T & S Liapis Pty Ltd v Commissioner of State Taxation

[2015] SASC 63

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

T & S LIAPIS PTY LTD v COMMISSIONER OF STATE TAXATION

[2015] SASC 63

Judgment of The Honourable Justice Blue

22 April 2015

TAXES AND DUTIES - LAND TAX - ADMINISTRATION OF LAND TAX LEGISLATION

TAXES AND DUTIES - LAND TAX - EXEMPTIONS - PRIMARY PRODUCTION LAND

Taxation appeal against land tax assessments.

The appellant T & S Liapis Pty Ltd owned five hectares of land at Rostrevor.  It created a residential subdivision on 3.5 hectares of the land and by 30 June 2005 had sold all but two residential allotments.  It developed an olive grove on the remaining 1.5 hectares (“the Land”).

In August 2009, the respondent Commissioner of State Taxation issued to Liapis documents the Commissioner contends comprised notice of land tax assessments for 2004/2005 to 2008/2009.

Liapis lodged an objection against the assessments for all years, claiming that it was entitled to the primary production exemption under section 5(10)(g) of the Land Tax Act 1936 in respect of the Land. The Minister disallowed the objection and confirmed the assessments.

Liapis appeals against the assessments for 2005/2006 and 2006/2007.  It amended its notice of appeal during the hearing to include an appeal against a decision said to have been made by the Commissioner in respect of the 2004/2005 onwards that it was not entitled to the primary production exemption.

Liapis contends that the documents issued by the Commissioner in August 2009 did not constitute notices of assessment of land tax within the meaning of the Taxation Administration Act 1996 for any year except 2008/2009. Liapis contends that it is entitled to appeal against a decision it contends was made by the Commissioner that it was not entitled to the primary production exemption in respect of any of the years from 2004/2005 onwards.

Liapis contends that in 2005 and 2006 it was carrying on a business of primary production within the meaning of the Land Tax Act 1936 and its principal shareholder Thomas Liapis was engaged on a substantially full-time basis (either on his own behalf or as an employee) in the business or the business comprised Liapis’ main business. Liapis adduced evidence from Thomas and Thoma Liapis and expert evidence from Lisa Rowntree, Chief Executive Officer of the Australian Olive Association. The Commissioner adduced expert evidence from Charles Drew, a consultant agricultural economist.

Held:

1. It is not open to an appellant on an appeal under section 92 of the Taxation Administration Act 1966 against an assessment to contend that there was no assessment. Any such challenge must be brought by way of judicial review proceedings (at [116]-[117]).

2.       The Commissioner in August 2009 made valid assessments of land tax in respect of the financial years from 2004/2005 to 2008/2009 (at [138]).

3.       The Commissioner did not make a decision whether or not Liapis was entitled to a primary production exemption because Liapis had not applied for such an exemption and the question did not arise in August 2009 (at [144]).

4. Liapis was in June 2005 and June 2006 carrying on an olive growing and production business and was using the land for the business of primary production within the meaning of section 5(10)(g) of the Land Tax Act 1936 (at [172).

5.       Thomas Liapis was in 2005 and 2006 engaged on a substantially full-time basis (either on his own behalf or as an employee) in the business (at [182] and [186]).

6.       Liapis failed to prove that the business of primary production was its main business as at June 2005 but did prove that it was as at June 2006 (at [196]-[199]).

7.       Appeal allowed.  Land tax assessments for 2005/2006 and 2006/2007 set aside (at [200]).

Income Tax Assessment Act 1936 (Cth); Income Tax Assessment Act 1997  (Cth); Land Tax Act 1936 (SA) s 2, 3, 4, 5, 7, 8, 8B, 9, 13, 14, 16; Local Government Act 1919 (NSW); Statutes Amendments (Budget 2005) Act 2005 (SA); Taxation Administration Act 1996 (SA) s 3, 8, 10, 14, 82, 88, 92, 96, 97, 98, referred to.
Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310; Hope v Bathurst City Council  (1980) 144 CLR; Thomas v Federal Commissioner of Taxation (1972) 46 ALJR 397, discussed.
Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364 ; Cameron v Cole (1944) 68 CLR 571; Commissioner of Inland Revenue v Livingstone (1926) 11 TC 538; Cyril Henschke Pty Ltd v Commissioner of State Taxation (2008) 104 SASR 1; Ericksen v Last (1881) 8 Q.B. 414; Evans v Federal Commissioner of Taxation (1989) 20 ATR 922; Federal Commissioner of Taxation v JR Walker (1985) 16 ATR 331; Higgins v Comans (2005) 153 A Crim R 565; Inglis v Federal Commissioner of Taxation (1979) 10 ATR 493; Kalomel Nominees Pty Ltd v Commissioner of State Taxation [2012] SASC 10; Layala Enterprises Pty Ltd (in liquidation) v Commissioner of Taxation (1998) 86 FCR 348; Martin v Federal Commissioner of Taxation (1953) 90 CLR 470; Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; Newton v Pyke (1908) 25 TLR 127; Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369; Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476; R v Deputy Federal Commissioner of Taxation (SA); ex parte Cooper (1926) 37 CLR 368; Re Macks; Ex parte Saint (2000) 204 CLR 158 ; Ruhani v Director of Police (2005) 222 CLR 489 ; Tooth & Co Ltd v Newcastle Development Ltd (1966) 116 CLR 167; Tourism Holdings Pty Ltd v Commissioner of Taxation (2005) 15 NTLR 80; Tweddle v Federal Commissioner of Taxation (1942) 180 CLR, considered.

T & S LIAPIS PTY LTD v COMMISSIONER OF STATE TAXATION
[2015] SASC 63

Civil:

BLUE J.

1. This is a taxation appeal[1] following the Minister’s disallowance of an objection to land tax assessments on the ground that the land was not exempt from land tax under the primary production exemption.[2]

   [1]    Taxation Administration Act 1996 (SA) s 92.

   [2]    Land Tax Act 1936 (SA) s 5(1)(g).

2. The appellant T & S Liapis Pty Ltd (Liapis) owned 5 hectares of land at Rostrevor. It created a residential subdivision on 3.5 hectares of the land and by 30 June 2005 had sold all but two residential allotments. It developed an olive grove on the remaining 1.5 hectares which comprised Lots 74 and 75 (the Land).

3. In August 2009, the respondent Commissioner of State Taxation (the Commissioner) wrote to Liapis’ solicitors enclosing what the Commissioner contends, and Liapis denies, comprised notice of land tax assessments inter alia in respect of the Land for the years ended 30 June 2006 and 30 June 2007.

4. Liapis lodged an objection against the assessments,[3] claiming inter alia that it was entitled to an exemption under section 5(10)(g) of the Land Tax Act 1936 (SA) (the Act) because the Land was used for primary production, the main business of Liapis was a business of primary production and the Land was used to a significant extent for that business. The Minister for Finance determined the objection,[4] confirming the assessments. Liapis appeals following the Minister’s determination.

   [3]    Taxation Administration Act 1996 (SA) s 82.

   [4]    Taxation Administration Act 1996 (SA) s 88.

5. The principal questions raised by the appeal are:

   1.Is Liapis entitled to appeal under section 92 of the Taxation Administration Act 1996 (SA) (the Taxation Administration Act) against a putative assessment on the ground that it is not a valid assessment?

   2.Did the Commissioner in August 2009 make assessments of land tax under and within the meaning of sections 8 and 14 of the Taxation Administration Act?

   3.Is Liapis entitled to appeal under section 92 of the Taxation Administration Act against a decision by the Commissioner that Liapis is not entitled to an exemption from land tax?

   4.Did Liapis at the relevant times carry on a business of primary production within the meaning of sections 5(10) and 2(1) of the Act?

   5.If yes to 4, was Thomas Liapis engaged on a substantially full-time basis in the business?

   6.If yes to 5, was Thomas Liapis engaged on a substantially full-time basis (either on his own behalf or as an employee) in the business?

   7.If yes to 4 but no to 5 or 6, was the business the main business of Liapis as at the relevant times?

   Background

6. At material times,[5] Thomas Liapis owned 505 shares and his brother Sotirios owned 500 shares, giving Thomas a majority shareholding in Liapis.

   [5]    The material times are as at 30 June 2005 in respect of the 2005/2006 year and 30 June 2006 in respect of the 2006/2007 year.

7. At material times, Thomas and Sotirios Liapis were directors of Liapis.[6] At material times, Liapis was the trustee of:

   ·the discretionary Thomas Liapis Children’s Trust (the Thomas Trust);

   ·the discretionary Sotirios Liapis Trust (the Sotirios Trust);

   ·the Liapis Unit Trust (the Unit Trust);

   ·the discretionary Thomas Liapis Family Trust (the Thomas Family Trust);[7] and

   ·the discretionary Sotirios Liapis Family Trust (the Sotirios Family Trust).[8]

   [6]    One of Thomas’ sons, Socrates Liapis, was also a director but had no legal or beneficial ownership of the company and can be ignored for the purposes of this appeal. Another of Thomas’ sons, Thoma Liapis, was later appointed a director in December 2011 when Sotirios died.

   [7]    Thomas was the original trustee but was replaced by Liapis.

   [8]    Sotirios was the original trustee but was replaced by Liapis.

8. At material times, Liapis held the Land (and other lands owned from time to time) on trust:

   ·as to one third for the Thomas Trust;

   ·as to one third for the Sotirios Trust; and

   ·as to one third for the Unit Trust which in turn held half of its interest on trust for the Thomas Family Trust and the other half on trust for the Sotirios Family Trust.[9]

   [9]    The beneficial ownership is not directly relevant on appeal. On 30 June 2005, minor beneficial interests were purportedly created in respect of part of Lot 74 and Lot 75: see [17] below. These minor interests are not directly relevant on appeal.

   The land

9. The Land forms part of five hectares[10] of land at Rostrevor (the Estate) that was purchased by brothers Thomas, Sotirios and George Liapis in 1966. The Estate was square and bounded on the west by Yalpara Avenue, the north by Cortlyne Street and the east by an unformed public road.

   [10]   13 acres. References to hectares are rounded to the nearest half hectare unless otherwise stated.

10. The western two thirds of the Estate (the Flat Land) was relatively flat. The Liapis brothers intended to use it for agriculture and horticulture and did so in due course.

11. The eastern third (the Steep Land) was sloping to quite steep and the steeper portion was situated in what later became the Hills Face Zone. More than 340 olive trees had been planted and/or grown from seeds around the turn of the century and had grown into very large mature trees with diameters in the vicinity of one metre (the old olive trees). At some point, the old olive trees were cut down near their base, leaving very large living rootstocks. There were also some smaller, more recent, wild seedlings. The brothers intended to use the Steep Land as an olive grove and did so in due course.

12. The brothers were initially busy operating a café in Hindley Street and rented out the Estate for the first six or seven years. In about 1972, they started using the Flat Land to raise pigs and chickens.

13. In 1975, Thomas and Sotirios started growing strawberries on the Flat Land. In the late 1980s, they started growing flowers as well, which they continued doing after 1990 when they stopped growing strawberries and until 1995. Their customers included the Central Market and Coles.

14. In 1992, the brothers decided to develop the Estate by creating residential allotments on the Flat Land and developing an olive grove on the Steep Land.

15. In June 1994, Thomas and Sotirios bought out George’s interest in the Estate. They incorporated Liapis for that purpose and created the Unit Trust, the Thomas Family Trust and the Sotirios Family Trust. George transferred his one third interest in the Estate to Liapis as trustee for the Unit Trust and the Unit Trust issued five units to each of the Thomas and Sotirios Family Trusts.

16. In 1996, Thomas and Sotirios created the Thomas Trust and the Sotirios Trust and transferred their one third interests in the Estate to Liapis as trustee for those trusts respectively.

17. On 30 June 2005, Liapis purported to create four new trusts (the 30 June 2005 trusts); to excise from the corpus of the Unit Trust its interest in four parcels of land forming part of Lot 74 and Lot 75 and thereafter hold each parcel as trustee for each new trust respectively; and as trustee of the Thomas Family Trust to appoint one percent of that Trust’s interest in each parcel to each of Thomas’ four children respectively (collectively the 30 June 2005 dispositions).[11] These purported dispositions formed the ground for a contention by Liapis to the Commissioner that each of Lot 74 and 75 should be disaggregated from Lots 16 and 36. While this formed one of the two grounds of objection against the assessments, it is not an issue on appeal and the purported dispositions can be treated as if they did not occur.

    [11]   Liapis as trustee for the Unit Trust executed three Excision Deeds purporting to excise from the corpus of the Unit Trust three parcels of land having an area of approximately 900 square metres each fronting on to the eastern side of Liapis Court and forming part of Lot 74 (in one case) and parts of Lot 75 (in the other two cases) and declared that it thereafter held the three parcels of land on three separate trusts. Liapis as trustee for the Unit Trust executed a fourth Excision Deed purporting to excise from the corpus of the Unit Trust a fourth parcel of land having an area of approximately 6,000 square metres fronting on to the eastern side of Liapis Court and forming the balance of Lot 75. By each Deed, Liapis declared that it thereafter held the relevant parcel of land on a separate trust known as the Liapis Lot 29 Trust, Liapis Lot 30 Trust, Liapis Lot 31 Trust and Liapis Lot 32 Trust respectively. On the same day, Liapis as trustee for the Thomas Family Trust purported to appoint one percent of the corpus of the Liapis Lot 29 Trust to Panagiota Liapis, one percent of the corpus of the Liapis Lot 30 Trust to Vasilios Liapis, one percent of the corpus of the Liapis Lot 31 Trust to Socrates Liapis and one percent of the corpus of the Liapis Lot 32 Trust to Thoma Liapis. On 29 October 2008, Liapis executed a deed of rectification to rectify various mistakes made on 30 June 2005.

18. In October 2011 Sotirios died and in December 2011 Thoma Liapis was appointed a director of Liapis in his stead.

    The subdivisions

19. In about 1992, Liapis subdivided portions of the Estate fronting onto Yalparra Avenue and the western two thirds of Cortlyne Street into 15 residential allotments (Deposited Plan 33377).[12] Liapis installed water, sewerage and electricity and sold the residential allotments to various purchasers. This was the first stage of the residential subdivision of the Estate. The 15 allotments were sold within two or three years.

    [12]   In 1996, Deposited Plan 48642 modified two or three allotments to accommodate a road needed for the second stage which road became Gortynia Crescent.

20. By 2001, Liapis had subdivided the remaining portion of the Estate (Deposited Plans 56827 and 57788).[13] These created two internal roads: Gortynia Crescent running eastward off Yalparra Avenue and Liapis Court running off Gortynia Crescent. They created 19 residential allotments. They also created two large allotments totalling 1.507 hectares (Lots 74 and 75) on the south-western side of Liapis Court on which the olive trees were situated. Liapis constructed the two roads and installed water, sewerage and electricity for the 19 residential allotments and thereafter sold the residential allotments to various purchasers. This was the second stage of the residential subdivision of the Estate.

    [13]   Deposited Plan 56827 created 14 residential allotments together with a large almost 4,000 square metre allotment (Lot 71) capable of being divided into four residential allotments and a residual 1.624 hectare allotment (Lot 73) upon which the olive trees were situated. Deposited Plan 57788 in turn divided Lot 71 into four residential allotments and divided Lot 73 into one small residential allotment and two large residual allotments (Lots 74 and 75) (the Land).

21. In 2001/2002, Liapis derived revenue from subdivisional sales in the amount of $1,328,475 and made a gross profit of $284,262. At the end of that financial year, it had available for sale land stock at cost of $2,235,618.

22. In 2002/2003, Liapis derived revenue from subdivisional sales of $1,465,077 and made a gross profit of $150,312. At the end of that financial year, it had available for sale five allotments (Lots 16 to 18 and 35 and 36) at cost of $920,853.

23. In 2003/2004, Liapis derived revenue from subdivisional sales of $749,859 and made a gross profit of $193,938. At the end of that financial year, it had available for sale two allotments (Lots 16 and 36) at cost of $364,969.

24. In 2004/2005, Liapis made no subdivisional sales. Thomas and Thoma gave evidence that Lots 16 and 36 were difficult to sell because of easements over the titles.

25. In 2005/2006, Liapis sold Lot 16 (on 14 June 2006) for $370,000 and a gross profit of $186,912. As at 30 June 2006, Liapis still owned Lot 36, which had a cost of $220,000.

26. In August 2006, Lot 75 was subdivided into Lot 32 and Lot 76. As this subdivision post-dates the last relevant date for land tax purposes - 30 June 2006 - it can largely be ignored.

27. Liapis sold Lot 36 on 29 October 2007 for $418,000.

    The olive grove

28. In about 1996, Thomas and Sotirios installed a mini sprinkler irrigation system supplied by mains water for the olive trees on the Steep Land. Thomas was the principal, undertaking most of the work, and was assisted by Sotirios.

29. Starting in about 1996, Thomas and Sotirios grafted cuttings onto rootstocks of the old olive trees. They purchased cuttings from the Department of Agriculture and from a supplier in the Riverland. Over time, they grafted between one and five cuttings onto an existing rootstock. Initially, they focused on grafting table varieties: Kalamata, Jumbo Kalamata and Spanish Queen. Later, they grafted oil producing varieties: Manaki, Korinthian Manaki, Mediterranean and Koroneiki. From time to time, if a graft did not take or flourish, they replaced it with a new graft. From time to time, they changed the variety grafted to a particular rootstock, usually from a table variety to an oil producing variety.

30. Liapis owned a Massey Ferguson tractor, a plough and a slasher used for cultivating the land, a boom spray for spraying for diseases or fertilizer and a Ford motor vehicle for transporting olives and olive oil.

31. Liapis first sold olives in 2001/2002. Olives was sold to customers who picked their own for $20 bucket ($1 per kilogram). Olives were picked and pickled by Liapis and sold for $5 per kilogram.

32. Olives are harvested in winter between May and July. The trees are pruned after harvesting. Grafting and planting is undertaken in spring. Maintenance includes weeding, slashing grasses, removing suckers, repairing and maintaining sprinklers and polypipe lines and spraying when necessary. The olives are irrigated during summer and early autumn. Each line supplies eight or nine trees and it is necessary to turn each line manually on and off.

1. By 2005, Liapis decided to create a series of terraces on the lower half of the Steep Land and plant olive seedlings of oil producing varieties in regular rows along the terraces. Over the next two or three years, the terraces were cut and seedlings were planted in lines along the terraces.

2. By 2005, Liapis was sending part of the harvest to contract crushers to extract the oil. The oil was then bottled and sold under a label bearing the name “Liapis Estate”. The oil was sold in ½ litre glass bottles for $12 ($24 per litre), 2 litre glass flagons for $20 ($10 per litre) and 10 litre plastic containers for $100 ($10 per litre). The oil was sold to regular customers, Greek clubs, customers who saw the “Liapis Estate” sign at the Estate and customers through word of mouth.

3. The position since 30 June 2006 is not directly relevant because the liability to and calculation of land tax is determined at midnight on 30 June immediately preceding the financial year in respect of which land tax is imposed.[14] However, considerable evidence was given about the position as at July 2014 when the trial took place on the basis that the position in June 2005 and June 2006 was determined by comparison with the present position. The parties make no distinction between the position as at June 2005 and the position as at June 2006 and treat the issue of primary production business as being factually the same for both years.

   [14]   Land Tax Act 1936 (SA) s 4(2) and (3).

4. After 2006, Liapis continue to graft cuttings onto the rootstocks of old olive trees and to plant new seedlings. As at July 2014, cuttings had been grafted onto the rootstocks of 340 old olive trees and in addition there were 50 planted olive trees. Assuming that on average 3 scions were grafted onto each rootstock, this gives a total of approximately 1020 scions and 50 trees. Over the intervening period of nine years, some of the producing trees in 2005 had been removed. The trees grafted or planted since 2005 were still relatively immature in 2014.

5. Olive oil production in 2014 was estimated at approximately 400 litres.

6. Lisa Rowntree inspected the olive grove in April 2014. She observed olive trees in three broad bands of maturity, being in the vicinity of 15 years old (grafted in the late 1990s), seven years old (grafted or planted around 2006) and three years old (grafted or planted around 2010).

   The assessments

7. The Commissioner routinely issued annual assessments of land tax to Liapis in August to October of each year after Liapis acquired an interest in the Estate in 1994. These assessments were issued under ownership number 70483546, being a number allocated by the Commissioner to Liapis as a taxpayer in its own right.

8. In August 2003, Liapis lodged an objection to the land tax assessment for 2002/2003, which objection was disallowed by the Treasurer in August 2004.

9. In August 2004, the Commissioner issued an assessment to Liapis for the 2003/2004 year. In August 2005, the Commissioner issued an assessment to Liapis for the 2004/2005 year. In November 2005, the Commissioner issued an assessment to Liapis for the 2005/2006 year.[15] These assessments aggregated Lots 74 and 75 with Lots 16 and 56.[16]

   [15]   A copy of each of these three assessments was tendered.

   [16]   The 2002/2003 assessment also aggregated Lots 17, 18 and 35.

10. On 30 June 2005, Liapis’ solicitors wrote to the Commissioner enclosing notifications of the 30 June 2005 trusts pursuant to section 13(3)(b) of the Act. On 17 November 2005, they wrote to the Commissioner contending that, by reason of the 30 June 2005 dispositions, the beneficial ownership of each of Lot 74 and Lot 75 differed from the beneficial ownership of Lots 16 and 36 and requesting the Commissioner to issue fresh assessments for each of Lots 74 and 75 on a single holding basis and for Lots 16 and 36 on an aggregated basis pursuant to section 13(3)(b) of the Act. This resulted in a stop being placed on the account on 1 December 2005. Correspondence passed between the parties over the next four years concerning the beneficial ownership of land owned by Liapis.

11. In May 2008, the account stop was removed and an assessment was issued for the 2007/2008 year.[17] In September 2008, a fresh stop was placed on the account.

    [17]   No further details of this assessment are available.

12. At some point, Liapis acquired two properties in Carrington Street, Adelaide in its capacity as trustee of the Liapis Self Managed Superannuation Fund and the Sotirios Liapis Superannuation Fund. Liapis was assessed for land tax in respect of those properties but the land tax is not in issue on appeal.

13. In August 2009, in response to Liapis’ November 2005 submission, the Commissioner created new ownership number 70808996 for Liapis in its capacity as trustee for the Thomas Trust, the Sotirios Trust and the Unit Trust. The Commissioner created new ownership number 70808988 for Liapis in its capacity as trustee of the two Superannuation Funds.

14. On 11 August 2009, the Commissioner wrote to Liapis’ solicitors informing them of the issue of the two new ownership numbers (the Letter). The Letter enclosed a Notice of Land Tax Assessment under ownership number 70808996 (the Notice), a Notice of Land Tax Assessment under ownership number 70808988 (not relevant) and a spreadsheet (the Spreadsheet). The first part of the Letter read:

    Ownership No: 70483546 – T & S Liapis Pty Ltd

    Reference is made to your request concerning properties in the above ownership being purchased on behalf the various trusts and superannuation funds.

    As a result of your submission, Land tax will now be assessed in the following manner:

    Ownership No: 70808996 – T & S Liapis Pty Ltd & Ors ATF the Liapis Unit Trust, the Thomas Liapis Children’s Trust and the Sotirios Liapis Trust.

    The properties referred to in your letter as ‘the Rostrevor Land’ are now assessable under Ownership No. 70808996 from the 2004-05 financial year onwards.

    Ownership No: 70808988 – T & S Liapis Pty Ltd & Ors ATF the Liapis Self Managed Superannuation Fund and the Sotirios Liapis Superannuation Fund.

    The property located at 53-55 Carrington St, Adelaide (Assessment No. 0207841114), is now assessable under Ownership No. 70808988 from the 2004-05 financial year onwards.

    As a result of the above, there are no properties remaining in Ownership No. 70483546 for the 2004-05 financial year onwards and is therefore not liable for Land Tax for these financial years.

    Please refer to the accompanying spreadsheet detailing the liability for both of the above ownerships for the 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 financial years.

    Enclosed are the amended Notices of Land Tax Assessment for the 2008-09 financial year for both of these Ownerships for payment by your clients, T & S Liapis Pty Ltd.  Please not that these Notices include arrears from the previous financial years.

15. The Notice read:

    NOTICE OF

    LAND TAX ASSESSMENT

    OWNERSHIP NUMBER
      70808996

    2008/2009 FINANCIAL YEAR ASESSMENT OF

    LAND OWNED AS AT 30 JUNE 2008

    T & S LIAPIS PTY LTD & ORS  DUE DATE        24/09/2009

    C/-

    202 GORGE RD

    NEWTON SA 5074

ASSESSMENT NUMBER	LOCATION	TAXABLE SITE VALUE	ARREARS/ CREDITS	CURRENT TAX	BALANCE
1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5037 LT 74 D57788	620,000	$29,786.43	$13,979.77	$43,766.20
1719552900	LT 75 LIAPIS CT ROSTREVOR SA 5037 LT 75 D57788	0	$28,808.62	$0.00	$28,808.62
1719552919	11 LIAPIS CT ROSTREVOR SA 5073 LT 32 D69720	560,000	$10,158.57	$12,626.89	$22,785.46
1719552935	15 LIAPIS CT ROSTREVOR SA 5073 LT 76 D69720	590,000	$11,299.99	$13,303.34	$24,603.33
1719574106	14 LIAPIS CT ROSTREVOR SA 5073 LT 36 D57788	0	$25,776.70	$0.00	$25,776.79

TOTAL TAXABLE SITE VALUE         1,770,000

TOTAL AMOUNT DUE
$145,740.40

24/09/2009

1. The Spreadsheet read:

T & S Liapis Pty Ltd ATF the Liapis Unit Trust, the Thomas Liapis Childrens Trust and the Sotirios Liapis Trust
Assessment No.	Property Location	Cert of title:	Site Value:	Tax Applicable:	Running Total:
2004-05 Financial Year: 171955130*	LT 16 GORTYNIA CRES ROSTREVOR SA 5073 LT 16 D56827	CT 5852/885	$295,000.00	$5,880.54
1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5073 LT 74 D57788	CT 5863/863	$410,000.00	$8,172.95
1719552900	LT 75 LIAPIS CT ROSTREVOR SA 5073 LT 75 D57788	CT 5863/864	$460,000/00	$9,169.65
1719574106	LT 36 LIAPIS CT ROSTREVOR SA 5073 LT 36 D57788	CT 5863/859	$275,000.00	$5,481.86
TOTAL LIABILITY Less Payments Recv:	$1,440,000.00	$28,705.00
5/06/2006	$5,880.54	(Part of payment for $12,713.85)
30/10/2007	$7,875.75
TOTAL OUTSTANDING:	$13,756.29	$14,948.71	$14,948.71
2005-06 Financial Year: 171955130*	LT 16 GORTYNIA CRES ROSTREVOR SA 5073 LT 16 D56827	CT 5852/885	$330,000.00	$6,833.31
1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5073 LT 74 D57788	CT 5863/863	$440,000.00	$9,111.08
1719552900	LT 75 LIAPIS CT ROSTREVOR SA 5073 LT 75 D57788	CT 5863/864	$490,000.00	$10,146.43
1719574106	LT 36 LIAPIS CT ROSTREVOR SA 5073 LT 36 D57788	CT 5863/859	$310,000.00	$6,419.18
TOTAL LIABILITY Less Payments Recv:	$1,570,000.00	$32,510.00
TOTAL OUTSTANDING:	5/06/2006	$6,833.31 $6,833.31	(Part of a payment for $12,713.85)
			$25,676.69	$40,625.40
2006-07 Financial Year: 1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5073 LT 74 D57788	CT 5863/863	$475,000.00	$8,507.46
1719552900	LT 75 LIAPIS CT ROSTREVOR SA 5073 LT 75 D57788	CT 5863/864	$530,000.00	$9,492.54
1719574106	LT 36 LIAPIS CT ROSTREVOR SA 5073 LT 36 D57788	CT 5863/859	$335,000.00	$6,000.00
TOTAL OUTSTANDING:	$1,340,000.00	$24,000.00	$64,625.40
2007-08 Financial Year: 1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5073 LT 74 D57788	CT 5863/863	$520,000.00	$11,870.69
1719552919	11 LIAPIS CT ROSTREVOR SA 5073 LT 32 D69720	CT 5973/54	$445,000.00	$10,158.57
1719552935	15 LIAPIS CT ROSTREVOR SA 5073 LT 76 D69720	CT 5973/55	$495,000.00	$11,299.99
1719574106	14 LIAPIS CT ROSTREVOR SA 5073 LT 36 D57788	CT 5863/859	$345,000.00	$7,875.75
TOTAL OUTSTANDING:	$1,805,000.00	$41,205.00	$105,830.40
2008-09 Financial Year: 1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5073 LT 74 D57788	CT 5863/863	$620,000.00	$13,979.77
1719552919	11 LIAPIS CT ROSTREVOR SA 5073 LT D69720	CT 5973/54	$560,000.00	$12,626.89
1719552935	15 LIAPIS CT ROSTREVOR SA 5073 LT 76 D69720	CT 5973/55	$590,000.00	$13,303.33
TOTAL OUTSTANDING:	$1,770,000.00	$39,910.00	$145,740.40
(Total Invoiced)
2009-10 Financial Year: 1719552855	LT 74 LIAPIS CT ROSTREVOR SA 5073 LT 74 D57788	CT 5863/863	$650,000.00	$15,158.56
1719552919	11 LIAPIS CT ROSTREVOR SA 5073 LT 32 D69720	CT 5973/54	$600,000.00	$13,992.51
1719552935	15 LIAPIS CT ROSTREVOR SA 5073 LT 76 D69720	CT 5973/55	$620,000.00	$14,458.93
TOTAL OUTSTANDING:	$1,870,000.00	$43,610.00	To be invoiced
T & S Liapis Pty Ltd ATF the Liapis Self Managed Super Fund and the Sotirios Liapis Super Fund
Assessment No.	Property Location:	Cert of Title:	Site Value	Tax Applicable	Running Total:
2008-09 Financial Year: 207841114	53-55 CARRINGTON ST ADELAIDE SA 5000 LTS 1 2 DP17395	CT 5298/804	$670,000.00	$4,100.00
TOTAL OUTSTANDING:	$670,000.00	$4,100.00	$4,100.00
(Total Invoiced)
2009-10 Financial Year: 207841114	53-55 CARRINGTON ST ADELAIDE SA 5000 LTS 1 2 DP17395	CT 5298/804	$670,000.00	$4,100.00
TOTAL OUTSTANDING:	$670,000.00	$4,100.00	To be Invoiced

Objection, disallowance and appeal

1. On 15 October 2009, Liapis’ solicitors wrote to the Treasurer. They said that they were instructed to give notice of objection against each of the assessments for the 2004/2005 to 2008/2009 years. The first ground related to aggregation: it is not pursued on appeal. The second ground was that Lots 74 and 75 were exempt from land tax under the primary production exemption under section 5(10)(g)(v) of the Act.

2. On 31 August 2012, the Acting Minister for Finance wrote to Liapis’ solicitors disallowing the objection.

3. On 4 September 2013, Liapis filed a notice of appeal against the Minister’s determination.[18]

   [18]   This was filed out of time. However, the Commissioner does not oppose an extension of time being granted. Liapis subsequently twice amended the notice of appeal. The Third Notice of Appeal (FDN 15) was filed on 8 July 2014 during the trial.

   The evidence

4. For the appellant, three affidavits of Thomas Liapis and one affidavit of his son Thoma Liapis were received in evidence. An expert report by Lisa Rowntree was received in evidence. They each also gave oral evidence.

5. For the respondent, an affidavit of Lee Jurga, a Senior Taxation Specialist in Revenue SA, was received in evidence. An expert report by Charles Drew was received in evidence. They each also gave oral evidence.

6. No challenge is made by either party to the honesty of any witness and I accept each of them as an honest witness. No general challenge is made to the reliability of the evidence of the lay witnesses, although the Commissioner’s submissions are premised on evidence given by Thomas Liapis being unreliable as to the years when certain events occurred and as to quantities in relation to olive grafting and planting and olive oil production over the years.

7. Thomas Liapis was at times vague and inconsistent in his answers to questions about the year in which certain events occurred. This is not surprising given his age (79 years), English being his second language and the events in question having occurred 10 or 20 years ago. I find that Thomas’ evidence was generally reliable about the sequence in which events occurred, although he was inaccurate as to the year in which an event occurred. I find that Thomas’ evidence as to quantities was generally reliable at a broad level but not reliable as to accurate quantities. As to both years and quantities, Thoma’s evidence was more accurate and reliable.

8. Annual financial statements and/or tax returns for one or more of the three trusts which have a one third interest in the Estate[19] for the years 2002/2003 to 2006/2007 were tendered. They showed revenue from primary production of $6,501, $4,752, $4,2436, $4,947 and $3,470 respectively. Thoma gave evidence that records were not kept of individual sales but revenue was calculated at year end based on total production of olives and oil. A document provided by Thoma to the accountant for 2006/2007 showed sales in 2006/2007 of 180 litres of oil at an average price of $16.50 and 100 one kilogram jars of pickled olives at $5 per kilogram.

   [19]   The Unit Trust, the Thomas Trust and the Sotirios Trust.

9. The financial statements for 2006/2007 showed labour and olive crushing of $257, vehicle expenses of $2,465, rates and taxes of $4,164,[20] plant depreciation of $1,104 and wages paid to Thomas and Sotirios of $2,880.  The document provided by Thoma to the accountant for that year showed that the figure of $257 in the financial statements comprised crushing costs of $128 for 180 litres of oil ($0.16 per litre ) and jars and salt of $129 for 100 jars of pickled olives ($1.30 per kilogram). While expenses in 2006/2007 post date 30 June 2006, they indicate the annual amount of expenses in the mid 2000s.

   [20]   Allocating 25% of total rates and taxes of $5,552 to Lot 36.

10. Ms Rowntree has an Advanced Diploma in Horticulture and is a graduate of the Australian Institute of Company Directors. She has been a joint owner and manager of a 500 hectare olive grove in the Coonalpyn region since 2000. She is a past President of Olives South Australia Inc and since November 2010 has been the Chief Executive Officer of the Australian Olive Association. Ms Rowntree inspected the Land in April 2014.

11. Ms Rowntree estimated that the old trees had been planted in the 1890s and said that they are some of the oldest olive trees she has seen in Australia. She expressed the opinion that the olive trees she saw fell into three broad size/age groups. They are approximately 15 years, seven years and three years old. She expressed the opinion that the olive trees were in good condition and should produce good high quality Extra Virgin Olive Oil. She tasted olive oil from the 2013 season and assessed it as Extra Virgin Olive Oil. She expressed the opinion that the olive grove as a whole had been well planned and well maintained, tended using good horticultural practices and carried on in a business-like manner consistent with many of the Australian Olive Industry’s smaller boutique growers. She expressed the opinion that the cultivation of olives on the Land was carried on in a manner similar to that of other small-scale commercial olive producers.

12. Ms Rowntree gave evidence about the makeup of the Australian olive growing industry. She said that there are approximately 30 large enterprise growers who have over 80 hectares, of whom the largest has approximately 6,000 hectares; approximately 40 medium-sized growers who have between 10 and 80 hectares; and approximately 320 smaller growers (representing 82 percent of all growers) who have less than 10 hectares. 38 percent of all growers have around 2½ hectares and 25 percent of all growers have less than one hectare. There are 21,000 to 22,000 hectares of olives under cultivation in Australia, of which approximately 3,000 hectares are cultivated by growers with less than 10 hectares each.

13. Ms Rowntree gave evidence that the crop from a mature olive tree can vary, depending on variety, conditions and seasonality, from 0 to 180 kilograms[21] but that a fair reliable average is 40 to 50 kilograms. Ms Rowntree gave evidence that the olive oil yield can vary from 16 percent to 28 percent and that a fair reliable average is 24 percent.

    [21]   The high degree of variability was corroborated by exhibit P11 which is a study by Newberg and Yunasa of the Rural Industries Research & Development Corporation in September 2003, which showed average yields at a Waikerie site of 5 kilograms in 2000 increasing to 83 kilograms in 2001; average yields at a Two Wells site of 98 kilograms in 2000 decreasing to 37 kilograms in 2001; as well as average yields at a Balaklava site of 14 kilograms in 2000 and 8 kilograms in 2001 and a Greenock site of 19 kilograms in 2000 and 18 kilograms in 2001.

14. Ms Rowntree gave evidence that generally olives produce their first crop when about four years old but do not reach maturity in the sense of full production for many years. She estimated that two thirds of the trees she saw on the Land in 2014 would have been cropping in 2006.

15. Mr Drew has a Bachelor of Agricultural Science, a Diploma in Agricultural Extension and a Master of Science (Agricultural Economics). He has been an agricultural economist with Scholfield Robinson Horticultural Services since 2001, having previously been a consultant with URS, a District Manager in the Victorian Department of Agriculture and an employee of Wesfarmers. He inspected the Land in May 2014. His expertise is in agricultural economics generally and he does not have particular expertise or experience concerning olive cultivation or production, having provided reports concerning olive groves in three matters over the last 20 years.

16. Mr Drew estimated that 390 olive trees on the Land would produce 7,800 kilograms of olives assuming an average crop of 20 kilograms per tree. He estimated that 7,800 kilograms of olives would produce 1,560 kilograms of oil, assuming an average yield of 20 percent, which would translate to approximately 1,700 litres of oil. This would result in annual revenue of $17,000, assuming sales at $10 per litre.

17. Mr Drew expressed the opinion that revenue of $17,000 was too low to characterise the activity as a business of primary production. He expressed the opinion that an enterprise generating revenue over $20,000 would amount to a business of primary production.

1. Mr Drew expressed the opinion that, if all inputs including family labour were charged to Liapis at armslength rates, a surplus of income over expenditure would be unlikely.

2. Mr Drew considered the indicators of a business of primary production listed in TR 97/11. He considered that some of the indicators were satisfied in the case of Liapis’ activities, including repetition and regularity, businesslike systematic manner and similarity to other enterprises producing the same product. However, he considered that Liapis did not satisfy other indicators, including prospect of profit if all expenses such as family labour were charged against proceeds, creating written plans and keeping written records and size, scale and permanency.

3. Ms Rowntree implicitly expressed the opinion that Liapis carried on a business of primary production and Mr Drew implicitly expressed the contrary opinion. However, it is common ground that this is the ultimate issue for me to decide and not a matter for expert evidence. I take into account the specific opinions expressed by Ms Rowntree and Mr Drew as explained below, but have reached my own conclusion independently of what appear to be their views as to whether Liapis was carrying on a business of primary production at the relevant times.

   Factual matters

   Tree numbers

4. Thoma gave evidence that shortly before July 2014 he counted the number of old trees on the rootstocks of which new cuttings had been grafted as totaling 340 and the number of new trees planted as 50. There was no challenge to this evidence and I accept its accuracy as at July 2014.

5. Thoma gave evidence that he estimated the total number of scions on old trees’ rootstocks and new planted trees as at July 2014 at approximately 1,000 and perhaps more. He gave evidence that there is room to plant a further 200 new trees, mostly towards the upper or eastern end of the Land and that Liapis has intended for some years to plant that number of trees eventually, Thomas gave evidence that he estimated the total number of scions on old trees rootstocks and new planted trees as at July 2014 at approximately 1,300. Thoma and Thomas both gave evidence that multiple scions have been grafted onto the rootstocks of old trees and, where this has occurred, there are now between one and five scions on each such rootstock.

6. I find that as at July 2014, there were approximately 1,020 scions which have been grafted onto the rootstocks of old trees. In this respect I find that an average of three scions had been grafted onto 340 rootstocks and I also accept Thoma’s evidence, which was not challenged by the Commissioner.

7. Thoma and Thomas both gave evidence that in the second half of the 1990s table olive varieties were grafted onto the rootstocks of the old trees and then at some point a decision was made to change over to oil producing varieties, from which point new graftings were of oil producing varieties and in addition, from time to time, some existing graftings of table olive producing varieties were removed and replaced with oil producing varieties.

8. Thomas and Thoma both gave evidence that as at mid 2005 scions had been grafted onto 200 to 220 rootstocks of old trees. In a general sense, this was corroborated by a series of photographs taken by Thoma in 2004.[22] I accept this evidence, which was not challenged by the Commissioner. I find that as at mid 2005 an average of two scions had been grafted onto 210 rootstocks, giving a figure of 420 scions in total.

   [22]   Exhibit P7.

9. Thoma gave evidence that as at mid 2005 it was intended to terrace the lower half of the steeper portion of the steep land and plant new olive trees on the terraces and generally to expand the olive grove in the future towards its full capacity. A number of invoices for earthmoving were tendered, the first of which relates to earthmoving undertaken in March 2006. Thoma gave evidence that the invoices tendered were not complete and that other earthmoving works were undertaken to create the terraces. Thoma gave evidence that the decision to terrace and plant new olives was made well in advance of the work undertaken.

10. I find that as at mid 2005 it was Liapis’ intention to expand the olive grove gradually over future years at whatever capacity Thomas and Sotirios had so that ultimately (after many years) all of the 340 rootstocks of old trees were grafted with an average of three scions and to plant an additional 250 new trees with a great predominance of oil producing varieties.

    Tree maturity

11. Thomas gave evidence that grafted olives mature quicker than planted olives because they have the benefit of an established rootstock. He gave evidence that planted olives did not typically produce a crop until the age of about six years and not very many olives until the age of about 10 years. He gave evidence that grafted olives typically produced a crop after four or five years and produced significant quantities by the age of about seven years. He gave evidence that the olives did not reach full maturity until 15 years old.

12. Ms Rowntree gave evidence that olive trees would continue to grow larger for several decades and the only relevant restraint would be pruning to ensure that they were accessible for picking.

    Olive quantities

13. Thoma and Thomas both gave evidence that approximately 1,500 kilograms of olives were expected to be harvested in 2014, with more than 50 percent having been harvested at the time of trial. This figure was not challenged by the Commissioner.

14. Thoma gave evidence that as at 2014 about 150 kilograms are picked by customers and 120 kilograms are pickled by Liapis. The balance of the production is sent for crushing to be made into oil. About 50 litres of oil is consumed by the Liapis family and the balance sold.

15. Thoma gave evidence that olive production in 2005 was lower than in 2014. The document referred to at [57] above for 2006/2007 shows 100 kilograms of pickled olives and 180 litres of olive oil, to which should be added 50 litres of oil consumed by the Liapis family, giving a total of 230 litres of oil. The extraction rate was 23 percent, indicating that 1,000 kilograms of olives were crushed to make the oil and a total of 1,100 kilograms of olives were picked. At first sight this is surprising given that there are now approximately twice as many scions grafted to the rootstocks of old trees in addition to 50 new trees planted since 2005. On the other hand, Thoma and Thomas gave evidence that some graftings as at 2005 have been removed since then and replaced with new graftings and some wild seedlings have been removed. The graftings and plantings since 2005 would not have been producing olives at full production in 2014 and some would have been producing no olives at all. In addition, Ms Rowntree gave evidence that approximately two thirds of the olive trees she saw in 2014 would have been productive in 2005. I find that olive production in 2005 was approximately 1,000 kilograms.

16. Thomas and Thoma both gave evidence that some trees are producing no olives but their best trees are producing 60 to 70 kilograms of olives. Thomas was asked in cross-examination how many kilograms he expects to pick on average from each tree once the trees reach their maximum capacity and he said that he expects to pick 50 kilograms per tree. Thoma gave evidence that he expects to pick on average 40 to 50 kilograms per tree once the trees reach maximum capacity.

17. Ms Rowntree gave evidence that, based on her inspection of the trees, Liapis should easily get 50 kilograms per tree once the trees reach their maximum capacity.

18. Mr Drew made an assumption that the trees will produce an average of 20 kilograms once they reach their maximum capacity. However, this was in the nature of an assumption rather than Mr Drew’s assessment based on his expertise and experience. Mr Drew has not had much involvement with olive trees and does not have the expertise or experience that Ms Rowntree has in assessing producing capacity.

19. Liapis tendered as exhibit P13 a document issued by the New South Wales Department of Primary Industries in November 2007 entitled “prime facts”. It included a table to be used by growers in preparing budgets which showed average olive production of 40 kilograms per tree based on a range of 25 to 50 kilograms per tree for nine year old trees. On the one hand, it described the yield as “possibly conservative”, but on the other hand it assumed a well managed olive grove with adequate water and varieties producing average yields of fruit.

20. I find that, as at mid 2005 a reasonably conservative prediction of the yield per tree once the trees reach maximum production was 40 kilograms.

    Olive revenue

21. Liapis’ financial statements showed revenue from primary production of $4,236 in the year ending 30 June 2005 and $4,947 in the year ending 30 June 2006.

22. Thoma and Thomas both gave evidence that in 2005 and 2006 olives picked by customers were sold for $20 per 20 kilogram bucket. Thoma gave evidence that pickled olives were sold for $5 per kilogram. Oil was sold in ½ litre glass bottles for $12 ($24 per litre) and 2 litre flagons and 10 litre plastic containers for $10 per litre.

23. Thoma gave evidence that the oil extraction rate from Liapis’ olives is 23 percent. This figure is consistent with the evidence given by Ms Rowntree summarised at [61] above and was not challenged by the Commissioner.

24. As at 2005, it was reasonable to predict that, if all 340 rootstocks of old trees had been grafted with oil producing varieties and 250 new trees had been planted and all trees reached maximum production capacity, potential annual olive production would be 23.6 tonnes. This assumes an average crop of 40 kilograms from each tree which is relatively conservative, given that the rootstocks of the old trees had multiple scions grafted on to them and Ms Rowntree’s assessment of 50 kilograms per tree.

25. As at 2005, it was reasonable to predict that, if all 340 rootstocks of old trees had been grafted with oil producing varieties and 250 new trees had been planted and all trees reached maximum production capacity, potential annual olive oil production would be $6,000 litres based on an oil extraction rate of 23 percent and a conversion ratio from kilograms to litres of 1.1. This would generate revenue of $60,000.

    Olive profit

26. Direct costs in 2005 incurred by Liapis to produce olive oil comprised:

    ·crushing approximately $0.20 per kilogram;

    ·glass bottles approximately $1 per litre; and

    ·labels printed by Thoma’s wife at negligible cost.

27. Indirect costs comprised:

    ·vehicle expenses approximately $3,300;

    ·water and council rates approximately $4,000; and

    ·depreciation of equipment approximately $1,000.

28. In the financial years ended 30 June 2005 and 30 June 2006, Liapis made a loss on the olive grove of approximately $3,000 to $4,000 disregarding labour by the Liapis family.

29. If production had been doubled to 2,000 kilograms, disregarding labour Liapis would have made a marginal profit. If in the long term production had increased to 7,800 kilograms, being the figure assumed by Mr Drew referred to at [64] above, Liapis would have made a significant profit. If in the long term production had increased to 23,000 kilograms, being the figure referred to at [89] above, Liapis would have made a substantial profit. I address the significance of the cost or value of family labour below.

    Land tax regime

30. In this judgment, I refer to the provisions of the Act in force between midnight on 30 June 2005 and midnight 30 June 2006.[23]

    [23]   The Act was relevantly amended with effect at midnight on 30 June 2005 by the Statutes Amendments (Budget 2005) Act 2005 (SA). In general terms, the Act has not been relevantly amended since 2005.

31. Land tax was imposed generally in respect of land in the State subject to 13 specified exceptions in respect of land owned by specified bodies (such as local councils) and/or used for specified purposes (such as certain charitable purposes).[24] These exceptions were applied automatically when the criteria were objectively satisfied.

    [24]   Land Tax Act 1936 (SA) s 4.

32. In addition to the 13 exceptions, land was exempt from land tax if the Commissioner exempted it upon being satisfied that it fell within one of seven specified categories principally by reference to the purpose of its use.[25] Unlike the 13 exceptions, these exemptions only applied upon the Commissioner being satisfied that the specified criteria were met and the Commissioner granting an exemption.

    [25]   Land Tax Act 1936 (SA) ss 4(1)(n) and 5.

33. Land tax was imposed jointly and severally on the “owner” of the land.[26] In the case of ordinary freehold land, the owner comprised:

    ·the legal owner of the fee simple;

    ·any person entitled to, or entitled to purchase or acquire, the fee simple legal estate;

    ·any person holding an equitable estate of fee simple;

    ·any person entitled to, or entitled to purchase or acquire, the equitable fee simple estate; and

    ·any person holding, entitled to, or entitled to purchase or acquire any other estate or interest (other than leasehold) conferring a right to possession of the land.[27]

    [26]   Land Tax Act 1936 (SA) ss 14 and 16.

    [27]   Land Tax Act 1936 (SA) s 2(1) definition of owner.

34. Land tax was a progressive tax ranging from 0 percent of the first $110,000 of the site value up to 3.7 percent of the site value insofar as it exceeds $1 million.[28] Subject to qualifications, land tax was calculated on the aggregate site value of all land owned by the taxpayer.[29] One qualification was when there were two or more owners of one parcel of land and partial commonality of ownership of another parcel of land.[30] Another qualification was when the owner held two or more parcels of land under different certificates of title on different trusts without commonality of beneficiaries and the trustee gave notice of the trust as required by regulation.[31]

    [28]   Land Tax Act 1936 (SA) s 8(1) and 7(1).

    [29]   Land Tax Act 1936 (SA) s 8B(1).

    [30]   Land Tax Act 1936 (SA) s 13(3)(a). But see also s 13(1), (2) and (4).

    [31]   Land Tax Act 1936 (SA) s 13(3)(b) and (4). Land Tax Regulations 1999 (SA) reg 9.

35. One of the 13 exceptions referred to at [96] above was land of not less than 0.8 hectare[32] outside a defined rural area (essentially outside Greater Adelaide and Mount Gambier) where the Commissioner was satisfied that the land was used wholly or mainly for the business of primary production.[33] The Land lies inside a defined rural area and this exception is not applicable in the present case.

    [32]  Land Tax Act 1936 (SA) s 2.

    [33]   Land Tax Act 1936 (SA) s 4(1)(l) and 9. Defined rural areas were declared by proclamation on 26 June 1975: South Australian Government Gazette 26 June 1975 page 2457.

36. One of the seven categories eligible for exemption by the Commissioner referred to at [97] above (the primary production exemption) was land of not less than 0.8 hectare within a defined rural area in respect of which the Commissioner was satisfied that:

    1.the land was used wholly or mainly for the business of primary production;[34] and

    2.where the land was owned by a company - either:

    2.1the main business of the company was that business of primary       production and the land or produce of the land was used to a          significant extent for the purposes of that business; or

    2.2    inter alia a natural person owned a majority of the company’s shares and was engaged on a substantially full-time basis (either on his or her own behalf or as an employee) in that business.[35]

    [34]  Land Tax Act 1936 (SA) s 5(10)(g).

    [35]   Land Tax Act 1936 (SA) s 5(10)(vi)(A).

37. The Act provides that its administration and enforcement is governed, inter alia, by the Taxation Administration Act.[36] It follows that the two Acts are to be read in pari materia.

    [36]   Land Tax Act 1936 (SA) s 3.

38. As described in more detail below, the Commissioner is empowered to make an assessment of a land tax liability of a taxpayer. However, the liability to pay land tax is imposed automatically by the Act and is not dependent upon the making of an assessment by the Commissioner.[37]

    [37]   Tooth & Co Ltd v Newcastle Development Ltd (1966) 116 CLR 167 at 170 per Barwick CJ, McTiernan, Taylor, Menzies and Windeyer JJ (addressing comparable New South Wales legislation); Kalomel Nominees Pty Ltd v Commissioner of State Taxation[2012] SASC 10 at [30] per Gray J.

39. As described in more detail below, an assessment is an act undertaken by the Commissioner that culminates in the issue to the taxpayer of a notice of assessment. The notice of assessment simultaneously is the final step in the assessment process and communicates the result to the taxpayer.

    Approach on appeal

40. Sections 3(1), 82, 88(4), 92, 96, 97 and 98 of the Taxation Administration Act relevantly provide:

    3—Interpretation

    (1)In this Act, unless the contrary intention appears—

    assessment means an assessment by the Commissioner under Part 3 of the tax liability of a person under a taxation law, and includes—

    (a)a reassessment and a compromise assessment under Part 3; and

    (b)an assessment by the Minister or the Supreme Court on an objection or appeal under Part 10,

    …

    82—Objections

    A person who is dissatisfied with—

    (a)an assessment (other than a compromise assessment); or

    (b)a decision under Part 4 concerning a refund or an application for a refund of tax; or

    (c)any other decision of the Commissioner under a taxation law that is not declared to be a non-reviewable decision,

    may lodge a written notice of objection with the Minister.

    88—Determination of objection

    …

    (4)The Minister may, after consideration of the objection, do one or more of the following:

    (a)confirm or revoke the assessment or decision to which the objection relates;

    (b)make an assessment or decision in place of the assessment or decision to which the objection relates.

    92—Right of appeal

    A person who has made an objection may appeal to the Supreme Court if—

    (a)the person is dissatisfied with the Minister's determination of the objection; or

    (b)90 days (not including any period of suspension under section 88) have passed since the objection was lodged with the Minister and the Minister has not determined the objection and served notice of the determination on the person.

    96—Grounds of appeal

    (1)The appellant's and respondent's cases on an appeal are not limited to the grounds of the objection or the reasons for the determination of the objection or the facts on which the determination was made.

    (2)However, if the objection was to a reassessment, any limitation of the matters to which the objection could relate under Division 1 applies also to the appeal.

    97—Onus on appeal

    On an appeal, the appellant has the onus of proving the appellant's case.

    98—Determination of appeal

    On an appeal, the Supreme Court may do one or more of the following:

    (a)confirm or revoke the assessment or decision to which the appeal relates;

    (b)make an assessment or decision in place of the assessment or decision to which the appeal relates;

    (c)make an order for payment to the Commissioner of any amount of tax that is assessed as being payable but has not been paid;

    (d)make any further order as to costs or otherwise as it thinks just.

41. Section 92 does not explicitly identify the subject matter of the appeal; that is, whether the appeal is against the original assessment or decision by the Commissioner or against the determination of the objection by the Minister. However, it is apparent from section 98 that when as in the present case the Minister merely determines to disallow the objection and confirm the assessment or decision of the Commissioner under subsection 88(4)(a), it is the Commissioner’s original assessment or decision that is the subject of the appeal.[38]

    [38] Conversely, it is apparent from section 98 that, when the Minister determines to make an assessment or decision in place of the assessment or decision to which the objection relates under subsection 88(4)(b), it is the Minister’s substituted assessment or decision that is the subject of the appeal.

1. It is common ground that, although section 92 describes the proceeding in this Court as an appeal, the hearing is a hearing de novo.[39]

   [39]   Cyril Henschke Pty Ltd v Commissioner of State Taxation [2008] SASC 360, (2008) 104 SASR 1 at [36] per Bleby J. See also in the context of different legislation Tourism Holdings Pty Ltd v Commissioner of Taxation [2005] NTCA 3, (2005) 15 NTLR 80 at [7]-[20] per Martin CJ and [90]-[92] per Angel J (Mildren J dissenting).

2. It is also common ground that, while section 5 of the Act requires the grant of an exemption by the Commissioner in respect of land within a defined rural area used for primary production, Liapis is not precluded from arguing on appeal that it was entitled to an exemption under section 5 notwithstanding that it did not apply to the Commissioner for an exemption but rather claimed an entitlement in its objection lodged with the Treasurer. It is common ground that it is a question for this Court to determine on an objective basis whether Liapis fell within the criteria entitling it to the grant of an exemption.

   Existence of assessments           

3. Liapis contends that the Notice, either alone or read with the Spreadsheet and the Letter, does not comprise assessments, or notice of assessments, of land tax for the 2005/2006 or 2006/2007 years within the meaning of the Taxation Administration Act.

4. The Commissioner makes an in limine contention that it is not open to Liapis to rely on an appeal against an assessment on a ground that there was no assessment. The Commissioner also joins issue on the merit of Liapis’ contention that the 17 August 2009 documents do not comprise an assessment.

   Availability of ground on appeal        

5. Section 82 of the Taxation Administration Act (extracted at [105] above) confers on a taxpayer a right to object against an assessment made by the Commissioner. Section 88 empowers the Minister to confirm or revoke the assessment the subject of the objection or to make a fresh assessment in place of the Commissioner’s assessment. Sections 82 and 88 proceed on the fundamental basis that there is only a right of objection in respect of an act of and document issued by the Commissioner that amounts to an assessment within the meaning of the Taxation Administration Act.

6. These contentions raise the issue of construction whether the reference in sections 82, 88, 92 and 98 to “assessment” means an assessment at law or merely a purported assessment.

7. Section 92 of the Taxation Administration Act (extracted at [105] above) confers on a taxpayer a right to appeal, inter alia, against an assessment made by the Commissioner when the taxpayer’s objection has been disallowed and the assessment has been confirmed by the Minister. Section 98 empowers this Court in these circumstances to confirm or revoke the Commissioner’s assessment or to make a fresh assessment in place of the Commissioner’s assessment. Sections 92 and 98 proceed on the fundamental basis that there is only a right of appeal in respect of an act of and document issued by the Commissioner that amounts to an assessment within the meaning of the Taxation Administration Act.

8. The making of an assessment and issue of notice of assessment by the Commissioner (or indeed by the Minister on objection) is a purely administrative act. If the Commissioner undertakes an act or issues a document that does not amount to an assessment, it has no legal effect as an assessment. It is what is sometimes described as a nullity.[40] In this respect, the position is to be contrasted with a judgment of a court (all superior courts and most inferior courts) that is later held to have been made outside jurisdiction, which judgment is not a nullity[41] and may be the subject of appeal on the ground, inter alia, that it was made without jurisdiction.[42]

   [40]   Compare Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597 at [51] per Gaudron and Gummow JJ (with whom McHugh J agreed) and [152] per Hayne J; Plaintiff S157/2002 v The Commonwealth [2003] HCA 2; (2003) 211 CLR 476 at [76] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ.

   [41]   Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369 at 391 per Dixon J (with whom Evatt and McTiernan JJ agreed); Re Macks; Ex parte Saint [2000] HCA 62; (2000) 204 CLR 158 at [20] per Gleeson CJ, [48]-[53] per Gaudron J, [216] per Gummow J, [257] per Kirby J and [328] per Hayne and Callinan JJ; Ruhani v Director of Police [2005] HCA 42; (2005) 222 CLR 489 at [47] per McHugh J; Higgins v Comans [2005] QCA 234; (2005) 153 A Crim R 565 at [5]-[6] per McPherson JA; Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 at [13]-[16] and [31] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.

   [42]  Cameron v Cole (1944) 68 CLR 571 at 590 – 591 per Rich J; Re Macks; Ex parte Saint (2000) 204 CLR 158 at [49] per Gaudron J,

9. On the proper construction of the Taxation Administration Act, the reference in sections 82 and 92 to an assessment is to an assessment at law and no right of objection and no right of appeal is conferred in respect of a purported assessment that does not amount to an assessment at law and has no legal effect.

10. It is not open to Liapis to contend on an appeal against an assessment that there was no assessment. Conversely, if the Court is satisfied on an appeal against a purported assessment that there was, in law, no assessment, the Court would dismiss the appeal as incompetent.

11. It would have been open to Liapis to bring judicial review proceedings seeking a declaration that the purported assessment does not constitute an assessment in law and consequential prerogative relief. Liapis has not done so and did not raise the point on appeal until shortly before the hearing of the appeal.

12. If, contrary to my conclusion reached above, on the proper construction of the Taxation Administration Act section 92 in referring to an assessment incorporates a purported assessment, it would follow that the Court would have power under section 98, if it concluded that the purported assessment did not in law constitute an assessment, to make an assessment itself in accordance with the true underlying liability, if any, of the taxpayer to land tax.

13. It follows that, whichever is the proper construction of the Taxation Administration Act, Liapis’ contention that the purported assessments do not constitute assessments at law is futile.

14. Given this conclusion, it is not strictly necessary to consider the merits of Liapis’ contention. I do so, however, for completeness.

    Did the Commissioner make assessments?

15. Sections 3, 8, 10 and 14 of the Taxation Administration Act relevantly provide:

    3—Interpretation

    (1)In this Act, unless the contrary intention appears—

    assessment means an assessment by the Commissioner under Part 3 of the tax liability of a person under a taxation law, and includes—

    (a)a reassessment and a compromise assessment under Part 3; and

    (b)an assessment by the Minister or the Supreme Court on an objection or appeal under Part 10,

    8—General power to make assessment

    (1)The Commissioner may make an assessment of a tax liability of a taxpayer.

    (2)An assessment of a tax liability may consist of or include a determination that there is not a particular tax liability.

    10—Reassessment

    (1)The Commissioner may make one or more reassessments of a tax liability of a taxpayer.

    …

    (4)Despite the other provisions of this section, the Commissioner cannot make a reassessment of a tax liability more than five years after the initial assessment of the liability except—

    (a)with the agreement of the taxpayer; or

    (b)where there has been a deliberate tax default.

    …

    14—Form of assessment and service on taxpayer

    (1)The Commissioner may make an assessment only by a written notice that is—

    (a)expressed to be an assessment of liability to the tax; and

    (b)in a form approved by the Commissioner.

    (2)The assessment must be served on the taxpayer concerned.

    (3)However, neither the validity of an assessment nor the recovery of an amount to which it relates is affected by failure to serve the assessment on the taxpayer.

    (4)The receipt by the Commissioner of a return or an amount as payment of a tax does not constitute the making of an assessment of tax liability.

16. The concept of an assessment under the Taxation Administration Act accords at a general level with the concept of an assessment under tax administration legislation generally, namely:

    an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer.[43]    

    [43]   R v Deputy Federal Commissioner of Taxation (SA); ex parte Cooper (1926) 37 CLR 368 at 373 per Issaacs J.

17. The evident function of a notice of assessment being required to be in writing, expressed to be an assessment of liability to tax and being served on the taxpayer accords with the primary function of a notice of assessment under tax administration legislation generally, namely:

    to put the [taxpayer] on notice of both the assessment and the Commissioner’s calculations...[44]   

    [44]   Layala Enterprises Pty Ltd (in liquidation) v Commissioner of Taxation (1998) 86 FCR 348 at 359 per Cooper J; Kalomel Nominees Pty Ltd v Commissioner of State Taxation[2012] SASC 10 at [32] per Gray J.

18. Liapis contends that, at least in respect of the relevant years, the 11 August 2009 documents are not expressed to be an assessment;[45] are not in the nature of a form and do not conform with a form approved by the Commissioner;[46] and do not fix the date by which the tax is payable.

    [45]  Taxation Administration Act 1936 (SA) s 14(1)(a).

    [46]  Taxation Administration Act 1936 (SA) s 14(1)(b).

19. As to whether the 11 August 2009 documents are “expressed to be an assessment” in accordance with section 14(1)(a) of the Taxation Administration Act, standing alone the Notice would be regarded as an assessment only for the 2008/2009 year. Thus, its heading refers to the 2008/2009 year and to land owned as at 30 June 2008; it shows the taxable site value and land tax in respect of each of the properties being Lot 74 and Lots 32 and 76 [formerly Lot 75] for 2008/2009; and it shows the total land tax for the year of $39,910.

20. However, it is plain from the content of the Notice and the Spreadsheet that the two documents are to be read together. It is plain that the total of the figures in the “Tax Applicable” column of the Spreadsheet is equal to the total amount payable shown in the Notice. It is plain that the figure shown in the “Arrears” column in the Notice for each lot is the total of the figures shown for that lot in the “Tax Applicable” column of the Spreadsheet. The Letter confirms that the Notice and Spreadsheet are to be read together and are to be read with the Letter.

21. The Spreadsheet shows the taxable site value and land tax for each lot owned by Liapis in respect of each of the years from 2004/2005 to 2008/2009. It allows credits for payments made in June 2006 and October 2007. Read with the Notice, it is plain that the due date for payment of the land tax for each of the years from 2004/2005 to 2008/2009 was 24 September 2009. It is also plain that, while figures are given for the 2009/2010 year, the documents do not on any view comprise an assessment of land tax for that year and the intention was to issue an assessment for that year later on.

22. At first sight, when the Notice and Spreadsheet are read together, they might be regarded as ambiguous as to whether they constitute an assessment for the 2008/2009 year together with a breakdown of arrears from prior years for information purposes on the one hand, or an assessment for each of the 2004/2005 to 2008/2009 years on the other hand. However, there are several indicia that collectively show that the Notice and Spreadsheet constitute an assessment for each of the 2004/2005 to 2008/2009 years.

23. First, the Commissioner had never issued an assessment for the 2006/2007 year and, unless the Notice and Spreadsheet comprised an assessment for that year, the inclusion of land tax for that year in the Spreadsheet was pointless and the inclusion of that tax in the arrears column in the Notice was baseless.

24. Secondly, the Notice bore ownership no 70808996, which was only newly created by the Commissioner to designate Liapis in its capacity as trustee for the Unit Trust, Thomas Family Trust and Sotirios Family Trust. The Commissioner had never issued an assessment under that ownership number for any of the five years in question and it is clear from a reading of the Notice and Spreadsheet together that the Commissioner’s intention was to issue an assessment under that ownership number for all five years.

25. Thirdly, Liapis itself on 17 November 2005 had requested the Commissioner to issue fresh assessments by reason of Liapis’ trusteeship in respect of the Estate and the Commissioner’s ultimate response was to allocate a new ownership number to Liapis in its capacity as trustee, albeit the Commissioner did not accede to the request insofar as it sought disaggregation.

26. Fourthly, the Letter stated explicitly that land tax was now being assessed for the 2004/2005 years onwards under the new ownership number and Liapis was not liable for land tax under the old ownership number [under which previous assessments had been issued]. After referring to Liapis’ request of 17 November 2005, the Letter stated that:

    As a result of your submission, Land tax will now be assessed in the following manner:

    Ownership No: 70808996 – T & S Liapis Pty Ltd & Ors ATF the Liapis Unit Trust, the Thomas Liapis Children’s Trust and the Sotirios Liapis Trust.

    The properties referred to in your letter as ‘the Rostrevor Land’ are now assessable under Ownership No. 70808996 from the 2004-05 financial year onwards.

    …

    As a result of the above, there are no properties remaining in Ownership No. 70483546 for the 2004-05 financial year onwards and is therefore not liable for Land Tax for these financial years.

27. Accordingly, read together, the Notice and Spreadsheet were expressed to be an assessment of liability to land tax in respect of each of the years from 2004/2005 to 2008/2009. Read together, they constituted the Commissioner’s ascertainment, on consideration of all relevant circumstances, of the amount of land tax chargeable to Liapis for each of those years and further put Liapis on notice of both the assessment and the Commissioner’s calculations.

28. As to whether the 11 August 2009 documents are in the nature of a form in accordance with section 14(1)(b) of the Taxation Administration Act, the word “form” is used in that provision in the sense of:

    A set or fixed order of words (e.g. as used in religious ritual); the customary of legal method of drawing up a writing or document.

    …

    A formulary document with blanks for the insertion of particulars. [47]

    [47] J Simpson and E Weiner, The Oxford English Dictionary (Oxford University Press, 2^nd ed, 1989) 79.

29. The Notice and Spreadsheet read together comprise a form in that sense. It is common for forms to incorporate separate pages where there is too much information to fit onto the form itself. The Spreadsheet itself follows a standard form in that it contains columns showing, inter alia, taxable site value and land tax and rows showing, inter alia, year, assessment number and land description.

30. As to whether the 11 August 2009 documents conform with “a form approved by the Commissioner” in accordance with section 14(1)(b) of the Taxation Administration Act, I infer that the Commissioner approved the generic form which the Notice and earlier notices tendered take (the generic form). I infer that the Commissioner approved the use of a supplementary spreadsheet when there is insufficient room for all the information on the generic form. Read together, the Notice and Spreadsheet conform to the form of the generic form in that they show assessment number, property location, taxable site value and land tax assessed for each lot for each year from 2004/2005 to 2008/2009. They also show the ownership number and the due date for payment of the land tax for each of those years.

31. There is no explicit requirement in the Taxation Administration Act that an assessment show the date by which the tax is payable. In any event, the Notice shows that the due date for payment for all years is 24 September 2009.

32. The Notice and Spreadsheet comprise an assessment and notice of an assessment within the meaning of the Taxation Administration Act in respect of each year from 2004/2005 to 2008/2009.

    Did the Commissioner make a decision on exemption?

33. Liapis contends that, independently of its appeal against the assessments, it can appeal against a decision by the Commissioner made on 11 August 2009 that it was not entitled to a primary production exemption.[48]

    [48]   Liapis did not purport to appeal against the asserted decision by the Commissioner until July 2014 when its amended its Notice of Appeal to include an appeal against the asserted decision.

34. Section 82 of the Taxation Administration Act confers a right of objection on a taxpayer who is dissatisfied with any decision of the Commissioner (other than an assessment or a decision concerning a refund) under the Act that is not declared to be non-reviewable. The right of appeal conferred by section 92 is conditioned upon the taxpayer being dissatisfied with the Minister’s decision on the objection.

35. Section 5 of the Act relevantly provided at material times:

    5—Exemption or partial exemption of certain land from land tax

    (1)Land is wholly exempt from land tax under this section if—

    (a)proper grounds for the exemption exist; and

    (b)such an exemption has been granted, and remains in force, under this section.

    …

    (3)An owner of land may apply, in a form approved by the Commissioner, for an exemption or partial exemption from land tax.

    ...

    (5)The Commissioner may, if satisfied that proper grounds exist for doing so, wholly or partially exempt land from land tax (whether or not an application for exemption has been made).

    (10)Proper grounds for exempting land from land tax under this section exist as follows:

    …

    (g)land used for primary production that is situated within a defined rural area may be wholly exempted from land tax if—

    …

    (v)the land is owned by a company, or by 2 or more companies, or by a company or companies and 1 or more natural persons, and the main business of each owner is a relevant business; or

    (vi)the land is owned by a company and 1 of the following conditions is satisfied:

    (A)a natural person owns a majority of the issued shares of the company and is engaged on a substantially full‑time basis (either on his or her own behalf or as an employee) in a relevant business;

36. Liapis did not before 11 August 2009 apply to the Commissioner under subsection 5(3) of the Act for an exemption from land tax under the primary production exemption. Liapis made submissions to the Commissioner over an extended period in support of its disaggregation contention but those submissions made no reference to the primary production exemption.

37. While the Commissioner might of his or her own volition grant a primary production exemption under subsection 5(5) of the Act, there was no reason for the Commissioner to consider the grant of an exemption in the absence of some request, whether amounting to a formal application under subsection 5(3) or not, from Liapis or contention by Liapis that it was entitled to such an exemption.

38. The Commissioner made no decision under section 5 of the Act on 11 August 2009 whether or not to grant a primary production exemption.[49] It follows that there could be no such decision the subject of objection by Liapis under section 82 or in turn the subject of appeal by Liapis under section 92 of the Taxation Administration Act.

    Business of primary production

    [49] Liapis does not contend that, if the Commissioner did not make a decision on an exemption, the Minister made a decision against which it is entitled to appeal under section 92 of the Taxation Administration Act. While the Minister took the view that Liapis was not entitled to an exemption, this was in the context and for the purpose of determining Liapis’ objection against the assessments and not in the context or for the purpose of determining an objection (which was not made) by Liapis against any decision by the Commissioner (which was not made) that Liapis was not entitled to an exemption. It follows that Liapis has no right of appeal against any decision of the Minister that Liapis was not entitled to an exemption (other than its right of appeal against the assessments).

1. The primary issue on appeal, being the issue to which most of the evidence and submissions by the parties were addressed, is whether Liapis was carrying on a business of primary production within the meaning of the Act as at mid 2005 and mid 2006.

2. The primary production exemption was expressed in section 5(10)(g) in the following terms relevant to this case:

   (g)land used for primary production that is situated within a defined rural area may be wholly exempted from land tax if—

   …

   (v)the land is owned by a company, or by 2 or more companies, or by a company or companies and 1 or more natural persons, and the main business of each owner is a relevant business; or

   (vi)the land is owned by a company and 1 of the following conditions is satisfied:

   (A)a natural person owns a majority of the issued shares of the company and is engaged on a substantially full‑time basis (either on his or her own behalf or as an employee) in a relevant business[50]

   [50]   (Emphasis added).

3. Section 2(1) defined “land used for primary production” to mean:

   land of not less than 0.8 hectare in area as to which the Commissioner is satisfied that the land is used wholly or mainly for the business of primary production[51]

   [51]   (Emphasis added).

   Meaning of “business”

4. It is apparent from the reference in the definition of “land used for primary production” to land being used for the business of primary production and the reference in each of subparagraphs (v) and (vi)(A) to business that the Act requires a distinction to be drawn between a business on the one hand and a hobby on the other.

5. Section 6-5 of the Income Tax Assessment Act 1997 (Cth) refers to “income according to ordinary concepts” which includes income from carrying on a business but not income from carrying on a hobby. The Income Tax Assessment Act 1997 (Cth) also uses the terms “business of primary production” and “primary production business”.

6. There is a large body of case law on what constitutes a “business” for the purposes of income tax law. It is common ground that the principles developed in this caselaw are equally applicable to the concept of “business of primary production” in the Act.

7. The question whether an activity amounts to a business or a hobby[52] involves matters of fact and degree and ultimately is a matter of overall impression in which no one factor is determinative or necessarily predominant.[53]

   [52]   Martin v Federal Commissioner of Taxation (1953) 90 CLR 470 at 479 per Williams ACJ, Kitto and Taylor JJ; Ferguson v. Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J.

   [53]   Ericksen v. Last (1881) 8 Q.B. 414 at 416 per Jessel MR; Martin v Federal Commissioner of Taxation (1953) 90 CLR 470 at 474 per Webb J; Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J; Inglis v Federal Commissioner of Taxation (1979) 10 ATR 493 at 496-497 per Brennan J; Evans v Federal Commissioner of Taxation (1989) 20 ATR 922 at 941 per Hill J.

8. The most important indicia of a business are that the taxpayer has a purpose, expectation and prospect of making a profit.[54] When there are significant start-up costs and/or a significant leadtime is required to reach full production or revenue, a long-term view can be taken and it does not matter that losses will be sustained for a number of years until it is expected that a profit will ultimately be made.[55]

   [54]   Ferguson v. Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J; Hope v Bathurst City Council (1980) 144 CLR 1 at 9 per Mason J (with whom Gibbs CJ, Stephen, Murphy and Aickin JJ agreed).

   [55]   Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1 at 6 per Williams J; Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J and per Fisher J.

9. Other indicia are:

   1.that there is repetition and continuity to activities rather than an isolated activity;[56]

   2.that activities are conducted in an organised, businesslike or systematic manner;[57]

   3.the size of the operation, although size is not a determining factor and a business might be quite small in scale;[58]

   4.that activities are of the same kind and conducted in the same manner as by recognised businesses.[59]

   [56]   Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J and 325 per Fisher J; Hope v Bathurst City Council (1980) 144 CLR 1 at 9 per Mason J (with whom Gibbs CJ, Stephen, Murphy and Aickin JJ agreed).

   [57]   Newton v Pyke (1908) 25 TLR 127 at 128 per Walton J; Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J and 325 per Fisher J.

   [58]   Thomas v Federal Commissioner of Taxation (1972) 46 ALJR 397 at 401 per Walsh J; Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J and 323 per Fisher J; Hope v Bathurst City Council (1980) 144 CLR 1 at 3-4 per Gibbs CJ and Stephen J and 10 per Mason J (with whom Gibbs CJ, Stephen, Murphy and Aickin JJ agreed); Federal Commissioner of Taxationv JR Walker (1985) 16 ATR 331 at 334 per Ryan J.

   [59]   Commissioner of Inland Revenue v Livingstone (1926) 11 TC 538 at 542 per Lord Clyde; Ferguson v. Federal Commissioner of Taxation (1979) 37 FLR 310 at 323 per Fisher J

10. In Thomas v Federal Commissioner of Taxation,[60] Walsh J said:

    But a man may carry on a business although he does so in a small way. In my opinion the appellant's activities in growing the trees ought not to be found to have been carried on merely for recreation or as a hobby. I leave out of account the pine trees, the growing of which did not have, I think, a significant commercial purpose or character. But the appellant in planting the avocado pear trees and the macadamia nut trees set out to grow them on a scale that was much greater than was required to satisfy his own domestic needs and he expected upon reasonable grounds that their produce would have a ready market and would yield, if the trees became established, a financial return which would be of a significant amount, with relatively small outlay of time and money, and that this return would continue for a very long time.[61]

    [60] (1972) 46 ALJR 397.

    [61] Ibid at 401.

11. In Ferguson v Federal Commissioner of Taxation,[62] Ferguson, a Lieutenant Commander in the Royal Australian Navy, planned to become a grazier on his retirement and leased five Charolaise cows, engaging a management company to agist and breed from them in preparation for his retirement in three years’ time. A Full Court of the Federal Court held that he was carrying on a business notwithstanding its small size. Bowen CJ and Franki J said:

    There are many elements to be considered. The nature of the activities, particularly whether they have the purpose of profit-making, may be important. However, an immediate purpose of profit-making in a particular income year does not appear to be essential. Certainly it may be held a person is carrying on business notwithstanding his profit is small or even where he is making a loss. Repetition and regularity of the activities is also important. However, every business has to begin and even isolated activities may in the circumstances be held to be the commencement of carrying on business. Again, organization of activities in a business-like manner, the keeping of books, records and the use of system may all serve to indicate that a business is being carried on. The fact that, concurrently with the activities in question, the taxpayer carries on the practice of a profession or another business, does not preclude a finding that his additional activities constitute the carrying on of a business. The volume of his operations and the amount of capital employed by him may be significant. However, if what he is doing is more properly described as the pursuit of a hobby or recreation or an addiction to a sport, he will not be held to be carrying on a business even though his operations are fairly substantial.[63]

    [62] (1979) 37 FLR 310.

    [63] Ibid at 314.

12. Fisher J said:

    the conclusion is open to be drawn that a taxpayer is engaged in business activities notwithstanding the fact that he is operating in a very small way i.e. on a few acres, with very few trees or with a very small number of stock. I would be of opinion that the size of the operation could be of significance for the purpose of testing whether a taxpayer is conducting a hobby rather than a business, but that size is certainly not the determining factor…

    The courts have from time to time grappled with the question whether the taxpayer is engaged in carrying on a business, and a number of tests have been suggested. Walsh J. in Thomas' case … found that a certain activity of the taxpayer, namely the growing of pine trees, did not have "a significant commercial purpose or character" and thus was not a business activity. For the purpose of characterizing an outgoing as part of the cost of "trading" operations it is certainly relevant to ascertain if the operations of the taxpayer have a commercial purpose i.e. pursuit of profit or gain rather than pleasure or recreation. The activity is also reviewed for the purpose of determining whether, in the words of Lord Clyde in Commissioner of Inland Revenue v. Livingstone, "the operations involved in it are of the same kind and carried on in the same way as those which are characteristic or ordinary trade in the line of business in which the venture was made". By the application of this test if may be possible to determine whether the activities have a commercial character.

    Moreover if the transactions which go to make up the activity or operations of the taxpayer have an element of regularity or repetitiveness this factor assists in concluding that the taxpayer is carrying on a business rather than indulging in a recreational or hobby activity. 

    … the venture as a whole had a commercial flavour, was conducted systematically and, as counsel for the commissioner conceded, in a businesslike manner. It could not be said that there was anything haphazard or disorganized in the way in which he carried out the activity. In my opinion it amounted to the carrying on of a business.[64]

    [64] Ibid at 322, 323 and 324-325.

13. In Hope v Bathurst City Council,[65] the High Court considered the meaning of the word “business” in the context of a primary production exemption from council rates under the Local Government Act 1919 (NSW). Mason J (with whom Gibbs CJ, Stephen, Murphy and Aickin JJ agreed) said:

    Although it has been common ground that "business" is used in its ordinary meaning in s. 118 (1), the courts below have refrained from saying what that meaning is. This is perhaps understandable because, as a glance at the Shorter Oxford Dictionary will show, the word has many meanings. Ironically it is the last meaning given by the Shorter Oxford Dictionary, "19. A commercial enterprise as a going concern", that comes closest to the popular meaning which the courts appear to have acted on in the present case. In truth it is the popular meaning of the word as used in the expression "carrying on a business", rather than the popular meaning of the word itself, that is enshrined in the statutory definition. It is the words "carrying on" which imply the repetition of acts and activities which possess something of a permanent character. This conclusion serves to emphasize that it is necessary to engage in a process of construction in order to arrive at the meaning of the word in s. 118 (1).

    I accept, then, that "business' in the sub-section has the ordinary or popular meaning which it would be given in the expression "carrying on the business of grazing". It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis.[66]

    [65] (1980) 144 CLR 1.

    [66] Ibid at 8.

14. In Taxation Ruling 97/11 (TR 97/11), the Australian Taxation Office addresses the question whether a taxpayer is carrying on a business of primary production within the meaning of and for the purposes of the Income Tax Assessment Act 1997 (Cth).

15. It is common ground on appeal that the term “business of primary production” in the Act has the same meaning as in the Income Tax Assessment Act 1997 (Cth) and as elucidated in TR 97/11.

16. TR 97/11 includes the following passage:

    12.     Whilst each case might turn on its own particular facts, the determination of the     question is generally the result of a process of weighing all the relevant indicators. Therefore, although it is not possible to lay down any conclusive test of whether a        business of primary production is or is not being carried on, the indicators outlined     below provide general guidance. This is explained further at paragraph 25 of this       Ruling.

    13.     The courts have held that the following indicators are relevant:

    *whether the activity has a significant commercial purpose or character; this indicator comprises many aspects of the other indicators (see paragraphs 28 to 38);

    *whether the taxpayer has more than just an intention to engage in business (see paragraphs 39 to 46);

    *whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity (see paragraphs 47 to 54);

    *whether there is repetition and regularity of the activity (see paragraphs 55 to 62);

    *whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business (see paragraphs 63 to 67);

    *whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit (see paragraphs 68 to 76);

    *the size, scale and permanency of the activity (see paragraphs 77 to 85); and

    *whether the activity is better described as a hobby, a form of recreation or a sporting activity (see paragraphs 86 to 93).

    Analysis

17. As at 2005 and 2006, there was repetition and continuity to Liapis’ olive growing and production activities rather than their being an isolated activity.[67] Liapis’ operations were conducted in an organised, businesslike or systematic manner.[68]

    [67]   Ferguson v. Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J and 325 per Fisher J; Hope v Bathurst City Council (1980) 144 CLR 1 at 9 per Mason J (with whom Gibbs CJ, Stephen, Murphy and Aickin JJ agreed).

    [68]   Newton v Pyke (1908) 25 TLR 127 at 128 per Walton J; Ferguson v. Federal Commissioner of Taxation (1979) 37 FLR 310 at 314 per Bowen CJ and Franki J and 325 per Fisher J.

18. The size of the operation[69] was much larger than would ordinarily be the subject of a hobby or past time which might involve the growing of a handful of olive trees, which would produce sufficient olives and olive oil for the family’s own consumption. Devoting 1½ hectares to the operation is more than would ordinarily be the subject of a hobby or past time. On the other hand, a size of 1½ hectares necessarily limits production capacity and hence potential revenue and profit.

    [69]   Thomas v. Federal Commissioner of Taxation(1972) 46 ALJR 397 at 401 per Walsh J; Hope v Bathurst City Council (1980) 144 CLR 1 at 3 per Gibbs CJ and Stephen J and 9 per Mason J (with whom Gibbs CJ, Stephen, Murphy and Aickin JJ agreed).

19. Accepting Ms Rowntree’s evidence, Liapis’ activities were of the same kind and conducted in the same manner as boutique olive producers who are recognised as participants in the olive industry.[70]

    [70]   Commissioner of Inland Revenue v Livingstone (1927) 11 TC 538 at 542 per Lord Clyde; Ferguson v. Federal Commissioner of Taxation (1979) 37 FLR 310 at 323 per Fisher J

20. Liapis did not keep systematic or comprehensive records of income or expenditure and did not prepare formal plans or budgets.

21. I turn to the most important indicia being purpose and prospect of profit. The Commissioner contends that, for the purpose of these indicia, profit means economic profit and should take into account the economic cost of inputs, including internal or family labour even if such labour is not charged or fully charged to the putative business. Conversely, Liapis contends that, for the purpose of these indicia, profit means accounting profit, or profit generated by the enterprise, disregarding internal inputs of labour and capital and takes account only of external inputs which have an actual cost.

22. I reject the Commissioner’s contention that profit means economic profit taking into account the cost of internal labour. The primary production exemption in section 5(10)(g) applies to enterprises owned and conducted by sole traders and partnerships as well as companies. Accounting profit for sole traders and partnerships does not take into account the cost of labour provided by the sole trader or the partners. In ordinary usage, a sole trader makes a profit if his or her income exceeds his or her expenses without deducting a notional wage. Income tax is payable by the sole trader of the profit generated by his or her business without deducting a notional wage. There are many sole traders and partnerships who are universally regarded as conducting businesses who would never make an economic profit if the cost of their own labour were taken into account. For example, many farmers, delicatessen owners and other small businesses – commonly regarded as small businesses – would not make a profit if they were required to pay award wages for their own labour.

23. Although the Commissioner does not extend his contention to the economic cost of capital employed, economic profit also takes into account the cost of capital employed. However, in ordinary usage an enterprise generates a profit even though, if the cost of capital employed were taken into account, it would make an economic loss. Many small businesses deploy large amounts of capital to produce relatively small returns. Many farmers, delicatessen owners and other small businesses – commonly regarded as small businesses – would not make a profit if the cost of capital were taken into account.

24. Accordingly, when considering whether Liapis had a purpose and prospect of profit, I disregard the cost of labour provided by the Liapis family. In 2005 and 2006, disregarding family labour, Liapis made losses of between $3,000 and $4,000. However, I accept the evidence of Thoma and Thomas Liapis that they were engaged in a process of expanding the olive grove by grafting and planting more trees, in which they had been engaged for several years and which they intended to continue in future until ultimately they reached the production capacity of the land. I accept that their purpose was to make a profit ultimately.

25. I find that, as at 2005 and 2006, Liapis had a reasonable prospect of ultimately making a profit. With a continuation of the expansion upon which Liapis had already embarked, it was inevitable that ultimately Liapis would double its production of olives and the analysis at [94] above demonstrates that, at this point, Liapis would make a profit, albeit a small one. On the basis of the estimate by Mr Drew of future production of olives at 7,800 kilograms, but on the basis of Liapis would have made a significant profit.

26. The analysis at [94] above demonstrates that, if the olive grove were expanded to its full capacity of 620 trees, it would generate revenue of the order of $60,000 and would make a substantial profit. Caution needs to be exercised in relation to this revenue figure. While these two factors are not identified by the Commissioner in his submissions as bearing upon projected future profit, there are two potential limitations upon Liapis achieving the maximum revenue capable of being generated by the olive grove at full capacity. The first limitation is the availability of sufficient family labour to harvest the olives. The second limitation is the availability of sufficient demand to purchase Liapis’ olive oil product.

1. As to the availability of family labour, Thoma’s evidence was that various members of the Liapis family assisted with the harvest of the order of 1,000 to 1,500 kilograms. Increasing the harvest fifteen fold would require fifteen times the labour. At this level, Liapis would have to engage a proportion of external labour; although given the higher revenue generated, Liapis would have a capacity to pay for some such labour. As to demand, increasing the harvest fifteen fold, Liapis would need to extend greatly its existing marketing activities but it could do so gradually because the expansion itself would be gradual. Having regard to these two factors in combination, as at 2005 and 2006 a realistic expectation for Liapis was that ultimately production would be expanded seven fold. On that basis, Liapis had a reasonable prospect of significant profit. Even on the basis of a twofold expansion, Liapis stood to make some profit.

2. Weighing all indicia together, overall Liapis in 2005 and 2006 was carrying on an olive growing and production business and the Land was being used by Liapis for the business of primary production.

   Substantially full-time basis (on own behalf or as employee)

3. Liapis is only entitled to the primary industry exemption if not only was it conducting a business of primary production but also either Thomas Liapis was engaged on a substantially full-time basis (either on his own behalf or as an employee) in that business or that business was Liapis’ main business.

4. Section 5(10)(g)(vi)(A) framed the first alternative in the following terms:

   a natural person owns a majority of the issued shares of the company and is engaged on a substantially full-time basis (either on his or her own behalf or as an employee) in a relevant business;

5. Relevant business was defined by section 5(13) in the following terms:

   "relevant business"—a business is a relevant business in relation to land used for primary production that is situated within a defined rural area if—

   (a)     the business is a business of primary production of the type for which the land is     used or a business of processing or marketing primary produce; and

   (b)     the land or produce of the land is used to a significant extent for the purposes of     that business;

6. In 2005 and 2006, Thomas owed a majority of the issued shares of Liapis and this aspect of the test is not in dispute. It is not in dispute that the Land was in a defined rural area. I have concluded that Liapis carried on a business of primary production. It is not in dispute that Liapis’ olive business (if it conducted such a business) was a type for which the Land was used or that that Land was used to a significant extent for the purposes of that business.

7. The relevant questions are whether Thomas was engaged on a substantially fulltime basis in the olive growing and producing business; if so, whether there is a further and independent requirement that he be so engaged on his own behalf or as an employee; and if so, whether that further requirement is satisfied.

   Substantially full-time basis

8. Thomas gave evidence that, apart from harvest and pruning time, he usually spent at least 30 to 35 hours per week working at the olive grove. He usually spent four hours a day during the week and eight hours a day on the weekend. During harvest and pruning time, he worked seven or eight hours a day seven days a week. Harvest usually lasted about two months and pruning a further six weeks. Thoma gave evidence generally corroborating the hours worked by his father.

9. I accept Thomas’ evidence and find that he worked the hours that he said he did. Although he did not give evidence of the hours he worked when grafting and planting in the spring, it is likely that he had to work more hours at that time than during the balance of the year excluding harvest and pruning time.

10. The Commissioner does not challenge Thomas’ evidence of the hours he spent at the olive grove. However, the Commissioner contends that, apart from harvest, pruning and possibly planting time, Thomas was not actively working or working hard all the time he was present at the olive grove and that his work was at a leisurely pace and in a relaxed manner.

11. The question whether an owner is engaged on a substantially fulltime basis ultimately involves questions of fact and degree and is a matter of overall impression in a similar manner to the question whether a person is conducting a business. It is relevant to take into account the absolute time devoted by the owner to the business in question as well as the relative time devoted to that business compared to time devoted to any other business or income producing activity undertaken by the owner. On one hand, the question is not how much time would be devoted to working in the business if the person worked efficiently but how much time is actually devoted working in the business by the person working at his or her own pace. On the other hand, time is only counted when the person is actually working in the business. The reference to “substantially” entails that the person does not need to work full time in the business but it is sufficient if the person is engaged on a substantially full-time basis in the business.

12. Applying this approach, in 2005 and 2006 Thomas was engaged on a substantially fulltime basis in the business of primary production. He was not devoting his time to any other business or income producing activity. For at least four months of the year during harvest, pruning and planting time, he was working hard more than 40 hours per week. During the balance of the year, he was working, albeit as a leisurely pace, at least 30 or 35 hours per week and, taking into account his age in assessing his efficiency, he was engaged on a substantially fulltime basis in the business of primary production throughout the year.

    On own behalf or as an employee

13. Section 5(10)(g)(vi)(A) frames the test in the following terms:

    a natural person owns a majority of the issued shares of the company and is engaged on a substantially full-time basis (either on his or her own behalf or as an employee) in a relevant business[71]

14. The Commissioner contends that the words in parentheses impose an additional and independent requirement. Liapis contends that the words in parentheses are merely explanatory that the owner can be engaged in either capacity and do not impose any additional or independent requirement to satisfy the test.

15. I reject the Commissioner’s contention. The fact that the words in question are placed in parentheses suggests that they are merely explanatory. If those words did not appear, the clause might be read as requiring that the person be engaged as an employee, such that if he or she worked in his or her capacity as owner or as a so-called independent contractor, the test would not be met. The words in parentheses proceed on the basis that there is a simple dichotomy when work is undertaken by an owner of a company and such work is always undertaken either on the person’s own behalf (capacity as owner or as independent contractor) or as an employee. The words do not contemplate that there is some third capacity in which a person might undertake work for the company which does not qualify for the purpose of engagement on a substantially fulltime basis. Nor would there be any rationale for such a distinction.

16. Thomas was an employee of Liapis as at 30 June 2005 and 30 June 2006 because he was paid wages for each of those financial years. While his wages were very modest, there is no reason to doubt that he was an employee. It does not matter whether the work he undertook is regarded as having been undertaken by him in his capacity as majority owner of the company or as an employee. All of the work undertaken by Thomas in those years was undertaken either on his own behalf or as an employee.

    Conclusion

17. Liapis has established that paragraph (vi)(A) is satisfied and that it was entitled to the primary production exemption under section 5(10)(g)(vi) of the Act.

    Main business of Liapis

18. Given my conclusion concerning subparagraph (vi), is not strictly necessary to determine whether Liapis was entitled to the primary production exemption under subparagraph (v). However, I do so for completeness.

19. Subparagraph (v) required that:

    the land is owned by a company, or by 2 or more companies, or by a company or companies and 1 or more natural persons, and the main business of each owner is a relevant business

20. Relevant business was defined by section 5(11) in the following terms:

    "relevant business"—a business is a relevant business in relation to land used for primary production that is situated within a defined rural area if—

    (a)     the business is a business of primary production of the type for which the land is     used or a business of processing or marketing primary produce; and

    (b)     the land or produce of the land is used to a significant extent for the purposes of     that business;

21. It is not in dispute that the Land was in a defined rural area. I have concluded that Liapis carried on a business of primary production. It is not in dispute that Liapis’ olive business (if it conducted such a business) was a type for which the Land was used or that that Land was used to a significant extent for the purposes of that business.

22. As at 30 June 2005 and 30 June 2006, Liapis was engaged in two businesses: the olive business and the residential land subdivision business. The issue is which was its main business as at those dates.

23. There is no doubt that as at 30 June 2002 and 30 June 2003, residential land subdivision was Liapis’ main business. In the year ended 30 June 2002, that business produced revenue of $1,328,475, gross profit of $284,262 and had retained land stock of $2,235,618 at cost. In the year ended 30 June 2003, that business produced revenue of $1,465,077, gross profit of $150,312 and had retained land stock of $920,853 at cost.

24. By 30 June 2004, the position was not so clear. Liapis retained only two residential allotments (Lots 16 and 36) at cost of $364,969. Those allotments were difficult to sell because of easements and were still unsold a year later on 30 June 2005.

25. The position as at 30 June 2005 was that Liapis’ only revenue derived during the year came from the olive business, albeit that revenue was only $4,236 Thoma gave evidence that at this point Liapis was no longer proactively trying to sell its last two residential allotments. The residential subdivision business was descending and the last two allotments represented its tail. The olive business was ascending and the vast majority of Liapis’ efforts was devoted to that business and building it up. Based on the Valuer-General’s valuations, the value of assets deployed in the residential subdivision business was $640,000 and the value of assets deployed in the olive business was $930,000. On the other hand, if and when the last two residential allotments were sold, they would generate revenue (using the Value-General’s valuations) of $640,000 and a gross profit of $273,000.

26. In these circumstances, comparing the two businesses as at 30 June 2005 is like comparing chalk and cheese. Given the different directions in which different criteria point, it is difficult to determine which was Liapis’ “main” business. I am not persuaded either way that the olive business or the subdivision business was Liapis’ main business as at 30 June 2005. The onus lies on the appellant on an appeal under section 92 of the Taxation Administration Act. It follows that Liapis has failed to demonstrate that the olive grove was its main business on that date.

27. The position as at 30 June 2006 was that Liapis now had only a single residential allotment being allotment 36 at cost of $220,000. Based on the Valuer-General’s valuations, the value of assets deployed in the residential subdivision business was $335,000 and the value of assets deployed in the olive business was $1,005,000. On the other hand, if and when the last residential allotment was sold, it would generate revenue of $335,000 and a gross profit of $113,000.

28. By 30 June 2006, given the marked proportion of assets deployed in the olive business compared to the residential subdivision business, the vast proportion of effort being expended in the olive business compared to the residential subdivision business, the future potential of the olive business and the fact that it was ascending while the residential subdivision business was almost wound up, the olive business was now Liapis’ main business.

    Consequences for assessments

29. The Commissioner accepts that, if the Court concludes that Liapis was entitled to the primary production exemption as at 30 June 2005 or 30 June 2006, the assessments should be adjusted accordingly notwithstanding that the Commissioner did not exercise, and was not asked to exercise, his discretion at the time under section 5 to grant an exemption.

    Conclusion

30. I allow the appeal. I set aside the Commissioner’s assessments for the 2005/2006 and 2006/2007 years. Liapis was entitled to an exemption from land tax under section 5(10)(g) of the Act at the beginning of and throughout those years. In lieu of the Commissioner’s assessments, assessments should issue to Liapis for 2005/2006 in respect of Lots 16 and 36 and for 2006/2007 in respect of Lot 36 only. I will hear the parties as to the amount of those assessments and consequential orders.

    
    

[71] (Emphasis added).