Australian Investment & Development Pty Ltd v Commissioner of State Revenue

[2023] VSC 741

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT
TAXATION LIST

S ECI 2022 01238;
S ECI 2022 01240;
S ECI 2022 01241

AUSTRALIAN INVESTMENT & DEVELOPMENT PTY LTD (ACN 060 609 289)	Appellant
v
COMMISSIONER OF STATE REVENUE	Respondent

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JUDGE:	Croft J
WHERE HELD:	Melbourne
DATE OF HEARING:	14, 15 & 30 November 2023
DATE OF JUDGMENT:	13 December 2023
CASE MAY BE CITED AS:	Australian Investment & Development Pty Ltd v Commissioner of State Revenue
MEDIUM NEUTRAL CITATION:	[2023] VSC 741

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TAXATION — Land Tax — Appeal against assessment by the Commissioner of State Revenue — Primary production exemption — Land Tax Act 2005, ss 67, 68 — Whether the land was used primarily for the business of primary production — Whether the Appellant’s principal business was primary production of the type carried on on the land — Whether the Appellant’s sole shareholder and director normally engaged in a substantially full time capacity in the business of primary production of the type carried on on the land — CDPV Pty Ltd v Commissioner of State Revenue [2016] VSC 322 — Abbott v Commissioner of Land Tax [1985] VR 164 — Annat Pty Ltd v Commissioner of State Revenue [2020] VSC 108 — Jones v Dunkel (1959) 101 CLR 298 — Appellant’s business of cultivation of cassinia not the primary business and not the primary production of the type carried on on the land — Appeal refused.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr D Bloom KC and Mr T Grace	Davies Collison Cave Law Pty Ltd
For the Respondent	Mr DJ Williams KC and Mr D Morgan	Solicitor for the Commissioner of State Revenue

HIS HONOUR:

Introduction

1. Australian Investment and Development Pty Ltd (ACN 060 609 289) (“the Appellant”) is, and was, as at midnight on 31 December 2013, 31 December 2014 and 31 December 2015, the registered proprietor (and “owner”[1]) of the land located at 2‑180 Davis Road, Diggers Rest, being the land described in Certificates of Title Volume 10044, Folio 151 (“Lot 1”) and Volume 7659, Folio 121 (“Lot 4”) (together, “the Land”).  

   [1]Section 10(1)(a) of the Land Tax Act 2005 (“LTA”).

1. On 12 February 2016, the Commissioner issued land tax assessments to the Appellant for the 2014, 2015 and 2016 tax years[2] in respect of the land owned by the Appellant as at 31 December 2013, 31 December 2014 and 31 December 2015, respectively.[3]  

   [2]Witness Statement of David Geoffrey Apswoude, dated 14 December 2022 (“First Apswoude Statement”), [22] and exhibits DGA‑09, DGA-10 and DGA-11.

   [3]Land tax is imposed in respect of land owned as at midnight on 31 December of the year preceding the tax year: s 36(1) of the LTA.

1. Objections were lodged by the Appellant against the assessments on the basis that the Land was exempt under s 67, or alternatively s 68, of the Land Tax Act 2005 (“LTA”) for each of the years.[4]  

   [4]First Apswoude Statement, [23]-[24]; exhibits DGA-12 and DGA-13.

1. On 17 December 2021, the Commissioner determined to disallow the Appellant’s Objection and gave notice of his reasons for doing so (“the Determination”).[5] On 11 February 2022, the Appellant requested the Commissioner to treat its Objection as an appeal and cause it to be set down for hearing in this Court, pursuant to s 106 of the Taxation Administration Act 1997 (“TAA”). Proceedings under which an exemption in s 67 of the LTA is being sought are de novo proceedings[6] and are not an appeal in the strict sense of that term, despite being referred to as an “appeal” in s 106(1) of the TAA.[7] 

   [5]First Apswoude Statement, [25]; exhibit DGA-14.

   [6]Annat Pty Ltd v Commissioner of State Revenue [2020] VSC 108, [3] (Kennedy J).

   [7]Takhar v Commissioner of State Taxation [2020] SASC 119, [190] (Blue J): “It is common ground that, although section 92 describes the proceeding in this Court as an “appeal”, the hearing is a hearing de novo.”

Legislative provisions and issues for determination

1. The LTA imposes land tax in respect of each year on all taxable land in Victoria.[8]  The owner of that land is liable to pay the land tax.[9] By reason of the definition of “year” in s 3 of the LTA, land tax is assessed based on calendar years, not financial years.

   [8]LTA s 7.

   [9]LTA s 8.

1. The expression “taxable land” means, under the provisions of the LTA, “land that is not exempt land”.[10] A number of classes of exempt land are created by the LTA. Of relevance in the present proceedings is s 67 of the LTA which exempts certain land used for the business of primary production, in the following terms:

   [10]LTA s 3.

67Exemption of primary production land in an urban zone in greater Melbourne

(1)Land is exempt land if the Commissioner determines that –

(a)the land comprises one parcel that is –

(i)wholly or partly in greater Melbourne; and

(ii)wholly or partly in an urban zone; and

(iii)used solely or primarily for the business of primary production; and

(b)the owner of the land is a person specified in subsection (2).

(2)The owner of the land must be –

(a)… ; or

(b)a proprietary company (not acting in the capacity of trustee of a trust) –

(i)in which all the shares are beneficially owned by natural persons; and

(ii)the principal business of which is primary production of the type carried on on the land; or

…

(3)For the purposes of subsection (2)(b)(ii), the principal business of a proprietary company is not primary production of the type carried on on the land unless –

(a)the main undertaking of the company is primary production of that type; and

(b)either –

(i)… or

(ii)if no dividends were declared during the relevant period, ordinary shares representing more than 60% of the paid up capital of the company (excluding shares entitled to a fixed rate of dividend) have been beneficially owned for the relevant period by persons normally engaged in a substantially full‑time capacity in the business of primary production.

1. The expression “primary production” is defined by s 64(1) of the LTA as follows:

(a)cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state); or

(b)the maintenance of animals or poultry for the purpose of selling them or their natural bodily produce; or

(c)the keeping of bees for the purpose of selling their honey; or

(d)commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear; or

(e)the cultivation or propagation for sale of plants seedlings mushrooms or orchids.

1. Preparation of land for primary production is the subject of s 68 of the LTA, which provides:

68Exemption of land being prepared for use for primary production

(1)Land is exempt land for a tax year if the Commissioner is satisfied that –

(a)the land is being prepared for use primarily for primary production; and

(b)the land will become exempt land under section 65, 66 or 67 within 12 months after the day on which the preparation referred to in paragraph (a) commenced.

(2)The Commissioner may extend the period referred to in subsection (1)(b) by a further period of 12 months.

1. Section 36(1) of the LTA provides that a taxpayer is to be assessed for land tax on land for a tax year on the total taxable value of all taxable land owned by the taxpayer as at midnight on 31 December of the immediately preceding calendar year. This provision makes it “unambiguously clear that the question of the taxable status of the land in question is to be determined as at the assessment date”.[11]  Depending on the evidence with respect to particular land, one may simply look at “what was occurring on the land on the date in question” or, alternatively, “the ascertainment of the use at that date may depend on additional evidence about what was happening on the land shortly before and/or shortly after the date in question”.[12] 

   [11]Rainn Pty Ltd v Commissioner of State Revenue [2016] VSCA 338, [15] (“Rainn”).

   [12]Rainn [2016] VSCA 338, [17]; see also Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 660.

1. It follows from the provisions of the LTA to which reference has been made that the question in these proceedings is the use of the Land and associated issues as at midnight on 31 December of each of 2013, 2014 and 2015, with the ascertainment of that use possibly assisted by looking at the periods around these assessment dates. In this context, the Appellant puts its case, primarily, in terms of reliance on s 67 of the LTA, with an alternative case, relying on s 68 of the LTA.

1. In relation to the primary case, which relies on s 67 of the LTA, there are three issues in dispute with respect to each of the relevant tax years, namely:

(a)   whether the Land was used primarily for the business of primary production;

(b)  whether the Appellant’s principal business was primary production of the type carried on on the Land; and

(c)   whether the Appellant’s sole shareholder (and also sole director for the relevant years in dispute), Mr David Apswoude, was normally engaged in a substantially full‑time capacity in the business of primary production of the type carried on on the land. 

Under these provisions, the Appellant must establish each of these matters to succeed in respect of any tax year.  In this respect, the Appellant’s case is that all of the activities undertaken on the Land were undertaken by it, and that it did not undertake any primary production activities other than at the Land. 

1. For the secondary case, under s 68 of the LTA, there are two issues:

(a) whether, for any year, the Land was exempt under s 68(1); and

(b) whether the discretion in s 68(2) ought to be exercised by the Commissioner, such that the exemption is potentially available for two years, rather than just one.

Evidentiary issues

Burden of proof

Mr Apswoude’s credit

1. As the Appellant observes, the Commissioner states in his closing submissions[13] that it, the Appellant, has the onus of proving its case; with reference to s 110 of the TAA and CDPV Pty Ltd v Commissioner of State Revenue.[14]  Addressing this proposition, the Appellant submits that this does not mean, however, that the taxpayer has a “special burden of proof”.  Rather, it is submitted that what the taxpayer is required to do is to prove its case on the usual civil standard, namely “on the balance of probabilities”.[15]  Continuing, it says that, as Steward J (in the Federal Court) said in Federal Commissioner of Taxation v Cassaniti,[16] “the degree or standard of proof required is that which ordinarily applies in civil proceedings”.  Steward J then quoted with approval from the judgment of Hunt J in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation:[17]

…if the plaintiff succeeds… in weighing down those scales ever so slightly in his favour then he has discharged the burden he carries…[18]

Reference is also made to the statement of Hunt J in Allied Pastoral where, after referring to one of his previous decisions, he continued:[19]

I went on to suggest [in that case] that the approach of the Board of Review to the discharge of the taxpayer’s burden in that particular case appeared to have placed a weight upon the taxpayer similar to that placed upon Atlas, who carried the whole weight of the heavens as well as the globe of the universe upon his shoulders.

[13]Respondent’s Closing Submissions (21 November 2023), [16].

[14][2016] VSC 322 (“CDPV”).

[15]Section 140(1) of the Evidence Act 2008 (Vic).

[16](2018) 266 FCR 385, 409 [88] (Steward J, with whom Greenwood and Logan JJ agreed).

[17][1983] 1 NSWLR 1.

[18][1983] 1 NSWLR 1, 8B.

[19][1983] 1 NSWLR 1, 8C.

1. The Commissioner responded to the submissions, emphasising, that he was not suggesting that the burden of proof flowing from the onus of the taxpayer was at anything other than the usual civil standard, namely “on the balance of probabilities”.  In so doing, reference was made to the following statement made in CDPV:[20]

The Commissioner is, as observed in the Commissioner’s submissions, at an evidentiary disadvantage inasmuch as those who are seeking an exemption have within their control almost all of the evidence in relation to what is occurring on the Land and why things were or were not done on the Land. The Commissioner can only really point to objective circumstances with a view to determining the position. Consequently, I accept that, when the Court is faced with a case of this nature, and particularly where, as in this case, the Court is faced with very uncertain evidence, a focus must be maintained on whether the onus has been met.

Thus, there is no issue with respect to the standard of proof required of a taxpayer, in this case the Appellant.  Nevertheless, it does not follow that a taxpayer’s evidence — which is, inherently, potentially self‑serving — is not to be tested in the usual way; particularly with respect to consistency in itself and also with respect to other oral and documentary evidence. 

[20](2016) 103 ATR 385; [2016] VSC 322, [45] (Croft J).

1. The principal witness in support of the Appellant’s case was Mr Apswoude, its sole shareholder and director.  The Commissioner submits that Mr Apswoude was not an impressive witness and, as a general observation, that he was prone to speechmaking rather than attending to and responding to questions.  It is said that he was unwilling to concede anything against his interests, even where his position defied credulity — of which the questions relating to the “Davis Vineyard” are said to be a good example.[21]  It is also said that a number of matters the subject of his evidence reflect poorly on his credit; namely the “Cassinia Arcuata Business Plan 2008/2009”,[22] “Business Plan DRAFT Diggers Rest Nursery”[23] and “Reconstructed Business Plan from 2004”.[24]  I turn now to Mr Apswoude’s evidence with respect to these documents.

   [21]See, for example, Respondent’s Closing Submissions (21 November 2023), [42].

   [22]CB326.

   [23]CB336.

   [24]CB2647.

1. The first document exhibited was initially described by Mr Apswoude as being the formalisation of “a business plan I have initially completed in 2007 but which was destroyed in an office fire”.[25]  However, the day before trial, Mr Apswoude changed his evidence in this respect and accepted that it was not a “reconstructed plan” at all but was intended to record, in around 2016, the Appellant’s intentions with respect to the cultivation of cassinia (a type of plant once known as cassinia arcuata and now known as cassinia sifton (“cassinia”)) on the land.[26]  As the Commissioner contends, no explanation was given as to why he had misdescribed the document initially.  As well as indicating in the heading that this document was created in 2008 or 2009, the footer on each page of the document gives the impression that it was computer‑generated in August 2008.  As the Commissioner says, the footer is misleading and in this respect the Commissioner contends that this was probably deliberately so and was intended to persuade the Commissioner that there was a business plan as early as 2008 for the commercial cultivation on the Land of cassinia.  It is said that the deliberately misleading nature of this document reflects poorly on the credibility of Mr Apswoude. 

   [25]First Apswoude Statement, [44].

   [26]Third Witness Statement of David Geoffrey Apswoude, 13 November 2023 (“Third Apswoude Statement”), [15].

1. A document entitled “Business Plan DRAFT Diggers Rest Nursery (Reconstructed following fire on 6 May 2007)” was also exhibited by Mr Apswoude.  The Commissioner observes that, like the Business Plan 2008/2009, this document was not a “reconstruction”, since there had never been a business plan for the Diggers Rest nursery.[27]  It is submitted that the Court should find that this document was created in order to give the misleading impression to the Commissioner that in 2007 there was a business plan for the nursery for cultivating cassinia.  Again, the Commissioner says that this document also reflects poorly on the credibility of Mr Apswoude. 

   [27]T149.27-149.28.

1. The Commissioner submits that once it became clear that these documents were created no earlier than 2016, Mr Apswoude’s assertion that they were the product of an insurance response to the 2007 fire was obviously untenable — yet he did repeatedly declined to resile from that proposition.[28]  Notably, no evidence, such as insurance records, was offered to support this assertion, and the consultants who assisted in the preparation of the “reconstructed” documents (Messrs Taylor and Burns)[29] were, inexplicably as the Commissioner contends, not called to corroborate Mr Apswoude’s highly unlikely account.  Additionally, in cross‑examination, Mr Apswoude was taken to a document entitled “Reconstructed Business Plan from 2004”.[30]  Again, the Commissioner contends that this document is misleading because there was in fact no business plan in 2004.[31] 

   [28]T126.4-126.21.

   [29]T133.24-133.29; T146.23-146.26; T155.12-155.17.  Mr Burns’ name has been incorrectly rendered as “Byrnes” in the transcript.  The correct spelling appears at exhibit DGA-61, CB593.

   [30]CB2647.

   [31]T157.8-157.21.

1. In relation to these three documents, the Commissioner contends that they were prepared in order to persuade the Commissioner and/or the Victorian Civil and Administrative Tribunal (“VCAT” or “the Tribunal”) in previous proceedings[32] that cassinia was being cultivated on the Land in the 2009‑2013 years, and as to the purpose of that cultivation.[33]  They were, it is submitted, prepared by Mr Apswoude or by consultants working closely with him for that purpose.[34]  Moreover, in these proceedings, the Appellant again urged that the Land was used primarily for the cultivation of cassinia for the purposes of its sale, together with a small amount of other primary production, ultimately not relied upon.  Concluding with respect to these three documents, the Commissioner contends that the “Cassinia Arcuata Business Plan 2008/2009”, the “Business Plan DRAFT Diggers Rest Nursery (Reconstructed following fire on 6 May 2007)” and the “Reconstructed Business Plan from 2004” were created for the purpose of falsely representing that there was a business plan for the commercialisation of cassinia which dated back to the time that intentional planting of it commenced. 

   [32]Australian Investment and Development Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2017] VCAT 1418.

   [33]T128.15-128.16.

   [34]T133.24-133.29; T146.23-146.26; T155.12-155.17.

1. The Appellant criticises the Commissioner’s seeking to make something of three “reconstructed” business plans prepared by AID for a variety of reasons, emphasising that these were “reconstructed” rather than reproduced business plan documents and that Mr Apswoude never gave evidence that there was an earlier document in the same form.  Indeed, it is said that all his evidence, both at VCAT and before the Court, has been to the contrary and that, consequently, the cross‑examiner misunderstood the language and ignoring the evidence, including prior evidence, misconceived any basis for attacking his credit.  More particularly, it is said by the Appellant that it did not provide these documents to the Commissioner as part of its objection against the assessments the subject of these proceedings and they have not been relied upon, and are not relied upon, in any submission in this case.  They were produced by Mr Apswoude in his first witness statement and, it is submitted, by so doing he submitted himself to cross‑examination on these documents.

1. In closing oral submissions, an issue arose whether the Commissioner was alleging that Mr Apswoude had “changed his evidence” in relation to his evidence on these documents.[35]  The position was clarified that the Commissioner’s contention was that they were “reconstructed” documents, a position which the Appellant says is consistent with the evidence that the “reconstructed” business plan was reconstructed from material destroyed in the fire.[36]  It is also said that the Commissioner is aware of prior evidence that the reconstructed business plan[37] was prepared on advice from the Appellant’s previous lawyers and/or previous accountants[38] and that the Cassinia business plan (exhibit DGA‑21 in these proceedings[39]) was also prepared on advice from the Appellant’s previous advisers.[40]  Moreover, in relation to the Cassinia business plan to which reference has been made, the Appellant said that the Commissioner submitted to VCAT in the previous proceedings that it “should find that Mr Apswoude intended to mislead the Commissioner by producing a document that he wanted the Commissioner to rely on, and that materially misrepresented its date”.  The Tribunal, however, declined to make such a finding.[41]  The Appellant submits that, despite these matters, the Commissioner persisted with cross‑examination in these proceedings based upon the proposition that the Appellant had prepared these documents in a vacuum. 

   [35]See Respondent’s Closing Submissions (21 November 2023), [21].

   [36]Australian Investment and Development Pty Ltd v Commissioner of State Revenue [2017] VCAT 1418: Transcript, 25 July 2017, T108.2-108.9. At lines 2‑9: Mr Apswoude: “’Reconstructed business plan from 2004’, so it was a business plan that was cobbled together and constructed, reconstructed some … many years after 2004 …”. Mr Morgan: “What you say in your statement is that there was an original plan and it was destroyed in the fire?” Mr Apswoude: “Anything that I had on the farm originally was destroyed, yes.” This extract from the VCAT Transcript is at Annexure 2.

   [37]CB2647.

   [38]See Australian Investment and Development Pty Ltd v Commissioner of State Revenue [2017] VCAT 1418: Transcript, 25 July 2017, T108.12-108.20 (names redacted): Apswoude: “The … a business plan was called for from [lawyer], so [lawyer] was advising me and [accounting firm] as we were dealing with the decision … the investigation and decision by … the Commissioner of State Revenue and [lawyer] said that a business …”. This extract from the VCAT Transcript is at Annexure 3.

   [39]Cassinia Arcuata Business Plan 2008/2009, CB325.

   [40]VCAT, Transcript, 26 July 2017, p 155, lines 10-28: Responding to a question about the Cassinia business plan, Mr Apswoude: “… so the State Revenue Office engaged lawyers, we engaged lawyers … Part of the process was the – both the solicitors consulting with the accountants said that they wanted to formalise and consolidate a plan … I’m not passing on advice Mr Morgan, I’m just … As a preamble to your question … as a part of the process engaged by the State Revenue Office delegates and then its lawyers, we formalised and consolidated our business plans in 2016 on that. So that’s the answer to your question.”  This extract from the VCAT Transcript is at Annexure 4 and refer also to the decision in Australian Investment and Development Pty Ltd v Commissioner of State Revenue [2017] VCAT 1418 and [51] which refers to the consultant who assisted in the preparation of the Cassinia business plan in 2016.

   [41]Australian Investment and Development Pty Ltd v Commissioner of State Revenue [2017] VCAT 1418, [52]‑[53].

1. Additionally, the Appellant says that the Commissioner was also aware, from previous VCAT proceedings, that the Cassinia business plan was prepared in around 2016[42] and that the “reconstructed business plan”[43] was prepared in around 2012‑2014, and post‑2012[44] and on the basis that the “reconstructed” business plan was, on the evidence, based on material gathered by the Appellant in earlier years that had been destroyed by fire.  Thus it is said that Mr Apswoude did not by his third witness statement[45] “change” his evidence but, rather, confirmed the evidence that he gave at VCAT in relation to the Cassinia business plan.  The Appellant also emphasises that it was in the early‑2000’s that Mr Apswoude discussed with Mr Foley the possibility of commercially exploiting the cassinia on the Appellant’s land[46] which was, clearly, before the 2014‑2016 years. 

   [42]Australian Investment and Development Pty Ltd v Commissioner of State Revenue [2017] VCAT 1418, [51].

   [43]CB2647.

   [44]Australian Investment and Development Pty Ltd v Commissioner of State Revenue [2017] VCAT 1418, [51] (re the Cassinia plan); and Transcript, 25 July 2017, T109.9-109.16 (re the “reconstructed business plan”).

   [45]Third Apswoude Statement, [15].

   [46]Witness Statement of Allan Foley, 15 December 2022 (“Foley Statement”), [8], CB1299.

1. In any event, the Appellant says that in these proceedings it does not rely on any of the business plans but relies wholly on other evidence, being evidence which goes to the issues in these proceedings, being the existence, or otherwise, of a primary production business by the Appellant in the 2014‑16 years, and the extent to which the Land was used in those years for the business activity.  It is also said that the production by a taxpayer of a written and fully documented business plan in order for the taxpayer to be regarded as carrying on a business is not a precondition to establishing its position. 

1. In my view, there is force in the Commissioner’s submissions with respect to Mr Apswoude’s evidence in relation to the creation of those documents.  It was certainly not made clear in his evidence, without the need for cross‑examination, that these documents were not a “reconstruction” of any previous document in any sense but, at best, a compilation of his thought processes and plans for the Appellant’s business from time to time.  As such, his evidence, particularly in cross‑examination, does not reflect well on his credibility but, particularly as the Appellant does not seek to rely upon any of the business plans which may or may not have existed into which these “reconstructed” documents may have been directed, is not necessary to make any further findings in this respect.  Moreover, it is not necessary to make any findings as to whether or not there was some intention to misrepresent matters to the Commissioner with respect to relevant tax years.[47] 

Ms Apswoude-Hardacre

[47]See Appellant’s Closing Submissions (27 November 2023), [46].

1. Issues arose in the proceedings with respect to the evidence of Ms Apswoude‑Hardacre who had made two witness statements.  However, shortly before the hearing the Appellant informed the Commissioner that she would not be available for cross‑examination.  On 10 November 2023, Ms Apswoude‑Hardacre swore an affidavit stating that she was “not medically fit” to attend the trial.  Exhibited to this affidavit was a medical certificate from a doctor stating only that Ms Apswoude‑Hardacre was medically unfit to appear in the Supreme Court from the 14 to 16 November 2023.  The Commissioner contends that both the 10 November affidavit and the exhibited medical certificate were inadequate to explain Ms Apswoude‑Hardacre’s unavailability to give evidence.  More particularly, it is said that they do not explain, even in general terms, the nature of the medical condition, how long it has affected her or when she might be able to give evidence again.  Additionally, it is said that there is no consideration in the affidavit or certificate of Ms Apswoude‑Hardacre giving evidence by video or at some time shortly after the hearing.  The Appellant was given an opportunity to address this by further material, or to propose evidence being given remotely or on a later date[48] but the Appellant did not take up that opportunity. 

   [48]T10.27-11.30.

1. This matter was set down for trial on 26 April 2023, with evidence to be given by witness statement. As the Commissioner observes, the Appellant and Ms Apswoude‑Hardacre have known since then that she would likely be required to attend Court at some time during the trial. The Commissioner submits that for the reasons advanced on the first day of the trial,[49] and which it is said appeared to find favour on that day on a preliminary basis,[50] the Court should adhere to that preliminary view.  Thus it is said that Ms Apswoude‑Hardacre’s evidence should not be admitted and, further, in the absence of any adequate explanation of her absence, even by video, or on a later date, a Jones v Dunkel[51] inference should be drawn in respect of her. 

   [49]T8.24-10.20.

   [50]T10.23-10.25.

   [51](1959) 101 CLR 298.

1. In the alternative, the Commissioner submits that Ms Apswoude‑Hardacre’s evidence should be given no weight, contending that it is highly selective, as two examples are said to demonstrate:

(a)   the evidence of Mr David Sidley, a surveyor, is that he was engaged by Ms Apswoude‑Hardacre.[52]  She says nothing of this engagement in her witness statements; and

(b)  Ms Apswoude‑Hardacre performed work for the Appellant registering the business name “Davis Vineyard” in July 2014.[53]  She says nothing of this in her statements.

Both of these activities were, it is said, apparently unrelated to the cultivation of cassinia on the Land and suggest that, contrary to the impression given by her witness statements, Ms Apswoude‑Hardacre performed other functions on the Land.  In her absence, the Commissioner says that he is prejudiced by being unable to ask her about these other activities, and to test the nature and intensity of those activities referred to in her statements.  For these reasons, it is said that it would not be appropriate to have any regard to the evidence of Ms Apswoude‑Hardacre. 

[52]Witness Statement of David Sidley, 14 August 2023 (‘Sidley Statement”), [6].

[53]Exhibit DGA-54, CB554.

1. The Appellant does not appear to oppose the alternative course as submitted by the Commissioner, that the evidence of Ms Apswoude‑Hardacre should be given no, or at least little, weight.  Rather, the Appellant opposes any Jones v Dunkel[54] inference being drawn against Ms Apswoude‑Hardacre as a result of her failure to appear and give evidence at the trial. 

   [54](1959) 101 CLR 298.

1. For the reasons indicated below, both with respect to Ms Apswoude‑Hardacre’s evidence and the evidence of Mr Justin Taylor, I am of the opinion that, at least in her case, it is not appropriate to draw a Jones v Dunkel[55] adverse inference against her.  Rather, in my view, even if her evidence could be relied upon, it should be given little or no weight, both due to its selectivity, as contended by the Commissioner, and also because of its relative paucity in relevant detail and hence its failure to provide any meaningful assistance to the Court in respect of relevant issues in this proceeding. 

   [55](1959) 101 CLR 298.

Other evidence

1. Mr Justin Taylor made a witness statement which the Appellant filed in these proceedings.  As the Commissioner observes, without explanation, the Appellant elected not to rely on Mr Taylor’s statement where much of his proposed evidence would have gone to corroborating what Mr Apswoude says about the farming activities on the Land.  In view of this, and the position that Mr Taylor is in the Appellant’s “camp”, it is submitted that the Court should draw a Jones v Dunkel[56] inference that Mr Taylor’s evidence would not assist the Appellant.  The same is said to be true of Mr Burns, whose failure to give evidence was also unexplained.[57] 

   [56](1959) 101 CLR 298.

   [57]T111.6-111.11; T133.24-133.29; T146.23-146.26.

Jones v Dunkel

1. The Appellant responded to the Commissioner’s submissions with respect to its decision not to call Ms Apswoude‑Hardacre (or otherwise to arrange the presentation of her evidence), Mr Taylor and Mr Burns.  First, it is said that it is a misconception that a taxpayer must call all available witnesses, by reference to the judgment in Federal Commissioner of Taxation v Cassaniti where Steward J said:[58]

…secondly, for that purpose [of discharging the standard of proof, of the balance of probabilities] it is not obligatory for a taxpayer, in order to discharge his burden of proof, to call all material witnesses …

This proposition was not, as I understand it, doubted by the Commissioner but, as indicated previously, the taxpayer’s obligation to discharge its burden of proof on the balance of probabilities does not change.  The evidence must be tested in the usual way and, in the particular circumstances, the failure to call certain witnesses may affect the balance in discharging this burden.

[58](2018) 109 ATR 119 at 141, [88](2); referring to Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 at 10G.

1. The second issue raised by the Appellant was the Commissioner’s contention that a Jones v Dunkel[59] inference should be drawn against both Ms Apswoude‑Hardacre and Mr Justin Taylor without saying exactly what inference should be drawn.  The Appellant concedes that Ms Apswoude‑Hardacre’s evidence was, at best, at the margin and, in any event, most of the photographs verified by her were produced by Mr Apswoude.  In my view there is much force in these submissions and so I do not draw a Jones v Dunkel[60] inference.  However, as indicated previously, I am of the view that Ms Apswoude‑Hardacre’s evidence bears so little weight so as to be of no assistance to the Appellant.  In relation to Mr Justin Taylor, I am of the view that the same position generally applies in that his evidence bears little weight and even to the extent that there may have been corroboration of farming activities on the Land in general terms they are activities which do not assist the Appellant’s position, for the reasons indicated in the paragraphs which follow.  In any event, the Appellant’s position is that the evidence of these witnesses is not relied upon, including the evidence of Mr Burns.[61] 

   [59](1959) 101 CLR 298.

   [60](1959) 101 CLR 298.

   [61]See Appellant’s Closing Submissions (27 November 2023), [4]-[7].

Primary production activities on the Land

1. The position is, as the Commissioner observes, that the evidence of primary production activities on the Land came almost entirely from the witnesses, Mr Apswoude and Mr Tran, there being very little documentary or other corroborative evidence.  Of the witnesses ultimately called by the Appellant, only Mr Apswoude and Mr Tran gave evidence of having worked at the Land at the relevant times, namely at or around 31 December 2013, 2014 and 2015.  Mr Duong and Mr Larmer gave evidence that they worked at the Land, but only after this time.  Mr Taylor was not called and the other witnesses gave evidence of different matters, matters which do not figure in relation to this issue. 

1. Mr Tran was a family member who worked part‑time on the Land while studying between July 2014 and January 2018.  His activities are relevant only to the 2015 and 2016 years.  He undertook some cassinia‑related activities, but also general farm duties such as creating fire breaks, checking water levels, spraying weeds and fixing fences.[62]  His evidence does not, however, say how much of his time was spent on cassinia‑related activities and how much on other activities at the Land.  Mr Tran also gave evidence of two others who assisted at the Land, but not of their hours or which years they performed work.[63]  The Commissioner reiterates his criticism of Mr Apswoude’s evidence, for the reasons discussed previously.  On that basis, the Commissioner contends that Mr Tran’s evidence must be treated with considerable caution. 

   [62]Witness Statement of Man Tran Huu, 12 December 2022 (“Tran Statement”).

   [63]Tran Statement, [14].

1. The gravamen of Mr Apswoude’s evidence is that the Appellant’s purpose in growing cassinia was for commercial exploitation, though that was necessarily a long process.  The Commissioner, on the other hand, contends that the reasons why cassinia was being cultivated on the Land appear to have their genesis in a report prepared for the Appellant by permaculturalists, Bill and Lisa Mollison, in 2007 (“the Mollison Report”).[64]  The Mollisons appear, it is said, to have been asked to consider the future use of the Land as development land.  Their report therefore referred to “future development”, “residential areas” and “residents”.  The Mollisons concluded, as the Commissioner emphasised, that the soil on the Land had a very high salinity content and needed to be remediated.  They recommended “extensive salt tolerant tree planting to remove the salt and restore viability to the site”.[65]  Cassinia turned out to be that tree.[66]  It is plain, the Commissioner contends, that at all material times this was the principal reason that cassinia was allowed to grow, given that it was found to be naturally growing on the Land,[67] and was grown on the Land. Consequently, it is submitted that Mr Apswoude’s denials of that principal reason are not credible.

   [64]Exhibit DGA-19, CB319.

   [65]Exhibit DGA-19, CB320.

   [66]T105.25-105.27.

   [67]T106.7; T107.2-108.1.

1. Moreover, the Commissioner submits that it is notable that whilst the Mollison Report has been retained by the Appellant, there is not a single contemporaneous document — created prior to 31 December 2015, the latest date directly relevant to this proceeding — supporting the Appellant’s claimed commercial purpose for growing the cassinia during the tax years now under consideration.  In the years in question, the activities undertaken by Mr Apswoude and Mr Tran are, the Commissioner contends, consistent with growing cassinia in order to remediate the soil and to keep weeds at bay, as had been advised by the Mollisons.  These activities, it is said, are not consistent with a commercial cassinia business having commenced.  There were no written business plans from this time that evidenced cassinia cultivation being a commercial enterprise for the Appellant.  Additionally Mr Duong had not yet been engaged to measure fences.  Mr Larmer had not yet been engaged to assist on the farm.  There had been no sales of cassinia[68] and the business name “Native Brush Fencing” had not yet been registered.[69]

   [68]First Apswoude Statement, [59].

   [69]First Apswoude Statement, [68].

1. The Appellant does concede that Mr Apswoude may not, so far, have had the short‑term sales of cassinia he would have liked from his farming. Nevertheless, it is said that sales from farming are not a requirement under s 67 of the LTA and nor is a lack of sales with farming in two of the years in question a reason to form an unkind view of Mr Apswoude, hence the Appellant.[70]  In the early years after purchasing the land, the Appellant, it is said, tried to farm various crops on the Land and, later, Mr Apswoude sought to use the Land to widely accelerate the growth of cassinia across it and it was that crop, ultimately, that the Appellant sought to exploit for commercial advantage.  The Appellant observes that it was in the early‑2000’s that Mr Apswoude discussed with Mr Foley the possibility of commercially exploiting the cassinia on the Land — which was years before the 2014‑2016 years.[71]  The Appellant contends that as this evidence of Mr Foley was unchallenged it stands as independent evidence that it was, in the early 2000’s, looking to cultivate and commercially exploit the cassinia plant that was growing on the Land.[72]  Moreover, reference is made to Mr Apswoude’s own evidence that he had plans for the commercial exploitation of cassinia in the early‑2000’s and that he had a plan, from the time he started widespread cultivation of cassinia on the Land to seek to commercialise it for brush‑fencing.[73]  However, without wishing to appear disingenuous, it is clearly one thing to have plans with respect to a property, yet it is another thing to actually be undertaking primary production activities on that particular property. 

   [70]The first sale was on 12 November 2016 (in the 2016 year): Cassinia sales table, exhibit DGA‑30, CB393.

   [71]Foley Statement, [8], CB1299: “Sometime in the early 2000’s, I learned that David had purchased a farm and land on Davis Road, Diggers Rest … through his company … A couple of years later, David mentioned to me that he was planting Cassinia trees, and that the produce of these Cassinia trees could be used for all manner of things, especially as a competitor to existing products used for brush fencing. This was the first time that I had heard that David was planning to grow Cassinia for use in brush fencing.”  This evidence of Mr Foley was unchallenged by the Commissioner.

   [72]While later in the period, Mr Apswoude’s passion for growing and commercialising Cassinia on the land was the subject of evidence by Mr Larmer: “But David asked me to help with him – to grow Cassinia, he was very passionate about Cassinia, and the general farming, and that’s what happened”: T53.25-53.28.

   [73]Apswoude Statement, [40]-[41], CB179-180; T120.26-120.29.

1. The Mollison Report, which as the Appellant observes, was submitted by the Commissioner as indicative that the Land was being prepared for residential development.  However, the Appellant submits that the evidence of Mr Apswoude,[74] the objective evidence[75] and the Mollison Report itself (which refers to “rain water and run off harvest[76]) all contradict this.  Thus it is said that the Mollison Report is dealing with “permaculture” as an eco‑friendly way of remediating the land and to provide, as in agriculture, forward‑looking sustainable methods for preserving the land.  More particularly, the Appellant contends that, as for the Commissioner’s claim that the Mollison Report was directed to any residential development, the objective evidence is all to the contrary and includes the fact that Lot 1 has not (to the year 2023) been developed, being some 7‑9 years after the tax years in question.  Moreover, it is said that Lot 1 may never be developed in Mr Apswoude’s life‑time, and the fact that only a small part of Lot 4 has, as at the year 2023, been developed provides objective evidence in this respect.  Additionally, only 4.7% of the whole of the Land has been developed — as at 2023[77] (being land within Lot B — and which development did not take place until the year 2022). Further, it is said, Lot E (which contained paddock 18 — the part of the land with the highest saline levels,[78] and with sparse coverage of cassinia[79]) was sold in June 2018 to a developer who has since developed the land.[80]  Despite the Commissioner’s submissions to the contrary, it is said, neither the state of the land, nor the absence of cassinia, which could have otherwise supposedly remediated that land for its better future residential development, were apparent impediments to the purchase of Lot E for development by a developer.  Thus it is said that there is independent evidence against the Commissioner’s claims, which are said to be speculative, that cassinia was being grown on the land to remediate the land so that it could be better prepared, and used, for residential subdivision and sale.  

   [74]T104.1-104.8.

   [75]The non-development of any part of Lot 1 up to the year 2023, and the development of only a very small part of Lot 4 (which did not take place until 2022-23: Third Apswoude Statement, [3]‑[5], DGA‑96 and DGA‑97.

   [76]CB319, last paragraph: “Thus future development on the site will rely entirely on rain water and run off harvest.” On the third page (CB321), the Mollison Report refers to creating “a water efficient system that maximizes available rainfall that ensure the water table is replenished”.  The Mollision Report is referring to permaculture development, not residential – as residential development is never dependent on “run off harvest” water, or maximising water collection for the “water table”.  And, on the second page (CB320), Mollison says: “The recharge can only be achieved by infiltrating fresh water run off via a set of successive contour swales. These are tried and true methods.”  The Mollison Report then refers to “Permaculture Design”, which is the entire focus of this report; refer also definition of “permaculture”: “n. the development of agricultural eco-systems intended to be sustainable and self‑sufficient”: Concise Oxford English Dictionary, Tenth edition, 2002 (emphasis added).

   [77]Third Apswoude Statement, [3]-[6] and the maps at exhibits DGA‑97 and DGA‑97; T5.18‑6.7; T68.14‑68.27.

   [78]First Apswoude Statement, [90], CB188.

   [79]See Supplementary Expert Report of Karl Just dated 30 November 2022, at CB1765, Table 1, stating Cassinia sifton presence across Lot 1 is widespread, but sparse in paddock 18 – being part of Lot E.

   [80]T72-73; T169.4-169.6.

1. Cassinia may have been considered a suitable plant to assist with the remediation of the soil, including, particularly, in Lot 1, but the Appellant says it was not being grown in 2007 and the following years to improve the soil for residential development and, further, that the Mollison Report did not say this.[81]  Moreover, it is said that the entirety of the objective evidence since 2007 shows that this was not the case, citing by way of example, the undeveloped state of Lot 1 as at 2023, which is said to be still used exclusively for primary production activities, as is most of Lot 4.  Emphasising this position, the Appellant contends that its decision to use the Land for commercial farming of cassinia is experimental and innovative and has worked with the, so‑called, cassinia enterprise now bearing fruit — through real and substantial sales of its brush fencing product.[82]  The total of the sales of the cassinia product to date, as set out in the evidence as summarised in the Cassinia sales table[83] is $442,141.50.  In addition, it is said that if the Appellant were to win the work to replace the Caroline Springs brush fences, those contracts alone would generate around $4.1m in gross revenue.[84]  However, in this respect, it should be observed that as the Commissioner submitted this is apparently speculative as Caroline Springs subdivision is not now held in private hands, the lots having being sold, so there is no overall development contract for the provision of brush‑fencing throughout the whole of that development which might be “won” by the Appellant at some time in the future. 

   [81]Appellant’s Closing Submissions (27 November 2023), [16], referring to footnote 25 of their submissions [: See also at 11G: “Although the taxpayer’s burden of proof usually cannot be discharged unless evidence as to purpose is accepted as true … it is quite wrong to impose as a requirement for the discharge of that burden a legal obligation to produce corroborative evidence …”].

   [82]Cassinia Sales table; Tender Bundle, Document 1 (and the evidence cited therein).

   [83]Cassinia Sales table; Tender Bundle, Document 1 (and the evidence cited therein).

   [84]Witness Statement of Phillip John Larmer, 12 December 2022 (“Larmer Statement”), [21], CB828‑829; and Cassinia Sales table (Tender Bundle, Document 1, second page).  See also the Witness Statement of Tri Minh Duong, 12 December 2022 (“Duong Statement”), CB1227 and the Caroline Springs survey that he prepared, at TMD-01, CB1230-1256.

1. Concluding on the issue of commercial purpose, the Appellant submits that the Court should accept Mr Apswoude’s evidence that he (and the Appellant) bought the Land because Mr Apswoude wanted a farm and that the Court should reject the “sceptical, and ill‑founded, submissions of the Commissioner”[85] that he bought it because he wanted to develop the Land, or that he wanted to develop the Land after the Diggers Rest Precinct Structure Plan (“PSP”) was issued or that he was developing the Land in 2014‑2016.  Additionally, it is submitted that the Court should accept the evidence of Mr Apswoude that he (and the Appellant) made a decision to use the Land to cultivate and to commercially exploit the cassinia plant growing on the Land.  This evidence is said to be supported by the unchallenged and independent evidence of Mr Foley, but also by the subsequent commercial sales by the Appellant of its brush‑fencing product.  These pieces of evidence, it is said, provide proof that the Appellant made a decision to commercialise cassinia on the Land — and had done so, as corroborated by the evidence of Mr Foley, as early as the early‑2000’s.  In addition to those pieces of evidence, it is contended that there is separate evidence of Mr Apswoude’s, hence the Appellant’s, commercial purpose, during the 2014‑2016 years and hence intention to farm cassinia for commercial benefit existed during each of the 2014‑2016 years.  It is observed that the sales of cassinia products commenced in November 2016 — which is within the relevant period. 

   [85]Appellant’s Closing Submissions (27 November 2023), [17].

1. As indicated previously, in relation to evidentiary issues and the burden of proof on a taxpayer, evidence of intention with respect to commercial purpose must be tested in the context of the evidence as a whole and including corroborative and any objective evidence.  In relation to this particular issue, the Mollison Report assumed some significance, with both the Appellant and the Commissioner submitting its contents supported each of their positions.  In my view, however, the Mollison Report is equivocal in terms of the positions of the parties so that the position with respect to the Appellant’s purpose of growing cassinia on the property is actually wholly dependent on Mr Apswoude’s assertions in this respect, assertions which are not supported by any definitive documentary evidence.  Also, as discussed further in these reasons, there is only a very modest record of commercial activity and exploitation with respect to the cassinia product which, on the evidence, does not appear to have produced sufficient income over the years of its said to be development which would go any distance to meeting costs associated with the Land, whether municipal rates or otherwise and financial holding costs. 

1. In my view, another telling indication that no commercial cassinia business had been commenced at any relevant time is the absence of any business plans.  True it is that the absence of a business plan with respect to a taxpayer’s business does not necessarily indicate the absence of a commercial business but in circumstances where there may be another, non‑commercial or non‑relevantly commercial, explanation for a claimed business activity, the absence of such a plan may be a critical piece in the balancing of the overall evidence on that issue.  As indicated previously, there was, in these proceedings, controversy in relation to three “reconstructed” business plans prepared by the Appellant and cross‑examination by the Commissioner directed to their contemporaneousness or otherwise.  In any event, the Appellant does not rely upon any business plans but relies wholly on what it says is other evidence, being evidence which goes to the issues in these proceedings.  This is said to be the existence, or otherwise, of the primary production business by the Appellant in the 2014‑2016 years and the extent to which the Land was used in the 2014‑2016 years for that business activity.[86] 

   [86]See Appellant’s Closing Submissions (27 November 2023), [41]-[46].

Land development activities

1. In 2012 the PSP was approved and gazetted,[87] a plan which covered the Land.  Mr Brendan Kennelly, an experienced town planner, said that in his experience once land has been the subject of a precinct structure plan, it will generally be developed and that one of the first steps in any development is to obtain a planning permit.[88]  Additionally, Mr Larmer, a current director of the Appellant, was, as the Commissioner contends, under no illusion that the Land was development land: “I mean, obviously, you know, there will be some stage where the land will go to development, because Melbourne’s just there, and obviously Blind Freddy will see that’s going to come, yes”.[89]  For the reasons which follow, and having regard to the state of the evidence as a whole, it is, as the Commissioner submits, very difficult to accept there was no intention on the part of Mr Apswoude ever to develop Lot 1 of the Land.  In my view, and as considered further in the context of the Appellant’s submissions, the critical question is whether this was an intention during the relevant tax years. 

   [87]T220.12-220.18.

   [88]T220.20-220.27.

   [89]T53.22-53.25.

1. In any event, within a very short period after the approval and gazettal of the PSP, Mr Kennelly was appointed to assist the Appellant in making applications for planning permits over a substantial part of the Land.[90]  The first application was made on 21 December 2012[91] and was granted on 29 October 2013.[92]  It was for a multi‑lot staged development and was accompanied by plans that included a number of residential lots, roads, a roundabout and a site set aside for a school.[93]  It was, as was observed, a fairly typical greenfields residential development plan.[94]  Two further planning permits were applied for in 2014.  The first was granted on 12 August 2014 and allowed the subdivision of Lot 4 into four Lots known as A, B, C and D.[95]  Lot D was the original farmhouse and heritage area; Lot C was designated for a school; Lots A and B were for residential development.[96]  A further application was made on 11 August 2014.[97]  It concerned the further subdivision of Lot A to create Lots E and F, and ultimately permitted Lot E to be sold by the Appellant to another developer in 2018 for over $10 million.[98] 

   [90]Witness Statement of Brendan Kennelly, 11 August 2023 (“Kennelly Statement”), [10], CB1301.

   [91]Kennelly Statement, [15], CB1302.

   [92]Exhibit BK-04, CB1315-1336.  The version of the permit in the Court Book is the version as amended four times after the relevant years.  The nature of the amendments is apparent from the table at CB1336.

   [93]Exhibit BK-04, CB1315, paragraph 1.

   [94]T224.24-224.26.

   [95]CB1342-1344 and CB1346.

   [96]T221.27-222.6.

   [97]Kennelly Statement, [28], CB1304.

   [98]T213.1-213.3.

1. In 2014, the Appellant registered the business name “Davis Vineyard” — a name by which the housing estate is being marketed; though the name was never used in connection with the sale of cassinia.[99]  As the Commissioner observes, Mr Apswoude’s uncorroborated evidence was that “Davis Vineyard” was registered for a proposed business selling cassinia.[100]  In my view, this evidence cannot be accepted because when cassinia sales were actually undertaken by the Appellant, this was done under the far more logical business name — initially unregistered, but later registered — of “Australian Native Brush Fencing”.[101] 

   [99]T92.4-92.9.

   [100]T92.16-93.11.

   [101]T88.13-88.15.

1. Also telling against the Appellant’s position is that on 15 December 2015, it applied for an electricity supply to be provided to a building which had previously been constructed on the Land.[102]  The nature of this building was the subject of evidence from both Mr Apswoude and Mr Larmer.  Mr Apswoude described it as a “nursery” but it was never actually used as such.  Mr Larmer rarely went into it[103] and Mr Apswoude accepted that it was only ever used as a storage shed.[104]  It is currently used as a sales office for land sales on the Land and the contemporaneous video footage of it suggests that it was probably constructed for that purpose.  At any event, the application for an electricity supply does, as the Commissioner submits, give the lie to the suggestion that it was ever a nursery as in that application it is described as a “portable planning office”.[105]  Mr Apswoude’s explanation for this description was unsatisfactory to say the least.[106]  The application form was completed by Mr Apswoude’s mother[107] and signed by Ms Apswoude‑Hardacre.  As the Commissioner observes, whatever they may have meant by “portable planning office” they plainly did not understand the building to have been a nursery. 

   [102]CB2257.

   [103]T58.19-58.27.

   [104]T97.20-98.2.

   [105]CB2258.

   [106]T96.10-97.4.

   [107]T94.2-94.7.

1. The contention by the Commissioner that the Appellant was, in reality, carrying on the business of land development at all relevant times in the 2014‑2016 years is contested by the Appellant.[108]  In so doing, the Appellant asserts that the Commissioner has, for the purpose of this contention, relied upon many inaccurate or misleading descriptions of the evidence in circumstances where seeking to establish a positive fact against the Appellant the evidentiary burden falls on him to make good this allegation.[109] 

   [108]See Appellant’s Closing Submissions (27 November 2023), [18]-[40].

   [109]Referring, by way of example, in support of this position, Lockhart J in Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243, at 245-246: “Essentially, it is for the taxpayer to prove that an assessment is excessive: … The onus of proving that the assessment is excessive lies upon the taxpayer; although the evidentiary onus in a particular case may shift from time to time.”

1. In support of its position, the Appellant provides detailed submissions in relation to a range of factual and other matters but the strong thread running through those submissions is reliance upon assertions of subjective intentions by Mr Apswoude in relation to his desire to continue to enjoy the Land as a “farm” and in so doing to sell part of the Land to reduce debt.  Particularly illustrative of this evidence are the following:[110]

   [110]Appellant’s Closing Submissions (27 November 2023), [24], [25] and [29] (footnotes included).

24.At [63] of his closing submissions, the Commissioner continues and asserts that “the value … associated with the Property came primarily from its development potential.” A large part of the value of the Property – according to the evidence of Mr Apswoude – is its value to him, as a farm,[111] and a place to get away from city life, and his previous life in real estate.[112] The motive for AID selling Lot E and parts of Lot B was to reduce AID’s debt,[113] so that Mr Apswoude, through the AID land, could enjoy the land as a farm,[114] and farm life. The Property was bought as a farm (zoned rural); it was not a development site and it has never been treated as a development site by AID. At [63], the Commissioner goes on with the same unsubstantiated commentary: “… when a significant aspect of the activities done on and in respect of the land is directed to future development …”.[115] Nothing at all had been done on the Property directed to “future development” in Lot 1 in the 2014‑16 years – nor has anything been on Lot 1 in any of the years up to the 2023 year – and there is no evidence that there ever will be any such development of Lot 1. AID could continue to use Lot 1 (and the balance of Lot 4) as a farm, indefinitely – yet the Commissioner is asking the Court to find, in the absence of any evidence, that the whole of the AID Property “is directed to future development”. The Commissioner’s misrepresentation of the evidence continues at [66] where he asserts: “… how this could be reconciled with the Appellant’s clear intention to sell or develop the Property.” All the evidence is that Mr Apswoude, and AID, did not want to develop the land – even after the approval of the PSP[116]; instead, Mr Apswoude wanted a farm, and wanted to retain the Property as a farm,[117] and to use it, or as much of it as he could retain (after selling off part to clear debt) as a farm.[118] Referring back to the time of the original purchase of the Property by AID in 2003, up to the sale of Lot E to Charles Lloyd, the developer, in June 2018, Mr Apswoude said:[119]

[111]Transcript, 14 November 2023, pp 77-78, p 85.

[112]Transcript, 14 November 2023, pp 77-78.

[113]Transcript, 14 November 2023, pp 86-87: Apswoude (referring to the 2014 year): “I would say that … I wanted to relieve the debt … at that point … I was just happy to get some debt off the books … and we needed to relieve debt.”; Transcript, 15 November 2023, p 178: Qu: “… own this land in order to grow Cassinia on it?” Apswoude: “Until we disperse the debt and become debt free, I’d agree with that.”; “The picture at that stage was to disperse the debt, which we took a considerable chunk out of in 2018 … and we were hoping and thinking that either the developer or anyone else would purchase [the permit, being the balance of Lot 4] thereafter and relieve the debt fully.”; Transcript, 15 November 2023, p 206: Apswoude: “… I had no intention to develop the land myself at that point in time … Ultimately, that’s what happened, the only alternative to get out of debt.”.  And Transcript, 15 November 2023, p 213: Apswoude: “By of itself, the sale of the land … partial sale of the land that we had … relieved a good part of the debt. But that was … Cassinia could not only pay part of the debt, it could service some debt and it could actually provide the income that - that it’s now providing.” Transcript, 15 November 2023, p 213: Qu: “And it's your hope, is it, that by selling the residential lots, that 4.7[%] in total that you are marketing as Davis Vineyards, that you will pay down more debt?”--- Apwoude: “We … just clearing the debt is all that we'd like to do.”

[114]Transcript, 14 November 2023, p 85, lines 30-31.

[115]See also the Commissioner’s closing submissions, at [66]: Cassinia cultivation was also a side benefit of “the land development” – without referring to any evidence of that land development.

[116]Transcript, 14 November 2023, p 82: Apswoude: “… but my thought didn’t go to developing land.”

[117]See footnote 10 above. [: Transcript, 14 November 2023, p 24, lines 27-29.]

[118]Transcript, 14 November 2023, p 85: Apswoude; Transcript, 15 November 2023, p 169: Apswoude: “… but we were pretty desperate at that stage. We wanted to relieve our debt and … continue to recover from the drought …”; Transcript, 15 November 2023, p 178: Qu: “… own this land in order to grow Cassinia on it?” Apswoude: “Until we disperse the debt and became debt free, I’d agree with that.”

[119]Transcript, 14 November 2023, p 86.

“As I said just before the break, I had no desire to develop, subdivide, to be the developer, to be a real estate agent, so that was the actual initial intention in 03/04. So, it hadn’t changed by then and the permit application was what was required to sell to a developer. Not to be a developer, or to be an agent.”

25.A small part of the Property had been sold – in the years well after the 2014‑16 years – to relieve debt, so that Mr Apswoude could lead a farming life. Lot 1 has not been the subject of any development plans, let alone actual development – in the 20 years that AID has had the land – yet the Commissioner makes the allegation that AID wants to sell or develop “the [whole of the] Property”. In the 2014‑16 years, Mr Apswoude had no intention of developing the land.[120] Once again, all of the Commissioner’s submissions must now be viewed with some concern, given his habit of distorting the evidence – and then asking the Court to accept his submissions, based on that distorted (or non‑existent) evidence.

…

29.It was not until 2022 that a plan of subdivision was registered for the land (in Lot B) – and it is a part of that land that is currently (in 2023) being developed for residential sale. This part of the land only represents 4.7% of AID’s Property[121] – and subdivision and development took place in the 2022‑2023 years – some 6‑9 years after the 2014‑2016 years. Furthermore, both the sale of Lot E in June 2018 (to a developer) and the decision to proceed with the residential subdivision of part of Lot B (being 4.7% of AID’s land in 2022‑23) was driven by a simple – and stressful – need to reduce AID’s debt. Mr Apswoude desperately wanted, and still wants, to eliminate all AID’s debt so that he can live out his long‑held dream of owning, and running, his own farm – and if that means selling off “part of the farm”, he is prepared to do that (and he has no real choice but to do it).[122] The objective evidence surrounding Lot 1 supports, and confirms, this – Lot 1 has not been touched in any development sense in the 21 years that AID has owned it – and it may well never be developed in Mr Apswoude’s lifetime.

[120]Transcript, 15 November 2023, p 178: Apswoude, after referring to the sale of Lot E to Charles Lloyd, in an attempt to relieve the AID debt: “I think it is clear in the following years up to 18 that our intention was to sell land to a developer, not to develop ourselves”; and Transcript, 15 November 2023, p 206: Qu: “… the intention that you had in 2014 and 2015 and 16 for this property was that it would be developed for residential subdivision. Now, do you agree with that?” ---Apswoude: “The property was used and the focus was on the forest and the - the activities that I could do at the time. I had no intention to develop the land myself at that point in time … that’s what was … the only alternative to get out of debt.”

[121]Apswoude Third Statement, [5]-[6], DGA-97: Tender Bundle, Documents 135 and 137 (Transcript, 14 November 2023, pp 5-6, p 68).

[122]Transcript, 14 November 2023, p 85: Apswoude; Transcript, 15 November 2023, p 169: Apswoude: “… but we were pretty desperate at that stage. We wanted to relieve our debt and … continue to recover from the drought …”; Transcript, 15 November 2023, p 178: Qu: “… own this land in order to grow Cassinia on it?” Apswoude: “Until we disperse the debt and became debt free, I’d agree with that.”; “The picture at that stage was to disperse the debt, which we took a considerable chunk out of in 2018 … and we were hoping and thinking that either the developer or anyone else would purchase [the permit, being the balance of Lot 4] thereafter and relieve the debt fully; Transcript, 15 November 2023, p 206: Apswoude: “… I had no intention to develop the land myself at that point in time … Ultimately, that’s what happened, the only alternative to get out of debt.”.  And Transcript, 15 November 2023, p 211: Apswoude: “By of itself, the sale of the land … partial sale of the land that we had … relieved a good part of the debt. But that was … Cassinia could not only pay part of the debt, it could service some debt and it could actually provide the income that - that it's now providing.” Transcript, 15 November 2023, p 213: Qu: “And it's your hope, is it, that by selling the residential lots, that 4.7 in total that you are marketing as Davis Vineyards, that you will pay down more debt?”--- Apwoude: “We … just clearing the debt is all that we'd like to do.”

1. The Appellant made reference to the decision of the New South Wales Court of Appeal in Chief Commissioner of State Revenue v Metricon Qld Pty Ltd (“Metricon”)[123], in support of the position that even if the Land were held for a future development use, holding land for a future use is not current use of the Land.[124]  Thus it was put, at least implicitly, that the Commissioner’s position was on the basis that land development was said to be the use of the Land rather than anything in the nature of “primary production”.  In my view, this is an incorrect characterisation of what was put against the Appellant by the Commissioner and to the extent that the Appellant’s submissions are directed to rebutting such a proposition they are misdirected and irrelevant to the issues in this proceeding.  Rather, as I understand the Commissioner’s position, the steps taken by the Appellant with respect to planning permission and the like in the context of the overall evidence as to the use of the Land goes to support the argument that the Land is not being used for “primary production” in the relevant sense without there being any necessity to establish some alternative business activity.  In any event, it does not follow that where a taxpayer has the onus of establishing a use of a piece of land for a particular purpose that it is necessary for the contradicting party to affirmatively establish some other purpose which is inconsistent, whether in whole or in part, with the purpose of which the taxpayer bears the onus of establishing.  In the present circumstance, I am of the view that the evidence advanced by the Commissioner with respect to the steps taken by the Appellant in relation to subdivision and land development, such as they are, should be treated as part of the tapestry of evidence which goes to rendering the Appellant’s, mainly subjective, assertions as to its primary production exemption entitlement. 

   [123](2017) 105 ATR 11; [2017] NSWCA 11 (“Metricon”).

   [124]Metricon, [71].

1. Illustrative of the range of subjective matters relied upon by the Appellant in support of its position is the submission with respect to its accounting treatment of various assets:[125]

19.If the Commissioner is seeking to establish a positive fact against AID (not being a fact that AID is required to prove in the proceedings), the evidentiary burden of proof falls on the Commissioner to do this – in other words, if the Commissioner is to make good this allegation that AID was carrying on the business of land development he has to provide evidence.[126] This he has not done – as observed above, the Commissioner, in submissions, has resorted to distorting and misrepresenting the evidence to seek to paint AID as a “land developer” in the 2014‑16 years (and, seemingly, from 2003, when it purchased the land). All the objective, including documentary, evidence is against this confected assertion by the Commissioner. This distortion of the evidence (which would have the Court accept that AID was in the business of “land development” in the 2014‑16 years) is also at odds with the simple evidence from Mr Apswoude.[127] Without listing at this stage all the other evidence against this conjecture on the part of the Commissioner, the land remained as a fixed asset in the financial statements of AID throughout the 2014‑2016 years and – unlike the Cassinia – was never treated as trading stock in those years. A developer is required to treat land as trading stock for accounting purposes, as well as for tax purposes.[128] AID’s financial statements, which are in evidence – and which were not challenged – are evidence of their contents.[129] Accordingly, the classification of Cassinia as trading stock in the 2015 and 2016 years, and the non‑classification of the Property as trading stock in the 2014‑16 years must be accepted as evidence of the correct treatment, and classification, of both the Cassinia and the Property in those years.

[125]Appellant’s Closing Submissions (27 November 2023), [19] (footnotes included).

[126]See, for example, Lockhart J in Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243, at 245: “Essentially, it is for the taxpayer to prove that an assessment is excessive: …. The onus of proving that the assessment is excessive lies upon the taxpayer; although the evidentiary onus in a particular case may shift from time to time.”

[127]Transcript, 14 November 2023, pp 77-78; p 82 lines 12-13; p 86, lines 17-22.

[128]Refer definition of “trading stock” in s 70-10(1) of the Income Tax Assessment Act 1997 (Cth), as including “anything … held for purposes of … sale … in the ordinary course of a business.”

[129]Section 1305 of the Corporations Act 2001 (Cth) (and definition of “books” in s 9, as including “financial reports” and “financial records”).

Whatever merit the submissions may have in relation to the proper accounting treatment of various assets to which reference has been made, it should be observed that a position adopted by the Appellant in the accounting treatment of various assets, unchallenged though that might have been, cannot be regarded as definitive in the present context.  Moreover, the submission is illustrative of the approach in these submissions as characterising the Commissioner’s submissions as seeking to establish that the Appellant was carrying on the business of land development whereas, for the reasons I have indicated, I do not accept that that is necessarily the position being put but, rather, that the evidence with respect to land development casts serious doubt on the largely subjective assertions on the part of the Appellant with respect to use of the Land in the context of seeking to establish its primary production exemption. 

Other activities

Activities on the Land

1. The Commissioner contends that there were at least two significant activities taking place on the Land at the relevant times that were not primary production: namely, the agistment of cattle and land development. Other activities included mending fences, removing rocks and spraying weeds. However, none of these activities fall within the definition of primary production in s 64 of the LTA, and Mr Apswoude acknowledged that these activities were not related to the cultivation of cassinia.  Cattle were agisted on a significant part of the Land (more than 20%)[130] up until 2015.[131]  In November 2015, the Appellant purchased its own cattle[132] but does not rely on this as a primary production activity.  The number of agisted cattle varied between 34 and 70 in the period 28 June 2013 to 3 July 2014.[133]  The evidence does not disclose the number of cattle on the Land after this date.  Agistment income varied over the three relevant years but was particularly significant in the 2015‑2016 financial year, where the total amount of agistment income ($31,200) was more than 70% of all of the income from the Land.[134] 

   [130]First Apswoude Statement, [94], [122] and [150].

   [131]First Apswoude Statement, [36].

   [132]First Apswoude Statement, [36].

   [133]First Apswoude Statement, [101].

   [134]CB797.

1. The Appellant does not argue with this position but says rather that the agistment on the Land was not a business and required little or no labour, or other resources.  It says that almost all the agistment was concentrated into a three month period between June to September 2015,[135] compared with the cassinia business that was carried on over the three‑year period, and with the agistment ceasing in September 2015.  By contrast, it is said, the cassinia farming was labour‑intensive and was conducted as a business, even if an emerging business in the 2014‑2016 years.[136]  

   [135]First Apswoude Statement, [128], CB193; invoices at exhibit DGA-61, CB592-596.  The income from agistment (which was not a business) in the other years was negligible: First Apswoude Statement, [117], CB192 and [145], CB196.

   [136]AID relies in this respect on paragraphs [30]-[37] of the Appellant’s Outline of Submissions, particularly at [30] where the extent of the use of the Property for the cultivation of Cassinia is summarised, in percentage terms (far outweighing the use of the land for agistment), and at [31] where the commercial objectives of the Cassinia business are discussed.

1. Mr Larmer’s evidence is that he worked between two and four days a week from 2017.  Although his evidence post‑dated the relevant period, the Commissioner submits that it may be inferred that the general farmwork he undertook was also required prior to his engagement.  In 2017, none of his activities involved cassinia: he did livestock maintenance, general fencing work, monitoring and repairing fences, and spraying weeds.[137]  From 2018, he continued to do “general farm work” and fencing work,[138] from which it may be inferred that this included looking after livestock, repairing fences and spraying weeds.  As Mr Apswoude accepted, fencing work relates to the keeping of livestock on the Land; cassinia does not need fences.[139] 

   [137]Larmer Statement, [6].

   [138]Larmer Statement, [7].

   [139]T174.24-174.26.

1. In this respect the Appellant, with reference to the Commissioner’s submissions, is critical of the suggestion that “mending fences, removing rocks and spraying weeds” is in any sense foreign to any farm or farming enterprise.  Thus it is said that even if they were not integral to the cultivation of cassinia on the Land, it matters not, as each of those activities may be accepted as being incidental to the cassinia farming business and are not somehow disproving of a cassinia business being carried on on the Land.  Whilst I accept the proposition that these activities may well go to a farming enterprise, I am of the opinion that the evidence simply does not support the proposition these activities are somehow incidental to cassinia farming.

Activities undertaken off the Land

1. In the 2015 financial year, the Appellant owned 11 Vespas valued at $668,450.[140]  It had registered the business name “Vespa Museum”.[141]  Mr Apswoude said in cross‑examination that these related to a café business run by his wife for 18 months in St Kilda.[142]  As the Commissioner contends, quite why a café would own such a considerable number of valuable Vespas was not explained and regardless of who managed the café, that its business was run by the Appellant is undeniable when regard is had to the financial statements.  The only answer the Appellant had to these submissions was that this evidence was of no relevance to these proceedings and that it is not a matter for the Court as to how a taxpayer should run its business and spend its money.[143] For the reasons which follow, I do not accept that evidence of these other business activities on the part of the Appellant is irrelevant. Rather, it does in my view, go to its entitlement to an exemption under the provisions of s 67 of the LTA, as discussed in the reasons which follow.

   [140]CB653-654.

   [141]T181.29-181.30.

   [142]T181.25-182.19.

   [143]Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1, at 7 (Williams J).

1. The Commissioner makes reference to the position that Mr Apswoude is also a director of a company named Home Real Estate Pty Ltd (“HRE”).  As the Commissioner observes, the connection between the Appellant and HRE is unclear and was not properly explained by the Appellant.  In the 2014 financial year, the Appellant’s balance sheet included a non‑current asset being an unsecured loan of $949,344 to HRE.[144]  This increased to $1,384,304 in the following year[145] and then decreased slightly the following year.[146]  Ms Apswoude‑Hardacre performed work for HRE: her invoices[147] were addressed to HRE and carefully broke down her time by reference to three businesses: the Appellant, HRE and “Vespa”.  Mr Apswoude claimed that HRE was inactive but nonetheless made payments on behalf of the Appellant for historical reasons.[148] Also, as observed by the Commissioner, this explanation still left much that was unexplained and, as the evidence stands, it does not exclude the possibility that the Appellant maintained significant business dealings with HRE in the relevant years for matters which, again, go to the application or otherwise of the provisions of s 67 of the LTA, for the reasons which follow.

   [144]CB575.

   [145]CB648.

   [146]CB803.

   [147]CB615-617.

   [148]T195.19-T196.10.

Financial matters

1. The Commissioner identifies two key matters disclosed by the financial material before the Court.  First, in the relevant years, the Appellant derived no income from primary production and, secondly, cassinia sales were never going to amount to a profitable business.  The 2014 financial statements[149] show “farm expenses” of $1,486,171.  However, few if any of these recorded expenses appear to relate to farming.  The main expense of the Appellant was interest: just over $1 million.  Rates and taxes alone (which did not include land tax)[150] were $95,568.  There was no income from cassinia sales and $5,190 in agistment income.  On the balance sheet, the only significant asset was the Land, which was valued at $11,534,755.  The total borrowings were $11,527,771.  Mr Apswoude accepted that he purchased the Land for $1.8 million in 2003 and it had been revalued, allowing for significantly increased borrowings.[151]  Those borrowings funded, among other things, the Vespas and a Mercedes‑Benz Gullwing.[152]  The revaluation of the Land was evidently enabled when it became subject to the PSP and thus became land that could be developed for residential and other use. 

   [149]CB567.

   [150]See T177.20-177.22.  This exchange concerned the 2015 financial statements but the numbers are similar and so the position must have been the same in the earlier year.

   [151]T167.28-168.10.

   [152]T183.10-184.27.

1. The 2015 financial statements[153] show “farm expenses” of $2,626,668, which again includes few if any actual farming expenses.  The costs of holding the land well exceeded $2 million (comprising interest of $1,690,584 borrowing costs of $359,682 and rates and taxes of $149,595).  Cassinia stock was valued at $5,890 (but this was not sales) and agistment income was $1,804. 

   [153]CB639.

1. The 2016 financial statements[154] show “farm expenses” of $4,671,966.  The increase from the previous years is largely caused by land tax.  Holding costs (excluding land tax) were over $2.4 million (inclusive of $267,558 of borrowing costs, $2,081,718 of interest, and rates and taxes (other than land tax) of $106,445).  Agistment income for the year was $31,200 and closing stock of cassinia was valued at $8,760. 

   [154]CB794.

1. The Commissioner submits that it is instructive to compare the financial statements with the “Cassinia Arcuata Business Plan 2008/2009”.[155]  It is submitted that the Court should not accept anything contained in this document as evidencing a genuine business plan, and certainly not as at any date prior to its creation in 2016, but it is said to be useful for illustrative purposes.  In a section headed “Income generation strategy” it performs a calculation to arrive at an annual gross income of $172,000.[156]  Mr Apswoude described this as showing where cassinia “was actually going to produce the highest income with the lowest costs”[157] and a “hopeful gross income”.[158]  Nevertheless, as he acknowledged, it was a gross figure and did not include any amount for cost of sales.[159]  As observed by the Commissioner, even on this “hopeful gross income”, it is apparent that cassinia was never going to be a profitable business on the Land.  Mr Apswoude said that the problem could be solved if he could get rid of the debt, which he did in part when a parcel of land was sold after the years in question.  This, however, was never going to solve the problem.  Even leaving aside the interest and borrowing costs, income from cassinia was never going to pay the rates and taxes, let alone the labour costs, equipment and other matters. 

   [155]CB326.

   [156]CB333.

   [157]T138.3-138.5.

   [158]T137.18-137.21.

   [159]T137.29-137.31.

1. For these reasons, the Commissioner contends that the reality of the situation facing the Appellant was that it was sitting on a very valuable piece of land and the highest and best use of which was residential development.  Whether the development was undertaken by the Appellant or by selling to a developer is neither here nor there, it is said.  The Land was going to be developed, the land was going to be sold to purchasers of individual residential lots (and possibly a school) and the Appellant would pay off all of its debts then.  It is submitted that the Court should find that, as at each of 31 December 2013, 31 December 2014 and 31 December 2015, that was the Appellant’s true plan for the Land and that its use for commercial cassinia production was barely, if at all, contemplated and that at its highest an entirely incidental use and purpose. 

1. In my view, it is of most assistance to set out the Appellant’s submissions with respect to financial matters:[160]

   [160]Appellant’s Closing Submissions (27 November 2023), [49]-[51] (footnotes included).

49.At [50]-[57] of his closing submissions, the Commissioner disputes the notion that the Cassinia business could be a business, because of the absence of income in the early years; AID again refers to and relies on paragraphs [31]‑[37] of its Outline of Submissions in response to this, and the authorities cited at that part of AID’s submissions.[161] The business is now generating significant income[162] – which is an indication of a pre-existing business. Further, there is the prospect of securing further large work orders at Caroline Springs.[163] At [56], the Commissioner wildly asserts that “cassinia was never going to be a profitable business”, and the “income from cassinia was never going to pay the rates and taxes, let alone the labour costs” and at [74] asserts that “the income from sales of cassinia was never likely to be sufficient …”. None of those statements are based on evidence. If the Caroline Springs work is secured, that could generate $4.1m in gross revenue.[164] As Mr Larmer said, in response to a question concerning AID’s prospects of obtaining the work to replace the Carolins Springs fences, there is no competitor for brush fencing that he was aware of that produces the brush fencing that AID is producing.[165] Also, Cassinia brush fencing must, under the Melton City Council Housing Guidelines, be used on all corner blocks in certain areas in Diggers Rest.[166] This evidence suggests that AID will have a secure basis for sales for the foreseeable future in relation to all those corner blocks, and at the current rate of $320‑$340 per lineal metre.[167]

50.Also, if that 4.7% of the land in Lot B can be sold, AID’s debt could be repaid, clearing the debt, and leaving the balance of the Property for AID, and Mr Apswoude, to continue to use for farming. Revenues of that order would comfortably cover all costs and, further, if the land tax exemption is granted, as the taxpayer is entitled to argue, there would not be any land tax costs. To return the judgment of Williams J in Tweddle:[168]

“I am satisfied that the appellant is seeking to establish himself at Winlaton as a recoginsed breeder of high class stud stock, and that while he is prepared to make losses to achieve this ambition he has a genuine belief that he will be able to eventually make the business pay.”

51.The same may be said of the Cassinia business being carried on by AID in the 2014‑16 years (which is now returning strong income).

[161]CB, pp 123-124.  Also, at [68] of the Commissioner’s closing submissions, he refers to the requirement that the land be used primarily for the business of primary production.  We, respectfully, consider the leading, and key, authorities on this question to be those discussed in AID’s Outline of Submissions, including the judgment in Tweddle (Book of Authorities, Document 42) – and we again adopt those submissions set out at [22]-[30], CB pp 121-123.

[162]Cassinia Sales table, Tender Bundle, Document 1 (Transcript, 14 November 2023, p7).

[163]Cassinia Sales table, Tender Bundle, Document 1 second page, last line.

[164]Larmer Statement, [21], CB pp 825-829: “[there is] about 12,953 lineal metres of brush-fencing” and refers to the survey prepared by Mr Duong (PJL-30, CB 9 957; and Duong Statement, CB p 1227, and TMD-01, CB pp 1230-1256).  Mr Larmer states at [22], CB p 829, that he intends to price the Cassinia brush fencing at $320 per lineal metre if AID was to be engaged to provide brush fencing for Caroline Springs, which would provide total gross revenues, based on Mr Larmer’s evidence, of $4,144,960 (and Cassinia Sales table, Tender Bundle, Document 1, second page, last line).

[165]Transcript, 14 November 2023, p 64: Mr Larmer: “I can’t see … anyone growing brush fencing in Victoria.  You know, actual brush, from when I’ve Googled and had a look around at our competitors. So I haven’t seen anyone growing any type of brush in Victoria.”

[166]Larmer Statement, [16], CB p 827 and PJL-20, CB p 912.

[167]Larmer Statement, [16], CB p 827; [17]-[18], CB 827-8.

[168]At 7.

1. In my view, the Appellant’s response to the matters and propositions put by the Commissioner in this respect could only, in light of the financial and other realities, be described as fanciful.  Moreover, the well‑known proposition articulated by Williams J in Tweddle[169] is simply not to the point in the present context where the taxpayer has the onus of establishing the requirements for a primary production exemption under the provisions of s 67 of the LTA.

   [169](1942) 180 CLR 1, at 7 (Williams J).

Section 67 — the primary production exemption

1. The Appellant claims that in each of the three land tax years, the Land was exempt from land tax under s 67 of the LTA. The Commissioner contends that there are three aspects of the exemption that are not made out. First, the Appellant has not established that the Land was used primarily for the business of primary production, as is required by s 67(1)(a)(iii). Secondly, the Appellant’s principal business was not primary production of the type carried on on the Land, as is required by s 67(2)(b)(ii). Thirdly, Mr Apswoude was not normally engaged in a substantially full‑time capacity in the business of primary production, as is required by s 67(3)(b)(ii). The Commissioner accepts that the other elements of s 67 were met by the Appellant.

The Land was not used primarily for the business of primary production

1. The requirement in s 67(a)(iii) of the LTA is that the land be used solely or primarily for the business of primary production. Primary production is defined in s 64 to include “cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state)”. In the present circumstances, the Appellant submits that the Land was used primarily for a business of cultivating cassinia for the purpose of sale. 

1. The requirement in s 67(a)(iii) has both a use and a purpose requirement. In Chief Commissioner of State Revenue v Godolphin Australia Pty Ltd, Kirk JA said, in this respect:[170]

Use and purpose with respect to land are concepts that are distinct but commonly linked. Use it what is done on the land. As the concept of use involves human activity it will be undertaken for some purpose or purposes The purpose is why (ie to what end) those things are done.

Kirk JA also recognised that different uses of land may be characterised as having the same purpose; conversely, the same use might be undertaken for different purposes.[171]

[170][2023] NSWCA 44 at [27] (“Godolphin”).  The High Court granted special leave to appeal on 13 October 2023: Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2023] HCATrans 136.

[171]Godolphin at [28] and [29] (Kirk JA).

1. In the present proceedings, the Land was used for multiple uses.  One of those uses was the growing of cassinia.  This use was undertaken for different purposes.  The process of determining the primary use of land where there are multiple uses does, as Kirk JA said:[172]

… requires weighing the nature and intensity of the competing uses, the physical areas over which they are conducted, the time and labour spent in conducting the different uses, the money spent or assets deployed in each use and the value derived or to be derived from it.

[172]Godolphin at [34] (Kirk JA), referring to White J in Leppington Pastoral Co Pty Ltd v Chief Cmr of State Revenue (2017) 104 ATR 820, at [158].

1. In this case, the competing uses of the Land are submitted by the Commissioner to be some agistment of cattle, the growing of cassinia and also land development.  Although, as has been indicated, the accounts recorded small amounts of closing stock of cassinia, in two of the three years, these were smaller than the income generated by agisting cattle.  More importantly, as the Commissioner contends, the value (as opposed to the negligible income) associated with the Land came primarily from its development potential.  I accept that land may still be used primarily for the business of primary production even while it appreciates in value as a result of rezoning.  Nevertheless, when a significant aspect of the activities done on and in respect of the land is directed to future development, it becomes difficult to conclude that the land is used primarily for the business of primary production.  In this case, planning permits were obtained in respect of a significant part of the Land; a business name that was to be used to market the developed land was registered; and a building to be used as a site office was constructed.  In my view, these activities do lend to the Land the quality of development land, hence there were clearly multiple uses.  In a situation such as this the statement of Crockett J in Abbott v Commissioner of Land Tax[173] is apposite:

But is it sufficient, when each of two uses is substantial, to determine the matter by saying that one of the uses is, as between the two of them, the main or principal use? I think not. …It is not enough to say of two genuine and substantial uses that one is – perhaps only marginally – when compared with the other, the “chief” use. It must be a sufficiently “chief” use as to give its character to the whole of the land.

[173][1985] VR 164 at 166.

1. As submitted by the Commissioner the statement in Abbott applies a fortiori where there are three uses.  Thus it would not be sufficient for the Appellant to establish that cassinia cultivation was the most significant of three uses.  It must be sufficiently “chief” to give its character to the whole of the Land notwithstanding the two other uses. 

1. As discussed previously, the cassinia cultivation on the Land appears to have come about following the Mollison Report’s recommendation that the Appellant plant salt tolerant trees to assist in remediating the soil on the Land.  Cassinia had self‑seeded on the Land[174] and, at some stage, Mr Apswoude appreciated that its cultivation would implement the Mollisons’ advice.  For the preceding reasons, I am of the view that it is clear that Mr Apswoude much later decided that he might be able to make a modest income from selling cassinia at some point in the future.  For the reasons indicated previously, this was, however, more of a side benefit to the real benefits of remediating the soil and keeping weeds at bay.  In CDPV, it was held that a mere side benefit of a different activity will not constitute the primary activity on the land.[175]

   [174]T107.6-107.20.

   [175]CDPV at [57]-[61] (Croft J). See also in the Court of Appeal: CDPV Pty Ltd v Commissioner of State Revenue [2017] VSCA 89 at [66].

1. Cassinia cultivation was, in my view, for the reasons indicated previously also a side benefit of the land development, and was little more than a way of making a small income in the period until development commenced.  What is clear from Mr Apswoude’s evidence is that cassinia was not a short or medium‑term project.  He spoke of the cassinia hardening over a period of more than a decade.[176]  What was never explained in his evidence is how this could be reconciled with the Appellant’s clear intention to sell or develop the Land.  There was a suggestion that the development activities on the Land would be limited to Lot 4, with Lot 1 remaining a cassinia plantation.[177]  It was Mr Apswoude’s evidence that developing Lot 1 “holds no interest to me”[178] but in the context of the matters previously considered in these reasons I am of the view that this assertion should not be accepted.  Even if it were to be accepted, when the Land as a whole is viewed,[179] it is the development activity in respect of Lot 4, rather than the cassinia in Lot 1, that gives its character to the whole of the Land.  As the Commissioner submits, at the very least, the opposite is not the case. 

   [176]See, eg, T210.24-211.5.

   [177]T212.6-212.19.

   [178]T212.16-212.19.

   [179]The Appellant has not run an argument that Lot 1 and Lot 4 constitute separate parcels.

1. It follows that the Land was not used primarily for primary production but rather was used for a number of purposes, among which the cultivation of cassinia was not the primary one.  Despite cassinia being widespread on the Land, it — or more particularly, its cultivation for the purpose of sale — did not give its character to the whole of the Land. It follows, for this reason, that the Appellant cannot meet the additional requirement in s 67 of the LTA: that the Land was used primarily for the business of primary production.

1. As to the question whether land is used primarily for the business of primary production in the context of s 67 of the LTA, Kennedy J in Annat Pty Ltd v Commissioner of State Revenue said:[180]

   [180][2020] VSC 108 at [103] (footnotes omitted, emphasis in original).

… there are a number of principles which provide assistance on the concept of whether the land is used primarily for the business of primary production:

•all the circumstances bearing on the degree, extent and intensity of the uses are to be considered, and the question is one of fact and degree to be approached on a broad, common-sense basis;

•this issue is to be determined by looking at all the activities together with the surrounding circumstances of the taxpayers [sic] evident purpose in carrying out those activities.

•The concept of use is one of physical deployment of the physical mass with deployment understood as including not only activity but also inactivity deliberately adopted as a means of obtaining advantage from the land.

•If there are multiple uses it is necessary to weigh the respective uses against one another in order to ascertain which is the dominant use. The classification is an evaluative task which may be approached in a number of ways. It involves questions of degree on which minds can reasonably differ. There are several possible methods of quantification and, except in glaringly obvious cases, no one conclusion will be correct to the exclusion of others. Hence, figures for income and expense may not necessarily provide a clear guide as to the relative level of the extent and intensity of the different uses;

•However, a key question of characterisation is whether the use for primary production was the predominant use of the land so as to impart to the whole of the land the necessary character.

1. In seeking to establish that the Land was used primarily for the business of primary production, the Appellant relies entirely on the cultivation of cassinia. Agistment of animals is not primary production for the purposes of the definition in s 64 of the LTA[181] and the Appellant has not sought to establish the necessary purpose of sale.  As the Commissioner contends, agistment can therefore be put to one side.  Although there was a significant amount of cassinia growing on the Land, there is scant evidence that it was being cultivated to the requisite degree, extent and intensity.  Additionally, there were no sales of cassinia in the relevant years and so the modest income from agistment was in fact greater.  

   [181]Shanahan v Commissioner of Land Tax (1996) 32 ATR 468; (1996) 96 ATC 4320.

1. More significant in the present context was, in my view, the capital appreciation brought about by the PSP in 2012 and by the applications for planning permits made in 2012 and 2014, two of which were granted in the relevant period.  This was not a case of a farmer whose land appreciated in value by reason of rezoning or other matters beyond their control.  Rather, it involved active steps taken by the landowner.  It is true that those steps did not commit the Appellant to undertake the development set out in the plans attached to the applications but they did constitute a clear indication of the Appellant’s intentions and led almost inevitably to the development that is now taking place. 

1. The evidence also discloses that the Appellant was engaged in a modest agistment business, a café business of unknown turnover but deploying assets of significant value, and property development that involved applying for planning permits and a business name.  It may have also had some business relationship with HRE.  Having regard to these matters which have been considered in detail previously, I am of the view that when the cultivation of cassinia is put alongside these other activities, it simply could not be concluded that a cassinia business was the primary use of the Land.  For this reason, the Appellant fails on the first of the three relevant issues. 

The Appellant’s principal business was not primary production

1. For the same reasons as discussed, with respect to the first aspect of the primary production exemption, the Appellant’s principal business was not primary production of the type carried on on the Land.  The Appellant does not claim to undertake primary production anywhere other than on the Land and so it follows that if the Court finds that the Land was not used for the business of primary production, then the Appellant must fail on this issue as well.  As, for the preceding reasons, I have found that the Land was not used for the business of primary production it follows that the Appellant does also fail on this issue.

1. As the Commissioner contends, even if there was a business of primary production carried on on the Land, it was only one of a number of businesses carried on by the Appellant.  Other significant businesses were agistment, the café and there was also the development of the Land which, whether or not it might be characterised as a separate business, does, as indicated previously, detract from assertions that the Land was primarily used for the business of primary production or that production was the Appellant’s principal business.  In any event, where a company conducts more than one business, the question of which, if any, is its principal business involves a consideration of factors including income, use of labour and deployment of capital.[182]  As the Commissioner contends, each of those factors points against the cultivation of cassinia being the principal business of the Appellant, for the following reasons in the present context:

   [182]Lavender Rain Pty Ltd v Commissioner of State Revenue [2022] VCAT 1264 at [108].

(a)   the income from sales of cassinia was never likely to be sufficient to sustain the Appellant.  The only plausible commercial undertaking for the Appellant was to sell the land, thus recouping the significant other losses made;

(b)  the Appellant’s cassinia undertaking was conducted by its director/shareholder and a small number of family and friends.  This is to be contrasted with the property development business which engaged professionals. 

(c)   the Appellant’s capital consisted almost entirely of the Land.  The development business involved the future sale of the Land and should properly be characterised as involving the devotion of the whole of the capital of the Appellant.  Any cassinia business was incidental; and

(d)  there is no contemporaneous evidence of any business plan to sell cassinia and the Appellant’s own expert on cassinia had never previously heard of cassinia being cultivated for any commercial purpose.[183]

Consequently, on the evidence, it is impossible to conclude that the Appellant’s principal business was primary production of the type carried on on the Property, namely the cultivation of cassinia. 

Mr Apswoude was not engaged in a substantially full‑time capacity in the business of primary production

[183]CB1565.

1. There was no suggestion on the part of the Appellant that Mr Apswoude was engaged by any entity other than the Appellant or that he undertook any relevant activities outside of that engagement.  On that basis, for the preceding reasons, it follows that the Appellant did not conduct a full‑time business of primary production and that Mr Apswoude was not engaged in a substantially full‑time capacity in the business of primary production. 

1. As to this aspect of the matter, the evidence of Mr Apswoude’s activities consists almost entirely of his own statements.  As observed in CDPV, non‑contemporaneous, self‑serving statements must be treated with caution.[184]  In the present circumstances, I am of the opinion that statements of Mr Apswoude should be treated with a considerable degree of caution as they are self‑serving and made in the absence of contemporaneous, corroborating evidence and also having regard to, what can fairly be described, as unforthcoming and unsatisfactory evidence in relation to the “reconstructed” documents to which reference has been made previously. 

   [184]CDPV at [35] and [45] (Croft J).

1. As to the particular matters, Mr Apswoude’s evidence is that he undertook a number of non‑cassinia related activities on the Land in the relevant years: weed spraying, sowing pulse, maintaining and checking on livestock, checking and repairing fences, inspecting dams, rock removal and surface levelling.[185]  He also instructed Mr Kennelly to prepare plans and applications for planning permits[186] and was a director of other companies. 

   [185]First Apswoude Statement, [111]-[113], [136]-[139] and [174]-[178].

   [186]Kennelly Statement, [10] and [13].

1. In the present circumstances I accept the Commissioner’s submissions that the present case has much in common with Lotus Oaks Pty Ltd v Commissioner of State Revenue,[187] where the relevant land was used for development purposes as well as cropping.  The shareholder undertook these activities, oversaw the taxpayer’s other primary production activities and was also a director of a number of companies.  As Garde J said in that case:[188]

Given Mario’s directorships and all of his other responsibilities, it is difficult to see how the appellant can satisfy the statutory requirement. While the cultivation of crops for sale was a significant business on which Mario worked, it was only one of the appellant’s significant businesses.

…

while it is clear that Mario “regularly participated” in the business of the cultivation of crops for sale, it has not been established that this was, in the language of Damon [v Commissioner of Land Tax (Vic) (1985) 17 ATR 278 at 281], “for a considerable part” of Mario’s time having regard to his time commitments to the other businesses and his director’s duties.

[187](2021) 113 ATR 379 (“Lotus Oaks”).

[188]Lotus Oaks at [217] and [219].

Conclusion

1. For the preceding reasons, the Appellant has not, in my view, established that the Land was exempt land in any of the 2014, 2015 or 2016 land tax years. 

Section 68 — the preparation exemption

1. The Appellant relies, in the alternative, on s 68 of the LTA which provides that land is exempt for a year if the Commissioner is satisfied that the land is being prepared for use primarily for primary production and will become exempt within 12 months of the day on which the preparation commenced.[189] Under s 68(2), the Commissioner has a discretion to extend this period by a further 12 months. If the discretion is exercised, the effect is that land may be exempt under s 68 for two consecutive years. Otherwise, it can only be exempt for one year.

   [189]Refer AID’s Objection, paragraphs 2.1.7-2.1.9 (2014 year) at CB7-8; paragraphs 2.2.7-2.2.9 (2015 year) at CB9; and paragraphs 2.3.7-2.3.9 (2016 year) at CB11.

1. The critical factor to the exemption is the Commissioner being satisfied that the land will become exempt within one year of preparation commencing.  I accept that, as the Commissioner submits, this requires a precise identification of when the preparation commenced.  In this case, the Appellant has not sought to identify that date.  It relies on a Cassinia Arcuata Business Plan dated around August 2008[190] and a Business Plan apparently produced sometime prior to 6 May 2007.[191]  As observed by the Commissioner, to the extent that these documents can be relied on, each suggests that cassinia cultivation had already commenced on the Land at the time the document was created. 

   [190]CB326.

   [191]CB336.

1. Mr Apswoude’s evidence is that by the 2014 year, he was harvesting a crop of cassinia for sale in paddocks 1‑3, constituting 34.18% of the Land, and agisting cattle on a further 21.07% of the Land.[192]  It could not be concluded that the Land was being prepared for use primarily for primary production.  Even if such a conclusion could be reached, there is no evidence to support the further conclusion that the Land would become exempt within 12 months.  Whatever that might involve, it would certainly require a prediction that there would be a significant change in the use of the Land over the following 12 months.  Nothing in the evidence suggests that would happen. 

   [192]First Apswoude Statement, [94]; CB189.

1. I accept that this evidence, as its highest, is that the Appellant was preparing to conduct a business of primary production. Nevertheless, for the preceding reasons, that business would never have been the Appellant’s primary business and could only ever have been secondary to the main business of property development. Moreover, the Appellant points to no basis upon which the Commissioner erred in not extending the time in s 68(1)(b) and nor does it say which of the three years should be exempt under s 68, or which of the two, if time were to be extended.

1. The Appellant also contends that the Commissioner failed to perform the statutory tasks required of him under s 68(2) of the LTA. In this context the Appellant refers to the Determination[193] and the reference in the Determination to a ruling issued by the Commissioner which sets out a number of common preparatory activities to primary production and noted that none of those activities was conducted on the Land at the relevant times. Thus the Commissioner concluded that the Land was not being prepared for use primarily for primary production. The Appellant’s submissions are that the Commissioner wrongly substituted a test for the exercise of the discretion under s 68(2) other than that found in the legislation itself and therefore failed to undertake his statutory obligation, thus necessitating a remitter in this respect.[194] 

   [193]CB292.

   [194]Appellant’s Closing Submissions (27 November 2023), [57]; and Appellant’s Outline of Submissions (8 September 2023), [44]-[51].

1. The Commissioner contends in response that it did not commit the error ascribed to him.  It is submitted that the statutory language is whether the land was being prepared for use primarily for primary production.  It is said to be uncontroversial that in a public ruling the Commissioner would seek to provide guidance on how he administers the provision, including by giving examples of what may constitute preparation.  In my view, it does not follow that because such a public ruling has been made by the Commissioner and has, in the particular case been referred to by him that he has “substitute[d] some other test for that which the legislature has chosen”.[195]  On the contrary, in the present circumstances the Commissioner has, in my view, applied the statutory test as is clear from the evidence to which reference has been made in the preceding reasons.  Moreover, the Appellant has made no attempt to lead or identify any evidence which would support the “preparation” exemption.  That being so, I accept that there can have been no error in rejecting any claim to that exemption. 

   [195]Challenger Listed Investments Ltd v Commissioner of State Revenue (2010) 80 ATR 630 at 642.

Conclusion

1. For the preceding reasons the Commissioner’s assessments are confirmed. 

1. The parties are to bring in orders to give effect to these reasons. 

1. I reserve the question of costs and will hear the parties on this issue should that be necessary. 

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