Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue

Maraya Holdings Pty Ltd (the taxpayer) appealed to the Court of Appeal of New South Wales against a decision of the Supreme Court of New South Wales which upheld a determination by the Chief Commissioner of State Revenue (the Commissioner) that certain land owned by the taxpayer was liable for land tax. The dispute concerned whether the land, which the taxpayer claimed was used for primary production, qualified for an exemption under section 10AA(2)(a) of the *Land Tax Management Act 1956* (NSW).

The central legal issue before the Court of Appeal was whether the taxpayer's use of the land possessed a "significant and substantial commercial purpose or character" as required by section 10AA(2)(a) of the Act. This involved determining whether the activities conducted on the land, which included the breeding and sale of horses, constituted primary production in a manner that satisfied the statutory test for exemption, notwithstanding the Commissioner's contention that the primary purpose was investment or speculation.

The Court of Appeal affirmed the principles established in *FCT v. Smith* and *Commissioner of Taxation v. NCF Holdings Pty Ltd*, which require an objective assessment of the dominant purpose of the use of the land. Their Honours found that the taxpayer's activities, while involving the breeding and sale of horses, were not conducted with the dominant purpose of primary production. Instead, the evidence indicated that the activities were primarily driven by investment and speculative considerations, lacking the requisite significant and substantial commercial character of a primary production business. The Court concluded that the taxpayer had failed to demonstrate that the land was used for primary production in terms of the statutory exemption.

Consequently, the appeal was dismissed, and Maraya Holdings Pty Ltd was ordered to pay the costs of the Chief Commissioner of State Revenue.