Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Bisvic Pty Limited v Chief Commissioner of State Revenue (No 2) [2014] NSWCATAD 166 Hearing dates: 7 May 2014 Decision date: 08 October 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: R J Perrignon, Senior Member Decision: The respondent's decision dated 12 September 2012 is confirmed Catchwords: Land tax; exemption for primary production; use of land for maintaining horses for sale; whether dominant purpose; whether significant and substantial commercial purpose of character; whether for purpose of profit on a continuous or repetitive basis Legislation Cited: Civil and Administrative Tribunal Act 2013 Land Tax Management Act 1956 Taxation Administration Act 1996 Cases Cited: B & L Linings Pty limited v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 Ball v Chief Commissioner of State Revenue [2010] NSWADT 114 Bisvic Pty Limited v Chief Commissioner of State Revenue [2011] NSWADT 293 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 FCT v Dalcro [1990] 168 CLR 614 Hope v Bathurst City Council (1986) 7 NSWLR 669 Jones v Commissioner of Land Tax (NSW) (1980) 11 ATR 98 Leda Manorstead Pty Limited v Chief Commissioner of State Revenue [2010] NSWSC 867 McClelland v Goulburn City Council (1976) 35 LGRA 1 Maraya Holdings Pty Limited v Chief Commissioner of State Revenue [2013] NSWSC 23 Maraya Holdings Pty Limited v Chief Commissioner of State Revenue [2013] NSWCA 408 Thomason v Chief Executive, Department of lands [1994-95] 15 QLCR 286 Category: Principal judgment Parties: Bisvic Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: T Ensor (Applicant) A Gerard (Respondent) Thomas & Bisley (Applicant) Crown Socitor's Office (Respondent) File Number(s): 136052 reasons for decision 1The applicant, Bisvic Pty Limited ('Bisvic'), is the trustee of the Yallah Unit Trust. In 2004, it purchased about 70 acres of land at Yallah, south of Wollongong in New South Wales, for about $2.3 million. 2On 12 January 2012, the respondent Chief Commissioner of State Revenue assessed the land to land tax for the 2012 tax year. Bisvic promptly applied for exemption from land tax pursuant to section 10AA of the Land Tax Management Act 1956, on the basis that the land was rural land used for primary production. 3On 12 September 2012, the Chief Commissioner declined to grant the exemption. Bisvic seeks review of that decision. 4Bisvic says that it is entitled to the exemption because, as at midnight on 31 December 2011 (the 'taxing date'), the land was not rural land, it was using the land for the dominant purpose of maintaining horses for sale, it was doing so for the purpose of profit on a continuous or repetitive basis, and its horse business had a significant and substantial commercial purpose or character, as required by section 10AA. 5It is common ground that the land was not rural land. There is no dispute that, as at the taxing date, most of the land was being used for the purpose of maintaining horses for sale. However, the Chief Commissioner says essentially that the horse business was not the dominant purpose, was not engaged in for the purpose of profit on a continuous or repetitive basis, and did not have a significant or substantial commercial purpose of character. He says it was merely a 'token business' which was not profitable, and incapable of producing a profit on a continuous or repetitive basis. Its true purpose, he says, was to avoid liability for land tax. 6Objection was taken to the decision of 12 September 2012 and disallowed. An application for review of the decision was made to the Administrative Decisions Tribunal, which enjoyed jurisdiction to review the decision pursuant to section 96 of the Taxation Administration Act 1996. The decision was remitted to the Chief Commissioner for reconsideration, but remains unchanged. Pursuant to clause 7 of Schedule 1 to the Civil and Administrative Tribunal Act 2013, the proceedings in the Administrative Decisions Tribunal are taken to have been duly commenced in this Tribunal, and may be heard and determined by it. 7The applicant bears the onus of proving its case: section 100, Taxation Administration Act 1996. It must do so on the balance of probabilities: B & L Linings Pty limited v Chief Commissioner of State Revenue (2008) 74 NSWLR 481; FCT v Dalcro [1990] 168 CLR 614 at 626 per Deane J. The applicant "must prove all matters necessary to enable a Tribunal to answer the statutory question in its favour": Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36]. Legislation 8At all relevant times, section 10AA(2) and (3) of the Land Tax Management Act 1956 provided: '(2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land: (a) has a significant and substantial commercial purpose or character, and (b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made). (3) For the purposes 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, or .... Issues for determination 9The issues for determination may be summarised as follows. (1)Whether the maintenance of horses for sale by Bisvic had a 'significant and substantial commercial purpose or character'. (2)If so, whether that use was 'engaged in for the purpose of profit on a continuous or repetitive basis'. (3)If so, whether that use was the dominant use of the land, having regard to all the uses to which the land was put. 10To succeed, Bisvic must prove that all three of these issues should be answered in the affirmative. Background 11In Bisvic Pty Limited v Chief Commissioner of State Revenue [2011] NSWADT 293 ("Bisvic no 1"), the Administrative Decisions Tribunal reviewed and confirmed assessments of the land to land tax in respect of the tax years 2008, 2009 and 2010. As at 31 December in 2007, 2008 and 2009, the Tribunal found that the land was being used as follows: (1)Some ten paddocks, together occupying around 65 acres, were leased to Mr Meharg, who used them to maintain his own and other people's horses. He paid rent of $7,800 per year. (2)A cottage on the property was also leased to Mr Meharg. He lived there, paying rent of $8,580 per year. (3)Another cottage on the property was occupied by a Mr Pastrovic. He lived there, free of rent. (4)About four hundred square metres of vacant land in the vicinity of the abattoir buildings was leased to R H Hancock, Pty Limited ("Hancocks") who repaired and stored wooden pallets there. They paid rent of about $21,000 per year. (5)Bisvic also charged $3,600 per year for the parking of two trucks on the property. Evidence of Mr Bisley 12In these proceedings, the Tribunal had the considerable benefit of written and oral evidence from Mr Bisley, a solicitor who was also a director of Bisvic. He said that the above description of the uses of the land remained accurate up to November 2011. In an affidavit sworn on 22 January 2014, Mr Bisley said: "24. .... By early November 2011, having not yet received the Tribunal's decision the applicant was mindful that the next 31 December assessment of land tax was approaching. In light of this, the applicant decided to restructure the use of the subject land to try to make its use more closely comply with the statutory requirements of the primary production exemption so that, regardless of the Tribunal's decision, it would satisfy the requirements for the next land tax year. The applicant decided to restructure the operation of the farm as quickly as possible and prior to 31 December 2011. 25. Accordingly, in November 2011 the applicant: a. ceased leasing any part of the subject land to Mr Meharg; b. terminated all agistment arrangements on the subject land; c. terminated all truck parking on the subject land; d. decided to commence and run on the subject land a business of maintaining horses for the purpose of sale. The applicant intended that this would be a long term business which would generate profit for the applicant after its establishment; and e. purchased stock for this business." 13By the taxing date, he said: (1)3% of the land (about 1 hectare) was occupied by the abandoned abattoir buildings, (2)96.5% of the land (about 27.3 hectares) was used by Bisvic for the maintenance of horses for sale, (3)0.16% (about 450 square metres) was the site of the manager's cottage occupied by Mr Meharg and his family, (4)0.1% (about 300 square metres) was the site of a manager's office (described in oral evidence as a concrete bunker) occupied as a home by another director of the trustee, Mr Pastrovic, and (5)0.2% (about 400 to 600 square metres) was vacant land used by R & H Hancock for their pallet business. 14The applicant hurried to restructure activities on the farm, and set up its own horse business, prior to the taxing date. Mr Bisley described it in the following terms: "28. At the beginning of November 2011 the applicant did not own any stock. The applicant wanted to stock its business as quickly as possible and considered that the quickest means of attaining stock was to purchase the horses which had previously been agisted on the subject land. The applicant directed Mr Meharg to approach the owners of the previously agisted stock and give them the choice of either removing their stock or selling it to the applicant. Anyone electing to sell their stock to the applicant was given an option to re-purchase the stock at a later time at a price representing a 10% profit to the applicant. Numerous owners sold their horses to the applicant. .... As at midnight on 31 December 2011 the applicant owned 15 horses which it was maintaining on the subject land for the purpose of sale. Each of these horses was available for sale at that time. As at midnight on 31 December 2011 none of the horses had been sold as since the realigned business was so new, the applicant's focus was on acquiring stock to resell and commencing the business operations, rather than on selling. Since that time, the applicant has continued to purchase horses for resale, and has sold horses at profit. 29. Due to the large size and rural location of the subject land, the applicant wanted a manager present to secure and maintain the subject land and the horses. When the applicant ceased leasing any part of the subject land to Mr Meharg in November 2011, Mr Meharg asked if he could continue to live on the subject land in return for maintaining the subject land and the stock. The applicant accepted Mr Meharg's offer and since November 2011 he has so resided in the Manager's Cottage in return for his labour in maintaining the subject land and the stock. Mr Meharg is not paid any other salary or commission from the applicant for his services rendered." 15Mr Bisley described the daily activities of Mr Meharg in caring for the horses, and preparing them for presentation to prospective purchasers. Mr Meharg kept a record of receipts and expenses associated with stock to allow Bisvic to monitor the business and decide on whether it is successful and whether changes are required. He indicated that Mr Meharg was not otherwise employed. 16By 22 January 2014, when his affidavit was sworn, Mr Bisley admitted that Bisvic's horse business had not turned a profit, but he said that it was always Bisvic's intention that it would do so on a continuous or repeated basis. As there is no evidence of a board meeting evidencing such an intention, I infer that Mr Bisley was referring to his own intention as a director of Bisvic. From the remainder of his oral evidence, I also infer that he was in effect its managing director, having daily carriage of the company's affairs. The failure to turn a profit, he said, was due to 'the start up costs incurred in commencing the business and in purchasing the stock for resale, poor management of the business, and, in particular, the higher than expected maintenance costs of the horses.' 17By 31 December 2011, he said, Bisvic had spent $7,800 in the purchase of horses. He gave no estimate of the cost of maintaining them to that date, or the cost of permitting Mr Meharg to occupy a cottage and its surrounds for which he had previously paid rent of $8,580 per year. In its objection to the decision under review, Bisvic admitted that the rental value of the cottage was $200 per week. 18In his application for the primary production exemption dated 13 February 2012, Mr Bisley explained that Bisvic spent a further $9,025 in January 2012 to acquire more horses and was proposing to make further acquisitions. On 21 June 2012, he informed the Chief Commissioner by letter that sales to date had amounted to $661.72, explaining that Bisvic was 'more concerned with increasing stock levels than reducing the amount of stock'. 19In his objection to the decision under review, signed on 17 October 2012, Mr Bisley told the Chief Commissioner that revenue from the horse sales had amounted to about $18,400 to date. As that represented a period of just under 12 months from November 2011, it is not clear on what basis he then asserted, "Over a period of about 12 months, the revenue is expected to be about $30,000." On the basis of the previous 12 months performance, such an estimate appears to have been no more than a hope. 20He admitted that the cost of providing accommodation to Mr Meharg was about $10,000 per year, but did not disclose other running costs. It is not possible to infer from those figures that the business had turned a profit, or was capable of doing so. As indicated above, in his affidavit of 22 January 2014, Mr Bisley admitted that it had not turned a profit to date. 21Mr Bisley was skilfully cross-examined, but he did not resile from his evidence. He accepted that he was in effect the managing director of Bisvic with day to day conduct of its affairs, and that Bisvic had prepared no written business plan. He said he had given blank cheques to Mr Meharg in November 2011 to purchase the horses, as he trusted him implicitly. He said he wanted to avoid any contract of employment with Mr Meharg, and therefore arranged for his services to be provided as a volunteer. Though he did not say why, it is reasonable to infer that he wished to avoid the need for Bisvic to pay the usual expenses of employment such as wages, superannuation, workers compensation premiums and the like. He explained that Mr Pastrovic was a widower who had lost his home while his wife was alive, and he and his wife had occupied the former manager's office ever since. 22Mr Bisley's evidence was internally consistent, and not so improbable as to render any part of it inherently unlikely. I had the opportunity to observe him giving evidence. He was a most impressive witness, who answered questions directly without evasion, to the best of his ability. I formed the firm impression that he was a witness of truth. As indicated above, however, any hope he appears to have entertained of annual revenue in the order of $30,000, or of profit from the horse business generally, appears to have been no more than that. I accept his evidence generally, and make findings in accordance with it. 23In particular, I am satisfied that, as at the taxing date, Mr Bisley had set up Bisvic's horse business for the purpose of making a profit on a continuous or repetitive basis. It is likely there were other purposes as well, not least of which was to ensure, if possible, that the property was exempt from land tax to enable the trustee, as cheaply as possible, to secure the continuation of a rural lifestyle for Mr Meharg and of rent-free accommodation to Mr Pastrovic. The co-existence of these other purposes, at least in the circumstances of this case, do not cause me to doubt that Bisvic nevertheless engaged in the horse business for the purpose of profit on a continuous or repetitive basis. 24In the result, that purpose was not to be achieved. The failure to make a profit to date, and the extent of any loss, is relevant to a consideration of whether Bisvic actually had the requisite intention as at the taxing date, but in this case I am satisfied that it did have that intention, through Mr Bisley. Mr Bisley is a solicitor. There is no evidence that he had any experience with horses or livestock generally prior to November 2011. Having regard to his correspondence with the Chief Commissioner referred to above, it is likely that, at the outset, he expected the business to make a temporary loss in its establishment phase. That was not unreasonable. The clear failure to achieve any profit in the intervening years is more likely to indicate a lack of experience in this line of business, than lack of the requisite purpose as at 31 December 2011. Evidence of Mr Hillig 25The respondent relied on a report by chartered accountant and liquidator, Mr Hillig, who also gave oral evidence. 26Mr Hillig compared the information provided in Mr Bisley's affidavit with the records of Mr Meharg and the financial records of Bisvic as trustee. He was unable to reconcile discrepancies between the records of Mr Meharg and the figures provided by Mr Bisley, but doing his best, concluded that the horse business returned a loss of $140 in the first two months of operation, a loss of $5,348 in the 2012 land tax (calendar) year, and a loss of $13,366 in the 2013 tax year. These figures took no account of the cost to Bisvic of providing accommodation to Mr Meharg, or the putative cost of farm labour. Mr Hillig considered the losses would have been substantially greater if they did. 27From the information supplied to him, which included the affidavit of Mr Bisley, Mr Hillig was unable to discern any activity by Bisvic to halt the extent of the increasing losses, including any attempt to analyse the records of Mr Meharg for that purpose. 28In the 2012 calendar year, Mr Hillig noted that 17 horses had been sold. Two were sold at a total net loss of $1,205, five were sold for a total net gain of $845, and the remaining ten were sold at cost. He inferred that the business plan was to sell horses for more than their acquisition cost. Over that period, the expenses recorded by Mr Meharg were equal to $13,006. This, when coupled with other information, enabled him to calculate a holding cost per horse of $775 per annum, or $65 per month. This would increase or decrease depending on the time elapsed between acquisition and sale of a horse, and would need to be considered in assessing the profit or loss from sales. Having regard to the length of time that each horse was kept, and to the costs of acquisition and prices achieved on sale, Mr Hillig concluded that the horse business was neither profitable nor sustainable. He concluded: "As has been demonstrated above, the horse selling activity does not generate a profit. In fact, in the absence of a plausible business pan, I do not foresee the horse selling activity ever generating a profit, particularly wen factoring in labour costs." 29In describing the increasing losses above, no account was taken of labour costs. I interpret his conclusion as meaning that the horse business was unlikely to generate a profit whether or not putative labour costs were taken into account. Mr Hillig described in detail the source material to which he had regard. His reasoning was patent. His analysis was logical and internally consistent. He did not resile from his opinions in cross-examination. No contrary expert evidence was adduced. I am satisfied that his conclusions were correct. In particular, I am satisfied that, even when the cost of providing accommodation to Mr Meharg and any putative labour costs are ignored, the business has returned increasing losses ever since its inception, has never returned a profit, and has no likelihood of doing so. Significant and substantial commercial purpose 30Authorities touching on the issue of whether a business activity has a significant and substantial commercial purpose or character were set forth in Bisvic no 1. In Maraya Holdings Pty Limited v Chief Commissioner of State Revenue [2013] NSWSC 23, Gzell J made the following observation as to the meaning of that phrase: "83. In ordinary parlance, "significant" connotes importance, something of consequence, a key element, a vital or critical one. 84. These meanings tend to place "significant" at the upper end of the spectrum of meanings the word has developed. 85. In the context of s 10AA(2)(a) of the Management Act this is appropriate as the purpose of its commerciality test is to exclude a less important use of land from qualifying for exemption. 86. As the Administrative Decisions Appeals Panel said of the commerciality test in Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25 at [45]: "This criterion eliminates hobby or token operations even though they may have passed the de minimis threshold to which we have referred [above]. The taxpayer then needs to show that the operation is run on a commercial basis with appropriate attention to the orthodoxies of income, expenditure and the aim of profitability; cognisant of the elements of unpredictability of any business operation, especially primary production. This is a higher standard than the one that applies to rural land." 87. It has been said that the word "substantial" lacks universal meaning and takes its meaning from the noun that it describes. As Burchett J said in News Ltd v Australian Rugby Football League Limited [1996] FCA 1256; (1996) 58 FCR 447 at 521: "The adjective 'substantial' will have a different effect according to the noun which it describes. Often it refers to size, as in the expression 'a substantial amount of money', or (to take an example from the Trade Practices Act) in the adverbial use to be found in the expression 'substantially lessening competition' repeatedly used in s 45. One can measure an amount of money or a degree of lessening of some activity. But purpose is not measured in any comparable sense. Applied to purpose, the adjective refers to its quality or significance, and may be regarded as a word of characterisation." 88. But in ordinary parlance the word "substantial" connotes size or bulk. It means an ample or considerable amount, quantity or size. 89. The commerciality test in s 10AA(2)(a) of the Management Act required Maraya's use of the lands for primary production, either individually or in conjunction with the other lands, to have had a significant and substantial commercial purpose or character. That test required the commercial purpose or character of the use of the lands to have had a relatively high degree of importance. The combination of "significant" and "substantial" demands that conclusion. 90. Not every business will satisfy the commerciality test. The test distinguishes activities amounting to a business that is carried on in a small way or as a sideline from those of a more serious and weighty kind. A business that satisfies the commerciality test will be an important one. It will usually also exhibit some of such characteristics as size, depth, bulk, weight, seriousness, quality, intensity and prominence." 31The decision in Maraya Holdings was confirmed on appeal: Maraya Holdings Pty Limited v Chief Commissioner of State Revenue [2013] NSWCA 408. 32Bisvic's case horse business has never returned a profit, has no likelihood of doing so, and has in fact sustained increasing losses ever since its inception. There is no evidence of any written, detailed or convincing business plan to halt the losses and return a profit. Even assessing the character of the business as at 31 December 2011, before the major historical losses were incurred, it was sustaining a loss, without any written business plan pointing to a method of achieving profitability, even in the long term, or even of halting the loss. That is without taking into account the considerable capital costs of the property worth $2.3 million, the vast majority of which was used for this business. 33Bisvic carried on the enterprise without apparent regard to what level of return on investment was achieved, or to the amount of profit, if any. There is no evidence that Bisvic ever analysed the records of Mr Meharg for any purpose other than to prepare annual financial statements. Viewed objectively, its true purpose appears to have been to attract an exemption from land tax, thus reducing the trustee's costs of holding the land and enabling it more readily to continue to afford to Mr Meharg the opportunity to engage in the same lifestyle as he had to date, and to provide Mr Pastrovic with rent-free accommodation. Mr Meharg previously carried on the horse business on a 'break even' as a hobby or lifestyle choice. In Bisvic's hands, that business has not even achieved 'break even' status. 34It is, as the Chief Commissioner has submitted, a token business, which does not satisfy the stringent commerciality test imposed by section 10AA(2)(a). For the reasons given, I am not satisfied that, as at the taxing date, Bisvic's horse business had a significant and substantial commercial purpose or character. 35That finding is sufficient to dispose of the application. For completeness, however, the issue of dominant purpose is addressed below. Dominant purpose 36Bisvic submitted that the horse business was the dominant use of the land for the following reasons: (1)It was conducted on 96.5% of the land area to the exclusion of all other uses (even before taking into account the area occupied by Mr Meharg's cottage). (2)The capital investment represented by the proportion of the value of the land attributable to that 96.5% outweighed the value of the remainder of the land. (3)Mr Meharg spent far more time in the horse business than Bisvic did in receiving and processing rent from Hancocks. (4)As at the taxing date, more expense was incurred in the running of the horse business than in any other activity on the land. (5)The nature and intensity of the horse business outweighed the nature and intensity of the applicant's other uses, namely the lease to Hancock's, the licences to Meharg and Pastrovic, and the non-use of the abattoir buildings. 37The second of those reasons flows directly from the first, and will be considered together with it. All are considered below. 38In Leda Manorstead Pty Limited v Chief Commissioner of State Revenue [2010] NSWSC 867, Gzell J formulated the test for dominant use in the following way. '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) (1983) 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. At 84 his Honour said that what was called for where land was put to a number of uses, was the weighing of the evidence relating to 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.' 39In Leda, the taxpayer submitted that cattle grazing was the dominant purpose because, inter alia, it was conducted over 83% of the land. The land had been acquired for development as a residential subdivision. The Court found that the dominant purpose was residential subdivision because, inter alia, earthworks conducted on the land for that purpose had consumed far more time and expense than maintenance of the herd, and the cost of the earthworks far exceeded the value of the herd. 40In Hope's case, the taxpayer submitted that 15.55 acres of land at Kelso near Bathurst should have been rated as 'rural land' because the main purpose was grazing, which was conducted by way of an agistment business over 82.38 % of the land area. The taxpayer was an engineer, who lived with his wife in a house on the property, and conducted his engineering business there. The grazing activity generated revenue, but had been run at a loss for many years. The real benefit to the taxpayer was the avoidance of liability to land tax. The Court was not satisfied that grazing was the main use, despite being conducted over the greater part of the land. In reaching that conclusion, it had regard to the relative profitability of the competing uses ('nature and intensity' of use), and the time and labour spent in conducting them. 41The fact that a qualifying use was conducted on the greater part of the total area of lands was not found to be determinative in McClelland v Goulburn City Council (1976) 35 LGRA 1. In that case, the Land and Valuation Court of NSW was not satisfied that grazing was the dominant use, even though it was conducted on nine out of ten acres of land, as there was no evidence of profit. The Court found that the dominant use was as a residence. 42These were all cases where, as here, and as in Ball v Chief Commissioner of State Revenue [2010] NSWADT 114, the qualifying use was conducted over most of the land to the exclusion of other uses. That is distinct from the situation in Bisvic no 1 and Jones v Commissioner of Land Tax (NSW) (1980) 11 ATR 98, in which it was not possible to identify with precision the proportion of the land used for the qualifying use as distinct from other uses, because the uses of each portion of the land were mixed. 43In this case, there is no issue that the vast majority of the land was used exclusively for the qualifying use of maintaining horses for sale. It follows that most of the value of the land can be viewed as being invested in the qualifying use, as is always the case where most of the land is devoted to a qualifying use. Though not determinative, those findings support an argument that it was the dominant use. 44Properly viewed, Mr Meharg's cottage formed part of the qualifying use, because the provision of accommodation by Bisvic to its manager was an integral part of its horse business. The cottage was provided in lieu of wages. It would not be appropriate to characterise this as a competing use. 45It is next appropriate to consider the nature and intensity of the qualifying use, by reference to financial return and the amount of time and effort spent on it, and to compare that with other uses of the land: Hope's case. 46According to Mr Bisley, Hancocks paid around $18,500 exclusive of GST for the rent of their portion of the land. This is far greater than the net return from the horse business which, as indicated, has realised only increasing losses each calendar year, and was making a loss as at the taxing date. That weighs against a finding that the dominant purpose was the horse business. 47The evidence establishes that, by the taxing date, Bisvic had spent $7,800 to acquire horses and $140 in farrier's fees. There is no evidence that it spent money on other activity on the land, including Mr Pastrovic's rental or the rental to Hancocks, except the administrative cost, if any, of receiving and processing rent cheques from the latter. However, a meaningful comparison would have to include not only the amounts spent by Bisvic on qualifying and other uses, but also by others in the competing uses of the land. There is no evidence as to what expenditure was made by Hancocks in the conduct of its pallet business. Its 2013 tax return indicates very substantial revenue and expenses in relation to the totality of its businesses, but does not indicate what part of those figures relates to its pallet business. That makes it impossible to compare in a meaningful way the relative expenditures associated with the qualifying and non-qualifying uses of the land. This weighs neither for nor against a finding of dominant purpose. 48Though Mr Bisley did not describe the hours per day spent by Mr Meharg in the horse business, he did say that it was Mr Meharg's only occupation. In Bisvic no 1, the Administrative Decisions Tribunal found that Mr Meharg spent about four hours per day in the conduct of his horse business. In the absence of evidence that anything has changed except ownership of the business, it is likely that he continues to spend about that time looking after the horse business for Bisvic. There is no evidence that Bisvic expends time or effort on any other activity with regard to the land, except the minimal activity of receiving and processing cheques from Hancocks. 49However, a meaningful comparison between time and effort spent on the qualifying use as distinct from other uses would require a comparison with the time and effort spent by Hancocks on the land. As there is no evidence as to the extent of that time or effort, a meaningful comparison is not possible, and this factor likewise weighs neither for nor against a finding of dominant purpose. 50I rate the residential uses of the land by Mr Meharg and Mr Pastrovic highly. However, as the former formed part of the qualifying use and the latter did not as at the taxing date, this factor is evenly balanced, and weighs neither for nor against a finding of dominant purpose. 51In the result, the dominant purpose as at the taxing date is to be ascertained by weighing two competing considerations: most of the land was then used exclusively for the qualifying use, but all of the revenue and profit was being derived from the rental to Hancocks. 52Caution must be exercised in giving too much weight to the relative incomes derived from competing uses: "To apply a test related to relative incomes could, in the majority of cases, distract the enquirer from the primary question of determining the dominant use of land. On some limited occasions income may be helpful in conjunction with all other criteria in assisting to determine the question, but care must be taken not to allow income generated by a use to become the primary determinant.": Thomason v Chief Executive, Department of lands [1994-95] 15 QLCR 286 (per Ambrose J at 303). 53The function of the Tribunal is to determine what was "the main, chief or paramount use ... as an objective matter of impression having regard to the facts" (Leda at paragraphs 69-70). To that end, it is appropriate to consider among other things "the end to be achieved by the use" (Leda at paragraph 73, applying Hope v Bathurst City Council (1986) 7 NSWLR 669). 54The end to be achieved by the rental to Hancocks was to achieve revenue for the trust in a way that resulted in a reliable and readily quantifiable source of income on a continuous basis. The ends to be achieved by the horse business were more complex. As stated, they included the attraction of the primary production exemption, thus reducing the trustee's costs of holding the land and enabling it more readily to continue to afford to Mr Meharg the opportunity to engage in his preferred lifestyle, and to provide Mr Pastrovic with rent-free accommodation. They also included the hope of making an unspecified profit from the horse business at an uncertain time. 55From a financial point of view, there can be no real comparison between the nature and intensity of the use for rental purposes to Hancocks and the qualifying use. The former resulted in a continuous and predictable profit. The latter resulted only in a loss, without any real prospect of profitability, despite Mr Bisley's hopes. When looked at only from that point of view, the rental use was the dominant use. 56One cannot, however, ignore the fact that the horse business was conducted on the vast majority of the land, to the exclusion of all other uses. That factor is to be weighed against the financial dominance of the non-qualifying use, having regard among other things to the end to be achieved by the qualifying use. 57Mr Bisley hoped and desired that the horse business should return a profit. The weight to be accorded to this particular end, however, is reduced by the fact that, in the absence of any written business pan, there is no convincing evidence that the likely amount of profit, or the time in which that profit was likely to be generated, was ever ascertained by Bisvic, or even considered by it. That, among things, distinguishes these facts from those in Ball. The more weighty purpose appears to have been the attraction of the land tax exemption, so that the trustee might reduce its holding costs, and more readily accommodate Mr Meharg's lifestyle and Mr Pastrovic's residence, as it had done to date. When viewed objectively, the horse business was not so much a vehicle for profit, but a token business designed to attract an exemption from land tax. 58In those circumstances, and having regard to the clear financial dominance of the use of part of the land for rental to Hancocks, the mere fact that the horse business was conducted over the majority of the land does not prove that it constituted the dominant use of the land. 59For the reasons given above, I am satisfied that as 30 December 2011 Bisvic engaged in its horse business for the purpose of profit on a continuous or repeated basis. I am not satisfied, however, that the business then had a significant and substantial commercial purpose or character, or that it was the dominant use of the land. 60The decision under review is confirmed. ********** 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 October 2014