The NSW Civil and Administrative Tribunal has found that a parcel of land used for grazing cattle was not exempt from land tax in the 2011 to 2015 land tax years under the “propagation for sale of mushrooms” category in s10AA(3)(f) of the Land Tax Management Act 1956 (NSW).
Quite why land used for grazing cattle might be thought to qualify under a mushrooms exemption needs further explanation. The cattle were used to eat the waste from the mushroom production.
[And just quite there was this contest, under the more remote ‘mushrooms’ heading, remains unclear. There is, after all a more general exemption for grazing cattle: “maintenance of animals … for the purposes of [inter alia] selling them” under s10AA(3)(b).]
Background
There were three parcels of land, two with mushroom growing facilities and cattle grazing. They were both exempt under the mushroom heading.
The case was about a third piece of land, which would be used, in the future, for mushroom production after a successful development application. In the interim, it was used to rotate cattle from the other two properties, under good animal husbandry practices. At this property, these cattle were not fed any mushroom waste products.
The Taxpayer’s arguments
The taxpayer made 2 arguments in support of its contention that the dominant use of the Londonderry land was also for mushroom propagation.
- First, it argued that the Londonderry land was used as part of the process of mushroom propagation and the disposal of resultant waste product, with cattle being maintained on all 3 parcels solely for the purpose of disposing of the waste.
- Secondly, it contended that the “activity” involved in gaining the approvals necessary for the new mushroom growing facility constituted a use of the Londonderry land for the purpose of mushroom propagation, albeit in the future.
Tribunal decision
The Tribunal dismissed the taxpayer’s arguments and confirmed the Chief Commissioner’s land tax assessments, finding that the dominant use of the Londonderry land was cattle grazing, not the propagation of mushrooms for sale.
The Tribunal said that the connection between the use of the Londonderry land for grazing and the process of mushroom propagation was “too remote”, given that the cattle were not fed mushroom by-product on the land. This was the case even if the cattle could be viewed as machinery in the propagation process, ie as bovine “disposal machines”.
In relation to the taxpayer’s development activities, the Tribunal noted that a distinction needs to be drawn between those activities which are preparatory to a future use of land and those which are part of an intended use of that land (ie beyond the preparatory phase). The Tribunal also emphasised that the use of the land must be a present use, making reference to several decisions, including the recent NSW Court of Appeal case of Chief Comr of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11, (where the current use of grazing cattle was sufficient to attract the primary production exemption, even though there was a longer term land-bank/development purposes.
The Tribunal concluded that the various activities on the land (site visits, studies, replacing old fences, removing fallen trees and draining a dam) did not amount to a dominant use of the land for propagation of mushrooms for sale.
D W Tolson Management Pty Ltd v Chief Comr of State Revenue [2017] NSWCATAD 173 (NSW Civil and Administrative Tribunal, Hamilton SC, 1 June 2017).
[FJM] [LTN 107, 8/6/17]