Moore v Chief Commissioner of State Revenue [2018] NSWCATAD 88

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Moore v Chief Commissioner of State Revenue [2018] NSWCATAD 88 Hearing dates: 8 March 2018 Date of orders: 19 April 2018 Decision date: 19 April 2018 Jurisdiction: Administrative and Equal Opportunity Division Before: R Hamilton SC, Senior Member Decision: 1. Pursuant to sec 101(1) of the Taxation Administration Act 1996, the assessment is revoked. Catchwords: TAXES AND DUTIES – Land tax – Primary production exemption- dominant use of land- meaning of secondary production Legislation Cited: Land Tax Management Act 1956 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183 D W Tolson Management Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 173 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2010] NSWSC 867 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 Category: Principal judgment Parties: Kenneth John Moore (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: Applicant – self represented Respondent - Mr Kanagaratnam

Solicitors: Respondent – Crown Solicitor's Office File Number(s): 2017/00141473 Publication restriction: Nil

REASONS FOR DECISION 1. The issue in this case is whether the dominant use of the subject land is for the purpose of primary production (here cultivation, for the purpose of selling the produce of the cultivation), sec.10AA(3)(a) Land Tax Management Act 1956 (LTMA). The 'commerciality' test (sec.10AA(2) LTMA) is not in issue. The year in question is the 2016 land tax year. 2. It is an unusual situation because the area of land in question is relatively small. The land area is approximately 1117 sq m. 3. The primary production activity is the growing of various types of fresh sprouts (mung beans, alfalfa and snow peas). The land is used for activities ancillary to sprout growing as well as other things discussed in more detailed below. 4. The Chief Commissioner treated the land as exempt primary production land in the 4 years preceding the 2016 land tax year. He changed his approach in relation to the 2016 land tax year and controversy has been the result. The matter comes before the Tribunal following disallowance of the taxpayer's objection, pursuant to sec.96(1) of the Taxation Administration Act 1996 (NSW) (TAA). 5. The land in question covers part of two adjacent lots (basically the backyards of two long residential lots) which I will call Lot 1 and Lot 2. There are fences dividing the land off from the residential premises. 6. Lot 1 provides access from the public road to Lot 2. Lot 1 is about 500 sq m in area. On Lot 1 there is a packing/storage shed (covering about 250 sq m) rented to an arms length tenant who uses the residue of Lot 1 for parking and deliveries. 7. The taxpayer has a shipping container and a dumpster bin for rubbish on Lot 1. The taxpayer uses Lot 1 to access Lot 2 with his own vehicles and for delivery trucks. 8. Lot 2 is about 620 sq m in area. On Lot 2 there is a larger warehouse/shed used in the primary production business. It has a ground floor (about 312 sq m) and a mezzanine floor (about 268 sq m). The warehouse/shed is used to store seeds, to prepare seeds by washing them, to sprout the seeds in low light conditions on stacked vertical racks, for a packing area and a cool room to hold sprouts for sale, for office space, and an amenities area. There is a loading bay and toilet. It is also used in a seed roasting business of the taxpayer. 9. Up until April 2015 there were two poly tunnels 'green houses' on Lot 2 each covering about 114m2. I shall call them Green House A and Green House B. These were used to grow snow pea sprouts. 10. Green House A was badly damaged by a storm in early 2015. Instead of repairing the damage, a vertical racking system was installed in the undamaged Green House B. This enabled the same quantity of snow pea sprouts to be produced in half the previous space. 11. The area previously covered by Green House A was generally unused thereafter except for parking on the hard standing and storing pallets. This seems to have been the main factor in the Chief Commissioner's change of heart over the operation of the primary production exemption in 2016 land tax year. 12. On the residue of the land area of Lot 2 (approximately 305 sq m) there was a shed used as a forklift storage area, a dumpster rubbish bin, pallet storage and space for the owner's car and for a delivery van for the business; there was no public parking. 13. The area devoted to the seed roasting business inside the shed on lot 2 is quite small (there is some seed storage, a gas fired roasting drum covering about 1 sq m, and shared use of packing tables with sprout growing activities). 14. The majority of the floor area inside the warehouse/shed is used for sprout production and associated activities. The area for sprout production itself is done in stacked racks about 6 or 7 high and in drums. But there are spaces for the storage of seed; washing facilities for seed, sprouts and trays; packing and cool storage; an office, amenities room and kitchen; as well as a loading bay and toilet. 15. It appears from the applicant's evidence that the area of all the racks inside the shed, and in Green House B is well over half the land area of Lot 2. 16. The taxpayer and his wife work together full-time in the business, and the financial accounts were in evidence. It is a successful business. The sprout business is according to the applicant's evidence highly regulated for food hygiene and safety. There are only four licensed sprout producers in NSW. All stages of production must very carefully follow the regulations and the end product (edible sprouts) must be in approved packaging for when it leaves the grower for sale.