Ball v Chief Commissioner of State Revenue

[2010] NSWADT 114

CITATION:	Ball v Chief Commissioner of State Revenue [2010] NSWADT 114
DIVISION:	Revenue Division
PARTIES:	APPLICANT John Ball and Elizabeth Ball RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	096110
HEARING DATES:	3 May 2010
SUBMISSIONS CLOSED:	3 May 2010
EXTEMPORE DECISION DATE:	3 May 2010
DATE OF DECISION:	13 May 2010
BEFORE:	Perrignon R - Judicial Member
CATCHWORDS:	Land tax – exemption for primary production – whether works preparatory to maintaining horses constitutes use of land under section 10AA(1) of the Land Tax Management Act 1956Land tax – exemption for primary production – horses maintained on 53% of land area for breeding and training - no income derived from qualifying use – income derived from horse agistment - whether horse breeding and training was dominant use of land
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	Jones v Commissioner of Land Tax (1980) 11 ATR 98 Southern Estates Pty Limited v Commissioner fo Taxation (Cth) [1966-67] 117 CLR 481 Thomason v Chief Executive, Department of lands [1994-95] 15 QLCR 286 St Pier v Chief Commissioner of State Revenue [2002] NSWADT 112 Greenville Pty Limited v Commissioner of Land Tax NSW (1977) 7 ATR 278 McClelland v Goulburn City Council (1976) 35 LGRA 1 Hope v Bathurst City Council (No 2) (1983) 52 LGRA 79 Hope v Bathurst City Council (1986) 7 NSWLR 669 Abbott v Commissioner of Land Tax (Vic) (1978) 9 ATR 728 Council of the City of Newcastle v Royal Newcastle Hospital (1956) 96 CLR 493 Council of the City of Newcastle v Royal Newcastle Hospital (1958) 100 CLR 1
REPRESENTATION:	APPLICANT S Ahmed, barrister RESPONDENT S Kaur-Baines, barrister
ORDERS:	(1) The assessment under review is revoked (2) The land at Terrey Hills is assessed as being exempt from land tax for the 2009 tax year, by reason of its being land used for primary production.

REASONS FOR DECISION

1 Mr and Mrs Ball own an acreage at Terry Hills, in the Northern Beaches District of Sydney. There, they maintain their own horses, and agist other people’s horses for a fee.

2 In these proceedings, they seek review of the Chief Commissioner’s decision to deny them exemption from land tax for the 2009 tax year. They submit that the Terrey Hills property was exempt from land tax, because it was being used for primary production.

Facts

3 Except where indicated below, the facts are not in dispute.

4 For many years, Mr and Mrs Ball lived at nearby Duffy’s Forest, where they earned income from stabling other people’s horses, and agisting them on nearby land leased from the Crown. They called this their ‘horse-boarding’ business.

5 When the horse flu epidemic hit Sydney in 2007, they decided to begin buying horses for the purpose of breeding with them, training them and their offspring as ‘showjumping’ horses, and selling them at a profit. For this purpose, they purchased a brood mare, ‘Trinity’.

6 Their home at Duffy’s Forest was not big enough to accommodate their proposed new business. So, in March 2008, they entered into a contract to purchase some 19,820 square metres of land at Terrey Hills. There they intended to pursue this new line of work, to continue their horse-boarding business as before, and to live. To enable them to sell their home at Duffy’s Forest, settlement was delayed till September 2008.

7 Due to its state, the house at Terrey Hills was not fit to live in. The Balls intended to refurbish it with the proceeds of sale of Duffy’s Forest. Mr Ball considered, however, that the Terrey Hills land and its improvements were in a suitable condition to commence the new business. Unfortunately, he was later advised that extensive works were needed to bring them up to the necessary standard.

8 So, on 22 March 2008, Mr and Mrs Ball took a licence of the Terrey Hills property pending settlement, in order to do the necessary upgrade work. Between 22 March and 31 December 2008, they expended more than $180,000 on works necessary to use the property for breeding and training horses, and selling them at a profit. The works included removing dangerous items such as wire and rotten wood fencing, white-ant ridden shelters, and white-ant damaged or dead trees; restoring paddocks; covering rocks; top-dressing pastures; weeding them; re-pasturing; installing drainage works to make paddocks useable; resurfacing an old horse arena; designing new stables and refurbishing old ones.

9 In April 2008, they drew up a business plan for their lenders. They did not expect the horse breeding and training business to generate income for some years, because it would take time to refurbish the land and improvements, to obtain approval for the erection of new stables and the construction of a new arena, to carry out those constructions, and then to breed, train and sell the horses. Meanwhile, they intended to continue deriving income from their horse-boarding business.

10 By May 2008, the Terrey Hills property was sufficiently improved for the Balls to transfer two horses there as part of the horse-boarding business. They continued to agist horses at Duffy’s Forest as well.

11 Duffy’s Forest failed to sell at auction in April, and again in June 2008. As planned, settlement of the Terrey Hills property occurred in September 2008. At that point, all horses boarding on the Duffy’s Forest property were transferred to Terrey Hills, together with the brood mare, Trinity.

12 Duffy’s Forest remained unsold. Mr and Mrs Ball could not renovate the house at Terrey Hills. They continued to live at Duffy’s Forest. They did not occupy the Terrey Hills property as their place of residence.

13 From May to December 2008, the number of horses boarding at Terrey Hills gradually increased. By December, nine were boarding on the property. By 31 December, that number had decreased to eight. All were grazed on a single paddock at the Terrey Hills property, and on three other paddocks leased from the Crown.

14 In December 2008, Mr and Mrs Ball acquired a new brood mare for their horse breeding and training business, called ‘Bambi’. On purchase, Bambi took up residence with Trinity at Terrey Hills.

15 In a letter to the Chief Commissioner of 17 March 2009, Mr Ball explained that he and his wife spent substantial time in ‘primary production business creation’. The Tribunal takes that to mean setting up the horse breeding and training business, including the maintenance of Trinity and Bambi. Mr Ball said that this consumed more than twenty hours per week of his own time, and between twenty and forty hours of Mrs Ball’s time. It is not clear how this time was divided between the maintenance of Trinity and Bambi on the one hand, and the setting up of the business on the other.

16 There is no evidence as to the amount of time consumed by the horse-boarding business. However, Mr Ball said that he and Mrs Ball had other, ‘primary’, jobs. The Tribunal infers that, on the whole, the horse-boarding business consumed less of Mr Ball’s time than the horse-breeding and training business. The situation in respect of Mrs Ball is unclear.

17 As at 31 December 2008, putting to one side the paddocks leased from the Crown, the horse-boarding business at Terrey Hills utilised a single paddock on which the eight boarding horses grazed, and some refurbished old stables. In total, Mr Ball gave evidence that this constituted about 3.44% of the total area of the Terrey Hills property.

18 In the Statement of Agreed Facts, the area was described as being less than 1% of the total. Mr Ball’s oral evidence differed from this, but it was not challenged. The Statement of Agreed Facts had originally been prepared by the Respondent as a précis of the likely facts, and Mr Ball gave evidence that he only ‘scanned’ it before agreeing to its accuracy in the course of the hearing. For reasons which will become clear, his oral evidence was against his interest. For those reasons, the Tribunal is satisfied that Mr Ball’s oral evidence is likely to be the more considered and correct version.

19 As at 31 December 2008, there were only two horses at Terrey Hills which had been purchased for the horse breeding and training business – Trinity and Bambi. According to Mr Ball, their housing and training took up some 53.1% of the total land area. Whereas the boarding horses together had access only to a single paddock and a set of stables on the property, these two horses were grazed across eight paddocks, trained in an extensive horse arena, and resided in two larger stables which had been renovated for them. Mr Ball’s evidence on this aspect was also unchallenged. It differs to some degree from statements made by him to the Chief Commissioner in the past. However, his attention was drawn in oral evidence to specific improvements on the property for the purpose of making his calculations, and the Tribunal accepts his oral evidence as being the more accurate and reliable version.

20 In February 2009, the Applicants lodged a development application with Warringah Council for the erection of new stables and other works, and for permission to use the site for animal boarding and training. The application was refused in April 2009.

21 By July 2009, Trinity and Bambi had been sold, because the Balls considered that it was not safe to bring up their foals without new stables being constructed.

22 Mr Ball gave evidence that, as at 31 December 2008, it was possible to conduct the business of breeding and training horses at Terrey Hills. Counsel for the Chief Commissioner put to him that he could not conduct that business there, because he had agreed that in the absence of new stables, it was unsafe to raise foals there. He maintained that it was possible to conduct the business, whether or not it was safe to raise foals, and that he was in fact maintaining and training Trinity and Bambi there as at 31 December 2008. His evidence is not inconsistent with the agreed facts, and the Tribunal accepts it as accurate.

23 There was no evidence that the breeding program had commenced by the taxing date. In his letter of 17 March 2009, Mr Ball explained that the breeding business was not expected to generate income for two years or more, but that he expected it to generate substantially more income than the horse-boarding business. The Tribunal infers that the horse breeding and training business had not generated income by the taxing date.

24 In the same letter, Mr Ball informed the Chief Commissioner that the horse boarding business at Terrey Hills had generated an operating profit of $14,000 for the last three months of 2008. However, this figure took no account of interest and depreciation. It is unclear whether that business was generating a profit, when these factors were brought to account.

25 A fresh development application was lodged in October 2009. On 30 December 2009, Council approved of the use of the site for animal boarding and training, and of works including new stables, but limited the number of boarding horses to fifteen at any one time.

26 Trinity and Bambi have been re-acquired by Mr and Mrs Ball for their horse breeding and training business.

27 The Tribunal makes findings of fact consistent with the foregoing narrative.

Decision under review

On 17 July 2009, the Chief Commissioner assessed the Terrey Hills property to land tax for the 2009 tax year. By letter of that date, he explained that he considered the dominant use of the land at the taxing date was residential use, though he acknowledged the land was not then occupied for residential purposes. He was not satisfied that the dominant use was the business of breeding and training horses.

28 Mr and Mrs Ball seek review of his decision.

Jurisdiction

29 They lodged an objection to the decision with the Chief Commissioner. Their objection was disallowed. For that reason, the Tribunal enjoys jurisdiction under section 96 of the Taxation Administration Act 1996 to review the Chief Commissioner’s decision. Mr and Mrs Ball bear the onus of proving their case: section 100.

Legislation

30 Land tax is levied and payable on the taxable value of all land in New South Wales, except land which is exempted from taxation under the Act: section 7, Land Tax Management Act 1956. For each calendar year, tax is charged on land as owned at midnight on 31 December the previous year: section 8.

31 Section 10AA of the Land Tax Management Act 1956 provides relevantly as follows.

‘(1) Land that is rural land is exempt from taxation if it is land used for primary production.

(2) ...

(3) For the purposes of this section, land used for primary production means land the dominant use of which is for:


(a) …

(b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase ….’

32 It is common ground:

(i) that the Terrey Hills property was ‘rural land’ as defined for the purposes of subsection 10AA(1);

(ii) that the horse-boarding business did not fall within the meaning of ‘primary production’ in that subsection; and

(iii) that the business of horse breeding and training, for the purpose of selling the horses and their natural increase, did fall within the meaning of ‘primary production’.

33 Two fundamental issues remain for determination:

(1) Whether, as at the ‘taxing date’ of 31 December 2008, the land was being ‘used’ for the latter business.

(2) If it was, whether that business constituted the ‘dominant use’ of the land.

34 Mr and Mrs Ball submit that that the land qualified for exemption under section 10AA(1) because, as at 31 December 2008, it was being used for the horse training and breeding business. In support of that submission, they point to the following.

(i) Substantial physical improvements had been made to and upon the land, referable only to that business.

(ii) Those improvements had been made at substantial cost, and with considerable effort on their part.

(iii) Two horses had been acquired, and were being maintained and trained on the land, for the purposes of that business.

35 They submit that this business satisfied the ‘dominant’ use requirement in subsection 10AA(3), because it took up over 50% of the land area, and because the only other use was a horse boarding business, which took up only 3.44% of the area.

36 In reply, the Chief Commissioner submits that, at the taxing date, the land was not being used for the horse breeding and training business, for the following reasons.

(i) Mr and Mrs Ball merely intended to engage in that business, and mere intention does not constitute engagement in primary production.

(ii) The works conducted on the land were merely preparatory to engaging in the business, and did not constitute actual engagement in the business.

(iii) The maintenance of Trinity and Bambi was likewise no more than a preparatory step to the conduct of the proposed business, as the improvements at Terrey Hills were not in a fit state to carry out horse breeding safely.

37 Alternatively, if the land was being used for the horse breeding and training business as submitted by Mr and Mrs Ball, the Chief Commissioner says that this was not the ‘dominant use’ of the land, even though it took up over 50% of the land area, because:

(a) one must look at all factors, not just the amount of land being used in the business; and

(b) the only income being derived from the land was derived from the horse boarding business.

38 In Southern Estates Pty Limited v Federal Commissioner of Taxation [1967] 117 CLR 481, the High Court found that a taxpayer which expended substantial sums in clearing and making pastures upon virgin scrub, in order to make it suitable for grazing animals, was not ‘engaged in primary production’ under section 75(1) of the Income Tax and Social Services Contribution Assessment Act 1936-1961. Despite the expenditure, the taxpayer had sold the lands before it had been able to introduce stock to the land. The High Court affirmed the decision of the Federal Commissioner to disallow a deduction for the expenditure. Chief Justice Barwick said [at 488]:

‘I am unable to read “a taxpayer engaged in” as satisfied by one of whom no more can be said than that he intends to engage in. To prepare land for primary production, even for primary production thereon by the person making the improvement is not of itself, in my opinion, to engage in primary production.’

39 A similar approach was adopted by the Supreme Court of NSW in Greenville Pty Limited v Commissioner of Land TaxNSW (1977) 7 ATR 278. Helsham CJ in Eq said at 280:

‘As counsel for the plaintiff conceded, whether land is being used for primary production within the meaning of the definition must be decided by an objective test – the inquiry is an inquiry into actual land use; it is not to be tested by the intention of the owner.’

40 In Thomason v Chief Executive, Department of Lands (1995) 15 QCLR 286, the Land Appeal Court of Queensland construed the phrase ‘the dominant use of the land’ in section 17(2) of the Valuation of Land Act 1944 (Qld). The Court observed [at 293]:

‘The land must be ‘used’, that is, it must be applied, employed for some purpose, put into service, turned to account (see Macquarie Dictionary ). The word ‘use’ has been held to be ‘a word of wide signification’ ( British Motor Syndicate Ltd v Taylor & Son [1900] 1 Ch 577 at 583 per Stirling J) and ‘a word of wide import’ ( Shell-Mex & BP Ltd v Clayton [1955] 3 All ER 102 at 106 per Court of Appeal) the meaning of which in any particular case depends to a great extent on the context in which it is employed ( Ryde Municipal Council v Macquarie University (1978) 139 CLR 633 at 637 per Gibbs ACJ, 651 per Stephen J, 658 per Aickin J). For land to be used it must be actually used, not be contemplated or intended to be used nor be suitable for use ( London & South Western Ry Co v Blackmore (1870) LR 3 HL 601 at 617 per Lord Hatherley LC). That does not mean that there must be activity on all the land. An owner can use land by keeping land in its unimproved state where retaining it in that state is relevant to a particular purpose ( Newcastle City Council v Royal Newcastle Hospital [1959] AC 248 at 255 … 100 CLR 1 at 4, Privy Council).’

41 In St Pier v Chief Commissioner of State Revenue [2002] NSWADT 112, this Tribunal adopted a similar approach in construing the phrase, ‘land used for primary production’ in section 10AA(1) of the Land Tax Management Act 1956, as it then stood. In that case, a taxpayer claimed exemption from land tax for rural lands adjoining the Myall Lakes National Park, on the basis that it was ‘land used for primary production’. By the taxing date, the taxpayer was intending to introduce deer to the property. He had made preparations for doing so, but had not yet introduced them because he had yet to comply with certain requirements. The deer were introduced later.

42 The Tribunal found that, as at the taxing date, the land was not used for primary production, despite the intention of the taxpayer to commence deer farming, his preparations for deer farming, and the fact that the delay in commencement had been beyond his control. The Tribunal construed the phrase ‘land used for primary production’ in the same way as the High Court had construed the phrase ‘engaged in primary production’ in Southern Estates.

43 In this case, it is appropriate to adopt the same approach. The phrase ‘land used for primary production’ in section 10AA(1) of the Act is enlivened neither by a mere intention to engage in primary production, nor by works preparatory to engaging in primary production, even if the cost of those works has been substantial. It follows that the works conducted at Terrey Hills by Mr and Mrs Ball in order to render the property suitable for their breeding and training business, extensive though they were, were not sufficient to attract the exemption in section 10AA(1).

44 However, unlike the situations in Southern Estates and St Pier, by the taxing date Mr and Mrs Ball were actually maintaining their two brood mares on the property. That activity was referable only to the business of training and breeding horses, with a view to selling them or their natural increase.

45 The business had not yet generated revenue, because they were yet to sell either of the two mares or breed from them. However, Mr and Mrs Ball were maintaining them ‘for the purpose of selling them or their natural increase’, as required by subsection 10AA(3)(b). It would be an extraordinary result if an activity which satisfied the requirements of subsection 3(b) did not constitute a ‘use’ of land in terms of subsection (1). To construe the word ‘use’ in any other way would defeat the purpose of the legislation which, so far as section 10AA is concerned, is at least in part to exempt from land tax persons who maintain animals on their land with a view to selling them or their natural increase.

46 For those reasons, the maintenance of Trinity and Bambi at Terry Hills was sufficient to constitute use of the land for primary production.

Dominant use

47 It remains to determine whether this horse breeding and training business constituted the ‘dominant’ use of the land.

48 In Greenville’s case, the Supreme Court of New South Wales found that sowing pumpkin seeds two days before Christmas on one and a half acres of a disused golf course, which occupied some 160 acres of land, did not constitute the dominant use of the land. That was so, even if the seeds had sprouted by the taxing date of 31 December, which the Court doubted. No pumpkins, of course, had resulted by the taxing date, and the crop later failed.

49 Helsham CJ in Eq said [at 280]:

‘I think the only question to be decided here is this: can it be said that land most of which is not being used at all is used primarily for the cultivation of it for the purpose of selling the produce of that cultivation if a very small part of it is under cultivation? Another way of putting the question I suppose is: when does land which is not being used at all become land used primarily for cultivation? …

… in applying [an objective] test one must adopt a broad approach and a commonsense one. For example, it would not be sufficient merely to look at the area actually under cultivation at the relevant time, if cultivation were being relied upon as the use, so as to ascertain whether for example more than half of the whole of the land was under cultivation – because of course, the part not under cultivation might be unusable or laying fallow, although in the latter instance fallow land might be regarded as a passive use of land similar to the kind that was held to be a use in Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 ….. It would probably not be sufficient to look merely at the financial return from the cultivation; the fact that that there was none would not of itself warrant a finding that the land was not used primarily for cultivation, nor would the existence of a more rewarding cottage industry carried on by the owner of the land at the same time. Likewise the quantity of produce of the cultivation taken from the land would not of itself be a determinant of its primary use. The matter will be one of degree in each case. To claim an exemption under the Act the owner must be able to point to an activity being conducted on the land that will give the land the character of being mainly used for that activity, or that will enable a person having to decide the matter to say that the land is, in substance and looked at as a whole, being used for an activity that gives rise to an exemption.’

50 He continued [at 280-281]:

‘I do not regard the use of that portion of the property for pumpkin growing as requiring or indeed enabling the finding that the land was used primarily for the cultivation thereof for the purpose of selling pumpkins. If it was a real use, rather than a token or colourable one, as I must assume it was, the degree of use does not in all the circumstances and at the relevant time endow the land comprised in the golf course with the character of being used primarily for growing pumpkins, nor enable me to say that in substance and looked at as a whole the land was being used for this activity.’

51 In McClelland v Goulburn City Council (1976) 35 LGRA 1, the Land and Valuation Court of New South Wales considered whether ten acres of land at Goulburn should have been rated as ‘rural land’ under section 118(1) of the Local Government Act 1919. Rural land was defined to mean land ‘wholly or mainly used … for ... grazing’.

52 The Plaintiff lived in a large house on the property. Nine out of the ten acres were used at various times for grazing. As at the relevant date, there were about four sheep and one cow with calf on the property. Though the grazing generated income, there was no evidence as to profit. Rath J was not satisfied that the Plaintiff was conducting a business of grazing. Nor was he satisfied that the land was ‘mainly used’ for grazing. He said [at 8]:

‘The word ‘mainly’ has the meanings of ‘for the most part; chiefly, principally.’ Thus the expression ‘wholly or mainly’ could mean either ‘solely or chiefly’ thus relating to the use of the land; or ‘wholly or in the most part’, thus referring to the amount of the land that is used. In my view the expression ‘wholly or mainly’ is not used in the definition with either of these meanings exclusively, and the expression is wide enough for the emphasis in some cases to be on the extent of the land used, and in others on the extent or intensity of the use. If this is so, the appellants’ grazing activities do not fall within the denotation of ‘parcel … wholly or mainly used’ merely because 9 acres are devoted to that use and only 1 acre to the residential use. As at 1st January 1976, the residential use was the dominant use of the parcel, and it is immaterial that that use might not have extended to all the land, or even the greater part of it.’

53 In Hope v Bathurst City Council (No 2) (1983) 52 LGRA 79, Perrignon J in the Land and Environment Court considered whether 15.55 acres of land at Kelso near Bathurst should have been rated as ‘rural land’ under the same provision. The land was owned by an engineer, who lived with his wife in a house on the property, and conducted his engineering business there. He also agisted other people’s stock on some 82.38 % of the land area. Though this grazing activity generated revenue, it was run at a nett loss, and had been for many years. The owner was better off for conducting the activity because, inter alia, he would otherwise have been subject to land tax.

54 Perrignon J found [at 84]:

‘Upon a consideration of the evidence I am not satisfied that the land was mainly used for the carrying on of the business of grazing. … Mr Hope has argued that the word ‘mainly’ should be construed as referring to area only, so that if more than half the area of the subject land is used for one or more of the businesses specified the definition of ‘rural land’ is satisfied. I do not agree with this submission. I think that the proper approach to the question is to consider all the evidence relating to the uses to which the land is put and if upon such a consideration it appears that the land is mainly used for one or more of the businesses or industries specified then is it ‘rural land’. Such an approach calls for the weighing of the evidence relating to the various uses to which the land is put, including, but not being limited to, the nature and intensity of such uses, the physical areas over which they extend, and the time and labour spent in conducting them. If it can be said, weighing the uses which would bring the land within the definition of ‘rural land’ against the other uses to which the land is put, that the former uses constitute the main or the major use of the land, or, what I think is the same thing, that the land is mainly devoted to such uses, it is ‘rural land’ ….’

55 On appeal to the Court of Appeal, the decision of Perrignon J was affirmed: Hope v Bathurst City Council (1986) 7 NSWLR 669.

56 In Jones v Commissioner of Land Tax (NSW) (1980) 11 ATR 98, the Supreme Court of NSW considered whether two and a half acres at North Turramurra in Sydney was ‘primarily’ used for ‘the maintenance of animals ... for the purpose of selling them or their natural increase’, under section 3 of the Land Tax Management Act 1959. The plaintiff was a medical practitioner, who had a long-standing interest in racing and breeding horses. He lived with his family in a house on the property. He conducted his medical practice elsewhere, but sometimes examined patients at the house.

57 Between 50% and 60% of the land area was used for maintaining the owner’s race horses, breeding from them, and agisting other people’s horses. Of the three uses, only agistment generated any income. Hope J found that only the activity of breeding fell within the statutory definition. There was no evidence distinguishing the area used for breeding from the areas used for the other, non-qualifying, uses.

58 In finding that the land was not primarily used for horse breeding, Hope J quoted with approval the following passage from the decision of Lush J in Abbott v Commissioner of Land Tax (Vic) (1978) 9 ATR 728:

‘In construing the word ‘primarily’ in its application to a case where a parcel of land is divided into two parts one of which is devoted to an exempt use and one not it must be remembered that the question is whether the whole of the parcel is primarily used for the exempt purposes. In my opinion it is not sufficient to inquire whether some difference can be discerned between the uses to justify classing one as the main use or predominant use. The predominance must be of such a degree as to impart a character to the parcel as a whole.’

59 In Thomason, a taxpayer owned about 24 hectares of rural land. He resided there on an area of about one-third of an acre. Though he derived no income from this portion, its lettable value was about $6,240 per year. On a very small portion of the land, he also took meteorological readings, for which he was paid about $1,500 to $1,600 per year. On most of the land, he agisted between 30 and 40 dairy heifers owned by another. He earned about $2,400 per year from this. The Land Appeal Court of Queensland considered that the business of grazing constitute d the ‘dominant use of the land’ in terms of section 17(2) of the Valuation of Land Act 1944 (Qld). Delivering the judgment of the Court, Ambrose J said [at 303]:

‘In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in section 17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole.’

60 He continued [at 304]:

‘We have reservations about adopting an income approach to determine the question of dominant use, although it may be relevant in considering other criteria contained in Section 17(2). To apply a test related to relative incomes could, in the majority of cases, distract the enquirer from the primary question of determining the dominant use of land. On some limited occasions income may be helpful in conjunction with all other criteria in assisting to determine the question, but care must be taken not to allow income generated by a use to become the primary determinant.

It is only by comparing the income the owner receives from agistment of dairy cattle with that which he receives from the Bureau of Meteorology (and, perhaps, the value to him of the occupancy of his house upon the land) that one would be able to conclude that, in spite of the fact that 30 of 40 dairy heifers continually graze the 24 hectare block, the dominant use of the land is for purposes other than farming.

We are of opinion, however, that a person viewing the area of land and the number of cattle on it would, as a matter of commonsense, say that the main or major use of the 24 hectare block was for the grazing of cattle. Consequently, we are satisfied that the dominant use of the land is for the business of grazing.’

61 In Mr and Mrs Ball’s case, unlike the situation in each of the four cases considered above, no part of the property was used for residential purposes. Mr and Mrs Ball did not reside there. The Chief Commissioner had relied on a dominant residential use as the basis for his original decision, but did not do so before the Tribunal. It was not suggested, for instance, that the unused portion of the land was set aside for a non-qualifying use, in the way that bushland owned by the Royal Newcastle Hospital had been set aside for a qualifying use in Council of theCity of Newcastle v Royal Newcastle Hospital (1956) 96 CLR 493, affirmed by the Privy Council in Council of theCity of Newcastle v Royal Newcastle Hospital (1958) 100 CLR 1. Having regard to the maps produced in evidence, such an argument was unlikely to succeed.

62 Some 43.55% of the land was unused. The remaining 56.45% was divided between two uses only. One was a qualifying use – namely, maintaining horses for training, breeding and sale. The other was a non-qualifying use – namely, horse-boarding. 53.1% of the land was devoted to the former, and only 3.44% to the latter. So far as the amount of land used for each purpose is concerned, the proper inference is that the main use was training and breeding horses for sale.

63 On the other hand, by the taxing date, no revenue had been generated by the qualifying use, whereas some revenue had been generated by the non-qualifying use. Against that must be weighed the fact that the evidence is silent as to whether the latter use was returning a profit when interest and depreciation were brought to account.

64 In terms of human effort, the evidence establishes Mr and Mrs Ball devoted very considerable time to setting up the horse breeding and training business, and the maintenance of Trinity and Bambi. It is silent, however, on the amount of time spent by the couple on the horse-boarding business.

65 The main factor weighing against the taxpayers is the lack of revenue generated by the horse training and breeding business. However, the significance of income as a factor is reduced by the lack of evidence as to the profitability of the horse-boarding business. The very nature of the horse breeding and training enterprise precluded the generation of revenue in the short term. It was none the less a use conducted with a view to generating income – indeed, to substantially more income than the horse-boarding business was expected to generate. The substantial amounts of time, energy and funds devoted to establishing the horse breeding and training business are compelling proof of that. To that must be added the caution expressed in the authorities against treating revenue alone as being decisive or determinative.

66 It is appropriate to weigh all the factors referred to by Perrignon J in Hope – that is, the nature and intensity of the various uses, the physical areas over which they extended, and the time and labour spent in conducting them. In the peculiar circumstances of this case, neither revenue nor the amount of time spent on setting up the horse breeding and training business can be considered determinative. For that reason, it is unnecessary to decide whether time spent in setting up a business can be taken into account when assessing which of a number of uses is the dominant one.

67 On balance, the Tribunal considers that the dominant use of the land at Terrey Hills was the business of maintaining horses for the purpose of selling them or their natural increase, because a greater portion of the land was used for that purpose than for any other, and most of the land was used for that purpose. Adopting the test formulated by Helsham CJ in Greenville’s case, the evidence establishes that as at the taxing date, in substance and looked at as a whole, the Terrey Hills property was being used for the horse breeding and training business.

68 The same result is obtained by applying the ‘reasonable bystander’ test adopted by the Land Appeal Court of Queensland in Thomason, though the result in that case is difficult to reconcile with the principles developed in McLelland, Hope and Jones, except perhaps by reference to the significantly greater ratio between the amount of land devoted to grazing and the residential portion in Thomason.

69 For those reasons, the Tribunal determines the issues in dispute as follows.

(1) By maintaining the brood mares Trinity and Bambi at Terrey Hills as at the taxing date, the taxpayers were using the land for the ‘maintenance of animals … for the purpose of selling them or their natural increase’ in terms of section 10AA of the Land Tax Management Act 1956 .

(2) That use constituted the ‘dominant use’ of the land in terms of section 10AA(3).

70 It follows that, as at 31 December 2008, the land at Terrey Hills was being used for primary production. It attracted an exemption from land tax for the 2009 tax year under section 10AA of the Act.

71 Pursuant to section 101 of the Taxation Administration Act 1996:

(1) The assessment under review is revoked.

(2) The land at Terrey Hills is assessed as being exempt from land tax for the 2009 tax year, by reason of its being land used for primary production.