Craig v Chief Commissioner of State Revenue

NCAT Appeal Panel|2019-05-28

Introduction

The appellants have been assessed to land tax in relation to a property located at Goulburn (land), which consists of 59 ha of cleared, undulating country which has been used for more than 63 years as a cattle enterprise.
In 2011, the land was rezoned to low density residential land. Consequently, the appellants became liable to land tax unless the use of the land met the exemption conditions of s 10AA(2) of the Land Tax Management Act 1956 (NSW) (LTM Act). There is no dispute that the dominant use of the land is for primary production (s 10AA(3) LTM Act).
Two decisions were made by the respondent. The first was made on 28 October 2016 which reassessed land tax as payable for the 2013 land tax year and also for the years 2014 to 2016. The second decision was made by the respondent on 13 January 2017. This was a land tax assessment for the 2017 land tax year. In making these decisions, the respondent determined that the exemption under s 10AA(2) was not applicable to the appellants.
The appellants applied to the Tribunal for a review of the two decisions. On 2 January 2019 the Tribunal affirmed both decisions (Decision). In doing so, the Tribunal was satisfied that the appellant carried on a genuine business but the Tribunal was not satisfied that the primary production use of the land had a significant and substantial commercial purpose or character. The Tribunal provided written reasons for decision (Reasons).

Consideration

The matter for determination in this appeal is whether the Tribunal was correct to conclude that the primary production use of the land by the appellants did not have a significant and substantial commercial purpose or character and therefore did not satisfy the requirements of s 10AA(2)(a) of the LTM Act. Section 10AA(2) provides: (2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land: (a) has a significant and substantial commercial purpose or character, and (b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).
We will deal with the questions of law first and then the application for leave to appeal and the challenge to the factual findings.

Questions of law

Broadly, the challenge by the appellants was as to adequacy of reasons, failing to identify the correct statutory test and failing to have regard to relevant considerations in the context of the evidence provided.

Adequacy of reasons

Having recounted the evidence of the parties and having referred to various authorities concerning the test to be applied the Tribunal said at [70] and following of the Reasons: Submissions of the parties Applicants' submissions 70 In their written submissions, the applicants noted that for the purpose of making an ordinary rate (i.e. council rates), s 514 of the Local Government Act 1993 (NSW) (LG Act), requires each local council within the State of NSW to declare, for each parcel of rateable land in its area of responsibility, what category, as prescribed in that section, that parcel of land falls within. The prescribed categories include 'farmland' which is defined in s 515 of the LG Act in terms similar to that of s 10AA. In this case, the applicants noted that their Local Council had rated the Land on the basis of it being 'farmland', which they argued to be a factor the Tribunal should have regard to. 71 The applicants otherwise contend, on the basis of the evidence of Mr Schuster, that their cattle operation has a significant and substantial character or purpose because it: (1) was being conducted efficiently and utilising labour effectively; (2) distinguished itself from most other small operations through its dedication to the profitable production of a high-quality, low-cost beef cattle product in a fully costed manner; (3) complied with industry regulations and requirements which exceeded that associated with many other enterprises; (4) is the continuation of a long standing business with a demonstrated intent to continue into the future; (5) is real and genuine and not just an aberration or construction designed in an ad hoc manner to achieve some other purpose; (6) is not trivial nor is it excessive; (7) has well-kept and extensive business records which speak to the genuine nature of the operation; (8) has a herd with a value of $90,450 which is not trifling in the context of beef production enterprises; (9) unlike most cattle operations, is capable of generating sufficient income to offset costs; and 72 The applicants contend that profits are not determinative of the statutory test in s 10AA(2)(a), they noted that in Vartuli in four out of the eight years the losses ranged from - $323 to - $5,777 and the profits in other years ranged from $96 to $2,863. In the present case, profits were $29,589 over the five-year period and the retained herd value was $90,450. This, it was contented, demonstrates a significant and substantial commercial cattle operation for its size and characteristics and one engaged in for continuous profit year after year. 73 The applicants also contended that this case is distinguishable from that in Maraya and Vartuli as the Court in those cases was not asked to consider the value of the herd, or the differing forms of accounting for determining 'profit'. In addition, there was no evidence before the Court in those cases that small and medium-sized beef operations relied on off-farm income to the effect that reliance on other income is normal in this particular industry. 74 The applicants contended that as the transactions entered into in regard to the operation of their business during its 63 years of operation were on a continuous and repetitive basis with a purpose of making profit and had a permanent character, this weighed in favour of a finding that the test in s 10AA(2)(b) was satisfied. That is, although the land size is small and the operation itself is small, it is run to maximum capacity and put to its best use as a cattle operation to maximise profits. Respondent's submissions 75 The respondent, on the other hand, contends that, on the evidence, the activities of applicants on the Land were meagre or modest and were not significant and substantial. Instead, the evidence points to the Land being used for hobby or token cattle grazing activities. 76 In this regard, the respondent pointed to the small number of cattle, the meagre amount of activity that was undertaken in conducting the applicants' cattle grazing activities and the losses over five years. In summary, it was contended that the following were matters which pointed to the applicants' cattle operation not having a significant and substantial commercial purpose or character: (1) there was no pasture improvement save for average weed eradication costs of around $935 per year; (2) farm maintenance and checking (sic) costs were low (i.e. between $1685 and $2000 and $100 and $29 per annum[respectively]); (3) the losses and profits were insignificant when compared to the value of the land which was more than its taxable value of 2.9 million dollars; (4) the average rate of return on the land over five years was a loss of 0.1836% of the value of the land which is well below that experienced for cattle farmers in New South Wales of a similar value where the average rate of return was 0.68 to 0.96%. In this regard when the value of Mr Craig's services are included in the cost of the cattle operations conducted on the Land during the relevant years, those operations never produced a profit and always operated at a loss; and (5) the net profits or losses from the cattle operation on the Land did not make any real, as distinct from trifling, contribution to the income of the applicants. 77 The respondent contended that as the applicants derived no net income from the Land, it was difficult to accept that they held their Land for the purpose of profit on a continuous or repetitive basis. In summary the respondent contended that the lack of activity on the Land, lack of improvement on the pastures, lack of profit generated and relative value of the Land suggest that the activities on the Land should be considered token or insignificant and not substantial and significant. A significant and substantial commercial purpose or character - s 10AA(2) 78 While the decisions of Ashley (sic) Development, Maraya and Vartuli provide guidance as to the relevant factors to be taken into account in determining whether a use of land for primary production has a significant and substantial purpose or character, ultimately it is a question of fact, whether a particular use of land has a significant and substantial commercial purpose or character. 79 I accept that the Land is categorised as 'farm land' for the purpose of assessing the Local Council rates on the property and that it is used as such. However, I do not consider that this is of any relevance to determining whether the applicants use of the Land has a significant and substantial commercial purpose or character under s 10AA(2)(a) of the LTM Act. 80 In this case, I am satisfied that the applicants have operated their cattle business on the Land in substantially the same manner it was operated during the time the business was owned by their mother. That is, I am satisfied that it is a genuine business that has been run efficiently and effectively for a number of years. However, on the evidence before me, I am not satisfied that the applicants' primary production use of the Land has a significant and substantial commercial purpose or character. 81 While the applicants cattle operation is genuine, as they readily acknowledge it is a small cattle operation where resources are limited to that which enable the operation to sustain itself from one year to another. That is, I accept it is more than a hobby farm as the respondent contends. However, as noted by Gzell J in Maraya, at [90], in my view, the operation when objectively assessed cannot be described as an operation that is of 'the more serious and weighty' kind. While there is no single factor which distinguishes the applicants' use of the Land from those that are more serious and weighty, in my view, when examined as a whole, it is the small size of the herd, the total carrying capacity of the Land, the limited resources/investment and low profit which distinguishes the applicants' operation from one that has a significant and substantial commercial purpose or character. At the same time it is these features which have enabled the applicants' mother and the applicants to continue to operate their small business for many years. However, with the change in the zoning of the Land, from rural to low density residential, their business needed to meet the 'commerciality' test in s 10AA(2) in order for the Land to be exempt from land tax. 82 As I have noted, in my view, the applicants have failed to meet the first limb of that test. Had the test applied while the Land was zoned rural, I would have made the same finding. That is, in this case, it has not been necessary for me to consider the change in value of the Land since it was re-zoned.
In evaluating the reasons on the adequacy ground, we are mindful of the comments of the Court of Appeal in New South Wales Land and Housing Corporation v Orr [2019] NSWCA 23, particularly the reasons of Bell P at [65] and following.
When the Reasons are read in the context of the evidence recorded at the commencement of the Reasons, it seems to us that the Tribunal has paid close regard to the particular characteristics of the appellants business and has evaluated the evidence of Mr Ivey concerning the financial and physical characteristics of the operation being conducted by the appellants and that of Mr Schuster. Based on this evidence the Tribunal has determined as a matter of fact that these activities do not have a significant and substantial commercial purpose or character. In this regard, the evidence of Mr Ivey went to the particular attributes of the appellants' activities, Mr Ivey reaching different conclusions to Mr Schuster in relation to profitability of the appellants' business.
The Tribunal made clear at [82] that its conclusion was independent of the fact of rezoning and that the Tribunal had not used a rate of return method in reaching its conclusion that the primary production activity did not have a significant and substantial commercial purpose or character. The Tribunal concluded that the particular primary production activity carried on by the appellants, even if undertaken on lands zoned rural, would not be regarded as having a significant and substantial commercial purpose or character as those words are used in s 10AA(2)(a) of the LMT Act. At [81] of the Reasons, the Tribunal rejected the evidence of the appellant that this particular business was of the more serious and weighty kind. The Tribunal resolved the factual contest based on "the small size of the herd, the total carrying capacity of the Land, the limited resources/investment and low profit", findings consistent with the evidence of Mr Ivey and his analysis of the profits derived from the business and the resources employed. Consequently, the Tribunal was not satisfied the appellant had discharged the onus of proof: Reasons at [84(2)].
In our view it could not be said that the Tribunal's reasons are inadequate. The Reasons explain the Tribunal's understanding of the law and the principles to be applied, identify the evidence of the parties, explain why particular findings of fact were made and apply the facts to the law: Orr at [71]-[77] and Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 443-4.
Accordingly, we reject this ground of challenge.

The correct test

On one view, the challenge made by the appellants is to the ultimate finding of fact, namely that the primary production activity does not have a significant and substantial commercial purpose or character.
However, the appellants seek to analyse the various authorities interpreting s 10AA(2)(a) and other sections of the LTM Act and draw from those authorities a formulation of a test to support the submission that inappropriate criteria were considered and the test misapplied. As stated above, the appellants contentions include: 1. The Tribunal used wrong or irrelevant comparators which infected its decision; 2. Little or no weight should have been given to the reasonable rate of return on investment evidence; 3. Lack of profit is not determinative of whether the test has been satisfied; 4. Further, because of the language of s 10AA(2)(b), the requirement for profit should not be imported into the test for s 10AA(2(a); 5. Quoting Metricon at [61], "there is no requirement that immediate productive return be achieved, as long as some benefit or advantage accrues". The appellants then submitted that the benefit or advantage accruing in the present case included "the retained herd, growing and fattening on the Land, which is in addition to the income derived from the sale of cattle in the year" and "the size and value of the retained herd demonstrates the significance in character and purpose including the object of derived profits"; 6. Unlike s 118 of the Local Government Act, 1919 (NSW), nothing in the language of s 10AA(2)(a) that the Parliament intended the test to operate to exclude land of a particular size
To deal with these submissions it is appropriate to review the relevant authorities to which reference has been made. From these authorities the following principles can be distilled: 1. The word "purpose" is subjective in nature or at least has a subjective component reflecting an intention or desire of those engaged in a business to pursue commercial goals rather than engage in an enterprise for recreational or some other purpose: Thomason v Chief Executive, Department of Lands (1995) 15 QLCR 286 (Thomason) at 305. 2. The word "character" has an objective connotation to be ascertained "by reference to a range of criteria, quite independently of the intention or desire of those engaged in the business or industry or their goals": Thomason at 305. 3. A determination of the purpose or character of the activity may be evident from either the use of the subject land viewed in isolation or as part of other lands where used as part of an enterprise: Maraya Holdings Pty Ltd v Commissioner of State Revenue [2013] NSWSC 23 (Maraya) per Gzell J at [73] and Thomason v Chief Executive, Department of Lands (1995) 15 QLCR 286 at 307. 4. The expression "significant and substantial" raises the threshold of what might constitute a "significant commercial purpose or character" as that latter expression was considered in Thomas v FCT (1972) 3 ATR 165; 46 ALJR 397: Hope v Bathurst City Council [No 3] [1994] NSWCA 139; Maraya appeal per Leeming JA at [83] and Vartuli at [129]. 5. Significant and substantial qualifies both purpose and character: Maraya appeal per Leeming JA (with whom Meagher JA agreed) at [82]. 6. "[F]or the use of land to have a significant and substantial commercial purpose or character, the use must have a character such that it generates, or can reasonably be expected to generate, profit that contributes in a real and not trifling way to the user's income for the purpose of generating such profit": Vartuli at [129]. These matters may be relevant to "contextualise" the particular business activity having regard to its scale and profitability to determine if a particular operation had a commercial purpose or character which was significant and substantial: Vartuli appeal per Gleeson JA (with whom Meagher and Ward JJA agreed) at [93]. 7. Also relevant is the use of land when compared with that of relevant competitors: Vartuli appeal at [96] and Maraya appeal per Emmett JA at [56] and Leeming JA at [84]. However, such a comparative test is not the "true and only test for significance or substantiality" such an approach being inconsistent with the evaluative judgement required by s 10AA(2)(a) of the LMT Act: Vartuli appeal at [86]. 8. Hypothetical examples can only be of limited assistance, careful consideration being required of the particular factual circumstances relevant to an individual taxpayer: Vartuli appeal at [98]. 9. The commerciality test does not involve a "binary choice between hobby farm or token business and a significant and substantial commercial purpose". Rather, the particular activity of the taxpayer in question needs to be considered and "categorised as 'significant and substantial'" or not according to where it falls on a spectrum: Vartuli appeal at [106]-[107]. 10. Finally, a point will be reached where the small scale of a particular operation may be such that it could not be considered to be carried on for a significant and substantial commercial purpose or character: Vartuli at [136].
When considering the particular cattle farming business, as stated in Chief Commissioner of State Revenue v Brown Cavallo Pty Ltd [2017] NSWCATAP 189 at [31], the following factors may be relevant: 1. The intensity of the operation being conducted, including the size and carrying capacity of the Land. 2. The herd number and its quality. 3. The resources committed to the operation including the land, the man hours, plant and equipment etc. 4. The profitability or expectation of profit including the history of the operation, and reasons for any lack of profit.
As is evident from the above, whether or not a business makes or is intended to make a profit is a relevant consideration under s 10AA(2)(a).
At [9] - [10] of the reasons the Tribunal said: 9. For the reasons that follow, I have decided that the applicants have discharged their onus and proven that the dominant use of the Land during the relevant land tax years was for the maintenance of animals (i.e. cattle), for the purpose selling them or their natural increase. 10. However, I am not satisfied that the applicants have proven that this dominant use of the Land met the commerciality test (i.e. the use had a significant and substantial commercial purpose or character for the purpose of profit). I accept the applicant's cattle operation on the Land has a commercial purpose but I am not satisfied that this purpose is significant and substantial for the purpose of profit. Accordingly, I have decided that the decisions of the respondent are the correct and preferred decision and should be affirmed.
This was a summary of the decision.
In our view these paragraphs should not be read in isolation to the balance of the Reasons and were not intended to state that the test under s 10AA(2)(a) required proof of profit in order to demonstrate that use of the land has a significant and substantial commercial purpose or character. Inter alia, the Reasons at [81] do not reflect such an approach was taken by the Tribunal.
Consequently, we reject the contention that the Tribunal wrongly stated the test in so far as profitability was a factor to be considered under s 10AA(2)(a) of the LTM Act.
As to the submission the Tribunal used inappropriate comparators, having regard to the principles we have outlined above, the use of inappropriate comparators may demonstrate error.
In the present case, the ABARES evidence dealt with survey results of farms of various herd sizes, the smallest banding being herd size of 100 - 400 head of cattle. There was no ABARES survey data for operations with a smaller herd size. No suggestion was made by either party that ABARES collected such data. The evidence of Mr Schuster (the appellants' expert) suggested "the use of 100 head of cattle in defining a 'small beef farm' is arbitrary" (Appeal Book (AB) Vol 1, Tab A5 p 366 para 26).
However, the Reasons do not reflect that the Tribunal used the ABARES evidence in the manner contended. While there was evidence about operations with herd sizes of greater than 100 head, there was also evidence from the parties' experts as to the actual financial performance of the appellants' business, the management practices for their farm and the financial performance of farms of similar size: see eg Reasons at [37]- [55].
It is this evidence and the submissions made about this evidence, namely the actual activities of the appellants and its comparison to other small operations (as described by Mr Schuster), that the Tribunal evaluated and that formed the basis for its conclusion that the "significant and substantial commercial purpose or character" test was not satisfied: Reasons at [70]-[82].
Accordingly, we are not satisfied the Tribunal applied the wrong test by using inappropriate comparators, or by referring to a 'purpose of profit' in a summary of its decision..

Relevant considerations

Finally, having regard to the matters set out in the Reasons identified above, it could not be said the Tribunal failed to have regard to relevant considerations for making the evaluative judgment required. The matters taken into account have been set out above. Further, there was evidence concerning relative prices obtained at local markets, the particular operation conducted by the appellants and that operations of similar size do not require additional resources and investment.
The Tribunal had a range of evidence dealing with both the cattle industry generally and the specific operation of the appellants. An evaluation of the competing evidence of the experts concerning the appellants' operation and a consideration of all attributes of the appellants' business formed the basis for the Tribunal's decision about profitability, carrying capacity and resources employed and that the herd was small in size. In short the Tribunal decided the enterprise was not of the "more serious and weighty" kind as described in Maraya at [90]: Reasons at [81].
As to the alleged failure by the Tribunal to consider the appellants' submissions about character or purpose as alternatives, in our view the Tribunal identified the correct test and applied it to the facts as found and it was not necessary to consider the significance and substantiality of character and of purpose as separate matters in the circumstances of this case where there was a long established cattle business involved.
Accordingly, we are not satisfied the appellants have demonstrated any error of law.

Leave to appeal

The first question to deal with on this aspect is whether leave should be granted to amend the Notice of Appeal.
The respondent said that no further amended notice of appeal had been lodged or served on it. Consequently "leave to appeal should not be granted without a constitutional document".
However, the respondent did not suggest in submissions that it would suffer any prejudice if leave was granted to amend the Notice of Appeal.
As recorded above, the submissions lodged by the appellant in support of their application for leave to amend included a typed copy of the proposed further grounds of appeal. In these circumstances, in our view it is unnecessary to require the filing of a further document, the grounds being stated clearly in the submissions.
The appellants have not sought to rely on any new material from that submitted for the purpose of the substantive appeal, the submissions in relation to leave to appeal overlapping to a large degree with the submissions made in respect of the questions of law. The respondent has provided submission in reply.
In the absence of any prejudice to the respondent, leave to appeal should be granted to allow the appellants to amend the Notice of Appeal to seek leave to appeal on the grounds set out in paragraph 3 of the document entitled "Appellants' Supplementary Submissions" dated 4 June 2019 filed in these proceedings.
Leave is required to appeal on grounds other than a question of law: s 80(2)(b) of the Civil and Administrative Tribunal Act, 2013 (NSW) (NCAT Act). The principles applicable to the exercise of the discretion to grant leave are set out in Collins v Urban [2014] NSWCATAP 17. At [84] the Appeal Panel said: 84. The general principles derived from these cases can be summarised as follows: 1. In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; 2. Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed, BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [20] and the authorities cited there, SAB v SEM [2013] NSWSC 253 at [8] and [9] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; 3. In relation to an application for leave to appeal relating to a question of practice and procedure, the application is to be approached with the restraint applied by an appellate court when reviewing such decisions, especially if the application is made during the course of a hearing: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [21] and the authorities cited there.
The appellants says leave should be granted for the following reasons: 1. There is an issue of principle about whether primary production conducted on parcel of land 60 hectares or less are able to satisfy the tests in s 10AA(2) of the LMT Act; 2. There is an issue of public importance arising from rezoning and the consequential effect of rezoning land as non-rural; 3. The factual findings were unreasonably arrived at and clearly mistaken having regard to the totality of the evidence; and 4. There is an overlap with issues for which leave is not required, both parties have made submissions and there is no prejudice to the respondent.

There is an issue of principle about whether primary production conducted on parcel of land 60 hectares or less are able to satisfy the tests in s 10AA(2) of the LMT Act;

In our view no issue of principle of the type described arises in the present appeal.
The courts have made clear that the size of the land may be a relevant but not determinative factor deciding whether or not the use of the land has a significant and substantial commercial purpose or character: see eg Maraya appeal per Leeming JA at [84]. Neither party contended that a cattle grazing enterprise conducted on land of less than 60 ha could not satisfy the test.
Consequently, we do not accept this is a reason why leave to appeal should be granted.

There is an issue of public importance arising from rezoning and the consequential effect of rezoning land as non-rural;

We do not accept that there is an issue of public importance arising from rezoning and the consequential effect of rezoning land as non-rural.
It is clear that the legislature intended to exempt from land tax land that was formerly zoned rural notwithstanding an existing or continuing primary production only if the use of the land satisfied the tests prescribed by s 10AA of the LTM Act.
A resolution of any dispute concerning a claimed exemption involves an issue of statutory construction as to what is the test and whether, as a matter of fact, the test is satisfied in a particular case. Such issues have been subject of appellate court consideration, the principles being as set out in paragraph 31 above.
Having regard to the issues raised in the present case, we are not satisfied that any resolution of this appeal will otherwise result in a decision of significant public importance.

The factual findings were unreasonably arrived at and clearly mistaken having regard to the totality of the evidence;

The factual findings which the appellants say it should have been made by the Tribunal are set out in the document entitled Appellants' Supplementary Submissions dated 4 June 2019. At para 13, the appellants say: 13. In substituting its decision for that of the Tribunal, the appellant contends that the Appeal Panel should instead find that the following factual matters demonstrated that the use of the Land had a significant and substantial commercial purpose or character and was engaged in for the purpose of profit on a continuous or repetitive basis. (a) the use of the Land by the Craig's Hill operation for primary production: i) is run efficiently and utilises labour effectively (AB1 p152 [51]) whereas on average small enterprises manage labour inefficiently but the cattle operation conducted on the Land sets itself apart from other small enterprises in that it does cost and efficiently manage its labour (AB3 p 152.46-152.11; AB1 p153[58]). ii) distinguishes itself from most other small cattle operations through its dedication to the profitable production of a high quality, low cost beef cattle product in a fully costed manner (AB1 p153 [57]); iii) complies with industry regulations and requirements exceeding that associated with many enterprises (AB1 p153 [60]); iv) is the continuation of a longstanding business (exceeding 63 years) with demonstrable intent to continue into the future (AB1 p153 [61]); v) is real and genuine and not just an aberration or construction designed in an ad hoc manner to achieve some other purpose (AB1 p152 [55]); vi) is not trivial nor is it excessive (AB1 p152 [53]); vii) has well kept and extensive business records which speak to the genuine nature of the operation (AB1 p152 [55]); viii) has a herd with a value which is not trifling in the context of beef production enterprises (AB1 p152 [53]); ix) unlike most small cattle operations, is capable of and did generate sufficient income to offset costs (AB1 p151-152 [51]-[52] and AB3 p153.18-19); x) is consistent with broadacre farming operations in which off-farm income plays a major role (AB1 p366 [30]); xi) makes a valuable contribution to the meat market (AB1 p149 [45]). xii) the quality of the cattle from this particular parcel of Land and the prices ultimately achieved for that cattle at sale were better than the average for the Eastern Seaboard (AB3 p121.36-42:122.2-13; p134.12 20, 135.26-27). xiii) sets itself apart from most small farming enterprises in that it actually delivers a profit. (AB1 p151 [55]; AB3 p153.18-19,45-47; p154.2-3) xiv) The cattle operation did not require investment of equipment or labour beyond that currently employed and to do so would be excessive and render the operation trivial. (AB3 p152.2-5) xv) The resources and labour devoted to the primary production use of the Land is efficient and consistent with a herd maintained on land that size (AB3 p152,20-23, AB1 p152[55]). (b) Although in this case the rate of return and reasonable rate of return measure is not applicable for determining the tests in s 10AA(2) LTMA (for the reasons contended for by the appellants in the Tribunal below and on appeal), the use of the Land by the Craig's Hill cattle operation is, in any event, consistent with an operation seeking to achieve a reasonable rate of return (as noted by the respondent's expert Mr Ivey) given the quality and intensity of the cattle operation which has not changed over the period (AB2 p979,27-40); the amount of resources put into the development and maintenance of the cattle operation on a per hectare basis (AB2 p979); the control of weeds and pests (AB2 p965 and 981); and the maintenance of fences and water supply (AB2 p965 and 981). (c) The comparator of cattle farms of 100-300 head relied on by the respondent (and his expert Mr Ivey) from the ABARES survey is not an appropriate comparator in this case. In order for the appellants' cattle operation to be comparable to one running 100-300 head of cattle, it would require the use of additional land three to five times in size (AB3 p170.4-6,34-35). The relevant comparator is cattle operations conducted on similar sized land to the appellants. (d) Although the quantum of profits is not determinative of the tests in s10AA(2) LTMA, the diminution of profit in the 2014 and 2015 land tax years was explicable given the damage to the bull's pizzle and its consequential inability to service the heifers. A new bull had to be purchased and a whole season of production was negatively impacted. (ABl1 p5 [23]).
The evidence from the appellants, as recorded by the Tribunal can be summarised as follows: 1. A cattle grazing farming enterprise had been carried out on the subject land for approximately 63 years: Reasons at [29]: 2. One of the appellants, Mr Craig has operated the business for many years and Ms Shuttle does not get involved in the day-to-day operations but does assist with "paperwork and accounts": Reasons at [32]; 3. A consultant, Mr King, provided much of the physical aspects of the operation of the farming enterprise: Reasons at [33]. While not recorded in the Reasons, the evidence shows that on average, Mr King spends 3 hours per week involved in the business: Schuster Report AB Vol 1 p15; 4. The average breeding herd size was 26 cows, consistent with the notional carrying capacity being "22 cows with followers (referring to calves) and one bull": Reasons at [38]; 5. The operation was "real and genuine". There was efficient and effective use of labour, the stocking rates were reasonable for an operation seeking to minimise imports and expenditure so as to maximise profit. There were well-kept and extensive records concerning animal husbandry practices: Reasons at [40].
As to closing stock levels, these were as follows: Year Cows Yearlings Calves Bulls 2012 22 6 22 1 2013 27 8 11 1 2014 23 0 9 1 2015 24 0 9 1 2016 23 7 16 1 2017 36 0 23 0
There was a dispute about net profit levels.
The appellant said the total profit for a five-year period was $29,589: Reasons at [72]. The yearly net profits were $15,073 (2013), $7488 loss (2014), $171 (2015), $9068 (2016) and $12,765 (2017). This was in respect of income from cattle trading of $31,916 (2013), $7350 (2014), $23,443 (2015), $25,417 (2016) and $32,083 (2017): Reasons at [49]. Apparently, these calculations did not include depreciation: Reasons at [51]. These findings were based on evidence from the appellants' witnesses Mr Anderson and Mr Lethbridge: see AB Vol 2 tab A9.
On the other hand, against an average yearly profit of approximately $5917 as asserted by the appellants, the respondent's position was that the business had made an average of $2828 profit over that five-year period, and that "during the financial years of 2015 to 2017 conditions were reasonably favourable and the appellants' cattle operation produced a profit of $8555": Reasons at [52].
The Tribunal recorded that the value of the stock on hand (apparently at the end of 2017) was $90,450 according to the appellants: Reasons at [72]. As outlined above, this was made up of cows and calves.
There appeared to be some issue between the experts concerning valuing the stock for the purpose of calculating stock in trade and cost of sales figures. In this regard we note the report of Mr Ivey records the closing livestock value in 2017 was $87,588: AB Vol 3 Tab R3 at p 978.
On the other hand, there appeared to be agreement that the returns for the business had been affected by drought at various times in the five-year period.
A review of the evidence to which we have been referred would suggest that the herd size was not large, being conducted on what the appellants' expert Mr Schuster described as land class 4. At para 15 of his report (AB Vol 1 tab A4 p 138) Mr Schuster described such land as: Land suitable for grazing but not for cultivation. Pasture improvement relies on minimum tillage techniques. Productivity may be seasonally high but overall is low as a result of major environmental constraints.
Similarly, regardless of which expert evidence is preferred, the profits for this particular business were themselves not large nor was the gross income derived in each relevant tax year. In this regard the respondent submitted in the proceedings below (AB Vol 3 p.263-4) that average annual net profit when shared between the applicants, contributed a trifling amount to their average taxable income over the relevant period. The evidence identified by the respondent supports this submission and lends weight to the Tribunal's conclusion.
These factors are consistent with the Tribunal's finding that the use of the land did not have a significant and substantial commercial purpose or character.
The fact that other businesses of like size and in the same market might have been operating as a loss does not assist the appellants in demonstrating the Tribunal was in error.
On the other hand, the value of the closing stock in 2017, namely approximately $90,000 and the length of time which the businesses been in operation in various forms, namely 63 years, are matters which could lend support to a conclusion that there was a significant and substantial commercial purpose or character. However, we note the value of closing stock was significantly less during the earlier tax years. In this regard, the appellants' expert Mr Lethbridge records the closing stock values as $37,660 (2013), $31,840 (2014), $39,970 (2015) and $54,100 (2016): see AB Vol 3 tab A9 p 690.
As recorded in the Reasons at [81], which we have set out above, the Tribunal accepted that the business activity was "more than a hobby farm". However, the Tribunal determined, when considering the evidence as a whole,that the matters to which we have referred were not sufficient to demonstrate that the use of the land had a significant and substantial commercial purpose or character.
It seems to us that this conclusion was open to the Tribunal on the evidence before it. As noted by the Tribunal, the onus was on the appellants to demonstrate on the balance of probabilities that the land was exempt under s 10AA of the LTM Act: see s 100(3) of the Taxation Administration Act, 1996 (NSW).
Certainly it could not be said the factual findings were unreasonably arrived at and clearly mistaken having regard to the totality of the evidence.
It follows that leave to appeal should be refused on this ground.

There is an overlap with issues for which leave is not required, both parties have made submissions and there is no prejudice to the respondent.

The fact a party raises a ground of appeal for which leave is not required is not a reason to grant leave on other grounds for which leave is required. While the fact of prejudice to an opponent may operate against the grant of leave, in the present case it is a neutral consideration.

Conclusion

It follows, having regard to our reasons above, that leave to appeal on grounds other than a question of law should be refused and the appeal should be dismissed.

Orders

The Appeal Panel makes the following orders: 1. Leave is given to the appellants to further amend the Notice of Appeal so as to seek leave to appeal on the grounds set out in paragraph 3 of the document entitled "Appellants' Supplementary Submissions" dated 4 June 2019 filed in these proceedings. 2. Leave to appeal is refused and the appeal is dismissed.

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: 31 October 2019

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