s decision to assess land tax on land (the “assessed Land”) owned by the Applicant at Kurrajong as being liable to land tax for the 2017 and 2018 land tax years.
The Applicant has owned land in the Kurrajong area for almost 40 years and has received principal place of residence (PPR) and primary production (PPL) exemptions from land tax during this time. The Applicant currently reside on Lots 5 and 6 (“Lots 5 and 6”) and runs a cattle farm on various land holdings.
Part of the land owned by the Applicant was sold in 2016, which severed any connection between the assessed Land and his residence. Following this sale, the Chief Commissioner determined that the assessed Land was unused and issued land tax assessments for the 2017 and 2018 land tax years.
The key issue in dispute was whether the Land was eligible for the PPL exemption pursuant to s. 10AA of the Land Tax Management Act 1956 (NSW) (“the LTM Act”).
The Land was rural land within the meaning of s. 10AA(4)(b). Therefore, for the primary production exemption to apply, the Applicant needed to demonstrate that primary production was the dominant use of the Land at the relevant taxing dates, within the meaning of s. 10AA(3). The applicant claimed the land was used for the maintenance of animals (being cattle) for the purpose of selling them or their natural increase or bodily produce (s. 10AA(3)(b)).
The Chief Commissioner submitted that the Land was not used for the dominant purpose of primary production during the relevant land tax years and was, in fact, unused during that time.
The Chief Commissioner relied on an expert’s report prepared by an agricultural consultant. The consultant’s report concluded that the Land was suitable for use for grazing cattle but there were 2 difficulties:
The lack of fencing would present a risk of safety to both the public using the public road and to the cattle grazed on the Land. Moving the cattle along the common property road would require the consent of the other users of the common property road, but several fences along the common property road were in poor condition and could be knocked down by wandering cattle.
The Chief Commissioner relied on photographs and aerial imagery showing that the Land was not enclosed by a fence during the relevant land tax years.
The Applicant accepted that the Land was not enclosed by fences during either of the land tax years and that the Land was still currently unfenced. He explained that he was in the process of having a fence replaced, but that there had been some delays due to medical and financial issues. The fence had been marked out and would soon be constructed.
The Applicant also stated that he had not grazed any cattle on the Land while it was without a fence and that, therefore, no cattle had been grazed on the Land during the 2017 and 2018 land tax years. He also accepted that he had not used the common property road to move cattle onto the Land during the 2017 and 2018 land tax years.
However, the Applicant maintained that the Land was used for the dominant purpose of primary production. He submitted that he was keeping the Land in perfect condition for grazing, by cultivating kikuyu grass for cattle grazing and undertaking slashing, weeding and other maintenance tasks on the Land, to ensure that cattle could return as soon as the fence was constructed.
The Tribunal found that the Applicant had not discharged his onus of proving that the dominant use of the Land during the relevant land tax years was for the maintenance of animals for the purpose of selling them or their natural increase, within the meaning of s. 10AA(3) of the LTM Act.
The Tribunal was satisfied that the Applicant intended to fence the Land and use it for grazing cattle in the future. However, the Tribunal noted that the test for whether the land is being used for primary production is an objective test and is an inquiry into the actual use of the land, which cannot be determined by the intentions of the owner; Chief Commissioner of State Revenue v Metricon Qld Pty Ltd  NSWCA 11 (“Metricon”) at .
The Tribunal further noted that preparing land for primary production does not of itself constitute use of the land for primary production: Southern Estates Pty Ltd v Federal Commissioner of Taxation (1967) 117 CLR 481 at 488.
The Tribunal also relied on Metricon (at ), applying the proposition that some benefit or advantage would need to accrue from the Land being kept unused. However in this case the Tribunal found that “there was no advantage in Mr McCabe’s keeping the land unused” (at ).
Applying these tests, and taking into account its finding that there were no cattle on the Land during at the relevant land tax years, the Tribunal held that the Applicant’s work in slashing and maintaining the land in a good condition and his intentions to graze cattle in the future did not amount to an actual use of the Land for primary production.
Accordingly, the Tribunal found that the primary production exemption was not available in respect of the Land.
The decision under review was affirmed.