Appellant v Respondent

(a) Notice of Assessment 15512470 for the 2015 land tax year dated 21 April 2017;

(b) Notice of Assessment 15512268 for the 2016 land tax year dated 21 April 2017;

(c) Notice of Assessment 15512226 for the 2017 land tax year dated 21 April 2017;

(d) 2017 Land Tax Reassessment Notice No 15512226 dated 27 April 2017;

(e) 2017 Land Tax Reassessment Notice No 15512226 dated 5 May 2017;

(f) 2017 Land Tax Reassessment Notice No 15512226 dated 12 May 2017;

(g) 2017 Land Tax Reassessment Notice No 15512226 dated 22 March 2019;

(h) 2017 Land Tax Reassessment Notice No 15512226 dated 29 March 2019; and

(i) 2017 Land Tax Reassessment Notice No 15512226 dated 5 July 2019.

3 The Commissioner conceded that during the relevant period s 67(1)(a)(iii) of the Act was satisfied, in that the subject land was used primarily for the business of primary production.

(a) whether the principal business of the appellant at the relevant times was primary production of the type carried on on the subject land; and

(b) whether Mario Bozzo was at the relevant times normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the subject land.

5 Those issues correspond with the requirements found in ss 67(2)(d)(i) and 67(2)(d)(iii)(A) of the Act.

6 Under s 110 of the Administration Act, the appellant has the onus of proof on both issues. The standard of proof is the civil standard, being the balance of probabilities.

7 The appellant relies on affidavits deposed by Mario, Peter and Teresa Bozzo. It also relies on the affidavits of Ross de Blaquiere, the appellant's accountant, and three people who were employed by the appellant or related companies: Daniel Smith, Daryl Bruton and Brittnee Boulton. Mario died on 2 April 2021. The Commissioner did not object to the tender of his affidavit.

8 The Commissioner did not call witnesses, but cross-examined the appellant's witnesses.

9 Mario was born in Italy and moved to Australia in 1956 when he was about 20 years of age. After running a series of butcher shops, he bought and conducted farms at Dandenong, Benalla and Mornington.

10 In 1988, Mario established the Bozzo Family Trust as a discretionary trust with Lotus Oaks as trustee. Mario, his parents, and his three adult children, Peter, Teresa, and Claudia Miller,[3] were made specified beneficiaries. All relevant land purchases were made by Lotus Oaks as a trustee. Lotus Oaks did not act in its own right or in any other capacity.

11 Over the relevant period, Mario, Peter, Teresa and Claudia were the directors of Lotus Oaks.

12 Mario was a director of numerous related companies (collectively, the 'Bozzo Group'), including Lotus Oaks. Peter, Teresa and Claudia were also directors of these companies, as well as of their own entities.

13 Before 2010, business matters were discussed and decided informally at family functions and events. From about 2014, on the advice of Mr de Blaquiere, five separate business units responsible for preparing their own accounts and reporting their own profits and losses were introduced.

(a) farming, which was undertaken by the appellant;

(b) egg production, which involved oversight of a 25 percent interest in the Bridgewater Poultry Farm, held by the appellant;

(c) the milling of grain, which was undertaken by Riverbank Milling Pty Ltd ('Riverbank Milling');

(b) property development on the subject land ('Jubilee project'), which was undertaken by the Jubilee Development Partnership; and

(d) property development at Yarrawonga ('Silverwoods project'), which was undertaken by Lotus Projects Pty Ltd as trustee of the Bozzo Unit Trust and a number of other special purpose entities.

15 In 1989, the appellant purchased an egg farm in Chapel Road, Keysborough ('Keysborough farm'). This was a large business employing about 20 people. In about 1995 or 1996, the appellant and others engaged John Woodman, a property developer, to assist in obtaining a rezoning. The Keysborough farm was subdivided by the appellant into about 163 residential lots. All lots were sold before 30 June 2014.

16 In about 1994, the appellant purchased a farming property in Wyndham Vale which included the subject land. In about 2012, the Victorian Government compulsorily acquired approximately 81ha of the farming property for a railway line. The appellant received about $34 million in compensation. The subject land is the land that remained after the compulsory acquisition, and was about 427ha in area.

17 The farming property was initially stocked with sheep, which were replaced shortly after the purchase by Angus steers. In 1996, a stockfeed mill was constructed on the subject land, which was operated by Riverbank Milling. The property was used for cattle until 2007, when crops were also grown. In 2012, all cattle were removed. Thereafter, the arable part of the subject land was used solely for the purpose of cultivating crops.

18 Crop rotation was practised on the subject land. Barley was grown in 2012 and 2015, canola in 2013 and 2016, and wheat in 2014 and 2017.

19 From about 2013, the mill on the subject land was managed by Teresa. Some grain used at the mill was purchased on the open market.

20 Only some of the crops grown on the subject land were milled. Canola was sold to produce canola oil or to a customer in Geelong for export. Durum wheat was high in protein and too expensive for the mill. It could be sold more profitably for pasta or bread. Barley could be supplied to the mill or exported to China for beer production.

21 In his affidavit, Mario explained that the appellant did not have the necessary machinery to farm crops. As it was uneconomic to buy machinery for just one farm, a share farming arrangement was entered with Glen Creek Farm Pty Ltd ('Glen Creek'). Glen Creek is a company owned by Peter Griffith, a neighbouring farmer. Under that arrangement, Mr Griffith and Glen Creek farmed the crops on the subject land with Mario's oversight. Sale proceeds were divided equally.

22 From 1 July 2014, Mario agreed with Mr Griffith that Glen Creek would thereafter be engaged as a contractor to farm the subject land. Glen Creek farmed the subject land over the relevant period.

23 Mario reviewed and approved major decisions related to the farm on the subject land, and remained aware of what was going on for the purposes of overseeing the farm. He did not need to supervise the day to day activities of Mr Griffith. Teresa deposed that Mario was always available by phone to discuss the progress of the crops or any other issues involving the farm. During 2014 to 2016, Teresa would speak to Mario once or twice a day over the phone. Mario would usually manage to steer the conversation to farming.

24 The appellant and related companies maintained an office in Southbank during the relevant period, where Mario's residence was also located. It would take Mario about 30 minutes to drive to the subject land from his home or office. Mario usually visited the subject land once during each working week for about two hours, and often on the weekend as well.

25 Teresa inspected the crop on the subject land about once or twice a month with Mr Griffith. On these occasions, Mario would attend, or speak on the phone during the inspection, or later. Teresa sometimes provided him with crop samples or photos.

26 Teresa gave evidence that she assisted Mario in the sale of grain during the relevant years. She deposed that Mario's approval was necessary before grain was sold. Mario stated that while he was informed of the details of sales of grain and other crops on the subject land, the sales were arranged by Teresa and Mr Griffith.

27 Mario approved all expenses over $1,000. Teresa said that Mario visited the mill quite often, and together they would go through invoices for about half an hour to an hour each week to obtain Mario's approval. On those occasions they discussed the farm business generally and made decisions.

28 In 2004 and 2005, the appellant purchased two properties at Giffard, known as Manna Gum and Seaspray (collectively known as 'Seaspray Farm'). Seaspray Farm was about 930ha in size. Initially there were 600 steers at the farm, but this was built up to 700.

29 In March 2016, Mario employed Ms Boulton as the farm hand at Seaspray Farm. She resided at Giffard, and replaced the previous farm hand who had also resided nearby. Mario had oversight of the Seaspray Farm, and stayed in contact with Ms Boulton discussing matters such as the weather and its effect on farming activities on the property.

30 Ms Boulton said that she visited Seaspray Farm about two or three times a week, but could call into the farm as needed. Seaspray Farm was solely a beef farm for fattening steers. Mario bought young steers for the property, and decided when to sell the cattle. They were then sent to the abattoirs or to the market at the saleyards through a livestock agent.

31 Over the period from 2014 to 2016, Mario usually visited Seaspray Farm once a week for two days. It was a three and a half hour drive from his office and home at Southbank. In late 2016 or in 2017, his visits reduced to once a fortnight for two days at a time, as he became more confident in Ms Boulton's abilities as a farm hand. During a visit, Mario would stay overnight at one of the houses on the farm, and drive around inspecting the cattle and paddocks.

32 In around 2007, the appellant bought a one quarter interest via two unit trusts in an egg farm in Bendigo called the Bridgewater Poultry Farm.

33 The Bridgewater Poultry Farm was larger than the Keysborough farm, and had contracts for the supply of free range eggs to Coles and Woolworths. All profits were reinvested. The farm operated over the relevant period but closed due to a salmonella infection in about March 2019. Mario did not oversee or work on the Bridgewater Poultry Farm.

34 In around 2011, the appellant purchased a new mill at Leongatha to expand its stockfeed business.

35 The appellant used some of the proceeds from the compulsory acquisition in 2012 to purchase Tuppal Station near Tocumwal in southern New South Wales. Tuppal Station was about 5,666ha in area, with 1,619ha unsuitable for crop farming. That area comprised natural habitat, buildings and a small vineyard, and was used at times for light grazing. Canola, wheat and barley were cropped in rotation over the relevant period. Small amounts of hay, lupins and fava beans have also been grown. In normal weather, Tuppal Station produced about 12,000 tonnes of crops annually. Cattle and sheep were also farmed at Tuppal Station. Facilities at Tuppal Station included a manager's residence, two employee residences, another residence for Mario when staying at the station, an office building, a 2,000 tonne grain shed, and eighteen grain silos of various sizes. Up to 4,000 tonnes of grain could be stored on Tuppal Station, with additional grain stored in a warehouse in Tocumwal. There was also a hay shed for up to 1,000 tonnes of hay, a shearing shed, a sheep and cattle yard, chemical and fertiliser sheds, a weighbridge, a working shed and an amenities block.

36 During the relevant period, Tuppal Station employed Mr Bruton as a farm manager, as well as an assistant farm manager, two casual employees in the low season, and four casual employees during the sowing and harvesting of crops.

37 Mr Bruton gave evidence in relation to Tuppal Station that:

(a) in 2014, about 1618ha was used for cropping canola, wheat and barley, while 2,428ha was used for grazing 3,000 sheep and 100 cows/calves;

(b) in 2015, about 2,023ha was used for cropping canola, wheat and barley, while a similar area was used for grazing 3,500 sheep and 100 cows/calves; and

(c) in 2016, about 2,630ha was used for cropping canola, wheat and barley, while about 1,416ha was used for grazing 3,000 sheep and 100 cows/calves.

38 In October 2016, there was significant flooding at Tuppal Station. The 2017 cropping program was increased to two thirds of the property to grow more hay.

39 During 2014, 2015, 2016 and most of 2017, Mario usually visited Tuppal Station once a week for two days. From August 2017, he attended Tuppal Station on average once a fortnight for two days. The purpose of the visits included examining crops and inspecting livestock and other produce on the farm, including cattle, sheep and grapes.

40 Mario would arrive around 10:00am, having driven up from Melbourne, stay the night and then depart the following afternoon. It took about four hours to drive from Mario's home or office in Southbank. He would drive around the property checking on crops and livestock, speaking with farm workers about farm activities. Mario was always contactable via phone when he was not at Tuppal Station. Mr Bruton, the farm manager, spoke with him at least every second day and sometimes more often to discuss farming matters, accounts, the sale and purchase of crops and livestock, and land and weather conditions. Mario always had the final say as to important decisions at Tuppal Station, and he authorised and arranged the sale of grain and cattle with the help of Teresa. An agronomist was retained to advise how crops might best be allocated or rotated.

41 Mario reviewed and approved all expenses relating to Tuppal Station over $1,000 before they were paid, including wages, fertiliser and chemical purchases, the purchase of seed for crops, and the purchase of livestock and feed.

42 A brief travel log of Mario's farm visits for the period of 8 October 2015 to 16 January 2016 shows that he travelled to one or other of the farms multiple times each week. Mario stated that the travel log was representative of the period of 2014 to 2016.

43 Mario deposed that, when not physically present at one of the farms, he would spend most of his time thinking about the farms.

44 By 2015, Mario was about 80 years of age. He was not in good health. He had commenced kidney dialysis in about 2009, and in 2014 to 2016 he was on dialysis three or four times a week for five hours. In mid-2017, his dialysis was increased to six times a week for three or four hours at a time.

45 Mario had a dialysis machine installed in his home, and preferred to undertake dialysis in the morning or late in the evening. This meant that he was available for the rest of the day.

46 In about 2010, the Urban Growth Boundary of Melbourne was extended to include the subject land.

47 Mario discovered that the subject land was to be a future residential area when the Victorian Government compulsorily acquired part of the subject land for a railway line in 2012. The payment of about $34 million in compensation showed that it was worth much more than he had previously thought. It was at this time that the idea of developing the subject land first arose. Peter suggested developing the subject land and took control of this project for the family. The appellant had previous experience in property development, having subdivided and sold the former Keysborough farm as residential allotments.

48 In February 2013, Mr Smith, an experienced and qualified project director, was employed as the project director and manager of all property developments to be undertaken by the Bozzo Group. Mr Smith was engaged full-time in property development. He was not involved in farming. He was given responsibility for:

(c) the Silverwoods project, which occupied much of his time.

49 Peter retained and liaised with Mike Day, a strategic planner of RobertsDay, to act for the appellant during the preparation of the Westbrook Precinct Structure Plan ('PSP').

50 In June 2014, the PSP was released for an area largely consisting of the subject land. The PSP contemplated the development of a new suburb with a broad range of household types, and including a local convenience centre, primary and secondary schools, and a town centre adjoining the proposed railway station. Following its gazettal in July 2014, the way was open to transform the subject land into a large residential estate.

51 The PSP proposed 5,827 dwellings with an average dwelling density of 17 dwellings per hectare of net developable area. The future population of the area was estimated at 16,315 residents. Over 23 hectares of sports fields were to be provided, and 10.8ha of local parks.

52 A trade mark search shows that the appellant filed the Jubilee trademark on 16 April 2014. The Jubilee name was adopted as the name of the residential estate to be developed on the subject land.

53 The project for the residential development of the subject land was soft launched on 25 October 2014. Sale contracts were signed with builders for the construction of a design village of display houses.

54 The Mill Quarter was about 85ha located in the western corner of the subject land. It was the first part of the subject land to be subdivided.

55 The planning permit for the Mill Quarter was granted in April 2015. The estate was to be subdivided into 985 residential allotments. Construction commenced on 2 June 2015. Titles of residential lots were registered from May 2016.

56 Mr Smith advised the Bozzo family that there should be a separate development company for the Jubilee project. As a result, Lotus Oaks Developments Pty Ltd (ACN 168 812 842) ('developer') was registered on 18 March 2014. Mario, Peter, Teresa and Claudia were the directors of the new company.

57 By a partnership agreement dated 4 May 2015 prepared by the appellant's solicitors ('development agreement'), entities associated with Mario, Peter, Teresa and Claudia agreed to establish the Jubilee Development Partnership and to appoint the developer as manager of the partnership. The twelve issued shares in the developer were divided equally between the four family members.

58 The recitals to the development agreement stated that the appellant wanted the properties developed outside the Bozzo Family Trust to quarantine other assets from development risk. In return for the developer agreeing to undertake the project, incur the project costs, make developer contributions and obtain funding, the appellant agreed to grant development rights and pay a development fee. The appellant would provide the Mill Quarter as security for the senior loan, and grant a fixed and floating charge over its assets limited to the Mill Quarter.

59 Importantly, under cl 8.1 of the development agreement, the appellant appointed the developer as its attorney to act in its name and on its behalf:

(a) to make and submit applications for consolidation or subdivision necessary or desirable for the project;

(b) to apply for any approvals, planning permits, building permits or other consents and permits necessary or desirable for the project;

(d) to sign any documents relating to permitted encumbrances and any related priority deeds;

(e) to sign all other documents relating to or arising from the project or required or desirable for the development;

(f) to receive and bank gross proceeds into the project bank account for distribution; and

(g) to act upon any additional powers conferred on the developer by the project control group.

60 If requested in writing, the appellant agreed to provide an executed power of attorney, and to ratify anything done under the power of attorney.

61 The general obligations of the appellant under cl 9.1 included:

(a) to co-operate with, actively support and do all things reasonably requested by the developer to enable the developer to obtain the approvals and carry out the project;

(b) to execute all documents and do all things the developer reasonably required for development;

(c) to consent to specified encumbrances to enable the developer to obtain the senior loan; and

(d) to do all things reasonably requested by the developer in relation to the project.

62 The development agreement contained an acknowledgment by the appellant that it would be named as a party to all lot sale contracts and would assume a direct responsibility to purchasers to deliver title and to execute all documents necessary to transfer title. It also remained liable for GST payable in relation to any taxable supply under a sale contract.

63 Under cl 15, the developer was entitled to the gross proceeds after repayment of taxes and borrowings less the landowner retention allowance ('LRA') and the landowner retention allowance premium ('LRA premium'). In accordance with a valuation obtained from Charter Keck Cramer ('valuer') in about December 2014, the LRA was fixed at $17,157.36 per lot on an estimate of 985 lots, while the LRA premium was equal to 10% of the LRA.

64 Following negotiations with the National Australia Bank ('Bank') as project financier, cl 17.3 broadly provided that the gross proceeds of sale were to be paid in the following order of priority:

65 The developer was required to keep proper financial books of account, and to give access to the appellant on request.

66 The endorsed plan for the subdivision of the Mill Quarter approved by the Wyndham City Council was annexed to the development agreement.

67 The project feasibility ('project feasibility') for the subdivision of the Mill Quarter was also annexed to the development agreement, and showed a project commencement date of June 2014, and a project completion date of January 2020. A sales rate of six allotments per month was planned.

68 The residential subdivision of the Mill Quarter was a project of very considerable scale consisting of twenty stages. Forecast sales revenue exceeded $189 million. Sales commission to be paid to agents calculated on the basis of a fee of $6,333 per lot exceeded $6.2 million. Sales and marketing costs of $5,254 per lot exceeded $5.1 million.

69 Expected development costs were very substantial (exceeding $160 million), with subdivision construction of about $51.8 million, above ground construction of about $17.2 million, and authority fees and taxes of around $45 million.

70 The project feasibility anticipated a profit exceeding $11.3 million. The cash flow estimate showed a peak debt exceeding $27.2 million in October 2015.

71 On 12 May 2015, the appellant filed a notification of exclusive dealing ('notification') with the Australian Competition and Consumer Commission ('ACCC') under s 93(1) of the Competition and Consumer Act 2010 (Cth), advising that the appellant would be subdividing the subject land into numerous lots on several proposed plans of subdivision as part of the Jubilee project. Eight registered builders were nominated in relation to the estate. The ACCC was advised that the completed estate would comprise about 7,000 dwellings with about 5,500 residential lots and 1,500 medium density dwellings.

72 The notification stated that the Jubilee project was one of several existing or proposed residential developments in the area, and formed part of the broader metropolitan residential market of Melbourne. It said that there were numerous choices available to potential purchasers of residential properties, with each development offering different prices, features and amenities. The real estate market was described as highly competitive with various competing residential developments available.

73 On 18 August 2014, the appellant instructed the valuer to undertake a valuation of the subject land for mortgage purposes ('first valuation report').

74 The valuer returned a valuation of the subject land of $105 million (exclusive of GST). The project related site value of the Mill Quarter was assessed at $16.9 million (exclusive of GST) as at 10 December 2014.

75 In a second valuation report dated 19 April 2016 ('second valuation report'), the valuer undertook a valuation to determine the gross realisation of the subdivision of the Mill Quarter, and the value of the balance of the developable part of the subject land, again for mortgage purposes. The developable balance of the subject land of about 236ha was estimated to have a value of $122.5 million (exclusive of GST). This gave a land value exceeding $500,000 per hectare for the balance of the developable part of the subject land.

76 The valuer noted that there were four large master planned estates in the general locality of the Jubilee project providing long term competition.[4]

77 In the second valuation report, details of about 369 lot sales from Stages 1 to 13 of the Mill Quarter are provided. Sales prices ranged from $120,000 to $150,000 for the smallest lots, up to $240,000 to $301,000 for the largest. These sales on settlement would bring a very substantial cash flow to the developer, and to the appellant when the LRAs and LRA premiums were paid.

78 In the period up to 31 December 2014, the second valuation report shows that there were about 28 lot sales to builders. Lot sales to the public commenced with six sales in October 2014, ten sales in November 2014, and another ten in December 2014. In all, there were about 26 lot sales to members of the public and 28 sales to builders by 31 December 2014.[5] Sale prices ranged from $155,000 for a 400m² lot to $220,000 for a 640m² lot.

79 Mr Smith gave evidence that by 31 December 2016, there were 221 registered lots in the Mill Quarter, comprising four stages of works. 157 settlements had been completed. 64 lots were still for sale or yet to settle.

80 Following the second valuation report, the Bank agreed to increase the LRA under the development agreement to $29,000 per lot. This increased the payments to be made to the appellant when sales were settled, while the amounts to be paid to the entities of the four partners after taxes and borrowings decreased to a like extent.

81 On 30 January 2017, the appellant and the developer executed a deed of confirmation, rectification and variation of the development agreement ('variation deed'). The variation deed amended the development agreement by advancing the commencement date of the development agreement to 19 August 2014 rather than the date of execution, and increasing the LRA to $29,000 per lot.

82 From about 2015, monthly board meetings were held for the Bozzo Group. One board meeting was held for all entities. The agenda and minutes for each meeting were divided into separate business units. Each business unit prepared separate board papers.

83 The only Bozzo Group board agenda available is that for the Board meeting on 11 December 2019. It shows seven business items. The first and longest item related to the residential subdivision of the subject land and lasted for 1¾ hours. The Sebel Hotel (another property development) occupied 30 minutes, as did reports on the Bridgewater Poultry Farm. Riverbank Milling occupied 45 minutes. The farm update occupied only 15 minutes.

84 The appellant did not produce the Board agendas, minutes or papers for the Bozzo Group meetings over the relevant period.

The appellant's income and expenses based on its financial statements and income tax returns

85 Mr de Blaquiere acted as the Bozzo Group's accountant from the 2013 financial year. He said that over the 2013 to 2017 financial years, the appellant had two main sources of income, which were:

(b) the sale of subdivided residential lots from the former Keysborough farm and the subject land.

86 Over the relevant period, the appellant owned the farms on the subject land, Tuppal Station, and Seaspray Farm. Farming operations on the subject land and at Seaspray Farm were transferred to the appellant on 1 July 2013, while the operation of Tuppal Station was transferred on 1 April 2014. During the 2013 to 2016 financial years, the appellant also owned a 25% interest in the Bridgewater Poultry Farm No 1 Trust which operated the Bridgewater Poultry Farm, and a 25% interest in the Loddon Valley No 1 Trust which owned the land on which the Bridgewater Poultry Farm operated. During the 2017 financial year, these interests were transferred to Mario, Peter, Teresa and Claudia.

87 The appellant's financial statements over the relevant period show the total income from farming activities from all farming properties. They do not separately identify farming income or expenses for each farm. This was not required for income tax purposes at the time, and has not subsequently been done.

(a) grain sales ranged from approximately $1.09 million to $1.48 million;

(c) crop and pasture expenses predominantly associated with grain ranged from $400,847 to $514,759;

(d) fertiliser costs associated with the rejuvenation of pasture at Seaspray Farm ranged from $83,421 to $399,510; and

(e) the cost of the consulting agronomist in the 2016 and 2017 financial years was $82,270 and $91,500.

89 In addition to grain cropping and cattle grazing, the appellant conducted other businesses. Sheep sales generated income ranging from $256,941 to $646,396 over the 2015 to 2017 financial years, while wool sales generated income ranging from $107,654 to $201,581. Wine production provided little if any income. A small number of alpacas were maintained. Timber sales amounted to almost $50,000 in the 2016 financial year.

90 The appellant paid Mario a salary for running the farms. For the 2015 financial year, his salary was $65,280, and for both the 2016 and 2017 financial years it was $66,560.

91 The appellant's profits from the sale of lots in the Mill Quarter amounted to $87,820.30 in 2016 and $3,050,637.53 in 2017.

92 In the 2015 financial year, the issue arose as to whether the lots in the Mill Quarter amounted to trading stock for income tax purposes. Mr de Blaquiere was concerned that if the appellant treated the lots in the Mill Quarter as being on capital account, the Australian Taxation Office ('ATO') might disagree and take the view that they had become trading stock when the development agreement was made. He determined that the lots should be treated as having become trading stock under the development agreement. Following discussions with Peter, Claudia and Mr Smith, the appellant's 2015 tax return was lodged on this basis.

93 The same position was adopted in the 2016 and 2017 financial years.

94 Subsequently, the ATO imposed tax liabilities on Bozzo family members arising from the trading stock election. They have lodged objections against the liabilities, contending that the Mill Quarter lots were not trading stock of the appellant.

95 As far as the evidence goes, the only financial records maintained by the appellant were the minimum possible to prepare an income tax return in each financial year. Given the rudimentary financial information available, it is not possible to determine which of the appellant's major businesses was the most profitable over the relevant period. Because expenses cannot be allocated to farms or businesses, it cannot be determined whether an individual farm or primary production business was profitable. It is impossible to draw meaningful comparisons between the farms from the limited information available in the financial statements and tax returns.

96 The Act imposes land tax on all taxable land in Victoria.[6] The owner of taxable land is liable to pay land tax on the land.[7] Land tax is assessed on calendar years.[8] A taxpayer is assessed for land tax on the total taxable value of all taxable land which the taxpayer owned at midnight on 31 December of the preceding calendar year.[9] The Act directs consideration of activities occurring 'during a period not overlong and not overshort within which 31 December... falls'.[10]

97 The term 'taxable land' is defined to mean all land that is not exempt land.[11] Part 4 of the Act is concerned with exemptions and concessions. Division 2 of Part 4 is concerned with primary production land. 'Primary production' is defined in s 64(1) of the Act to mean:

(a) cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state); or

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

(c) the keeping of bees for the purpose of selling their honey; or

(d) commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear; or

(e) the cultivation or propagation for sale of plants seedlings mushrooms or orchids.

(1) Land is exempt land if the Commissioner determines that -

(a) the land comprises one parcel that is -

(i) wholly or partly in greater Melbourne; and

(ii) wholly or partly in an urban zone; and

(iii) used solely or primarily for the business of primary production; and

(b) the owner of the land is a person specified in subsection (2).

(2) The owner of the land must be -

...

(d) a trustee of a discretionary trust of which -

(i) the principal business must be primary production of the type carried on on the land; and

(ii) either -

• (A) each specified beneficiary is a natural person...

; and

(iii) either -

• (A) at least one of the specified beneficiaries is a natural person who is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land...

99 The principles of statutory construction are well established. In Project Blue Sky Inc v Australian Broadcasting Authority, McHugh, Gummow, Kirby and Hayne JJ said:

[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.[12]

100 The plurality of the High Court emphasised the importance of context in SZTAL v Minister for Immigration and Border Protection:

The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.[13]

101 In CIC Insurance Ltd v Bankstown Football Club Ltd, the majority of the High Court said:

[T]he modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous.[14]

102 These principles are consistent with s 35(a) of the Interpretation of Legislation Act 1984 (Vic), which requires that a construction that would promote the purpose or object underlying the Act is to be preferred to a construction that would not promote that purpose or object.

What legislative purpose underlies the primary production exemption?

103 The Land Tax Act 1973 (Vic) introduced differing exemption requirements depending on the location of the land and the zone to which it was subject. Section 8(a) provided that where land was within the metropolitan area and in an urban zone, the new requirement for exemption was, in the case of a corporation, that 'the principal business of the company is primary production of a type carried on on the land'. There was no distinction at that time between a corporation acting in its own right and a corporate trustee. Section 3 defined the expression 'business of primary production' in a manner similar to categories (a) to (d) of the current definition.

104 The exemption was altered to discourage land speculation or 'land banking' on the suburban fringes of Melbourne. There was a concern that land owners were enjoying the land tax exemption through only minor or token primary production operations. During the parliamentary debate concerning the Land Tax Bill 1973 (Vic), it was observed that:

...primary production land inside the planning area will become subject to land tax unless the person farming it is substantially a primary producer.[15]

105 In the same debate, the then Premier and Treasurer said:

Many people who own land designated as suitable for residential development have been holding the land for primary production, in some cases, simply to allow a rise in values to take place. In other words, speculation was occurring with only minor primary production being performed on the land in question so as to obtain an exemption from land tax. There is to be no distinction and exemptions in those cases have been removed.[16]

106 Turning to the provisions of the Act which were in force during the relevant period, s 32 of the State Taxation Acts Further Amendment Act 2011 (Vic) added a provision to the Act which applied in the case of trustees of a discretionary trust where the principal business of the trust was primary production of the type carried on on the land.

107 Under s 67 of the Act, a number of additional requirements must be satisfied if an exemption from land tax is to be obtained. For land wholly or partly in an urban zone in greater Melbourne, the first requirement is that it be used 'solely or primarily for the business of primary production'.[17] Land not used for a type of primary production listed in the definition of that term in s 64(1) of the Act is excluded. Hobby farming conducted as a pastime, pursuit or diversion and not as a business is also excluded.

108 Additional requirements are imposed by ss 67(2)(a)-(e), which all speak of the type of primary production carried on on the land.

109 Section 67(2)(d) then directs that if the land is to be exempt, the principal business of the trustee of a discretionary trust must be primary production of the same type as is carried on on the land.

110 As Digby AJA observed in Mould v Commissioner of State Revenue in relation to a previous form of the same legislation:

It can reasonably be inferred that this exception for primary production in s 67 of the Land Tax Act exists so as to prevent a certain class of trust from availing itself of the exemption; trusts that also carry on businesses other than primary production.[18]

111 While Digby AJA was dealing with an earlier version of the Act which required the 'sole' rather than 'principal' business of the trust to be primary production of the type carried on on the land,[19] a similar observation can be made about the legislation applicable in the present case.

112 Section 67(2)(d) of the Act has the effect of excluding discretionary trusts where the principal business of the trust is not primary production of the same type as that carried on on the land. In practical effect, this excludes trusts which have two or more different businesses, unless it can be said that the type of primary production carried on on the land is the principal business of the trust. If a different business of the trust is the principal business, or if there is no principal business, the land is not exempt. The trustee bears the onus of showing that the principal business of the trust is primary production of the type carried on on the land. [20]

113 This restriction was introduced in circumstances where Parliament intended to discourage land speculation and land banking of urban zoned land in greater Melbourne. Minor primary production activity conducted on the land should not give rise to an exemption from land tax. The legislative purpose was pejoratively described by the Commissioner as evincing an intent to exclude 'Collins Street farmers' whose professional or business activities conducted through a discretionary trust would be wider than the type of primary production actually carried on on the land.

114 Section 67(2)(d)(iii) of the Act imposes a further requirement. It requires the trustee to show that either a specified beneficiary who is a natural person, or a relative of a specified beneficiary, is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.

115 In 2019, the Act was amended again. The trustee is now required to show that it carries on the business of primary production on the relevant land and that that business is the trustee's principal business.[21] The reference to 'primary production of the type carried on on the land' was removed. The trustee must also show that at least one of the specified beneficiaries who is a natural person, or a relative of a specified beneficiary, is normally engaged in a substantially full-time capacity in the business of primary production carried on on the land.[22] These amendments are not retrospective and do not apply to the assessments in dispute in this proceeding.

116 In the second reading speech for the Bill which introduced the new provisions in 2019,[23] the Treasurer said:

The most stringent requirements apply to land in an urban zone within the boundaries of greater Melbourne: these require the land to be owned by a genuine primary producer, and used by them primarily for a business of primary production. The intention of this stringent test is to prevent people who are land banking in urban areas from accessing an exemption.... The amendment strengthens the exemption test to restore the intended connection between the owner of the land and the business conducted on that land.... These amendments close unintended scenarios permitted by the broad wording. They will reinforce the intent to help genuine primary producers running a business on their own land, which the vast majority of owners already do.[24]

117 As the legislative history shows, the provisions should be construed relatively strictly - it was not the intention of Parliament to exempt all persons carrying on farming activities from land tax. Rather, the exemption has been progressively narrowed. The practice of 'land banking' coupled with minor farming is a particular mischief which the Act seeks to counter.

What type of primary production was carried on on the subject land?

118 To establish an exemption from land tax, s 67(2)(d)(i) of the Act requires the appellant to show that the principal business of the discretionary trust is primary production of the type carried on on the land.

119 The first issue of fact which must be determined is the type of primary production carried on on the subject land.

120 The Macquarie Dictionary lists the following relevant definitions of the word 'type':

1. a kind, class, or group as distinguished by a particular characteristic.

1. a person or thing embodying the characteristic qualities of a kind, class, or group; a representative specimen.
2. the general form, style, or character distinguishing a particular kind, class or group.[2]

121 I accept the Commissioner's submission that 'type' is an ordinary English word not defined in the Act and that it should be given its ordinary and natural meaning.

122 The undisputed evidence is that over the relevant period, and during a period not overlong and not overshort within which the 31 December preceding each relevant year falls, canola, barley and wheat were grown on the subject land in rotation for the purposes of sale. There were no other crops grown on the subject land. While cattle and sheep had once been grazed on the subject land, this was permanently discontinued in 2012. It was not suggested that the appellant had any intention of resuming the grazing of cattle or sheep on the subject land after 2012.

123 The cultivation of crops falls under category (a) of the definition of primary production in s 64(1) of the Act. Category (a) relates to cultivation for the purpose of selling the product of cultivation, whether in a natural, processed or converted state. The evidence shows that canola was sold for the production of canola oil or to a customer in Geelong for export. Barley could be processed in the mill on the subject land, sold on the open market or exported to China. Durum wheat was too expensive for the mill and was sold on the open market.

124 In CDPV Pty Ltd v Commissioner of State Revenue, Croft J considered the meaning of 'cultivation' in the context of the definition of primary production:

The critical aspect of requirement of the definition of "primary production" is that "cultivation" takes place on the land. As the word "cultivation" is not defined in the Act, it follows that the word should be taken to be used in its ordinary sense. Consequently, some assistance is provided by the dictionary definitions of the word "cultivation". The Shorter Oxford English Dictionary defines "cultivation", insofar as relevant, to mean "the action of cultivating". It defines the word "cultivate", so far as is relevant, to mean "prepare and use (soil) for crops; bring (land) into a state of cultivation; break up (ground) with a cultivator; give attention to (a plant) to promote growth, improve fertility, etc; produce or raise by agriculture or horticulture". Similarly, the Macquarie Dictionary defines the word "cultivate", insofar as it is relevant, to mean "to work (land) in raising crops; to dig, turn over (earth); to encourage the growth or development of; to grow".

Having regard to these dictionary definitions, the provisions of s 66 of the Act and the definition of "primary production" being considered together with the authorities discussed in the reasons which follow, the meaning of the word "cultivate" in the context of these provisions would, in my view, extend to activities that precede the sowing of crops, which activities include the preparation of the soil for crops and the bringing of the land into a state of cultivation. Moreover, it is submitted by the Appellants that it is not necessary that the activities be profitable, provided that they are carried out for the purpose of sale of the produce of "cultivation". They also contended that there is nothing in s 66 that mandates an operation - cultivation - in the nature of business. The Appellants also submitted that the scale of the activity is not relevant, save and except to show that the relevant cultivation was genuine and not merely colourable. In my view... I think these submissions by the Appellants correctly state the position.[25]

125 In the ordinary course, I would conclude on the facts that I have found that this is a simple case. The type of primary production carried on on the subject land during the relevant period was indisputably the cultivation of crops for sale. No other type of primary production was conducted by the appellant on the subject land at any time during the relevant period, or during a period not overlong and not overshort within which the 31 December preceding each relevant year falls. Cattle and sheep grazing had been permanently discontinued in 2012.

(a) the cultivation of grain on the subject land formed a material part of a wider business which could be described as grain, cattle and sheep farming across three properties in Victoria and New South Wales;

(b) its farming activities were integrated in a number of ways indicative of only one business; and

(c) in light of the above, the 'type' of primary production carried on on the subject land should be characterised as the growing of crops and the grazing of livestock for sale, or alternatively as the growing of crops as a part of a wider mixed farming business of growing crops and grazing livestock for sale.

127 The appellant submitted that there were three matters which established that the primary production business carried on by the appellant was a single business, and not a number of separate businesses. They were:

(b) the fact that Mario was responsible for primary production operations on each farm; and

(c) the fact that accounts were kept on the basis that there was one single business.

128 In support of these contentions, the appellant argued that category (a) of the definition of primary production in s 64(1) should be taken to extend to the cultivation of livestock and animals with the result that the cultivation of grain, cattle and sheep all formed part of this category, and hence could be considered a single 'type' of primary production. It said that such a construction of category (a) would still leave category (b) with some work to do. It would apply to the production of milk, or eggs by poultry. The appellant also argued that the use of the word 'maintenance' in category (b) was not apposite to the grazing and fattening of livestock.

(a) the type of farming carried on on the subject land was not the same type of primary production as that carried on at Tuppal Station and Seaspray Farm;

(b) the appellant's approach was the wrong approach, and misconstrued the Act. Section 67(2)(d)(i) called for the identification of the type of business carried on on the land based on the primary production activities in fact conducted on the land; and

(c) in any event, the business of primary production carried on on the subject land was not integrated with the other farms. It could not legitimately be said that there was a single overall business.

130 The Commissioner submitted that category (a) in the definition of primary production applied to the cultivation of land by way of agriculture or horticulture. Animal husbandry fell within category (b). Milk, eggs and wool were bodily produce and their production also fell within category (b).

131 The appellant's submissions encounter an immediate difficulty. Section 67(2)(d)(i) of the Act requires the determination, as a matter of fact, of the kind or class of primary production carried on on the land. This is not intended to be a difficult or complex task. The classification of the type of primary production carried on on the subject land as the cultivation of crops and the grazing of livestock for sale does not reflect the actual activities conducted on the subject land. It would import a legal fiction into the otherwise simple task of determining the type of primary production carried on on the subject land. The legislative purpose outlined earlier in these reasons provides a strong basis to resist importing such a legal fiction. The exemption must be construed narrowly so as to uphold the purpose of discouraging land banking.

132 It is most unlikely that the legislature intended that the determination of the exemption of the subject land from land tax should require the consideration of, or be consequent upon, the types of primary production carried on on two other properties remote from the subject land, including one outside of Victoria.

133 The appellant's alternative submission encounters another difficulty. Section 67(2)(d)(i) states that the principal business must be primary production of the type carried on on the land. It is hard to see how it could be open for the Commissioner or a court to classify the principal business as one type of primary production and the type of primary production carried on on the subject land as another and yet to say that the requirement imposed by s 67(2)(d)(i) had been met.

134 The appellant sought to buttress its submissions by reference to the Business Industry Codes 2017 ('codes') published by the ATO.[26] It submitted that the codes showed how one regulator characterised different primary production business activities. The codes recognise 'Sheep, beef cattle and grain farming', but they also recognise 'Grain, cereal growing', 'Beef cattle farming', 'Sheep and beef cattle farming', and many other individual farming activities. If anything, the codes support the Commissioner's submission because they recognise each of these business activities as different primary production business activities.

Construction of the definition of primary production

135 I disagree with the appellant's submission that category (a) of the definition of primary production in s 64(1) should be taken to extend to the cultivation of livestock and animals.

136 In CDPV, Croft J held that category (a) applied to the cultivation of produce from the land, and considered that cultivation extended to the sowing of crops, the preparation of soil for crops, and the bringing of the land into a state of cultivation.[27] I respectfully agree with his Honour's judgment and analysis.

137 Turning first to the text of the definition, it is sensible and reasonable to construe category (a) as applying to the produce of cultivation of the land itself rather than the cultivation of something brought onto the land such as an animal. The reference in paragraph (a) in parentheses to the produce of cultivation whether in a natural, processed or converted state also suggests that it is the produce of land with which the definition is concerned. It is unlikely that the legislature intended that this expression would apply to animals or poultry.

138 Turning to context, category (a) overlaps with category (e) which is concerned with the cultivation or propagation for sale of plants, seedlings, mushrooms or orchids. In its ordinary meaning, category (e) would extend to the propagation of plants and flowers in a nursery, greenhouse, hothouse or by hydroponics, and includes circumstances where the plants or flowers are grown in planter boxes or other devices or apparatuses and are not physically inserted into the ground.

139 Category (b) is expressed to apply to animals and poultry, and extends to the breeding of livestock and poultry for sale and to the production of products such as milk, eggs and wool. The appellant's wide interpretation of category (a) would leave little work to be done by category (b). If the cultivation of animals and poultry for the purpose of sale were taken as included in category (a), the part of category (b) which applies to the sale of the natural increase of animals or poultry would be rendered nugatory. In practical effect, category (b) would be reduced to the sale of the bodily produce of animals and poultry. Such a construction is awkward and contrived and is unlikely to have been intended by the legislature.

140 Turning now to purpose, it is obvious that the definition of primary production includes five well known and distinctive forms of primary production. The definition is expressed in ordinary English words. There is every reason to conclude that Parliament intended category (a) to apply to produce from the cultivation of the land itself, while category (b) applied to the natural increase or bodily produce of animals and poultry.

141 The appellant contended that the use of the word 'maintenance' in category (b) was an uncomfortable word in the context of animals and poultry. The word 'maintenance' is a protean word of many meanings.

142 The Macquarie Dictionary gives the following relevant definitions of 'maintenance':

1. the act of maintaining.
2. the state of being maintained.
3. means of provision for maintaining; means of subsistence.[28]

143 The same dictionary gives the following relevant definitions of 'maintain':

1. to keep in existence or continuance; preserve; retain: to maintain good relations with New Zealand.
2. to keep in due condition, operation, or force; keep unimpaired: to maintain order; maintain public highways.
3. to keep in a specified state, position, etc.

...

7. to provide with the means of existence.[29]

144 The Shorter Oxford English Dictionary gives the following relevant definition of 'maintenance':

The action of providing oneself, one's family, etc., with means of subsistence or the necessaries of life; the fact or state of being so provided. Also, enough to support life; means of subsistence; the amount provided for a person's livelihood.[30]

145 It also gives the following relevant definition of 'maintain':

Provide for the keep of (an animal).[31]

146 It is apparent from these references that there is nothing inapt or inappropriate in the use of the word 'maintenance' in the context of animals or poultry. There is no inconsistency or difficulty caused by the use of the word 'maintenance' in category (b) of the definition of primary production in s 64(1) of the Act.

147 The appellant's submission that category (a) of the definition of primary production in s 64(1) should be taken to extend to the cultivation of livestock and animals must fail. In my view, the plain and likely correct interpretation of categories (a) and (b) is that category (a) extends to the cultivation of produce of the land itself for the purpose of sale, while category (b) applies to the maintenance of animals and poultry generally, both for their natural increase and for their bodily produce.

Did the appellant carry on a single integrated business?

148 Quite apart from what I have said above, I find that the appellant did not carry on a single integrated business of primary production for the following reasons.

149 Mario's evidence was that approximately 202ha of the subject land was suitable for the growing of crops. The remaining part was not arable because of unsuitable soil, poor drainage or excessive surface rock.

150 While Mario approved major decisions, Peter Griffith undertook all routine tasks associated with the cropping of the subject land. The sale of crops was arranged by Teresa and Peter, subject to Mario's approval.

151 Crops were normally sown in April or May of each year and harvested in October or November, although harvesting could be as late as February depending on the weather. There was no need for an agronomist because Mr Griffith had cropping experience and effectively performed this role.

152 Seaspray Farm only ever had cattle. Over the relevant period, Ms Boulton and her predecessor attended the farm two or three times a week. Cattle from Seaspray Farm were sold at the Leongatha saleyards or at selling centres at Sale, Pakenham or Bairnsdale. Ms Boulton said that she dealt with Mario, and that there were only one or two occasions on which she had ever spoken to the manager of Tuppal Station. She recalled a conversation about the arrangements for unloading trucks bringing hay from Tuppal Station to Seaspray Farm. However, the conversation took place during the 2019 drought and not during the relevant period. In early 2019, 130 steers and heifers were moved from Tuppal Station to Seaspray Farm, also for drought reasons.

153 Mario referred to an occasion around November 2013 when steers purchased for Tuppal Station were transported to Seaspray Farm. There was also an occasion in about October 2017 when calves born at Tuppal Station were transported to Seaspray Farm.

154 Tuppal Station was an independent mixed farming operation of cropping and livestock, with beef cattle and sheep for meat and wool. It had its own staff, and sold through Elders as its livestock agent. It was a four hour drive from Melbourne and 500km from Seaspray Farm.

155 Mr Bruton, the farm manager, said he was not involved in operating the farms at Seaspray Farm and on the subject land. He did recall the transport of some cattle from Tuppal Station to Seaspray Farm in around 2013, and the transportation of hay from Tuppal Station to Seaspray Farm in about 2018 to 2019.

156 In Spriggs v Federal Commissioner of Taxation ('Spriggs'), the High Court said:

Where it is determined that a taxpayer is conducting a business, the next question will be the 'scope' of that business. It may be that the taxpayer pursues two separate fields of endeavour, which are properly described as two separate businesses or a business and some other non-business activity. In Payne, the taxpayer conducted a deer farming business and, quite apart from that business, was employed as a pilot by an airline: the two were activities of 'unrelated income derivation'. On the other hand, a taxpayer may pursue separate income-producing activities as part of a single business. The question is one of fact, turning upon the degree of connection and interdependence between the activities. One must consider 'the whole of the operations of the business concerned... To determine whether a taxpayer is conducting a business and the scope of that business, as said in a different context, 'it is necessary to make both a wide survey and an exact scrutiny of the taxpayer's activities'.[32]

157 In Westpac Banking Corporation Ltd v Commissioner of Stamp Duties, White J stated that:

Westpac has pointed to a number of English income tax cases concerned to decide whether the taxpayer conducted one business or two.... In Scales v George Thompson & Co Ltd... the taxpayer company carried on the business of under-writing. It also owned a fleet of steamers. Rowlatt J said...:

I cannot conceive two businesses that could be more easily separated than those two. They both have something to do with ships; that is all that can be said about them. One does not depend on the other; they are not interlaced; they do not dovetail into each other, except that the people who are in them know about ships; but the actual conduct of the business shows no dovetailing of the one into the other at all. They might stop the underwriting; it does not affect the ships. They might stop the ships and it does not affect the underwriting. They might carrying on underwriting in a country where there were no ships, except that it would not be commercially convenient; but the two things have nothing whatever to do with one another...

That method of book-keeping does not seem to me to throw any light upon this matter at all. I think the real question is, was there any inter-connection, any interlacing, any interdependence, any unity at all embracing those two businesses; and I should have thought, if it was a question for me, that there was none.[33]

158 In Commissioner of Taxation (Cth) v Marshall & Brougham Pty Ltd, Bowen CJ reviewed whether a business was an 'integral' or 'ordinary' part of the whole business carried on by the taxpayer, rather than a separate enterprise or a separate use of capital assets of its own.[34]

159 Despite the appellant's submission, I find that the farms were not each an integral or ordinary part of a single business for the following reasons:

(a) Farming of the subject land over the relevant period was conducted as an independent operation by Mr Griffith. He had no interest at all in the other two farms and used his own farming machinery and employees.

(b) The cattle at Seaspray Farm were overseen by a single farm hand, Ms Boulton. She had no role at all at the subject land or at Tuppal Station.

(c) Likewise, Mr Bruton and his staff were located at Tuppal Station, and had no role at the subject land or at Seaspray Farm. It is not suggested that any of the employees or machinery at Tuppal Station were ever deployed to the subject land or to Seaspray Farm or that this was ever considered.

(d) Mario, who was the representative of the appellant as common owner, visited each property and approved significant decisions and expenses. However, this practice does not establish that the farming businesses were integrated so as to constitute only one business. The program of visits and approvals is equally consistent with the farms operating as separate businesses.

(e) The three farms were physically remote from each other. A four hour drive was required to go from Melbourne to Tuppal Station, and it was a three and a half hour drive from Melbourne to Seaspray Farm. It was not a situation where integrated operations or regular mutual assistance was likely to be possible.

(f) Each of the farms operated in its own region and locality. A mill was located on the subject land. It was natural for grain produced on the subject land to be milled at that mill, although canola and durum wheat still had to be sold in the open market. Cattle from the Seaspray Farm were sold to local abattoirs or through saleyards in the Gippsland region. Grain and livestock from Tuppal Station were sold locally at Tocumwal or through Elders, the appointed livestock agent.

(g) While there were a few occasions where grain from one farm was used to feed livestock on another, or stock were moved from one farm to another, these were infrequent and isolated incidents in response to drought or unusual conditions, and not a routine or regular occurrence. They did not indicate integration or interconnectedness between the three separate farms in their ordinary operations and activities.

(h) Mario stated that he had always viewed the three farms as one enterprise and that they supported each other financially, with all income going into the one bank account from which all expenses were paid. However, he could not be cross-examined on his statement that he viewed the farms as one enterprise, and not much weight can be given to this aspect of his evidence.[35]

(i) While I accept Mario's evidence that there was a single bank account for all farming enterprises and that all farming income and expenses passed through the one account, this does not establish that the three farming businesses operated in an integrated manner. It is equally consistent with the common owner of three separate businesses using the combined cash flow from all businesses to meet expenses and support new investment.

160 In conclusion, I find that the farms on the subject land, at Seaspray Farm and at Tuppal Station were remote from each other and operated as separate farms and businesses of differing natures in their own localities under their own managerial arrangements. Although Mario oversaw each one, they were not integrated, connected or interdependent. Mutual assistance was sporadic and provided only in response to drought or unusual circumstances.

161 In these circumstances, it is clear that the 'type' of primary production carried on on the subject land was the cultivation of crops for sale. The facts do not establish that there was one single integrated business of primary production carried on by the appellant, and the legislative purpose underlying the exemption militates against applying a strained meaning to the word 'type' so as to find that a 'type' of business including grain, cattle and sheep farming was carried on on the subject land.

(a) the principal business of the appellant was the realisation of residential lots in the Jubilee project for sale to purchasers; or

(b) alternatively, the businesses conducted by the appellant were so many and varied that no one of them could be said to be its principal business.

(a) its principal business comprised its primary production activities at the subject land, Tuppal Station and Seaspray Farm, which consisted of farming grain, cattle and sheep;

(b) the requirement in s 67(2)(d)(i) is intended to exclude from the exemption a case where the type of primary production that is carried on on the subject land is not one that occurs as part of the principal business of the trust; and

(c) the Bozzo Family Trust is not the type of entity that was intended to be excluded from the exemption.

Was residential subdivision a business of the appellant over the relevant period?

164 The appellant contended that it did not carry on a business of property development. Instead, it submitted that the development of the Jubilee project was undertaken by the developer acting as manager of the Jubilee Development Partnership, and that the appellant did no more than realise in an enterprising way part of the subject land purchased twenty years earlier. The appellant relied on a number of authorities to support its position.

165 In Statham v Federal Commissioner of Taxation, a farm held for the purpose of raising beef cattle was sold by way of a staged residential subdivision involving 105 lots.[36] The owners objected to the imposition of income tax on the proceeds of sale.

166 The Full Court of the Federal Court considered various authorities regarding whether the realisation of an asset will be on revenue or capital account, and noted that:

(a) it was well established that the mere realisation of an asset at a profit does not necessarily render the profit taxable;

(b) the profit must arise from the carrying on of a business or a profit-making undertaking or scheme; and

(c) the mere magnitude of the realisation does not convert it into such a business, undertaking or scheme, but is relevant in determining whether the facts establish a mere realisation of a capital asset or a business or profit-making undertaking or scheme.[37]

167 In concluding on the facts that the disposition of the subdivided land was the mere realisation of a capital asset and not the carrying on of a business of land development or an undertaking or scheme in which an essential element was the purpose of profit-making, the factors relied on by the Court included:

(a) the owners were unable to sell the land as one parcel;

(b) the owners did not borrow money, although they gave a bank guarantee to the council;

(c) only very limited clearing and earthworks were involved;

(d) the council performed all subdivision works such as roadworks, kerbing, electricity and sewerage works;

(e) the owners did not erect buildings on the land or even a site office;

(f) the owners had no business organisation, manager, office, secretary or letterhead;

(g) the owners did not advertise the land for sale;

(h) the owners did not engage any contractors, although they did obtain some professional advice;

(i) the books were maintained by one of the owners; and

(j) the land was sold simply by listing it with local real estate agents.[38]

168 In Scottish Australian Mining Company Limited v Federal Commissioner of Taxation, a coal mining company ceased operations on certain land, and subdivided and sold the land for residential and other purposes.[39] Williams J observed that the company had purchased the land for coal mining operations many years earlier, and was taking the necessary steps to realise the land to the best advantage. The building of roads and the use of part of the land for parks and other amenities did not convert the transaction from one of realisation of a capital asset into a business.

169 The High Court reached the opposite conclusion in Federal Commissioner of Taxation v Whitfords Beach Pty Ltd.[40] Gibbs CJ held that the test was whether what was done was merely a realisation of the taxpayer's asset, or something done in the carrying on or carrying out of a business.[41] In that case, the taxpayer company had been transformed from a company which had held land for the domestic purposes of its shareholders into a company whose purpose was to engage in a commercial venture with a view to profit. The extensive work of development and subdivision was more than a mere realisation of an existing asset, and was work done in the course of a business venture.[42]

170 Mason J distinguished between the subdivision of an area of land into several allotments which might be the realisation of an asset in an enterprising way, and a subdivision on a massive scale involving the laying out and construction of roads, and the provision of parklands, services and other improvements. This amounted to the development and improvement of the land to such a marked degree that it was impossible to say that it was the mere realisation of an asset.[43]

171 Wilson J held that the change in the taxpayer's constitution and the contracts into which it entered signified the launching of a business of developing, subdividing and selling the land. The character of the land underwent significant change, and a great deal was done so that the land could be sold in residential subdivision.[44]

172 In Puzey v Commissioner of Taxation, the Full Court of the Federal Court said:

In deciding whether or not a business is carried on, courts have pointed to what have been called in the United Kingdom the "badges of trade", indicia which, while no one of them will be determinative of whether a business is carried on, collectively will demonstrate a business. These include the profit motive (although a non-profit company may still carry on a business), acting in a business-like way (although many businesses may be found which operate in a non-business like way), the keeping of books of account and records (although the fact that there are none will not necessitate the conclusion that a business is not carried on), and repetition (although a fixed term project may still be a business).[45]

173 Likewise, in Ferguson v Federal Commissioner of Taxation, Bowen CJ and Franki J of the same Court held:

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 a 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.[46]

174 In Mould, the Court of Appeal was required to determine whether the leasing of residential properties constituted a business for the purposes of s 67(2)(c)(i) of the Act.[47] Warren CJ considered a number of authorities, and said:

In determining the meaning of 'business' in that provision, the Court must consider the context of the provision with the object of interpreting it in a manner consistent with the language and purpose of the statute as a whole. The ordinary and natural meaning of the word 'business' in its statutory context must necessarily be taken into account.

The ability of the word 'business' to assume different meanings in different contexts has been recognised by the High Court. In Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation, Mason CJ, Gaudron and McHugh JJ observed that '[o]f all words, the word "business" is notorious for taking its colour and content from its surroundings'.

In NT Power Generation Pty Ltd v Power and Water Authority, McHugh ACJ, Gummow, Callinan and Heydon JJ remarked:

While the word "business" in any particular context takes its meaning from that context, normally it is a "wide and general" word.

Both the appellant and the Commissioner accepted that in Spriggs the High Court set out the indicia of a 'business' in the ordinary sense, and that those indicia inform the meaning of 'business' as it is used in s 67 of the [Act]. The High Court's statement bears repeating:

The existence of a business is a matter of fact and degree. It will depend on a number of indicia, which must be considered in combination and as a whole. No one factor is necessarily determinative. Relevant factors include, but are not limited to, the existence of a profit-making purpose, the scale of the activities, the commercial character of the transactions, and whether the activities are systematic and organised, often described as whether the activities are carried out in a business-like manner.[48]

175 Her Honour held that the word 'business' in s 67 of the Act bears its ordinary, general meaning, and that determining the existence of a business requires consideration of the Spriggs criteria.[49]

176 In the present case, it is plain that the residential subdivision of the subject land was a business of the appellant over the relevant period. It was a comprehensive and planned large-scale enterprise for profit in a competitive market that went well beyond the mere realisation of a capital asset in an enterprising way.

177 The first relevant factor is the nature and magnitude of the project:

(a) the development of the Jubilee project was residential subdivision on a massive scale involving the laying out and construction of roads, the provision of parklands, services and other improvements. The PSP proposed 5,827 dwellings, and the future population of the area was estimated at 16,315 residents, mainly on the subject land;

(b) the Mill Quarter was a major subdivision into 985 residential allotments, being the first part of the Jubilee project to be subdivided;

(c) the subject land was not surplus to the appellant's farming requirements - rather, development of the Jubilee project was a higher and better use, likely to generate much higher profits;

(d) the expected development costs of the Mill Quarter were very substantial, and estimated in the project feasibility to exceed $160 million (with subdivision costs and above ground construction costs of about $69 million);

(e) borrowings were considerable and estimated to peak above $27 million in October 2015;

(f) subdivisional construction was to be undertaken by and at the expense of the developer and not the council or other authorities; and

(g) residential lot sales were continuous, frequent and repetitive in nature.

178 A second factor is the profit making intention underlying the development of the Jubilee project, as evidenced by:

(a) the project feasibility which anticipated a likely profit for the Mill Quarter exceeding $11.3 million, on sales revenue of over $189 million;

(b) the formation of a new partnership involving entities associated with Mario, Peter, Teresa, and Claudia, who were the directors of the appellant and specified beneficiaries of the Bozzo Family Trust;

(c) the incorporation of the developer to undertake the development of the Jubilee project and to protect the other assets of the Bozzo Family Trust from risk as far as possible;

(d) the execution and implementation of the development agreement to subdivide and sell the Mill Quarter; and

(e) the payment of the LRA to the appellant for each allotment sold supplemented by the LRA premium.

179 Moreover, the development of the Jubilee project and the Mill Quarter was avowedly competitive and undertaken within the broader Melbourne metropolitan residential lot market:

(a) the notification of exclusive dealing in May 2015 stated that the development was one of several existing or proposed residential developments in the area. It stated that there were numerous choices available to potential purchasers of residential property, with each development offering different prices, features and amenities;

(b) the notification described the real estate market as highly competitive;

(c) the valuer noted in the second valuation report that there were four large master planned estates in the general locality of the Jubilee project providing long term competition; and

(d) the residential allotments were treated as trading stock of the appellant for a number of years.

180 The organisation and arrangements made by the appellant show that a business was intended:

(a) the Jubilee name and logo were registered as a trademark;

(b) property development on the Jubilee project was recognised as a business unit of the Bozzo Group, with Peter as the director mainly responsible for the development businesses;

(c) reports concerning the Jubilee project were routinely presented at Bozzo Group board meetings;

(d) an experienced and qualified project director was employed as the project director and manager for the Jubilee project and other development projects. He was not involved in farming;

(e) planning consultants were retained to liaise with the authorities prior to the gazettal of the PSP;

(f) the project director gave advice to the appellant and its directors as to the preferred corporate structure for the Jubilee project, which was accepted and adopted; and

(g) a detailed project feasibility was undertaken to confirm the profitability of the Mill Quarter subdivision.

181 The Jubilee project involved an intensive marketing strategy, with:

(a) a sales office on-site to generate sales with prospective clients;

(c) estimated sales commission to be paid to estate agents exceeding $6.2 million for the Mill Quarter; and

(d) estimated sales and marketing costs expected to exceed $5.1 million for the Mill Quarter.

182 The appointment of a developer under the development agreement did not mean that the appellant was not carrying on the business of residential subdivision, as:

(a) the appellant received the LRA for each and every allotment sold;

(b) the specified beneficiaries and directors of the appellant received the profits of development after payment of borrowings and taxes through their own entities and trust structures;

(c) the developer acted as the attorney and agent of the appellant in important respects, including:

(1) making and submitting applications for permits and approvals;

(4) receiving and banking proceeds into the project bank account;

(d) the appellant had significant obligations under the development agreement, including:

(1) to co-operate with and actively support the developer; and

(2) to execute documents and do all things the developer reasonably required or requested.

183 As to the relationship between principal and agent, the High Court said in Petersen v Moloney:

The legal conception of agency is expressed in the maxim "Qui facit per alium facit per se", and an "agent" is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal, and third parties.[50]

184 A similar statement was made by the High Court in International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co.[51]

185 In Northern Land Council v Quall, Nettle and Edelman JJ said:

In its most precise description, the concept of "agency" should be used "to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties". As suggested by the maxim qui facit per alium facit per se the acts of an agent are, in law, attributed to the principal. A company director or chief executive who has authority to bind the company in its legal relations with third parties is an agent in this strict sense. Since a company "'cannot act in its own person for it has no person'... it must of necessity act by directors, managers, or other agents".[52]

186 In Howland-Rose v Commissioner of Taxation, Conti J described as an established principle that a person may carry on a business for income tax purposes, notwithstanding that management of the business has been delegated to an agent.[53] Here, the developer was the agent of Lotus Oaks in important respects, including signing contracts and receiving proceeds.

187 Finally, the residential subdivision of land was not new to the appellant. It had previous experience, having subdivided and sold its Keysborough land. It also had other projects underway.

When did the appellant commence its residential subdivision business?

188 The decided cases distinguish between activities constituting the carrying on of a business, and activity which is preliminary to the commencement of a business. It is the element of commitment which distinguishes one from the other.

189 In Esso Australia Resources Ltd v Commissioner of Taxation, the Full Court of the Federal Court said:

Intent of the taxpayer alone in respect of the expenditure is not sufficient to establish deductibility under s 51(1) for outgoings or expenditures that are not themselves productive of income, but are intended to lead in the future to the production of income... In cases where it is necessary to discern between activity constituting the carrying on of a business and activity which is preliminary to the carrying on or recommencement of a business it is the element of commitment that establishes the requisite nexus between the expenditure claimed to be deductible and the business said to be carried on for the purpose of gaining or producing assessable income...

In Steele v Federal Commissioner of Taxation... Burchett and Ryan JJ referred to these cases for the proposition that a sufficient connection, for the purposes of s 51(1), between an outlay and the prospect of income requires a degree of commitment on the part of the taxpayer to the relevant income producing activity. The existence of the requisite nexus in a particular case is a question of fact and of degree...

Commitment was considered... by Menhennitt J in Softwood, a case relating to expenses incurred in evaluating whether a paper mill should be established. His Honour, in rejecting the claim, held... that the activities in respect of which the expenses were incurred were "entirely preliminary and directed to deciding whether or not an undertaking would be established to produce assessable income". In reaching this conclusion, his Honour emphasised that "no one was committed, at all, to go on with the project..."[54]

190 In Steele v Commissioner of Taxation, Burchett and Ryan JJ concluded that a taxpayer had the requisite commitment in respect of the acquisition of grazing land for redevelopment by constructing a motel and town house complex, because:

...she obtained the Council's assent to a change of zoning, employed architects and engineers, entered into joint venture arrangements, and pursued the project with some tenacity until litigation with her collaborator put a complete stop to it. She demonstrated her "commitment" from the beginning by committing $1,000,000 to the venture plus the time, energy and considerable expense of the subsequent architectural and engineering work, and negotiations with the local Council, sewerage authority and prospective joint venturers and financiers. The matters, of course, raise questions of fact: but it appears to us there is much to be said for the proposition that the Tribunal's own findings of fact, set out in the various reasons in telling detail, suggest it was not open to the Tribunal to find in this case a relevant lack of commitment.[55]

191 Softwood Pulp & Paper Ltd v Federal Commissioner of Taxation is a Victorian decision to the same effect.[56] Menhennitt J found on the facts of that case that:

The critical point is that the company had not reached a stage remotely near the carrying on of a business. Even assuming that at some stage prior to the mill turning, the company could be said to be carrying on a business, in this case the company had not even approached the stage of making a decision about carrying on a business. All that had happened had been that certain investigations had been made to decide whether or not the business was feasible, and whether or not it was economically viable on a competitive basis, but nothing had been done which could be said to be carrying on a business or anything associated with or incidental to the actual carrying on of a business. Everything which was done was concerned with making a decision whether or not steps should be taken to set up a business, but no decision on even that matter had been reached.[57]

192 In Puzey, Hill and Carr JJ concluded that the taxpayer had committed himself to a business with the first step of entering into relevant agreements and in so doing had commenced a business.[58]

193 In the present case, Mr Smith was retained as project director of all property developments in February 2013. The developer was registered on 18 March 2014. The project feasibility shows a project commencement date of June 2014. The development agreement was made on 24 May 2015, and it defines the commencement date as the date of the agreement. However, the variation deed substituted a commencement date of 19 August 2014. The Jubilee project was soft launched on 25 October 2014.

194 In my view, it is reasonable to take 19 August 2014 as the commencement of the Jubilee project, as the appellant and the developer agreed in the variation deed. The variation deed was a considered modification to the development agreement, and was prepared by legal advisers on the instructions of Mr Smith. There is no competing evidence.

195 What is important for present purposes is that the appellant had commenced the subdivision of the Mill Quarter at some time before 31 December 2014. By that time, the appellant had sold about 26 lots to members of the public and 28 lots to builders for the display village. It had completed all works and matters preliminary to these sales, which were from Stages 1 and 2 of the Mill Quarter subdivision.

196 If the subject land is to be exempt land, the appellant must show under s 67(2)(d)(i) of the Act that its principal business was primary production of the type carried on on the subject land. The type of primary production carried on on the subject land over the relevant period, and during a period not overlong and not overshort within which the 31 December preceding each relevant year falls, was the cultivation of crops for sale.

197 At the relevant times, the cultivation of crops was also carried on at Tuppal Station. It was not carried on at Seaspray Farm. Cattle and sheep farming, and the production of wool, were also carried on at Tuppal Station. Only cattle farming was conducted at Seaspray Farm.

198 In 2014, a larger area of land at Tuppal Station was used for grazing livestock than for cropping. In 2015, the areas used for those purposes were approximately equal, while in 2016 a greater area of land at Tuppal Station was used for cropping than for grazing livestock.

199 In addition to these activities, the appellant also owned a stockfeed mill at Leongatha until 23 December 2014 and a grain mill on the subject land, both of which were operated by Riverbank Milling. It had a vineyard at Tuppal Station. During the 2013 to 2016 financial years, the appellant also co-owned the Bridgewater Poultry Farm with parties external to the Bozzo Group.

200 By 31 December 2014, the subdivision of the Mill Quarter was a burgeoning business. By 31 December 2016, it was an established and successful business. 157 settlements had been completed, while 64 lots were still for sale or yet to settle. The appellant received income from the sale of lots in the Mill Quarter exceeding $87,820 in 2016 and over $3,050,000 in 2017.

201 The financial statements and accounts of the appellant provide only limited information. In the three financial years ending in 2015 to 2017, the appellant received income of about $3,903,957 from grain, $891,432 from cattle, and $1,069,479 from sheep and wool. It received about $50,000 from the sale of timber.

202 Operating expenses for all primary production activities over the same three financial years totalled $7,926,494. The state of the accounts does not permit the apportionment of these expenses over the different primary production activities. Operating expenses significantly exceeded the income derived from the primary production activities over the three year period. By contrast, income from lot sales received by the appellant was about $3,138,000. The sale of lots was a profitable activity for the appellant, as the costs and expenses of land development, borrowing and taxes were borne by the developer. The accounts of the developer showing the total income received and the actual development and financing costs for the Mill Quarter were not provided by the appellant.

203 The Macquarie Dictionary gives the following definitions of 'principal' when used as an adjective:

1. first or highest in rank, importance, value, etc.; chief; foremost.

2. of the nature of principal, or a capital sum.[59]

204 The Shorter Oxford English Dictionary gives the following relevant definitions for 'principal' as an adjective:

1. First or highest in rank; most important, foremost; greatest. ...

2. Belonging to the highest group or first rank; prominent, leading. ...[60]

205 It was not suggested by the appellant or the Commissioner that the word 'principal' was used in anything other than its ordinary English meaning in s 67(2)(d). I accept that the ordinary adjectival meaning of 'principal' should be applied to s 67(2)(d).

206 Over the relevant period, and during a period not overlong and not overshort within which the 31 December preceding each relevant year falls, the appellant conducted the business of cultivating crops for sale, but it also conducted major businesses of residential subdivision, animal husbandry through the breeding and fattening of cattle and sheep, and the sale of wool. Each of these businesses were significant businesses of the appellant. By 31 December 2014, residential subdivision was a rapidly growing and profitable business of the appellant. It is very likely that it was, by that time, the appellant's most important business. It remained the appellant's most important and profitable business throughout the relevant period.

207 In the circumstances that I have described, I am not satisfied on the evidence available that the appellant has discharged its onus of proof, or shown on the balance of probabilities, that primary production of the type carried on on the subject land (i.e. the cultivation of crops for sale) was the principal business of the Bozzo Family Trust at the relevant times.

Was Mario Bozzo normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the subject land?

208 The final question is whether the appellant has shown that Mario satisfied the requirement in s 67(2)(d)(iii)(A) of the Act, being whether he was at the relevant times a natural person 'who is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the [subject] land'.

209 The meaning of this expression was considered in Damon v Commissioner of Land Tax (Vic), in which Member Gibson considered that the phrase connotes 'regular participation in the business for a considerable part of the time of the owner'.[61] The expression was also considered by Kennedy J in Annat Pty Ltd v Commissioner of State Revenue, where her Honour considered that Member Gibson's description was sufficient and that no further precision was appropriate where much must depend on the particular context.[62] I will proceed on the same basis.

210 Mario was the director of about 20 private companies, and was involved with numerous Bozzo Group entities, including the developer. The developer's activities and works were very extensive. Undoubtedly there were ongoing discussions and conferences with co-director, professional advisers, Mr Smith and others. Even with the assistance of co-directors and advisers, it was inevitable that he would spend a significant amount of time preparing for and participating in meetings and other discussions. Mario discussed the property development activities of the Bozzo Group with Peter and others, and would occasionally drive around the development areas to see that the Jubilee project was being delivered in an appropriate manner. The evidence is that he was always well read, and took an active interest in the affairs of the Bozzo Group. He was the respected patriarch of the family whose advice and guidance were taken seriously by all.

211 Mario appears not to have kept a diary, or at least none has been produced. Apart from the brief travel log, no daily or digital record of his activities appears to exist. The Bozzo Group board papers for the monthly directors meetings over the relevant period have not been produced, and it is not possible to gain any real insight from the evidence as to the main issues facing the Bozzo Group which would have attracted Mario's attention and involvement over the relevant period. One board agenda, that of 11 December 2019, was produced and shows that after the initial CEO update, the first and longest agenda item related to the residential subdivision of the subject land, with farming being the shortest item on the agenda towards the end of the meeting.

212 In October 2014, the Bozzo Group and the appellant soft launched the Jubilee project, and commenced the Mill Quarter residential subdivision. Very substantial funding was required and obtained for the developer, securities were negotiated and signed, legal documentation was completed, and large scale subdivisional civil works were contracted and commenced. Even with the assistance of Peter and Mr Smith and the advice of professional advisers, it was inevitable that Mario was significantly engaged in the process and concerned to minimise the costs and risks involved in such a large project. It is absurd to suggest that he was disengaged with a project involving borrowing and spending many millions of dollars, given his practice of personally approving every farm expense exceeding $1,000, and even then usually after a discussion with the appropriate manager. It is not credible that he was disinterested in the largest investment that the Bozzo Group had ever made.

213 Given the scale and significance of the Mill Quarter project, it was inevitable that over the relevant period Mario received regular reports about lot sales, and engaged with the cost and progress of the Mill Quarter subdivisional works. It is inconceivable to think otherwise. He must also have spent significant time on the other affairs and major projects of the Bozzo Group.

214 I accept that Mario managed his frequent treatments on dialysis so as to be able to attend to his duties. He did regularly visit and oversee farming operations on the different properties of the Bozzo Group. He was keen on farming, particularly cattle grazing following on from his earlier career as a butcher. He did speak with employees and make decisions about the farms.

215 In his 2015 income tax return, Mario described his occupation as 'Farmer/farm overseer - beef cattle'. In his 2016 and 2017 returns, he described his occupation as 'Farmer/farm overseer - grain and livestock'. His returns adopt the corresponding salary and wage occupation codes as published by the ATO for 2015 to 2017. He received a salary for running all of the farms, and appears to have regarded oversight of the cultivation of crops as only part of what he did.

216 The statutory test in s 67(2)(d)(iii)(A) is whether the specified beneficiary is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the subject land - here, the cultivation of crops for sale.

217 Given Mario's directorships and all of his other responsibilities, it is difficult to see how the appellant can satisfy the statutory requirement. While the cultivation of crops for sale was a significant business on which Mario worked, it was only one of the appellant's significant businesses. As I have found, by 31 December 2014, residential subdivision was a burgeoning business which was, or shortly thereafter became, the appellant's most important business.

218 The livestock businesses including the grazing of cattle, the breeding of sheep, and the production of wool were also important primary production businesses carried on by the appellant. There was also the vineyard at Tuppal Station, which occupied a small amount of Mario's time.

219 The evidence does not offer any real insight into the extent to which Mario devoted his time to the business of cultivating crops for sale, as against his duties as a director of about 20 private companies, his responsibilities as a director of the appellant and of the developer for the large scale Jubilee project, and his oversight of all of the other primary production businesses of the appellant. Thus, while it is clear that Mario 'regularly participated' in the business of the cultivation of crops for sale, it has not been established that this was, in the language of Damon, 'for a considerable part' of Mario's time having regard to his time commitments to the other businesses and his director's duties.[63]

220 As a result, I am not satisfied that the appellant has shown on the balance of probabilities that Mario was normally engaged in a substantially full-time capacity in the business of the cultivation of crops for sale.

221 I am not satisfied that the appellant has discharged its onus of proof in relation to the requirements for exemption from land tax set out in ss 67(2)(d)(i) and 67(2)(d)(iii)(A) of the Act in relation to the subject land over the relevant period.

222 The result is that the assessments by the Commissioner for land tax must stand, and the proceeding and appeals must be dismissed.

[1] The appeals were consolidated into one proceeding by an order made on 16 October 2019.

[2] As at 29 June 2016. The parties accepted that this version of the Act contained the relevant provisions as in force throughout the relevant period.

[3] In these reasons, it is convenient to use the first names of members of the Bozzo family. No disrespect is intended by doing so.

[4] The other estates were Manor Lakes, Harpley and Eynesbury.

[5] Stage 1 Lots 110-121, 123-137 and 140 (inclusive) were sold to builders. Stage 2 Lots 232-233, 235, 237-238 and 257 were sold in October 2014. Stage 2 Lots 210, 219, 226, 228, 230-231, 234, 236, 258 and 262 were sold in November 2014. Stage 1 Lots 104-108 (inclusive) and Stage 2 Lots 255-256, 259, 261 and 263 were sold in December 2014.

[10] Longford Investment Pty Ltd v Commissioner of Land Tax (NSW) (1978) 8 ATR 656, 660 (Sheppard J).

[11] Act s 3(1), definition of 'taxable land'.

[12] (1998) 194 CLR 355, 384 [78] (McHugh, Gummow, Kirby and Hayne JJ) (citations omitted).

[13] [2017] HCA 34; (2017) 262 CLR 362, 368 [14] (Kiefel CJ, Nettle and Gordon JJ) (citations omitted).

[14] (1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey and Gummow JJ) (citations omitted).

[15] Victoria, Parliamentary Debates, Legislative Assembly, 11 December 1973, 3366 (Peter Ross-Edwards, Leader of the Country Party).

[16] Ibid 3374-5 (Rupert Hamer, Premier and Treasurer).

[18] [2015] VSCA 285, 57 [172] ('Mould').

[19] Land Tax Act 2005 (Vic) s 67(2)(c)(i) (as at 9 December 2009), later amended by the State Taxation Acts Further Amendment Act 2011 (Vic) s 32(1)(c).

[21] Land Tax Act 2005 (Vic) s 67D, as inserted by State Taxation Acts Further Amendment Act 2019 (Vic) s 25.

[23] State Taxation Acts Further Amendment Bill 2019 (Vic).

[24] Victoria, Parliamentary Debates, Legislative Assembly, 16 October 2019, 3531 (Tim Pallas).

[25] (2016) 103 ATR 385, 389 [18]-[19] (citations omitted) ('CDPV').

[26] Australian Taxation Office, Business Industry Codes 2017 (at March 2017).

[28] Macquarie Dictionary (online at 24 June 2021) 'maintenance' (def 1-3).

[30] Shorter Oxford English Dictionary (6th ed, 2007) 'maintenance' (def 6a).

[32] [2009] HCA 22; (2009) 239 CLR 1, 20 [60] (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ) (citations omitted).

[33] (2003) 55 ATR 50, 67-68 [69] (citation omitted).

[34] (1987) 17 FCR 541, 548 (Jenkinson J agreeing). See also Westfield Ltd v Commissioner of Taxation [1991] FCA 97; (1991) 28 FCR 333, 343 (Hill J, Lockhart and Gummow JJ agreeing).

[35] Re O'Neil [1972] VicRp 35; [1972] VR 327, 333 (Anderson J); Re O'Brien; Ex parte Allchurch [1923] SAStRp 35; [1923] SASR 411 (Murray CJ, Poole and Angas Parsons JJ); Re Baecher [1964] NSWR 293 (McLelland CJ).

[36] (1988) 20 ATR 228.

[39] [1950] HCA 16; (1950) 81 CLR 188.

[40] [1982] HCA 8; (1982) 150 CLR 355.

[45] [2003] FCAFC 197; (2003) 131 FCR 244, 257 [48] (Hill and Carr JJ, French J agreeing) ('Puzey').

[46] [1979] FCA 29; (1979) 37 FLR 310, 314.

[48] Ibid [52]-[55] (citations omitted).

[50] [1951] HCA 57; (1951) 84 CLR 91, 94.

[51] [1958] HCA 16; (1958) 100 CLR 644, 652.

[52] (2020) 383 ALR 378, 398 [82] (citations omitted).

[53] (2002) 118 FCR 61, 125 [101], citing Commissioner of Taxation v Lau [1984] FCA 401; (1984) 6 FCR 202; Commissioner of Taxation v Emmakell Pty Ltd [1989] FCA 34; (1990) 22 FCR 157; Federal Commissioner of Taxation v Brand (1995) 31 ATR 326.

[54] [1998] FCA 851; (1998) 84 FCR 541, 556-7 (Lee, Heerey and Merkel JJ) (citations omitted).

[55] (1997) 73 FCR 330, 336.

[56] (1976) 7 ATR 101.

[59] Macquarie Dictionary (online at 10 June 2021) 'principal' (def 1-2).

[60] Shorter Oxford English Dictionary (6th ed, 2007) 'principal' (def 1-2).

[61] (1985) 17 ATR 278, 281 ('Damon').

[62] [2020] VSC 108 [149].