Banting (as Executor of the Estate of the Late K C Banting) v Chief Commissioner of State Revenue

The land the subject of this application

1. As there appears to have been some misunderstanding as to the land which is subject to land tax, it is useful to briefly set out the registered Lots that were owned by the applicant's father and those which the applicant concedes are subject to land tax and those for which he claims to be exempt under s 10AA(3)(b) of the LTA Act: 1. Lot 20 in DP755714 - this was the largest Lot of land and 177.25 hectares in size. It was divided and fenced into 5 paddocks and used for grazing cattle. Located on this land was an unused sawmill and cattle yards. 2. Lot 1, Lot 2 and Lot 3 in DP1148316: 1. Lot 1 was on the northern side of Kyogle Road with the Tweed River running along its upper boundary. The Lot was 2.94 hectares in size and used to graze cattle; 2. Lot 2 was also on the northern side of Kyogle Road and 85.5 hectares in size. The Lot was divided into 4 fenced paddocks where cattle grazed and the homestead of the applicant's father was located; 3. Lot 3 was made up of 3 Parts: 1. Part 1 was very small in size. It was located on the northern side of Kyogle Road; 2. Part 2 was on the southern side of Kyogle Road and 4.68 hectares in size; and 3. Part 3 was 2.42 hectares in size and was also on the northern side of Kyogle Road. Located on Part 3 was a caravan park, a general store and 2 amenity blocks. 1. Lot 1 in DP605170 - this was a small area of land where cattle use to be dipped (decommissioned dip site).
2. On 12 March 2014, the applicant sold Lot 1 in DP 605170 (the decommissioned dip site).
3. On 28 November 2014, the applicant sold Lot 1 in DP 1148316. It was sold to Peter Francis Smith.
4. On 4 July 2015, the applicant sold Lot 20 in DP 755714 and Lot 2 in DP1148316.
5. On 7 June 2016, the applicant sold Lot 3 in DP1148316 (i.e. the caravan park).
6. The applicant concedes that the land on which the caravan park was located (Part 3 of Lot 3 in DP 1148316) was not exempt under s 10AA of the LTM Act. The applicant has also conceded that the land on which the decommissioned dip site was located was also not exempt under s 10AA for the purpose of the 2014 land tax year.
7. However, he does contend that the s 10AA(3)(b) exemption does apply to the remaining Lots (i.e. Lot 1 and Lot 2 in DP1148316, Part 1 and Part 2 of Lot 3 in DP1148316 and Lot 20 in DP755714), as this was the farming land on which cattle had grazed and continued to graze during the relevant land tax years.
8. As I have noted below, the respondent's assessment decision was based on Part 3 of Lot 3 in DP1148316 having been valued as a separate parcel of land to that of Part 1 and Part 2 of Lot 3. These parts (i.e. Part 1 and Part 2 of Lot 3), were valued as part of another separate parcel of land that included Lot 20 in DP755714 and Lots 1 and 2 of DP1148316).

Relevant legislation

1. Land tax is levied under s 7 of the LTM Act. That section provides: "7 Land tax on taxable value of land Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act)." (italics added)
2. Section 8 provides that land tax is to be charged on land owned at midnight on 31 December immediately preceding the year for which it is levied. A "year" is defined in that section to mean the period of 12 months commencing on 1 January.
3. The word "owned" is defined in s 3(1) of the LTM Act to have the same meaning as that of an "owner", which is defined in the same section to relevantly mean: "Owner includes: (a) in relation to land, every person who jointly or severally, whether at law or in equity: (i) is entitled to the land for any estate of freehold in possession, or (ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise, (b) (Repealed) (c) …, and (d) a person who, by virtue of this Act, is deemed to be the owner."
4. In this application, there is no dispute that the applicant, in his capacity as Executor of his father's estate, was the owner of the abovementioned rural land that was the subject of the respondent's Assessment.
5. Section 9(4) of the LTM Act provides that the "land value of land", in relation to a "land tax year" is the value of the land entered in the Register of Land Values as at 1 July in the previous year. The word "Register" is defined in s 3(1) of the LTM Act to mean "the Register of Land Values kept under section 14CC of the Valuation of Land Act 1916."
6. Pursuant to s 14A of the Valuation of Land Act 1916 (NSW) (VL Act), the Valuer-General is required to ascertain the land value of each parcel of land in New South Wales and enter that value into the Register of Land Values. In undertaking his/her task the Valuer-General can separately value different parts of a parcel of land and the VL Act applies equally to each part as if it were a separate parcel. Under s 14CC the Valuer-General is also required keep a record the following information in regard to each parcel of land valued; the name of the owner, the name of the occupant of the land, the title of the land, the location or description of the land and the area of the land.
7. Each parcel of land valued by the Valuer-General and recorded on the Register of Land Values is given a Property Number (i.e. a property identification number).
8. The term 'tax year" and "land tax year" is defined in s 3(1) of the LTM Act to mean a period of 12 months starting on 1 January for which land tax is leviable and payable.
9. As I have noted, in order for the primary production exemption in s 10AA(3)(b) of the LTM Act to apply, an applicant/tax payer must establish that the "dominant" use of the land in question was for the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce. The word "dominant" is not defined in the Act and should be given its ordinary meaning. As pointed out by Gzell J In Leda Manorsted v Chief Commissioner of State Revenue [2010] NSWSC 867, at [69] to [70], Gzell J, considered the meaning of the word and its application in the LTM Act as follows: "69 Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use. 70 That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts. 71 In Saville v Commissioner of Land Tax (1980) 12 ATR 7, Roden J was concerned with whether land was used primarily for the maintenance of animals thereon under a former provision in the Land Tax Management Act. The primary use test was not unlike the dominant use test in the present legislation. His Honour said at 10: "I am of the view that, for any use of the land to justify the statement that the land is used primarily for that purpose, it is necessary not only that that use prevail over any competing use but also that it be sufficiently substantial to prevail over the proposition that the land is primarily to be regarded as unused land.""
10. Hence, where different parts of the whole parcel of land is used for different purposes, the primary production use must be weighed against the other uses of the land in order to determine which is the dominant by considering the parcel as a whole: Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378 at [37]-[38]. And as pointed out by Gzell J, in Leda Manorstead (supra), where the primary production activity on a parcel of land is conducted only on part of the land and the remainder of the land is unused, the question will be whether the primary production activity is sufficiently substantial or intensive to make a finding that the predominant use is primary production and not that the land is predominantly unused.

Material before the Tribunal

1. The applicant relied on the following material: 1. a statutory declaration he made, dated 18 September 2017 and a further one page statutory declaration he made that day which contained two short amendments to his earlier statutory declaration; 2. a further statutory declaration he made, dated 10 November 2017. Annexed to that statutory declaration were copies of 4 Cadestral Record Enquiry Reports marked "A" to "D"; 3. a statutory declaration of Peter Warren Wade, dated 14 July 2017; and 4. a statutory declaration of Peter Francis Smith, dated 14 July 2017;
2. The respondent relied on: 1. the documents filed pursuant to s 58 of the ADR Act; and 2. an affidavit, sworn by Alison Bell, solicitor for the respondent. and dated 27 October 2017.
3. The applicant gave oral evidence at the hearing and he was cross-examined by counsel for the respondent. When giving evidence, the applicant marked a further copy of annexure "A" to his further statutory declaration of 10 November 2017. This marked copy was tendered into evidence as Exhibit A6.
4. During the course of the hearing, the respondent also tendered into evidence documents produced by the North Coast Local Land Service, on 4 October 2017, pursuant to a summons issued by the Tribunal, at the request of the respondent. These documents were marked Exhibit R3.

The respondent's Assessment

1. As explained above, subject to land that is exempt from taxation, land tax is levied on the "value" of "each parcel of land", as determined by the Valuer-General and recorded in the Register of Land Values.
2. For the purpose of this application, for the 2014 and 2015 land tax years, the respondent relied on the land values of the Valuer-General, as recorded in the Register of Land Values, in regard to the following parcels of land with the following property identification numbers (PIDs): 1. 2014 tax year: 1. PID 3700234 - This PID was made up of Part 3 of Lot 3 DP 1148316 (the caravan park); 2. PID 3700235 - This PID was made up of Lot 20 DP755714, Lot 1 in DP605170, Lot 1 and Lot 2 in DP1148316 and Parts 1 and 2 of Lot 3 DP 1148316. 1. 2015 tax year: 1. same as (a) above; 2. PID 3761204 - This PID was made up of the same Lots as (b) above, with Lot 1 in DP605170 being removed as that Lot had been transferred on 12 March 2014.
3. There is no dispute about the accuracy of the PIDs, the title descriptions of the land falling within the parcel of land of each PID and the value of the parcel of land in question. As I have already mentioned, the applicant does not dispute the respondent's assessment notice in so far as it relates to PID 3700234 - Part 3 of Lot 3 DP 1148316 (the caravan park).
4. The only matters in issue are the respondent's assessment notice in regard to PID 3700235 and PID 3761204.

The applicant's case

1. The applicant's evidence was that his parents purchased the Property in or around 1963. From about 1965 onwards, the applicant's father raised beef cattle on the Property. The applicant explained that this involved both breeding, fattening and selling the cattle. He said his father would regularly sell his cattle at the Murwillumbah Sale Yards and those that were sold would be replaced by breeding, as at any one time there would be three to four bulls in the herd.
2. The applicant explained that his mother became ill in 2009 and increasingly became dependent on his father. He said that he visited the Property regularly to assist his father during this time and that his mother died 2011. He said he and his father spoke about how many head of cattle he had on the Property at that time. He said his father told him he had about 200 head of cattle.
3. The applicant said that after his mother died, his father continued to sell and increase the size of his herd of cattle. However, the number of cattle he had would occasionally drop due to theft, which had become a problem. Cattle numbers also dropped because cattle were lost or died because of intestinal worms.
4. He said, that to the best of his recollection, there were approximately 70 cattle on the Property when his father died, yet the Annual Return of Land and Stock that his father had prepared and lodged in August 2013, stated that the number of beef cattle on his Property, as at 30 June 2013, was 45.
5. The applicant explained that he had given some thought to selling the cattle after his father died. However, his three siblings did not want to sell as the cattle were an asset. In his oral evidence the applicant explained that the cattle were considered as an asset as they would eat the grass. Consequently, he did not sell and he, together with his brothers-in-law, kept the cattle and checked on them regularly. He said he would attend the Property every couple of months and his brothers-in law would go in between his visits. He explained that the cattle sustained themselves through grazing and in the winter months he and his brothers-in-law would supplement their diet with molasses and salt blocks. He also said that while there were bulls on the property there was no breeding program in place.
6. Attached to the applicant's statutory declaration was a copy of the Annual Return of Land and Stock on the Property as at 30 June 2014. The applicant completed the Return and stated that there were 75 cattle on the Property at that time. In his oral evidence the applicant explained that he obtained the number of cattle from a head count he had done while driving around the Property.
7. Attached to the applicant's statutory declaration were a number of Tax Returns, Rate Notices, and a tax invoice for stock ID renewal, which supported his evidence that there were costs incurred in maintaining the cattle. In cross-examination the applicant confirmed that he had not sold any cattle during the relevant land tax years and that his main intention during this period was to sell the Property together with any cattle that remained on the Property. It was conceded that the last sales of any cattle from the Property had occurred in 2009.
8. As I have mentioned above, Lot 20 and Part 2 of Lot 3 was sold in June 2015 and it was sold with the cattle that were on the Property: see the statutory declaration, Peter Warren Wade, the Principal of Elders Real Estate in Murwillumbah. However, as explained by Mr Wade, the cattle were not specifically referred to in the contract of sale. Mr Wade did not give any evidence about how many cattle were left on the Property or where they were located.
9. In his oral evidence the applicant said that the land comprising Lot 20, Lot 1, Lot 2 and Parts 1 and 2 of Lot 3 was grazing land and there were no other uses for that land. In cross-examination, the applicant acknowledged that about half of the land in Lot 20 and Lot 2 was heavily timbered. The applicant also explained that the cattle were divided into two equal sized mobs - one mob was left to graze in one of the paddocks on Lot 20 and the other mob was left to graze one of the paddocks in Lot 2. The statutory declaration of Peter Francis Smith supports the evidence of the applicant in regard to Lot 2. Mr Smith purchased Lot 1 in late 2014 and he gave evidence of cattle from Lot 2 having escaped onto his land.
10. In summary, the applicant contends that he has discharged his onus in that his evidence establishes, on the balance of probabilities, that the relevant Lots were used for primary production in accordance with s 10AA(3)(b) of the LTM Act. In this regard he points to his evidence that with the help of his brothers-in-law he retained and maintained the cattle that were on the land at the time of his father's death. They grazed on the land, their numbers grew through natural re-production and also declined due to theft and death from disease and they were sold together with the land.
11. He submitted that as there was no other use of these Lots during the 2014 and 2015 land tax years, primary production was the dominant use.
12. The applicant also pointed out that in May 2016, the respondent reassessed its Assessment Notice for the 2012 and 2013 land tax years and determined the land was exempt under s 10AA of the LTM Act. It was submitted that this reassessment was consistent with the use of the land in the following years (i.e. 2014 and 2015).

The respondent's case

1. The respondent accepted that the applicant was a credible witness and accepted his evidence that cattle were being maintained on the land in question. However, the respondent went on to contend that the applicant had failed to discharge his onus. In this regard, it was contended that there was no objective evidence that the cattle were maintained for a purpose falling within s 10AA(3)(b) of the LTM Act.
2. It was submitted that as the number of cattle was limited and the fact that only 2 out of ten paddocks was used at any one time this was not sufficient to establish the prescribed dominant use. In this regard there was no evidence of the cattle being maintained for sale during the relevant period. The fact that the exemption was given for the 2012 and 2013 land tax years did not mean that the exemption applied subsequently.
3. The respondent also submitted that on its proper construction, the words "their natural increase" in s 10AA(3)(b) did not mean that the dominant use could include the maintenance of the natural increase of the animals on the land during the relevant land tax year. Instead, the words in the context of that section the words "their natural increase" should be construed to mean the maintenance of the animals (i.e. the cattle) for the purpose of selling those animals (cattle) or their offspring (calves) during the relevant land tax year.

Consideration and findings

1. As noted by the respondent, in the context of the primary production exemption in s 10AA of the LTM Act there is no mechanism to separately value a non-exempt portion of a single parcel of land valued by the Valuer-General. As a consequence, the single parcel of land must be considered as a whole even if different parts are used for different purposes. Practically this means that where the Register of Land Values identifies a parcel of land with its own property identification number in a given land tax year, that parcel of land is to be considered as a whole even though it is made up of several registered Lots or Pats of registered Lots.
2. Accordingly, for the purpose of this application, the following parcels of land must be considered as a whole: 1. For the 2014 land tax year - PID 3700235 - Lot 20 in DP755714, Lot 1 in DP605170, Lot 1 and Lot 2 in DP1148316 and Parts 1 and 2 of Lot 3 DP 1148316, and 2. For the 2015 land tax year - PID 3761204 - Lot 20 DP755714, Lot 1 and Lot 2 in DP1148316 and Parts 1 and 2 of Lot 3 DP 1148316
3. I note that the Valuer-General's determination of the value of the parcel of land in (1) above was the same as that for (2) above.
4. The total area of the parcel of land in PID 3700235 was around 270 hectares and this did not substantially change for PID 3761204 after the small Lot 1 in DP605170 was sold in 2014.
5. I accept that there were cattle grazing on this land during the relevant land tax years. The exact number of cattle is not clear. As I have noted, in 2013, the applicant's father declared that he had 45 head of cattle on the Property. In 2014, the applicant said there were 70, however, he was unable to explain how the number had so significantly increased in one year. At the same time, I agree with the respondent that the applicant was a credible and reliable witness, who acknowledged he had only roughly estimated the number as he drove around the property during one of his visits.
6. In any event, the applicant did not reject the proposition that the number of cattle was small given the size of the parcel of land and that at any one time they only occupied two of the ten paddocks. The applicant did not adduce any objective evidence as to the number of cattle that could be grazed on the land at any one time, or whether the cattle were rotated through the remaining paddocks and if they were rotated when and how often. Consequently, I was left with the impression that a large portion of the parcel of land in question was not used for cattle grazing, or any other form of primary production.
7. Even if I am wrong and the cattle grazed in most of the paddocks during the relevant years, I am not satisfied that this use was a dominant use for the purpose of "selling them or their natural increase or bodily produce," as prescribed in s 10AA(3)(b) of the LTM Act.
8. In this regard I agree with the respondent as to the proper construction of s 10AA(3)(b) in that the words "them or their natural increase or bodily parts" are included as objects of the verb "selling." The word "them" is the pronoun for the word "animals" as is the word "their". Hence, in the context of this application, the applicant was required to prove, on the balance of probabilities that the dominant use of the parcel of land (PID 3700235 and PID 3761204) was for the maintenance of the cattle on that land for the purpose of selling them or their calves or their bodily produce such as milk.
9. As I have noted, during 2014 and 2015, the applicant took no steps to sell any cattle, or their calves. Nor was there a breeding program in place for the purpose of sale and the cattle on the land were not milk producing. Instead, the evidence is that the cattle were mainly kept on the land to keep the grass down until the Property was sold. I accept the cattle were sold with the Property, but there is no evidence of how many cattle were on the Property at that time or what price they were sold for. I can only assume there may not have been many cattle at that time.
10. I am not critical of the applicant in making this assumption - I am merely noting where the applicant's evidence was lacking in failing to meet the dominant use test in s 10AA(3)(b).

Conclusion

1. For the reasons set out above, I find that the applicant has failed to discharge his onus in establishing, on the balance of probabilities, that the parcel of rural land the subject of PID 3700235 and PID 3761204 is exempt because the land was used for primary production as prescribed in s 10AA(3)(b) of the LTM Act. That is, I am not satisfied that the dominant use of the each parcel of land was for the maintenance of cattle for the purpose of selling or their natural increase or bodily produce.
2. Accordingly, I find, on the material before the Tribunal and the applicable law, that the decision of the respondent to issue the applicant with a land tax assessment notice is the correct and preferred decision and should be affirmed.
3. I order that the decision of the respondent, made on 14 March 2016, is confirmed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 February 2018