Colusso v Chief Commissioner of State Revenue
[2008] NSWADT 79
•13 March 2008
CITATION: Colusso and ors v Chief Commissioner of State Revenue [2008] NSWADT 79 DIVISION: Revenue Division PARTIES: APPLICANTS
RESPONDENT
Dora Colusso
Atanasio Colusso
Andrea Colusso
Chief Commissioner of State RevenueFILE NUMBER: 066055 HEARING DATES: 17-18 December 2007 SUBMISSIONS CLOSED: 18 December 2007
DATE OF DECISION:
13 March 2008BEFORE: Verick A - Judicial Member CATCHWORDS: Land tax exemption - primary production MATTER FOR DECISION: Principal matter LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Horticultural Stock and Nurseries Act 1969
Land Tax Management Act 1956
State Revenue Legislation Further Amendment Act 2000
Taxation Administration Act 1996CASES CITED: Abbott v Commissioner of Land Tax (Vic) 9 ATR 728
Colusso & Ors v Chief Commissioner of State Revenue [2003] NSWADT 211
Commissioner of Income Tax v Hanover Agencies Ltd [1967] 1 AC 681
Commissioner of Land Tax v Christie (1973) 2 NSWLR 526
Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278
Knowles v Salford Corporation (1922) 1 CH. 328
McFadden v Ashfield Municipal Council 31 LGRA 211
McMillan v Commissioner of Land Tax [1972] NSWLR 545
Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305
Ryde Municipal Council v Macquarie University (1978) 139 CLR 633
Safety Beach Estates Pty Ltd v Commissioner of Land Tax (1979) 79 ATC 4032
Sonter v Commissioner of Land Tax (NSW) (1976) 7 ATR 30
Spic’n’Span Corporation v Fredericks (1982) 50 LGRA 46
Thomas v FC of T (1972) 46 ALJR 397REPRESENTATION: APPLICANTS
RESPONDENT
J Robson, barrister
A Rider, barristerORDERS: The decision under review is affirmed.
REASONS FOR DECISION
INTRODUCTION
1 In these proceedings, the Applicants seek a review of a decision made by the Respondent disallowing their objection to Land Tax Notices of Assessments issued to the Applicants for the 2001 to 2004 land tax years in respect of land tax on land owned by the Applicants at 821-835 Bass Hill (the “Land”) comprising of Lots 100 and 101 of DP 7111837.
2 The Applicants claim that the Land was exempt from land tax under section 10(1)(p)(i) of the Land Tax Management Act 1956 (LTM Act), as at midnight on 31 December immediately preceding each relevant year it was “land used for primary production”.
3 In 2003, the Applicants and the Respondent were parties to proceedings before the Tribunal in respect of land tax assessments over the Land for the years 1990 – 1999 (the “2003 Proceedings”). The Applicants were successful. The Tribunal (Colusso & Ors v Chief Commissioner of State Revenue [2003] NSWADT 211) upheld their objection to the assessments on the grounds that the Land was entitled to an exemption pursuant to section 10(p)(i) of the LTM Act for land tax years 1990 to 1999 inclusive.
4 At the current hearing, documents filed pursuant to section 58 of the Administrative Decisions Tribunal Act 1997 (“the ADT Act”) were admitted. In addition, a folder containing various documents obtained by the Respondent and described as “Respondent’s Evidence” was admitted. The Applicants filed an affidavit made by John Paul Sammut with various exhibits including an affidavit made by him in the 2003 proceedings was also admitted.
FACTUAL BACKGROUND
5 In the relevant years under review, the Applicants were the registered owners of the Land for land tax purposes under the LTM Act, which was leased to Syesun Pty Limited (“Syesun”). The lease allowed Syesun to use the land as a “General Garden Hardware and Leisure Retail and Wholesale Centre and Car Parking area”. Under the lease Syesun was liable for all land tax in respect of the Land. The Land was zoned by the relevant local council as “Residential”.
6 The Land including land adjoining Lot 101, being Folio ID 1/117235 of Lot in Deposited Plan 117245 owned by the New South Wales Minister of Education and leased to Syesun constituted the whole area used by Syesun at Bass Hill. The land leased from the Minister is not the subject of any assessment nor part of the review in this matter.
7 Syesun is the holding company for the Flower Power group of companies (“Flower Power Group”) and its principal shareholders are members of the Sammut family. In addition to Syesun, Flower Power Pty Ltd (“FPPL”) and Arborglen Pty Limited (“Arborglen”) make up the Flower Power Group.
8 The Flower Power Group commenced operations as a retail nursery some 40 years ago at a site at Moorebank and there are currently 15 nurseries operating within the Flower Power Group (12 in New South Wales and 3 in Victoria).
9 The Sammut Family, owners of the Flower Power Group, have had a very long history with Lots 100 and 101. The two lots historically were one lot owned by the Petricone Family, which had operated a market garden business from it. The Sammut Family commenced to lease part of the land owned by the Petricone Family in 1967 and operated a nursery from the site. The Petricone Family continued to live in a cottage on the site with Sammut Family using most of the land as a nursery. In the late seventies, the business at Bass Hill, with council approval, commenced to sell on the site “non plant stock such as items incidental to the establishment, maintenance and decoration of the garden”.
10 The business in 1982 obtained council approval and constructed “a new area comprising indoor and outdoor display areas for plants and items incidental to the establishment, maintenance and decoration of the garden”. In addition, at about the same time a “glass house” was constructed on Lot 101 and “ a customer car park was also constructed along the front boundary of the site”. In 1984, the business also began to lease the land adjoining land from the Minister of Education.
11 Further historical background is set out in John Paul Sammut’s Affidavit dated 22 November 2006 (filed in these proceedings) in the following paragraphs:
12 From information obtained from the Flower Power Group website, publications of the Group and from the Nursery and Garden Industry NSW and ACT, the Respondent has in his written submissions set out the current business structure of the Flower Power Group as follows:
“30. In 2000 a new car park was constructed over Lot 100 of the land. The cottage, which was previously occupied by the Petricone family, was demolished, as was the shed at the back of the cottage. Mrs Petricone who continued to live at the cottage died in December 1992 and thereafter it was occupied by members of her family.
31. Other than the new carpark development which was completed in early 2000, no significant development or changes had been taken place at Flower Power Bass Hill.”
13 The events leading to these proceedings are set out in the Respondent’s written submissions as follows:
“Business operations of the Flower Power Group
11. During the Review Period, the Group’s business operations comprised the production, wholesale and retail sale of plants (organised into a vertically integrated structure as set out below) and the retail sale of general (that is non-plant) merchandise (General Merchandise) from various outlets in New South Wales and Victoria.
Production
12. Aborglen operated the Group’s commercial plant propagation nursery at Glenorie in Sydney’s northwest. Here, new plants were generated from seeds or cuttings on a large commercial scale. From 8 August 2002 onwards, Aborglen was accredited as a production nursery (grower) under the Nursery Industry Accreditation Scheme Australia (NIASA). The Arborglen nursery at Glenorie was not open to the general public to purchase plants during the review Period.
Wholesale
13. Aborglen sold the potted plants it propagated by wholesale and to retail outlets, including the various Flower Power retail outlets operated by FPPL around the greater Sydney region. The general public could not purchase plants by wholesale from Arborglen at any material time. The Group also operated a substantial plant import business through its Glenhaven wholesale operation.
Retail
14. FPPL, through its various retail outlets, including its retail landscaping centre and retail garden centre known as “Flower Power Bass Hill” (the Retail Outlet), sold General Merchandise and plants growing in pots (Potted Plants) by retail to the general public. The Retail Outlet bought all its stock (being General Merchandise and Potted Plants) from wholesale suppliers. The Retail Outlet was not accredited as production nursery (grower) under NIASA during the Review Period.”
Evidence
“20. The Respondent issued Land Tax Notices of Assessment to the Applicants on the taxable values of each of Lots 100 and 101 for all years during the 2001 to 2004 Land Tax Years ( Assessments ).
21. The Applicants objected to the Assessments by letters dated 23 October 2003 and 12 March 2004 (Objection) on the ground that the Land on which the Retail Outlet operated was exempt from land tax as land used primarily for primary production in the course of carrying on a business of primary production.
22. On 19 October 2004, two compliance officers from the New South Wales Office of State Revenue (OSR) inspected the Retail Outlet and found that the Retail Outlet operated as a retail nursery, being a nursery at which the principal cultivation was the maintenance of plants pending their sale to the general public.
23. On 8 July 2005, to gather further information to assist in the determination the Objection (Audit), two OSR officers attended:
24. Based on information obtained from the Audit, an Audit Report was prepared by the OSR which recommended that the Assessments stand on the basis that the Land was used to operate a retail nursery, with the main characteristic being the maintenance of plants pending their sale to the general public.
(a) at 124 Newbridge Road, Moorebank, New South Wales (Group Head Office) and made records of interview with Michael Spiteri (Group Finance Director) and Nathan Rowe (Group Area Manager) while the Applicants’ solicitor ( Robert Barnes ) was present; and
(b) at 821 Hume Highway, Bass Hill, New South Wales (the Retail Outlet) and made a record of interview with Lek Sim (Nursery hand) while Robert Barnes and Nathan Rowe were present.
25. On 24 March 2006, the Respondent informed the Applicants that their Objection had been disallowed (Decision) on the grounds that:
26. On 22 May 2006, the Applicants filed an application for review of the Respondent’s decision to disallow their Objection ( Application for Review ) in the Administrative Decisions Tribunal.”
(a) the land was used as a retail store, where the principal cultivation conducted on the Land was the maintenance of plants pending their sale to the general public.
(b) the placing of pots on the Land and tending those pots did not constitute cultivation of the Land; and
(c) the primary use of the Land was considered to be a retail nursery, whereby plants were imported onto the Land, maintained by watering, feeding, fertilising and re-potting to enable sale of healthy plants to the general public.
14 The activities at “Flower Power Bass Hill”, the “Retail Outlet” were described by John Paul Sammut, Managing Director of the Flower Power Group of companies in his affidavit made on 22 November 2006 as follows:
15 At the hearing, John Paul Sammut when cross-examined by Counsel for the Respondent confirmed that most plants were sold fairly quickly after they arrived at Bass Hill site from the Flower Power’s commercial nursery (Arboglen) and other suppliers but that some plants would take longer, up to three months, to sell.
“Flower Power Bass Hill
12. Part of my role as Managing Director requires me to have detailed knowledge of the operations at all of the Flower Power nurseries. As I have already stated, the business was started by my father and even before I commenced employment with Flower Power in 1974, I was familiar with the manner in which the business was conducted. My father and I have a close relationship and we have always discussed business matters. Indeed in respect of the Flower Power Bass Hill, I was engaged as the full time manager at the nursery from 1978 to 1984 so I am very familiar with the way it operated and continues to operate.
13. I have an intimate knowledge of the operations at Flower Power Bass Hill. I regularly visited the nursery and I am in twice weekly contact with the various individual nursery managers who are responsible for managing the Bass Hill nursery on a day to day basis. Over the years (including the years of the Assessments), I have made and continue to make all decisions in consultation with my management team about the operation of the nurseries including plant stock cultivated and propagated. I decide what species are grown, the quantities grown and where the plant stock is grown. I also make all decisions regarding the development of the individual nursery sites including the Bass Hill nursery, for example the construction of new garden beds and alterations to planting areas.
14. In describing the activities conducted at Flower Power, Bass Hill I have referred to the whole of the nursery, namely Lot 100, Lot 101 and the Department of Education land not just that part of the nursery which comprises the land.
…
16. In terms of propagation and cultivation, the activities carried out on the land during the years subject to the Assessments included:
32. Once development of the new carpark was completed on lot 101 in early 2000, the extent of propagation (but not cultivation) at Flower Power Bass Hill declined considerably. While propagation is still carried on at the nursery, with cuttings taken regularly and planted in plants tray, the use of lot 100 as a carpark has restricted the ability to undertake extensive propagation. The majority of plants are now brought in off site and are cultivated in the manner described below by nursery staff awaiting sale.
Preparation and maintenance of in ground garden beds including pruning and trimming plants as required, watering with automated watering systems, fertilising and mulching soil to ensure the healthy growth of plants in garden beds and spraying plants to control pests, laying wood chips over the beds to control weeds, and weeding. All raw material used in the propagation and cultivation of plants in these in ground garden beds were stored on site in the bulk storage bins.
Levelling and preparing parts of the site for the propagation and cultivation of plants in containers including cleaning and providing a hygienic environment from which plants could be cultivated and propagated.
Where pots were placed directly on the land, it was necessary (and remains so today) for the land to be treated so that fungus does not develop and infect the plants. This treatment was carried out by the levelling the land, installing agricultural pipes for drainage and then laying a 40 to 50 mm layer of gravel. The gravel was delivered on site and stored in the bulk storage bins. The gravel was required to be replenished by the laying of new gravel at least twice a year. This process continues to be undertaken at Flower Power Bass Hill.
Maintenance and cultivation of growing plants in pots including potting immature seedlings brought to the site from outside nurseries, pruning and repotting plants as required, watering with automated watering systems and in the case of seedlings watering by hand, fertilising potted plants to ensure the healthy growth of plants in pots and spraying plants to control pests.
The use of a glasshouse facility to grow plants in a fully automated and artificially controlled environment for optimal growing conditions for certain plants. Such plants include seeds, which are germinating, cuttings which have yet to strike, immature seedlings and immature and mature plants.
Regularly repotting plants to bring plants cultivated on site to a commercial size and enable growing of plants to continue.
…
33. Nearly all plant stock sold at Bass Hill is cultivated at Bass Hill. Most of such plant stock is propagated at Flower Power’s Arborglen nursery and is then cultivated at Bass Hill for a period of at least 3 months before it is sold. This process is known as “growing on” and is what distinguishes Flower Power from its competitors and is what gives Flower Power a competitive advantage over its competitors. In this way nearly all plant stock sold at Bass Hill is either propagated or cultivated at Bass Hill.”
16 As part of his compliance activities leading to making the objection decision under review, the Respondent’s officers interviewed on 8 July 2005 three key employees of the Flower Power Group in the presence of their solicitor and obtained signed statements in a question and answer form.
17 Lek Sim a nursery hand for Flower Power at Bass Hill who has worked in that capacity for a number of years and is employed to work six days a week responded to the following questions as follows:
18 Nathan Rowe, the Flower Power Group’s Area Manager at the interview provided the following information:
“Q: What are your roles and responsibilities (work performed)?
A: In my job I:
Q: How much time do you spend growing plants in an average week?
(a) Look after plants including feeding, pruning, staking, potting-on;
(b) Look after the front garden;
(c) Collect trolleys
(d) Help customers.
A: I do not grow any plants from the ground-up. I re-pot roses, fruit trees, and ornamentals. These come bare rooted in Hessian bags. I cut the bags and put plants in the pots. I back-fill the pots with soil, and larger plants are stacked and bar-coded.
Q: How often are plants grown from seeds or cuttings at the Bass Hill site?
A: I do not grow plants from seeds or cuttings on the Bass Hill site. I do not know of any plants grown from seeds or cuttings at the store in Bass Hill.”
“Q: Do you assist any other areas of the Bass Hill site?
A: I usually attend to plants as a training exercise for staff. I show them how much fertiliser to use, and what fertiliser to use. I show them how to prune and how much to prune. I show them how to stake a plant and how to ‘pot-on’.
Q: What is the meaning of the term ‘potting-on’?
A: The term ‘potting-on’ refers to taking a small plant pot and transferring it to a larger pot. This involves:
Q: How much time do you spend growing plants in an average week?
(a) removing the plant from the small pot;
(b) pre-filling the larger pot with soil so that the plant is level with the new pot height;
(c) loosening up the root base;
(d) black-filling the larger pot with more soil as needed;
(e) banging the pot against the ground to compact the soil;
(f) then feed, water, prune and stake the plant.
A: I do not propagate or cultivate plants within my role. There is no generation of plants from seeds or cuttings on the Bass Hill site. The plants sold from this site are generated in seed houses and propagation houses. This is due to need for a controlled environment to prevent diseases. These processes need to be carried out in a sterilised environment. The majority of plants on this site are imported from suppliers.
Q: How many plants would you propagate and cultivate in an average week? How do you make this determination?
A: No propagation of plants from cuttings or seeds has occurred on the Bass Hill site since the car park was constructed. As plants grow larger they get ‘potted-on’ to a larger pot. Records of this should be kept, but more often than not this gets forgotten. The purpose for the record keeping is for inventory control and to factor in costs.
Q: How often are plants generated from cuttings or seeds?
A: No plants are generated from cuttings or seeds on this site. All plants sold to the public are purchased from suppliers in a pot stage and then potted on until sold.
Q: What protective measures are put in place to assist their survival? Where are they kept and how are they maintained?
19 Michael Spiteri, Finance Director of the Flower Power Group in his interview was asked about the ownership, operational structure, stock controls, staff and financial details of income from the operations and some general issues. He confirmed that Lek Sim was responsible for cultivation at the Bass Hill site and that the “majority of plant stock sold is brought in from suppliers. The stock purchased from suppliers occupies the majority of the site. The level of propagation at Bass Hill is minor.”
A: There is no need to take protective measures to ensure plants survival prior to reaching a saleable condition as they are purchased in a hardened condition from suppliers. Hardened condition is when a plant has no risk of deteriorating that is it doesn’t have to be stored in a hot house for preservation. In its current form it is available for sale immediately to the public.”
20 The Respondent in his bundle of evidence included various aerial and on ground photographs of the site taken by professional photographers. Essentially, the photographs indicate the area of usage of the land in relation to the various activities carried on at the Bass Hill retail site.
Relevant Statutory Provisions
21 By the combined effect of sections 7, 8 and 9 of the LTM Act, land tax is levied each year on land value of all land in New South Wales owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied other than land which is exempt from taxation under the LTM Act.
22 Section 10 of the LTM Act sets out various categories of land that enjoy exemption from land tax under the LTM Act. In relation to these proceedings, the exemption relied upon by the Applicants under section 10(1)(p) was in the years under review in the following terms:
23 In relation to these proceedings, sections 10B, 10D, 10E, 10G and 10P of the LTM Act are not relevant and section 10(1)(p)(ii) does not apply to the years under review because at all material times the Land was zoned “Residential” and was accordingly not within a “rural” or “non-urban” zone under a planning instrument.
“10 Land exempted from tax
(1) Except where otherwise expressly provided in the Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act:
…
(p) with respect to taxation leviable or payable in respect of the year commencing 1 January 1991 or any succeeding year, land that:
(i) is land used for primary production in the course of the carrying on of a business of primary production, or
(ii) is land used for primary production (whether or not in the course of carrying on a business of primary production) if the land is within a “rural” or “non-urban” zone under a planning instrument or (in the case of land not within a zone under a planning instrument) is land that the Chief Commissioner is satisfied is rural land, …”
24 The words “land used for primary production” is defined in section 3(1) of the LTM Act, which relevantly for the land tax years under review, to mean:
Submissions
“land used primarily for:
(a) the cultivation thereof for the purpose of selling the produce of such cultivation,
(b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce,
(b1) the purpose of commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) and the commercial farming of fish, molluscs, crustaceans or aquatic animals,
(c) the keeping of bees thereon for the purpose of selling their honey,
(d) a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or
(e) the propagation for sale of mushrooms, orchids or flowers, …”
25 The Applicants essentially claim that “the land is, and was at all material times, exempt from land tax for each Assessment Year pursuant to section 10(1)(p) of the LTM Act as then in effect”. The Applicants claim that in each relevant year the land was “land used for primary production” because the Land “met the requirements of either or both sub-paragraphs” (a) and (d) of the definition of “land used for primary production” found in section 3 of the LTM Act.
26 In relation to sub-paragraph (a), the Applicants’ submission was “that breaking of the soil or ploughing is not a requirement of the definition of cultivation” and that “growing on” of plants involved cultivation. Reliance was placed on the following observations made by Rath J in Safety Beach Estates Pty Ltd v Commissioner of Land (1979) 79 ATC 4032 at 4037:
27 It was also submitted that:
“The land may in the relevant sense be cultivated in some instances by breaking it up, as by ploughing, or in other instances by activities that may or may not be associated with the breaking up of the soil. It is the land, not the soil alone, which is the subject of cultivation. This may be achieved by improvement to the water supply to the plants, by fertilising, by spraying plants with insecticides and fungicides and by the establishment of windbreaks.”
28 As to whether the Land was “primarily” used for cultivation in relation to the “Cultivation Issue” it was submitted that “the land was put to several uses during the Assessments Years:
“A further important feature of the meaning of the word “cultivate” in the LTM Act can be drawn from its use in the reference, in sub-paragraph (d) of the definition of “ land used for primary production ”, to a “ nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public ”. Those words show that cultivation and maintenance are not mutually exclusive but, rather, that maintenance is a sub-set of cultivation. That proposition is consistent with the natural meaning of both words.”
29 The above submission was made on the basis of judicially explained meaning of the concept “primary use” in a number of cases. Reliance was placed on the decisions in Sonter v Commissioner of Land Tax (NSW) (1976) 7ATR 30, Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7ATR 278, Abbott v Commissioner of Land Tax (Vic) 9 ATR 728 and Spic’n’Span Corporation v Fredricks (1982) 50 LGRA 46.
(i) in part as a car park (but that use was ancillary to the cultivation);
(ii) in part for the sale of items other than plants the result of the cultivation of the land (but that use was less important in scale and character than the cultivation); and
(iii) in part for the cultivation of the land and sale for the produce thereof. This cultivation use was the primary use and occurred in a business of primary production and, accordingly, the land was exempt from land tax under the “cultivation” exemption.”
30 In relation to the issue whether the Land was in the relevant years a commercial plant nursery other than one at which the principal cultivation was the maintenance of plants for sale to the general public, the Applicants have submitted that their cultivation activities on the Land went beyond “mere maintenance of plants pending sale” because the “growing on” involves significant cultivation activities.
31 Alternatively, it was submitted by the Applicants that if the above submission is rejected it would not disqualify the Applicants on relying on this ground to claim an exemption under paragraph (a).
32 Finally, it was submitted that, in considering the exemptions available to the Applicants, the Tribunal was obliged to consider both Lots as a single parcel of land. The arguments advanced for this view were as follows:
33 The Respondent on the other hand submitted that for the Applicants to succeed in this matter they had to establish:
“6. First, the land tax assessment was made in respect of the Land as a whole and not in respect of each lot. Accordingly, as these proceedings relate to that assessment, the question of the assessability of each separate lot does not arise in the proceedings.
7. Secondly, there is authority for the proposition that a holding of contiguous lots of land may be a single parcel of land for the purposes of the LTM Act. In this regard:
(a) in McMillan v Commissioner of Land Tax [1972] NSWLR 545, Issacs J had to consider whether land held under one title but comprising of two contiguous lots contained two or one parcels of land:
(i) for the purpose of determining whether a taxholder whose primary residence was contained on one of the lots held “other land”; and
(ii) for the purpose of determining whether the land was used solely as the site of a single dwelling house in circumstances where the dwelling house was completely contained on one of the lots and the garden and garage of the dwelling house was contained in the other lot;
(b) his Honour found that the land constituted a single parcel and that the use of the entire parcel was as the site of a single dwelling house;
(c) in Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305, Hunt J had to consider whether land under two contiguous titles constituted a single parcel of land used and was used as a principal dwelling place by its owner and for no other purpose. Again, the house was on one lot (owned in the joint names of husband and wife) and a garden on the other (owned in the name of the husband alone). His Honour found that the land constituted two parcels while it was held under different titles. The taxpayer and the Commissioner agreed that, when the garden lot was subsequently transferred into the joint names, the land constituted a single parcel.
8. Apart from a reasonable, practical and fair approach would itself be determinative, those authorities also clearly support the proposition that land will comprise a single parcel even where it is constituted by two contiguous lots, particularly where, as in the present circumstances, the same parties hold (and effectively and practically use) both lots.”
34 The Respondent identified the first issue that had to be resolved in these proceedings was, “what the Land was used for during the Review Period”. The Respondent submitted that in the absence of a definition of the word “used” in the LTM Act, reliance had to be placed on judicial approaches as to the meaning of the term “used”. In his written submissions, the Respondent examined the following cases:
“(a) that the primary use of each of Lots 100 and 101 was “primary production” being:
(b) that Lots 100 and 101 were used primarily for ‘primary production’ in the course of the carrying on of a business of primary production on each of Lots 100 and 101.”
(i) the cultivation thereof for the purpose of selling the produce of such cultivation; and/or
(ii) a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public; and
35 On the basis of the permitted use of the land under the lease, it was submitted by the Respondent that in the relevant years it was used for “General Garden Hardware and Leisure Retail and Wholesale Centre and Car Parking areas”.
“39. … In Commissioner of Land Tax v Christie (1973) 2 NSWLR 526, Bowen JA (as he then was) held (at page 533):
40. In Sonter v Commissioner of Land Tax (NSW) (1976) 7 ATR 30, a case involving land with mixed uses, Rath J held (at page 35):
“ Use” has regard to the purpose to which land is put.
41. In Ryde Municipal Council v Macquarie University (1978) 139 CLR 633, a case involving the issue of whether land leased from Macquarie University was within an exemption from council rates as being land used solely for the purposes of the university, Gibbs ACJ (as he then was) held (page 638-639):
“No refined consideration here is required of what is involved in the concept of “use” of land; as I have said, the land is plainly used in a number of ways, …”
“ A person who owns land may be said to use it for his own purposes notwithstanding that he permits someone else to occupy it, even under a lease. That is almost beyond argument when the owner’s purpose is to acquire income. In ordinary accepted meaning the word [land] is “used” for the purpose of acquiring income if rents are derived from it, and an owner of premises who leases them is making use of those premises by employing or applying them for the purpose of letting: Commissioner of Income Tax v Hanover Agencies Ltd [1967] 1 AC 681, at p.689 … Where use … is in question, I can see no reason to disregard the indirect use [a person] makes of [land] by providing it for the [use] of [others].”
36 On the evidence, it was submitted by the Respondent that Lot 100 was used by the Applicants to derive rental income and by Syesun, the lessee, “to provide a Public Car Park on 100 percent of Lot 100”. In relation to Lot 101, it was submitted that it was used “by the Applicants to derive Rental Income” and by Syesun:
37 It was also submitted that “in terms of total area”, in the relevant years, the Land was used as follows:
“(i) to provide a Public Car Park (occupying 45 percent of Lot 101 by area);
(ii) for the retail display and sale of General Merchandise to the general public (occupying 25 percent of Lot 101 by area and generating 59 percent of average annual sales revenue of the Retail Outlet during the review Period, with annual sales, at their highest, in excess of $1.6 million);
(iii) for the retail display and sale of Potted Plants to the general public (occupying 25 percent of Lot 101 by area and generating 41percent of the average annual sales revenue of the Retail Outlet during the Review Period, with annual sales, at their highest, of around $1.1 million); and
(iv) for Decorative Garden Beds (occupying 5 percent of Lot 101 by area)”.
38 The Respondent identified the second issue that required resolution was “what the Land was primarily used for during the Review period”. In the absence of a definition of the term “primarily” in the LTM Act, the Respondent sought to define the term on the basis of the following written submissions:
“56 percent for Public Car Parks;
20 percent for the retail display of General merchandise;
20 percent for the retail display of Potted Plants; and
4 percent for Decorative Garden Beds.”
39 Relying on the approaches suggested in the above cases, the Respondent submitted that, on the evidence, “the primary use of the Land (and the Site as a whole) was the conduct of a retail landscaping centre and retail garden centre business (i.e. the Retail Outlet).”
“49. … In Sonter , Rath J held (at page 35):
“The word “primarily”, as applied to the case, means that those uses are to be weighed and evaluated. There is no particular touchstone that can be used; all circumstances bearing on the degree, extent and intensity of the uses as land uses are to be considered. The question is one of fact and degree, and one to be approached on a broad, commonsense basis.”
50. In Grenville Pty Limited v Commissioner of Land Tax (NSW) (1977) 7 ATR 278, Helsham CJ in Eq., in discussing the determinant of the primary use of land, stated (at page 280):
“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.”
51. In Abbott v Commissioner of Land Tax (Vic) (1978) 9 ATR 728, Lush J stated (at page 732):
“In construing the word “primarily” … the predominant use (of the land) …must be of such a degree as to impart a character to the parcel as a whole.”
40 In order to resolve this issue, it was also submitted that the relevant factors in determining when land with multiple uses is land used primarily for primary production are those set out by the Respondent in his Revenue Ruling Number LT222 in the following paragraphs:
41 The Respondent submitted that the third issue that had to be resolved was “whether, during the Review Period, the Land was land used primarily for primary production being:
“ 3. In order to qualify for the primary production exemption, the land must be used primarily for primary production. Where land is used for more than one purpose, it will only qualify for exemption if the primary production activity conducted on the land is such as to give the land the character of being mainly used for that activity.
4. In determining whether this is the case, the degree extent and intensity of each use should be considered. Relevant factors include the area of land allocated to each use, the capital investment in each use, the income generated by each use, and the use both before and after the taxing date …”
42 In relation to this issue, the Respondent submitted that on the basis of the decision in Safety Beach Estates Pty Limited v Commissioner of Land Tax (NSW) “for land to be used primarily “for the cultivation thereof for the purpose of selling the produce of such “cultivation” the cultivation of the land must be:
(a) the cultivation thereof for the purpose of selling the produce of such cultivation; and/or
(b) a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public.”
43 It was further submitted that “statutory support” for the above view “is found in the fact that the LTMA makes special provision to include land used for the propagation of mushrooms, orchids or flowers (being crops or plants which are not necessarily planted or sown in the soil on the land, example mushrooms are usually propagated in bags, boxes or racks above the ground and orchids are propagated in pots) as land used for primary production”.
(a) for the benefit of a “crop” (example a plant) planted or sown in the soil on the land; and
(b) for the purpose of selling the produce of a “crop” planted or sown in the soil on the land.”
44 The Respondent submitted that the Applicants’ submission that cultivation of plants occurred on, and occupied, a large portion of the Land being approximately 60 percent of the Land, which is not used for car parking should be rejected on the grounds that section 3(1) of the LTM Act “is concerned with the cultivation of land, not cultivation of plants”. This submission was “based on the Safety Beach principles, that the cultivation must be for the benefit of plants planted or sown in the soil.”
45 The Respondent accepted that the land used for “Decorative Garden Beds” which constituted only 5 percent of Lot 101 was during the relevant years used for cultivation of plants growing in the soil. But that they were only grown as a condition of approval granted by the New South Wales Planning and Environment Commission for planning approval to use the Land as a retail nursery selling a wide range of merchandise and as a condition of the lease. It was further submitted that these plants did not come within the section 3(1) exemption, as there was no “evidence that the purpose of the cultivation of the Land was to sell the produce of such cultivation or that the Applicants did, in fact, sell the produce of such cultivation during the Review Period”.
46 The fourth issue that the Respondent considered necessary for resolution in this matter was whether the Applicants were entitled to the exemption under section 3(1)(d) of the LTM Act – “a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public”. In relation to this issue the Respondent made the following submissions:
“83. The Respondent submits that the word “commercial” in this context refers to a large scale enterprise carried on for the purpose of making profit. (See the definition of “commercial” in The Macquarie Dictionary, Third Edition, 1997)
47 In the present matter, it was submitted by the Respondent that “the evidence shows that all plants sold at the Retail Outlet to the general public were purchased from wholesale plant suppliers in a “hardened” condition (that is ready for immediate sale to the general public) and that accordingly, “during the Review Period, neither Lot 100 nor Lot 101 fell under sub-paragraph (d) of the definition of “land used for primary production” in section 3(1) of the LTMA.”
“Nursery”
84. In determining the meaning of the word “nursery” in this context, the Second Reading speech to the State Revenue Legislation Further Amendment Bill 2000 (NSW) (Bill) (which when enacted as the State Revenue Legislation Further Amendment Act 2000 (NSW) (Amending Act) amended subparagraph (d) of the definition of “land used for primary production” in sub-section 3(1) of the LTMA with effect from 31 December 2000) is highly relevant. The Second Reading speech to the Bill provided as follows:
85. The Explanatory Note to the Amending Act provided:
“Land Tax Management Act”
…
The Bill proposes an unavoidable change to the definition of “nursery”. Land used for a nursery is exempt from land tax on the basis that it falls within the definition of “land used for primary production”. Concessions in the Duties Act use the same definition, which relies in part on the definition of “nursery in the Horticultural Stock and Nursery Act 1969. That Act is to be repealed, effective from 31 December 2000. The bill includes a definition in relation to nurseries with essentially the same meaning as the current provisions.”
86. Section 3 of the Horticultural Stock and Nursery Act 1969 (prior to the repeal of that Act) contained the following relevant definitions:
“Commercial plant nurseries
Land used for primary production is exempt from land tax. The definition of land used for primary production in the [LTMA] includes a “nursery”, which, in turn, is defined by reference to the Horticultural Stock and Nursery Act 1969. The Horticultural Stock and Nursery Act 1969 is proposed to be repealed in the near future. In anticipation of the repeal, Schedule 3[1] amends the definition of land used for primary production to preserve its effect.”
87. Based on the Second Reading Speech to the Bill and the Explanatory Note to the Amending Act, the Respondent submits that a “nursery” in the above context means a place where plants that would have been “proclaimed horticultural stock” under the repealed Act are propagated (i.e. generated from seeds or cuttings) for the purpose of sale.”
“nursery” means any place at which any horticultural stock is propagated for the purpose of sale;
“horticultural stock” means any tree, vine, plant, shrub or other vegetation;
“proclaimed horticultural stock” means any class of horticultural stock that is for the time being declared to be proclaimed horticultural stock pursuant to section 5; and
“propagate”, in relation to any horticultural stock, means generate or multiply, by sexual or asexual means.
48 It was further submitted by the Respondent “that a nursery where ‘the principal cultivation is the maintenance of plants pending their sale to the general public’ is a nursery whose main growing activity is to keep plants alive and healthy while they await sale to members of the public” And that in respect of the Applicants’ nursery which imported plants in a “hardened condition”, any ‘cultivation’ activity such as watering, feeding, trimming or re-potting) by the nursery to keep the plants alive and healthy while they await sale to the general public amounted to “maintenance” of those plants. Accordingly, it was submitted “that during the Review Period, neither Lot 100, Lot 101 nor the Land fell under sub-paragraph (d) of the definition of ‘land used for primary production’ in section 3(1) of the LTMA, because (among other things) the principal cultivation (if any) of plants that took place on the Land was the maintenance of those plants pending their sale to the general public.”
49 The final issue the Respondent addressed was “whether during the Review Period each of Lots 100 and 101 was used for ‘primary production’ in the course of carrying on of a business of primary production on Lots 100 and 101”. It was submitted that the evidence shows that during the relevant years under review, the Land was used “to provide a Public Car Park for the general public to park their motor vehicles while shopping at the Retail Outlet; for the retail display and sale of General Merchandise and Potted Plants to the general public; and for the Decorative Garden Beds as required by the Development Approval” and “that none of these uses arose in the course of the … carrying on a business of primary production”.
Findings and Reasons for Decision
50 The first task the Tribunal has is to determine whether the Respondent in considering the application of the relevant exemptions was entitled to treat each lot as “land” for purposes of determining whether “the land was used for primary production” in terms of the application of section 10(1)(p) of the LTM Act or “land used primarily for” in terms of paragraph (a) of section 3(1) of the LTM Act “the cultivation thereof for the purpose of selling the produce of such cultivation” or in terms of paragraph (d) of section 3(1) of the LTM Act as “a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public”.
51 The term “land” is used in the LTM Act in various provisions, for example in section 7, which levies land tax “on the land value of all land situated in New South Wales”. More relevantly, section 3 defines “Land used for primary production means land used primarily for:
52 The term “land” is however not defined in the LTM Act. The question that arises, in particular in this matter, is whether “land” for purposes of the relevant exemptions means a lot with a specific title or does it include a parcel of lots depending on the circumstances. Some assistance in answering this conundrum is available from the judicial pronouncements in cases which have considered its meaning in the context of the principal place of residence exemption.
(a) the cultivation thereof for the purpose of selling the produce of such cultivation,
…
(d) a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public …”
53 Since the decision in McMillan v Chief Commissioner of Land Tax [1972] 1 NSWLR 545, it has been accepted that the term “land” in the context of the LTM Act is used in the same sense as the phrase “parcel of land”. In McMillan, his Honour Isaacs J was required to decide whether two lots in the same ownership with a dwelling on one lot and a garden on their lot constituted a “parcel of land”. His Honour was considering this issue in the context of section 9(3) of the LTM Act as in force at that time which allowed an exemption in respect of “land owned by a person … used and occupied by that person solely as the site of a single dwelling house …” It was held by Isaacs J that the “subject land was used and occupied” as a “single dwelling house”.
54 Subsequently, in Ryan and Anor v Commissioner of Land Tax (1982) 1 NSWLR 305 Hunt J, held “that contiguous blocks of land can comprise a ‘parcel of residential land’” within the exemption then available under section 10(1)(r)(ii) of the LTM Act for land used as a principal place of residence, “only where they are undivided not only by physical separation but also in use, occupation and title”. The principles settled in Ryan have been applied in several cases and Ryan remains a binding authority.
55 In the present matter, Lots 100 and 101 would, on the basis of the settled principles, clearly constitute a parcel of land or simply “land” in the context of the exemption under consideration. The question remains, as to whether the land adjoining Lot 101 and belonging to the New South Wales Department of Education could also be regarded as part of that parcel. The exemption relating to the principal place of residence was considered in Ryan in the context of “parcel of residential land” and also in the context of a defined limited area in terms of square metres.
56 The exemption under consideration for “land used for primary production” is not circumscribed in that manner. It is in that sense not restricted in its application to any particular area. The test would simply be whether the parcel of land constituting, as in this case, three lots is used for primary production. Entitlement to the exemption would of course depend on ownership of each of the particular lots.
57 Accordingly, in this matter it is necessary to look at the activities on all three lots as a single parcel of land to determine whether the land was used for primary production in the relevant years. The Respondent has produced a great deal of detail in terms of percentages of use of each lot individually. This information is helpful but is not determinative of the use of the land as a whole. Fortunately, the Respondent has also considered the issues in this matter by treating the Lots100 and 101 as a parcel of land. The significance of the land belonging to the New South Wales Department should be assessed along with those considerations to determine this question.
58 There are two substantive issues that need to be resolved in this matter. The first relates to the exemption sought under section 3 (1)(a). This issue is, essentially, whether the land in this matter was land used primarily for the cultivation of the land for the purpose of selling the produce of such cultivation. The second issue only arises for consideration if the Applicants do not succeed on the first issue. The second substantive issue is whether the land in this matter was used primarily for a commercial plant nursery.
59 The first issue requires an examination of the meaning of the expression “the cultivation thereof for the purpose of selling the produce of such cultivation”. The term “cultivation” is not defined in the LTM Act. Hence, it is necessary to determine its ordinary meaning in the context used.
60 The Applicants’ case was “that breaking of the soil or ploughing is not a requirement of the definition of cultivation” and that “growing on” of potted plants involves cultivation. It was submitted that as to what constitutes “cultivation” in the broader sense is a question that has to be answered in accordance with the tests formulated by his Honour Rath J in Safety Beach Estates Pty Ltd v Commissioner of Land Tax (N.S.W.). In particular in their written submissions, reliance was placed on his Honour’s following statements:
61 In response, the Respondent submitted that, the Tribunal should reject the Applicants’ submission because sub-paragraph (a) of the definition of “land used for primary production” in the context of the exemption in section 3(1)(a) is concerned with the “ cultivation of land ” and not cultivation of plants. And that the cultivation of the land must be for the benefit of plants planted or sown in the soil. The Respondent for his view also placed reliance on the decision in Safety Beach case.
“… Rath J stated that the expression “ cultivation thereof for the purpose of selling the produce of such cultivation ” conveyed the idea of “the improvement of the land for the purposes of selling the produce of the improved cultivation”. Rath J stated that “ it is the land, not the soil, which is the subject of cultivation “ and that it may “ be cultivated in some instances by breaking it up, as by ploughing, or in other circumstances by activities that may or may not be associated with breaking of soil ”. By way of example, his Honour noted that cultivation not involving breaking of the soil may proceed “ by improvement to the water supply of the plants, by fertilizing, by spraying plants with insecticides and fungicides and by the establishment of wind breaks ”.
62 In Safety Beach, his Honour Rath J was there concerned with the same expression “the cultivation thereof for the purpose of selling the produce of such cultivation” appearing in section 3 (1)(a) of the LTM Act in the context of a parcel of land described in his Honour’s judgment as the “Woolgoolga land”. The Woolgoolga land was the residue of an area that had been the subject of subdivision approvals. As further subdivision approvals were not forthcoming in the near future in respect of the remaining Woolgoolga land, which was made up of some 183 acres with some substantial part with mature timber and some lightly timbered, the owners decided that the timber on the land should be conserved and developed for sale to timber mills. The owners proceeded to carry out work which was described by a consultant forester who gave evidence as follows in his Honour’s judgment at page 4035:
63 His Honour went on at page 4035 to make the following further factual observations:
“… that the main activity involved in the promotion and maintenance of a natural forest is to protect the timber from fire and then to develop access corridors either to extract the timber and/or to provide further fire protection. Depending on the potential of the land for future growth of timber it may be justifiable to remove such trees as are of no commercial value. He said that the creation of fire breaks is an essential step in the promotion of commercial timber.”
64 And at page 4036 his Honour reviewed the submissions made by counsel for the owners as follows:
“The commercial timber on the Woolgoolga land appears to have been hardwood, with blackbutt and flooded gum predominating. A fully grown blackbutt tree may be eighty to hundred years old, or much more. Saw logs or poles may be obtained from trees thirty to forty years old onwards. The most common method of regeneration is to put a light fire through the forest after timber has been felled to encourage germination of the seeds …”
65 The Commissioner’s case in Safety Beach was essentially that the forestry operation in issue did not involve planting and was “more like a capital operation; and did not fall within the common understanding of cultivation when all that was really happening was the protection of the perimeter from fire, the putting of some fire way or access ways, and a ‘bit of under scrubbing’”.
“Counsel for the plaintiff submitted that on the evidence relating to the Woolgoolga land it was land used for primary production in that it was “land used primarily for the cultivation thereof for the purpose of selling the produce of such cultivation”. One must, he said, look at cultivation by reference to the particular produce that is being cultivated. What good husbandry requires in the case of such a natural forest, as the one here is the establishment of fire breaks, under scrubbing and controlled burning to protect the trees and promote their growth. He referred to the definitions of “cultivate” and “cultivation” in the Shorter Oxford English Dictionary , saying that the common thread of the meanings is that of promoting or improving growth, and bestowing labour and attention upon land to do that. He submitted that the comments of Warrington L.J. on the cultivation of pasture land in Knowles v. Salford Corporation (1922) 1 Ch. 328 supported this wide meaning of “cultivation”. There Warrington L.J. said (at pp. 344-5): “Pasture land, though not of course broken up, may be cultivated in the sense that its power of production may be improved by judicious husbandry, as for example by manuring, harrowing or top dressing. There are many ways in which it may be improved for the purpose of production, and in that sense cultivated and used for the purposes of husbandry.” Many examples were discussed during argument by way of analogy. He said in effect that it would be natural use of language to refer to “cultivation” and “the produce of such cultivation” in the case of orchards, nut trees and planted pine forests, and that in such cases one would speak of the land as being used for cultivation years after the initial planting of the trees. He argued that even if the trees (or other growth or crop) were self-sown their proper maintenance for commercial production would be properly described as cultivation of the land. If these instances are accepted as cases of cultivation, they would support a view that the definition is not confined to annual crops. In McFadden v Ashfield Municipal Council 31 L.G.R.A. 211 Sugerman J said: “Nobody … hesitates to apply the word ‘crop’ to a crop of lucerne because it is not sown annually, but, once sown and the roots established, crops may from time to time be cut. Nor does it appear to me to signify that what is in question had its origins in a natural growth.” In Thomas v. F.C. of T. (1972) 46 A.L.J.R 397 the court upheld a claim under the Income Tax Assessment Act 1936 that the taxpayer was a “primary producer” within the meaning of that Act. Part of the claim related to macadamia nut trees which would not be in production for some seven years.”
66 His Honour in rejecting the Commissioner’s arguments and accepting the submissions made by counsel on behalf of the owners concluded (at pages. 4036-4037) as follows:
67 When the decision in Safety Beach is examined in some detail, it is not difficult to conclude that when his Honour spoke of activities other than planting and breaking up of the soil constituting “cultivation”, his Honour was making those observations against sown trees and the timber sold as the produce of the cultivated land. The reliance placed by the Applicants on some selective statements made by his Honour without regard to the factual background against which they were made is clearly misconceived. The case is clearly not an authority for the proposition that a person can carry out certain activities on the land without sown plants to satisfy the requirement of cultivation of the land for purposes of the exemption provided to primary producers under section 3(1)(a) of the LTM Act. The cultivation of the land must be for the benefit of plants however sown in the soil.
“In my opinion the expression “cultivation thereof for the purpose of selling the produce of such cultivation” should not be limited to annual crops, or crops with periodical production. The idea conveyed by the expression is the improvement of the land for the purpose of selling the produce of the improved land. The land may in the relevant sense be cultivated in some instances by breaking it up, as by ploughing, or in other instances by activities that may or may not be associated with the breaking up of the soil. It is the land, not the soil alone, which is the subject of cultivation. This may be achieved by improvement to the water supply to the plants, by fertilising, by spraying plants with insecticides and fungicides and by the establishment of windbreaks. It is unnecessary to decide whether land can be said to be used for primary production where the crop (I am using the word in the widest sense) is planted and not thereafter tended, except to extract the produce. This is not such a case. But however the crop is sown, there is cultivation of the land in a particular year if in that year it is tended, or subject to a programme of tending, in accordance with the practices of husbandry applicable to that crop. If this principle is correct it is applicable to natural forests as well as to planted forests; and it is applicable to either sort of forest whether there is a programme of regeneration or not. I am mindful of the force of the submission made by counsel for the defendant that the operation here has a capital nature, in that it is largely the realisation of a natural resource. If there had been no more to the operation than that, if the works carried out had related only to felling and carrying away of the trees then I do not think it could be said that the timber was the produce of cultivation. But I am satisfied that in this case there were significant works carried out for the protection and improvement of the growing timber, and the timber was sold was in the relevant sense the produce of those works. In this connection, it must be that when paragraph (a) speaks of “the produce of such cultivation” it means the produce of the cultivated land.”
68 I agree with counsel for the Respondent that support for this view is also found in the fact that the LTM Act makes special provision in section 3(1)(e) to include land used for the propagation of mushrooms, orchids or flowers, which are crops or plants not necessarily grown in the soil on the land. They are usually propagated in bags, boxes, racks or in pots. There is further support for this view from the need for an independent exemption in section 3(1)(d) for commercial plant nurseries where often the cultivation involves growing plants in pots and not in the soil on the land. If the submission of the Applicants is correct that “cultivation” as used in section 3(1)(a) is satisfied without the need for the crop or plants to be planted or sown in the soil on the land, then the exemptions set out in section 3(1)(d) and (e) are superfluous. That these provisions have been included supports the view that the exemption in section 3(1)(a) only operates in relation to crops and plants sown in the soil on the land.
69 In the present matter, the evidence was that all the plants for sale are in pots and the only plants in the ground are those described as the “Decorative Garden Beds” which occupy only about 5 percent of Lot 101. The “Decorative Garden Beds” were, however, not for sale and they were planted as a condition of the planning approval to conduct the Flower Power retail business on the site of the Land and as a condition of the lease. The Applicants’ case on this ground must accordingly fail.
70 It is therefore necessary to consider whether the Applicants are entitled to the exemption provided by section 3(1)(d). That is, whether the land in question was used primarily in the relevant years for “a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public”.
71 Essentially, the issue for determination is whether the Land in issue is to be denied this exemption because the activities carried on in respect of the plants in pots were merely “the maintenance of plants pending their sale to the general public.”
72 The term “nursery” is not defined in the LTM Act and the meaning of term has to be its ordinary meaning in the context used.
73 The current section 3(1)(d) provision was introduced with effect from 31 December 2000 by the State Revenue Legislation Further Amendment Act 2000 to replace the former exemption, which provided that land used primarily for a nursery within the meaning of the Horticultural Stock and Nurseries Act 1969, being a nursery in respect of which a person was registered under that Act as a nurseryman, fell within the definition of “land used for primary production”. The changes introduced in 2000 were largely made because of the pending repeal of the Horticultural Stock and Nursery Act 1969.
74 The old exemption was governed largely by the definitions in the Horticultural Stock and Nursery Act 1969. In particular, “nursery” was defined to mean “any place at which any horticultural stock is propagated for the purpose of sale” and “propagate” was defined in relation to any horticultural stock to mean, “generate or multiply, by sexual or asexual means”. In introducing the current exemption, the Minister in his Second Reading Speech had indicated that the bill (which was subsequently enacted) “includes a definition in relation to nurseries with essentially same meaning as the current provisions”. The current provisions that the Minister was talking about were the provisions in the Horticultural Stock and Nursery Act 1969.
75 The question that arises in this matter is whether the current exemption can be read in the manner suggested by the Minister in his Second Reading Speech. I think, the use of the words “commercial plant nursery” and the expression used to exclude “a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public” allow that construction to be given in relation to the current exemption. A commercial plant nursery would, in the context of the exemption read as a whole, necessarily mean a place where any horticultural stock is propagated for the purpose of sale. The exclusion of nurseries where any cultivation is merely “maintenance” activities of plants held in stock occur prior to their sale to the public allows that construction. It simply follows that, where the cultivation of plants includes propagation and cultivation activities beyond mere “maintenance”, the nurseries would fall within the exemption.
76 The Applicants’ submissions in relation to this issue were summarised by counsel for the Applicants in his “Opening Notes” as follows:
77 There was some contradiction in the above submissions with the evidence provided to the Tribunal. The statements made by Lek Sim, the nursery hand at the site and by Nathan Rowe, the Group Area Manager of the Flower Power Group was clearly that no propagation of plants from seeds or cuttings took place at Bass Hill in the relevant years under review. Only potting of plants, which were “in a hardened condition from suppliers”, took place at the site.
“8. The land in question is simply a garden centre. It covers several hectares. It has been in continuous use as a nursery and garden centre since at least 1960 and possibly earlier. Flower Power has built an enduring business on the site, the firm foundation of which is the cultivation on the site of plants and the sale of those plants and related materials over time, the mix of products sold may have changed as have the methods of cultivation. This is not unusual, indeed, it would be surprising if had not.
9. The methods of cultivation include levelling, gravelling, cleaning and draining the Site to improve its utility as an environment for the growth and cultivation of plants.
10. The evidence indicates that some 55 percent of the non-car park space on the Site is and was, during the relevant period, given over to the accommodation of plants.
11. During the relevant period, much of the plant stock at the Site was propagated at Flower Power’s Arborglen wholesale facility. In relation to those plants, Flower Power is engaged in a range of cultivation activities. These include the maintenance of the plants by watering and ensuring appropriate sunlight, and the “growing on” of the plants by encouraging their [growth/maturation] by re-potting them regularly.
12. While our submission is that propagation of plants is not requirement of cultivation, a certain, albeit diminishing, amount of propagation did occur on site.”
78 At the hearing, John Sammut confirmed that the plants after being potted were for immediate sale and often sold quickly. And that only in some cases they remained at the site for as long as three months before sale. In his Affidavit, John Sammut has set out in paragraph 16 details of what activities in terms of propagation and cultivation were carried out on the land during under review. Unfortunately, no evidence was produced to support the statements made in his Affidavit. In particular, he mentioned in his Affidavit, that he was in “twice weekly contact with the various individual nursery managers and area managers who were responsible for managing the Bass Hill nursery on a day to day basis”. But no evidence was given by any of his so described “nursery managers”.
79 In any case, no evidence was produced that any propagation of plants took place on the site. The evidence from their own sources, although obtained by the Respondent, was fairly clear that no propagation of plants took place at the land at Bass Hill in the relevant years under review. Lek Sim when asked, “How often are plants grown from seeds or cuttings at the Bass Hill site?” responded with the following answer, “I do not grow plants from seeds or cuttings on the Bass Hill site. I do not know of any plants grown from seeds or cuttings at the store in Bass Hill”. This was confirmed by Nathan Rowe, the Flower Power Group’s Area Manager when making his statement to the Respondent (in the presence of the Group’s solicitor) as follows:
80 The plants once potted were for immediate sale. Lek Sim’s duties as set out in his statement was to “look after plants including feeding, pruning, staking, potting-on” pending their sale to the general public. In his statement, Michael Spiteri confirmed that Lek Sim was the only staff member at Bass Hill involved in the cultivation of plants at that site. No mention was made by him of any other “nursery managers” involved in cultivation at the Bass Hill site.
“Q: How many plants would you propagate and cultivate in an average week? How do you make this determination?
A: No propagation of plants from cuttings or seeds has occurred on the Bass Hill site since the car park was constructed. As plants grow larger they get “potted-on”. Records of this should be kept, but more often than not this gets forgotten. The purpose for the record keeping is for inventory control and factor in costs.”
81 Counsel for the Applicants spoke of “growing-on” of the plants as a cultivation activity on the site. No evidence was produced to demonstrate the activity. It was, as understood by the Tribunal, merely growth of plants awaiting sale to the general public in case they were not sold quickly after they had arrived from the suppliers. This activity was incidental to the real retail business of the Flower Power Group at Bass Hill, which was to sell the potted plants soon after they had arrived at the site. As understood from the background provided by Respondent, from information on the website and also from the photographs of the, site it was a retail business which offered all kind of incentives for prompt sale of potted plants from the site. Where potted plants could not be sold quickly, there was naturally some growth and the need to, in some cases, for potting-on.
82 In considering this issue, it is not necessary to refer to the very substantial retail business of selling general merchandise that also occurred at the Bass Hill outlet in the relevant years. That activity was only relevant to consider whether the land was used primarily for primary production in the course of carrying a business of primary production.
83 Unlike the Flower Power’s commercial nursery, the wholesale supplier of plants, Arborglen, situated at Glenorie in Sydney’s north-west, Flower Power’s retail outlet at Bass Hill was not accredited as a production nursery (grower) under the Nursery Industry Accreditation Scheme Australia (NIASA).
84 Under section 100(3) of the Taxation Administration Act 1996, the Applicants had the onus of proving their case but no evidence was produced to show the extent of “growing-on” on the Bass Hill site. The only evidence was that the potted plants were sold fairly quickly after they had been potted. And the plants potted were in a healthy condition needing only the care of the kind described by Lek Sim.
85 In the absence of any propagation of plants on the site, the activities carried out to pot plants and maintain them pending their sale do not bring the Bass Hill retail outlet within the exemption provided under section 3(1)(d). The activities come within the exclusion because the principal cultivation activity carried on the site was the maintenance of the potted plants pending their sale to the general public in the relevant years. The exclusion recognises that other subsidiary cultivation activities may be involved, for example in this matter the potting-on of plants, which are not sold quickly. The Applicants are accordingly also not entitled to the exemption under section 3(1)(d).
86 In the result, it is not necessary for the Tribunal to consider the issues whether there was a primary production business being carried on the land and whether the land was used “primarily” for primary production.
Order
The decision under review is affirmed.
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