The NSW Civil and Administrative Tribunal has found that land owned by a taxpayer was not eligible for a land tax exemption as the dominant use of land was not for primary production, and in any case it did not meet the commerciality test.

The taxpayer purchased land that was zoned partly rural, partly environmental conservation and partly general residential. The Chief Commissioner assessed the taxpayer to land tax for the 2013 to 2016 land tax years. The taxpayer argued that the land was used for tree farming and that it constituted dominant use of the land during the land tax years in question.

The Tribunal said it could only be reasonably confident that 9 or so hectares out of 73 was used for tree activities and that only 598 trees could be counted in 2016. Therefore, it did not consider the dominant use of the land was tree farming. In addition, the Tribunal ruled that the activity did not satisfy the commerciality test, as the value of trees was uncertain, there was no business plan, very little caretaking of the trees, and no evidence it will every be profitable.

(Teebee Holdings Pty Ltd atf Teebee Property Trust v Chief Comr of State Revenue [2017] NSWCATAD 338, NSW Civil and Administrative Tribunal, Hamilton SM, 20 November 2017.)

Extract from Reasons

  1. The taxpayer’s position is that the land is used for tree farming and that this constituted the dominant use of the land during the land tax years in question (2013 – 2016). Section 10AA(1) LTMA provides as follows:

“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.”

  1. Section 10AA(3) LTMA relevantly provides:

“(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…”

  1. The meaning of “dominant use” is the ruling, prevailing or most influential use of the land (Leda Manorstead Pty Ltd v CCSR [2010] NSWSC 867 at[ 69] upheld on appeal).
  2. Rural land was defined in s10AA(4) LTMA in the 2013/2014 land tax years as follows:

“(4) For the purposes of this section, land is “rural land” if:

(a) the land is zoned “rural”, “rural residential”, or “non-urban” or under a planning instrument, or

(b) the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land.

and in the 2015/2016 land tax years as follows:

“(4) For the purposes of this section, land is “rural land” if:

(a) the land is zoned rural, rural residential, non-urban or large lot residential under a planning instrument, or

(b) the land has another zoning under a planning instrument, and the zone is a type of rural zone under the standard instrument prescribed under section 33A (1) of the Environmental Planning and Assessment Act 1979 , or

(c) the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land.

  1. There is also a “commerciality” test to be satisfied. Section 10AA(2) provides:

“(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) (b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).”

  1. As mentioned above, the subject land is within three different zones. A question which arises is whether each zone needs to be considered separately as to its dominant use or whether the parcel should be considered as a whole.
  2. Some helpful guidance is provided by Triston v CCSR ( [2017] NSW CATAD 100). In that case there were three lots in the parcel of land totalling 3.75 hectares combined, each of which was dual zoned. Part of each lot was zoned RU2 (rural landscape) and part of each parcel was zoned R2 (low density residential). In the 2011 land tax year 95% of the subject land in Triston was used for horse breeding.

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