Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Jamsapi Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 57 Hearing dates: 10 February 2014 Decision date: 08 May 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: A Verick, Senior Member Decision: The land tax assessments under review are affirmed Catchwords: TAXES AND DUTIES - Land Tax - whether land exempt from taxation as land used for primary production - whether the applicant failed to discharge onus of proof - whether the applicant failed the dominant use test Legislation Cited: Taxation Administration Act 1996 Land Tax Management Act 1956 Administrative Decisions Tribunal Act 1997 Administrative Decisions Review Act 1997 Civil and Administrative Tribunal Act 2013 Cases Cited: Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867 Saville v Commissioner of Land Tax (1980) 12 ATR 7 Hope v Bathurst City Council (No 2) (1984) 52 LGRA 79 Hope v Bathurst City Council (1986) 7 NSWLR 669 Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286 Greenville Pty Ltd v Commissioner of Land Tax (1977) 7 ATR 278 Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25 Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 204 Krew v Federal Commissioner of Tax 71 ATC 4213 Ferella v Chief Commissioner of State Revenue [2013] NSWADT 46 Jamsapi Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADT 202 Category: Principal judgment Parties: Jamsapi Pty Ltd (Applicant) The Chief Commissioner of State Revenue (Respondent) Representation: Counsel K Day (Respondent) B Anstee (Agent for the Applicant) Crown Solicitor's Office (Respondent) File Number(s): 126002, 126100 and 136053 reasons for decision 1The applicant, Jamsapi Pty Ltd, owns a property constituting five parcels of land, being Lots 8, 9, 11, and 12 in DP 729209 and Lot 1 in DP 770184 situated in the Southern Highlands ('the land') with a total area of 49.8751 hectares. 2The respondent, the Chief Commissioner, assessed the applicant to land tax with respect to the land tax years 2010, 2012 and 2013. The applicant objected against the assessments on the grounds that the land was in the years in issue used for primary production and was accordingly exempt under the Land Tax Management Act 1956 ('the Act'). The objections were disallowed. The applicant now seeks a review of the assessments pursuant to s 96 of the Taxation Administration Act 1996 ('the TA Act'). 3This application was instituted in the Revenue Division of the Administrative Decisions Tribunal ('the ADT') pursuant to the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). On 1 January 2014, the ADT with a number of other Tribunals in New South Wales, were abolished and their jurisdiction and functions integrated into the Civil and Administrative Tribunal of New South Wales ('the NCAT') established under the Civil and Administrative Tribunal Act 2013 ('the NCAT Act'). Because the proceedings in this matter were 'unheard proceedings' on 1 January 2014 as defined in clause 6(1) of Schedule 1 to the NCAT Act, they 'are taken to have duly commenced in NCAT and heard and determined instead by NCAT' (Clause 7(1)). This decision is accordingly a decision of NCAT. 4It is common ground that the land is 'rural land'. The question for decision is whether the primary production exemption found in s 10AA of the Act applies. Section 10AA provides relevantly: (1) Land that is rural land is exempt from taxation if it is land used for primary production. ... (3) For the purpose of this section, land used for primary production means land the dominant use of which is for: ... (b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, ... 5The applicant claims that the land was in the years in issue used for the maintenance of horses for purposes of breeding and training. The Chief Commissioner rejects that claim on the grounds that the land was substantially unused land. Factual Background 6On 19 January 2010, the Chief Commissioner issued an assessment for the 2010 land tax year. In a letter dated 19 March 2010, the applicant objected against the assessment on the grounds: The land was purchased on 19 June 2007 for the establishment of a horse breeding facility for harness ponies. At the time of purchase the land had cattle agisted on the land by Phil Hazzard who had been agisting cattle on the land from 21-12-2006. This arrangement has been allowed to continue since purchase but has been periodic due to drought conditions and the limited water supply on the [property]. The property is transversed [sic] by Kell's Creek which was without water for most of 2009. There are two dams on the land which has been almost dry during 2009. During 2009 clearing of the land of fallen timber has continued and weed infestation has been treated periodically to rid the land of gorse and blackberry. The pony mares have been maintained on the property during 2009 and to date. Water has been transported to the property for them daily and they are feed [sic] each night to supplement their grazing of the land. The land was selected for its sandy and dry conditions which is necessary for the ponies to avoid holf [sic - hoof] problems and over lush pastures which gives rise to founder in the ponies. While conditions of drought have been serious the primary production use has been continuous with transported water and hand feeding on the land. 7The applicant also attached an application form for land tax exemption for 2010. In the application, it was stated that two activities are being conducted on the land, cattle grazing and horse breeding. For the financial year 2009/2010, it was claimed in respect of the cattle grazing that it commenced the activity on '24/6/2009' and that '8 Head sold September 2009'. In relation to horse breeding it was claimed that the activity commenced on '1/7/2009' and 'No sales yet still breeding'. 8The objection was disallowed on 10 November 2011 and, on 9 January 2012; an application for review was lodged at the Tribunal. 9On 18 January 2012, the Chief Commissioner issued to the applicant a land tax notice of assessment for the 2012 land tax year. An objection dated 16 March 2012 was lodged by the applicant on the grounds - The land is used for Primary Production being the breeding of horses. The land is used as a horse breeding and training facility for the ultimate sale of horses and their produce. The land is "rural land" being within zone E3 under Wingecarribee local Environment Plan 2010. There is no other use of the land. 10The objection was disallowed on 5 June 2012 and an application for review was lodged at the Tribunal on 10 August 2012 on the ground that the 'land was used for the dominant purpose of primary production on the taxing date'. 11On 16 January 2013, the Chief Commissioner issued to the applicant a land tax assessment for land tax year 2013. The applicant lodged an objection dated 15 March 2013 on the same grounds as set out in his objection against the 2011 land tax assessment. 12The objection was disallowed on 24 May 2013 and an application for review was lodged at the Tribunal on 1 August 2013. 13The applicant also made a further application for exemption on the ground that the land was used for primary production. The answers to the various questions set out in the application were collated by the Chief Commissioner's counsel in her written submissions as follows: In answer to the questions in the application form, the Applicant stated that: (a)There was no residence on the property; (b) The primary production activity was carried on by the owners; (c) The property was not used for any other purpose apart from primary production; (d) The buildings and structures on the land which were used in conjunction with the primary production business included dams, fencing and tracks; (e) The Applicant's main occupation was primary production; (f) 100% of the land was used for primary production; (g) The land was not used in conjunction with any other farmland; (h) The land does not have a farmland rating for council rating purposes; (i) There are no current or pending development applications lodged for the property; (j) The primary production business carried out on the land was "grazing/livestock, more specifically, "breeding horses for sale". (k) In the past 12 months period, 4 horses were grazed on the property; one was purchased within the last 12 months; one was sold in the last 12 months for $2,500 - there was no natural increase of stock held on the land; (l) In answer to the question "What records are kept to substantiate the business activities currently being conducted?", the Applicant wrote "N/A"; (m) The Applicant did not answer the business details sought in Part 3 of the application (these included the date of commencement of primary production on the property, whether it was full-time or part-time, whether the Applicant was recognised as a primary producer by the Australian Taxation Office, whether the Applicant was a property subdivider and this is its main business, and details as to profit and loss results over the previous 5 years); (n) As to farm improvements, the Applicant stated that the property was divided into four paddocks, the farm buildings were nightyards, water facilities and a storage container, the equipment and machinery held on the property and used to carry out the primary production activities were "general farm tools" and the improvements made to the land and relating to the primary production activities were fencing repairs ($150) and water troughs and holding tanks ($650); (o) No cattle were held on the property; (p) A breeding programme is conducted on the property to improve the quality of the stock; (q) The property is currently registered with the Livestock Health and Pest Authority; (r) The Applicant did not answer the question whether the property had a PIC number; (s) The Applicant does not maintain Transported Stock Statements; (t) Livestock are transported by horse float; (u) The horse breeds held on the property are: an Australian Stud Book Pony, a Section C Welsh Pony and a New Forest Pony; (v) The property is registered as a stud for horse breeding, and the horses are used for breeding and training for sale; (w) Stock are not agisted on the property. 14The only evidence relied upon by the applicant was an affidavit of Mr Barry Anstee. 15In the affidavit Mr Anstee states that the land was acquired by the applicant in June 2007 and the applicant's sole director and shareholder until 4 November 2011 was Mr Harold Berry, his father-in-law. Mr Berry died on 4 November 2011 leaving his estate to Mrs Lynette Anstee, his only child, as sole executor. On 9 January 2013, she became the sole director of the applicant. 16He further stated that the 'subject land comprises 49.875 hectares with the only improvements being boundary and paddock fencing, two dams and cattle yards'. 17And Mr Anstee also asserted that - 15. For each of the Tax Years 2010, 2012 and 2013 the Respondent has acknowledged in the Respondent's correspondence contained in the Section 58 documents that the subject land has been used for primary production purposes. 16. The Respondent has erroneously asserted for each of the Tax Years 2010, 2012 and 2013 that the primary production use of the land is not the dominant use of the subject land. 17. The Respondent has erroneously asserted for each of the Tax Years 2010, 2012 and 2013 that the dominate use of the subject land is a proposed tourist development in circumstances where such a use is a prohibited development of the subject land under the provisions of WLEP 1989 (Wingecarribee Local Environment Plan 1989) and WLEP 2010 (Wingecarribee Local Environment Plan 2010). 18. All the subject land has been used for the primary production use during the Tax Years 2010, 2012 and 2013. 19. There has been no other use of the subject land for each of the Tax Years 2010, 2012 and 2013. 20. No part of the subject land has been unused during the Tax Years 2010, 2012 and 2013. 21. The dominant use of the subject land has been primary production during the Tax years 2010, 2012 and 2013. 18At the hearing, a fresh claim was made by Mr Astee that the ponies were being trained for coach driving. 19The respondent filed an expert statement dated 5th November 2013 made by Geoff Mills, Senior Ranger, working with the Cumberland Livestock Health and Pest Authority. Mr Mills was engaged by the respondent's solicitor to provide his opinion on various questions relating to the land in issue. In particular, he was asked what was 'the notional carrying capacity of the land (for cattle and, alternatively horses)'. He provided the following answer - The notional carrying capacity for the land was 46 400kg steers, 35 cows & 35 Horses. 20The applicant has previously challenged the assessment for the 2008 land tax year before the Tribunal on similar grounds. The Tribunal (Jamsapi Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADT 202) dismissed the application and affirmed the assessment. The Tribunal also awarded costs in favour of the Chief Commissioner. Relevant Legal Principles 21In the case of a rural property, it is exempt from land tax under s 10AA(1) of the Act if the rural property was 'land used for primary production' as at midnight on the thirty-first day of December immediately preceding the year for which the exemption is claimed. 22The phrase 'land used for primary production' is further defined in s 10AA(3) of the Act, relevantly, to mean land, the dominant use of which is 'the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling the produce of the cultivation'. 23The fundamental question in respect of the land that is required to be considered is whether the activity claimed of primary production represented the dominant use of the relevant land on the thirty-first December immediately preceding each land tax year in issue. 24In Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867 his Honour Gzell J examined, in the context of s 10AA of the Act, the meaning of 'dominant use of land' and his Honour has very usefully set out the principles that need to be considered in determining 'dominant use' as follows (69-76): 69 Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use. 70 That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts. 71 In Saville v Commissioner of Land Tax (1980) 12 ATR 7, Roden J was concerned with whether land was used primarily for the maintenance of animals thereon under a former provision in the Land Tax Management Act. The primary use test was not unlike the dominant use test in the present legislation. His Honour said (at 10): "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." 72 In Hope v Bathurst City Council (No 2) (1984) 52 LGRA 79, Perrignon J was concerned with the definition of "rural land" as land that is wholly or mainly used for carrying on the businesses or industries of grazing amongst other uses in the Local Government Act 1919, s 118. His Honour (at 84) said that what was called for where land was put to a number of uses, was the weighing of the evidence relating to the various uses to which land was 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. 73 His Honour's decision was upheld on appeal (Hope v Bathurst City Council (1986) 7 NSWLR 669). A majority of the Court of Appeal held that the characterisation of rural land as land that is wholly or mainly used for carrying on the businesses or industries of grazing, amongst other uses, did not relate solely to the quantum of area of land used for relevant purposes but related to the end to be achieved by the use and included other criteria such as the nature and intensity of the use. 74 In Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286 the Land Appeal Court of Queensland, presided over by Ambrose J, had to consider whether, at the relevant date of valuation, the subject land was "exclusively used ... for the purpose of farming". 75 In terms similar to the Land Tax Management Act, s 10AA, "farming" was defined for this purpose in the Valuation of Land Act 1944 (Qld), s 17(2) to mean the business or industry of grazing, and other specified pursuits, or any other business or industry involved in the cultivation of soils, the gathering in of crops, or the rearing of livestock, if the business or industry represented the dominant use of the land and had a significant and substantial commercial purpose or character and was engaged in for the purpose of profit on a continuous or repetitive basis. 76 The Court, helpfully, gave its approach to the determination of dominant use of land (at 303): "In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in s 17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole." 25In this matter, it is also relevant to consider unused land when determining the dominant use of the land. As noted by his Honour Gzell J in Leda, citing with approval Roden J's statement in Saville v Commissioner of Land Tax (1980) 12 ATR 7, that the use must be 'sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land'. 26In Greenville Pty Ltd v Commissioner of Land Tax (1977) 7 ATR 278, Helsham J was concerned with whether a pumpkin patch on 1.5 acres on land that was a golf course of a total area of 130 acres, exempted the whole property from land tax under the primary use test. His Honour (at p 280) made the following relevant observations - I think the only question to be decided here is this: can it be said that land most of which is not being used at all is used primarily for the cultivation of it for the purpose of selling the produce of that cultivation if a very small part of it is under cultivation? Another way of putting the question I suppose is: when does land which is not being used at all become land used primarily for cultivation? The plaintiff would have the court answer the first question: yes, and the second question: as soon as any cultivation commences. ... To claim an exemption under the Act the owner must be able to point to an activity being conducted on the land that will give the land the character of being mainly used for that activity, or that will enable a person having to decide the matter to say that the land is, in substance and looked at as a whole, being used for an activity that gives rise to an exemption. I do not think the question: what is the main use of the land, is to be answered by pointing to the only activity on the land. An activity going on on the land does not necessarily characterize the use of the land taken as a whole, so that one can say the land is used primarily for that activity. That is evidently a correct proposition if there is more than one activity going on on the land; it does not cease to be correct where portion of the land is not being put to any use. It may follow that one activity being conducted on land means that the land is used primarily for that activity; but it does not necessarily follow. 27These cases make it clear that 'dominant use' of land is not necessarily to be determined by reference to the sole physical activity conducted on the land. The non-use of part of the land is a relevant factor when only some part is being used for a primary production activity. 28Under s 100(3) of the TA Act the onus of proof in relation to the main issues of fact is on an applicant (see Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 204 affirmed by the Appeal Panel in Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25). 29In Cornish, the Appeal Panel, in affirming the decision of the Tribunal, stated that the onus of proof is on the balance of probabilities and that 'an applicant must prove all matters necessary to enable a Tribunal to answer the statutory question in its favour'. An applicant is essentially required to show in respect of each assessment that it is incorrect (see Walsh J in Krew v Federal Commissioner of Tax 71 ATC 4213 at 4216). Submissions and Consideration 30The applicant's case advanced by Mr Anstee was that all the land was being used to breed horses and that 'no part of the subject land has been unused during the Tax years 2010, 2012 and 2013'. 31The respondent submitted that - 44. The Applicant has failed to discharge its onus of proof. Its evidence simply does not enable the Tribunal to consider the enquiries necessary pursuant to s 10AA(3), to properly assess the actual use or uses of the Land, and to undertake the necessary comparison to assess which of them was the dominant use (if there was more than one sufficiently substantial use of the Land). 45. Mr Anstee's affidavit of 4 October 2013 contains no information at all as to the alleged activities of cattle grazing and horse breeding on the land. 46. The Applicant has provided no financial statements, invoices, cheque butts, cheques books and the like relating to the Applicant's business and the alleged uses of the Land. That is a further reason why its evidence simply does not enable the Tribunal to evaluate what may have been the "use" or "uses" to which the land was put by the Applicant (including any intangible use or indirect use), and why the Applicant has failed to discharge its onus of proof. 47. Even if the Applicant's statements (in its land tax objections and applications for exemption) were to be substantiated by evidence, that would establish no more than that for some period of time, 8 cattle were grazed on the land, 4 ponies were held on the land, and one was sold. Mr Mills' expert report indicates that the notional carrying capacity of the Land in the period 1 July 2009 to 30 September 2013 was 46 steers (400kg), 35 cows and 35 horses. Accordingly, even if the Applicant's claimed use of the Land were to be proved by evidence, it would not be sufficiently substantial to attract the exemption. 48. In those circumstances, on the evidence before the Tribunal it is not possible to conclude that the Land was used for the dominant purpose of primary production. See, by way of comparison, Ferella v Chief Commissioner of State Revenue [2013] NSWADT 46 32I agree with the submissions made by the respondent. Clearly, the applicant has failed to discharge the onus to establish 'all matters necessary to enable the Tribunal to answer the statutory question in its favour'. 33The applicant was required to produce evidence that, in the relevant years, the dominant use of the land was for the maintenance of cattle or horses for the purpose of selling them or their natural increase or bodily produce. 34There was no evidence before the Tribunal of any breeding of horses in the relevant period. In fact no evidence, as submitted by the respondent, was before the Tribunal to determine the intensity of the claimed primary production activity on the land. 35It was claimed that in the 2009/2010 financial year, 8 head of cattle were sold but no mention was made as to the number of pony mares 'maintained on the property during 2009 and to date'. 36In the application for exemption made on 15 March 2013, the applicant claimed that 'in the past 12 month period, 4 horses were grazed on the property; one was purchased within the last 12 months; one was sold in the last 12 months for $2,500 - there was no natural increase of the stock held on the land'. 37These figures were not substantiated by any evidence. Even if the Tribunal accepts these figures, the application would fail. The expert evidence of Mr Mills was that the land in the relevant period had adequate carrying capacity for 46 steers (400kg), 35 cows and 35 horses. The notional capacity, when compared with the claimed use, leads to the logical conclusion that it was not sufficiently substantial to prevail over the proposition that the land was dominantly to be regarded as unused land in the relevant land tax years. 38The application is, accordingly, dismissed and the assessments affirmed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 08 May 2014