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Banting (as Executor of the Estate of the Late K C Banting) v Chief Commissioner of State Revenue [2018] NSWCATAD 38

Date of judgement 14 February 2018 Proceeding No. 2017/30707
Judge(s) S Higgins, Senior Member
Court or Tribunal New South Wales Civil and Administrative Tribunal
Legislation cited Administrative Decisions Review Act 1997

Civil and Administrative Tribunal Act 2013

Land Tax Management Act 1956

Taxation Administration Act 1996

Valuation of Land Act 1916
Catchwords TAXES AND DUTIES – Land Tax – whether land exempt from taxation as land used for primary production – whether the dominant use was “use for the maintenance of animals …, for the purpose of selling them or their natural increase or bodily produce” – s 10AA(3)(b) Land Tax Management Act 1956
Cases cited Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184

Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378

Leda Manorsted v Chief Commissioner of State Revenue [2010] NSWSC 867

Background

The Applicant contended that the land tax exemption for land used for primary production under s.10AA(3)(b) of the Land Tax Management Act 1956 (“the maintenance of animals…”) applied for the 2014 and 2015 land tax years, to the following Lots:

  • Lot 1 and Lot 2 in DP755714;
  • Part 1 and Part 2 of Lot 3 in DP1148316; and
  • Lot 20 in DP755714.

The Applicant conceded that the exemption did not apply to Part 3 of Lot 3 in DP1148316 and Lot 1 in DP605170.

The Applicant argued that from 1965 onwards, the Applicant’s father raised beef cattle on the property for the purpose of breeding, fattening and selling the cattle. The Applicant stated that his father would often sell his cattle at the Murwillumbah Sale Yards, and those which were sold would be replaced from stock bred on the land. After the Applicant’s father died, the Applicant stated that there were approximately 70 cattle on the property. However, the Annual Return of Land and Stock which had been prepared by the Applicant’s father stated that there were 45 beef cattle as at 30 June 2013. The Applicant’s father died in August 2013.

The Applicant stated that he intended to sell cattle after his father died, however his siblings did not allow him to as the cattle were considered an asset, because they would keep the grass down. The Applicant gave evidence that he and his brothers-in-law tended to the cattle and checked them regularly. The numbers sometimes grew through natural re-production and sometimes declined due to theft and disease.

The Applicant confirmed that he had not sold any cattle during the relevant land tax years; that the last sale of any cattle from the property was in 2009; and that his main intention was to sell the property together with any cattle that remained. The Lots had not been used for any other purpose during the 2014 and 2015 land tax years. The Applicant also pointed out that in May 2016 the Chief Commissioner reviewed its assessment notice for the 2012 and 2013 land tax years and determined that the land was exempt under s. 10AA of the LTM Act. The Applicant submitted that such reassessment was consistent with the use of the land in the years following. The Applicant submitted that, in the absence of any other use for the property during 2014 and 2015 land tax years, primary production was the dominant use.

The Applicant further submitted that the s. 10AA(3)(b) dominant use test was satisfied if the land was predominantly being used for “the maintenance of animals… for the purpose of … their natural increase…”, that is, that the exemption applied if the cattle were maintained for the purpose of achieving a “natural increase” as opposed to “selling them”.

The Chief Commissioner submitted that the Applicant had failed to discharge the onus of proof as there was no objective evidence that the cattle were being maintained for a purpose of sale within the meaning of s. 10AA(3)(b) of the LTM Act. The limited number of cattle, occupying only two of ten paddocks at any one time, was not sufficient to satisfy the dominant use test. No evidence showed the cattle being maintained for sale during the relevant period. In addition, the fact that the exemption was given for the 2012 and 2013 land tax years did not mean that the exemption applied for subsequent tax years.

Furthermore, the Chief Commissioner submitted that as a matter of statutory construction, the words “their natural increase” in s. 10AA(3)(b) did not mean that the dominant use could include the maintenance of the natural increase of the animals. Rather it should be construed to mean the maintenance of the animals for the purpose of selling those animals or their offspring. That is, the purpose of sale was a necessary element of s. 10AA(3)(b), whether in relation to the animals, their offspring or their bodily produce.

Decision

The Tribunal noted that in order for the primary production exemption in s. 10AA(3)(b) of the LTM Act to apply, an Applicant must establish that the dominant use of the land in question was for the maintenance of animals, whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce. The word dominant should be given its ordinary meaning. Moreover, the contended use must prevail over the proposition that the land is predominantly unused. The Tribunal quoted from Leda Manorsted v Chief Commissioner of State Revenue [2010] NSWSC 867 at [69]-[71], in which Gzell J quoted Saville v Commissioner of Land Tax (1980) 12 ATR 7, at [10], that:

“I am of the view that, for any use of the land to justify the statement that the land is used primarily for that purpose, it is necessary not only that that use prevail over any competing use but also that it be sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land.”

Additionally, where different parts of a parcel of land are used for different purposes, the primary production use must be weighed against the other uses to determine which use is the dominant use. This is done by considering the parcel of land as a whole: Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378 at [37]-[38].

The Tribunal held that in the context of the primary production exemption in s. 10AA, a single parcel of land must be considered as a whole even if different parts are used for different purposes. Thus the parcel of land is to be considered as a whole even though it is made up of several registered Lots or Parts of registered Lots.

The Tribunal accepted that there were cattle grazing on the land during the relevant period, however the exact number of cattle was not clear. The Tribunal noted that the number of cattle was small given the size of the parcel of land and at any one time they only occupied two of the ten paddocks. The Tribunal concluded that a large portion of the parcel of land in question was not used for cattle grazing, or any other form of primary production.

The Tribunal stated that even if that conclusion was wrong and the cattle grazed more widely, this was still not sufficient to satisfy the purpose of “selling them or their natural increase or bodily produce”, as the Act requires. The Tribunal adopted the Chief Commissioner’s construction of s. 10AA(3)(b) that the purpose of selling was a necessary element of dominant use, whether the sale be of the animals, of their offspring or of their bodily products.

The Applicant took no steps to sell any cattle or their calves, nor was there an organised breeding program. Although the cattle were ultimately sold with the Property, there was no evidence of how many cattle were on the property at the time, or what price they sold for.

Thus, the Applicant failed to meet the dominant use test in s. 10AA(3)(b) and accordingly the land was not exempt from land tax under the primary production exemption.

Orders

The decision of the Chief Commissioner, made on 14 March 2016, was confirmed.

Link to decision

Banting (as Executor of the Estate of the Late K C Banting) v Chief Commissioner of State Revenue [2018] NSWCATAD 38

Last updated: 1 March 2018