Delli-Carpini v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2014-10-13

Solicitors: John R De Mattia & Co (Applicants) Crown Solicitor's Office (Respondent) File Number(s): 1410024

Background

On 17 January 2013 Rosina Delli-Carpini (the Applicant) applied for a primary production land tax exemption in respect of land (the Property) at Maraylya, north-west of Dural in New South Wales. The application which stated that primary production activity on the Property was carried on by tenants, was made by the Applicant both on her own behalf and on behalf of her late husband, Antonio Delli-Carpini, who then owned the Property as joint tenants. Mr Delli-Carpini passed away on 31 January 2013.
On 13 March 2013 the Respondent, sometimes referred to in this decision as the Chief Commissioner, issued a land tax assessment notice (the first assessment) to Antonio Delli-Carpini in respect of land including the Property for the 2009-2013 land tax years (the Relevant Period).
On 27 March 2013 the Chief Commissioner issued a land tax assessment notice (the second assessment) to Antonio Delli-Carpini in respect of land including the Property for the Relevant Period.
The first assessment included a taxable value for the Property while the second assessment stated that the Property was exempt.
On 11 April 2013 after communications between the Chief Commissioner and the Applicant's representative the Chief Commissioner issued three land tax assessment notices (the third fourth and fifth assessments) for land including the Property in respect of the Relevant Period. The third assessment was directed to both the Applicant and Mr Delli-Carpini, the fourth assessment was directed to the Applicant and the fifth assessment was directed to the late Mr Delli-Carpini. Each of these assessments included a taxable value for the Property.

Powers of Tribunal on review

Section 101(1) of the Taxation Administration Act 1996 ("the TA Act") empowers the Tribunal, on a review of an administratively reviewable decision, to confirm, vary or reverse the decision and make orders as to costs or otherwise as it thinks fit. That section does not empower the Tribunal to review the Disallowance Decision.
Section 96 of the TA Act relevantly provides: "96(1) A taxpayer may apply to the Civil and Administrative Tribunal for an administrative review under the Administrative Decisions Review Act 1997 of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if …the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection,…"
Section 97 of the TA Act, which empowers the Supreme Court to review a decision of the Chief Commissioner, is in similar terms to section 96. In Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184, Basten JA with whom Giles and Campbell JJA agreed said at [28]: "It is also important to note that the right of review under s 97 is given by reference to the operative decision of the Chief Commissioner and not to a ruling made on an objection. Although the existence of an objection is a necessary precondition to the power of review by the Court, and it is the taxpayer's dissatisfaction with the determination of the objection which provides standing to seek review, it is the initial decision which is the subject matter of the review."
In Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378, when considering an appeal against a decision of the Appeal Panel of the Administrative Decisions Tribunal in relation to a dispute concerning whether the dominant use of rural land was primary production, White J, with whom Barrett JA and Leeming JA agreed, said at [10]: "The Chief Commissioner's decision that should have been the subject of the application for review by the Tribunal was the decision the subject of the objection, that is, the decision to make the assessment of land tax, not the decision on the objection (Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28] and [53]).
The relevant operative decision which is subject to review by the Tribunal is the decision which led to the issue of the three assessment notices on 11 April 2013 (Assessment Decision). It is that decision which is reviewed in these proceedings.

Issues

The issue is whether the Assessment Decision, that the Applicant was not entitled to a primary production land tax exemption in any land tax year during the Relevant Period, is correct.

The law

The applicable law is the Land Tax Management Act 1956 (LTM Act) s. 7 of which provides that land tax shall be levied and paid on all land in New South Wales other than land which the LTM Act exempts from taxation. Section 3 provides that a land tax year is the period of 12 months starting on 1 January for which land tax is levied and s. 8 provides that land tax shall be charged on land owned at midnight on 31 December immediately preceding the year for which land tax is levied.
The exemption claimed by the Applicant is found in s. 10AA of the LTM Act. Section 10AA(1) and (4) provide that land zoned rural that is used for primary production is exempt from land tax. Relevantly s. 10AA(3)(b) provides that land will be "used for primary production" if the dominant use of the land is for "maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce".

The Applicant's Case

The Applicant relied on: 1. Statements by each of the Applicant and Mr Mark Dobson, the tenant; 2. an identification survey dated 9 October 2014 containing a sketch of the Property; 3. a partly marked up copy of the sketch which formed part of the survey; 4. a bundle of email and letter correspondence between Mr Dobson and the OSR; 5. a letter from the Crown Solicitor's Office to the Applicant's solicitors dated 20 June 2014; and 6. a written outline of submissions (AS) by Mr Knowles and oral submissions by him during the hearing.
In summary the Applicant's case (at [13] - [23] and [43]) is that the dominant use of the Property is primary production because: 1. for the whole of the Relevant Period the Property was zoned rural land and since about 2000 has been leased to Mr Dobson; 2. each of the Applicant and Mr Dobson have incurred significant expenses in respect of the Property. The expenses incurred by Mr Dobson have improved the Property for primary production purposes; 3. since 2007 Mr Dobson has kept alpacas on the Property with the intention of establishing a breeding herd, selling surplus offspring and selling the fleece and fleece products; 4. Mr Dobson has maintained horses on the Property except for a period between approximately 2008 and 2010 and operates a horse stud on the Property; and 5. Mr Dobson uses the Property to breed poultry which he sells.
References in this decision to quotes from numbered paragraphs in relation to submissions by the Applicant or Mr Knowles on behalf of the Applicant are all from AS unless stated to the contrary. References to numbered paragraphs in relation to evidence by Mr Dobson all relate to his written statement.

The Respondent's Case

The Respondent relied on: 1. documents filed in accordance with s. 58 of the Administrative Decisions Review Act 1997; 2. a bundle of tabbed documents entitled Respondent's Evidence Folder filed with the Tribunal on 31 July 2014 (REF); 3. a colour photograph of items on what appears to be a stand or table; and 4. a written outline of submissions (RS) by Mr Mitchell and oral submissions by him during the hearing.
References in this decision to quotes from numbered paragraphs in relation to submissions by the Respondent or Mr Mitchell on behalf of the Respondent are all from RS unless stated to the contrary.
Mr Mitchell submitted that there were throughout the Relevant Period significant non-primary production uses of the Property, namely residential use, commercial use and non-use. He also submitted that the Applicant failed to discharge her onus of establishing that there was any relevant primary production use of the Property let alone that the dominant use was primary production.

Onus and standard of proof

The Applicant has the onus of proving her case in a review by the Tribunal, s. 100(3) of the TA Act. The requisite standard of proof is the "balance of probabilities" Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 ("Cornish") at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187, (2008) 74 NSWLR 481 ("B & L Linings") at [104].
The Respondent conceded that the Property was zoned 'rural' throughout the Relevant Period.
The Applicant conceded that in order for her to succeed she must establish the facts on which she relies to satisfy the onus of showing that in each land tax year during the Relevant Period the dominant use of the Property was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce, s. 10AA(3)(b).
In Greenville Pty Ltd v Commissioner of Land Tax (NSW) (1977) 7 ATR 278 ("Greenville") Helsham CJ considered the then exemption from land tax of land used for primary production. The relevant definition of such land was "land used primarily for - (a) the cultivation thereof for the purpose of selling the produce of such cultivation". At page 280 His Honour said: "To claim an exemption under the Act the owner must be able to point to an activity being conducted on the land that will give the land the character of mainly being used for that activity, or that will enable a person to decide the matter to say that the land is, in substance and looked as a whole, being used for an activity that gives rise to the exemption." In considering the dominant use test for the purpose of s. 10AA(3)(b) in Leda Manorstead v Chief Commissioner [2010] NSWSC 867 Gzell J said at [69] to [71]: "Dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute's reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use." That is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts. 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."
The phrase "the maintenance of animals … for the purpose of selling them or their natural increase or bodily produce" as used in s. 10AA(3)(b) is not defined in the legislation.
In Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183 Block JM, when considering the maintenance of animals in the context of s. 10AA said at [42]: "…"maintenance" for the purposes of the Act comprises the keeping in existence or continuance of live animals. Thus, the activity of "maintenance" includes the provision of food, water and shelter to keep the animals alive. Further, to comprise "primary production" under the Act, such "maintenance" must occur on the land where the animals live for the purpose of selling the live animals themselves or the natural increase or bodily produce of the live animals."
Mr Knowles submitted that seven relevant propositions could be drawn from the text of s. 10AA and relevant authorities. In summary those propositions were: 1. Rural land is used for primary production if the dominant use of the land is for primary production 2. Land will be used for primary production if that use is more than a de minimis use. 3. If land is not rural land a higher threshold applies which excludes hobby or token operations even if they have passed the de minimis threshold. 4. It is not necessary that primary production be the only use provided it is the dominant use. Dominant means ruling, prevailing or most influential. 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. 5. The use is not limited to actual tangible uses and may extend to intangible uses e.g. interim use for grazing pending residential or commercial development may not satisfy the applicable test 6. Although use may extend to an intangible use it does not mean that deriving an economic advantage from the ownership of land amounts to the use of the land. Leasing of land may be a relevant use where part of land is leased and part is used by the owner for primary production. Where all of a property is leased the relevant use of the land should be determined by reference to the tenant's use of the property. 7. In determining whether land is used predominantly for primary production the tribunal should not limit its consideration to the relevant assessment years but should consider the use of the land a reasonable time before and after the relevant assessment period. 8. As I understand it, the Chief Commissioner did not materially disagree with the above propositions as far as they went. However the Chief Commissioner was concerned that the maintenance of animals on the Property must be for the purpose of sale.
While I do not disagree with the substance of Mr Knowles' propositions summarised above, other than width of the second proposition which I deal with at [47] to [50] below, they do not cover a critical aspect of the legislation.
Section 10AA(1) provides that land that is rural land is exempt from taxation if it is land used for primary production. The definition of land used for primary production is "land the dominant use of which is for the maintenance of animals (including birds),…for the purpose of selling them or their natural increase or bodily produce" (my emphasis) (s. 10AA(3)(b)). Accordingly even if the dominant use of land was for the maintenance of animals, unless the relevant purpose of the maintenance was the sale of the animals, their natural increase or bodily produce, then that land was not "land used for primary production" and the land tax exemption would not apply.
It was common ground that the Property was owned by the Applicant at all relevant times, that the whole of the Property had been leased to Mr Dobson since about 2000 and it remained leased to him at the date of the hearing. There was no evidence or submission that the Applicant conducted any primary production on the Property after 2000. The Applicant relied on s. 10AA(3)(b), that primary production had been carried on by Mr Dobson, and submitted at [34] "that primary production involves production of alpacas, horses and poultry".
Mr Mitchell conceded at [21] that the Chief Commissioner accepted: "that there were alpacas, poultry and (for all years other than the 2009 to 2011 tax years) horses maintained on the Property. The Chief Commissioner does not, however, accept that those animals were maintained for the purpose of sale (whether of the animals themselves or their natural increase or bodily produce)."

Maintenance of alpacas

Mr Knowles summarised part of Mr Dobson's evidence in relation to alpacas at [17] - [19] as follows (omitting footnotes): "17. Since 2007 (and throughout the relevant assessment period) MrDobson has kept alpacas on the Property. He purchased 2 alpacas inabout 2007 at a time when the cost of a single breeding female was$5,000. His intention was to establish a small herd of about 12females and a stud male, to sell the surplus offspring and to sell thefleece. 18. …Mr Dobson estimates the commercial losses associated with (alpaca) deaths at $20,600.00. He has also incurred breeding service fees and veterinary charges totalling many thousands of dollars. In addition, Mr Dobson has spent approximately $2,000.00 on alpaca shearing and fleece processing equipment. 19. Notwithstanding the setbacks and expense, Mr Dobson has persevered with his Alpaca breeding program. He trades under the name Park Lane Alpacas. His stud was, previously, registered with the Australian Alpaca Association and, since April 2013, his trading name has been registered as a business name. He also has an ABN which covers his alpaca and horse businesses. Mr Dobson sells alpaca fleece and fleece products at farmers' markets across the Sydney area."
Mr Dobson's evidence was that there is a 12 month gestation period for alpacas. Over a 3 to 4 year period (including part of the Relevant Period) of attempting to breed from the females, he did not get any live uncompromised babies. Rather he lost about six alpaca offspring and his best breeding female. All of his purchased animals were registered stud stock with the relevant Australian Alpaca Association. He allowed his registration to lapse because he had produced no suitable offspring to register. His written written evidence at [29] in relation to the alpacas was that all animals must be registered and he must be registered to show the animals. However he informed the Tribunal orally that he had no intention of showing the animals. There is no evidence that Mr Dobson sold any alpacas at any time between first buying them in about 2007 and the date of the hearing.
Mr Dobson said he fed and watered the alpacas before and after work on purchased food, they did not rely on grazing. There was poisonous weed on part of the property which could affect the alpacas. Accordingly Mr Dobson fed the alpacas before he left for work in the morning so that they were not hungry and had more room to walk during the day while he was away.
Mr Dobson's evidence was that he wished to sell alpaca fleece and fibre products. He sheared the animals once each year and could sell the fleece raw or send it to a local processing mill. He purchased shearing equipment and some processing equipment and spent money on dyes. He commenced marketing alpaca fleece from late 2010 or early 2011. Prior to that he stored the fleece at the Property. He weaved the product and it took about four hours to make each scarf. His evidence was that finished alpaca scarves were sold for between $50 and $70 each.
Submissions by the Respondent included at [49]: "Although the applicant seeks to characterise the above processing and knitting as part of a primary production use, in fact it is not. In Caruana v Chief Commissioner of State Revenue [2011] NSWADT 183 Judicial Member Block discussed the distinction between primary production (ie maintenance of animals) and the subsequent process by which those animals or their produce were transformed as follows: [42] … "maintenance" for the purposes of the Act comprises the keeping in existence or continuance of live animals. Thus, the activity of "maintenance" includes the provision of food, water and shelter to keep the animals alive.... [44] Primary production ends and secondary production (ie the processing of the primary product) begins when another process transforms a live plant or animal into a derivative product. For example, the processing of an orange to make orange juice, or the slaughtering of a chicken for its meat, is "secondary production" and the further processing of the product derived (eg the processing of orange juice into concentrate or the portioning or filleting of chicken meat) is another step in the productive process. [45] Thus, "primary production" involves the bringing into existence of a new product (ie the first step) comprising or derived from a plant or animal while it is alive and "secondary production" involves the processing of that primary product into further new products (ie the second step). Thus, secondary production is the antithesis of "maintenance", because it involves altering, not keeping in existence or continuance, the relevant thing."
In response to the Respondent's reference to Caruana Mr Knowles submitted that shearing, carding and washing were primary production activities rather than secondary production activities. He said that the Caruana approach was not appropriate in relation to s. 10AA and submitted that if grapes were grown on a property and were turned into wine and sold on the property all the activity would be primary production. However there would be a different production categorisation if grapes originating elsewhere were brought onto a property, processed into wine and sold. Mr Knowles provided no authority to support these submissions.
Section 10AA requires that the relevant dominant use of land is the maintenance of animals for the sale of their bodily produce, not the use of land for the subsequent conversion of that produce for the purpose of sale. It may well be that the process of shearing, that is, the necessary separation of an animal from its produce, is a primary production activity. However I do not accept Mr Knowles' unsupported submission that subsequent activities on the Property comprising the storage of fleece and the production of scarves involved the maintenance of alpacas as required by the section.
Mr Dobson estimated the value of his alpacas at the end of the 2009 to 2011 financial years and then at April 2013 as $5400, $9800, $9800 and $12,000 respectively. He provided no evidence to support these estimates. His evidence, without any supporting documentation, was that he spent substantial sums dealing with the alpacas and their fleece.
I accept that the alpacas roam over part of the Property and use sheds erected on the Property. I also accept that Mr Dobson's intention for some years including before during and after the Relevant Period may well have been to trade in alpacas, to breed the animals and sell surplus stock, fleece and scarves. However seven years after acquiring the initial animals there was no evidence of any successful breeding or sales of alpacas and the evidence of the sale of fleece and scarves is unsatisfactory.
In my opinion trade requires purchase and/or production of relevant products and their subsequent sale. I accept that Mr Dobson may well have registered the business name "Park Lane Alpacas". However his assertion that he trades under that name and sold fleece and scarves was not supported by evidence of any income derived by him at any time in the course of such trade.
An intention, of itself, to maintain animals for the purpose of sale does not satisfy the statutory test. See Greenville in which Helsham said at page 280: "whether land is being used for primary production within the meaning of the definition must be decided by an objective test - the inquiry is an inquiry into actual land use; it is not to be tested by the intention of the owner (cf Southern Estates Pty Ltd v FC of T (1967) 117 CLR 481; 10 AITR 525). And in applying that test one must adopt a broad approach and a commonsense one."
Mr Knowles's second proposition, summarised at [29] above was: "land will be "used for primary production" in the relevant sense provided the primary production use is more than a "de minimis" use of the land: Ashleigh Developments Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADTAP 25 at [45(i)]"
Ashleigh involved an application for a primary production exemption from land tax of non-rural land.
The Appeal Panel, in dismissing the appeal by the taxpayer, said at [44] and [45] it was not necessary to address the issues raised by the Chief Commissioner in any detail and would confine itself to certain short observations which were set out in [45] the first of which are: "45 In contrast to the position in relation to land that is rural land, it is not enough that there be some primary production activity on land. Sub-s (2) requires the following steps: (i) A threshold determination that the land is used for primary production. That means more, we consider, than some de minimis use of the land. It should be shown that the land as a whole is used for primary production in the requisite sense, even if that occurs in combination with some non-primary production uses…. (ii) If the threshold determination is favourable, there must be a level of use that 'has a significant and substantial commercial purpose or character' (factor (a)). This criterion eliminates hobby or token operations even though they may have passed the de minimis threshold to which we have referred in (i). The taxpayer then needs to show that the operation is run on a commercial basis."
Mr Knowles produced no authority other than Ashleigh to support his second proposition. In my opinion Ashleigh is not authority that rural land will be 'used for primary production' in the relevant sense if the use is more than an indeterminate 'de minimis' use. I reject the proposition.
Having regard to the evidence before the Tribunal I am not satisfied that the Property has been used, for any tax year during the Relevant Period, for the maintenance of alpacas for the purpose of selling the animals, their offspring or their bodily produce, sufficient to satisfy the statutory test.

Maintenance of horses

Mr Dobson statement included: "33. I moved on to the property with a horse that was a retired competition horse. Before I started teaching, I had worked in studs, and had worked professionally with horses for many years. I had managed properties that contained infrastructure for both competition and breeding horses. When I rented the property, I had to start from scratch and build infrastructure up over time. 34. I went for a period of approximately two years without horses on the property and in about 2010, I got horses again. Apart from that two year period, I have always had horses on the property. I currently have two horses on the property which are kept separate from the alpacas. 35. The Arabian horses I have are for the industry currency requirement for my job. I teach Diploma level horse breeding and horse management for students who go into the Horse Industry, work as stable hands and stud grooms and who ride and compete professionally. 36. I operate the Park Lane Arabian horse stud. The stud is registered with the Arabian Horse Society of Australian. My Arabian horse stud is being established with my initial purchase of a filly with the intention of her becoming a foundation breeding and competition broodmare. The quality of my filly is as such that she is a direct descendant of one of the first Egyptian/Polish purebred Arabian mares to be imported into Australia. The filly to date has cost me about $30,000.00. I maintain the registered stud name Park Lane Arabians."
At [42] Mr Dobson said the spreadsheets which comprise Annexure C to his statement include a five year summary of expenses, value of livestock on hand and livestock losses. The assets on hand were listed as horses, poultry and alpacas. The value of livestock was listed as $7,400 for 2008-2009, $11,800 for each of 2009-2010 and 2010-2011, $47,600 for 2011-2012 and $38,800 for 2012-2013. The only specific reference to the value of horses was $25,000 on the spreadsheet which covers the period July 2012 to March 2013.
Mr Dobson acknowledged that the values for livestock were estimates but did not provide any basis for his calculation of those estimates. No primary records were produced to the Tribunal supporting any of the amounts in Annexure C. I comment on the financial evidence at [63] to [67] below.
REF contains at pages 437-439 copies of transfer application forms for the Arabian Horse Society of Australia Ltd (the Society). Those forms and a covering letter from the Society dated 23 June 2014 state that Mr Dobson joined the Society in December 2010. He obtained a gelding on 20 November 1982, another gelding on 21 December 2010, and a horse registered number F 31264 named Nina Al Naadirah on 14 August 2012 (the filly). The letter states that Mr Dobson "has not submitted any Stud or Stallion Returns or Notices of Intention to Use a Stallion to the Society" and "the Society has no record of any horses registered with the Arabian Horse Society of Australia Ltd as having been bred by Mr Dobson."
Mr Dobson asserted that he operated a horse stud on the Property. However the evidence is that he had at most two horses, one of which was a gelding. There was no evidence of any breeding activity or preparation for such activity, other than the acquisition of the filly near the end of 2012. No horses were sold.
Mr Dobson's also gave evidence was that he kept animals, including horses, on the Property because of his love of animals, and he kept them as pets. Mr Dobson worked as a teacher at TAFE and said at [35] "The Arabian horses I have are for the industry currency requirement for my job." The evidence referred to in this paragraph does not indicate that the dominant use of the land for the maintenance of horses during the Relevant Period was for the purpose of selling them or their natural increase or bodily produce.
Mr Knowles submitted at [34] "The primary production undertaken by Mr Dobson….involves the production of … horses" and "The intensity of the operations is … reflected in the time and investment that Mr Dobson has devoted to the livestock operations."
I deal below with Mr Dobson's investment in time and the extent of the evidence as to his financial investment in the relevant operations.
Having regard to the evidence before me I accept that Mr Dobson may have intended to breed horses. However there can be no relevant maintenance of horses when there were no horses on the Property. I am not satisfied that the acquisition of a newly born filly late in 2012 and her maintenance from that date without any evidence of relevant breeding activity or preparation for breeding is sufficient evidence of maintenance of horses for the purpose of selling them or their natural increase so as to satisfy the statutory test.

Maintenance of poultry

At [37] under the heading "poultry" Mr Dobson stated "I breed poultry on the property and trade as Poultry Pickins." and "Annexed and marked 'B' is a copy of the internet site www.poultrypickens.com.au which I use to advertise for sales, and an extract for the registered business name. He also gave evidence that he erected several poultry sheds on the Property.
The Respondent's submissions included: Business use: construction and sale of poultry pens 43 Mr Dobson runs a business known as Poultry Pickens from the Property, the primary function of which is the construction and sale of poultry pens. Mr Dobson does not address the nature or intensity of this use in his evidence and it should therefore be inferred that the evidence would not have assisted the applicant. 44 This inference is consistent with the Chief Commissioner's searches which show that in his taxation returns Mr Dobson records Poultry Pickens as being in the business of "Prefabricated Metal Building Manufacturing". Those records record him as deriving only non-primary production income and incurring expenses as follows: Financial year Income Expenses 2009 $1,909 $0 2010 $450 $801 2011 $350 $128 2012 No data No data 2013 No data No data

Page 37 in the s. 58 documents contains a heading "BAS" which I assume refers to "Business Activity Statement", and a trading name "POULTRY PICKENS" and refers to ANZSIC TITLE "Other Personal Services n.e.c.". It contains the following information; 1. 2008 - sales $1300, purchases $8939; 2. 2009 - sales $2100, purchases $6157; 3. 2010 - sales $450, purchases $2977; 4. 2011 - sales $350, purchases $1607; and 5. 2012 - sales $0, purchases $517.
The information at page 38 is that income of $1,181 was derived in respect of the 2008 income tax year and there were purchases of $4,556 in that year and $128 in the 2011 income tax year. All of the income figures relate to non-primary production income apparently referable to a business described by an ANZSIC TITLE of "Prefabricated Metal Building Manufacturing". The primary production income for the 2008-2011 income tax years is shown as "0". The column for the 2012 income tax year contains no entries and is not consistent with the BAS at page 37.
I observe that s. 58 documents at Tab 5, pages 37 to 41, from which the above figures were derived, are OSR documents and contain the following disclaimer "The data comes from third parties, therefore no guarantee for its accuracy can be provided". The source material for the data on those pages was not put before the Tribunal. However I also observe that the Applicant did not dispute the accuracy of the data in Tab 5 of the s. 58 documents.
In cross examination Mr Dobson said that he was prepared to assist the Applicant in the dispute the subject of these proceedings. The information contained in Annex "C" to his statement was prepared from his bank statements which went back to 2008. He acknowledged that he kept his business activity statements and some of his income tax returns and invoices and receipts but that he had not produced any of those documents to the Chief Commissioner. He acknowledged that he knew the Chief Commissioner needed documents for the current proceedings. He further stated that the information in Annex C was largely estimates and that all of the figures used for the value of his assets were also estimates. He also stated that he had not received a summons to produce documents for the purpose of the proceedings.
Mr Dobson said he used documents which were available to him in order to provide some of the figures contained in his statement of 30 May 2014. However he asserted that he did not have time to produce those same documents to the OSR when requested one month later for the purpose of these proceedings.
The business name "Poultry Pickins" was registered on 16 November 2007. The website referred to in Annex 'B' to Mr Dobson's statement provided information concerning the colours of the poultry he bred, states that Poultry Pickins breeds and sells Belgian d'Anver bantams, and sets out the cost of pullets. The majority of website information produced by Mr Dobson related to portable poultry pens designed and manufactured by Poultry Pickins on the Property for the purpose of sale.
There was little evidence that poultry was maintained by Mr Dobson for the purpose of selling them or their natural increase or bodily produce. Instead it was Mr Dobson's evidence that he bred poultry in order to save the species and produce the best breed he could. His evidence was that his primary use of the birds was to show them. He agreed that he may sell lesser quality stock in order to cull birds. The impression I gained from Mr Dobson's evidence is that throughout the Relevant Period his purpose in maintaining poultry was as a hobby and any sales of poultry were ancillary to the sale of portable poultry sheds.
No evidence was produced to the Tribunal that the design manufacture and sale of portable sheds was materially related to the maintenance of the poultry on the Property.
I am not satisfied that the dominant use of that part of the Property used for the maintenance of poultry, was for the purpose of selling them or their natural increase or bodily produce.

Other matters regarding the Property

Photographs of the Property showed that improvements included a residence at least part of which was air-conditioned, several water tanks, some internal fencing which sub-divided sections of the Property, metal sheds some of which were used for livestock and others for general storage, and a workshop. There was also a concrete slab and a dam. Some of the Property had been substantially cleared, other parts had been cleared of undergrowth but not trees. No detailed dimensions were provided regarding the internal partitioning of different parts of the Property.
Several portable poultry pens were shown in photographs in evidence.
Mr Dobson said: 1. part of the Property was heavily timbered and contained substantial undergrowth and weeds including lantana and was unusable. 2. Part of the Property was full of snakes and was unusable.
The dam was a dam in name only and most of the dam area was unused. Grazing took place on the periphery of the dam and the dam was ineffective in holding water.
Mr Dobson's evidence was that he had carried out improvements to the Property. These improvements included: 1. painting inside the house, replacing curtains, replacing floorboards in the house, installing guttering on the garage, replacing floor coverings (vinyl), and replacing some wall panelling. 2. he had both cleared and fenced a substantial part of the Property, including setting up external electric fencing to protect stock from dog attacks, and he hired equipment to assist in the clearing. 3. he had installed stable buildings and poultry sheds including a barn for storing feed; 4. he fertilised and improved the pasture and installed water tanks; and 5. he spent $100,000 over the 14 year tenancy in what he called 'Livestock Facilities Audit'. 6. All the components of the $100,000 amount were estimates and no invoices or receipts were in evidence. The $100,000 included an amount of $50,000 for acreage/scrub clearing and rubbish removal being 100 days @t $500/day. There is no evidence as to whether this $50,000 estimate for clearing and rubbish removal was an amount paid by Mr Dobson or an estimated value for work carried out by him.
It appears that a substantial part of the work carried out by Mr Dobson on the Property related to the improvement of the dwelling in which he both resided and carried out work relating to his employment as a teacher.
Mr Dobson's evidence was that he attended to the horses and alpacas daily including before and after work. 80% of his weekends were spent at markets or tending livestock and working on the Property. He also gave evidence that over the five year period from 2007 he spent 3-4 hours per week day and 10-12 hours on the weekend on what he called "livestock related activities". This time included his attendance at markets in relation to the sale of both fleece and scarves.
Mr Dobson resided at the Property and worked there from 9:30 p.m. until midnight or 1 a.m. each work day in relation to his teaching position with TAFE.
Mr Dobson's said he knitted scarves for sale and it took about four hours work to knit each scarf. No authority was provided by the Applicant to indicate that this activity was primary production nor was it submitted that the activity involved maintaining the alpacas whose fleece was used in producing the scarves. It is not clear to me how many scarves were knitted by Mr Dobson during the Relevant Period nor when he found time to carry out such activity having regard to his evidence concerning the time he spent on maintenance of livestock, clearing and improving the Property, attending markets and attending to his principal vocation of teaching and carrying out work ancillary to that vocation.
It is common ground that the Property was used for multiple purposes before, during and after the Relevant Period.
The Applicant submitted that the relevant uses were: Residential. Maintenance of horses, alpacas and chicken/ducks for the purpose of sale. Unused.
The Respondent submitted that relevant uses were: Residential. Home office. Maintenance of animals as pets, to preserve certain species, and in relation to Mr Dobson's employment as a teacher. For secondary production of poultry pens and some scarves. Unused.
There is no town water on the Property. Mr Dobson bought all water for personal and stock use and bought a purpose built trailer for water cartage. Mr Dobson estimated that 90% of the water used on the Property was for animals and 10% was for his personal use.

Relevant law

The statutory question relates not only to whether animals are being maintained on the Property but whether the dominant use of the Property is to maintain those animals for the relevant purpose. The onus lies on the Applicant to provide relevant evidence to support her case.
In his submissions Mr Knowles placed some emphasis on what he said was the Chief Commissioner's "exclusive focus on the revenue and profits obtained from primary production" rather than referring to all relevant facts.
Mr Dobson provided some evidence by way of spreadsheets of what he said were monthly livestock expenses for the 2009-2013 financial years. These expenses did not differentiate between what was incurred in relation to alpacas, horses or poultry. No evidence was provided to substantiate the expense data in the spreadsheets. Nor was any evidence provided in relation to any income generated at any time from the sale of any animals or their natural increase or their bodily produce.
It is not necessary for the Applicant to prove that the use of the Property had a significant and substantial commercial purpose or character and that the use was engaged in for the purpose of profit on a continuous or repetitive basis. It may not be necessary to prove that a profit was made from any relevant sales. However in order to succeed, the Applicant must prove that the dominant use of the Property was the maintenance of animals for the purpose of relevant sales.
It may be that if there was no evidence of relevant sales then evidence of reasonable preparation for, or reasonable attempts to obtain sales would satisfy the Applicant's onus. No such evidence was provided other than that Mr Dobson said he had marketed fleece and some scarves he had made, had sold some poultry and had purchased a thoroughbred filly to be bred. These issues and my relevant findings have been dealt with in some detail above.
The fact is that Mr Dobson's occupation of the Property commenced in about 2000. No documentary evidence was provided to the effect that at any time during the Relevant Period nor at any time during the 14 years between the commencement of Mr Dobson's lease and the date of the hearing, had any material sales occurred from the use of the Property in accordance with the test in s. 10AA(3)(b).
The Property was used to produce some income in terms of rent paid to the Applicant by Mr Dobson. The initial rent was $260 per week rising to $290 per week by 2014. There was some evidence that the rent for the Property was consistent with the value for rent of the residence without any additional rent for the remainder of the Property. Mr Dobson derived some income from the sale of portable poultry pens manufactured on the Property. Mr Dobson said that he sold alpaca fleece and scarves but no evidence of income from these sales was produced. The undisputed evidence is that the whole of the income derived by Mr Dobson trading as Poultry Pickins, as set out in the s. 58 documents, was non-primary production income. In summary no evidence of primary production income derived from the use of the Property, whether or not that income resulted in a profit or loss from relevant activities, was placed before the Tribunal.
Mr Knowles submitted, as his seventh proposition, and I accept, that in the present matter the Tribunal should not limit its consideration to the relevant assessment years but should consider the use of the land for a reasonable time both before and after the relevant assessment period and consider matters such as those referred to at [71] to [82] above. Having regard to those matters and my findings as to the purpose for maintaining animals on the Property such consideration does not assist the Applicant.

Decision

I accept that parts of the Property were used during the Relevant Period to maintain horses, alpacas and poultry. However having regard to all the evidence before me and the above findings I am not satisfied on the balance of probability that the dominant use of the Property for any year during the Relevant Period was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce.
The correct and preferable decision of this Tribunal is that the decision of the Chief Commissioner under review is affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 28 January 2015

At a glance

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Judgment (15 paragraphs)

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Cases Cited (6)

Cited By (2)