Fitzpatrick Investments Pty Ltd v Chief Commissioner of State Revenue

The land in question

1. The land assessed by the Chief Commissioner forms part of a larger landholding of the Applicant in Erskine Park.
2. For each of the 2014 and 2015 land tax years the land in question is identified by the Property ID (PID) 3737407 and is approximately 70.39 ha in area. By the 2017 land tax year part of that parcel had been excised. The remaining parcel, the subject land for 2017, is identified by the PID 4004774 and is approximately 66.64 ha in area.
3. The land is adjacent to an industrial area known as the Fitzpatrick Industrial Estate. The Industrial Estate has been growing over the years: as its footprint grows so does the Applicant's remaining land shrink. An example is provided by the excision, referred to in the previous paragraph, of part of PID 3737407 prior to the 2017 land tax year - the excised portion is now leased as the Tyremax site as part of the Industrial Estate. Earlier excisions have resulted in the development, over several years, of sites leased by companies including Rondo, Viridian, DHL, Coates and Pelikan Artline.
4. The land has two distinct areas - the northern paddock and the southern paddock - which are separated by Lenore Drive. To the north of the northern paddock is an area of residential development. Bordering both the northern and the southern paddocks, to the west, are various portions of the Industrial Estate. To the east and south is a 'Conservation Area'. That part of the Conservation Area bordering the land to the east is adjacent to Ropes Creek. No part of the residential area, the Industrial Estate or the Conservation Area is included in the land that has been assessed for land tax and in respect of which the Applicant claims the primary production exemption.
5. For convenience, and even though the assessments are in respect of different PIDs across the relevant years, I will refer to the land the subject of the various assessments as the 'assessed land'.

The land tax legislation and the issues for determination

1. Under s 8 of the LTM Act, land tax is charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. Accordingly, 31 December is often referred to as the 'taxing date' for land tax purposes - 31 December 2013 is the taxing date for the 2014 land tax year, 31 December 2014 for the 2015 land tax year, and 31 December 2016 for the 2017 land tax year.
2. Section 10AA of the LTM Act contains provisions exempting land from land tax subject to specified conditions. Relevantly, s 10AA(1) and (2) provide as follows: (1) Land that is rural land is exempt from taxation if it is land used for primary production. (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).
3. The expression 'land used for primary production' is defined in s 10AA(3) to mean 'land the dominant use of which is for' one of the uses, activities or types of enterprise specified there. Paragraph (b) of s 10AA(3) specifies as one of the qualifying activities 'the maintenance of animals […] for the purpose of selling them or their natural increase or bodily produce'.
4. The Applicant cannot rely on s 10AA(1) for its exemption claim since the relevant parcels were at all relevant times zoned 'General Industrial IN1', which is not a rural zoning: s 10AA(4).
5. That means the exemption claimed by the applicant is available only if, for the relevant land tax years (or for any one or more of them), not only must the dominant use of the assessed land be for a qualifying purpose under s 10AA(3), but both paragraphs (a) and (b) of s 10AA(2) must be satisfied as well.
6. For convenience I will refer to these tests as: 1. the 'dominant use' test (s 10AA(3)); 2. the 'commerciality' test (s 10AA(2)(a)); and 3. the 'profit' test (s 10AA(2)(b)).
7. Although the imposition of, and exemption from, land tax fixes upon ownership and use of land at 31 December, the enquiry as to the use of land is not restricted to that one day of the year. As White J (as his Honour then was) said in Metricon Qld Pty Limited v Chief Commissioner of State Revenue (No. 2) [2016] NSWSC 332 (Metricon) at [132]-[133]: [132] Liability for land tax arises as at midnight on 31 December immediately preceding a calendar land tax year. In Longford Investments Pty Ltd v Chief Commissioner of Land Tax [(1978) 8 ATR 656)], Sheppard J said (at 660-661) that although the liability for land tax arises as at midnight on 31 December, the question of whether land was used primarily for primary production was to be considered having regard to the facts spanning "some few months" before and after that date. In Leda Manorstead [v Chief Commissioner [2010] NSWSC 867], Gzell J applied this reasoning and said that in the circumstances of that case a reasonable period for inquiry was six months before and after the relevant date (at [4]). His Honour observed that that allowed for a consideration of the financial records pertaining to the uses to which the land was put. [133] This approach recognises that the question of the dominance of a particular use, or whether a primary production use has a significant and substantial commercial purpose or character, requires examination not of a single event but of a state of affairs that exists as a continuum. Experience before and after 31 December that is part of that continuum can throw light on the position as it existed at that date. But that does not alter the fact that liability to land tax is imposed and hence a claimed entitlement to exemption is to be determined as at midnight on 31 December. This is significant where there is a material change occurring after 31 December.
8. The Applicant's case is that the use of the land that attracts the primary production exemption is use for the breeding and fattening of cattle for sale. The Applicant relies on activities conducted by a trustee company by the name of Filetron Pty Ltd, as trustee for The Russell Trust, under a pastoral lease (Filetron lease) granted in December 2013, in support of its case. It submits Filetron's use of the land was the dominant use of the land, that it had a significant and substantial commercial purpose or character, and that it was engaged in for the purpose of profit on a continuous or repetitive basis.
9. Before examining Filetron's use of the land it will be necessary to provide some brief background.

Background and recent prior use of the land

1. Hunter Cottle (Mr Cottle Senior) is the sole director of the Applicant, which is managed on a day-to-day basis by one of his sons, Barton Cottle. Another son, Bentley (Ben) Cottle, is a director of Filetron. References in these reasons to 'Mr Cottle' are references to Bentley Cottle.
2. Almost all of the Applicant's landholding in Erskine Park, including the assessed land, has been in Mr Cottle's family since the 1940s. His understanding is that the Erskine Park land, including the assessed land, has been used for cattle grazing ever since the 1950s. The grazing activities were carried out first by Mr Cottle's grandfather, and then by the Applicant, until 2008.
3. From about 2009 the Applicant has been developing the Fitzpatrick Industrial Estate in stages. The contractor engaged by the Applicant for the development of the Industrial Estate is the FDC Group of companies (Transcript (T) 73.36-43), of which Mr Cottle is the managing director. In broad terms, a development stage would require negotiation with a prospective tenant, the obtaining of relevant development approvals, construction of the building, separate valuation of the relevant portion of the land for land tax and rating purposes, and formal subdivision of the relevant portion from the residual, undeveloped parcel: Affidavit of Jamie Stewart, Project Director of the Applicant, Court Book (CB) 2335 [33].
4. On 12 November 2010 the Applicant entered into an agistment agreement in respect of part of its residual land, including the assessed land, with Matthew Besant and his partner Lisa Cooper, trading as L & M Rodeo Co (Besant Agreement - CB 2357). The commencement date of the Besant Agreement was specified as 1 November 2010. The agistors agisted cattle for the purpose of breeding bucking bulls for supply to various rodeos throughout Australia, and sale.
5. The 'Agistment Period' under the Besant Agreement was specified to be '[t]he period of one month commencing on the Commencement Date (1 November 2010) and thereafter continuing on a month to month basis terminable by either party by not less than one month's notice of termination'.
6. Precisely when the Besant Agreement came to an end is not clear. Mr Stewart said in his first affidavit - CB 2332 [17] - that it 'concluded' on 30 November 2013. Mr Stewart supported that claim in cross-examination with the statement (T113.21) that he 'spoke to Mr Besant and asked him to remove his cattle in November'. But that request seems at odds with the Applicant's invoicing of Besant at least one month later, on 31 December 2013 (CB 2379), for the entire 3-month period 1 October to 31 December 2013 (albeit that Mr Stewart characterised this as 'an error' - T113.45).
7. In any event, Mr Stewart agreed that some of the Besant cattle were on the land as late as February 2014 even though he could not recall exactly where they were (T119.29). Mr Cottle accepted it was 'possible' that some of the Besant cattle were on the land in February 2014 (T27.10). Peter Schuster, one of the expert witnesses engaged by the Chief Commissioner, attended the land for an inspection in February 2014, in the presence of Mr Cottle Senior and others. Mr Schuster observed cattle on the northern paddock and was told (he does not recall by whom) they were Besant's cattle (T195.30-41).
8. I find that at least some of the Besant cattle were still on the assessed land, and most likely on the northern paddock, as late as February 2014.

The Filetron lease and Filetron's use of the assessed land

1. The Filetron lease was signed on 13 December 2013 (CB 2470-1 [16]) but with a commencement date of 1 December 2013. The Filetron lease (CB 2367) granted to Filetron an area of approximately 98.39 ha (the leased land), and of which the assessed land forms part. The initial rental fee was $15,600 plus GST per annum.
2. Filetron is one of a number of companies that act as trustees for discretionary trusts controlled by Mr Cottle and of which he is a beneficiary, and which hold land and carry on pastoral businesses including the breeding and fattening of cattle and sheep for sale.
3. The Russell Trust, of which Filetron is the trustee, holds a number of properties that are used for agricultural purposes. All of the properties held by The Russell Trust are located in the Southern Highlands of NSW, with the exception of a property in Cootamundra which was acquired in January 2019 (and therefore outside any of the relevant years for the purposes of this case).
4. It is not in dispute that at all relevant times The Russell Trust operated a primary production business across its Southern Highlands properties, which covered over 12,000 acres of land.
5. Mr Cottle gave evidence (CB 2079 [30]), which I accept, that 'during the Relevant Tax Years' (a label that includes the 2016 land tax year even though the exemption claim for that year is no longer pressed), The Russell Trust ran in excess of 2,000 head of Angus cattle and 2,500 sheep, and those cattle numbers were generally maintained over the course of the Relevant Tax Years, although the numbers varied both during seasons and from season to season.
6. Mr Cottle claimed (CB 2080 [32]-[33]) the Filetron lease gave The Russell Trust 'a good opportunity' to remove cull heifers and dry heifers from one of the Southern Highlands properties 'in order to grow them out and sell them'. The 'plan', as he described it, was 'to take 30 to 40 of these heifers from around 250 kilograms to +550 kilograms and sell them for much more than we otherwise could'. He said there was 'no space' for these heifers on the other properties, so the Filetron lease 'presented a good opportunity to make the most out of these animals rather than having to quit the stock at reduced prices'.
7. Mr Cottle provided the Tribunal with the calculations by which he estimated the potential financial benefit of his plan. He thought the leased land, in its state at around the time of entry into the Filetron lease, could carry about 45 grown cattle. On that basis he thought 30-40 head of lighter weight heifers was quite feasible: CB 2285 [4]. Assuming an average daily weight gain of 1.1 kilograms, and a likely selling price of $2.00 per kilogram, he estimated the 'total revenue (on an annualised basis)' for 30-40 cattle at between $24,090 and $32,120 (for example, 30 cattle x 365 days x 1.1 weight gain per animal x $2.00 per kilogram = $24,090): CB 2286 [7]. The only major cost he anticipated was the cost of the rent, at $15,600 per annum, so the estimated 'annual profit' would be between $8,490 and $16,520: [8].
8. Although Mr Cottle described the projected figures of $24,090 and $32,120 as 'total revenue', it is clear his equation derives 'total additional revenue' - the increased revenue that could be received if the weight gains were achieved over the period, compared to selling the cattle at the beginning of the period, and not taking the opportunity to fatten them.
9. The first movement of cattle onto the leased land during the term of the Filetron lease occurred on 12 December 2013, when 30 female Angus cattle were transported from one of the Southern Highlands properties. They stayed there only until 21 March 2014, when they were removed. They were sold by Jim Hindmarsh Stock and Property Agents on 8 April 2014.
10. The second movement of cattle onto the leased land during the term of the Filetron lease occurred on 23 October 2014, when 25 female Angus cattle were transported from one of the Southern Highlands properties. They stayed there for over two and a half years (T63.23-25), in other words beyond the 'taxing date' for the 2017 land tax year. On 20 June 2017, 18 cattle from the leased land were sold by Jim Hindmarsh Stock and Property Agents.
11. The final movement of cattle onto the leased land in any of the relevant land tax years occurred on 17 December 2017, when 17 female Angus cattle were transported from one of the Southern Highlands properties.
12. During the term of the Filetron lease and up until January 2016, most of the day-to-day running of the leased land was undertaken by Mick Mara, who was employed on a full-time basis by The Russell Trust as a manager. Mr Mara was based at one of the Southern Highlands properties. In January 2016 Mr Mara's role was taken over by Rob Hall: CB 2081 [37]. Mr Hall gave affidavit evidence (CB 2542) that he lives on one of the Southern Highlands properties ([3]) and 'did not personally visit the [leased] land very frequently': [17].
13. Mr Stewart, the Applicant's Project Director, attended the Erskine Park land 'around twice a week (on average)', he said (CB 2337 [43]), but that depended on whether any construction work was being done on the Industrial Estate. From time to time, he said, he would also provide Mr Cottle with informal feedback about what was happening on the leased land: [44].
14. Mr Stewart also said 'there were ongoing problems with the fences being cut by local dirt bikers'. If he was ever at Erskine Park and couldn't see the cattle he would alert Filetron, usually by telephoning Mr Cottle or his staff. Sometimes the cattle would escape onto an adjoining property to the south, or into the Ropes Creek Reserve, and on one occasion they entered a nearby secondary college.
15. Mr Stewart said the fences 'were regularly being cut' and had to be repaired or replaced 'to maintain the integrity of the fencing and to contain the livestock'. From time to time he would assist with the repair of the fences and sometimes with the construction of new fences. Mr Stewart arranged for a company called Summit Fencing to conduct fencing works. The supplier's invoices in evidence, spanning the period 20 December 2013 to 16 June 2014, were made out to the Applicant even though fencing was Filetron's responsibility under the terms of the Filetron lease: CB 2339 [51], [52] and 2456-8.
16. Mr Cottle was aware of the problems with the fences. He said there were neighbours who 'repeatedly caused difficulties for us' by cutting the fences. He said he would attend the leased land 'about once a month to inspect the fences and often found them cut': CB 2082 [41]. As a result of the 'vandalism' to the fences, the cattle were 'repeatedly released and occasionally, lost for periods of time'. Sometimes the cattle would mix with nearby bulls, which resulted in several pregnancies. Mr Cottle said he, Mr Stewart and Mr Hall 'spent a lot of time attempting to recover the cattle in the Erskine Park area, and in some cases, without success': [42].
17. Mr Cottle described the cutting of the fences, the unwanted pregnancies, seasonal conditions, and animal welfare issues such as pink eye, as 'unexpected issues that caused problems': CB 2083 [44]. Ultimately, he explained, the activities undertaken on the leased land 'did not produce the returns [he] had anticipated': [45].

Other use of the assessed land, including use by the Applicant

1. It is also necessary to examine whether there were any uses of the assessed land other than the use by Filetron and, if so, what those uses were.
2. I have already referred to the continued presence of the Besant cattle on at least part of the assessed land during the period up to February 2014, but that was confined to the 2014 land tax year. Apart from those animals, and for that restricted period, there is nothing to indicate there were any livestock on the assessed land other than the livestock owned by The Russell Trust right through to the end of the 2017 land tax year. But that isn't necessarily the end of the matter.
3. Mr Stewart's evidence, which I accept, is that development approval for the construction of a warehouse on the Tyremax site - which is on the northern side of Lenore Drive and is therefore adjacent to the northern paddock - was granted on 19 November 2015, and the warehouse was practically complete by 5 August 2016: CB 2336 [38]. For that entire period the Tyremax site, 3.754 ha in area and since excised, formed part of the assessed land. No doubt it was the extensive nature of this construction activity, undertaken on part of the assessed land from 16 December 2015 to early August 2016 (CB 2475 [26]), that influenced the Applicant's withdrawal of its primary production exemption claim for the 2016 year.
4. In addition to the construction of the warehouse on the Tyremax site, the construction works also involved some stormwater drainage works. Mr Stewart explained (CB 2476 [29]): The stormwater drainage works were the construction of storm water diversion channels to take storm water into the dam in the northern paddock on the Leased Land. […] [The] existing over land flow paths of water were altered to fall into the temporary basin beyond the Tyremax site. These temporary works were required to divert existing flows from the Coates and Tectronic sites around the Tyremax site and once completed the area was made available for grazing.
5. He explained in cross-examination (T122.1-9) that the 'dam' had had a levee constructed in 2009 so it could fulfil the role of both a dam (for watering livestock) and a storm water detention pit, to enable water to 'overflow from the dam, fill up and be detained and then released more slowly'.
6. The Chief Commissioner submitted this continued use of the temporary detention pit, throughout the relevant land tax years and not only from the time in 2016 when the diversion channels were constructed, amounted to a competing use which needs to be taken into account in weighing the various uses of the assessed land.
7. Even before the construction of the Tyremax warehouse came the development of the Pelikan Artline site. This development differs in some material respects from the Tyremax development because the Pelikan Artline land had already been excised from the undeveloped area prior to the commencement of any of the physical construction work.
8. Pelikan Artline entered into an agreement for lease in relation to this excised portion of land on 1 April 2014, and construction of the warehouse building commenced soon after. On 1 October 2014 an occupancy certificate was obtained: CB 2336 [37]. During construction there was also a site supervisor located on what Mr Stewart identifies as the 'Erskine Park Land' - which encompasses the Applicant's entire landholding at 177-299 Lenore Drive: CB2337 [43] and CB 2330 [6].
9. To the east of the Pelikan Artline site, and south of Lockwood Drive, but located on the assessed land, is a dry detention basin. It was constructed to assist in the drainage of water from the Pelikan Artline site.

The 'dominant use' test

1. The focus of the exemption provision in s 10AA of the LTM Act is with 'use' of the land at large, rather than 'use' by any particular person. In Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 (Metricon Appeal) Barrett AJA stated at [47]: There is … in s 10AA a manifested legislative intention that land is to be exempt from land tax (to the advantage of its owner) regardless of the identity and attributes of the owner and by reference solely to the 'use' to which the land is put by the person - whether or not the owner - who has the ability to 'use' it.
2. In this context, 'use' means actual physical deployment of the concrete mass of the land itself for the purpose of obtaining a present benefit or advantage from it: Metricon Appeal at [61]. But physical deployment can also include (also at [61]): inactivity deliberately adopted as a means of obtaining such actual and present advantage from the land; and with purpose understood as objectively ascertained purpose. There is no requirement that immediate productive return be achieved, as long as some benefit or advantage accrues.
3. The test of dominant use, according to a number of authorities including Metricon Appeal at [52], is that set out by the Land Appeal Court of Queensland in Thomason v Chief Executive, Department of Lands (1995) 15 QCLR 286 at 303: In our view, the proper approach to be taken when ascertaining the dominant use of land is to consider such matters as the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry of a type specified in section 17(2), the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose. When undertaking this exercise, one cannot ignore the conclusion that an objective observer would reach from viewing the land as a whole.
4. The enquiry is directed towards determining whether what may be described, for convenience, as an 'exempt' use of the land (here, the maintenance of animals for the purpose of selling them) is the dominant use of the land. Where there is more than one physical use of land, the uses need to be compared and weighed, to see whether the 'exempt' use is dominant over all other uses. In this context, 'dominant' has been taken to mean 'main, chief or paramount': Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867 at [69].
5. The enquiry therefore boils down to the following questions: (a) is there a use of the assessed land for the maintenance of animals for the purpose of selling them; (b) are there any other uses of the assessed land; and (c) is the 'maintenance of animals' use the main, chief or paramount use, such that it can be characterised as the dominant use of the assessed land?
6. The questions need to be asked in respect of each of the 3 distinct 'taxing dates' of 31 December 2013, 31 December 2014 and 31 December 2016, since the answers may differ from one year to the next. Answering the questions also needs to take into account the state of affairs for a reasonable period either side of those dates, to determine whether any activities were conducted as a 'continuum' such that they may throw light on the position as it existed at each of the taxing dates: Metricon at [133]; see [17] above.

The 2014 land tax year

1. Mr Cottle's evidence was that he moved the first 30 heifers onto the leased land in December 2013 for the purpose of fattening and then selling them. He provided an estimate of the incremental revenue he anticipated from that activity and he explained how he arrived at the estimate. In cross-examination Mr Lynch SC picked apart the calculations, with a degree of success, but he did not shake the foundation of Mr Cottle's plan.
2. Mr Cottle explained there was a 'good body of feed' available to the 30 heifers when they arrived in December 2013; by March 2014 there was very little feed left, and he thought that was a good time to sell them: CB 2290 [6]. He also claimed the heifers 'had improved significantly' in that 3-month period but he provided no objective evidence to support that claim. Nevertheless, it is clear the heifers had been maintained on the leased land, including the assessed land, during this period and, viewed objectively, they had been maintained for the purpose of selling them. There was a use of the assessed land for that purpose, as part of a continuum of activity from December 2013 to March 2014, and I find accordingly.
3. Which parts of the assessed land were used for the cattle maintenance activity is less clear. The separation of the northern and southern paddocks by Lenore Drive, according to the Applicant's submission, is of little or no consequence. It cites Penrith Rugby League Club Ltd v Commissioner of Land Tax [1983] 2 NSWLR 616 at 622 to support its argument that the fact that the land was physically divided by a road is irrelevant because it was used as a whole.
4. But the facts of that case are a long way from this one. The substantial affidavit evidence before the Tribunal is almost silent on the question of rotating cattle from the southern (main) paddock, where the cattle were normally kept, into the northern. Mr Cottle did say in his third affidavit that he 'personally rotated stock to and from the upper section of the land at least once per year' (CB 2292 [16]) and he also mentioned, in cross-examination, that he rotated the herd himself some time between early February and 21 March 2014. But when Mr Lynch suggested to him that the first lot of cattle were always in the southern paddock, his response was a tentative 'No, I don't believe that's the case' (T29.15). On top of that, there is no easy access between the two paddocks; moving cattle from the southern to the northern paddock requires negotiation, along the Ropes Creek line, of a narrow underpass beneath the dual carriageway of Lenore Drive, and then traversing the electricity easement through to the paddock itself.
5. Similarly, Mr Stewart referred to the herd being 'periodically' mustered into the northern paddock 'if they had started to cross under the underpass of the Ropes Creek bridge. The cattle would remain in the northern paddock until they were mustered back onto the southern paddock': CB 2468 [6]. I accept this evidence, over the Chief Commissioner's objection, although I must say it tends to demonstrate not only that the use of the northern paddock was infrequent, but also that it was sometimes as much at the whim of the cattle as it was the result of any organised planning on the part of Filetron.
6. I find the cattle maintenance activity was almost entirely confined to the southern paddock.
7. What about other uses of the assessed land?
8. I have already found the Besant cattle were still on part of the assessed land in February 2014, and of course it follows that they were there on 31 December 2013. But does their continued presence amount to a 'use' of the land, either by Besant or by someone else? I do not think it does. I agree with the Applicant's submission that a 'use' of land requires at least that someone is causing something to happen: Metricon Appeal at [60]. Here, Besant had effectively abandoned his cattle, and neither he nor anyone else was engaging in a 'use' of the land as a result of the cattle's continued presence there.
9. Then there is the question whether the Applicant itself was using the assessed land, or part of it, because of the construction of the dry detention basin on the southern paddock adjacent to the Pelikan Artline site, and/or the use of the previously converted dam/stormwater detention pit on the northern paddock adjacent to the Tyremax site.
10. The dry detention basin on the southern paddock was constructed during the initial development of the Pelikan Artline site between April and October 2014. This is the time period during which no cattle were on the assessed land, since they had been removed for sale in late March. Neither the construction of the basin during that timeframe nor its use thereafter can be relevant to the use of the assessed land at 31 December 2013. (At most, on 31 December 2013 it was a planned use of part of the land, but Metricon Appeal confirms that only actual physical deployment matters.) For the purposes of the 2014 land tax year I disregard the construction and later use of the detention basin but I will return to a consideration of it later in these reasons, in respect of the 2015 and 2017 land tax years.
11. The conversion of the dam on the northern paddock into a combined dam and stormwater detention pit occurred in 2009 with the construction of the levee. From then on it was used both as a dam, for feeding the cattle on the odd occasion they ventured onto the northern paddock, and to detain and slowly release storm water. To some extent, therefore, it performs a function that is connected with the 'cattle maintenance' activity carried on by Filetron, and to some extent it performs a function that is not so connected.
12. With those uses of the assessed land identified, it is necessary to weigh them against each other to see whether the use of the assessed land for the maintenance of cattle for the purpose of selling them is the dominant use. In accordance with Thomason ([56] above), the weighing exercise requires the consideration of: the amount of land actually used for any purpose, the nature and extent and intensity of the various uses of the land, the extent to which land is used for activities which are incidental to a common business or industry … , the extent to which land is used for purposes which are unrelated to each other, and the time and labour and resources spent in using the land for each purpose.
13. Amount of land - The cattle maintenance use took up the southern paddock for the entire period 12 December 2013 to 21 March 2014, and possibly the northern paddock on one isolated occasion. The dam/detention pit took up part of the northern paddock for the entire period.
14. Nature and extent and intensity of use - There were 30 cattle on the land, and they were probably there for most of the time between 12 December 2013 and 21 March 2014. Mr Cottle attended the leased land 'at least twice a month' (CB 2290 [8]) during this period but there was no intensive activity undertaken such as pasture improvement, installation of irrigation or supplementary feeding of the cattle.
15. Time and labour and resources - Very little time, labour or resources were devoted to the cattle maintenance activity. There was some attendance on the leased land by Mr Cottle and Mr Stewart but it seems to have been as much for the checking or repair of the fences as for actually tending to the cattle. However, checking and repairing the fences is an activity incidental to the cattle maintenance activity and should be weighed on that side of the scale.
16. As for the detention pit on the northern paddock, I find on the basis of Mr Stewart's evidence (CB 2479 32(b)) that there was no work undertaken from the time the levee was constructed in 2009 until the Tyremax site was developed in 2015/16.
17. Conclusion - I am satisfied that the use of the assessed land for the maintenance of cattle for the purpose of selling them was the dominant use of the assessed land in respect of the 2014 land tax year. I have reached that view despite the fact that only part of (albeit the major part of) the assessed land was consistently used for the cattle maintenance activity, and also having regard to the fact that the competing use - the stormwater detention use of the combined dam/detention pit - was minor when compared with that use.

The 2015 land tax year

1. No more cattle were brought to the leased land until October 2014, when 25 heifers were delivered.
2. Mr Cottle's evidence is that there were a number of reasons why he did not immediately re-stock the leased land after the first heifers were removed: the March-April period is 'when we generally calve', so there was no immediate need to lighten the carrying capacity at the other properties; there was sufficient feed on the Southern Highlands properties; and to allow the pasture of the leased land to re-establish: CB 2291 [11].
3. Mr Cottle did not mention the development of the Pelikan Artline site, which was also taking place during precisely the same period when the leased land was free of cattle. While most of the work relating to this development was carried out on the previously excised parcel, the construction of the dry detention basin occurred on the assessed land, directly to the east of the development site and south of Lockwood Drive. After its construction the detention basin continued to perform the function of draining water from the Pelikan Artline site - although taking up only 1567.41m2 in area (CB 2474 [25]).
4. Mr Lynch, for the Chief Commissioner, submitted that Mr Cottle's initial calculation of additional revenue (detailed in [34] above) amounted to a 12 month plan for the first batch of cattle, and that the sale of the first 30 heifers after only 3 or 4 months indicated the original plan had been abandoned: T284.1-6. I do not see it that way. I think the proper way to characterise Mr Cottle's arithmetic is as an annualised calculation of the expected benefit for any period during which cattle might be deployed on the leased land. Accordingly, I infer that he put the 25 heifers on the land in October 2014 intending the same use and outcome as with the initial 30 heifers in December 2013.
5. But somewhere along the line, things changed. These 25 heifers stayed on the leased land for over two and a half years. Mr Cottle explained that '[u]nlike the previous occasion when we had stocked the Leased Land, we did not see rapid improvements in the cattle': CB 2291 [12]. He put this down to the cutting of the fences, the unwanted pregnancies resulting from some of the heifers mixing with the local bulls, seasonal conditions, and the acquisition of pink eye by some of the cattle.
6. His explanation is short on detail. The cutting of the fences had been a problem from the very beginning, but it seems to have been addressed only on a piecemeal, ad hoc basis.
7. As for the pregnancies, Mr Cottle said 'some of the cows' became pregnant (CB 2292 [12]) and he confirmed in cross-examination that it was only some of them, not all (T72.38), but he nevertheless 'made the assessment that the majority of them would have been pregnant or a vast majority of them would have been pregnant' (T73.1-2). He said he doesn't like transporting cows that are in calf so he decided to 'calve the cows down'. This, together with his view that 'a cow and a calf is going to be worth a lot more than an empty heifer, yes, or an older heifer' (T72.21-23), meant that none of them were sold until July 2017.
8. The pink eye occurred, on Mr Cottle's evidence, 'on at least one occasion during the Relevant Tax Years' (CB 2082 [43]). The lack of specificity as to timing does not allow me to make a finding that the affliction had an impact in relation to the 2015 land tax year.
9. In any event, it is clear there was an activity being carried on which is properly characterised as the maintenance of cattle. Was that maintenance activity conducted for the purpose of selling the cattle? The Applicant's counsel, Mr Richmond SC, submitted the question is not whether the cattle were being maintained for the purpose of profit, but for the purpose of sale: T283.12-13. In this he is correct, but I note the statement of Barrett AJA in Metricon Appeal at [59] that each of paragraphs (a) to (f) in s 10AA(3) 'has a purpose or objective of commercial gain'. In other words, it seems, selling animals for a hopelessly inadequate price, or after their condition has been allowed to deteriorate to such an extent that they are almost worthless, may invite a finding that the purpose of maintaining the animals, assessed objectively, was not the purpose of sale but was some other purpose.
10. During closing oral submissions I also raised with Mr Richmond the need for his client's case to establish, positively, that the cattle were being maintained for that purpose. Mr Richmond acknowledged the point. He submitted that this is the purpose for which the cattle were being maintained - and the fact that they were ultimately sold supports a finding that the purpose for which they were being maintained, assessed objectively (Metricon Appeal at [60]), was the purpose of sale.
11. Of course, the fact that the cattle were ultimately sold does not necessarily mean that they were maintained for the purpose of sale, any more than the failure to sell cattle necessarily means that they were not maintained for that purpose.
12. Here the cattle were indeed sold, but not during what might be regarded as a 'reasonable period' spanning either side of the taxing date of 31 December 2014. The question is, what does the evidence disclose about the activities undertaken on the assessed land at midnight on 31 December 2014, or during a reasonable period either side of that instant, and to what extent do those activities point to the existence of a state of affairs by which animals were maintained for the objective purpose of selling them.
13. The actual physical activities are few. There is no pasture improvement, there is no supplementary feed brought onto the land. Mr Cottle's visits, 'about once a month', comprised nothing more than driving across the paddocks and observing the cattle: CB 2290 [8]. Beyond that, there was fencing repair, and rounding up the cattle when they escaped. But it would not be correct to say the cattle were being neglected, or had been abandoned - either of which may have cast doubt on whether they were truly being maintained for the purpose of selling them.
14. Objectively, the cattle were being maintained there for the purpose of eventual sale. Therefore, the Applicant has established a use of the assessed land that answers the description 'the maintenance of animals … for the purpose of selling them'.
15. The area of the assessed land used for that purpose is slightly less than it was for the 2014 land tax year. This is because, in the interim, the dry detention basin had been constructed east of the Pelikan Artline site: [79] above. The reduction in the area of assessed land available for the use of the cattle is minimal, at 1567.41m2.
16. That detention basin, despite its small footprint, performs an important function for the Fitzpatrick Industrial Estate. It was constructed during the period April to October 2014, when no cattle were on the assessed land. During its construction there was, therefore, an area of the assessed land used for a purpose not connected with the cattle maintenance activity. The area used for that other purpose must surely have been greater than the area now occupied by the detention basin, to accommodate the movement of trucks and other equipment on a temporary access driveway. The Tribunal has not been told how much additional land was used for this purpose.
17. There is also the continuing use of the dam/detention pit on the northern paddock.
18. I now turn to the weighing exercise described in Thomason: see [56] and [71] above.
19. Amount of land - The cattle maintenance use took up the southern paddock (with the exception of the detention pit area) from 23 October 2014 onwards. However, there were periods, not identified with precision, during which there were fewer than the full complement of 25 head of cattle on the assessed land.
20. The use of the northern paddock for the cattle maintenance activity was at best patchy, and certainly significantly less than the use of the southern paddock. The combined dam/detention pit took up part of the northern paddock for the entire period.
21. The Applicant submits that leaving the leased land empty of cattle for a period of 7 months (late March to late October 2014) still amounts to a 'use' of the land for primary production purposes. For that submission it relies on Young v Chief Commissioner of State Revenue [2020] NSWSC 330 and Rainn Pty Ltd v Commissioner of State Revenue [2016] VSCA 338, which acknowledge that inactivity - such as leaving land fallow as part of a crop rotation cycle - can amount to a 'use' of land for a qualifying purpose. The evidence here is that one of the reasons for not running cattle on the land during the 7-month period was to allow the pasture to re-establish itself. But I am not satisfied that in the circumstances of this case, keeping the land empty of cattle for a period of 7 months amounts to a continued use of the land for the qualifying purpose.
22. It was while the land was free of cattle that the dry detention pit to the east of the Pelikan Artline site was constructed. The evidence does not disclose how much of the 7-month period was taken up on that activity. Owen Friend, chief estimator at FDC, estimated the cost of the detention pit and temporary driveway at $9,733 plus GST. Mr Friend explained in his affidavit that FDC billed the Applicant for the work it did on the Pelikan Artline site but the progress claims it made at the time did not separately detail the cost of these particular activities. Mr Friend's estimate was prepared in March 2020: CB 2547-2549.
23. Since its construction there has been a continuing use of the actual area of the detention pit for a purpose not connected with the cattle maintenance activity.
24. Nature and extent and intensity of use - The nature and extent of the various uses of the assessed land, or parts of it, are detailed in [95] to [99] above.
25. Based on actual physical activity, the most intensive use of any part of the assessed land during a reasonable period either side of midnight on 31 December 2014 was the use of part of the southern paddock for the construction of the dry detention pit.
26. Time and labour and resources - The time, labour and resources devoted by FDC, for the benefit of the Applicant, to the construction of the detention pit has not been quantified. The amount of money expended by the Applicant in connection with that activity has been estimated by Mr Friend as $9,733 plus GST.
27. The amount of time and labour devoted by Mr Cottle, on behalf of Filetron, to the cattle maintenance activity is, on his own admission, minimal. The amount of money expended by Filetron for its use of the leased land runs to $15,600 plus GST.
28. Conclusion - If dominant use were to be decided solely by reference to the area of land used for particular purposes, it may be possible to conclude in this case that the dominant use of the land at midnight on 31 December 2014, assessed by reference to a reasonable period either side of that date, was the cattle maintenance use.
29. But it is not as straightforward as that. The authorities establish that a range of factors and circumstances are to be taken into account. To the extent that I have been able to, that is what I have done in [95]-[103] above.
30. I am satisfied that all uses of the assessed land that may have a bearing on the question of exemption for the 2015 land tax year have been identified. But I am not satisfied that the dominant use of the assessed land was the cattle maintenance use. There are several reasons for this; no single one of them is determinative, but when weighed together they point me away from the level of satisfaction I need to reach.
31. There is the minimal use of the northern paddock for the cattle maintenance activity, at the same time that the combined dam/stormwater detention pit is used for the very significant purpose of controlling stormwater run-off from the Industrial Estate. In fact, this use of the northern paddock is easily the main use of that part of the assessed land.
32. There is the further significant use of part of the southern paddock for a similar purpose, in connection with the Pelikan Artline site. The information provided to the Tribunal about the construction of the detention pit fell short in important respects, making it difficult to establish precisely how this activity should be weighed in the balance.
33. There is the low-intensity nature of the cattle maintenance activity, which in practical terms is almost entirely conducted on only part (albeit the larger part) of the assessed land. Mr Cottle's relatively infrequent attendance, entailing driving across the paddocks and observing the cattle, may have been all that was necessary but it does not help to characterise this use of the land as the dominant use. There is no adequate information about why the number of cattle brought onto the land in October 2014 was as low as it was, particularly since the larger stocking level in December 2013 was regarded as such a runaway success. Was there not enough feed for more? Were there no more heifers needing to be culled from the herd? And why was the assessment made that a 'vast majority' of them would have been pregnant (a fact not disclosed in the affidavit evidence, but only in cross-examination)? If pregnancy was a factor in holding them back from sale, effectively reducing the options for making money from them, why not confirm the position with testing?
34. In any event, the result is that a major part of the assessed land was used for uses including the non-intensive cattle maintenance use, an unquantified but unquestionably intensive use of the construction of a dry detention pit, and the continuing use of the detention pit for drainage purposes; a smaller part of the assessed land was used hardly to any extent for cattle maintenance, but to a significant extent for stormwater drainage purposes. Both the water drainage uses were inextricably connected with the industrial use by the Applicant of adjoining land and those drainage uses did not have a primary production character to them.
35. When there are multiple uses of land and not all of them attract exemption, a taxpayer must be able to establish to the satisfaction of the decision-maker all the uses to which the land is put, and then provide enough information to enable a comparison to be undertaken to determine whether the 'exempt' use is the dominant use when compared with all other uses. But if the taxpayer does not provide enough information to enable a full comparison to be undertaken in respect of the factors identified in cases such as Thomason, then the taxpayer must necessarily have failed to establish the 'exempt' use is the dominant use.
36. That is one of the problems here. The other is that, in any event, the cattle maintenance use is so minor - not just in a relative sense, but in an absolute sense as well - that it is difficult to characterise it as the dominant use. It is an activity that has a superficial appeal to dominance on the basis of relative area used, but on no other.
37. I find in respect of the 2015 land tax year that the cattle maintenance use was not the dominant use of the assessed land.

The 2017 land tax year

1. The excision of the Tyremax site once its development was complete reduced the size of the assessed land but other than that, there was no change in the use of the northern paddock.
2. During the period July 2016 to February 2017 the Pelikan Artline site was extended, which involved the construction of a temporary access driveway running north/south along the side of the Pelikan Artline site, and at the very edge of that part of the western boundary of the assessed land. The driveway was constructed to allow vehicular access to the Pelikan Artline site: CB 2472 [21]-[22].
3. Neither of these activities makes the Applicant's case any stronger for the 2017 land tax year than I have found it to be for the 2015 year.
4. Other than these particular activities, the facts in relation to the 2017 land tax year are not materially different from those in relation to the 2015 land tax year. Accordingly I conclude in respect of the 2017 land tax year that the cattle maintenance use was not the dominant use of the assessed land.

The remaining tests

1. There are two further tests that need to be satisfied before the assessed land can be accepted as exempt from land tax for the 2014 land tax year. (Since the 'dominant use' test has not been met for 2015 or 2017 the two other tests are not relevant for those years. Therefore, in the analysis that follows I focus solely on the facts found in relation to the 2014 land tax year.)
2. The two further tests are the 'commerciality' test in s 10AA(2)(a) and the 'profit' test in s 10AA(2)(b) of the LTM Act.
3. These provisions were added to the LTM Act in 2005. They introduced a 'more stringent test' for the availability of the primary production exemption when the land in question is not rural land: Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23 (Maraya) at [66], per Gzell J, upheld on appeal in Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWCA 408 (Maraya Appeal) at [64].
4. Unlike the position with the 'dominant use' test - where the focus is on the use of the subject land and no other - the 'commerciality' and 'profit' tests are not necessarily so confined.
5. For example, in Thomason, the Court said at 307: It is implicit that the commercial purpose should be intended to be met, or the commercial character of the enterprise should be evident, from the use of the subject land, either on its own or in conjunction with other land. … The interpretation we have adopted would allow, for example, a person who owns two or more blocks of land and who uses them together to conduct the business of farming to take the benefit of section 17(1). The interpretation would also allow a person to make the land available for use by another person as part of that other person's business of farming.
6. While Thomason dealt with different legislation, Gzell J in Maraya thought the same considerations applied to s 10AA of the LTM Act. At [73] his Honour stated: It follows that where, as here, a primary production enterprise is conducted on the subject lands and other lands, the tests in s 10AA(2) of the [LTM] Act are satisfied if the requisite purpose or character is evident from either the use of the subject lands viewed in isolation from any other land or, the use of the subject lands viewed as part of the enterprise (Thomason at 307).
7. In Vartuli v Chief Commissioner of State Revenue [2014] NSWSC 678 (Vartuli), White J said in relation to s 10AA(2)(a) of the LTM Act at [36]: … In deciding whether the use of the land was engaged in for the requisite profit-making purpose, and whether the use of the land had a significant and substantial commercial purpose or character, it is appropriate to consider the entirety of Sydrom's and Deemhire's primary production activities, whether conducted on the land or not. This is because the Edmondson Park land was only part of the land used as part of those companies' primary production activities. Those activities had the same purpose and character, irrespective of the particular parcels of land upon which the cattle grazed (Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23; (2013) 88 ATR 379 at [73]; Thomason v Chief Executive, Department of Lands (1994-1995) 15 QLCR 286 at 307).
8. Similarly, in Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9, White J stated at [48]: … the inquiry is not confined to the use of the land the subject of taxation. If the land the subject of taxation is only part of the lands used for primary production, the use of the other lands can be considered in order to decide whether the primary production use has a significant and substantial commercial purpose or character and is engaged in for the purpose of profit.
9. The Chief Commissioner emphasises the use of the conditional 'if' in the final sentence of the excerpt from Leppington, and submits, correctly in my view, that it is for the Applicant to establish, as a fact, that 'the land the subject of taxation is only part of the lands used for primary production'; otherwise the enquiry for the 'commerciality' test and the 'profit' test will be confined to the assessed land and will not include the lands in the Southern Highlands.
10. There is nothing new or unique about the requirement for the Applicant to establish that fact. It is stated in Thomason - a person who can take multiple blocks of land into account is 'a person who owns two or more blocks of land and who uses them together to conduct the business of farming' (my emphasis). It is stated in Maraya - it is 'where … a primary production enterprise is conducted on the subject lands and other lands' that the subject lands will be 'viewed as part of the enterprise'. And it is stated in Vartuli - all of the primary production activities of the users were to be considered because the subject land was 'only part of the land used as part of those companies' primary production activities'.
11. The parties dealt with this issue, and the way to assess these two additional tests, in fundamentally different ways.
12. The Applicant focused on trying to establish, through the evidence of agricultural and financial experts, that the use of the 'Primary Production Properties' (defined to mean, collectively, the Southern Highlands properties and the leased land at Erskine Park) met the 'commerciality' and 'profit' tests. This approach effectively assumed that the use of the leased land at Erskine Park formed part of Filetron's overall primary production enterprise.
13. On the other hand, the Chief Commissioner's agricultural expert was instructed to assume that 'during the Relevant Period, the livestock operation carried on in the Southern Highlands had a significant and substantial commercial character' (CB 4394), and to provide an opinion on whether and how the use of the assessed land contributed to the overall operation conducted by Filetron. The Chief Commissioner's financial expert was asked to report, among other things, on 'what if any contribution the maintenance of cattle on the [leased land at Erskine Park] makes to the overall operation conducted by Filetron' (CB 4860 [3]).
14. At different times during the hearing the parties' respective approaches were described as 'like ships passing in the night' - which seems an entirely apt description.
15. A further potential point of difference between the parties' approaches is the Chief Commissioner's submission that the Applicant must demonstrate 'integration' of the primary production activities at Erskine Park with those in the Southern Highlands.
16. In the Chief Commissioner's submission, integration may be more difficult to establish where, for example, the nature of the operations conducted at different locations is dissimilar, or the operations conducted at one location provide little or no commercial or economic benefit in themselves.
17. The Applicant responds that 'integration' is not the test, but even if it is, it has been established.
18. The authorities do not use the word 'integration'; instead, they tend to use the expression 'part of'. It can be accepted that a part of something is integral to the whole, and so in that sense perhaps the word 'integration' has some relevance. But I see no advantage in introducing an additional label.
19. I will focus on whether the activities at Erskine Park are part of a larger whole.
20. I start with the observation that the cattle on the Erskine Park land were sourced from one of the Southern Highlands properties. On one view the exercise of transporting them to Erskine Park was simply a relocation of some of the cull and dry heifers from a place where there was 'no space' (Mr Cottle, CB 2080) to a different place where there was. But we are talking about 30 heifers. Mr Cottle said there 'might have been 100 heifers that were culled' that year (T61.41). Thirty per cent of those went to Erskine Park and the remainder 'went off the land' (were sold or otherwise disposed of) whereas in the past, all of them would have gone off the land (T61.46-T62.3). This is said to have reduced grazing pressure in the Southern Highlands, but 30 head represented only about 1.5 per cent of the entire herd.
21. The business had never done this before. That is not to say that a new activity can never form part of an ongoing business - businesses often grow that way - but nor does the common ownership of the livestock necessarily tie the activities together. And why do this now? Why these particular heifers? Were they the healthiest ones? Were they the ones with most potential to gain weight quickly? Answers to these questions may have been of assistance.
22. The Applicant cites as a factor in its favour the common sets of financial statements, which lump the Erskine Park and the Southern Highlands activities together. I disagree. It is a choice entirely open to Filetron whether it records and reports the activities separately or as one. Consolidated reporting says nothing about whether the Erskine Park activities are truly part of an overall operation.
23. The Applicant also refers to the shared labour between Erskine Park and the Southern Highlands properties. This factor is not irrelevant, but it is not particularly persuasive. The Applicant points to Mr Cottle's description of the arrangement, at CB 2081 [37], quoted here in full: During the terms of the Pastoral Lease and up until January 2016, most of the day-to-day running of the Leased Land was undertaken by Mick Mara who was employed on a full-time basis by The Russell Trust as a manager. Mr Mara was based at the property known as 'Bangadilly' [in the Southern Highlands]. In January 2016, Mr Mara's role was taken over by Rob Hall. Mr Hall was (and remains) based at Bangadilly. During the term of the Pastoral Lease Mr Hall also attended the Leased Land regularly. During the assessment years the Russell Trust also employed about four additional people as farm hands at any given time. From time to time, these farm hands would conduct work on the Leased Land. The Russell Trust's employees, including Mr Mara and Mr Hall, were not paid separately in relation to their work on the Leased Land and management of the Leased Land was part of their roles generally.
24. The Chief Commissioner had some objections to some of the content of this paragraph on the basis, generally, that it was speculative, hearsay and/or making unfounded assertions. But in any event, the evidence does not take the Applicant's case far. Much like the financial reporting, the failure to account separately for activities at different locations, or the use of staff from one location for piecemeal activities at another, says little about the issue at hand. That is especially so when Mr Cottle makes such a strong point about the low-intensity nature of the activities at Erskine Park in the first place.
25. The Applicant does address the 'low input' strategy for Erskine Park in the Applicant's Response to RASE at [14]. The point the Applicant makes is that the activities on the assessed land are different in intensity from those in the Southern Highlands, but that is a deliberate strategy. I agree the activities can still be part of the overall enterprise even though the nature and intensity of the activities differ in this way.
26. Nor is it necessarily a disqualifier that the activities are conducted at different locations, but it is a factor that needs to be taken into account. Here, a distance of over 100 kilometres separates the Erskine Park land from Filetron's properties in the Southern Highlands. It is not clear why the Erskine Park land, above all others, was chosen for these particular 30 heifers, for this particular activity. There is no suggestion that this was the sole, or even the best, tract of land available at the time.
27. Turning now to the very start of the arrangement between the Applicant and Filetron, Mr Cottle agreed it was his decision to 'chase the lease from Fitzpatrick Investments' (T34.42-45). But Mr Stewart said he was the one who approached Mr Cottle; it was his idea (T111.45-T112.5). No matter which is correct, or even if both of them together instigated the arrangement, it is clear the Filetron lease had the potential to benefit both the Applicant (by a saving in land tax of around $1 million a year) and Filetron (through an increase in revenue of, at best, $20,000 a year). And even though Mr Cottle emphasised the benefit to Filetron as the primary - perhaps sole - reason for entering into the lease, it is hard to imagine he would have been unaware of the land tax benefit that may at the same time accrue to the Applicant, as the trustee of a trust of which he is a discretionary beneficiary.
28. The Chief Commissioner's agricultural expert in this matter is Peter Schuster. He provided his opinions with his affidavit dated 2 March 2020. As already noted, Mr Schuster was instructed to assume that 'during the Relevant Period, the livestock operation carried on in the Southern Highlands had a significant and substantial commercial character' (CB 4394). His opinions are summarised at CB 4446-7 but the most significant ones are: 1. The use of the assessed land made 'a moderate negative contribution' to the overall operation conducted by Filetron; 2. Filetron would have been better off had it sold the cull and dry heifers rather than transporting them to Erskine Park; 3. He saw no strategic primary production outcome being derived by the overall operation from the use of the land at Erskine Park; 4. Mr Cottle's anticipated production level when assessed in terms of stocking rate relative to carrying capacity was within a reasonable range and probably conservative over the majority of the years in question; 5. Some of Mr Cottle's expectations, particularly about the rate of growth of the heifers, their estimated selling prices and overall net profit, were optimistic or unrealistic; 6. The amount paid by Filetron for the lease appeared excessive and disconnected from the production potential of the assessed land; and 7. Filetron did not need the Erskine Park land as it did not need to retain the cull heifers; their retention 'served no strategic, practical or evidently economic purpose'.
29. For the Chief Commissioner to rely on some of those opinions, particularly those at (b), (f) and (g), may be thought to amount to an attempt to dictate to a taxpayer how to run their business profitably or economically, which of course the Chief Commissioner cannot do: Tweddle v Commissioner of Taxation [1942] HCA 40. But that would be an incorrect characterisation. To the extent the Chief Commissioner wishes to rely on these opinions, it is for the purpose of resisting an argument that the activities conducted in Erskine Park form part of a broader activity also conducted in the Southern Highlands. He is perfectly entitled to take that course.
30. The Applicant's agricultural expert, Dr Neil Moss, agreed with (a), (d) and (e) but he did not fully accept the other propositions. He made the reasonable point during the concurrent evidence session that farmers often predict a best-case outcome when they do their budgeting. I also accept that one should be careful when looking back on outcomes that could not always be predicted with absolute precision.
31. In addition to the opinions he expressed in writing, Mr Schuster also accepted in cross-examination that: 1. A cattle farmer who has cull heifers from the breeding herd has a choice whether to sell them or instead put them in a paddock to fatten them for later sale (T220.15-28); 2. A commercial and rational way to assess the profitability of that second alternative is to estimate whether there will be a marginal profit from the activity, in other words whether the marginal revenue from fattening the heifers would exceed the marginal costs of doing so (T220.30-33); 3. The growing out of cull heifers in a separate paddock, which may be some distance from the main farm, to fatten them for later sale, 'if one takes into account properly the potential revenue and the marginal revenue and the potential marginal cost of doing it at that other place, is a common and rational way to conduct a cattle business' (T226.44-T227.4).
32. Mr Schuster also accepted that it 'certainly happens' that farmers have one or more properties in one district and another property in another district which may be some considerable distance away but still part of the operation of that farm (T228.5-9). He did not know how common it was, but said it can happen because 'it's often difficult to buy the neighbouring property and […] the opportunity to expand generally comes outside neighbouring properties' (T228.26-28).
33. On this topic Dr Moss added: [I]t's not uncommon for people to (inaudible) on remote sites for a variety of reasons. Some of that can be due to access to different opportunities with respect to the climatic variation as part of a risk management strategy. Sometimes, mainly because they run out of land in close proximity to either buy or lease that may have been available and they do want to do --- want to do something else. Sometimes an opportunity arises and they choose to pursue it.
34. I note there is no suggestion in this case that 'climatic variation' or 'risk management' were factors in the decision to move the 30 heifers to Erskine Park.
35. I accept it was a rational decision on Mr Cottle's part to remove 30 heifers from the main herd for the purpose of growing them out and selling them at what he estimated would be a higher price, at a later time.
36. However, it does not follow that the way he implemented that decision resulted in the activity forming part of the overall Filetron operation. It was certainly designed to look that way, and at a superficial level it does. It is, for example, easy to accept that there was a primary production activity being conducted at Erskine Park and there was a primary production activity conducted in the Southern Highlands. But unless they are 'used together to conduct the business' of primary production (Thomason), or the Erskine Park land was 'part of the land used as part of [Filetron's] primary production activities' (Vartuli), the overall Filetron operation is irrelevant to the 'commerciality' test or the 'profit' test.
37. There are factors that weigh significantly against the proposition that the activities at Erskine Park formed part of the overall enterprise of Filetron.
38. There is the lack of an explanation for the selection of this particular property for the growing out of the heifers. If the activity were truly to be conducted as part of the overall business operation, then there would surely be some evidence that alternative location options had been explored and evaluated, and this location eventually decided upon, on reasonable grounds.
39. There is the large distance between the main business operations in the Southern Highlands and the activities at Erskine Park. There is no explanation as to why it was thought to be a good business proposition to move the heifers so far away when other, closer, and equally appropriate locations may well have been available. The inference is open that the location was chosen (by Mr Cottle on behalf of Filetron) at least as much for the benefit that may accrue to the Applicant as for Filetron's business purposes. In all the circumstances I draw that inference. See the discussion in [144] above.
40. There is the lack of security of the cattle as a result of the repeated cutting of the fences. This was not an unexpected circumstance. It had been an issue, and it was known to have been an issue, even before the Filetron cattle arrived on the property. That it was not adequately addressed in a timely manner does not indicate a serious, business-like approach to the activities there.
41. There is the almost total lack of attention to the animals during their time there. I hear what Mr Cottle says about the 'low intensity' or 'low input' nature of the operation but this approach not only allowed the heifers to go missing but also their absence not to be noticed immediately. It is an unusually relaxed approach to livestock that are meant to be the source of income and, ideally, profit.
42. The Applicant submits (Closing Submissions at [97]) that Filetron's operations on the Erskine Park land were part of its wider farming business, which is properly characterised as a single business since all the farming activities, including those in Erskine Park, were 'closely connected and interdependent'. I do not see how that is an appropriate way to describe things. Nothing that was done in Erskine Park was connected, let alone closely connected, with anything done in the Southern Highlands - apart from the fact that, at a very high level of generality, the activities at both locations answered the description of primary production activities. Nor did anything done in Erskine Park depend on anything done in the Southern Highlands, or vice versa.
43. The Applicant also relies, in its reply submissions at [31], on the 'longstanding connection Mr Cottle has with the [Erskine Park land] and his familiarity with it' and the fact that 'cattle grazing reflects the longstanding prior use of the [Erskine Park land] before its rezoning in 1994 and again in 2009'. Even accepting those propositions, it is difficult to see how they bear on the question whether what Filetron, through Mr Cottle, decided to do in Erskine Park formed part of a larger enterprise including the activities in the Southern Highlands.
44. I am not satisfied, based on the way the Erskine Park activities were entered into and the way they were conducted, that they form part of a single business comprising the operations in Erskine Park plus those in the Southern Highlands.

The 'commerciality' test

1. The activities conducted in the Southern Highlands are irrelevant to the 'commerciality' test. The question is therefore whether Filetron's use of the Erskine Park land alone had a significant and substantial commercial purpose or character.
2. In Maraya, Gzell J observed at [90]-[91]: … The test distinguishes activities amounting to a business that is carried on in a small way or as a sideline from those of a more serious and weighty kind. A business that satisfies the commerciality test will be an important one. It will usually also exhibit some of such characteristics as size, depth, bulk, weight, seriousness, quality, intensity and prominence. To determine whether Maraya's cattle operation had a significant and substantial commercial purpose or character, the court should consider the intensity of the operation, the size and quality of the herd, the size and carrying capacity of the land and the resources (whether of time, labour or expenditure) put into the development and maintenance of the cattle operation.
3. This test was upheld in Maraya Appeal at [55] and [83].
4. Having regard to the factors listed by Gzell J, I conclude that Filetron's use of the Erskine Park land in relation to the 2014 land tax year had neither a significant and substantial commercial purpose nor a significant and substantial commercial character. The use of the Erskine Park land falls so comprehensively short of satisfying the relevant test that I do not consider it necessary to add anything to what I have already stated.
5. In light of that conclusion it is unnecessary to consider the 'profit' test in relation to the 2014 land tax year.

Conclusion

1. The Applicant has failed to establish the primary production exemption for any of the 2014, 2015 and 2017 land tax years.
2. The Tribunal notes that the Applicant no longer disputes the correctness of the land tax assessment for the 2016 land tax year.

Order 1. The land tax assessments for the 2014, 2015 and 2017 land tax years are 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: 29 October 2021