Two taxpayers (a couple) have been unsuccessful before the NSW Supreme Court in seeking the primary production land tax exemption in respect of a property pursuant to s 10AA(2) of the Land Tax Management Act1956 (NSW).
- The taxpayers purchased the land in November 1985.
- Since then they, or companies controlled by them, have conducted a small cattle-farming business on the land.
- In 2006 part of the land was rezoned from “rural” to “residential” and the balance was rezoned for other non-residential use such as electricity transmission easements, new roads and bushfire asset-protection zones.
- The land ceased to be “rural land” for the purposes of s 10AA(4) of the Act.
- The parties did not dispute that the dominant use of the land was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce (s 10AA(3)(b)).
However, the Commissioner argued the taxpayers did not meet the additional commerciality tests for the exemption to apply (s 10AA(2)). The Commissioner argued the use of the land did not have a “significant and substantial commercial purpose or character”. The Commissioner issued land tax assessments for the 2007, 2008 and 2009 land tax years.
The Tribunal did not agree with the Commissioner that the cattle grazing activities on the land were a hobby or token business. However, the Tribunal concluded “the use of the land lacked a significant and substantial commercial purpose or character because profits are not derived from the use of the land that make any real, as distinct from trifling, contribution to the income of the [taxpayers and associated companies]”.
(Vartuli & Anor v Chief Comr of State Revenue [2014] NSWSC 678, NSW Supreme Court, White J, 30 May 2014.)
[LTN 104, 2/6/14]