"The following are the key issues in the applications in respect of each of the land tax assessment periods as at 31 December 2010, 2011 and 2012:

(a) whether a "business" of primary production was carried on at the Cranbourne Property within the meaning of subsection 67(1)(a)(iii), Land Tax Act 2005 (Vic);

(b) if there was a business or primary production, whether the Cranbourne Property was "used solely or primarily" for the business of primary production within the meaning of subsection 67(1)(a)(iii), Land Tax Act 2005 (Vic). In this regard, the applicants have raised an issue as to whether s.70 of the Land Tax Act 2005 (Vic) applies;

(c) if there was a business of primary production, whether at least one of the applicants was normally engaged in a substantially full-time capacity in the business of primary production of the type carried on at the Cranbourne Property within the meaning of subsections 67(2)(a) and 67(4)(a) of the Land Tax Act 2005 (Vic)."

1. Mr Kotros of Counsel who appeared for the applicants stated that the key issue was:

"Whether at the relevant time (in the land tax years of 2011 - 2013 inclusive) Domenico Marrone was normally engaged in substantial full time capacity in the business of maintaining cattle for selling or natural increase"

Mr Kotros referred to s.67(2)(a), s.64(b), 67(1)(a)(iii) and s.70 of the LTA.

1. The land consists of 17.84 hectares (approximately 40 acres). On the land is a residential property, which property is fenced off from the rest of the land. During the relevant period, the house on the land was tenanted but is no longer tenanted. The house and veranda on the land is approximately 17.4 square metres (15 squares) and the land on which it sits as well as surrounding land is approximately 400 - 500 square metres.
2. The land was acquired by the applicants in 1984.
3. Prior to the land being re-zoned as an Urban Zone, the applicants claimed and received a Primary Production Exemption in relation to the land pursuant to s.66 of the Act.
4. At all relevant times, the applicants lived in residential premises away from the land. Currently, they are living in a residential property owned by them in Oakleigh East. However, there were occasions when they lived in the house on the land.
5. Until late 2010, the first applicant, Domenico Marrone was employed as a caretaker at Westall Secondary College (Westall) until late October 2010. From July to September of 2010, Domenico Marrone was on Long Service Leave from Westall. The first applicant maintains that he works long hours on farming duties associated with the land, for seven days a week. His evidence is that he leaves home early in the morning and returns late in the evening after working on the farm every day. His work consists of collecting feed such as stale bread and vegetables from various retail outlets, which he uses to feed the cattle on the farm. He then lays this food out in various food troughs on the land, so the cattle can eat the same. He also tends the fences and does other farming duties as required.
6. The long hours that the applicant alleges he works on the land, is contested by the respondent.
7. The animals on the farm consist of cows and a small number of sheep. At one stage there were two goats on the land, but they were apparently killed by a fox or foxes. The cows on the farm as at 30 June for the years 2010 to the year 2014 was 35, 28, 57, 93 and 120 respectively. At the present time the cattle on the farm number 106 head.
8. The evidence called by the applicant was that in 2009 after a period of drought the cattle stock on the farm was very low (approximately 28 cows). As a result a new Business Plan was developed whereby the cattle were to increase by natural increase and were to be hand fed from food sourced from various retailers and hay cut on the farm. Hand feeding the stock would allow the land to carry more head of cattle. In the years 2010 to the year 2014 the natural increase was 8, 0, 23, 0 and 89 respectively.
9. In all the relevant years plus an number of years before and since, the applicants have not made a profit from farming activities. They have been subsidised by money given to them by their children in particular, Ben Marrone (the applicants' son) has in the relevant years 2011 and 2012 paid the rates on the land which were approximately $30,000. It also appears, that the applicants' son, Frank Marrone gave the applicants $10,000 to purchase cattle and for other expenses. Although Domenico Marrone denied receiving money for the purchase of cattle from Ben Marrone, Ben Marrone stated that he had contributed cash sums for purchase of various cattle in particular in the financial year ending 30 June 2013. Also Ben Marrone had given money to his parents from time to time to help support them.
10. At the current time there is housing development around the land. Photos tendered in evidence showed that on the boundary of the land there were suburban houses constructed.
11. Dr Bender, Counsel for the respondent, has correctly summarised in a table relevant data in relation to activities on the land including income and expenditure. That table is reproduced hereunder, with an addition made by Mr Ben Marrone in relation to 2014:

Gross profit from cattle activities (see footnote calculation)[1]

All other expenses relating to Cranbourne Property[2]

$5,351 (plus council rates which are unknown for this year)

$6,568 (plus council rates which are unknown for this year)

Unknown (plus council rates which are unknown for this year)

Unknown (plus council rates which are unknown for this year)

Losses (cattle income less expenses - note that some of the expenses appear to relate to the rental property)

Loss but unknown quantum as council rates are unknown.

Loss but unknown quantum as council and water rates are unknown.

Loss but unknown quantum as council and water rates are unknown.

Loss but unknown quantum as council and water rates are unknown.

Figures for cattle stock on the property[3]

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

S.67 Exemption of primary production land in an urban zone in greater Melbourne

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

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

(b) the owner of the land is a person specified in sub-section (2).

(a) a natural person who is normally engaged in a ubstantially full- time capacity in the business of primary production of the type carried on on the land or...

(4) If 2 or more persons are the owner of a parcel of land and -

(a) at least one of them is normally engaged in a substantially full- time capacity in the business of primary production on the land; and

(b) the other or others are relatives of a person normally so engaged; and

(c) no other person is normally so engaged on that land -

the owners are deemed, for the purposes of sub-section (2), to be normally so engaged.

(a) a person is, or 2 or more persons are, the owner of a parcel of land on which the business of primary production is carried on; and

(b) a relative of the person, or of each of the persons, is normally engaged in a substantially full-time capacity in that business (whether or not the person, or any of those persons, is also normally so engaged); and

(c) no other person is normally so engaged on that land -

the owner is deemed, for the purposes of sub-section (2), to be ormally so engaged.

For the purposes of section 66 or 67, a part of a parcel of land is to be regarded as a separate parcel of land if -

(a) the part is occupied separately from or is obviously adapted to being occupied separately from other land in the parcel; and

(i) a natural person who is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land; or

(ii) a proprietary company all the shares in which are beneficially owned by natural persons and the principal business of which is primary production or a type carried on on the land; or

(A) the sole business is primary production of the type carried on on the land; and

(B) each beneficiary is a natural person who is entitled under the trust deed to an annual distribution of the trust income; and

(C) at least one of the beneficiaries, or a relative of at least one of the beneficiaries, is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.

S.22 Taxable value of parts of land not separately valued

(a) it is necessary to determine the taxable value of part of land ("the part") for or in a tax year; and

(b) the part was not valued separately as at the relevant date (within the meaning of section 19) in relation to that year; and

(c) the whole land was valued separately as at the relevant date.

(2) The taxable value of the part is the same proportion of the taxable value of the whole land as the area of the part bears to the area of the whole land.

1. Section 110 of the Taxation Administration Act 1997 makes it clear, that the applicants have the onus of proving their case.

1. Both Mr and Mrs Marrone were quite unsatisfactory as witnesses. In the case of Mrs Filomena Marrone, she stated, before her accident in February of this year which caused a fracture of one of her cervical vertebrae, she would spend five days per week helping her husband, Domenico Marrone, with farm duties. She said her duties would include driving the vehicle through the paddocks while her husband hand-fed the cattle. She also stated, that she had her own vegetable garden, behind the hay shed, where she would grow a variety of vegetables. The difficulty with her evidence was that in spite of stating that she was on the farm as I have previously described she seemed to know little about what was actually happening on the farm. When asked about the natural increase in cattle she did not seem to know if any calves had been born or otherwise. She also did not seem to know whether cattle had been taken to market or otherwise. That is, she neither saw the truck taking the cattle to market nor did she observe any decrease in the herd. I also observed, that she did not appear to know the contents of her witness statement which she swore to as being true and correct.
2. In relation to Domenico Marrone, like his wife his evidence was also unsatisfactory. He admitted that he had not read his witness statement until he attempted to read it with difficulty during the hearing. Further, there were numerous letters sent from his advisers, Pitcher Partners, on behalf of himself and his wife, which he knew nothing about. In fact, he did not even know who Pitcher Partners were. It should be noted that in this proceeding the applicants did not employ solicitors but instead employed Pitcher Partners who call themselves advisers but are a well-known firm of accountants in the city of Melbourne. I assume it was Pitcher Partners that instructed the applicants' counsel, Mr Kotros.
3. I also note that when Mr Marrone was giving evidence, his answers were both vague and evasive, and I was forced to warn him on at least one occasion that he should answer the question that was asked of him rather than the question he wanted to answer. His cross-examination took a lot longer than it needed to have done because of his evasive answers and the same question needed to be asked many times. Even though in part this problem may have arisen because English was not his first language, I tended to gain the impression that the problem really was that he did not want to answer a number of questions that Dr Bender put to him in cross-examination.
4. Further it is noted, that Mr Marrone on numerous occasions contradicted his own witness statement. It became clear that, in fact, Mr Marrone knew little of the documents that had been prepared and put to the Tribunal on the applicants' behalf by his Counsel and advisers. It also became apparent, that it was his son, Ben Marrone, who gave evidence before the Tribunal, had prepared and authorised the documents that were put to the Tribunal. It was Ben Marrone who instructed Pitcher Partners in relation to these proceedings. This was an unsatisfactory state of affairs, because it gave Mr Kotros the opportunity to say in his final address that the Tribunal should disregard the differences between Mr Marrone's oral evidence and that contained in the documents. For example, the figures in relation to the cattle numbers appeared to have come from Ben Marrone rather than Mr Domenico Marrone. This was very unsatisfactory.
5. The situation in relation to the evidence, was made more difficult by the applicants' son, Ben Marrone, being called to give evidence prior to both the applicants. This was clearly a choice made by Mr Kotros. As a result of the order in which the witnesses were called, Dr Bender was unable to put to Mr Ben Marrone matters that arose from the applicants' evidence when they were being cross-examined.
6. In spite of the many deficiencies from the evidence of both the applicants, I nonetheless gained the impression that the applicants were telling the truth in regard to:

1. The fact that Domenico Marrone spent most of his waking hours working on the farm. His hours would vary considerably, however I do accept what he said in that he treated his farming work like any other job. That is, he got up each morning and went to work, usually on seven days per week. On his way to work, he would pick up feed for the cattle. That feed for the cattle consisted of discarded and stale items such as bread, fruit and vegetables from various retail outlets. This would be used to feed the cattle; 2. That he was conducting the farming for the purpose of making a profit. This is in spite of the fact that no material was put before the Tribunal to show that the farming operations had ever made a profit. It is quite clear that the farming operations and the applicants' living expenses were being supported by donations of quite large amounts from the applicants' children. On one occasions, the applicants' child, Frank, gave them $10,000 in order to buy cattle. On at least two occasions, Ben Marrone had given the applicants approximately $30,000 to pay the annual rates for 2011 and 2012 relating to the land. That is a total of $60,000 approximately. Further on numerous occasions Ben Marrone said that he gave cash money to his father. While it is unclear how much cash money he was referring to, when asked about the purchase of $27,353 worth of cattle in the financial year ending 30 June 2013, Ben Marrone said that he gave his father numerous cash sums to help him purchase the cattle for this amount of money. He further stated that he gave his parents money in cash when they needed it. I found it surprising, that not only were the applicant's willing to accept money from their children who had young families to support, but they did not appear to see anything wrong with that habit.

1. Mr Domenico Marrone, believed that the farm made a profit in the last financial year and in this current financial year. While it is clear that the farm was doing better in those periods than it had done previously, there was no expert accounting evidence as to demonstrate whether there was a profit from the sale cattle, taking into account, such matters as the costs and depreciation of the cattle.

1. The applicant had a business plan although nothing was committed to writing. The business plan was suggested by Ben Marrone in 2009. The plan was that the applicants would seek to increase cattle numbers naturally by births. This increase would be done by allowing a greater number of cattle on the land than normal grazing would support. This was achieved by the use of hand feeding. While this was not a business plan considered in the modern day sense of having projected profit and loss statements and a proper analysis, nonetheless it was a plan. It is not necessary for a plan to have the formality of the documents that I have just described. The applicants' plan must also be taken in the context of the applicant's themselves who were not the sort of people that would sit down with an accountant and prepare formal documents, to see if their plan would work. 2. I accept, that the house property was rented until approximately 12 months ago, when, the applicants became sick of the tenants because there was difficulty obtaining payment of rent. It would appear, that the rent obtained from the house on the land, was greater than the profit obtained from the farming activities. However, the area of the house and the land which was adjacent to the house, which was largely fenced off from the farming property was less than 1% of the whole farming property. The evidence suggested that it occupied between 400-500 square metres. While the whole farming land was just under 40 acres.
2. Thus in relation to the applicant's evidence, although their evidence was highly unsatisfactory, there were important parts of their evidence which I do accept.

1. Mr Kotros submitted, that the requirements of section 70 of the LTA were complied with, in this particular instance, and that the land used by the farm house, including its surrounds, should be separated from the farm for the purposes of assessment under the LTA. Mr Kotros relied on a plan of the entire land which was prepared by the applicant's son Ben Marrone. The plan is in the Schedule hereto. That plan shows, that the house and the land which surrounds it, is entirely separate from that of the farm land, save and except for a common driveway, which driveway is sometimes used by the stock on the farm. It is also noted, that the garage shared by the farm and the house has a divide.
2. In dealing with section 70 of the Act, it is convenient that I deal with section s.70(b)(i) at the same time as I deal with s. 67(2)(a), as the wording of those two subsections is identical. Therefore I will only deal with s.70(a) at this time.
3. Dr Bender stated that in determining whether there was a separate occupancy of the house property, it was necessary to go further than the physical layout and operation of the premises[4]. Further he stated that the reference to 'obviously' in the section means that there needs to more than 'half baked' evidence of such adaption. He stated it raises the bar requiring physical evidence of such adaption to be very clear and demonstrable[5]. He further pointed out that there is difficulty in determining with reasonable precision whether there is any boundary between parts of the land and, if so, where can the relevant[6].
4. At paragraph 138 of Dr Bender's submissions, he stated the factors as to why I should accept his submission that s.70 of the Act did not apply to the property. He stated as follows:

"The onus is on the Applicants to prove separate occupancy, or that the house and immediate surrounds are obviously adapted to being occupied separately. The following factors point against a separate occupancy, or obvious adaptation to separate occupancy:

(a) A shared entrance and mailbox;

(b) One entry point to the property for electricity (although the farm no longer has it apart from the house);

(c) A shared driveway;

(d) A shared building for the garages (although with some attempt to have demarcation between the rental house garage and the other garage);

(e) Animals have access to the driveway and area near the house;

(f) No fencing off between the shared driveway and the backyard of the rental property (although there is some fencing around the backyard);

(g) House is owned and controlled by the applicants;

(h) The gate to the front yard is unlocked;

(i) There were lockers near the entrance of the house that were used by Domenico Marrone to store items;

(j) There were changes in the layout near the house. The photos at T21, 2011 proceeding show a different layout to those at page 24 and 25 of T10 of the applicants' folder. The oral evidence was that the photos at T21 depict the area as it was around 3 or 4 years ago. The evidence was unclear s to precisely when the layout changed to that shown in the photos at T10. The photos at T10 show no fence between the front fence of the property up to the house (other than the cyclone fencing to the right of the house);

(k) Domenico Marrone gave oral evidence that there was a lease agreement for the house and that it was with the agent, but gave no reason as to why it was not filed with the Tribunal. Accordingly, the Tribunal hs no access to the terms of the agreement. A negative inference should be drawn from that failure to file the lease.

(l) There is little evidence about the tenants' use of the house and how often they were there."

1. Even though, there is considerable separation between the house and its surrounds and the farm, I believe that the factors outlined by Dr Bender seem to indicate, that for the purposes of s.70 there was insufficient separation between the house and its surrounds and the farm. I accept what he has stated.
2. I further note, that the applicant's have asserted in a number of income tax returns that the rental house is part of the same business as the farming operation. Mr Kotros, submitted that the accountant was mistaken when he filled out these particular tax returns. However, the accountant was not called to say he was mistaken. In my view, I should not assume that the accountant was mistaken when there is no real evidence apart from some circumstantial evidence and the evidence of the applicant's themselves to say that that was not the situation. Further, I note that in Richardson v FCT [1932] HCA 67; (1923) 48 CLR 192 at 205-6 Dixon J stated:

"...it is enough for the present purposes to say that the general rule is that no person may, after obtaining an advantage by the assertion of rights in relation to another and while retaining it, set up and rely upon other rights against the same person inconsistent with the exercise of those already asserted."

1. In this particular instance, the applicants have already asserted on a number of occasions that the house is part of the same activity as the farming operations, and they should not now be allowed to take a different position by treating it as a separate parcel of land.
2. Having found, that the house and the farm property are one parcel of land, pursuant to s.70(a), I do not need to consider s.70(b)(i) except in so far as identical issues relate to s.67(1)(a)(iii) and (2a).

Matters concerning s.67 of the Land Tax Act

S.67(1)(a)(i) and (ii)

1. There is no issue in this proceeding, about s.67(1)(a)(i) and (ii). That is, that the land is in greater Melbourne and that it is in an urban zone.

S.67(1)(a)(iii) and (2)(a) Whether the activity on the land amounted to a 'business' of primary production

1. The parties are in agreement, that the applicant's activities in regard to the cattle did amount to 'primary production'. The issue is whether they were a business as required by s.67 LTA.
2. In Evans v FCT [1989] FCA 205; 20 ATR 922 at 939 Hill J digested the key indicators as to whether a business is carried on, although making clear that no particular indicator was decisive. The key indicators which he digested were:
   • (a) whether the activity has a 'significant commercial character' some of the other factors form part of this factor;
   • (b) whether the taxpayer has more than just an intention to engage in business;
   • (c) whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity;
   • (d) repetition and regularity of the activity;
   • (e) whether the activity is of the same kind and carried on in a similar matter to that of the ordinary trade in that line of business;
   • (f) whether the activity is carried out on in a symptomatic way and business like manner such that it is directed at making a profit (including the keeping of books and records);
   • (g) the size, scale and permanency of the activity (including the volume of operations and the amount of capital employed), although it is acknowledged that a person can carry on a business in a small way; and
   • (h) whether the activity is better described as a hobby or form of recreation or a sporting activity.

Each of these matters need to be considered separately.

1. Mr Kotros emphasised that the words "significant commercial purpose and character" are not statutory words, and he therefore suggested that to place importance on these words was adding a gloss. However, there are numerous cases that point to these words being used to determine whether or not a business is conducted, see Thomas v Federal Commission of Taxation 72 ATC 4094 at 4099 and Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 (8-9 per Mason J). In Hope's case, it was stated at 8-9:

"I accept, then, that 'business' in the subsection has the ordinary or popular meaning which would be given in the expression, 'carrying on the business of grazing'. It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purposes of profit and on a continuous and repetitive basis."

1. It is clear, from the cases of Martin v FCT [1953] HCA 100; (1953) 90 CLR 470 and Evans case that the test of whether a "business" is carried on, has both subjective and objective elements. In Martin v FCT at 474 Walsh J stated:

"The test is both subjective and objective: it is made by regarding the nature and extent of the activities under review, as well as the purpose of the individual engaging in them, and, as counsel for the taxpayer put it, the determination is eventually based on the large or general impression gained."

1. One of the important activities of business to consider is whether it has or in the future is capable of producing a profit, see Tweddle v FCT [1942] HCA 40; (1952) 180 CLR 1. Tweedle's case made it clear that a business may be carried on even if it is in a small way and further, that it is not for the Commissioner to dictate how a business should be carried on. In that case at page 7, Williams J stated:

"It is not to suggest that the function of the Income Tax Act or of those who administer them is to dictate to taxpayers in what business they shall engage or how to run their business profitably or economically. The Act must operate upon the result of the taxpayers activities as it finds them. If a taxpayer is in fact engaged in two businesses, one profitable and the other showing a loss, the Commissioner is not entitled to say he must close down the unprofitable business and cut his losses even if it might be better in his own interest, although it certainly would be better in the interest of the Commissioner if he did so."

1. In this particular instance, it is clear, that the cattle farming enterprise could not have survived up to the present time without the assistance of the applicants' children. I have previously made reference to these matters and say further, that it is clear that the applicant's son Ben has not only provided the applicants with money but has also provided a number of items of equipment which he obtained without cost from a building site belonging to another as well as his own building materials. Further, there has been labour donated by both Ben and Adrian (another son of the applicant). In relation to the labour donated by Ben, it is not only his labour that has been donated but also the labour of those that work for him in their working hours for example, the plumber Mr Fillipa. It is clear without all these donations, that the farming business could not have survived.
2. Even though, there has been no expert evidence of a financial nature as to whether it is likely that the farming operation will make a profit in the future, I accept the evidence of the applicant, that such a possibility is likely. Even though, the year for 30 June 2014 is not one of the land tax years with which I am concerned, it is clear that there was a natural increase in the cattle that year of 89 calves. This is substantially greater than what has been produced in previous years. It may be an indication, that the business plan which I have previously described is now working. While I appreciate, it is for the applicants to make out their case and prove the s.67 exemption, which could have been done by expert evidence, that is not the only way that they can do it. In this particular instance, they have done it by the opinion of the taxpayer themselves and the fact that future figures have shown a vast improvement in years subsequent to the tax years. I take into account, the words of Walsh J in Tweedle's case that even if a business does not make a profit, it is not for the Commissioner to say that the business should be closed down or that it is not a business. Thus at this point, I find, that even though the farming operation was not making a profit in the relevant years, it did have the potential to make a profit. I disagree with the submission by Dr Bender that the operation could never make a profit.
3. Dr Bender referred to Vartuli v Chief Commissioner of State Revenue [2014] NSWSC 678 and in particular to [111]. Before referring to Vartuli it should be noted, that was a NSW case and that Act had a more stringent test for commercial purpose than the words do in Victoria because it included the word 'substantial' which is not included in this State. One of the matters that the court considered in Vartuli's case was the return from primary production relative to the value of the land. In the instant case, the site value of the land as at 31 December 2010, 2011 and 2012 was $7,068,000, $7,068,000 and $9,424,000 respectively. Dr Bender stated that the return from the cattle farming operation relative to the land value was negligible over the relevant periods. It is difficult to disagree with this particular submission. Even if the cattle operations in the future are profitable, the profit compared with revenue that would be earned from the money value of the property (approximately $9,000,000) is indeed negligible or microscopic.
4. The court in Vartuli's case also considered in relation to commercial purpose or character the magnitude and the size of the farming activities and investment. While the size of the activities and investment in this case is low, as Wood J said in the Tweddle case, it is not for the Commissioner to tell taxpayers how to run their operations.
5. Thus looking at the operation as a whole, I have taken the view that there is a significant commercial purpose or character to the operation. While the operation is clearly small and a profit is yet to be realised, the evidence of Mr Domenico Marrone makes it clear that his purpose is to make a profit and that is what he is working for. I also note, that the test in _Vartuli'_s case is a more stringent test than is in Victoria.
6. The evidence of Mr Domenico Marrone clearly suggests that his intention at all relevant times was to engage in a business. Not only does his evidence suggest that he intended to do so, but his working hours also suggest the same. Even if he does not work as many hours as he actually stated, I do accept that he works almost every day of the year and for a substantial part of each day. Clearly he does visit relatives and friends and goes to Church, but, one does not have to work all the time to have an intention to engage in a business.
7. In relation to the requirement of a profit and prospect of profit I have already dealt with those matters under the commercial purpose of the cattle operation. Suffice to say here that during the years in question there was no profit and the business survived with the help of others. However, I have found that it does have potential for profit in the future. I also note the words of Bowen CJ and Franki J in Ferguson v Commissioner of Taxation [1979] 79 ATC 4261 at 4264-5 where they state:

"There are many elements to be considered. The nature of the activities, particularly whether they have the purpose of profit-making, may be important. However, an immediate purpose of profit-making in a particular income year does not appear to be essential. Certainly it may be held a person is carrying on business notwithstanding his profit is small or even where he is making a loss."

1. Dr Bender suggested, that the real purpose of the applicant conducting the farm was recreational rather than for profit or as a business.
2. The submission of Dr Bender is not borne out by the evidence. Mr Domenico Marrone was adamant that he was conducting a business and not recreational activities. Further, attending the premises each day at early hours of the morning and picking up feed for the cattle and staying at the land until late in the evening is consistent with objective facts of a business being conducted.
3. Evan's case also refers to the repetition and regularity of the activity. In this particular instance, the applicant Mr Domenico Marrone with his wife regularly attended the premises. They there performed work that was regular and repetitive. Further, the cows were fed and grew. It is noted that in the year 2013 there was no natural increase in the cattle. However, there was an increase of 13 in 2012. Further, in the year ending 30 June 2011, there was the sale of 11 cattle while 14 were purchased in that year. In the years ending 30 June 2012 and 2013, 7 and 36 cattle were purchased respectively. This would indicate a repetition in the business.
4. In relation to whether, "the activity is the same kind as carried on in a similar manner to that in the ordinary trade in that line of business", I have regard to the evidence of Mr Everitt who is a stock and station agent whose firm has been engaged by the applicant for the past 15 years. His evidence suggested that although the applicants' farming activities may be misguided, there were numerous farms in the area that made very little or no profit. Further he said that he sees a lot of farming on properties that are worth a lot more than the applicants property. He said that on occasions, "the only people that seek to make money in farming is the stock and station agent." Thus I conclude, that the activities carried on by the applicants is of a similar kind to that carried on in a similar manner to the ordinary trade of business of cattle farming in the Gippsland area where the farm is situated.
5. Dr Bender submitted, that the farming operation was not carried out in a systematic way and in a businesslike manner that was directed to making profit, including the keeping of books and records. Clearly in this particular instance, the books and records apart from some bank statements and the records produced by the stock and station agent have been non-existent. However, when one looks at the type of people the applicants are, they are not the sort of people that one would expect to keep good records or records at all of their business operation.
6. Dr Bender referred to Warriewood Valley Pty Ltd v FCT [1993] FCA 396; [1993] 26 ATR 270 at 281 where Lockhart J stated:

"Statements by taxpayers, and, in the case of corporate taxpayers those who control and manage their affairs, must be scrutinized with care, weighed against objective facts and inferences to be drawn from the taxpayers' activities generally. Statements of this kind must 'be considered most closely and received with greatest caution.' "

In a similar vein, Hill J in Imperial Bottle Shops and Egerton v FCT [1991] 22 ATR 148 at 155 stated:

"A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such statements, like statements of purpose, or object or state of mind must, however, be 'treated most closely and received with the greatest caution.'...It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that that evidence of the taxpayer is not to be regarded as 'prima facie unacceptable'".

1. This case is different to what was considered in Warriewood and the Imperial Bottle Shops cases. They were cases that dealt with corporate type organisations that were buying and selling stock on a frequent and regular basis, in all probability many times a day. The type of business that is alleged in this particular instance is very different. The business is of Mr Domenico Marrone attending the farm every day and doing what is necessary to maintain the farm and the cattle and then occasionally cattle are sold after they have been fattened after being produced naturally or on some occasions after having been purchased. It is not for the Revenue to decide in a situation like the present what records are to be kept. The records of Mr Everitt's stock and station agency clearly indicate where items are bought and sold and the amount thereof. There is no record of natural increase but that can be deduced by counting and some type of regular activity which has been the case in this instance. Thus I find, that in this particular instance there has been a systematic and businesslike way that the cattle operation has been managed.
2. In relation to the activity of the cattle operation of the applicants, there is no doubt that it is a small operation. However it is an operation that has continued since 1984. Dr Bender submitted, that this land was only being held for sale as a development site. It is noted, that there is housing development basically all round the farm. In making this submission, Dr Bender relied upon a letter containing an agreement between the applicants and Devine Homes which was signed by Ben Marrone. The letter formed an agreement between Devine Homes and the applicants to allow Devine Homes to use the applicants' land for laying of sewer pipes. As part of the agreement, Devine Homes supplied the applicants with certain infrastructure and it was noted in the agreement that Devine Homes would support a "future development proposal". It should be noted that Ben Marrone signed this document pursuant to a power of attorney from the applicants.
3. Mr Domenico Marrone said that from his point of view he intended farming the land as long as he was able or until he died. Further Ben Marrone's evidence was that while he would like to develop the land, he would not go against his father's wishes and he would wait until his father had died or was no longer able to conduct farming on the land before any development would take place. I accept what was said in relation to these matters by the Marrones.
4. Dr Bender also relied on an advertisement on the internet site of www.domain.com.au. That was an advertisement inserted by a real estate agent advertising the land for sale. All the Marrones gave evidence, that there was no authorisation for this advertisement. While the applicants have the onus of proving the exemption claimed, if the Commissioner wished to show the genuineness of this advertisement and that it was authorised by the owners of the land, they well could have called the estate agent who placed the advertisement. Dr Bender suggested that the applicants should have called the estate agent as they had the onus of proof. However it was the respondent that raised the issue of the advertisement and the estate agent was not in the "applicants' camp". In my view it is sufficient for the applicants to say they did not authorise it and it is for the respondent to prove that the advertisement was authorised if he so desired. In any event I accept the evidence of the Marrones on this point.
5. Thus I find, that although the cattle operation was small, there was a considerable degree of permanency attached thereto.
6. Dr Bender submitted, that the cattle operation was better described as a "hobby or form of recreation". He stated it was not a business. He relied on the applicants stating that they were conducting the farming operations because that was how they were brought up - to work hard and "provide for my family". Mrs Marrone stated that, "farming is what my husband has spent his life doing and what we depend on for our income." Dr Bender said that the assertions from the applicants did not reflect the reality which was that they did not depend on the farm operations for their income and that during the relevant period, the rental from the house on the land was greater than any income produce from the farm, in fact no income was produced from the farm a loss was made. He noted that over the ten year period from 1 June 2000 to 4 May 2010 only $55,812 of cattle were sold which is an average of $5,581 worth of cattle per year. He stated that even though no profit was made over such a long period, the decision to continue cattle farming is indicative of it being a hobby.
7. However, Mr Domenico Marrone as I have previously stated made it clear that his intention was to make a profit in the future. I have already found that it was likely that a profit will be made in the future. Mr Domenico Marrone also gave evidence that he was not doing the farming for his hobby, he was doing the same because that was his job that he did every day. He likened it to someone going to work each day and in my view that is a good simile. In Thomas v Commissioner of Taxation [1972] 3 ATR 165, it was made clear, that there can be an operation of a business even though a profit is yet to be made. This is a similar situation to the present case. I have found, that even though the business plan was not in writing it was nonetheless a genuine plan that was being actively pursued.
8. Further I agree with Mr Kotros that in construing the word 'business' in s.67(1)(a)(iii) the phrase should be construed as a whole. Mr Kotros stated at paragraph [28] of his submissions:

"One should remember to construe the statutory phrase as a whole rather than by adding up a meaning for each individual word. The word 'business' where appearing in ss.67(1)(a)(iii) ('used solely or primarily for business of primary production') and (2)(a)('normally engaged in substantial fulltime capacity in the business of primary production') takes colour from the surrounding words. It is submitted."

1. Dr Bender in his submissions referred to Besvic Pty Ltd v Commissioner of State Revenue [2011] NSWADT 293 at [52-53] for the proposition that working at something over a long period of time and not making money, is a lifestyle choice rather than a business. In my view, one cannot make a general assertion as to whether something is a lifestyle or a business. Sometimes it can be both. Each case should be taken on its own merits and on the evidence that is presented before the Tribunal. In this case, the evidence is that the cattle are raised for the purpose of making a profit and as I have found that is something that is likely to happen in the future.
2. Thus I find, that looking at each of the indicators referred to in Evans' case, I have come to the overall conclusion that the applicants were conducting a business on the land at the relevant time: that is 31 December in the years 2011, 2012 and 2013.

Whether the land was "used solely or primarily" for the business of primary production

1. Dr Bender at paragraphs [87-89] of his submissions, sets out some general propositions which he has digested from the cases as to the meaning of the words used 'solely or primarily'. He states:

[87] "In the phrase 'used solely or primarily' the word 'use' has meanings including 'to work' and 'to employ for a purpose' (see Carjulgar Industries Pty Ltd v Commissioner of Land Tax [1983] 9 QLCR 151 at 155). The word 'primarily' means 'chiefly' or 'principally' or 'of the first importance' (see Abbott v Commissioner of Land Tax [1985] VicRp 15; [1985] VR 164).

[88] The 'use' of land refers to the physical use being made of the land at the relevant time (see Newcastle City Council v Royal Newcastle Hospital [1957] HCA 15; [1957] 96 CLR 493 at 508) and land where no physical activity takes place is unused land (see Leda Manorstead v Chief Commissioner [2010] NSWSC 867 at [67]). 'Use' means a present and actual use of the land, not a contemplated future use or intended use of the land. The intentions of the owner as to future use are not relevant (see Parramatta City Council v Brickworks Ltd [1972] HCA 21; [1972] 128 CLR 1 at [18]). The 'use' must also be bona fide and genuine (see Carjulgar's case at [55]).

[89] When there are two competing uses of land it is not enough to decide between them which is the principal use. It is the character of the land as a whole that has to be determined. For land to be primarily used in a particular manner, the use must be sufficient and of such a degree to give its character to the whole land (see Abbott's case).

1. In paragraph [90] Dr Bender has usefully digested factors that need to be looked at when making an enquiry as to whether the land is solely or primarily used for a particular purpose. Those factors are:

(a) The nature and extent that the land used for particular purposes, including the physical areas to which the use extends;

(b) The substance and intensity of use of the land;

(c) Resources spent in using the land for a particular purpose;

(d) Relative incomes from competing purposes, although that is not the primary determinant;

(f) Time and labour spent in using the land for a particular purpose.

1. After elaborating on the particular criteria, Dr Bender then correctly stated that the question of the use of the land is an objective question based on the facts. The question in this case must have a temporal aspect as the use of the land must relate to a particular tax year although the use to which the land is put on the relevant date and extends to a considerable use during a reasonable period preceding and following the relevant date. Dr Bender suggests that a reasonable time before and after the relevant date is six months (see Leda's case at [4]).
2. From a physical point of view most of the land is devoted to farming. Less than 1% is devoted to the house use. Dr Bender, submitted that the use of the property was for investment purposes. That purpose includes the rental income of the house and the prospect of the land going up in value in the future. In support of this proposition, Dr Bender refers to the fact that in the financial years ending 30 June 2010 and 2011 the rental income of the property was $14,650 as compared with losses made in primary production activities.
3. There is no doubt, that the rental income in the years referred to far outweighed the losses of the farm property. That is clearly not the end of the matter. It would appear, that if the applicants were only using the property as an investment by renting of the property it is unlikely that the land would have been held by the applicants. I deduce from the evidence that the reason the land was held by the applicants was for the purpose of farming. That was the dominant or primary purpose. That was coupled together with the prospect of the cattle operation making a profit in the future. That was the purpose for which the land was used at the relevant time.
4. Dr Bender submitted that the emphasis should be on the intensity of use for the duration of rental income and the relative level of that income as compared with the low level of intensity of the primary production use of the Cranbourne property. Insofar as the 2013 assessment is concerned, it does not appear that any rental was received or that if rental was received during that financial year it was relatively minimal.
5. Dr Bender referred to McClelland and Anor v Goulburn City Council [1976] 35 LGRA 1 at [8] where the court found that the dominant use of the land was residential use, not grazing, even though the grazing activities were conducted on 9 out of 10 acres of the land.
6. After having heard the evidence, I have come to the conclusion that if it was not for the farming activities, the land would not be held by the Marrones at all. This is clearly shown by the fact that the land has continued to be held since 2012 even though little or no rent has been received. At the moment, the house is not rented at all and Mr Domenico Marrone has given evidence that he cannot be bothered renting the house, "it is more trouble than it is worth". In my view this shows that at least his dominant or primary purpose is farming. Also, taking the objective facts overall in this case, I have come to the conclusion that the dominant or primary purpose is farming rather than rental or any other form of use.
7. Dr Bender also suggested that because there had been efforts to sell the properties and he referred to the Devine letter and the advertisement on the website "www.domain.com.au" which had previously been alluded to and he concluded form this that the purpose was holding the property for future sale. However, that is contrary to what Mr Marrone and his wife stated. I have already dealt with this issue. I accept the advertisement did not have the authorisation of the applicants.
8. Dr Bender also stated at paragraph [127] of his submissions that:

"The objective documentary evidence demonstrates the following:

(a) 6 months prior to the 31 December 2010 assessment date as at 30 June 2010, there were 35 cattle. There does not appear to be any objective documentary evidence as to the number of cattle on the 31 December 2010 assessment date.

(b) 6 months prior to the 31 December 2011 assessment date as at 30 June 2011, there were 28 cattle. There does not appear to be any objective documentary evidence as to the number of cattle on the 31 December 2011 assessment date.

(c) 6 months prior to the 31 December 2012 assessment date as at 30 June 2012, there were 57 cattle. There does not appear to be any objective documentary evidence as to the number of cattle on the 31 December 2012 assessment date."

1. Dr Bender then compared these cattle figures with the large increase of cattle stock in the following years and thus concluded that the land was only being nominally used for the cattle operation. In support of this proposition, Dr Bender referred to Jamsapi Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 57 at [37] which he submitted established that the notional carrying capacity of the land when compared with the actual stock can be an indicator of whether the use of the land for primary production is sufficiently substantial to provide over the proposition that the land was primarily to be regarded as unused land.
2. In my view looking at the particular land in question in this case, leads one to the view that at no time was the land really underutilised. Initially it was used as grazing land with hand-feed supplement. Later on it was used also as grazing land but primarily with hand-feeding the cows. Mr Everitt gave evidence that without the hand-feeding of the cows that the stock numbers they were at the present time, the cows would not survive. Thus it is likely the land was fully utilised for grazing even in the earlier years and for intensive cattle operations in the latter years.
3. Taking all these matters into account, I have concluded that the land is primarily used for primary production as a cattle operation. Insofar as comparing the cattle operation as with the rental income, it is clear to me that when one looks at the use of the land to which it is being put, even though the rental income outstripped the primary production in terms of money, both in size and purpose, the primary production of the cattle was the main factor. Mr Domenico Marrone made this extremely clear. The rental income was no more than a by-product of the land. Put a different way, but for the primary production that was being carried on the land, it is unlikely that the land would have been held by the Marrones.
4. It was also submitted by Dr Bender that the land was substantially under-used. Some time was taken up in arguing as to whether not using the land can be a use at all for the purposes of the section. However I do not have to decide this issue because I find that the land was in fact primarily used for primary production of the cattle operation. It was not unused land. Even though the cattle numbers in the earlier years were small, there was still quite intensive cattle raising being conducted. The land was not unused.
5. Thus I find that the land was "primarily used for the businesses of primary production" for the purposes of s.67(1)(a)(iii) and (2)(a).

Whether either of the applicants were normally engaged in a substantial fulltime capacity in the business of primary production - see s.67(2)(a)

1. Section 67(4) of the Act makes it clear that where two or more persons are engaged in the activity of primary production, only one of them need normally be engaged substantially in the fulltime capacity in the business of primary production on the land.
2. In this particular instance, the applicants rely upon the activity of Domenico Marrone not the activities of Filomena Marrone.
3. Mr Kotros has correctly stated that the proper question that is before the Tribunal in relation to this point. He stated:

"The question is whether there is sufficient evidence for the Tribunal to find that Mr Marrone 'regularly participated' in the operation for 'a considerable part' of his time, such that he was 'normally engaged in a substantially fulltime capacity in it' (see Damon v Commissioner of Land Tax (Vic)[1985] 17 ATR 278 at [281] and Harper v Commissioner of State Revenue (Vic) [2005] 58 ATR 432; [2005] VCAT 325 at [30]).

1. In paragraphs [148 - 153] of Dr Bender's submissions he spends a considerable time analysing the evidence of Domenico Marrone and concludes, that he spent far less time in his farming activities than Mr Marrone would have the Tribunal believe.
2. In those paragraphs Dr Bender stated:

[148] The following summarises some of the claims previously made on behalf of Domenico Marrone about hours spent on the farming activities by Domenico Marrone and some of the periods for which there is no evidence as to the hours spent:

1. When Mr Marrone is not able to maintain the cattle due to bad health or being away from Melbourne or for some other reason, the cattle are maintained by his 3 sons; Andrew Pilipa, a family friend and employee of an associated business and Luigi Bernado, a friend and neighbouring market gardener.
2. As of August 2010, the Cranbourne Property was attended at least 6 days pr week for varying amounts of time;

1. In the period from 1 July 2010 to 31 December 2010, Domenico Marrone worked for a minimum of 7 hours per weekday and a minimum of 4 hours per day on weekends on the farming activities;

1. There does not appear to be any evidence as to what hours were worked in the period from 1 January 2011 to 30 June 2011;
2. In the period from 1 July 2011 to 31 December 2011 and 1 July 2012 to 31 December 2012, Domenico Marrone spent 90 hours on average per week on the farming activities;
3. There does not appear to be any evidence as to what hours were worked in the periods from 1 January 2012 to 30 June 2012 and 1 January 2013 to 30 June 2013.
4. Domenico Marrone worked at Westall Secondary College as a caretaker from 1 January 2008 until 19 October 2010, and was on long service leave between July and September 2010. He worked the following average hours:
   1. Monday to Friday 5.30 pm to 9.30 pm and Saturday and Sunday 1pm to 7pm (a total of 32 hours per week).
   2. An average of 27.22 hours per week in the year ended 30 June 2008.
   3. An average of 33.68 hours per week in the year ended 30 June 2009.
   4. An average of 35 hours per week in the year ended 30 June 2010.
   5. An average of 21.78 hours per week in the period 1 July 2010 to 19 October 2010 (the Applicants were overseas in July 2010 and up to 18 August 2010).

[149] There are a number of deficiencies with the above claims, in addition to a lack of objective evidence to support them (other than in respect of the time worked at Westall Secondary College).

[150] Firstly, for some of the periods in the relevant years (2011, 2012 and 2013) there is no evidence as to the hours that were spent on the farm.

[151] There were previously claims made in letters sent by Pitcher Partners about Mr Marrone spending a minimum of 7 hours per weekday and a minimum of 4 hours per day on weekends in the second half of the 2010 calendar year and about him spending 90 hours per week on average in particular time periods. Mr Marrone was taken to those letters in cross-examination. He had not seen the letters before and did not know where those figures came from. It is unclear who provided those figures to Pitcher Partners.

[152] Secondly, there is no detailed breakdown as to precisely what the time is supposed to have been spent on. The applicants suggest that they should not be expected to keep a diary of their time. The respondent has made no such suggestion. Given Domenico Marrone claims that he worked full-time on cattle activities over a number of years, one would expect that he could give evidence of a typical day on the farm and of about how long he spent on particular activities. He gave little such evidence. His evidence was generally vague and in may instance evasive. There are issues with Mr Marrone's credibility in light of the manner in which he gave evidence and because, amongst other things, of the issues about the role of Ben Marrone in preparing Mr Marrone's witness statement.

[153] Thirdly, the claim that in the period from 1 July 2010 to 31 December 2010 a minimum of 7 hours per weekday and a minimum of 4 hours per day on weekends was spent on the farming activities is not credible in light of:

1. The fact that Domenico Marrone was on long service leave overseas in July 2010 and for aprt of August 2010;
2. The fact that Domenico Marrone was still working at Westall Secondary College up to late October 2010. The time spent working at Westall is relevant to the 31 December 2010 assessment as it is relevant to look at facts occurring in a reasonable period prior to that assessment date;
3. The claim appears inconsistent with another claim made by the Applicant in August 2010 that he was working 6 days per week;
4. The Applicants were not living at the Cranbourne Property and the round-trip travel time between their home and that property was about an hour (assuming no traffic);
5. Domenico Marrone's age at that time;
6. Mr Marrone did not even know where these figures came from.

1. Dr Bender also questions how a man of Mr Marrone's age (79 years) would be able to work the hours that he stated. He makes the point that if Domenico Marrone spent time visiting his family and friends as he said he still would not be able to work the particular hours for which he said that he did work.

1. As I have previously stated Mr Domenico Marrone's evidence was not satisfactory and was exaggerated. However nonetheless, I do accept that he worked long hours on the farm property and doing work associated with the farming operation on most days including the weekends. There may be some time where he took an afternoon or a morning off but that would be rare. There were certainly times where he may have been unwell or was on holiday. On those occasions his family would help out. It would be ridiculous to say that in order to come within the meaning of s.67(2)(a) that a farmer would not be able to take a holiday or would not be able to take some time off to see his family and friends.
2. The fact is I accept that on most days, Mr Domenico Marrone would leave for work early in the morning in order to pick up the feed for his cattle and then spend the remainder of the day feeding the cattle, fixing the fences and checking the other matters around the farm. These activities may not have been done at lightning speed. But that is not the issue. They were in fact done by Mr Marrone each day every day in a regular type of fashion. Put in a different way, except when he was on long service leave in 2010, or he was sick, Mr Domenico Marrone would have worked at least 50 hours per week on the farm. He had no other employment during that time. In my view this is working in a fulltime capacity.
3. I have already found that Mr Domenico Marrone was working in the business of primary production which was carried on on the land. It is not only the actual time that Mr Marrone spent on the land that must be taken into account. It is proper to take into account the time that he spent collecting the food and the time he spent at cattle markets. Also I note, that the work at Westall and the holiday that Dr Bender refers to occurred before the years in question.
4. Thus I find, that Mr Marrone regularly participated in the farming operation for a considerable part of his time such that he was normally engaged in substantially fulltime capacity in it. I am satisfied, that the applicants have discharged the onus of proving that Mr Marrone who is a natural person was "normally engaged in substantially fulltime capacity in the business of primary production of the type carried on on the land." It should also be noted, that I have previously found that Mr Marrone's business was not recreational nor a lifestyle choice but a business.

1. I have come to the conclusion that the applicants have discharged the onus of proof that they have complied with the relevant sections of the Land Tax Act in that Mr Domenico Marrone used the land solely or primarily for the business of primary production and that he was engaged substantially fulltime and in the capacity of the business of primary production. Having made those determinations it necessarily follows that I must set aside the Assessment of the respondent and order the respondent to make a new Assessment for the relevant years finding that the exemption contained in s.67 of the Land Tax Act has been made out.

[1] Calculated as gross sales plus closing stock less opening stock less purchase costs.

[2] Note that some of these expenses such as the property agent commission are likely to relate to the Cranbourne House being rented, rather than to primary production activities.

[3] See also cattle movements on and off the Cranbourne Property from the Department of Primary Industries' records at T15, 2011 proceeding.

[4] See Craig v Yarra Ranges Shire Council (205) VCAT 1986 at [69].

[6] See Triguboff v Valuer General [2009] NSWLEC 9 at [26].