Federal Commissioner of Land Tax v Duncan

The Federal Commissioner of Land Tax appealed from a decision of the Supreme Court of South Australia, which had allowed an appeal by the taxpayer, Sir John James Duncan (and later his executors), against an amended assessment of land tax. The dispute concerned the unimproved value of a parcel of approximately 6,572 acres of land as of 30 June 1910. An initial assessment in 1911 valued the land at £5 per acre. Following a subdivisional sale in September 1912 where the land realised an average price of £7 7s. per acre, the Commissioner issued an amended assessment in April 1913, valuing the land at £7 1s. per acre as of 30 June 1910.

The High Court was required to determine the correct method for assessing the unimproved value of land under the Land Tax Assessment Act 1910. Specifically, the court had to consider whether the probability of land realising a higher price if sold by subdivision was a relevant factor, and the extent to which it should be taken into account. Additionally, the court had to decide whether valuations made by a State for its own land tax purposes were admissible as evidence of value in proceedings before the court.

The court held that while the probability of a higher price from a subdivisional sale is an element to be considered in estimating unimproved value, it is no more than that. The definition of unimproved value requires considering the capital sum a bona fide seller would require on reasonable terms and conditions, assuming a hypothetical purchaser. This does not mean assuming an indefinite number of purchasers willing to buy the land in separate parcels, but rather the price a willing purchaser would pay to a willing seller. The court also ruled that State land tax valuations, although available to the Commissioner for his own use in preparing assessments under section 17 of the Act, are not admissible as evidence of the land's value in court proceedings.

Despite finding that the Supreme Court Judge had erred in admitting State valuations as evidence and in his initial interpretation of the subdivisional sale aspect, the High Court dismissed the Commissioner's appeal. This was because the Judge's ultimate conclusion that the unimproved value did not exceed £5 per acre was based on independent findings of fact regarding the exceptional terms of the 1912 sale and the keener competition at that time, which he considered enhanced the nominal price beyond what would have been achieved in 1910. The appeal was dismissed with costs.