A taxpayer has been successful before the Supreme Court of NSW in having land tax assessments for the 5 land tax years set aside on the basis that the primary production use of the lands in question was “the dominant use” of the lands, except for one parcel in one land tax year.

The taxpayer was a property developer. The central issue was whether the taxpayer was entitled to exemptions for land tax in terms of s10AA(2) of the Land Tax Management Act 1956 (NSW) on the basis that certain lands that were included in the notices of assessment as being taxable were exempt from taxation because their “dominant use” was for primary production within the meaning of s 10AA and that that primary production use of the land had a significant and substantial commercial purpose or character and that, furthermore, the primary production activity was engaged in for the purpose of profit on a continuous or repetitive basis.

In arriving at its decision, the Court held that there was no requirement under s 10AA(3) for the primary production use of the land to be confined to a comparison with other physical uses of the land for the purposes of determining its dominant use and that instead, s 10AA(3) requires a comparison of the “current uses” of the land. Following on from this, it also held that the mere holding of land by a property developer for future residential development was not a “current use” of land that had to be taken into account for this purpose, despite the taxpayer claiming tax deductions for borrowing costs and loss of value. Likewise. the Court also found that the use of the land for a rental use in respect of the agistment of cattle on the lands was a “current use” of the land.

However, the Court held that to the extent that land is physically used for the carrying out preliminary activities necessary to obtain approval for the use of land for a particular purpose (such as property development), then the land was “currently” being used for a purpose other than primary production – albeit, the Court also acknowledging that such physical use of the land did not prevent primary production use from still being the “dominant use” of the land. Further, the Court held that such preliminary activities did not mean that use of the land for residential development had commenced.

(Metricon Qld Pty Limited v Chief Comr of State Revenue (No 2) [2016] NSWSC 332, NSW Supreme Court, White J, 31 March 2016.)

[LTN 63, 5/4/16]