Ferella v Chief Commissioner of State Revenue [2023] NSWCATAP 50
Background
Assessments for land tax were issued by the Chief Commissioner for land owned by the Appellant in Box Hill for the 2020 and 2021 land tax years (the land). The Appellant disputed the Assessments on the basis that she had used the land for the primary production purpose of breeding horses. The Appellant submitted that the land should be exempt from land tax for those years pursuant to s 10AA of the Land Tax Management Act 1956 (NSW) (LTMA).
These appeal proceedings arose as a result of an initial application by the Appellant to the New South Wales Civil and Administrative Tribunal (the Tribunal), in which she was unsuccessful: see Ferella v Chief Commissioner of State Revenue [2022] NSWCATAD 154.
The Tribunal dismissed the application because the Appellant did not discharge her onus of proof in relation to either of the dominant use or “commerciality conditions under s. 10AA of the LTMA.
Primary Decision
In the Tribunal proceeding, Senior Member Gatland had affirmed the Chief Commissioner’s Assessments and dismissed the Appellant’s application on the basis that she had not discharged her onus of proof in relation to either of the two statutory conditions (dominant primary production use and commerciality tests) under s. 10AA.
On the question of primary production, Senior Member Gatland adopted the view expressed in Saville v Commissioner of Land Tax (NSW) (1980) 12 ATR 7 (Saville) that, where land is used for a sole use, it does not necessarily follow that the sole use is also the dominant use, particularly where substantial parts of the land are unused (at [16]).
The Senior Member accepted that up to seven horses were maintained on the land as broodmares but concluded that, due to the lack of evidence, the Appellant had not demonstrated that the animals were maintained on the land for the dominant purpose of natural increase or sale (at [15] and [17]).
Similarly, the Tribunal found that, given the absence of any financial reports, business plan or strategic documents, there was insufficient evidence on which a finding could be made that the use of the land had a commercial purpose or character, let alone that it was significant and substantial (at [54] and [57]).
Submissions
Primary production
The Appellant submitted that the Tribunal erred when it found that the absence of evidence as to the extent to which the land was used for the purpose of maintaining horses, as opposed to the extent to which it was unused, led it to conclude that she had failed to satisfy the criterion of primary production (at [19]). The Applicant submitted that the Tribunal had failed to account for the Appellant’s intention regarding the use of the land (at [21]). The Appellant had relied on affidavit evidence from Mr Angelo Ferella which asserted that the dominant use of the land was for the stated primary production purpose; and that the Tribunal could have inferred intention from the materials before it (at [33]).
The Chief Commissioner submitted that the Tribunal was correct in its conclusion that the Appellant failed to discharge her onus, and the issue of whether part of the land was unused was never an issue before the Tribunal (at [21]).
Commerciality Test
The Appellant submitted that the Tribunal’s decision was based on the “slenderness” or low intensity of the horse breeding operation, and that it did not have adequate regard to principles as to use and intention as endorsed in Saville (at [39]).
The Chief Commissioner submitted that the Appellant had not discharged her onus because she did not provide the requisite evidence to satisfy the requirements of commerciality under the LTMA (at [40]).
Decision
Dominant primary production use
The Appeal Panel rejected the Appellant’s submission that the Tribunal made its decision based on an absence of evidence concerning how much of the land was used as opposed to unused. The Appeal Panel found that the Tribunal had in fact objectively considered all the material before it with respect to the use of land (at [35]; see also [28]).
The Appeal Panel did not accept the Appellant’s submission that the Tribunal had failed to account for intention, noting that drawing an inference as to intention is not justified when the onus is on the Appellant to prove the land’s use. Intention is also ultimately a small part of the facts and circumstances to be taken into account, and there was no evidence that the relevant periods could be regarded as hiatus years for the purposes of land management, the consequence being that intention has little to no weight in this case (at [34]).
Accordingly, the Appeal Panel held that the Tribunal’s processes were “both orthodox and rational” and that it was open on the material before it to find that the Appellant had not discharged her onus (at [28] and [32]).
Commerciality test
The Appeal Panel held that the Tribunal, in considering s. 10AA(2) of the LTMA, did not err in taking account of the size of the horse breeding operation, including the number of brood mares involved, the foals produced, progeny sold, and the existence or absence of profits, financial accounts and business plans. The Appeal Panel approved White J’s statements in Vartuli v Chief Commissioner of State Revenue [2014] NSWSC 678 98 ATR 545 at [109] –[111] (at [43]).
In conclusion, the Appeal Panel found that there was no error of law affecting the Tribunal’s decision, and there was no basis for granting leave to appeal on the merits, as the Tribunal’s conclusions were “clearly open on the material before it”, there being “no obvious errors” (at [45]-[47]).
Orders
The Appeal Panel refused leave to appeal on the merits and dismissed the appeal.
Decision
Link to the decision