Young v Chief Commissioner of State Revenue [2020] NSWSC 330
Background
The Plaintiff is the registered proprietor of adjoining parcels of land at Arcadia. The key issue in dispute was whether the dominant use of each parcel of land for the 2016 and 2017 land tax years was for the maintenance of horses for the purpose of selling them or their natural increase or bodily produce as required by s.10AA(3)(b) of the Act.
The Plaintiff claimed that the land was being used for the maintenance of horses, specifically dressage horses, for the purpose of their eventual sale or the sale of their natural increase or bodily produce. The Plaintiff also claimed that the construction activities that occurred on the land during the tax years were for that use of the land, i.e. for the maintenance of horses for the purpose of their sale, in particular that the construction works were for the establishment of a dressage facility.
It was not in dispute that the Plaintiff’s land was “rural land” for the purposes of s.10AA of the Act.
Submissions
Counsel for the Plaintiff submitted that:
- The land was used for the maintenance of horses from at least the time the horses were brought onto the parcels of land;
- The construction of facilities for the horses on the land during the relevant tax years was central to the maintenance of horses and not a “separate competing use of the land”. The construction of such facilities was indicative of the “main” purpose of selling the horses or their progeny;
- The only competing relevant physical use of the land was the small part of land which was used for a dual residential and land maintenance purpose;
- The dominant physical use of the land for the maintenance of the horses was for “the [main] purpose of selling” them and the activities on the land were directed to this purpose;
- “Construction” as a use of land is characterless - earthworks have to be characterised into a use and such earthworks were ancillary to, not competing with, that use of the land.
Counsel for the Chief Commissioner submitted that:
- For the purposes of s. 10AA(3), “use” refers to present physical activity or deliberate inactivity on the subject land, and “for” is to be seen as a present use of the land – land can be used now for a particular purpose, even though its use for that purpose may also be in preparation for its eventual use for a different purpose;
- It follows that regard cannot be had to the subjective intention, past, present or future, of the owner except insofar as that intention sheds light on the objective character of the physical activities on the land;
- Where construction activities take place on land in a tax year, the “use” of the land in that tax year is “for” construction, regardless of the end purpose of that construction and/or the use of the land in a later tax year when construction is complete;
- As an annual tax, the statutory test looks to what the land is presently used “for”, not what it will be used for in a later tax year;
- Even if the dominant use of each parcel of land could be characterised as being “for” the maintenance of horses, the Court would not be satisfied that the use of the land for the maintenance of horses was for the purpose of selling them or their natural increase or bodily produce;
- The “purpose of selling” is to be determined objectively and not based on subjective intention. It requires an objective of commercial gain, and relevant considerations include whether any sales or breeding have occurred, the time that has passed since the animals were acquired until any successful sale or breeding, the extent and intensity of the activity and whether the animals are maintained for recreational or hobby purposes.
Decision
The Court concluded that each of the primary production activities in s.10AA(3) of the Act, which includes the maintenance of animals for the purpose of their sale or the sale of their natural increase or bodily produce, has a purpose or objective of commercial gain. It therefore followed “that little is likely to turn on subjective purpose or intention” (at [135]).
The Court held that the “correct construction of s. 10AA(3) is that the “use” of land relevant to s. 10AA(3) is one of physical use of the land in pursuance of one of the identified purposes...Purpose is to be objectively ascertained although subjective purpose may be taken into account”, noting that the parties were in agreement that the purpose required must be the dominant purpose (at [136]).
The Court held that the prevailing physical use of both Lots for the 2016 land tax year and one of the Lots for the 2017 land tax year was the ongoing clearing, excavation, demolition and construction works. Those Lots on which the construction activities occurred were used for the relevant construction works, and not for the maintenance of horses, which plainly could not occur on the land while the construction was underway (at [140]). For the remaining Lot for the 2017 land tax year, the Court found that the dominant use of that Lot was for the maintenance of horses (at [140]).
The Court rejected the Plaintiff’s submission that all of the activities were for the purpose of establishing the dressage facility (at [141]).
The Court was not satisfied that the Plaintiff had established that the dominant use of the land during each of the tax years was for the maintenance of horses for the purpose of their sale or the sale of their natural increase or bodily produce [143]. Relevant to this finding was that:
- horses are animals that are also maintained for recreational purposes, and so it could not necessarily be concluded that horses are maintained on land for the purpose of sale (at [144]);
- there were no sales, purchases or breeding of horses on the land during the tax years, and there was only limited training on the land of one of the horses towards the end of the second tax year (at [146]);
- objectively, the horses on the land were unsuitable and untested for any business of breeding and selling dressage horses (at [148]); and
- the relevant development consent for the construction activities provided that the stables were being constructed for “private equestrian training” (at [149]).
The objective evidence favoured the conclusion that the horses were being maintained on the land during the tax years for recreational or lifestyle reasons and so the Court was not satisfied that the horses were being maintained on the land during those years for the purpose of sale [146].
Orders
The Court made the following Orders:
- Application dismissed;
- Assessments of land tax for the 2016 land tax year, issued on 29 September 2016, and the 2017 land tax year, issued on 21 October 2017 are confirmed;
- Plaintiff to pay the costs of the Defendant.
Link to decision
https://www.caselaw.nsw.gov.au/decision/5e82c5c6e4b0529762cf0946