|Date of judgement|
31 October 2019
M Harrowell, Deputy President
R Hamilton SC, Senior Member
|Court or Tribunal|
NSW Civil and Administrative Tribunal (Appeal Panel)
Land tax; primary production exemption; significant and substantial commercial purpose or character.
Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue (RD)  NSWADTAP 25
Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430
Collins v Urban  NSWCATAP 17
Hope v Bathurst City Council [No 3]  NSWCA 139
Maraya Holdings Pty Ltd & Ors v Chief Commissioner of State Revenue (2013) 97 ATR 818:  NSWCA 408
New South Wales Land and Housing Corporation v Orr  NSWCA 231
Thomas v FCT (1972) 3 ATR 165; 46 ALJR 397
Thomason v Chief Executive, Department of Lands (1995) 15 QLCR 286
The appellants had been assessed for land tax in relation to a 59 hectare property located at Goulburn, which has been used for more than 63 years as a cattle enterprise.
In 2011, the land was rezoned from rural land to low density residential land. As a result, the appellants became liable to land tax unless the use of the land satisfied the exemption conditions of s 10AA(2) of the Land Tax Management Act 1956 (NSW) (“LTM Act”).
On 18 October 2016, the Chief Commissioner reassessed the land as liable for land tax and issued land tax assessments for the 2013-2016 land tax years and on 13 January 2017, the Chief Commissioner issued a land tax assessment for the 2017 land tax year (together, “the decisions”). In making the decisions, the Chief Commissioner determined that the primary production exemption was not applicable to the land.
Section 10AA of the LTM Act exempts non-rural land from land tax if that land is used for the dominant purpose of primary production and if that use of the land satisfies both the dominant use test in s.10AA(3), and the commerciality tests contained in s. 10AA(2), which provides:
“(2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land:
On 2 January 2019, the Tribunal affirmed the Chief Commissioner’s decisions. The Tribunal was satisfied that the appellants operated a genuine cattle business and that the dominant use of the land was for primary production, but was not satisfied that the use of the land had a significant and substantial commercial purpose or character. The Tribunal indicated that its conclusion was based on multiple factors including the small size of the herd, the carrying capacity of the land, the limited resources used and the low profit. Therefore, the appellants did not meet the exemption under s 10AA(2).
The appellants submitted that the Tribunal’s fact-finding process was infected by legal error and that the reasons given by the Tribunal were inadequate. In their written submissions, the appellants asserted that the following related errors of law were made by the Tribunal:
(1) using an inappropriate comparator, namely larger cattle operations on larger parcels of land;
(2) taking into account the rate of return on investment in the land which was irrelevant evidence which was not probative of the matter to be determined, and contrary to the Court of Appeal’s decision in Chief Commissioner of State Revenue v Metricon Qld Pty Ltd  NSWCA 11 which provides that only the physical tangible use of the land is to be considered, not any passive benefit received from ownership of the land;
(3) misdirecting itself as to the correct statutory question in relation to s. 10AA(2)(a), by requiring a significant and substantial profit or purpose of profit; and
(4) reaching a conclusion not available on the evidence.
During the hearing, the appellants also sought leave to appeal on questions other than questions of law. The appellants submitted that the findings of fact and the ultimate conclusions of fact made by the Tribunal were against the weight of evidence and not available on the evidence, and should be overturned by the Appeal Panel.
The appellants submitted that leave to appeal should be granted in line with Collins v Urban  NSWCATAP 17, for the following reasons:
(1) there is an issue of principle about whether primary production activities conducted on land of 60 hectares or less are able to satisfy the commerciality test;
(2) there is an issue of public importance arising from rezoning and the consequential effect of rezoning land as non-rural;
(3) the factual findings were unreasonably arrived at and clearly mistaken having regard to the totality of the evidence; and
(4) there is an overlap with issues for which leave is not required, both parties have made submissions and there is no prejudice to the respondent.
The Appeal Panel held that the Tribunal’s reasons were not inadequate. The Appeal Panel applied New South Wales Land and Housing Corporation v Orr  NSWCA 23 and held that the Tribunal’s reasons explained its understanding of the law and the principles to be applied, identified the parties’ evidence, explained why particular findings of fact were made and applied the facts to the law (at ).
The Appeal Panel identified that the appellants sought to analyse the various authorities which had interpreted s. 10AA(2)(a) and draw from those authorities a formulation of a test to support the submission that inappropriate criteria were considered and that the test had been misapplied. The Appeal Panel rejected this contention, concluding as follows:
The Appeal Panel rejected the contention that the Tribunal failed to have regard to relevant considerations for making the evaluative judgment required. The Appeal Panel found that the Tribunal had a range of evidence dealing with both the cattle industry generally and the specific operation of the appellants (at ) and that the Tribunal identified the correct test and applied it to the facts (at 45]).
The Appeal Panel found that there was no prejudice to the Chief Commissioner in permitting the appellants to amend their Notice of Appeal to seek leave to appeal, but ultimately did not accept any of the appellants’ reasons for granting leave to appeal and refused the application.
The Tribunal found that:
(1) no issue of principle about whether primary production conducted on parcels of land of less than 60 hectares in size are able to satisfy the tests in s. 10AA(2) arises, as the courts have been clear that the size of the land may be a relevant but not determinative factor in deciding whether or not the use of the land has a significant and substantial commercial purpose or character (at );
(2) no issue of public importance concerning the rezoning of land arises, as the Appeal Panel was not satisfied that any resolution of the appeal will result in a decision of significant public importance (at );
(3) the Tribunal’s factual findings were not unreasonably arrived at or clearly mistaken having regard to the totality of evidence; it was open to the Tribunal to conclude that the use of land did not have a significant and substantial purpose or character, in light of evidence about herd size, profits, and gross income (at -); and
(4) the fact a party raises a ground of appeal for which leave is not required is not a reason to grant leave on other grounds for which leave is required (at ).
(1) Leave is given to the appellants to further amend the Notice of Appeal so as to seek leave to appeal on the grounds set out in paragraph 3 of the document entitled “Appellants’ Supplementary Submissions” dated 4 June 2019 filed in these proceedings.
(2) Leave to appeal is refused and the appeal is dismissed.