Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Hearing dates: 15 May 2013 Decision date: 03 June 2013 Jurisdiction: Appeal Panel - Internal Before: RL Seiden, Deputy President S Frost, Judicial Member J Schwager, Non-Judicial Member Decision: Appeal dismissed Catchwords: Land tax - whether dominant use of land for primary production - onus of an applicant - whether Appellant failed to discharge its onus Legislation Cited: Administrative Decision Tribunal Act 1997 (NSW) Income Tax Assessment Act 1936 (Cth) Land Tax Act 1956 (NSW) Land Tax Management Act 1956 (NSW) Taxation Administration Act 1953 (Cth) Taxation Administration Act 1996 (NSW) Cases Cited: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2008) 74 NSWLR 481 Chief Commissioner of State Revenue v Mr Espresso Group Pty Limited [2012] NSWADTAP 1 Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 Chief Commissioner of State Revenue v Print National Pty Ltd [2013] NSWCA 96 Commissioner of Taxation v Dalco (1990) 168 CLR 614 Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 204 Denham Constructions Pty Ltd & Anor v Chief Commissioner of State Revenue (1998) 40 ATR 416 Federal Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1 Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 Pharmos Nominees Pty Ltd v Commissioner of State Taxation [2012] SASC 24 Category: Principal judgment Parties: Cornish Investments Pty Limited (Appellant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel I Hemmings (Appellant) A H Rider (Respondent) Marsdens Law Group (Appellant) State Crown Solicitor (Respondent) File Number(s): 129037 Decision under appeal Citation: [2012] NSWADT 204 Date of Decision: 2012-10-05 00:00:00 Before: Revenue Division File Number(s): 106033, 116079 reasons for decision 1Cornish Investments Pty Limited (the Appellant) was assessed to land tax for the years 2008 to 2011. The application to have the land treated as exempt was unsuccessful: Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2012] NSWADT 204 (the Decision). The Appellant now appeals. The decision below 2The substantive issue is whether land situated at St Andrews/Varroville is exempt from land tax because the dominant use of that land is for primary production, as contemplated by s 10AA of the Land Tax Management Act 1956 (NSW) (the Management Act). 3The land the subject of the application (the Cornish Land) adjoins other land owned by Mr Greg Sweeney and others (the Sweeney Land). There is no dispute that Mr Sweeney uses the Cornish Land, pursuant to an agricultural lease, for raising cattle, cropping and grazing (the prescribed use). However, in the documents produced by the Chief Commissioner of State Revenue (the Respondent) under s 58 of the Administrative Decision Tribunal Act 1997 (NSW) (the ADT Act) there is a record of an interview of Mr Sweeney, disclosing that during the relevant period he also used the Cornish Land for non-primary production activities, such as horse riding (a use not authorised under the agricultural lease). 4The question, at first instance, was whether the prescribed use was the dominant use of the land. 5The Tribunal focussed upon s 100(3) of the Taxation Administration Act 1996 (NSW) (TAA) which provides that the "applicant has the onus of proving the applicant's case in an application for review". The Tribunal contrasted this with the absence, in s 100, of any onus on the Respondent to show that the assessment was correct: see [24] to [34] of the Decision. The Tribunal drew support from various authorities in the Federal jurisdiction concerned with a similar provision, s 190(b) of the Income Tax Assessment Act 1936 (Cth) (now found in s 14ZZK and s 14ZZO of the Taxation Administration Act 1953 (Cth)). That section provided that an applicant has the burden of proving that the assessment is excessive. Mason J said in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89: The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor, is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail. 6This view was approved in Commissioner of Taxation v Dalco (1990) 168 CLR 614. 7The Tribunal concluded (at [30] of the Decision) that in order to discharge the onus, the Appellant was required to: establish affirmatively, on the balance of probabilities, that in each of the Tax Years under review the Cornish Land was predominantly used for an activity or activities recognised in s 10AA as a primary production activity or activities. 8Ultimately, the Tribunal was not able to conclude what was the dominant use of the Cornish Land. The Tribunal outlined the inadequacies in the evidence relating to the extent of the non-primary production use and concluded that the Appellant had failed to discharge its burden under s 100(3) TAA: at [38] to [49] of the Decision. The assessments were therefore confirmed. Grounds of appeal 9The question for the Appeal Panel is whether the Judicial Member erred in law on the construction of s 100(3) of the TAA. The Appellant's contention is that the Judicial Member erred in treating the Appellant's onus as requiring it to prove that the prescribed use was the dominant use of the land. It contends its case is narrower than that. The Appellant says that it is no part of its case to show that the assessment is wrong or excessive and that the Tribunal's reasoning was inappropriately influenced by the jurisprudence in the Federal jurisdiction: cases dealing with different statutes using different language. 10Whilst the Appellant accepts that the Tribunal ultimately must reach a conclusion about the dominant use of the land, it contends that the "case" it has the onus of proving does not require it to prove the dominant use of the Cornish Land. Its case is limited to a case it can make out from evidence within its control, without recourse to the compulsory processes available to it once proceedings have commenced in the Tribunal. Mr Sweeney, who used the Cornish Land, was not, it was submitted, within the Appellant's control. Therefore, proving the extent of his primary production use of the Cornish Land could not constitute part of the Appellant's case. The Appellant submitted that its case was limited to demonstrating only that the Cornish Land was being used for a prescribed use, which was not in any event in contest. 11It was argued that to require an applicant to meet a case that could only be met once the Tribunal's own processes were engaged, would be requiring that applicant to commit an abuse of process: it would be required to commence a proceeding without a proper foundation. 12The Appellant contended that once it had satisfied the onus of proving its limited case, s 100 of the TAA was spent. The Tribunal was then required to decide what was the dominant use of the Cornish Land in accordance with s 73 of the ADT Act, by weighing up all the evidence and arriving at the correct and preferable decision. 13The Appellant also maintained that the Respondent bore an onus: to demonstrate that another use of the land predominated over the prescribed use. Mr Sweeney was, so the Appellant contends, within the Respondent's control because the Respondent could (and did) utilise his compulsory powers, under s 72 of the TAA to obtain evidence from him. 14The Appellant's submissions drew support from the fact that s 100(3) of the TAA does not, in terms, require an applicant to prove an assessment is excessive and also that s 100(2) contemplates that both an applicant and a respondent will have a "case", therefore distinguishing the position under State legislation from the position under Federal legislation, where the Commissioner of Taxation bears no onus at all. 15On the other hand, the Respondent contended that an applicant's onus is to demonstrate that the assessment is wrong and to prove everything necessary to establish it is entitled to an exemption. In this case it means proving what was the dominant use of the land. The Respondent also relied on s 119 of the TAA which provides that the amount and particulars of the assessments are prima facie correct. Further, the Respondent contended that he bore no onus. Statutory regime 16Land tax is levied by s 7 of the Management Act which provides as follows: 7 Land tax on taxable value of land Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act). 17The relevant date of ownership for land tax purposes is 31 December in the year immediately preceding the land tax year: s 8 Management Act. Section 9 defines taxable value of the land and provides at sub-s (1): Land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under this Act. 18Section 10AA of the Management Act relevantly provides: Exemption for land used for primary production 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. ... (3)For the purposes of this section, "land used for primary production" means land the dominant use of which is for: (a)cultivation, for the purpose of selling the produce of the cultivation, or (b)the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or ... 19Land tax rates are identified in the Land Tax Act 1956 (NSW). 20Provisions concerning assessment of liability, objection and review are found in the TAA. Section 8 provides the Respondent with the general power to make an assessment. Section 16 of the TAA protects the validity of an assessment in the event a particular provision of a taxation law is not complied with. 21A taxpayer who is dissatisfied with an assessment may object in writing: s 86 of the TAA. The expression "dissatisfied" was considered in Chief Commissioner of State Revenue v Print National Pty Ltd [2013] NSWCA 96 (Print National). In that case Gzell J (Bathurst CJ and Beazley P agreeing) held that the expression "dissatisfied" in s 86 of the TAA was to be given its ordinary meaning of "displeased": at [34]. 22Section 87 of the TAA provides that the taxpayer's grounds for objection must be "stated fully and in detail, and must be in writing". Section 88 provides that "on an objection, the objector has the onus of proving the objector's case". 23Under s 91, the Chief Commissioner must consider an objection and either allow or disallow it in whole or part (the Objection Decision). A taxpayer dissatisfied with the Chief Commissioner's determination of an objection may apply to the Administrative Decisions Tribunal for review under s 96 of the TAA. In any such application for review an applicant has the onus of proving its case: s 100(3). Section 100(2) provides that "the applicant's and respondent's cases on an application for review are not limited to the grounds of the objection." 24Section 119 of the TAA provides that production of a notice of assessment is: (a) conclusive evidence of the due making of the assessment, and (b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only. [emphasis added] 25Both parties submitted that the particulars of the assessment included the name of the taxpayer, the description of the land and various other matters that are referred to in the notice of assessment. In our view, the particulars of an assessment depend upon the statutory requirements for making the assessment: Federal Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1 at 14. In this case the particulars would include, at least, the identity of the land held by the taxpayer at the relevant date and the taxable value of that land. It is not necessary to decide if an entitlement to an exemption (or disentitlement) constitutes a particular of the assessment, for the reason that the amount of the assessment is also prima facie correct for the purposes of the proceedings in the Tribunal: sub-para 119(b) TAA. The starting point for the Tribunal therefore, in any application for review of a land tax assessment, is that the assessment is correct. In this case the starting point for the Tribunal was that the exemption, in s 10AA of the Management Act, did not apply. 26The powers of the Tribunal on review derive from both the ADT Act and the TAA. Section 8 of the ADT Act gives the Tribunal jurisdiction to review a "reviewable decision" if another enactment so provides. In this case the other enactment is the TAA (s 96). The reviewable decision is the assessment: Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28] per Basten JA, Giles and Campbell JJA agreeing. 27In determining an application for review of the assessment, the Tribunal is to decide what the correct and preferable decision is having regard to the material then before it, including "any applicable written or unwritten law": s 63(1) of ADT Act. In a review under s 96 of the TAA the Tribunal must also have regard to the various provisions of the TAA which importantly include ss 16, 100 and 119. In determining the application the Tribunal may affirm, vary, set aside and make a decision in substitution for, or set aside and remit the assessment for consideration by the Respondent: s 63(3) of ADT Act and s 101 TAA. Section 73 of the ADT Act provides the procedure generally to be adopted. Resolution 28The question for the Appeal Panel is whether the Appellant bore the onus of proving that the dominant use of the land was primary production. 29The statutory question that the Tribunal must answer is whether the correct and preferable decision is that the dominant use of the Cornish Land was, during the tax years in question, primary production. In our view, the Appellant's case must address the statutory question and be capable of answering it. 30The presence of s 119 of the TAA underlies our conclusion. The starting position is that the Tribunal must accept that the assessments are correct and that there is no entitlement to an exemption. If neither party adduced any evidence, the assessments would stand. This suggests that the Appellant's case must move the Tribunal away from the starting position. 31There is surprisingly little authority defining an "applicant's case" in the context of reviews under s 96 of the TAA. In B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 (the Judgment); (2008) 74 NSWLR 481 Allsop P (Giles and Basten JJA agreeing) at [104] held that the requisite standard of proof in such cases is the "balance of probabilities". At [87] of the Judgment Allsop P said: The Appeal Panel correctly stated that the appellants bore the onus of proof of establishing the facts on which they rely in objecting to the assessments. 32The Appellant in this case pointed to the fact that in B & L Linings there is no express reference to s 100 of the TAA. However, their Honours were there considering the same statutory regime we are here considering. The reference to the onus of proof must be a reference to s 100(3) of the TAA. 33Studdert J in Denham Constructions Pty Ltd & Anor v Chief Commissioner of State Revenue (1998) 40 ATR 416 at 425-426 said: I remind myself of the nature of these proceedings, and of the onus which the plaintiffs bore in satisfying the defendant of substantial independence and the absence of substantial connection between the plaintiffs and the other members of the group. Having so reminded myself, I am not satisfied that a proper basis has been established to disturb the decision of the defendant. 34In Pharmos Nominees Pty Ltd v Commissioner of State Taxation [2012] SASC 24 at [53]-[54] Gray J said: Section 97 of the Taxation Administration Act provides: On an appeal, the appellant has the onus of proving the appellant's case. The effect of section 97 is that Pharmos must prove that the amount assessed in fact exceeds its true liability to duty. 35The Appeal Panel in Chief Commissioner of State Revenue v Mr Espresso Group Pty Limited [2012] NSWADTAP 1 at [9] said: The [taxpayer] was required to place before the Tribunal below all necessary information to allow a decision to be made in respect of the dispute of fact. 36These authorities support the proposition that an applicant must prove all matters necessary to enable a Tribunal to answer the statutory question in its favour. In light of the statutory regime and the clear expression in B & L Linings, we have not found it necessary to review the authorities in the Federal jurisdiction. 37In the present context, the Appellant must establish all the facts on which it relies to claim the exemption. This necessarily requires it to establish that the dominant use of the land was for a prescribed purpose. 38It remains necessary to deal with the Appellant's abuse of process argument: that the Appellant's case could not require it to discharge a burden of proof in respect of the use by a third party of its land. The section that enlivens an applicant's right to approach the Tribunal is s 96 of the ADT Act. This requires only that the taxpayer be dissatisfied with the Objection Decision. It does not require the taxpayer to have more than a reasonable basis for being displeased with the Objection Decision: Print National at [34] by analogy. 39In conclusion, the Appellant has contended that its case is that it is entitled to the primary production exemption, but it does not need to prove the assessment wrong or excessive and particularly it does not need to prove the dominant use of the land. That conclusion, so it is submitted, can be reached by the Tribunal with no burden upon the Appellant. However, in our view the Appellant can only be entitled to the primary production exemption if the land is land the dominant use of which is for primary production purposes. To put forward a case that stops at mere use of the land, is to put forward a case that will not establish that the Appellant is entitled to the exemption. Its case must be more than that. It must include at least a contention that the primary production use is the dominant use. One way this could be achieved is by demonstrating that the prescribed activity is the only use of the land. In our view, this was the Appellant's implicit case, which it unsuccessfully sought to establish by the evidence of Mr Cornish: the prescribed use was authorised by the agricultural lease and so far as the Appellant could ascertain, there was no unauthorised use of the Cornish Land. In our view it was necessary to incorporate a contention of either dominant or exclusive use into the Appellant's case, that it bore the onus of proving. Decision 40The Appeal was restricted to a question of law. In our view there has been no error demonstrated that the Tribunal at first instance misconstrued or misapplied the onus provision in s 100(3) of the TAA. We therefore order the decision of the Tribunal as originally constituted be affirmed. The Appeal is dismissed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 June 2013