|Date of judgement||30 June 2020|
|Proceeding No.||AP 19/33288|
|Judge(s)||Hennessy ADCJ, Deputy President and M Harrowell, Deputy President|
|Court or Tribunal||NSW Civil and Administrative Tribunal|
Land Tax Management Act 1956 – exemption for primary production use – multiple users of subject land – aggregating use of land by different users - integration of primary production enterprise where different primary production use of other land
Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 75 ALD 630
Big Top Hereford Pty Ltd v Thomas  NSWSC 1159
Chief Commissioner of State Revenue v Metricon Qld Pty Ltd  NSWCA 11
Clarke v Commissioner of Land Tax (NSW) (1980) 11 ATR 794
Glenworth Valley Pastoral v Chief Commissioner of State Revenue 106 ATR 160
Jones v Commissioner of Land Tax (NSW) 11 ATR 98
Leda Manorstead Pty ltd v Chief Commissioner of State Revenue  NSWSC 366
Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue  NSWSC 9
Major v Chief Executive, Department of Natural Resources (1991) 21 QLCR 163
Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue  NSWSC 23
Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue  NSWSCA 408
San v Rumble (No 2)  NSWCA 259
Shanahan v Chief Commissioner of Land Tax (1996) 32 ATR 468
Sinclair v Judge  QSR 200
Streatfield v Winchcombe Carson Trustee Co (Canberra) Ltd  NSWLR 519
Thomason v Chief Executive, Department of Lands (1995) 15 QLCR 286
Vartuli v Chief Commissioner of State Revenue  NSWSC 678
Vartuli v Chief Commissioner of State Revenue  NSWSCA
The Chief Commissioner of State Revenue assessed land near Cobbity in New South Wales as liable for land tax for the three tax years of 2014, 2015 and 2016. The land is owned by McIntosh Bros Pty Ltd (In liq) (McIntosh Bros). The Chief Commissioner determined that the land did not satisfy the criteria for exemption under s.10AA on the basis that its use by multiple users could not be aggregated so as to satisfy the dominant use test in s.10AA(3), nor did its use by those multiple users satisfy the commerciality tests in s.10AA(2).
Following an application for review of the Commissioner’s decision by McIntosh Bros, the Tribunal set aside the assessments. The Commissioner appealed to the Appeal Panel, raising 5 key issues.
The Chief Commissioner submitted that several independent primary production “uses” of land by several unrelated users cannot be aggregated so as to amount to the “dominant use” of land as required by s. 10AA(3) LTMA. As s. 10AA(2)(b) requires the user to have a subjective “purpose of profit”, the several users of land cannot possess an aggregated single purpose.
The Appeal Panel determined that:
The Appeal Panel did not accept the Chief Commissioner’s submission that the requirement for a “purpose” involving a subjective element in the purpose of profit test would produce incongruous results when applied to an aggregated use. Rather, it concluded that:
“[c]onsidering individual users and the subjective purpose in respect of each use of the land does not prevent an overall assessment of whether the use of the land as a whole meets these tests”: , .
At first instance the Tribunal had held that the “agistment” arrangement between one of the users of the Land, Ian McIntosh (“Ian”), and R M Hayter; Sons (“Hayter”) for the running of Hayter’s dairy cattle on Ian’s part of the Land constituted a primary production use of the Land by Hayter. This was on the basis that Hayter retained “control” of its cattle while placed on Ian’s land.
On appeal, the Chief Commissioner submitted that Ian was the person “maintaining” Hayter’s dairy cattle within the meaning of s. 10AA(3)(b) but he did not do so for the purpose of selling their bodily produce (ie, milk). Hayter may have had that purpose but it did not “maintain” the cattle while they were on Ian’s land. The Chief Commissioner submitted that neither Ian nor Hayter were engaged in a primary production use of the Land in respect of Hayter’s cattle, and therefore any agistment income received by Ian ought not be taken into account in evaluating commerciality.
The Appeal Panel determined that:
The Chief Commissioner submitted, in relation to Richard McIntosh’s (“Richard’s”) sheep operation on other land at Molong, that there is no authority for the proposition that separate and distinct enterprises using separate and distinct lands may be treated as one use of all lands by all enterprises. The Chief Commissioner contended that the authorities relied upon by the Tribunal, Maraya and Vartuli involved a single use by a single enterprise conducted on discrete parcels. It was submitted that is not the present case.
The Appeal Panel disagreed with the Chief Commissioner’s interpretation of NSW Court of Appeal authorities, holding that it is consistent with those authorities that the commerciality of an enterprise may be evaluated by reference to use of the subject land in conjunction with use of other land by that enterprise: -.
The Appeal Panel agreed with McIntosh Bros’ submission that there is nothing in the Vartuli decision to “suggest that the species of livestock is critical”: .
Further, the Appeal Panel noted that the Tribunal had found the Molong sheep operation and the cattle grazing operation on the Land were part of the same business, not separate and distinct enterprises: . That factual finding could not be disturbed without leave being granted to the Chief Commissioner, and the Appeal Panel refused to give such leave: .
The Chief Commissioner submitted that the Tribunal, in evaluating the commerciality and purpose of profit tests in s.10AA(2), failed to consider the “uncommercial features” of the land use, such as the non-payment of land rates, the non-use of some of the land, the absence of remuneration for the labour of the users, miniscule profits, and the omission of management fees.
The Appeal Panel determined that there is no requirement to include in the calculation of profit, land holding costs or notional costs for labour that are not actually incurred: .
In relation to the question of whether such notional costs detract from a conclusion that the use of the land satisfies the commerciality test and the purpose of profit test, the Appeal Panel did not identify any error in the Tribunal’s decision. At -, the Appeal Panel relied on the following factors in support of its conclusion:
The Chief Commissioner submitted there was evidence of other physical activities on the Land during the land tax years, eg, sewer pumping station, electricity works, physical works procured by A V Jennings, and that McIntosh Bros had failed to adduce evidence about the timing, extent, duration and costs of these, such that it could not prove that grazing cattle was the dominant use of the Land.
The chief Commissioner submitted that the Tribunal failed to apply the legal principles by the Supreme Court in Leppington which held that once non-primary production uses are identified, the taxpayer is required to prove the nature and intensity of the competing uses of the land, the time and labour spent in conducting the different uses, the money spent or assets deployed in each use and the value derived or to be derived from it.
The Appeal Panel agreed with McIntosh Bros’ submission that this was an attempt to re-litigate the matter on its facts and that in its opinion, the Tribunal had properly understood the taxpayer had the onus of proof: .
The Appeal Panel decided that this ground of appeal does not identify a question of law: .
The Chief Commissioner’s appeal was dismissed.