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Spedding Estates Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 117

Date of judgement 13 April 2017 Proceeding No. 1510070
Judge(s) Senior Member N S Isenberg
Court or Tribunal New South Wales Civil and Administrative Tribunal
Legislation cited Administrative Decisions Review Act 1997

Land Tax Management Act 1956

Taxation Administration Act 1996
Catchwords REVENUE LAW – land tax – onus - primary production exemption – competing uses - dominant use – cultivation for the purpose of sale – rural land – s.10AA(3) Land Tax Management Act 1956
Cases cited Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADT 250

Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183

Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184

Codlea Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 136

Delli-Carpini v Chief Commissioner of State Revenue [2015] NSWCATAD 12

Leda Manorstead v Chief Commissioner [2010] NSWSC 867

Reolon v Chief Commissioner of State Revenue [2013] NSWADT 96


Spedding Estates Pty Ltd (“the Taxpayer”) sought a review of land tax assessments issued by the Chief Commissioner of State Revenue for the 2013 and 2014 land tax years (“the Relevant Period”) in respect of seven contiguous lots of land at Carool in New South Wales (“the Property”). The Taxpayer claimed two of the lots (Lot 3 and Lot 4) were exempt from land tax under the primary production exemption pursuant to s.10AA of the Land Tax Management Act 1956 (“the Act”).  The 2 lots have a total area of approximately 26.66 hectares (approximately 266,594 m2). Lot 3 comprises 25.73 hectares; Lot 4 comprises approximately 0.93 hectares. The other 5 Lots were not in issue. The property is zoned “rural landscape” and is therefore “rural land”. Villas used for short term accommodation were located on the 5 Lots not in issue in the proceedings.

The Taxpayer carried on a multifaceted business on the property with three main focuses: primary production, short term accommodation and a restaurant. A substantial feature of the business on the property involved its use as a location for wedding ceremonies, receptions and associated purposes. The Taxpayer also grew a variety of crops including olives, grapes, nuts, citrus fruits, mangoes, peach, guava, bush lemons, coffee, avocados, mulberries, prickly pear cactus fruits, timber and fodder and maintained some chickens. The Taxpayer’s evidence indicated that the main use to which the produce of the cultivation on Lot 3 and Lot 4 was put accorded with the ‘paddock to plate’ philosophy. That philosophy is that produce is not produced for sale to third parties, but it is produced to enhance the service provided by the restaurant.[1]

The Statutory Framework

Land Tax Management Act 1956

“10AA   Exemption for land used for primary production

  1. Land that is rural land is exempt from taxation if it is land used for primary production.

  1. For the purposes of this section, land used for primary production means land the dominant use of which is for:

    1. cultivation, for the purpose of selling the produce of the cultivation, or

    2. the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce…”


The main issue for determination by the Tribunal was whether, during the relevant years, the dominant use of the land was for primary production, i.e. whether the dominant use of the land was for “cultivation, for the purpose of selling the produce of the cultivation” and therefore exempt from land tax under s.10AA(3) of the Act.


The Tribunal applied the test in Sonter v Commissioner of Land Tax (NSW)[2] that “all circumstances bearing on the degree, extent and intensity of the land uses are to be considered”. Applying this test the Tribunal determined that the dominant use of the land was not primary production for the following reasons:

  1. The majority of the produce grown on the property was not sold to third parties but “internally transferred” to the Taxpayer’s restaurant and therefore did not meet the requirement of “sale” in s.10AA(3)(a). The Tribunal agreed with the Chief Commissioner’s submissions that there was no sale of the “internally transferred” produce for the purposes of s.10AA(3)(a) as the “vendor” and “purchaser” of those notional sales are the same entity.[3]

  2. The sale of the natural produce that has been transformed into a constituent part of a restaurant meal is not the sale of the produce of cultivation as envisioned by s.10AA(3) but a sale of a “secondary product” and does not satisfy the s.10AA(3)(a) test.[4] The Tribunal held:

    “that the Taxpayer confus[ed] the ordinary meaning of ‘primary production’ which involves the act “of bringing into existence” live plants or products, …with the statutory definition in s 10AA(3) …[which] includes a purpose of sale of the plants or products without the occurrence of further production processes. Those further processes are described…as converting “(an agricultural commodity) into marketable form by some special process”.[5]

    The Tribunal was “not satisfied that the … conversion of primary produce into meals (consumed by third parties), some of the constituents of which have been cultivated on the Property, is a sale of primary produce for the purpose of s 10AA(3).”[6]

  3. The dominant use of the actual area of Lot 3 was found to be for the wedding venue business when the area used specifically for that purpose was compared with the area of land used for primary production. The Tribunal formed this view by including uses of the property as a general background to the weddings:

    “[T]he area of Lot 3 used in relation to wedding functions extends substantially beyond the 1 ha area initially stated to be used and beyond the bounds of the 4 ha area later conceded by the Taxpayer to be used for these purposes. It seems to me that the use of much of Lot 3 whether as a general background for the ceremony or reception, or for photograph opportunities, picnics, recreation such as use of tennis court and swimming pool, and enhancement of the wedding function experience by the consumption of locally grown produce in the restaurant plays a substantial role in the Taxpayer’s business on the Property. To that extent, I find that primary production activities on the Property are ancillary to and supportive of the wedding and associated activities.”[7]

  4. The income derived from the primary production (albeit not from sales) was minimal (“less than 0.7% of income derived from the Subject Land in 2013 and less than 0.5% in 2014”) when compared to the total income derived from the Taxpayer’s non-primary production business income which was derived from the property.[8]

  5. The use of Lot 4 for storage of farm implements was ancillary to the cultivation carried out on the Property to provide produce for the restaurant and not for the purpose of sale required by s.10AA(3)(a).”[9]

  6. In relation to Forestry activities, the Tribunal found that the Taxpayer’s passive approach to management of Camphor Laurel trees (which were classified as a noxious weed) was not in accordance with accepted forestry practice. After comparing the Taxpayer’s evidence and submissions as to proposed timber sales and harvesting of timber with the Chief Commissioner’s silviculture expert’s evidence as to the likely quality of any product and the costs and practical problems with harvesting and selling, the Tribunal found that the cultivation of trees on the property was not for the dominant purpose of sale as required by s.10AA(3)(a).[10]

  7. Growing grass to use as fodder for future cattle agistment was held not to be cultivation for the purpose of selling the produce of the cultivation (i.e. the grass), nor was the land used for the maintenance of animals for any purpose.[11]

  8. Chicken maintained for the purposes of natural fertiliser and pest management on Lot 4 was not a material use of Lot 4 for the purposes of s.10AA(3)(b).[12]


The decision of the Chief Commissioner under review was affirmed.

Link to decision

Spedding Estates Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 117


  1. ^ Paragraph 54 of the decision.
  2. ^ (1976) 7 ATR 30 at 35 at paragraphs 29 and 31 of the decision.
  3. ^ At paragraphs 61 and 66 of the decision.
  4. ^ At paragraph 130 of the decision.
  5. ^ At paragraph 67 of the decision.
  6. ^ At paragraphs 68-69 and 130 of the decision.
  7. ^ At paragraph 106 of the decision.
  8. ^ At paragraphs 39-40, 48 of the decision.
  9. ^ At paragraph 55 of the decision.
  10. ^ At paragraphs 94, 98 and 99 of the decision.
  11. ^ At paragraphs 74 and 79 of the decision.
  12. ^ At paragraphs 82-83 of the decision.
Last updated: 30 May 2017