Background
The Applicants sought administrative review of land tax assessments of non-rural land at Box Hill for the 2020 and 2021 land tax years on the basis that the property was exempt from land tax because it was used for primary production, namely breeding and sale of horses.
The Statutory Framework
Land is exempt from land tax if it is land that is used for primary production in accordance with s. 10AA of the Land Tax Management Act 1956 (“LTM Act”), which relevantly provides:
- "Land that is rural land is exempt from taxation if it is land used for primary production.
- Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land—
- has a significant and substantial commercial purpose or character, and
- is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).
- For the purposes of this section, land used for primary production means land the dominant use of which is for—
.- (b)the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce …”
Section 10AA(4) of the LTM Act defines “rural land” by reference to zoning, various legislation and planning instruments or, absent any zoning or planning instrument applying, to the satisfaction of the Chief Commissioner. The Box Hill property was not rural land, as it was zoned “high density residential”.
The Applicants’ Submissions
The Applicants relied on two affidavits of Mr Angelo Ferella, which included the following claims; [22]-[25]:
- the Box Hill property was used for breeding horses for sale,
- COVID-19 had a dramatic impact on the identification, branding, microchipping and registration of foals with the Australian Stud book, which is necessary for taking them to market, and
- an ATO audit of the Applicants’ business had accepted that it involved “the enterprise of property leasing and horse breeding activity”.
Mr Ferella’s evidence indicated that there were no more than seven horses on the Box Hill property at any point during the relevant years, comprised of three brood mares and four foals, two born in 2016, one born in 2019 and one born in 2020.
The Applicants presented various receipts relating to the horses, and undated advertisements of two horses for sale. The Applicants submitted that evidence of sales in each year was not required meet the requirements of the exemption: [34].
The Respondent’s Submissions
The Chief Commissioner submitted that the Applicants had not met their onus of proving that the Box Hill property should be exempt. The Chief Commissioner submitted that there was limited evidence in respect of the use of the land to maintain and sell horses, there were no financial reports showing profits and losses or forecasts, there was no business plan or strategic documents which might allow the Tribunal to determine whether the use of the land had a commercial purpose or character, and no evidence to demonstrate actual use of the land for a significant or substantial commercial purpose or character: [56].
Decision
Senior Member Gatland indicated he took into account the evidence of the relevant activities in the six months before and after the 2019 and 2020 taxing dates : [13].
Senior Member Gatland found that of the 7 horses maintained on the property during the relevant period, only the colt (born on the property in 2016) was maintained for the dominant purpose of sale of its natural increase . He concluded that there was no evidence of any sales of horses during the relevant period, limited evidence about attempts to breed further horses and evidence of only two horses being advertised for sale (at [34]-[35]).
Accordingly, Senior Member Gatland found that the Box Hill property was solely used for the purpose of maintaining horses, but was not land used for the dominant purpose of maintaining animals for the purpose of selling those animals or their natural increase as required by s. 10AA(3) and, therefore, was not land used for primary production as required by s.10AA(1): [36]-[44].
Senior Member Gatland found that there was no evidence that the use of the land had a significant and substantial commercial purpose or character, nor was there evidence that the use of the land was engaged in for the purpose of profit on a continuous or repetitive basis (at [59]). Therefore the requirements for the exemption under s. 10AA(2) were not met.
Senior Member Gatland concluded that the activity was small; there was limited evidence of breeding and attempted sales; the level of intensity and activity did not satisfy the required “significant or substantial commercial purpose”; there was no evidence of expected income or profit from the activity: [45]-[52] ; and there was insufficient evidence to suggest that the activity was engaged in the purpose of profit on a continuous or repetitive basis : [52]-[57].
Orders
The land tax assessments for the land tax years 2019 and 2020 were confirmed.
Link to decision
https://www.caselaw.nsw.gov.au/decision/180cfaa6ee866ecd4c66205d
