Victorian Civil and Administrative Tribunal|2016-08-29

The applicant claims that in the years 2009 and 2010, it was preparing for primary production in relation to Lots 3, 4 and 5 in that it carried out fencing, purchased sheep, purchased extra bath tubs for water and ploughed Lot 5.
Mr Morgan also submitted that Lot 4 was prepared for primary production in the years 2012 and 2013. However in the light of the findings that I made in relation to s.66 that Lot 4 was primarily used for primary production in those years, it is unnecessary for me to deal with that submission.
In relation to preparation of land for primary production, Croft J at [34] and the CPDV case stated:

"In relation to preparation of the land for cultivation, reference was also made by the appellants - and reliance upon - on the provisions of s.68 of the Act which provide an exemption from land tax if the Commissioner is satisfied, inter alia, that the land is being prepared for a primary production. The provisions of s.66 and 68 must be read together, particularly as they are not only in the same statute, but also in the same division, Division 2 of Part 4 (exemptions and concessions) "a division entitled and directed to 'Primary production of land'. ... I do not take it, however, that the appellants are suggesting that preparatory work as part of 'cultivation' for the purposes of s.66 and the definition of 'primary production' would not have a greater intimacy and temporal proximity to the process of seeding growing and harvesting contemplated by these provisions - then what might be contemplated by s.68 ..."

On examining of the wording of s.68(1) in my view, the preparatory work must be done on the land itself. It is not sufficient for things such as a report or purchasing sheep. It must be something directly connected to the land because that is what the words of the statute say. That is "the land is being prepared". The purchasing of sheep or the preparation of a report cannot be the preparation of a land. However, clearly fencing, extra bath tubs for water, ploughing and weed eradication, may be.
On the evidence that was presented before me, I am not satisfied that there was any work done in the preparation for primary production relating to Lots 3 and 5. Further, I am also not satisfied that sufficient preparation was done with the object of primary production in mind in relation to the years between 2009 and 2010 in relation to Lot 4. It is quite unclear what work was done on what land and when such work was done. It is incumbent upon the applicant in a matter such as this to identify with particularity the actual preparation work that was done. In this case, because of the entirely unsatisfactory nature of the evidence that was put before me, apart from Mr Parke's evidence, I am not satisfied that any work was done to bring the land within s.68(1)(a).
Having come to the conclusion I have above, I do not believe it is necessary for me to consider the extension of time in relation to s.68(1)(b). The preparatory work, as I have stated, did not take in any of the lots until subsequent to the year in which Mr Parke published his report, in 2010.
Thus I will not allow an exemption pursuant to s.68 of the Act.

Remission of penalty s.28 Taxation Administration Act 1997

The applicants seek that the premium interest opposed on the total amount assessed by the respondent in relation to the land as at 28 July 2016 should be remitted. Those sums are:

In relation to this matter Mr Jeffrie submitted:

"It is clear that the imposition of premium interest is a form of penalty intended to operate as a disincentive to delaying tax payments. Moreover, the Commissioner's policy on this matter notes that in exercising its discretion will take into account whether the tax payer has taken reasonable care to comply with taxation law. The evidence available to the Tribunal indicates that the applicant reasonably believed at all times that it was eligible for the exemption under s.66 or s.68. It disclosed to the Commissioner all relevant information when requested and sought to inform the Commissioner about its activities on the Lots.

I do not agree with the submission of Mr Jeffrie. In my view, the applicant has attempted, apart from the relevant years relating to Lot 4 that I found there were was primary production, to use the colloquial "spin a story" as to the activities carried on the land. I agree with what Mr Morgan has said, that the applicant has used the activities to "cover" its real activities that were going on in this land which, even looking at the present activities, were basically rental activity.
Thus I will not remit the interest charged by the respondent save and except for that part of the interest that relates to the assessment for Lot 4 for the years 2011, 2012 and 2013.

I intend to confirm the decision of the respondent except in so far as it relates to Lot 4 in the taxation years of 2011, 2012 and 2013. In so far as it relates to those years the assessment relating to Lot 4 should be remitted to the respondent for reassessment and a reduction in the penalty accordingly.

Administration Act 1997

(Land Management Act 1956

Tax Management Act 1956

Amazon Property Group Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2016] VCAT 1439 (29 August 2016)

The land other than Lot 4, during the years 2011 to 2013, which is the area where the sheep predominantly grazed, is used very little or unused. There is some grazing on Lot 3, but virtually none on Lots 2 and 5. It was stated, by Mr Parke and other witnesses, that there was rotation of the sheep and the other lots were used for that purpose. However, it was quite unclear on the evidence as to what the rotations were and when the rotations took place. The highest of the evidence that was put was 'when the grass was low on one lot the sheep would be moved to the next'. However, it was conceded that, in the later years, the rotations were not as frequent.
On the evidence, I am not convinced, that any of the land, save for Lot 4, during the years 2011 to 2013, was used primarily for a primary production purpose at all. To use the words of Croft J in CDPV Pty Ltd v Commissioner of State Revenue [2016] VSC 322 at 61, the grazing of the sheep on the lots other than Lot 4, during the years 2011 to 2013, was a "side benefit" or, more accurately, on an odd and infrequent occasion for grazing through rotation. However, the evidence is insufficient for me to be satisfied that as a matter of reality it had any connection with primary production.
Mr Jeffrie said the provisions creating exemptions in the Act should be interpreted broadly. With the purpose in mind, "being rewarding or protecting some class of activity" (see Diethelm MFG v Commissioner of Taxation (1993) FCR 50 at 457). Moreover, provisions that afford tax exemptions, while being read in their statutory context, should not normally be narrowly construed as they seemed to be beneficial (see Federal Commissioner of Taxation v Murray (1998) 193 CLR 605 at 632).
Croft J in the CDPV case at [31] and [32] considered the proper approach in construing s.66. He stated:

Bearing in mind my findings on the evidence, as I have previously stated, I take the view that the applicant decided, that it would put some stock on Lot 4, in order to give the impression that the land was used for primary production. It was not really interested in primary production at all. The applicant did the bare minimum that it had to do. Constructing fences, poisoning weeds and ploughing and buying stock are minimal, when one considers all the facts of this case which I have outlined above.
I take the view that the applicant bought the land and was holding it until a time that may arrive where it was able to subdivide or develop the land in order to make a profit out of the land. It held all the land for that purpose. It did not hold the land for the purpose of primary production. The primary production was no more than a "side benefit" which appeared to be an inconvenience to the applicant. It is inconceivable, that any organisation that wished to engage in primary production would put the accountants and financial managers from their office in charge of farming when those persons had no farming experience whatsoever. Even though they may have gained some experience as time went on, it is difficult to believe that farming was the primary use of the land.
Mr Jeffrie stated that, even if the applicant's intention was to hold the land for "land banking" as long as primary production was primarily carried on the land, at the relevant times, that is sufficient to attract the exemption. He said what I must look at is the intention to use the land at the particular time and not the future use of the land and therefore, he concluded that the matters on the applicant's website were irrelevant. He further stated, correctly, that it did not matter whether or not the applicant had made a profit because it was not the Commissioner's position to judge whether or not the project was commercial. He stated that land banking was not to be considered a use of the land. For this proposition, Mr Jeffrie relied on Metricon Qld Pty Ltd v Chief Commissioner of State Revenue (No. 2) [2016] NSWSC 332, a decision of Justice White in the Supreme Court of NSW. In that case, his Honour was dealing with the Land Tax Management Act 1956 (NSW), which I have previously referred to, and which differed from the present legislation with which I am concerned because, inter alia, it required a "significant and substantial commercial purpose or character".

88. ... Brownie AJA [in Blacktown City Council v Fitzpatrick Investments [2001] NSWCA 259] appeared to accept that because the acquired land formed part of the applicant's "land bank", being land acquired and held for the purpose, when the time was right, of being subdivided and resold for profit, that the land was thereby actually used. His Honour said that this was consistent with the reasoning in cases such as Royal Newcastle Hospital (Council of the City of Newcastle v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493 ("Royal Newcastle Hospital") and Brickworks (Parramatta City Council v Brickworks Limited [1972] HCA 21; (1972) 128 CLR 1 ("Brickworks"). Brownie AJA cited Taylor J in the High Court in Royal Newcastle Hospital at [515] where his Honour said:

The issue in the Brickworks was whether "new land" acquired in 1939 that adjoined a brickworks and quarry could be used for those purposes in 1960, notwithstanding the introduction of a planning ordinance for which that was not a permitted use. The question was whether that was an existing use of the land. If it were, it could be continued. Gibbs J who gave the leading judgment, said (Parramatta City Council v Brickworks Limited [1972] HCA 21; (1972) 128 CLR 1 at [22]-[23]):

Amazon Property Group Pty Ltd v Commissioner of State Revenue

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Judgment (9 paragraphs)

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Amazon Property Group Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2016] VCAT 1439 (29 August 2016)