Ferella v Chief Commissioner of State Revenue [2013] NSWADT 46

Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Ferella v Chief Commissioner of State Revenue [2013] NSWADT 46 Hearing dates: 22 February 2013 Decision date: 27 February 2013 Jurisdiction: Revenue Division Before: J Block, Judicial member Decision: The objection decision under review is affirmed Catchwords: Primary production exemption - consideration of different uses- onus of proof Legislation Cited: Land Tax Management Act 1956 Cases Cited: Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 Commissioner of Land Tax v. Christie (1973) 2 NSWLR 526 Thomason v. Chief Executive, Department of Lands (1994-95) 15 QLCR 286 Saville v Commissioner of Land Tax (1980) 12 ATR at 10 Romano v Chief Commissioner of State Revenue [2011] NSWADT 7 Category: Principal judgment Parties: Gustavo and Nida Ferella (Applicants) Chief Commissioner of State Revenue (Respondent) Representation: Counsel JT Svehla (Applicant) E Bishop (Respondent) Crown Solicitor's Office (Respondent) File Number(s): 126062

REasons for decision

Part A Introduction and preliminary 1The Applicant seeks the review of a decision (dated 21 March 2012) by the Respondent (who is usually referred to in these reasons as the "Chief Commissioner") disallowing an objection by the Applicant dated 6 December 2012 in which the Applicant claimed an entitlement, in respect of land situated at 6 Alan Street Box Hill, ("the land" or "the Property") to a primary production exemption for the land tax years 2007 to 2011 (both land tax years inclusive) and referred to in these reasons as "the relevant years". The term "relevant period" as used in these reasons refers to the period covered by the relevant years (1 January 2007 to 31 December 2011 and in addition, and having regard to the judgment in Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 at para 4, ("Leda") the period of 6 months preceding the first of those dates and the period of 6 months succeeding the second of those dates. 2The Tribunal had before it the documents lodged in accordance with section 58 of the Administrative Decisions Tribunal Act 1997; in addition it admitted exhibits as follows: Exhibit A1 is an affidavit by Angelo Ferella ("Angelo") dated 20 August 2012; Exhibit A1 refers as an exhibit to a large folder of documents marked AF-1 and which is referred to separately in these reasons as "AF-1. Exhibit A2 is a further affidavit by Angelo dated 23 October 2012; (Exhibit A2 also refers to AF-1); Exhibit A3 is a diagram, or more accurately a sketch plan, prepared by Angelo in respect of the Property and which refers to the buildings and improvements on it. That diagram suggests that the area encompassed by the cottage as a proportion of the whole may perhaps be in excess of 5% and which is the percentage referred to in the Applicant's written submissions dated 13 December 2012 "(AS"). Exhibit R1 consists of two documents issued by the NSW Department of Primary Industry dealing with the 2007/2008 Equine Influenza epidemic; those documents indicate that the outbreak in question lasted for 6 months ending in February 2008. Exhibit R2 consists of two colour photographs of the Property tendered by the Respondent, which show inter alia, on the right hand side, a cottage and on the left hand side stocks of material required for construction purposes. Exhibit R3 is an affidavit by Mirjana Pecikova who is employed by the Crown Solicitor) dated 19 February 2013 and which was admitted on the basis that the Applicant did not require the deponent for cross-examination. 3The Tribunal had before it, at the commencement of the hearing, written submissions by both parties; AS has been referred to previously in these reasons; the Respondent's written submissions dated 8 February 2013 are referred to in these reasons as "RS". 4It is convenient in the first instance to draw on RS so as to include its content under the head of "Background Facts' and contained in clauses 3 to 15 of RS and which are included without footnotes (although the footnotes have been checked and found to be correct) as follows: 3.It is common ground that the land the subject of these proceedings is non-urban rural land. 4.The land is approximately 1.324 hectares. A residence and curtilage is on approximately 700 square metres of the land. The remainder of land is fenced off 2 from the cottage and it is on this part of the land that the applicant contends the primary production is carried out ("the remainder land"): 5.The residence has been tenanted at least since 2004 for $185 per week. The remainder of the land has been used by the trustee of the Modena Family Trust (a trust for the benefit of the Ferella family). On 1 June 2007 the name of the Modena Family Trust was changed to Agusta Trust.' 6.The trustee until 6 May 2006 was Nida Ferella (the second applicant). The trustee from 6 May 2006 was Agusta Industries Pty Ltd. The trustee from 15 July 2011 was Agusta Pty Ltd.' 7.The applicants contend that during the relevant land tax years the primary production on the remainder land was conducted by Nida Ferella then Agusta Industries Pty Ltd and then Agusta Pty Ltd and that the primary production is thoroughbred horse breeding.' 8.On 1 October 2007 the applicants entered into a written lease of the land with the trustee of the Agusta Trust.' Consideration for the lease was $1. 9.Mr Angelo Ferella, the son of the applicants, is the person with sole responsibility for the primary production of thoroughbred horse breeding on the land. 10.There have been some improvements made to the remainder land being three new stables and a tack room, which it is stated were constructed in 2007." The invoices for this work were made to Riva NSW Pty Ltd. There is no evidence about the 3 relationship of this company to the applicants but it appears Riva NSW Pty Ltd received the invoices for work done on the lane. 11.The respondent issued land tax assessments for the years 2007 to 2011:3 12.On 4 October 2011 the respondent refused the applicants' application to treat the land as exempt from land tax." 13.On 6 December 2011 the applicants lodged an objection: 14.On 21 March 2012 the respondent disallowed the objection. 15.On 23 May 2012 the applicants lodged an application for review of the decision. 5Having included content from RS, and in the interests of balance I include clauses 9 to 16 of AS (and notwithstanding the fact that it includes contentions as to law) (on the basis that G & N as set out therein refers to the parties constituting the Applicant) as follows: 9.It is also not in issue that there is a one bedroom fibro veneer cottage located on the Box Hill Land, fenced off and segregated from the rest of the Box Hill Land. The cottage and surrounding grounds occupy about 700 square metres ("Cottage Area") of the total area of the Box Hill Land, which is 1.34 hectares or approximately 13,700 square metres. The Cottage Area represents approximately 5.1% of the total area of the Box Hill Land. 10.The remainder of the Box Hill Land, fenced off from the Cottage Area, on which there are located three stables, a tack room and two sheds, and on which there are, depending upon the time, 1 to 3 thoroughbred horses, comprising approximately 94.9% of the Box Hill Land ("Thoroughbred Area"). 11.At all times G&N have maintained control over the Cottage Area and have until recently rented out the Cottage Area. 12.The reference to the "dominant use" of the Box Hill Land: "presupposes that land may be used for more than one purposes and requires the determination of which use of the land is the main, chief or paramount use", Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867 at [69]. This is a question of fact and depends upon a detailed consideration of all of the circumstances in each case, which should be determined:"as an objective matter of impression having regard to the facts" ,Leda Manorstead at [70]. 13.This requires weighing of evidence relating to various uses to which the land is put, including, but not limited to, the nature and intensity of such uses, the physical areas over which they extended and the time and labour spent in conducting them: Hope v Bathurst City Council (No. 2) (1983) 52 LGRA 79 at 84; upheld on appeal in Hope v Bathurst City Council (1986) 7 NSWLR 669. 14. Almost all of the Box Hill Land is used for thoroughbred horses (94.9%). Further, the Thoroughbred Area is fenced off from the Cottage Area. The Thoroughbred Area is only used for maintaining and propagating thoroughbred horses purchased and owned by the Trustee. 15.It is accepted by G&N in the relevant years that: (a)the thoroughbred horse activities undertaken by the Trustee in the relevant years did not derive a profit, but made a loss; (b) in the relevant years, G&N made a profit of several thousand dollars each year from renting the Cottage Area. 16.In terms of time and human effort spent, it is spent on the Thoroughbred Area, not in relation to the Cottage Area, as that is tenanted. Stables and other structures in relation to the carrying on of the thoroughbred horse breeding activity have been carried out in the Thoroughbred Area and are part of the time and human effort spent in relation to this business activity.