Rainn Pty Ltd v Commissioner of State Revenue
[2016] VSCA 338
•20 December 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0043
| RAINN PTY LTD | Applicant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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| JUDGES: | MAXWELL P, SANTAMARIA JA and RIORDAN AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 27 October 2016 |
| DATE OF JUDGMENT: | 20 December 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 338 |
| JUDGMENT APPEALED FROM: | [2016] VCAT 402 (Judge Harbison, Vice President) |
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TAXATION – Land tax – Exemptions – Exemption for primary production – Whether land used primarily for primary production – Timing of ascertainment of use – Whether at assessment date or during tax year – Meaning of ‘use’ – Whether land lying fallow or not used – Saville v Commissioner of Land Tax (1980) 12 ATR 7, Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656 considered – Land Tax Act 2005, ss 36, 59, 60 and 66.
APPEAL – Appeal on question of law – Appeal from Victorian Civil and Administrative Tribunal – Whether question of fact or question of law – Leave to appeal refused – Victorian Civil and Administrative Tribunal Act 1998, s 148(1).
WORDS AND PHRASES – ‘Use’, ‘is used’.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr S R Morris QC with Mr J Korman | Belleli King & Associates |
| For the Respondent | Mr C M Caleo QC with Mr N A Kotros | Mr A Langton, Solicitor for the Commissioner of State Revenue |
MAXWELL P
SANTAMARIA JA
RIORDAN AJA:
Summary
The applicant taxpayer was assessed for land tax for the 2011 tax year in respect of certain land owned by it (the ‘land’). Under s 36(1) of the Land Tax Act 2005 (the ‘Act’), a taxpayer is to be assessed for land tax for a tax year
on the total taxable value of all taxable land of which the taxpayer was the owner at midnight on 31 December immediately preceding that tax year.
Before the Victorian Civil and Administrative Tribunal (the ‘Tribunal’), the applicant contended that the land was exempt from land tax under s 66 of the Act because, at the relevant date, the land was ‘used primarily for primary production’.[1] The Tribunal did not accept that the exemption was applicable and dismissed the challenge to the assessment.
[1]An alternative argument was advanced, but relying on s 68 of the Act, but the Tribunal’s rejection of that argument is not challenged on this application.
The applicant now seeks leave to appeal, under s 148 of the Victorian Civil and Administrative Tribunal Act 1998, against the Tribunal’s decision. As the Tribunal was constituted by a Vice President, her Honour Judge Harbison, the application for leave to appeal is made to the Court of Appeal.
For reasons which follow, we would refuse leave to appeal. It is not reasonably arguable that the Tribunal made an error of law. The questions before the Tribunal were questions of fact and, in our respectful opinion, the conclusions which her Honour reached were well open on the evidence.
It was common ground before the Tribunal that the taxable status of the land fell to be determined as at 31 December 2010. Accordingly, the applicability of the s 66 exemption turned on whether on that date the land was being used ‘primarily for primary production’.
On the hearing of this application, however, senior counsel for the applicant submitted that this interpretation of the provisions — which has hitherto been universally accepted — was ‘fundamentally wrong’. The question of the use of the land was to be determined, counsel submitted, not as at the assessment date but on the basis of what occurred over the 12 months of the tax year which followed. Accordingly, the Tribunal had asked itself the wrong question and had thereby fallen into jurisdictional error.
These reasons will show that there is no basis for the reinterpretation contended for. The accepted interpretation which the Tribunal applied is plainly correct.
Assessing the ‘use’ of land
The relevant provisions of the Act are as follows:
36 Land tax assessed on aggregated basis
(1)Subject to this Act, a taxpayer is to be assessed for land tax on land for a tax year on the total taxable value of all taxable land of which the taxpayer was the owner at midnight on 31 December immediately preceding that tax year.
…
66Exemption of primary production land in greater Melbourne but not in an urban zone
Land is exempt land if the Commissioner determines that the land comprises one parcel—
(a)that is wholly or partly in greater Melbourne; and
(b)none of which is within an urban zone; and
(c)that is used primarily for primary production.
As noted earlier, s 36(1) requires the land tax payable for a tax year to be assessed on the total taxable value of
all taxable land of which the taxpayer was the owner at midnight on 31 December immediately preceding that tax year.
In s 3 of the Act, ‘taxable land’ is defined to mean ‘land that is not exempt land’. ‘Exempt land’ is defined, in turn, to mean ‘land that is declared by or under this Act to be exempt land’.
On the accepted interpretation of s 36(1), the question of whether land is exempt land is to be determined as at the date specified in s 36(1), that is, at midnight on 31 December immediately preceding the tax year in question. Before the Tribunal, counsel for the Commissioner submitted — and counsel for the applicant accepted — that the assessment date was 31 December 2010 and that the Tribunal’s task was therefore to ascertain whether the land was exempt land as at that date.
In this Court, as already mentioned, senior counsel for the applicant (who did not appear in the Tribunal) submitted that this interpretation was ‘fundamentally wrong’. Counsel submitted that, although s 36(1) made 31 December the relevant date for ascertaining ownership of taxable land, the question of its exempt status was to be considered by reference not to that particular date but to the tax year.
As already noted, the exemption relied on here is the primary production exemption in s 66. The argument concentrated on the phrase ‘is used primarily for primary production’ in s 66(c). On the proper construction of this phrase, it was said, the question of the use of the land had to be determined by considering its use ‘during the tax year’. Counsel submitted that the phrase ‘is used’ connoted a continuous process of use. Use was ‘inherently a concept that relates to a period, not a date’. That being so, it was submitted, the question of use would only fall to be determined as at a particular date if the Act so specified.
Counsel referred to ss 59(1) and 60(1) of the Act as examples of the Act specifying use at a particular date. Those sections (as in force at 1 May 2010) relevantly provide as follows:
59 Purchase of new principal residence
(1) If a person—
(a)becomes the owner of the land in a year for use and occupation as his or her principal place of residence; and
(b)as at 31 December in that year uses and occupies other land as his or her principal place of residence—
the land referred to in paragraph (a) is exempt land for the following year.
Note
In this situation, the land referred to in paragraph (b) will be exempt land in the circumstances set out in section 54(1)(a).
…
60 Sale of old principal residence
(1)If an owner—
(a)as at 31 December in a year uses and occupies land as his or her principal place of residence; and
(b)as at that date is the owner of other land that, for a period of at least 6 months during that year, was continuously used and occupied as the principal place of residence of the owner—
the land referred to in paragraph (b) is exempt land in respect of the following year.
Note
In this situation, the land referred to in paragraph (a) will be also be exempt land in the circumstances set out in section 54(1)(a).[2]
[2]Sections 59 and 60 of the Act have been subsequently amended in part by State Taxation and Other Acts Amendment Act 2012 ss 10–11.
By contrast, counsel submitted, s 66(c) did not specify a date at which the use of the land had to be assessed. As a result, the use of the relevant land was to be assessed over the full period of the tax year.
In our view, this submission fails at each step. First and foremost, it fails to confront the plain words of s 36(1), which make it unambiguously clear that the question of the taxable status of the land in question is to be determined as at the assessment date. Where an exemption is relied on, the taxpayer must show that the land fell within the exemption on that date. On ordinary principles, the words ‘is used’ in an exemption provision will direct attention to the use of the land at the date in question.
Secondly, there is nothing inherently ‘continuous’ about the concept of use. Depending on what is being used, ‘use’ may be long or short, continuous or intermittent. Typically, of course, a particular use of land will be continuous, at least for some period. Quite correctly, the applicant points to s 64 of the Act, which defines ‘primary production’ as including the continuous processes of ‘cultivation’ of land and ‘maintenance of animals’.
It is, nevertheless, perfectly intelligible to ask whether land is, at a particular date, being used for a particular purpose. Depending on the state of the evidence, that question may be able to be answered simply by looking at what was occurring on the land on the date in question. Alternatively, the ascertainment of the use at that date may depend on additional evidence about what was happening on the land shortly before and/or shortly after the date in question.[3] It is, of course, equally intelligible to ask whether there has been, or will be, continuous use of land over a specified period. Sections 59(1)(b) and 60(1)(a) are examples of the former; s 60(1)(b) is an example of the latter.
[3]See Longford Investments Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656, 660.
Thirdly, the references in ss 59(1)(b) and 60(1)(a) to 31 December are entirely consistent with the proposition that the use of land can be determined as at a particular date. In each of these instances, the application of the particular exemption depends on the satisfaction of two conditions, only one of which requires the ascertainment of the use of land as at the assessment date (31 December in the year preceding the tax year). In each case, that date needed to be specified because satisfaction of the second condition was not date-specific.
Fourthly, other provisions of the Act reinforce the accepted interpretation, by distinguishing expressly between the use of land as at the assessment date and the use of that land over a period. One example is s 54 (as in force at 1 May 2010), which provides as follows:
54 Principal place of residence exemption.
(1) Subject to this Division, the following land is exempt land—
(a)land owned by a natural person that is used and occupied as the principal place of residence of that person;
(ab)land owned by a person that is used and occupied as the principal place of residence of a natural person who has a right to reside on that land;
(b)land owned by a trustee of a trust that is used and occupied as the principal place of residence of a natural person who is a beneficiary of the trust.
…
(2)Subject to section 55, subsection (1)(a) or (b) only applies if the land has been used and occupied as the principal place of residence of the owner or beneficiary—
(a) since 1 July in the year preceding the tax year; or
(b)if the owner or trustee became the owner of the land on or after 1 July in the year preceding the tax year, since a later date during that year.[4]
[4]Emphasis added. Section 54 of the Act has been subsequently amended in part by State Taxation and Other Acts Amendment Act 2012 s 5.
As can be seen, the words ‘is used and occupied’ in s 54(1)(a) and (b) assume that the question of use will be determined as at the assessment date. At the same time, the words ‘has been used and occupied’ in sub-s (2) introduce the additional requirement that the relevant use and occupation must be shown to have been continuous in the year preceding the tax year.
In our view, the language of s 36(1) is unambiguously clear. The subject-matter of the tax is taxable land owned by the taxpayer on the relevant date. The question to be determined by the Commissioner is whether, as at that date, the land in question was taxable or exempt. In a case where the primary production exemption is relied on, the question is whether — as at that date — the land satisfied the three requirements in s 66. The only requirement in issue in the present case was the third, namely, whether as at that date the land was ‘primarily used for primary production’.
For completeness, we should mention the applicant’s reliance on s 30 of the Act (as in force at 1 January 2006).[5] Under that provision, ‘special land tax’ was imposed on land referred to in s 66 which ‘ceases to be exempt land’. The contention for the applicant was that the notion of ‘cessation’ made sense only if the relevant use was continuous. So much may be accepted. But, as we have said, the fact that a particular use of land is a continuing use does not prevent a question being asked about its use at a particular date.
[5]Land Tax Act 2005 s 30(1)(a) and (b), since repealed by State Taxation and Gambling Legislation Amendment (Budget Measures) Act 2007 s 6.
The decision of the Tribunal
What follows is a summary of the Tribunal’s findings of fact, which were not challenged on this application. The applicant purchased the land in July 2010. At that time, a neighbour had an arrangement with the previous owner to graze his sheep on the land, in return for spraying the land. The neighbour could not reach a similar agreement with the applicant and, as a result, the sheep were removed from the land in about November 2010.
The applicant approached Mr Grant Burns, the principal of Agricultural Resources Pty Ltd, which was in the business of carrying out farming activities on land owned by various developers. At that time, Agricultural Resources Pty Ltd was managing 21 different farms with 13 different owners.
Mr Burns gave evidence on behalf of the applicant about discussions which had taken place and about work which he recalled undertaking on the land. The Tribunal noted, however, that under cross-examination ‘Mr Burns[’s] certainty about when he had done work on the land and what sort of work it had been completely evaporated’.[6]
[6]Rainn Pty Ltd v Commissioner of Land Tax (Review and Regulation) [2016] VCAT 402 [111] (‘Reasons’).
On the evidence, the Tribunal was not ‘positively satisfied’ that Mr Burns did any work on the land until well after the end of December 2010.[7] In her Honour’s view:
the inevitable conclusion is that the applicant has not established as a matter of fact that any, let alone any substantial primary production activity took place on [the land] in the period before March 2011.[8]
[7]Ibid [123].
[8]Ibid [120].
In the alternative, the applicant had submitted that, in the period between the removal of the sheep and the assessment date, the land had been ‘lying fallow until conditions were right for planting’.[9] Reliance was placed for that purpose on the decision of Roden J in Saville v Commissioner of Land Tax.[10] The land in question in that case had been farming land but, at the time of the land tax assessment, the only activity on the land was intermittent grazing of cattle.
[9]Ibid [76].
[10](1980) 12 ATR 7 (‘Saville’).
The applicant relied on the following passage from Saville:
3. The position of the relevant date falls during an ‘hiatus period’. If, upon the relevant date, there is no activity relating to any use or claimed use of the land, it is clearly appropriate to look both to the period prior to that date and to the period subsequent to it in order to determine the nature of the use of the land during that hiatus period, as it has been termed. Such a period can arise in any number of different circumstances. If land is allowed to lie fallow before and after periods of cultivation, that clearly, it seems, does not represent an interruption of the use of the land for the purpose of that cultivation, and the land can properly be said at that time to be used for that purpose.
There can be a chance occurrence which causes land to be unused in the sense that there is no relevant activity going on at any particular time. Such occurrence could be the disposal of the owner’s entire stock which is being replaced, with the replacement stock not yet arrived. In such a case, again it seems clear that it would be proper to say that during the hiatus period the land was being used for that purpose.[11]
[11]Ibid 11 (emphasis added).
Her Honour rejected the submission that the land was ‘lying fallow prior to a period of cultivation’.[12] She concluded that, in the case before her:
the notions of fallow, interruption or hiatus are not relevant because those concepts each pre-suppose that there has been some primary production activity proven on the land which is being interrupted.[13]
[12]Reasons [138].
[13]Ibid [124].
Her Honour accepted the Commissioner’s submission that:
this concept can only be appropriately used where a fallow period occurs between two continuous periods of exempt land use.[14]
[14]Ibid [138]
The applicant also relied on the following further passage from Saville:
2. The relevance of intention with regard to use of land. Basically, what is to be determined is the actual use of the land, and this may of course 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 the 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.[15]
[15]Saville (1980) 12 ATR 7, 11.
The applicant submitted that the Tribunal should be satisfied that, as at the relevant date, the applicant had intended that the land would be used in the future for primary production. Her Honour rejected this argument, holding that mere evidence of intention that a canola crop be ultimately planted on the land could not be used ‘to fill the gap in the evidence that otherwise exists’.[16]
[16]Reasons [126].
Error of law?
Senior counsel for the applicant conceded — correctly, in our view — that:
(a) the word ‘used’ in s 66(c) was used in accordance with its natural and ordinary meaning; and
(b) the question whether the land satisfied the requirement in s 66(e) was a question of fact.[17]
Counsel maintained, however, that what the Tribunal had said about the word ‘fallow’ involved error of law. This was said to be so because the Tribunal had erroneously applied ‘a concept or a construct which confined the notion of when land would be lying fallow’.
[17]S v Crimes Compensation Tribunal [1998] 1 VR 83, 88–9.
This point is without substance. As already noted, the Tribunal was not satisfied that any primary production activity was taking place on the land as at the assessment date. There is no challenge to that finding. Quite properly, her Honour then considered whether that condition of inactivity could nevertheless be shown to have been connected to any prior or subsequent activity, such that the land could still be said to have been ‘in use’ at the assessment date.
As indicated by what Roden J said in Saville, such a connection might be established if the state of non-use of a piece of land were shown to be part of a cycle of cultivation.[18] A familiar example of this is crop rotation, where land is used for crops and then allowed to lie ‘fallow’, before being used for crops once again. In such circumstances, the period of (temporary) non-use can be viewed as part of the ‘use’ of the land for primary production. Put another way, the period of non-use is not to be viewed as an interruption of the use.[19]
[18]Saville (1980) 12 ATR 7, 11.
[19]Ibid.
But there was no evidence of that kind in this case. The land was simply unused. There was no connection of any kind between the state of non-use on 31 December 2010 and the cultivation of canola which commenced in March 2011, or the sheep grazing which preceded it. Senior counsel for the applicant conceded that this was so. The finding of fact which her Honour reached was well open in the circumstances. Indeed, it was plainly correct.
In the alternative, counsel submitted that the necessary connection was supplied by the applicant’s intention as to future use of the land. That is, although the land was not in use as at the assessment date, it was sufficient that the applicant at the time intended to use it the following year for canola cultivation.
This point, too, may be disposed of shortly. First, mere intention on the date in question to use land for primary production in the future cannot suffice. The section is directed at actual use. The Tribunal’s reasons record the applicant’s concession to that effect. Secondly, and in any event, there was no evidence before the Tribunal which could have established the state of mind of the applicant company at any relevant time.
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