Zonadi Holdings Pty Ltd ATF Wombat Investment Trust v Chief Commissioner of State Revenue

[2025] NSWCATAD 84

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Zonadi Holdings Pty Ltd ATF Wombat Investment Trust v Chief Commissioner of State Revenue [2025] NSWCATAD 84

Hearing dates:

24 March 2025

Date of orders:

11 April 2025

Decision date:

11 April 2025

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

EA MacIntyre, Senior Member

Decision:

The assessment of the Respondent is confirmed.

Catchwords:

ADMINISTRATIVE LAW - reviewable decision - correct and preferable decision - Civil and Administrative Tribunal - objection - appeal – administrative review

STATE REVENUE - land tax - exemption - land used for primary production - rural land - dominant use - wine grapes - sale – use for secondary production

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Land Tax Act 1956 (NSW)

Land Tax Management Act 1956 (NSW)

Taxation Administration Act 1997 (NSW)

Cases Cited:

Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183

CDPV Pty Ltd v Commissioner of State Revenue [2017] VSCA 89

Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11

Dwayne Taylor FT Pty Limited as trustee for Dwayne Taylor Family Trust and DA and P Taylor v Chief Commissioner of State Revenue [2024] NSWCATAD 8

Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378

Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2024] HCA 20

Leda Manorstead v Chief Commissioner [2010] NSWSC 867

Romano v Chief Commissioner of State Revenue [2011] NSWADT 73

Sonter v Commissioner of Land Tax (NSW) (1976) 7 ATR 30

Thomason v Chief Executive, Department of Lands [1995] QLAC 4

Texts Cited:

None

Category:

Principal judgment

Parties:

Zonadi Holdings Pty Ltd ATF Wombat Investment Trust (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel
O Berkmann (Respondent)

Solicitors
Piper Alderman (Applicant)
Crown Solicitor (Respondent)

File Number(s):

2024/00211709

Publication restriction:

None

REASONS FOR DECISION

1. The applicant, Zonadi Holdings Pty Ltd as trustee for Wombat Investment Trust (“Applicant”), challenges five assessments of land tax made by the Chief Commissioner of State Revenue, the respondent in this matter (“Respondent”).

2. The Applicant considers that exemption from land tax should apply because the land the subject of the assessments is, in the Applicant’s submission, land used for primary production. The Respondent disagrees. Exemption applies if the dominant use of the land is for cultivation, for the purpose of selling the produce of the cultivation. The question for determination is whether or not exemption applies on this basis.

Background

3. The Applicant during the land tax years the subject of the five assessments owned land at Pokolbin in New South Wales.

4. The land in question was used to produce wine grapes. The grape varieties produced included Shiraz, Semillon and Chardonnay.

5. The land contained the vineyard from which the grapes were produced, a cellar door at which sales of wine occurred, a wine storage area, a residence and tourist accommodation.

6. The total area of the land was about 11ha. About 38% of the land was used for planting and growing of vines. Between the Semillon and Shiraz vineyards were two unused areas of land estimated at 1.3ha in size consisting of trees. There was also a paddock of approximately 1.1 ha in size near the Chardonnay vineyard.

7. The tourist accommodation on the land occupied about 660 square metres. That accommodation was available only to customers of the Applicant who had joined a membership scheme offered by the Applicant.

8. The residence on the land included an office as well as a swimming pool.

9. The area of the cellar door, cellar storage, residence and tourist accommodation along with the surrounding area and curtilage was approximately 1.56ha.

10. The cellar door was open to the public for certain days of the week and weekends and contained a facility for tasting and selling wine. At the rear of the cellar door was a storage facility which stored the Applicant’s wines.

11. A portion of the wine grape crop grown on the land was sold during the five land tax years in question. The remainder of the available crop was used to make wine for the Applicant.

12. The wine produced and sold by the Applicant was derived only from wine grapes cultivated on the land. The wine itself was made off the land, with the wine later brought onto the land for sale including tasting. The Applicant’s product was described as a “paddock to glass” offering.

13. The Applicant earned revenue from the sale of wine grapes, the sale of wine at the cellar door, the sale of certain goods and the rental of the tourist accommodation on the land.

14. The evidence included the gross revenue earned from the sale of wine grapes, the sale of wine and the provision of tourist accommodation. The Applicant also placed before the Tribunal its calculations of the respective profit from both the sale of wine grapes and the sale of wine. There was evidence of the respective tonnage of wine grapes sold into the market and the tonnage used for making wine for the Applicant.

15. The Applicant gave evidence as to how sales of wine grapes occurred. First, an estimate of the likely yield for all varieties of wine grapes was worked out in advance between the buyer and the seller. The buyer would then inspect the variety of wine grapes in the vineyard and indicate which variety of wine grapes the buyer wished to purchase. A price was then agreed. The seller dropped those wine grapes that were not acceptable to the ground. The harvested wine grapes were then sold and weighed at the weighbridge prior to crushing and delivery to the buyer.

16. The residence on the land was used on weekends by a director of the Applicant.

17. On 31 August 2023, the Respondent issued a letter to the Applicant indicating that the land may be subject to land tax and/or surcharge land tax. Subsequently, the Respondent issued a land tax assessment for the 2023 land tax year. On 23 January 2024, the five assessments in dispute were issued. They related to the land tax years 2020, 2021, 2022, 2023 and 2024. The assessments are dated 22 January 2024.

18. On 15 March 2024, the Applicant lodged an objection to the five assessments. On 29 April 2024, the Respondent disallowed the Applicant’s objection.

19. The Applicant by application filed on 7 June 2024 sought administrative review of the assessments by the Civil and Administrative Tribunal (“Tribunal”). That appeal is the subject of these proceedings.

Applicant’s right of review

20. Where land tax has been assessed, s 86 of the Taxation Administration Act 1996 (NSW) (“Administration Act”), allows rights of objection to a taxpayer dissatisfied with an assessment. This is an internal review process under which the Chief Commissioner of State Revenue, the Respondent in these proceedings, must consider and determine the objection (s 91 of the Administration Act).

21. A taxpayer who is dissatisfied with the decision made upon the Respondent’s determination of an objection, may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (“NSW”) (“ADR Act”)of the decision of the Chief Commissioner of State Revenue.

22. These circumstances have arisen in the present matter as set out in the background above, so bringing the matter within the jurisdiction of the Tribunal.

23. The onus of proving their case lies with the Applicant (s 100(3) of the Administration Act).

24. The Tribunal, dealing with the taxpayer’s application, may do one or more of the following under s 101 of the Administration Act:

“(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

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

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.”

Consideration

25. Land tax is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers, other than land which is exempt from taxation under the Land Tax Management Act 1956 (NSW) (“LTMA”) (s 7). The rates of land tax payable are set out in the Land Tax Act 1956 (NSW).

26. Exemption for certain land used for primary production is allowed under s 10AA of the LTMA. That section provides as follows:

“10AA   Exemption for land used for primary production

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

(2)  Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land—

(a)  has a significant and substantial commercial purpose or character, and

(b)  is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).

(3)  For the purposes of this section, land used for primary production means land the dominant use of which is for—

(a)  cultivation, for the purpose of selling the produce of the cultivation, or

(b)  the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or

(c)  commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) or the commercial farming of fish, molluscs, crustaceans or other aquatic animals, or

(d)  the keeping of bees, for the purpose of selling their honey, or

(e)  a commercial plant nursery, but not a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or

(f)  the propagation for sale of mushrooms, orchids or flowers.

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

(a)  the land is zoned rural, rural residential, non-urban or large lot residential under a planning instrument, or

(b) the land has another zoning under a planning instrument, and the zone is a type of rural zone under the standard instrument prescribed under the Environmental Planning and Assessment Act 1979, section 3.20, or

(c)  the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land”.

27. For the exemption claimed by the Applicant to apply, the land in question must, first of all, be “rural land” within the meaning of the LTMA. There was no dispute that the land was rural land as a consequence of its zoning.

28. Where land is rural land, the availability of exemption depends on whether the land is “land used for primary production”. Land will fall within this description if the “dominant use” of the land is a use within one of the subparagraphs of s10AA(3). In the present case, what is in dispute was whether the “dominant use” was that specified in subparagraph (a) of s 10AA(3). The question for determination in this matter, therefore, is whether the land in question had a dominant use for “cultivation, for the purpose of selling the produce of the cultivation” within the meaning of s 10AA(3)(a).

29. The Applicant’s submission is that the dominant use of the land in question fell within s 10AA(3)(a) because the land had a dominant use for cultivation, for the purpose of selling the produce of the cultivation, namely wine grapes. The Respondent’s submission, on the other hand, was that the Applicant had not discharged the onus of proof to show that the dominant use was what the Applicant claimed.

30. Two particular issues arose. They were:

1. whether the cultivation of land for the purposes of producing wine grapes to make and sell wine is “primary production” for the purposes of s 10AA(3)(a);

2. whether the cultivation of the land for the purposes of selling wine grapes was the “dominant use” of the land.

Use of grapes for making and selling wine

31. Section 10AA(3)(a) requires that cultivation of land be for the purpose of “selling the produce of the cultivation”. The Court of Appeal in Victoria considered the reach of a similar provision in CDPV Pty Ltd v Commissioner of State Revenue [2017] VSCA 89. The Court said that exemption could only apply where the purpose of cultivation was the sale of what was produced. That is, there needed to be an identity between what was produced on land and what was sold. The Court said, at [59]:

“Cultivation may be undertaken for different purposes, including to grow crops for sale, to grow crops in order to obtain seed for re-sowing, to produce other agricultural inputs such as feed for animals or, as Mr Kroker’s evidence accepted, to prevent weeds from growing. The legislation provides for an exemption only where the purpose of the cultivation is ‘selling the produce of cultivation’”. 

32. “Primary production” is not itself a defined term within s 10AA(1)(a). What s 10AA(3) does is set out when land is “used for primary production”. Such a use will be found if the dominant use is one of the uses described in a subparagraph of s 10AA(3). If a use falls within one of the subparagraphs and that use is the dominant use, the land qualifies as “land used for primary production”. Whether the use in question must, as an additional matter, amount to “primary production” within its ordinary meaning for a claim for exemption to succeed, is doubtful. Nevertheless, the cases have given consideration to what the expression “primary production” means. In Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183, the Administrative Decisions Tribunal said that “primary production” meant “creating” something. It observed, at [37]:

“The ordinary meaning of "primary" is, relevantly, "of or relating to the production of naturally occurring foods as meat, grains, fish, etc., or of naturally occurring things as wool, cotton, etc" and "production" is, relevantly, "the act of producing; creation". The meaning of "produce" is, relevantly, " to bring into existence; give rise to" and "create" is "to bring into being; cause to exist; produce"”.

33. The Administrative Decisions Tribunal went on to draw a distinction between “primary production” and “secondary production”, saying at [39]:

“ … the ordinary meaning of "primary production" is the act of bringing into existence live animals (and live plants) or products comprising or derived from live animals (or live plants); "primary production" is to be contrasted with "secondary production", which means "of or relating to the processing of primary products", with "processing" meaning, relevantly, "to convert (an agricultural commodity) into marketable form by some special process".

34. The activity of growing of wine grapes on land will, with little doubt, answer the description of “cultivation” of land within the meaning of s 10AA(3)(a). It will also amount to “primary production” in its ordinary meaning. This was not in dispute. However, cultivation of land of itself is insufficient to qualify for exemption. Cultivation must be for the purpose described in s 10AA(3)(a), namely for “the purpose of selling the produce of the cultivation”.

35. The evidence was that there was no sale of the wine grapes used to produce wine. Ownership of these wine grapes did not, at any point in time, change. It always remained with the Applicant. This was also not in dispute.

36. In circumstances where wine grapes produced on the land were not sold but instead used to make the Applicant’s wine, I am satisfied that there has been no selling of those wine grapes within the meaning of s 10AA(3)(a). What was sold was the wine made from the wine grapes.

37. When wine is sold, it cannot be said that the subject of the sale is or includes the grapes used to make the wine. The wine is a product that is different to the wine grapes used to make it. It is created by processing the primary product in question, namely the wine grapes. That process is part of the “secondary production” that produces the wine. Therefore, when the wine is sold, this is not a sale of the product of the cultivation of the land. It is the product of secondary production that uses what is produced by cultivation of the land.

38. It follows that there has been no cultivation of land for the purpose of selling the produce of that cultivation within the meaning of s 10AA(3)(a) when wine grapes grown by the Applicant on the land were used by the Applicant to make wine.

Dominant use

39. The evidence is that the land the subject of the assessments in dispute had at least two uses. Those uses were cultivation for the purpose of selling wine grapes and cultivation for the purpose of using the wine grapes to make and sell wine. The land was also used as a residence and for the provision of tourist accommodation. The question for the Tribunal is to decide on the basis of the evidence, which of the uses was the dominant use.

40. Cultivation may, taken a whole, amount to a single use. However, in determining what is the dominant use, s 10AA(3)(a) requires consideration of the purpose of cultivation. Cultivation of the land, in the present case, occurs both for the purpose of selling the produce of the cultivation and also for the purpose of using it make and sell wine. Where the product of cultivation is used in part for the making and sale of wine and in part for the purpose of selling the produce of cultivation, there are two relevant purposes of cultivation within the meaning of s 10AA(3)(a).

41. In addition to cultivation for the two purposes in question, the land is also used for tourist accommodation and as a residence.

42. Where there are multiple uses of land as in the present case, the onus is on the Applicant to show what the dominant use is. In Leda Manorstead v Chief Commissioner [2010] NSWSC 867, Gzell J said that finding what was the dominant use where there were multiple uses required finding the prevailing or most influential use. This was a question of fact and degree. He said, at [69]-[70]:

“Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute’s reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use.

That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts”.

43. The kinds of matters that need to be considered in determining what is the dominant use were described in the following terms in Thomason v Chief Executive, Department of Lands [1995] QLAC 4. The Court said:

“In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in section 17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole”.

44. The approach set out in Thomason has been adopted in a number of subsequent cases (Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2024] HCA 20, at [63]; Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11, at [52]; Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378, at [39]).

45. The High Court in Godolphin, at [34] made the following observations about the relevance of various matters that went to determining what was the dominant use, including the financial gain produced by different uses:

“The proper approach is to consider the amount of land used for any purpose, the nature and extent and intensity of the various uses which are taking place, and the time and labour and resources spent in using the land.[54] In some cases, the financial gain from a given activity may be an indicator of predominance.[55] And in all cases one should not ignore the conclusion reached by an objective observer who is viewing the land as a whole.”

46. The Administrative Decisions Tribunal in Romano v Chief Commissioner of State Revenue [2011] NSWADT 73 made the following observations on the relevance of the comparative financial gains from primary production and the earning of rent (at [43]-[45]).

“The difference between this case and Ball is that in Ball , not only did the area of land used for qualifying purposes clearly predominate over the area used for non-qualifying purposes; the potential income to be derived from the qualifying purpose was also clearly in excess of what could be expected to be achieved from the non-qualifying activities. That is not the case here. The historical information relating to income shows that the rental income clearly predominates (by a factor of over 30 to 1) over the income from primary production activities, and there is absolutely no possibility that this position could ever be reversed, or even that the significant discrepancy between them might be reduced in any meaningful way.

One of the properties has three income-producing residences on it, and the other has one. While the evidence suggests that each residence is quite modest, there is a level of investment in them - represented by the buildings themselves, together with their curtilages - which weighs in the balance against the farming infrastructure referred to in [21]-[22] of those reasons.

Although there is no single factor that is determinative of the "dominant use" question, this is a case where the renting out of residential premises is such a significant activity that it renders it impossible to conclude, in relation to the land tax years in question, that the dominant use of either of the properties was for primary production”.

47. The relevance of financial gain in determining what is the dominant use, having regard to the intensity of various uses, was affirmed in Sonter v Commissioner of Land Tax (NSW) (1976) 7 ATR 30. Rath J said at 34, “the financial gain from the various activities is some indication of the comparative intensity of the activities”.

48. However, financial gain is not determinative of what is the dominant use. The Tribunal in Dwayne Taylor FT Pty Limited as trustee for Dwayne Taylor Family Trust and DA and P Taylor v Chief Commissioner of State Revenue [2024] NSWCATAD 8 found that the dominant use was not the use that produced substantial revenue. In this case, the vast majority of the land was used to maintain horses for the purpose of sale. There was no evidence of effort or time that was similar to what was spent on horse maintenance being spent on any other use. On the evidence, horse maintenance also attracted significant development investment. There is no evidence that any other use attracted such investment. The Tribunal said that in these circumstances, even where a horse sale operation was conducted at a loss, and a competing rental use attracted greater revenue, the Tribunal was satisfied that the maintenance of horses constituted the dominant use of the land in question, when compared with any other known use.

49. Gzell J in Leda Manorstead considered the period of time over which the use of land needs to be considered for the purposes of the relevant land tax exemption. He said, at [4]:

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

50. The cases say that there is no single factor that can determine the dominant use, to the exclusion of other relevant factors. The relevant factors that may be taken into account to determine which use is dominant include:

1. the intensity of each case;

2. the extent of the physical area in which each use takes place;

3. the time and labour that go to each use;

4. the resources deployed for each use; and

5. the financial gain derived from each use.

51. The task of the Tribunal is to assess the importance of each relevant factor going to the different uses of land, in order to identify which use is dominant. This is not a task that can be undertaken based on some kind of mathematical formula applied mechanically to every case. Each case will turn on its own particular facts.

52. It is clear that the total area of the land used for the sale and storage of wine in the cellar door area, the residence and the tourist accommodation was significantly less than the area used for the cultivation of wine grapes. The area used for these purposes comprised about 1.56ha out of a total area of about 11ha.

53. The land comprising of the plantings of vines occupied a substantial portion of the land, namely about 4.2ha or 38% of the land. This is a substantially greater portion of the land than the 1.56ha used for the cellar door area, the storage area, the residence and the tourist accommodation.

54. The Applicant's evidence was that open areas of the land not including vines were necessary for the operation of the vineyard and the cultivation of wine grapes. These areas included turning areas known as “headlands” for use by tractors and harvesters. The internal roads were also used to allow the machinery to move from place to place and operate across the area of the land used for cultivation. There was also a need for storage areas to keep materials such as new posts, vine wires and compost and mulching material. I accept the Applicant’s evidence as to these matters and I am satisfied that most of the land in question including the open areas used for activities related to cultivation was used for cultivation. The larger area of land used in relation to cultivation is a factor that indicates that cultivation was the dominant use rather than any other use of the land. However, the other factors set out below also need to be considered in making the determination of what was the dominant use within the specific meaning of s 10AA(3)(a).

55. Even though the parts of the land used for cultivation included most of the land, the cultivation carried out on the land served two purposes, namely, the production of wine grapes for sale and the use of wine grapes to make wine for the Applicant and sell the wine on the land. In these circumstances, the question of what was the dominant use needs to have regard to the relative importance of each of these purposes.

56. The evidence included information about the respective tonnage of grapes used for sale and the production of wine. The volume of wine grapes actually sold varied between 24% and 88% of the total available crop during the land tax years in question. The Applicant's evidence was that over the five-year period in issue, 59.3% of the harvested produce was sold rather than used for making wine. The Respondent objected to the use of a five-year average and submitted that the inquiry as to the dominant use needed to occur based on the evidence for each land tax year.

57. I am in agreement with the Respondent’s submission. Gzell J in Leda Manorstead said that information taken from the six month period spanning the land tax liability date could appropriately be taken into account. In some years, a greater tonnage was used for making wine. In other years, the situation was reversed. The respective tonnage used by the Applicant for each purpose is relevant to the determination of what is the dominant use. However, other matters also need to be brought to bear in making that determination.

58. There was evidence as to the respective gross revenue earned from each of the activities carried out on the land during each of the land tax years in issue. That revenue was as follows:

2019/2020	2020/2021	2021/2022	2022/2023	2023/2024
Wine sales (and proportion of total revenue represented by wine sales)	$119,096 (85%)	$198,950.41 (89%)	$174.127.82 (80%)	$220,722.55 (86%)	$232,341.47 (94%)
Wine grape sales	$18,720	$15,788	$37,805.30	$32,612.82	$6,233
Tourist accommodation	$2,234	$7,804.09	$4,751.37	$6,032.27	$8,699.09
TOTAL TRADING INCOME	$140,050	$222,542.41	$216,684.67	$257,724.91	$247,243.56

59. The overwhelming majority of the gross revenue was produced by wine sales. It ranged between 80% and 94% of the total gross revenue for each land tax year in issue. A small percentage of that revenue was attributable to wine grape sales and an even smaller percentage of revenue came from the provision of tourist accommodation.

60. There was uncontested evidence that the operating expenses alone exceeded the level of income generated from the sale of wine grapes.

61. Where the gross revenue earned from cultivation of the land is overwhelmingly not from the sale of the produce of that cultivation but from the sale of wine made by the Applicant from that produce, this is a factor that lends weight to the conclusion that the dominant use of the land in question was the cultivation of the land to produce grapes for winemaking and the sale of that wine.

62. The Applicant said that the submissions made by the Respondent as to the comparative financial gain from selling wine grapes and producing and selling wine should not be accepted because they used gross figures for wine sales rather than profit. The Applicant indicated that its calculations of profit showed that most of the returns for the land tax years in question were derived from wine grape sales and not wine sales.

63. The Applicant’s calculation was that the profit from the sale of wine grapes averaged $24,662.00 per year compared to the profit for production of wine for sale which averaged only $16,763 per year. The Applicant in making these calculations assumed an “internal transfer” of the wine grapes used for wine making, at average prices of wine grapes used for wine production. That assumed “internal transfer” price was $16,763 per year and a total of $83,818 for the land tax years in issue. The calculations relied upon by the Applicant were produced before the Tribunal and dealt with each relevant land tax year.

64. The Applicant’s calculations of profit, however, do not have regard to the revenue received from actual wine sales (including tasting). These sales, on the evidence, occurred on the land at the cellar door. The grapes from which the wine was produced came from the land and having been produced offsite was brought onto the land for sale. In these circumstances, a methodology that takes into account the revenue earned from selling wine, in my opinion, allows for a better comparison of the financial gain from the different uses of the land, than does a methodology that disregards revenue from wine sales. An artificial calculation of profit based on a hypothetical “internal transfer” of the grapes used for winemaking cannot, in my opinion, form a convincing basis for such a comparison, excluding as it does the actual revenue earned from the activity of making wine from grapes produced on the land and selling that wine at the cellar door.

65. The evidence before the Tribunal did not include any calculation of the net revenue derived from each activity carried out on the land, when costs attributable to each activity were deducted from gross revenue. The Applicant was given the opportunity at the hearing to make further submissions based on the evidence, explaining what the net revenue was. The Applicant, however, declined to do so.

66. The difference between the gross revenue from wine sales is substantial, as set out at [58] and [59] above. In the absence of an explanation from the Applicant as to what the net revenue or profit would be from the wine sales compared with other activities on the land, the Tribunal is not able to make its own calculation based on the description of expenses in the evidence. Those descriptions are not sufficiently detailed or specific. No submission was made by the Applicant that that the net revenue from wine sales was less than the net revenue from other uses of the land or evidence adduced to support such a conclusion. In these circumstances, the only relevant evidence of financial gain before the Tribunal remains the gross revenues.

67. Most of the land was used for cultivation. That use also attracted significant investment and labour compared to other uses. Having regard to the proportionate land area used for cultivation, the level of investment and labour deployed to cultivate the land and the resulting intensity of that use, I find that cultivation of the land, taken as whole, was the most important use of the land. Where that cultivation had two purposes, the determination of what is the dominant use of the land, in my opinion, will turn substantially on the relative financial gains from each use. The overwhelming majority of the gross revenue from production was derived from the use of wine grapes to make wine and sell that wine at the cellar door. These are circumstances where the financial gain from growing grapes for the making and selling of wine indicate the predominance of that use of the land.

68. The Respondent made the submission that the land was marketed as a vineyard and that the Applicant invited customers to visit the vineyard in order to taste and purchase wine. In the Respondent’s submission, the marketing did not support the position that the dominant use of the land or the purpose of cultivation was that of primary production. Rather the evidence suggested a use for tasting and selling wine made with grapes grown on the land.

69. I do not think that how land is marketed should necessarily carry significant weight in determining what is the dominant use of land. That determination is to be made on the evidence as to the actual use of the land including the relative financial gain from each activity carried out on land. In circumstances where a dominant use does not require marketing to customers, the weight attached to how land is marketed should not carry significant weight.

70. In the particular circumstances at hand, the marketing of the land as a place to taste and purchase wine nevertheless has some relevance as evidence supporting the conclusion that the dominant use of the land is cultivation for the purpose of making and selling wine. I do not, however, rely on the way in which the marketing of the land takes place in reaching the conclusion that the dominant use of the land was its cultivation for the purpose of the using wine grapes produced on the land to make wine and sell that wine at the cellar door.

71. I do not think that the relative tonnage of grapes sold on the one hand and used to make wine on the other is sufficient to displace the importance of the relative financial gain from each activity. Even in years where most of the grapes grown was sold rather than used for winemaking, the overwhelming majority of the gross revenue produced from activities carried out on the land was from the production and use of grapes to make and sell wine. These circumstances in my opinion, carry greater weight than the volume of wine grapes sold during a particular year.

72. The Applicant said that on average, the majority of the wine grapes are intended to be sold and not retained for production of wine. The Applicant says that the intention to sell the majority of wine grapes had not changed. I understood the Applicant’s submission to be that where an intended purpose is established, a claim for exemption under s 10AA(3)(a) remains open, even if actual output for sale fell short of the intended levels of production.

73. I accept that what s 10AA(3)(a) requires is “cultivation, for the purpose of selling the produce of the cultivation”. As long as the relevant purpose exists, exemption may apply even if actual sales cannot not made. For example, where a farmer produces a crop for the purposes of sale but is unable to actually sell the crop on account of changed market conditions, that subsequent inability to sell should not prevent exemption from applying.

74. The Applicant gives evidence of conditions from 2021 to 2024 that reduced the grape crop and therefore, the quantity of grapes otherwise available for sale. The Applicant also gives evidence of a glut of Shiraz grapes in 2025 and as a result, that a quantity of wine grapes could not be sold for that year, having to be dropped to the ground.

75. The Applicant’s evidence included the quantity of the actual harvest for each relevant years measured against both average yields and best results achieved. For years, 2021, 2022 and 2023, the actual total yields exceeded average yields. In 2020 and 2024, there were shortfalls against average yields.

76. Even if s 10AA(3)(a) allowed for predicted or intended levels of production for sale to be brought to bear in determining that the dominant use of land was cultivation for the purpose of sale, simply making a comparison of the actual yields for a given year against average or best yields over a period of years will not be sufficient to substantiate a claim for exemption.

77. The Applicant did produce evidence of particular climatic conditions and other circumstances arising during the two shortfall years affecting production of wine grapes. The Applicant said that in 2024, there was limited rainfall, a hot summer and other adverse conditions. In the case of the 2020 crop, production was affected by the smoke produced by bushfires. These conditions affected yields for these two years.

78. I do not, however, think that the Tribunal can, on the basis of this evidence, hypothesise as to what volume of sales of wine grapes would have been produced for sale during the particular years of shortfalls against average production. Such a hypothesis would, at least, require proof at the requisite standard of the assumptions made for estimating hypothetical yields for the particular year as to climatic and other growing conditions and proof that those assumptions were sufficiently sound. There was no evidence provided as to the assumptions made by the Applicant at the time cultivation occurred of what expected yields should be, including any modelling of anticipated climatic and other growing conditions. The evidence provided by the Applicant described the climatic conditions that occurred during the years in question. It was a description of those conditions after the event. That evidence does not assist the Tribunal to ascertain the extent to which the purpose at the time of cultivation was to produce grapes for sale and the volume of production or relevant assumptions made at the time as to climatic and other growing conditions.

79. The Tribunal cannot, in the circumstances, determine the matter based on making any finding as to the hypothetical volumes of production of wine grapes for sale during any of the land tax years in dispute. I do not see how an uncertain hypothesis of this kind can displace the evidence as to the volume of grapes actually produced and sold, the actual volume of grapes used to make and sell wine and the evidence of the relative returns from the sale of wine grapes and the sale of wine.

80. The Applicant’s evidence was that despite significant investment required to produce crops, “agricultural risks remain at all times”. It is well understood that the production of crops is subject to the vagaries of climatic and other conditions for each particular year. In these circumstances, I observe in passing that the viability of bringing to bear upon s 10AA(3)(a) of any notion of hypothetical levels of production for sale based on predictions as to risk, remains doubtful.

59. The Applicant gave evidence that most of the time and labour and expenditure was for the cultivation of the land to produce grapes. I accept this evidence. However, that most of the time and labour was expended on cultivation of the land and most of the expenditure incurred for that purpose is not determinative of whether exemption under s 10AA(3)(a) applies. The outcome of these proceedings turns not on whether the dominant use of the land was cultivation, but whether it was cultivation for the purpose of sale of the produce of cultivation.

60. I do not think Dwanye Taylor assists the Tribunal in the determination of this matter. In that case, the maintenance of horses for sale ran at a loss and the competing rental use attracted greater revenue. The vast majority of the land in issue, however, had been used to maintain horses and most of the effort and investment went to the maintenance of horses rather than the competing rental use. The dominant use was therefore found to be the maintenance of horses.

61. In the present case, most of the land in issue has been used to cultivate wine grapes and significant investment and effort has gone into that activity. As in Dwayne Taylor, both the larger part of the land and significant investment and effort went into production on the land. These matters, as in Dwayne Taylor, support the conclusion that the dominant use of the land taken as a whole was the activity of production, which in the present case involved cultivation of land.

62. However, unlike in Dwayne Taylor, there is an alignment of the activity which engaged the greater effort and investment with the activity that produced most of the revenue. That activity was the cultivation of the land.

63. However, the question is not whether cultivation was the dominant use of the land. It is whether the dominant use was cultivation for the purpose of selling the produce of cultivation or whether it was cultivation for the purpose of using that produce to make and sell wine. In my opinion, the derivation of the overwhelming majority of the gross revenue from the use of wine grapes grown on the land to make and sell wine at the cellar door allows for greater weight to attach to the cultivation of the land for the purpose of making and selling wine than cultivation for the purpose of selling wine grapes. I have set out at [67] above my reasons for so concluding.

64. It may be reasonable to apportion the greater part of the effort and investment spent to cultivate the land to the production of wine grapes to make and sell wine, commensurate with the higher return from that activity. Alternatively, such an apportionment may be made based on the respective tonnage of wine grapes produced for each relevant purpose. The respective tonnage used for each of the two purposes varied between the land tax years in question. However, I do not think I need to make such an apportionment. The weight attaching to the significantly higher financial gain from making and selling wine allows me to find that the dominant use of the land was the cultivation of wine grapes for making and selling wine for the reasons set out above.

65. The land contained facilities for the sale of wine including wine tasting. These facilities included the cellar door and the wine storage area. The portion of the land used for these purposes did not, on the evidence, in any material way serve the purpose of selling grapes. This is not a matter that of itself is determinative. However, it adds weight to the matters set out at [67] above in allowing me to conclude that the dominant use of the land was not cultivation for the purposes of the sale of wine grapes.

66. The Applicant also gave evidence of intention in the future to sell 100% of the wine grapes produced. The Applicant says that this had happened for the 2025 vintage. The liability for land tax, however, needs to be determined having regard to the circumstances applicable to each relevant land tax year and not future circumstances. What transpires in later land taxes will be relevant to each such future year but does not determine the liability to land tax for previous years.

67. There was evidence that the Respondent had briefed an expert to provide expert evidence in support of the Respondent’s case. No such report was in evidence. I was invited by the Applicant to conclude that the absence of such a report is evidence that its conclusions did not assist the Respondent.

68. I do not think that any useful purpose could be served by speculating on what the content of any expert report might have been. The evidence before me has been sufficient to come to the conclusion I have reached that the dominant use of the land was cultivation for the purpose of producing wine grapes for use in making and selling wine.

69. Accordingly, I am of the opinion, following consideration of the evidence, that the Applicant has not shown, on the balance of probabilities, that the dominant use of the land in question was cultivation for the purposes of sale within s 10AA(3)(a). I accept that cultivation is the dominant use. However, that cultivation had two purposes, namely the sale of wine grapes and the production from wine grapes of wine for sale on the land. This is a case where, preponderance attaches to the relative financial returns from each of those activities. This consideration is not in all cases determinative. However, the return from the use of wine grapes for making and selling wine overwhelmingly exceeded that from the sale of grapes during each land tax year in question. Even if the tonnage sold exceeded the tonnage used for winemaking in certain land tax years, I do not think that these are matters that can displace the weight carried by the significantly greater financial return from the making and selling of wine. The other uses of land were residential use and tourist accommodation. The proportionate land area used for these purposes was not significant nor the revenue earned from the tourist accommodation nor the time and investment for these uses. Taking into account these uses does not displace as the dominant use, cultivation for the purpose of producing grapes in order to make wine, and the sale of that wine.

70. The Respondent’s assessment should be confirmed.

Orders

1. The assessment of the Respondent is confirmed.

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

Registrar

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

Registrar

Decision last updated: 11 April 2025