The South Australian Court of Appeal agreed, with the Court at first instance, that certain South Australian rural land, was exempt from land tax, under the relevant ‘primary production’ exemptions, when the land produced its first crop, the next year. The taxpayers bought the land 22 years earlier, for primary production, but it had not yielded any primary produce, in all that time, for various reasons.

See below for further details.

[Tax Month – July 2021]



The facts were these.

  • The taxpayers carried on a primary production business on a number of parcels of land in South Australia.
  • ln 1991 they purchased a property at Burton to be used for egg production.
  • However, when they discovered they could not use it for that, they asked a third party (Mr K) with whom they had a share-farming arrangement to include the land in cropping he was undertaking.
  • However, the land was not cropped because of access issues (a freeway proposal) and then,
  • in 2010, an Environment Protection Order (EPO) was issued after the taxpayers deposited soil on the land to enhance its use for primary production.
  • The EPO was lifted in 2013. The taxpayers then instructed Mr K, who had been looking after the Burton land, to resume farming.
  • Mr K sprayed weeds and ploughed the land, in 2013, in readiness to sow a barley crop, the following year (2014).
  • Mr K did sow the barley crop the next year.

The issue was whether the land had been used for primary production, in the 2013 year, when it had only been ploughed for cropping the next year – and that on the back of not having actually been farmed, since its acquisition 22 years earlier.

At first instance, the  SA Supreme Court held that the land was relevantly exempt.

The South Australian Court of Appeal agreed with the primary judge that the Burton land was used wholly or mainly for the business of primary production in 2013-14. The land therefore qualified for exemption, under s 4(1)(l) (the “primary production exception”) in respect of parts of the Lewiston land, and the exemption under s 5(10)(g) (the “DRA primary production exemption”) applied in respect of the whole of the Burton land(see the Land Tax Act 1936 (SA)).

  • The Court said that once the taxpayers were satisfied that the EPO no longer constituted a bar to cropping, they commenced the necessary physical activity to grow crops, ie preparing the land.
  • Further, the land was used to a significant extent for the purposes of the taxpayers’ primary production business, as it was used for no other purpose.
  • The Court added that the the demands of a primary production business include environmental obligations with respect to land, including taking steps to comply with an EPO.

(Commissioner of State Taxation v Takhar & Anor [2021] SASCA 58 (Doyle, Livesey and Bleby JJ, 10 June 2021.)

[LtN 136, 19/7/21]


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