Bisvic Pty Limited v Chief Commissioner of State Revenue
[2011] NSWADT 293
•12 December 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Bisvic Pty Limited v Chief Commissioner of State Revenue [2011] NSWADT 293 Hearing dates: 1 July 2011 Decision date: 12 December 2011 Jurisdiction: Revenue Division Before: R Perrignon, Judicial member Decision: The assessments made by the Chief Commissioner of State Revenue in respect of the 2008, 2009 and 2010 tax years are confirmed
Catchwords: Land tax - primary production exemption -land used for maintaining horses for the purpose of sale and agistment - whether purpose of profit on a continuous or repeated basis - whether a significant and substantial commercial purpose or character - whether dominant use of the land Legislation Cited: Land Tax Management Act 1956
Taxation Administration Act 1996Cases Cited: Ball v Chief Commissioner of State Revenue [2010] NSWADT 114
Hope v Bathurst City Council No 2 [1979] NSWLR 471
Hope v Bathurst City Council (No 2) (1983) 52 LGRA
Jones v Commissioner of Land Tax (NSW) (1980) 11 ATR 98
Leda Manorstead Pty Limited v Chief Commissioner of State Revenue [2010] 867
McClelland v Goulburn City Council (1976) 35 LGRA 1
Romano v Chief Commissioner of State Revenue [2011] NSWADT 73
Ryde Municipal Council v Macquarie University (1977) 1 NSWLR 304
Thomas v Commissioner of Taxation (Cth) (1972) 46 ALJR 397Category: Principal judgment Parties: Bisvic Pty Ltd (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
N Canosa (Applicant)
Crown Solicitor (Respondent)
File Number(s): 106055
REasons for decision
The applicant, Bisvic Pty Limited ('Bisvic'), is the trustee of the Yallah Unit Trust. Since 2005, it has been the registered proprietor of about 70 acres of land at Yallah, south of Wollongong in New South Wales.
On 7 April 2010, the respondent Chief Commissioner of State Revenue assessed the land to land tax for the tax years 2008, 2009 and 2010. Bisvic seeks review of those assessments.
It submits that the land attracted the 'primary production' exemption from tax, because it was used for the dominant purpose of maintaining horses 'for the purpose of selling them or their natural increase': section 10AA(2), Land Tax Management Act 1956.
Objection has been taken to the assessments and disallowed. For that reason, the Tribunal enjoys jurisdiction to review them pursuant to section 96 of the Taxation Administration Act 1996. The applicant bears the onus of proving its case: section 100.
Background
For the most part, the facts are not in dispute. Though in a rural area, the land was zoned 'Offensive or Hazardous Industrial', as it had been used as an abattoir in years gone by. The abattoir had ceased to operate before Bisvic acquired the land, and the abattoir buildings had become disused before the tax years in question.
In each of the tax years, Bisvic leased most of the land in the following way.
1) Some ten paddocks, together occupying around 65 acres, were leased to Mr Meharg, who used them to maintain his own and other people's horses. He paid rent of $7,800 per year.
2) A cottage on the property was also leased to Mr Meharg. He lived there, paying rent of $8,580 per year.
3) Another cottage on the property was occupied by a Mr Pastrovic. He lived there, free of rent.
4) About four hundred square metres of vacant land in the vicinity of the abattoir buildings was leased to R & H Hancock, who repaired and stored wooden pallets there. They paid rent of about $21,000 per year.
5) Bisvic also charged $3,600 per year for the parking of two trucks on the property.
These figures produce a total income of $40,980 per year, in the following proportions, calculated to the nearest percent:
1) Mr Meharg's paddocks: $7,800 pa 19%
2) Mr Meharg's cottage: $8,580 pa 21%
3) Mr Pastrovic's cottage: $nil 0%
4) Hancocks' portion: $21,000 pa 51%
5) Truck parking: $3,600 pa 9%
Total: $40,980 100%
The total rental income derived from the property by Bisvic for the financial years ending 30 June 2007 through to 2010 varied, in the following amounts:
2007: $37,555
2008: $29,950
2009: $34,340
2010: $30,753
Land tax is assessed by reference to calendar years, rather than financial years. Though precise figures for each calendar year are not available, the parties agree that it is appropriate to infer that in each of the three tax years in question, Bisvic earned rental income somewhere between $30,000 and $37,000.
It follows that the income from one or more of the uses described above probably varied. It was not suggested by either party that the proportions in which each of those uses contributed to the total varied to any significant degree. In the absence of any evidence to the contrary, it is appropriate to infer that those proportions remained roughly the same.
Legislation
At all relevant times, section 10AA(2) and (3) of the Land Tax Management Act 1956 provided:
'(2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land:
(a) has a significant and substantial commercial purpose or character, and
(b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).
(3) For the purposes of this section, land used for primary production means land the dominant use of which is for:
....
(b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or
....
Submissions
Bisvic submits that the Tribunal would be satisfied:
1) that the 'dominant' use of the land was the maintenance of horses by Mr Meharg for sale, or for the sale of their offspring,
2) that this use had a 'significant and substantial commercial purpose or character', and
3) that it was ' engaged in for the purpose of profit on a continuous or repetitive basis', whether or not Mr Meharg made a profit from it in any particular tax year.
The Chief Commissioner submits that the exemption cannot apply, for the following reasons:
1) On the evidence, Mr Meharg used the sixty-five acres to maintain his own horses and agist other people's horses.
2) His horses were kept in a single paddock near the cottage in which he lived. The other horses were kept in nine other paddocks throughout the property.
3) By far, most of the horses belonged to clients.
4) Even if Mr Meharg sold some of his horses in each tax year, and helped arrange for the sale of some of his client's horses which he maintained, the evidence does not establish that he sold most of the horses which he maintained on the property in each of the tax years, or that they were offered or intended for sale.
5) Accepting his evidence at its highest, the Tribunal would conclude that Mr Meharg conducted a mixed business of agistment and maintenance of horses (or their offspring) for sale. It would not be able to differentiate between the amount of land used in the two enterprises, or the amount of revenue or profit generated by each, to determine that the maintenance of animals for sale was the dominant use.
6) Use of the land by the owner for rental purposes is a use which must be taken into account, and weighed against other uses, to determine which is dominant. Rental was the dominant use because, viewed as a whole, rental of the property to Mr Meharg, R & H Hancock and the truck owners, was the most financially rewarding use of the property. It also made use of all the land, except for the disused abattoir buildings.
Issues for determination
The issues for determination may be summarised as follows.
1) Whether the maintenance of horses for sale by Mr Meharg (whether owned by him or others) had a 'significant and substantial commercial purpose or character'.
2) If so, whether that use was 'engaged in for the purpose of profit on a continuous or repetitive basis'.
3) If so, whether that use was the dominant use of the land, having regard to all the uses to which the land was put.
To succeed, the applicant must prove that all three of these issues should be answered in the affirmative.
Mr Meharg's evidence
The Tribunal had the benefit of written statements and oral evidence from Mr Meharg. He said that he had lived on the property continuously since 2006. At first, he had lived there with his wife and children. After separating from his wife in early 2010, he continued to live there. His young son still lived with him there fifty percent of the time.
He maintained his own horses in the paddock nearest the cottage. Apart from one horse reserved for his son's use, he would buy horses in poor condition for the purpose of maintaining them and selling them at a profit. He would try to pay around $500 or $600 for a horse, and sell it for around $1500.
The remaining nine paddocks were occupied by horses owned by other people. Mr Meharg charged the owners agistment fees. He would maintain their horses by filling up their water troughs, maintaining the paddocks generally where they fed, and hand-feeding them when their owners could not do so. Hand-feeding was necessary in winter, because the number of horses on the land exceeded its carrying capacity. Mr Meharg also maintained and repaired the fences.
Eight of the nine paddocks were each allocated to a single client, who would lease a paddock for running one or more horses on it. For the largest of them, he charged about $2,000 per annum. The remaining paddock was a 'mixed paddock', on which Mr Meharg maintained horses belonging to different clients. Each client would pay agistment fees, calculated by reference to the number of horses they owned in the paddock.
He would also act as a selling agent for other people's horses. He thought that, between 2006 and 2010, he had sold about thirty or forty horses. He said he had sold about ten in 2006, more than ten in 2007, some (though he could not recall how many) in 2008, more than ten in 2009, and between ten and fifteen in 2010.
Mr Meharg explained that he was in receipt of pension benefits from Centrelink. He did not keep records of the income and expenditure relating to his horse businesses because, calculated as a whole, they did not return a sufficient profit in any financial year to reach the income tax threshold.
Nevertheless, in a statement made in 2007, he said 'the operations from [sic] the farm are run as a business'. In oral evidence, he said he spent most of his time looking after the horses, and maintaining the farm, observing that there was 'always plenty to do'. In his most recent statement, he estimated spending three to four hours per day looking after the horses and maintaining the facilities. That is not inconsistent with his oral evidence, if the latter is interpreted as referring to time other than leisure time. I accept his estimate of three to four hours per day as accurate.
He said he was not otherwise employed. Most of his income went to paying the rent, and in maintaining the farm. He observed that there was 'not much left over for me', and that he enjoyed the rural lifestyle.
By letter dated 18 February 2010, Bisvic provided the following information to the Chief Commissioner:
'During the time he has rented the property, Craig Meharg has been in receipt of benefits from Centrelink. Consequently, the farm is run on a break even basis. The income which he received from the property is intended to cover the costs of paying rent, costs of maintaining the property and costs of maintaining the stock. He is more interested in the lifestyle than trying to make a profit out of the conduct of the farm. As he does not receive a taxable income from the property he is not required to prepare profit and loss statements for the farm. His statements would not in any event show the sales receipts as these belong to other persons.'
In the same letter, Bisvic also asserted:
1) that at any one time there were generally between thirty and forty horses on the property,
2) that of these, only two were owned by Mr Meharg,
3) that he looked after the remaining horses for other people, and
4) that about thirty horses had been sold off the land in the last two years, with sales usually arranged by Mr Meharg.
There is no evidence that anyone other than Mr Meharg provided this information to Bisvic, or that anyone else knew it. It is likely that Bisvic obtained the information from Mr Meharg.
The information provided by Bisvic is broadly consistent with Mr Meharg's evidence. In his 2007 statement, Mr Meharg had said that he ran the farm 'as a business'. This implies that he was intending to make a profit on a continuing basis. In 2010, Bisvic said that he ran the farm on a 'break even basis', intending only 'to cover the costs of paying rent, costs of maintaining the property and costs of maintaining the stock', because he was 'more interested in the lifestyle than trying to make a profit'.
This is consistent with his statement made on 25 October 2010, that revenue from the farm had been sufficient to pay the rent until recently, when 'I have ... got behind in payment of the rent because of my matrimonial problems'.
The information provided by Bisvic is also consistent with a statement by Mr Cooper dated 21 October 2010, that he had collected thirteen horses from the property from 2007 to 2010, and sold them at the request of Mr Meharg. It is also consistent with the statement of Mr Hadlow, that he had sold four horses between 2005 and 2010, when he had been running horses on the property.
The suggestion that Mr Meharg was running the farm on a 'break even basis' is not necessarily inconsistent with his 2007 statement that he was running the farm as a business. Bisvic's letter of 18 February 2010 indicated that a 'break even' basis meant generating sufficient revenue to cover, not only the costs of the farming operations, but also the cost of renting the cottage, which was a living expense.
Interpreted in that way, the statement of 2007 is consistent with the information provided to Bisvic in 2010, which was reproduced in its letter. I am satisfied that, in each of the tax years, Mr Meharg intended that the return from the farming operations as a whole should pay, not only for themselves, but also for the rent of the cottage. It follows that the farming operations were conducted with a view to making a 'profit on a continuous or repeated basis', whether or not a profit was made. That is distinct from the issue whether the business of maintaining horses for sale was conducted for that purpose. That issue is considered separately below.
In his 2007 statement, Mr Meharg said:
'The number of horses upon the property varies from time to time however the number of the horses is generally between about 40-50 horses. Some horses are kept on a long term basis. Other horses are bought and sold on a short term basis. In the appropriate circumstances, all the horses are potentially for sale.'
The reference to horses 'kept on a long term basis' implies that they were not for sale. It is likely that at any one time, some horses were intended for sale, and others were not. The final sentence is to be interpreted in this context. It indicates that horses were for sale only 'in appropriate circumstances', without describing the nature of those circumstances. It indicates they were only 'potentially' for sale in those circumstances. It is a heavily qualified statement. The nature of the qualifications themselves is unclear. It does not go so far as to prove that all the horses were intended for sale in any tax year, or even that any of them were. Some were probably intended for sale, but it is unclear how many, or what proportion of them were so intended in any tax year.
In his statement of 25 October 2010, Mr Meharg said that there were, by then, thirty-seven horses on the farm. Five were his. From his oral evidence, I infer that four of them were for sale, and the other was reserved for his son. Of the remaining thirty-two horses, he said as follows.
1) Eight belonged to a client called Suzanne. These were 'for a combination of personal use and for sale'.
2) Five belonged to Carol. Her horses were also 'for a combination of personal use and for sale'.
3) Six belonged to Karen and Matt. They were pets.
4) Two Clydesdale show horses belonged to another client. They were not presently intended for sale.
5) Four horses belonged to Mark. He entered them in shows. There was no suggestion that they were intended for sale.
6) There was a child's pony belonging to Madeleine. There is no evidence that this was intended for sale. I infer it was a pet.
7) Two horses belonged to Chaniese. There is no evidence that they were intended for sale.
8) Five horses belonged to Boyd. Boyd kept his horses for the sole purpose of selling them and their offspring. That is consistent with a statement made by him dated 16 October 2010. To the extent that his sole purpose was sale, it seems that he was unlike any other client.
This evidence demonstrates that at least five, and perhaps more, of the thirty-seven horses on the property in 2010 were intended for sale. It also demonstrates that many of them were not so intended. The evidence does not establish the number of horses present in 2008 or 2009, but in view of Mr Meharg's statement of 2007, it seems likely that the picture remained much the same throughout. Some of the horses were intended for sale. Others were not.
The Tribunal had the benefit of observing Mr Meharg give his evidence. It was not the subject of any significant challenge. It was internally consistent, and broadly consistent with the information provided by Bisvic in its letter dated 18 February 2010. His evidence is not so improbable as to cause the Tribunal to doubt its accuracy. I am satisfied of its truth, and make findings in accordance with it.
Profit
It is convenient to deal first with the issue of whether the business of maintaining horses for sale was 'engaged in for the purpose of profit on a continuous or repetitive basis'. In this decision, references to maintaining horses for sale shall include maintaining them for sale, or for the sale of their natural increase.
It is not necessary for the applicant to show that a profit was made. Even without a profit, the requisite purpose of generating one may be present.
The evidence demonstrates that Mr Meharg maintained horses of his own for sale, maintained the horses of others for sale, and agisted horses which were not for sale. The first two uses were capable of attracting the primary production exemption from land tax. In that sense, they were qualifying uses. The third (referred to below as 'mere agistment') was not.
In determining whether the qualifying uses were 'engaged in for the purpose of profit on a continuous or repetitive basis' , it is necessary to distinguish their purpose from that of the non-qualifying use.
Though Mr Meharg kept no records of his revenue or profit, it seems that something exceeding $2,000 per annum was derived from agisting horses. It is not clear what part, if any, of that amount was referable to maintaining horses for sale, as opposed to any other purpose. The evidence does not establish either the revenue from total farming operations in any tax year, or what portion of it was derived from the qualifying uses. Nor does it establish whether the qualifying uses returned a profit.
However, the applicant does not need to establish that the qualifying uses returned a profit on a continuous or repeated basis. It is sufficient that they were engaged in for that purpose.
For the reasons given above, I am satisfied that Mr Meharg conducted the farming enterprises as a whole for the purpose of profit on a continuous or repeated basis. That does not necessarily mean that each aspect of the farming business was engaged in for that purpose. For instance, he could have maintained horses for sale as a hobby, intending to fund it from the profits from his business of 'mere agistment'.
However, there is no persuasive evidence of that.
Viewed as a whole, the evidence suggests that Mr Meharg conducted the totality of his farming operations with a view to profit. In any business consisting of distinct enterprises, it is to be expected that each will produce varying returns, and perhaps losses, from time to time depending on the circumstances. The farming operations had precisely that character. I am satisfied that Mr Meharg did his best to make a profit from each of the business which made up his farming operation - that is, from the qualifying uses, and from mere agistment. It is unlikely that he knew in what proportion each contributed to the profits of the business as a whole, as he did not keep records. His aim was to make a profit from each of them. Whether each actually returned a profit, and if so when, is impossible to say.
I am nevertheless satisfied that the qualifying uses were engaged in for the purpose of profit on a continuous and repeated basis, whether or not either of them actually returned one in any of the relevant tax years.
Commercial purpose or character
It is next necessary to consider whether the qualifying uses - as distinct from mere agistment - were of a ' significant and substantial commercial purpose or character'. That phrase was considered by the Court of Appeal in Hope v Bathurst City Council No 2 [1979] NSWLR 471. Its origins lay in the decision of Walsh J in Thomas v Commissioner of Taxation (Cth) (1972) 46 ALJR 397 (at 400-401). In the latter case, the learned trial judge distinguished between a business on the one hand, and activity by way of recreation or hobby on the other. He found that a practising barrister who grew avocado pear, macadamia nut and pine trees did so as a business.
In Hope No 2 , Rath J had found at first instance that Mr Hope was not conducting a business. To qualify as a business, he observed, 'there must be some activity of which it can be said that it has a significant commercial purpose of character'. He considered that the word 'significant' implied important, real, genuine and weighty. His decision was upheld by the Court of Appeal. Samuels JA, expressing the view of the majority, observed [at 477]:
'In my view, the appellant's argument is essentially this. Once a finding is made that the activities in suit are carried on for the purpose of profit, or for commercial purposes, it necessarily follows that they constitute a business. I am afraid that I cannot accept this argument. Activities may bear the ordinary indicia of commerce, but yet, in all the circumstances, may not constitute a business.'
The issue in this case is not whether Mr Meharg conducted a business, but whether the qualifying uses were of a ' significant and substantial commercial purpose or character'. That involves questions of whether they were, properly viewed, important, real, genuine or weighty. A finding that they constituted activity by way of recreation or hobby, even if a profit was made or intended, would weigh against a finding that they had the requisite purpose or character.
Unlike Mr Hope, Mr Meharg did not keep financial records of the business. In the absence of such records, it is not possible to say whether the qualifying uses returned a profit, as distinct from revenue, or even whether they might reasonably have been expected to do so in the foreseeable future. That is so, even though I am satisfied that Mr Meharg conducted them for the purposes of profit.
It was the applicant's submission that, 'the use of the land has a significant and [substantial] commercial purpose or character in that it produces sufficient income to pay the annual rent ... for the cottage and the farm.'
The fact that Mr Meharg conducted the farming operations as a whole on a 'break even' basis, albeit one which included the rent of his home (except to the extent, if any, that the rent was subsidised by his pension), strongly suggests that the decision to engage in the qualifying uses reflected a lifestyle choice. That is, a decision to conduct the qualifying uses so that they at least pay for themselves, and a little more to the extent possible. This is consistent with Mr Meharg's evidence that, even though the combination of qualifying and non-qualifying uses did not return sufficient profit to attract income tax throughout the years in question, he continued to engage in them, and sought no other employment or conducted no other enterprise.
Such a decision is more suggestive of recreation than of a ' significant and substantial commercial purpose or character'.
There is also no evidence that the qualifying uses (as distinct from the farming operations as a whole) generated sufficient profit to fund investment in any of the farming enterprises, or that any such profits were in fact invested in the farm. Though not necessarily determinative, the generation of profits sufficient to warrant further investment would weigh in favour of a finding that an undertaking had a 'significant and substantial commercial character'. Here, there is insufficient evidence to conclude that such profits were generated or invested, because even though Mr Mehag maintained the fences and otherwise cared for the property, it is not possible to distinguish either revenue or profit from the qualifying uses, as distinct from mere agistment. It is therefore not possible to determine whether profits from the qualifying uses were made, or invested in the farming operations.
For all those reasons, I am not satisfied that the qualifying uses of maintaining horses for sale had a ' significant and substantial commercial purpose or character'.
Dominant use
It remains to consider whether the qualifying uses constituted the 'dominant' use of the land. In Leda Manorstead Pty Limited v Chief Commissioner of State Revenue [2010] NSWSC 867, Gzell J formulated the test for dominant use in the following way.
'69 Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use.
70 That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts.
71 In Saville v Commissioner of Land Tax (1980) 12 ATR 7, Roden J was concerned with whether land was used primarily for the maintenance of animals thereon under a former provision in the Land Tax Management Act . The primary use test was not unlike the dominant use test in the present legislation. His Honour said at 10:
"I am of the view that, for any use of the land to justify the statement that the land is used primarily for that purpose, it is necessary not only that that use prevail over any competing use but also that it be sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land."
72 In Hope v Bathurst City Council (No 2) (1983) 52 LGRA 79, Perrignon J was concerned with the definition of "rural land" as land that is wholly or mainly used for carrying on the businesses or industries of grazing amongst other uses in the Local Government Act 1919, s 118. At 84 his Honour said that what was called for where land was put to a number of uses, was the weighing of the evidence relating to various uses to which land was put, including, but not limited to, the nature and intensity of such uses, the physical areas over which they extended, and the time and labour spent in conducting them.
73 His Honour's decision was upheld on appeal ( Hope v Bathurst City Council (1986) 7 NSWLR 669). A majority of the Court of Appeal held that the characterisation of rural land as land that is wholly or mainly used for carrying on the businesses or industries of grazing, amongst other uses, did not relate solely to the quantum of area of land used for relevant purposes but related to the end to be achieved by the use and included other criteria such as the nature and intensity of the use.'
In Leda , Gzell J rejected the taxpayer's submission that cattle grazing conducted over 83% of some 593 hectares was the dominant purpose. The land had been acquired for development as a residential subdivision. His Honour found that the dominant purpose was residential subdivision because, inter alia , earthworks conducted on the land for that purpose had consumed far more time and expense than maintenance of the herd, and the cost of the earthworks far exceeded the value of the herd.
In Hope's case , Perrignon J was asked to consider whether 15.55 acres of land at Kelso near Bathurst should have been rated as 'rural land'. 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 had been run at a loss for many years. The owner was better off for conducting the activity because, among other things, he would otherwise have been subject to land tax. The Court was not satisfied that grazing was the main use, despite being conducted over the greater part of the land. In reaching that conclusion, it had regard to the relative profitability of the competing uses ('nature and intensity' of use), and the time and labour spent in conducting them.
Similarly, the mere fact that a qualifying use was conducted on the greater part of the total area of lands was not found to be determinative in McClelland v Goulburn City Council (1976) 35 LGRA 1. In that case, the Land and Valuation Court of NSW was not satisfied that grazing was the dominant use, even though it was conducted on nine out of ten acres of land, as there was no evidence of profit. The Court found that the dominant use was as a residence.
The fact that a qualifying use is conducted over the greater part of the land cannot alone satisfy the dominant use test, where that use is conducted over the same area as non-qualifying uses, and there is no means of distinguishing their relative importance. In Jones v Commissioner of Land Tax (NSW) (1980) 11 ATR 98, Hope J sitting in 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.
Between 50% and 60% of the land area was used for the mixed purposes of 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. Hope J was not satisfied that the land was used primarily for the qualifying purpose.
In this case, I am satisfied that 65 out of 70 acres of land - about 93% of the total - was used for the mixed purposes of maintaining Mr Meharg's horses for sale, maintaining other people's horses for sale, and maintaining horses for other people whose sale was not in contemplation. The first two, as I have said, were qualifying uses. The third was not.
I am satisfied that each of the ten paddocks was used for a mixture of uses - namely, maintaining his and other people's horses for sale, and maintaining horses which were not for sale. The evidence does not enable a distinction to be drawn between the area used for the former use, and that used for the latter. To that extent, the facts resemble Jones' case . Accordingly, even if area alone were a sufficient criterion by which to assess the dominant use, I could not be satisfied that more land was used for the qualifying use than for the non-qualifying use of mere agistment.
That situation is to be distinguished from the facts in Ball v Chief Commissioner of State Revenue [2010] NSWADT 114, where it was possible to distinguish between the area used for qualifying uses, as opposed to other uses.
A finding of dominance cannot be justified on the basis of financial return, because the evidence does not establish the revenue from each of the qualifying and non-qualifying uses, or (as in McLelland's case ) their respective profitability, for the purposes of a comparison. Historical financial return, where there is evidence of it, can be determinative: Romano v Chief Commissioner of State Revenue [2011] NSWADT 73.
So far as revenue and profitability are concerned, a comparison would need to be made also with the revenue and profit derived by the Hancocks from their use of the land, even though the area they used was much smaller. It would also be appropriate to compare the qualifying uses with the uses to which Bisvic itself has put the land, including renting part of it to the Hancocks for about $21,000 a year. Even ignoring the profits derived by the Hancocks, if any, the rent derived by Bisvic from the portion rented to the Hancocks significantly exceeded the profit derived by Mr Meharg from the entirety of his farming enterprises.
In terms of time and human effort, I am satisfied that Mr Meharg spent up to four hours a day in his farming businesses. It is impossible to say what part of that, however, was spent on the qualifying uses as distinct from mere agistment. In any event, a meaningful comparison would require evidence of the time and effort spent by the Hancocks in their use of the land, and by any other users of the land. As that evidence is not before the Tribunal, a meaningful comparison of that kind is not possible.
For those reasons, I am not satisfied that the maintenance by Mr Meharg of his horses or those of others for sale constituted the dominant use of the land, whether by reference to the area of land over which that use was conducted, the return generated by it, or any other factor.
In those circumstances, it is unnecessary to consider the comparative significance of the residential uses made of the two cottages on the land by Mr Meharg and Mr Pastrovic, save to observe that I rate the importance of those uses highly.
Nor is it necessary to consider the Chief Commissioner's argument that the qualifying uses to which the land was put by Mr Meharg are to be compared with the 'rental use' to which the property was put by the Bisvic, viewed as a whole. I should observe, however, that Bisvic's 'rental use' was itself divisible into individual rents for different purposes. An owner's use of land can be characterised by the use made of it by a tenant or licensee, at least where that use is made with the knowledge and consent of the owner: Ryde Municipal Council v Macquarie University (1977) 1 NSWLR 304. Whether or not they weigh in favour of an exemption, rents derived from qualifying uses by a tenant ought not weigh against the exemption. The issue does not arise in this case, because the greater proportion of rent was paid by the Hancocks.
Determination
For the reasons given, I am satisfied that that the qualifying use of maintaining horses for sale was 'engaged in for the purpose of profit on a continuing or repetitive basis'.
However, I am not satisfied that this use was of a 'significant and substantial commercial purpose or character', or that it constituted the dominant use of the land, having regard to all the uses to which the land was put.
It follows that, for each of the relevant tax years, the land did not attract the primary production exemption from land tax.
Order
The assessments made by the Chief Commissioner of State Revenue in respect of the 2008, 2009 and 2010 tax years are confirmed.
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Decision last updated: 19 December 2011
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