Morris v Chief Commissioner of State Revenue

[2015] NSWCATAD 229

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Morris v Chief Commissioner of State Revenue [2015] NSWCATAD 229
Hearing dates:	08 July 2015
Decision date:	06 November 2015
Jurisdiction:	Administrative and Equal Opportunity Division
Before:	N S Isenberg, Senior Member
Decision:	(1) The assessments under review in respect of the 2011 and 2012 land tax years are affirmed. (2) The Applicant is entitled to the exemption sought in respect of the 2013 land tax year and the assessment issued in respect of that year is set aside.
Catchwords:	REVENUE LAW - land tax - primary production exemption - dominant use – maintenance of animals - s 10AA Land Tax Management Act 1956.
Legislation Cited:	Administrative Decisions Review Act 1997 Land Tax Management Act 1956 Taxation Administration Act 1996
Cases Cited:	B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 Caruana v Chief Commissioner of State Revenue [2011] NSWADT Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278 Leda Manorstead v Chief Commissioner [2010] NSWSC 867 Saville v Commissioner of Land Tax (1980) 12 ATR 7
Category:	Principal judgment
Parties:	Kevin Samuel Morris (Applicant) Chief Commissioner of State Revenue (Respondent)
Representation:	Counsel: E Bishop (Respondent)   Solicitors: Caldwell Martin Cox (Applicant) Crown Solicitor's Office (Respondent)
File Number(s):	1410479

Reasons for decision

Background

1. The Applicant has owned land at Thirlmere (the Property) since the 1970s. On 20 March 2008 the Respondent informed the Applicant that a primary production exemption for the Property was granted from the 2007 land tax year. On 2 September 2013 the Applicant applied for a further primary production exemption from land tax for the Property. The Respondent refused the application and on 1 November 2013 issued a Land Tax Assessment Notice (the Assessment) in respect of the Property for the 2011, 2012 and 2013 tax years (the Tax Years) which did not provide for any exemption. The Applicant objected to the Assessment and the objection was disallowed.

2. The Applicant applied to the Tribunal for a review of the disallowance of his objection.

Powers of tribunal on review

3. Section 96 of the Taxation Administration Act 1996 (TA Act) provides that a taxpayer may apply to the Tribunal for an administrative review of a decision that has been the subject of an objection under certain circumstances including if the taxpayer is dissatisfied with the Respondent’s determination of the objection. The Tribunal may confirm, vary or reverse a reviewable decision of an administrator and make orders as to costs or otherwise as it thinks fit, s 101(1) of the TA Act. It is common ground that the decision in respect of the Assessment is a reviewable decision and that the decision the subject of review by the Tribunal is the Assessment rather than the disallowance of the objection.

Issues

4. The issue for determination by the Tribunal is whether the decision in respect of the Assessment, that for each Tax Year, the Property was not entitled to a primary production land tax exemption, is the correct and preferable decision.

The law

5. The applicable law is the Land Tax Management Act 1956 (LTM Act). Section 7 of the LTM Act provides that land tax shall be levied and paid on all land in New South Wales other than land which the LTM Act exempts from taxation. Section 3 of the LTM Act provides that a land tax year is the period of 12 months starting on 1 January for which land tax is levied and s 8 provides that land tax shall be charged on land owned at midnight on 31st December immediately preceding the year for which land tax is levied.

6. The exemption claimed by the Applicant is found in s 10AA of the LTM Act which relevantly states:

“10AA Exemption for land used for primary production

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

(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:

(a) …, or

(b) the maintenance of animals … for the purpose of selling them or their natural increase or bodily produce, or

(c) …

(4) For the purposes of this section, land is "rural land" if:

(a) the land is zoned "rural", "rural residential" or "non-urban" under a planning instrument, …”

7. In summary, s 10AA provides that land zoned rural that is used for primary production is exempt from land tax. However land zoned other than rural that is used for primary production is not exempt unless the dominant use is primary production and the commerciality tests in s 10AA(2) are satisfied. Except where indicated to the contrary references in this decision to the phrase “land used for primary production” mean “land used for primary production as defined in s 10AA(3)”.

The onus

8. The Applicant has the onus of proving his case in a review by the Tribunal, s 100(3) of the TA Act. The requisite standard of proof in such a review is the “balance of probabilities” Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 at [104].

Material before the Tribunal

9. The Applicant relied on attachments which accompanied the Application to the Tribunal; a statement by the Applicant dated 22 January 2015; a statement by Katie Remington dated 20 January 2015; a statement by Lang Crighton dated 22 January 2015, written submissions on behalf of the Applicant dated 4 March 2015 (AS) by Mr G Lloyd Solicitor, who represented the Applicant at the hearing; the Applicant’s written submissions in reply dated 11 June 2015 (ASR) and oral submissions by Mr Lloyd.

10. The Respondent relied on documents filed with the Tribunal on 5 November 2014 pursuant to section 58 of the Administrative Decisions Review Act 1997; written submissions dated 14 May 2015 (RS) and oral submissions by Ms E Bishop of Counsel who represented the Respondent at the hearing. The Respondent also exhibited to the Tribunal an affidavit of Robert Ghanem dated 14 May 2015; a bundle of documents including a Deposited Plan Administration Sheet in respect of DP 1188841, some aerial photographs and some other documents; and a copy of the Assessment Notice comprising nine pages, in respect of which pages numbered 1, 3, 5, 7 and 9 formed part of the section 58 documents.

Agreed evidence

11. It is common ground that:

1. the Property comprises five blocks of land treated as one parcel for valuation and land tax purposes.

2. The Property was owned at all relevant times by the Applicant.

3. At all relevant times the Property was rural land for the purpose of s 10AA.

4. The Property is divided into 2 parts by a public road.

5. The improvements to the Property include a relatively basic residence with an external laundry which are fenced off from the rest of the Property, a large dam, a number of stables and sheds, a roundhouse with a sand floor for exercising horses, stallion yards, stables, a wooden race for livestock, and fencing.

6. The Property was leased:

1. from 21 July 2006 until approximately 26 December 2011 to tenants (the first tenants) pursuant to a commercial lease (the first lease). The rent from June 2010 until the end of the term of the first lease was $385 per week including GST. The last recorded payment of rent in evidence in respect of the first lease was received by the Applicant’s agent on or about 10 February 2012.

2. to Ms Remington and her partner by commercial lease (the Remington lease) from 21 May 2012 at a weekly rent of $495 including GST. The Applicant’s evidence was that this lease continues at the date of the hearing.

7. Both leases provide that the Property shall be used for primary production.

Consideration

12. The Applicant seeks exemption under s 10AA(3)(b) (AS at page 1). I observe that this section in conjunction with s 100(3) of the TA Act and the evidence and submissions of the Applicant require the Applicant to prove on the balance of probability that the dominant use of the Property in respect of each land tax year during the relevant period was the maintenance of horses for the purpose of selling them or their natural increase or bodily produce.

Use of the Property and relevant user

13. The Respondent submitted at [14] and [15]:

In Commissioner of Land Tax v Christie [1973] 2 NSWLR 526, Bowen JA (as he then was) said (at 533): " 'Use' has regard to the purpose to which land is put. " 'Use' is a term with an extremely wide ambit and can be measured from a number of different perspectives. 'Purpose' carries the sense of an object in view. There are many examples where land is used in more than one capacity or by different entities simultaneously. 'Use' involves actual use, not contemplated use.

Section 10AA does not specify whose use is the relevant use. Rather, the LTMA looks to all the competing uses of the land, whether by land owners, lessees and licensees, the public, councils, primary producers (whether land owners or not), and other interested persons.

14. The Applicant submitted at page 1 of AS and at [5] of ASR:

The Courts have determined that the question of use of the land is to be assessed on a "broad common sense basis";

5.   On the question of use, attention is drawn to the High Court case of Newcastle City Council v Royal Newcastle Hospital [1957] HCA15. Paragraph 11 of such judgment talks of the term "used". While that case related to the issue of rating for local government purposes, nonetheless it is submitted that the case remains good authority in regard to the issue of use for the purposes of the Land Tax Legislation. In such case Justice Taylor stated:-"But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land…it is nothing to the point to say that [the taxpayer]…has derived no benefit or advantage therefrom in the fulfilment of its purposes."

In this case the applicant achieves a benefit from the land namely rent. The applicant does not occupy the land but the land is occupied by the applicant's tenant. The applicant's current tenant, Ms Remington, has given evidence that she uses the land for the purposes of raising horses

15. The parties agree that it is not necessary that the relevant user of the Property be the owner. The Respondent submitted at [15] “…the LTMA looks to all the competing uses of the land, whether by land owners, lessees and licensees… and other interested persons.”

Maintenance of animals

16. Section 10AA(3)(b) refers to “the maintenance of animals…for the purpose of selling them or their natural increase or bodily produce”. In Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183 Block JM, when considering the maintenance of animals in the context of s 10AA said at [42]:

“…”maintenance” for the purposes of the Act comprises the keeping in existence or continuance of live animals. Thus, the activity of "maintenance" includes the provision of food, water and shelter to keep the animals alive. Further, to comprise "primary production" under the Act, such "maintenance" must occur on the land where the animals live for the purpose of selling the live animals themselves or the natural increase or bodily produce of the live animals.”

17. The Applicant acknowledged at page 1:

…It is long established law that maintenance of animals does not merely involve activities such as agistment but requires the maintenance of the relevant animals for sale by the relevant owner.

Dominant use

18. The Respondent submitted at [16]-[19] and [21]:

Justice Gzell in Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 (Leda) stated that the LTMA's reference to 'dominant' use requires a determination of which use is the main, chief or paramount use (at [69]).

Whether the dominant use of land is for primary production (s 10AA(3)), depends upon whether that use prevails over any competing uses of the land, or whether the land is primarily 'unused'.

In Thomason v Chief Executive, Department of Lands (1994-95) 15 QLCR 286, the Land Court found at 303:

In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in s.l7(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole.

This was relied on by Gzell J in Leda and subsequently approved by the Court of Appeal in Leda v Chief Commissioner of State Revenue [2011] NSWCA 366.

Dominant use is a concept of relativities and relationships. It requires a weighing of the evidence relating to the competing uses with respect to the nature and intensity of the uses, the surface area over which they extend, and the time, labour and cost of conducting them as well as the income generated. Whether a particular use is the dominant use of land is a question of fact and degree and a decision maker must weigh the competing uses of the land against each other to find that which prevails over all others.

Further, whether the dominant use of land is for primary production depends upon whether that use prevails over any competing uses of the land, or whether the land is primarily unused. In Saville v Commissioner of Land Tax (NSW) (1980) 12 ATR 7, Roden J 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.

19. The Applicant’s submission in reply to [19] to [21] by the Respondent was at [2] and [3] in ASR. The Applicant submitted:

In its submissions at paragraphs 19 to 21, the respondent, refers is made (sic) to the concept of dominant use. In this regard, the applicant points to the fact that in his original application of 2 September 2013, and again in his letter of 3 November 2013, he invited the respondent to inspect the property to enable it to properly form a view as to the use of the land. The applicant notes the respondent has not taken up such opportunity.

The applicant holds a document prepared on behalf of the respondent headed "Land Tax Primary Production Land Exemptions" from January 2008, a copy of which is annexed and marked "A". The applicant says that he considered he complied with the respondent's own directions by leasing his property to "someone else who uses it for primary production purposes" namely, (most recently), Ms Remington.

20. Later in this decision I deal with the evidence before the Tribunal in relation to the use of the Property for the 2011 and 2012 tax years and the dominant use of the Property for the 2013 tax year. However I observe at this point that the onus lies on the Applicant to prove his case on the balance of probability. Merely inviting the Respondent to inspect the Property and leasing the Property to a lessee where the terms of the lease require that the Property be used for the purpose of primary production do not, in my opinion, satisfy the onus.

Intention

21. The Applicant submitted on page 2 in AS:

The intention of the use of the property is important and as was stated in the case of Saville & Ors v Commissioner of Land Tax (NSW) 81 ATC 4373 Roden J said –

"I believe that intention is a matter to which regard can properly be had as a matter capable of characterising a use of the land in a manner which may not emerge from a consideration

simply of the rate of activity or the area of the land actually used or the period for which it is used".

22. In response the Respondent submitted at [20]:

Whether land is used for primary production within the meaning of s lOAA must be decided by an objective test. The inquiry into actual land use is not to be tested by the intention of the owner.

23. The Respondent relied on Leda at [70] in relation to the first sentence. I observe that Gzell J in Leda said at [69] and [70]:

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.

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.

24. The Respondent’s authority for the second sentence was Greenville Pty Ltd the Commissioner of Land Tax NSW (1977) 7 ATR 278 in which Helsham CJ said at 280:

… Whether land is being used for primary production within the meaning of the definition must be decided by an objective test - the enquiry is an enquiry into actual land use; it is not to be tested by the intention of the owner (cf Southern Estates Pty Ltd v FC of T (1967) 117 CLR 481…) And in applying that test one must adopt a broad approach and a commonsense one”

25. I observe that the excerpt referred to by the Applicant from Roden J’s decision in Saville is part of a paragraph at the head of page 11 in that decision. In my opinion it is necessary to consider the whole paragraph in order to appreciate the context in which the excerpt appeared. The whole paragraph 11 is as follows:

2. The relevance of the intention with regard to use of the land. Basically, what is to be determined is the actual use of the land, and this of course may be quite different from any intention that the owners may have as to its later or ultimate use, or indeed any wish that the owners might have as to its use at that particular time. Nevertheless, it having been stated that, even where there is only a single use of the land, that fact alone does not necessarily establish that the land is used primarily for that purpose, I believe that intention is a matter to which regard can properly be had as a matter capable of characterising a use of the land in a manner which may not emerge from a consideration simply of the rate of activity or the area of the land actually used or the period for which it is used.

26. The intention of the user may be a matter to which regard can properly be had in characterising a use of the land. However having regard to the above excerpts from Leda, Saville and Greenville, it is in my opinion that it is the actual use to which the Property was put during a relevant period which determines whether or not the Property was used for primary production.

Relevant period

27. At [13] in RS the Respondent submitted that in determining the dominant use of the Property the Tribunal should consider a time period of six months on either side of the taxing date. That is the Tribunal should have regard to the use of the land from 1 July 2010 until 30 June 2013. The authority relied on by the Respondent was Leda Manorstead v Chief Commissioner [2010] NSWSC 867 (Leda) at [4] (Gzell J).

28. In Leda His Honour determined in relation to s 10AA that the dominant use of certain non-rural land was not for the maintenance of animals. At [4] His Honour said:

…inquiry is not limited to the use to which land is put on the relevant date. It extends to a consideration of its use during a reasonable period preceding and following the relevant date (Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 at 660-661). In my view, six months before and after the relevant date is a reasonable period for inquiry in this case. It allows for consideration of financial records pertaining to the uses to which the land was put.

29. As Leda dealt with non-rural land the provisions of s 10AA (2) applied. Accordingly in order for the taxpayer to succeed it was necessary for the court to find that the use of the land had a significant or substantial purpose or character and if so that the cattle raising was engaged in for the purpose of profit. I surmise that this is the reason His Honour referred to a consideration of financial records for a reasonable period before and after the taxing date in respect of each Tax Year. I deal with the relevant period for each Tax Year below.

The 2011 and 2012 land tax years

30. At [28] the Respondent submitted:

The applicant has led no evidence to demonstrate that, between 1 July 2010 and 20 May 2012, any horse breeding business was conducted on the Land, whether by (the first tenants), or any other person.

31. In ASR at [9] the Applicant responded to this submission by stating "the applicant is no longer in a position to obtain this documentation from his former tenants", when those tenants were in occupation of the Property the Applicant was not aware that there would be a dispute in relation to a claim for exemption from land tax, and the Applicant had understood from the 2008 correspondence that the Respondent accepted that the primary production exemption applied to the land.

32. The relevant taxing dates are 31 December 2010 and 31 December 2011. For the purpose of these proceedings the Tribunal sits in the place of the Respondent. The onus lies on the Applicant to prove to the Tribunal on the balance of probability that the dominant use of the Property, at the taxing dates and for a reasonable period before and after those dates, was the maintenance of horses for the purpose of selling them or their natural increase.

33. The Applicant’s evidence is:

1. that there was a commercial lease in existence from at least June 2010 to 26 December 2011 and the purpose stated in the lease for which the Property was to be used was primary production (s 58 documents pages 36-40c);

2. at [6] in the Applicant’s statement he said it is difficult to lease the Property unless the tenant happens to have a strong interest in horses… The Property is better set up as a horse breeding facility than as a family home; and

3. in the first paragraph of the letter accompanying his application to the Tribunal, the Applicant asserted "the dominant use of the property is for primary production, and there is no other use."

34. There is also evidence that from June 2010 until December 2011 the permitted use of the Property, in accordance with the first lease, was primary production. However there is no evidence that the Applicant himself or the initial tenants or any other person actually used the Property whether for primary production or any other purpose during the term of the first lease or during the period between the end of the first lease and the start of the Remington lease.

35. Having regard to the material before me I am not satisfied on the balance of probability, that from June 2010 to 20 May 2012, including on 31 December 2010 and 31 December 2011, the Property was land used for primary production within the meaning of section s 10AA (3).

The 2013 land tax year

36. The Applicant’s covering letter with his application to the Tribunal states "the dominant use of the property is for primary production and there is no other use." There is no evidence that the Applicant personally used the Property at any time during the relevant period for any purpose other than to lease the Property.

37. The Applicant’s evidence in his statement includes;

1. Ms Remington has a passion for horses;

2. he has seen varying numbers of horses on the Property at different times;

3. the photographs (in evidence) were taken in his presence on 20 January 2015 (more than two years after the taxing date in respect of the 2013 land tax year) disclose three horses on the Property adjacent to the house;

4. he was informed by Ms Remington that the three horses comprise two mares and a stallion and both the mares were in foal at the time of the photographs.

38. The section 58 documents include at Tab 1 the Primary Production Land Exemption Application dated 2 September 2013 signed by the Applicant. That Application includes the following:

1. The primary production activity on the Property is carried on by tenants.

2. The Property is not used for any purpose apart from primary production.

3. The approximate percentage of land use for residential purposes is 1% and for primary production 99%.

4. The number of horses presently held on the Property is 10, stock purchased in the last 12 months was 4, stock sold in the last 12 months was 5 and the price received was $10,000, and the number of natural increases was 1.

5. The Property is not registered as a stud for horse breeding.

6. The horses on the Property are used for breeding and selling.

39. In his objection letter of 8 November 2013 (section 58 documents pages 24-25) the Applicant stated

The "basic" house on the property is of little value, being an old 2 bedroom fibro construction, with an outside laundry. It is suitable for those tending animals, but would be an unattractive proposition as a rental house. The rent being paid is mainly for the use of 22 acres of land and the improvements thereon for animals, i.e. stables, sheds, round house, wash bay, loading ramp, dam and piped water. The tenants would not be renting the house, if it were not for the land and other improvements. The land and improvements could be rented, even if there was no residence.

The degree, extent and intensity of the use of the land for grazing/breeding is the maximum the property will allow having regard to the area of land and weather conditions, and the property is not used for any other purpose.

… The tenants are a young couple with a baby…

40. Ms Remington's evidence at the date of her statement, 20 January 2015, was that she lives at the Property and is the tenant. She has leased the Property since May 2012; the Property is ideal for her purpose of raising horses on an affordable Property. She would not live in a house such as that on the Property unless she had facilities for her horses. She is involved in raising paint horses.

41. At [13] Ms Remington said:

I at one stage had up to 13 horses and 4 foals. Around this time I gave birth to our 2 children in fairly quick succession and I reduced my holdings to 9 horses.

42. No date was given in relation to any of the events referred to at [13]. However the context in which the paragraph occurs relates to the Property and the next paragraph refers to the good pasture on the Property and the Property being big enough so that "even when there is less rain there is enough room to be able to rotate the horses through the pastures without the need for excessive feed." The context is also consistent with the Applicant’s objection letter of 8 November 2013.

43. Ms Remington refers to an arrangement with a supplier who can provide large hay bales when additional feed is needed "However, fortunately because of the recent rain there is currently more than adequate pasture on the property." The statement was made in January 2015.

44. Ms Remington's evidence refers to the large dam on the Property, a pump which is connected to watering facilities and at [16] "In the whole time I had been on the Property the dam has never run dry." Ms Remington referred to arrangements with local vets and her registration with both the Paint Horses and Quarter Horses Association. She states at [22] and [23]:

I keep records by way of a diary where I record the servicing of my horses, worming and other matters.

…We don't really have a backyard and in fact we use the front yard for horses at various times. The pastures around the house in particular are very, very good and that is why we have the horses nearby.

45. Ms Remington states that she does not use a bank overdraft and uses the money from selling horses to reinvest in the purchase of more horses. Her partner is considering buying cattle which can be fattened up and sold at a profit and the paddock that he plans to use is currently empty. I again observe that the statement was made in January 2015, some two years after the relevant taxing date.   

The Respondent’s submissions

46. The Respondent submitted at [22] that on the information before the Tribunal it was unclear how much of the Property was encompassed by the residence. The uncontested evidence from the Applicant was that the residence comprises 1% of the Property, see [38] above.

47. At [29] the Respondent submitted:

There was limited information “as to the number of horses kept on the Land at any particular time. Ms Remington states that she "at one stage had up to 13 horses and 4 foals" but it is unclear whether this was when she was a tenant of the applicant's Land.”

This submission is dealt with above having regard to Ms Remington’s statement at [13] in conjunction with the Applicant’s covering letter in respect of his objection at [39] above. I also have regard to Ms Remington’s statement at [11] that prior to moving to the Property a decision was made to concentrate on raising horses. At some time during 2013 the number of horses on the Property were, according to the Applicant’s unchallenged evidence "the maximum the property will allow having regard to the area of land and weather conditions, and the property is not used for any other purpose”. I observe that the Respondent provided no evidence as to the maximum carrying capacity of the Property.

48. “The applicant states that on 20 January 2015 there were 3 horses on the Land.” The Respondent’s authority for this statement is the Applicant’s statement at [16]. What the Applicant said at [16] was that at the time he was present when photographs were taken in January 2015, that is, more than two years after the relevant taxing date "there were 3 horses on Brundah Road adjacent to the house… Katie has told me there are 2 mares and a stallion in the photographs and that the mares are both in foal at the time the photographs were taken."

Accordingly the Applicant’s evidence was that there were 3 horses at a particular location on the Property, not that there were 3 horses on the whole of the Property at the relevant time. I also observe that the statement was made in respect of a period more than 18 months after the end of the period to which the Respondent submitted at [13] that the Tribunal should have regard.

49. “There is evidence that between 14 February 2013 and 20 March 2013 Ms Remington owned a mare by the name of 'Hot 'N' Sassy', but no evidence as to where that mare was stabled nor as to for how long Ms Remington owned the mare.” I observe that the statements in evidence from the Applicant, Ms Remington and Mr Crighton are somewhat unsophisticated. To that extent their assistance to the Applicant is limited. However I find from the wording used and the context of Ms Remington’s statement that she held horses nowhere other than on the Property from May 2012.

50. “Ms Remington states that she currently owns a paint horse named 'KRS Kiss Mint' but it is not clear when this horse was obtained or where it is stabled.” I find on the balance of probability that the subject horse was at the time of Ms Remington statement stabled at the Property. However I repeat that the statement was made, more than two years after the taxing date and well beyond what the Respondent submitted was a relevant period in respect of the 2013 land tax year.

51. From [30] to [34] the Respondent provided submissions concerning a substantial lack of documentation as to the horse breeding business carried on by Ms Remington at the Property. In summary the Respondent referred to a minimal number of documents provided by Ms Remington comprising two receipts for the purchase of mares, two receipts for the respective sale of one filly and one colt, one minor invoice for the purchase of some horse accessories, two bills of sale for the purchase of horses one of which was undated. The Respondent also submitted that there were no relevant profit and loss statements, business activity statements, tax returns, tax invoices or receipts (other than the minor receipt referred to above) in support of aspects of her business to which Ms Remington referred in her statement, nor were any documents in evidence in respect of relevant horse association registration. No evidence was provided to the Tribunal as to the amount of time Ms Remington spent conducting her business nor was the diary, which Ms Remington stated she maintained in respect of servicing her horses, worming and other matters, in evidence.

52. I observe from Mr Ghanem’s affidavit that a summons was issued to Ms Remington requiring the production of various documents including the diary referred to above, documents regarding her registration with two named horse associations, details of expenditure relating to the horse breeding business for the period 21 May 2012 to 31 December 2012 and other documents relevant to her business. There is no evidence that the summons was served on Ms Remington. However there is a letter in evidence from the solicitors acting for the Applicant which refers to the summons and states that "all documents relevant to your Summons" had previously been provided to the Applicant who had forwarded them to the Respondent and those documents which were provided appear in the s 58 document bundle.

53. The s 58 documents contain at pages 46 and 47 Notices of Assessment for Ms Remington for the income tax years ended 30 June 2012 and 30 June 2013. The taxable income shown for each year is $0. I make two observations in relation to those documents:

1. Firstly I observe that the ATO Notices of Assessment related to taxable or net income. They do not provide any information in respect of Ms Remington's gross income derived from a relevant business for the relevant financial years nor do they provide any information as to relevant deductible expenses incurred by Ms Remington in respect of those years nor is there any indication as to whether any deductible losses may have been brought forward from prior years.

2. Secondly I observe that Ms Remington's lease commenced on 21 May 2012, less than six weeks before the end of the 2012 financial year, and it is not exceptional that a notice of assessment in respect of the 2012 financial year would be of little assistance in considering the extent to which the Property had been used for primary production during either the 2012 or the 2013 financial years.

54. The Respondent submitted at [37] that the rental use of the Property must be weighed against the horse breeding use to decide which use is dominant or prevailing in respect of the 2011 to 2013 tax years. In determining the nature and intensity of each use of the land, the Tribunal will need to be moved, by the Applicant, from the position that the land is not exempt.

55. My finding in favour of the Respondent in respect of the 2011 and 2012 tax years is at [35] above. In respect of the 2013 tax year I observe that the Respondent did not require any of the Applicant or Ms Remington or Mr Crighton to attend the hearing for cross examination. Accordingly their evidence, although disputed, was unchallenged. I also observe that the Respondent called no evidence in respect of the carrying capacity of the Property. The only evidence in this regard is that of the Applicant who said in his objection letter, at pages 24 - 25 of the s 58 documents, which related to the 2011-2013 Tax Years:

The degree, extent and intensity of the use of the land for grazing/breeding is the maximum the property will allow having regard to the area of land and weather conditions, and the property is not used for any other purpose.

56. The unchallenged evidence of Ms Remington is that the horses are rotated throughout the pastures; that she has concentrated on raising horses on the Property which has everything she needs for raising horses including stallion yards and other fencing, stables, a large dam, watering facilities and good pasture. Her evidence at [9] was that the residence "is a bit of a dump and there is no way that we would live in a house like that unless we have the facilities for my horses".

57. The unchallenged evidence by Mr Crighton, at [4] in his statement, who states that he is the licensee of Richardson and Wrench Tahmoor and has been the managing agent for the Applicant for some years, is that the residence at the Property is very basic, and "if it was to be leased on a stand-alone basis, I believe it would be difficult to find a tenant for, unless the rental was at a very low rental, less than $200.00 per week".

58. At [38] the Respondent submitted that the Applicant had failed to establish the competing primary production use in a manner similar to that demonstrated in Romano. I find that there was no obligation on the Applicant to establish any competing primary production use. The evidence is that the only use of the Property other than in respect of the maintenance of horses was a residence for the family which was maintaining the horses. The evidence of Ms Remington is that the only way her family would live in the "dump" of the house on the Property is that the Property had facilities for horses. The evidence of the Applicant in his application to the Tribunal was that the residence is a "modest ancillary residence which is part of the operation of the "primary production" venture.

59. At [39] the Respondent submitted “While income alone is not determinative, the Applicant's evidence demonstrates that the income generated by the rental use of the Land far exceeds the income derived from any horse breeding business.” The Applicant agreed that income alone is not determinative and, after submitting at pages 1 and 2 in AS:

The Courts have determined that the question of use of the land is to be assessed on a "broad common sense basis";

In Greenville Pty Ltd v C. of L.T. .(1977) A.T.R. 278 Helsham CJ in Equity said –

"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".

Various Courts looking at similar revenue legislation have commented on the importance of the "....conclusion that an objective observer would reach from viewing a land as a whole" (Thomason v Chief Executive Department of Lands) (1994-1995) 15 QLCR 286

the Applicant submitted at page 3 of AS:

The Commissioner appears to have taken into account the level of income received by Ms Remington from these activities. It is submitted this is not a determinative consideration and in fact an objective bystander looking at the matter would be of the opinion that Ms Remington has a modest horse breeding business with an onsite residence. The evidence of Ms Remington makes it clear that this was her intention and once again it is submitted that an objective bystander would also form such an opinion.

60. The Respondent submitted at [40] and [41]:

40. There is insufficient evidence demonstrating that … Ms Remington and/or Mr Atarra were maintaining horses for the purpose of selling them or their natural increase or bodily produce in the relevant land tax years. This is a requirement under the LTMA which has not been satisfied on the materials provided. While there may have been a horse from time to time on the Land, there is simply not enough evidence to support a contention that objectively speaking the keeping of a horse imbues the Land with the character of primary production. Even the applicant himself refers to Ms Remington's plans for a horse raising business being in the future rather than a presently operating business.

41. If there is horse breeding business being conducted on the Land, the applicant has failed to produce cogent evidence as to the scale and the nature of that activity.

61. The Respondent’s submission at [40] is that it is necessary to show that the use of the Property was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce in the relevant land tax years. This wording is derived directly from the LTM Act and is unexceptional. However I find that the submission that "there may have been a horse from time to time" on the Property is not supported on the evidence presented and is contrary to the Applicant's unchallenged evidence.

62. Although the exact number of horses maintained at the Property at all relevant times is not clear, the application for exemption dated 2 September 2013, stated that the (then) present number of horses was 10, there were four horses purchased in the previous 12 months, five were sold for $10,000 with a natural increase of one animal. In November 2013 the Applicant stated “the degree, extent and intensity of the use of the land for grazing/breeding is the maximum the property will allow”. I have referred above to Ms Remington's statement at [13] the effect that at one stage she had up to 13 horses and 4 foals.

63. I also observe that the section 58 documents contained on page 43 a document supplied to the Respondent by the Applicant which the latter stated was supplied (to him) by his tenant. That document is headed "Tax Year Ending 2013" and includes the following:

This tax year, the business acquired two colts which were to be bred to mares which we had also required by this time. For ease on the animal, an optimal time for breeding is the period lasting from Spring to late Summer, but due to time restraints, the mares not coming into season when expected and then not falling pregnant at all, there were only three foals born the following season (December 2013). One of the colts mentioned above was sold during this tax period and a bill of sale is provided. The gestation of a horse is around 11 months and the newborn foal must stay on its mother for at least six months. For this reason the sale of these foals were recorded in the following years tax return.

64. The Respondent did not indicate any source as to his submission in the last sentence at [40] that the Applicant's knowledge of Ms Remington's plans indicates that the horse raising business was in the future rather than presently operating. However at [8] in his statement the Applicant said:

I know that Katie has plans for a horse raising business but I also understand that she now has 2 young children and these have occupied a fair bit of her time. As a result some of the improvements associated with horse raising do need some repairs.

65. The Remington lease provides at clause 16 that the landlord is responsible for normal repairs and maintenance to the house but not for any farm improvements (s 58 documents at page 16). Ms Remington's evidence at [9] and [10] is that she and her father have carried out some work on the Property with the Applicant's permission including fixing the stable door and removing mould from the house. I take the reference to Ms Remington's plans to relate to improvements to the Property and the ongoing development of the horse raising business rather than any intimation that the business was not then operating.

66. Having regard to the evidence before me I find on the balance of probability that throughout the period of the Remington lease which includes the period from 1 July 2012 to 30 June 2013, the relevant period suggested by the Respondent, the Property was used for the maintenance of horses for the purpose of selling them or their natural increase or bodily produce. I find that the dominant or prevailing use of the Property for the 2013 land tax year was primary production.

67. Having regard to my above findings I reject all the Respondent's submissions at [40] and [41] other than that part of [40] referred to in [61] above.

Decision and orders

68. Having regard to my above findings on the evidence before me the correct and preferable decision of this Tribunal, and my orders are as follows:

1. The assessments under review in respect of the 2011 and 2012 land tax years are affirmed.

2. The Applicant is entitled to the exemption sought in respect of the 2013 land tax year and the assessment issued in respect of that year is set aside. The Respondent will issue an assessment in respect of the 2013 land tax year which will have regard to the exemption to which the Applicant is entitled.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 06 November 2015