Rainn Pty Ltd v Commissioner of Land Tax

[4]

This dispute involves two properties located in Plumpton, on the outskirts of Melbourne. Each of the properties is owned by the applicant. The Commissioner has assessed land tax on each of these properties for the 2011 tax year and the applicant has appealed against that assessment to this Tribunal.
One of the properties is a large parcel of land. I will call this the Beattys Road land. The other property is a small parcel of land. I will call this the Taylors Road land.
Section 7 of the Land Tax Assessment Act 2005 provides that land tax is imposed in respect of each year on all taxable land in Victoria. This obligation to pay land tax can only be displaced if the land comes within one of the exemptions in the Act.
Section 66 provides for one such exemption. Section 66 provides that land is exempt land if the land comprises one parcel that is wholly or partly in greater Melbourne, none of which is within an urban zone and which is also used primarily for primary production.
So section 66 requires the Commissioner to make a positive determination that those three elements are present in order for land to be exempt. The first two elements are not in contention in this case. What is in contention is whether the land at Beatty's Road is able to be described as being used primarily for primary production at the time at which the Commissioner's assessment is made.
The applicant says that the Beattys Road land is exempt from land tax under section 66 of the Land Tax Act 2005 because the evidence demonstrates that it is land that was used primarily for primary production as at the relevant date. If I am not persuaded about that then the applicant says that the land is exempt under section 68 of the same Act because it is land that was being prepared for use primarily for primary production.
As for the Taylors Road land, the applicant concedes that section 66 of the Act does not apply, as this land has not been actually used for primary production, but the applicant says that section 68 of the Act applies squarely to Taylors Road because the Taylors road land was also being prepared for use primarily for primary production at the relevant time.

[27]

As I have said, both parties agree that the evidence of what occurred on the land in the period prior to and after the assessment date must be used to inform a decision as to whether as at 31 December 2010 the land was being used primarily for primary production.
Thus the applicant says that when you combine the evidence of Mr Harrison that sheep were being grazed on Beatty's Road until November 2010 with the evidence of Mr Burns that he had done some work on the property in November /December 2010, and then had started to plant the Canola crop in early March 2011, this evidence conclusively shows that as at the assessment date the land was primarily used for primary production.
As I understood it there were two different ways in which this argument was put.
The first was that this evidence revealed that on the Beatty's Road property there was a clear and uninterrupted transition from sheep farming during 2010 (an activity which comes under the definition of primary production, being the maintenance of animals or poultry for the purpose of selling them or their natural increase or bodily produce) to Canola cultivation in 2011 (an activity which comes under the definition of cultivation for the purpose of selling the produce of cultivation).
The second way in which the applicant put the argument was that leaving the issue of sheep farming aside, there was clear evidence from Mr Burns of carrying out aspects of the work required for cultivation of canola in November 2010 and continued that work into 2011 culminating in the planting of the canola crop in March of the next year.
The applicant concedes that there was a short break in the actual physical use of the land for canola cropping over the summer of 2010, as the spraying of land for canola production did not commence till February 2011.
To address this issue counsel for the applicant took me to various authorities which discussed the concept of land lying unused or fallow, and the concept of hiatus in the use of the land.

[39]

So, applying those passages to the case before me, the applicant says that the delay in planting the canola can be seen to be the land lying fallow until conditions were right for planting, or the delay can be characterised as a hiatus period or a chance occurrence, similar to the hypothetical example given in Saville where the owner had disposed of existing stock before the replacement stock had arrived.
The Commissioner conceded that there may be situations where a land is lying fallow and could properly be described as still being used for primary production despite it being in that state as at the assessment date.
However the Commissioner argued that that concept could only apply where the period of fallow who was between two occasions of actual use of the land for primary production- so that it could be said that the use justifying the exemption had continued throughout the fallow period.
This explains why winter cropping land could take the benefit of the exemption notwithstanding that it would always be lying fallow as at the assessment date. The Commissioner suggested that the only difference between a winter and a summer crop for assessment purposes would be that the exemption would not apply to a winter crop in the first year of cropping.
Taking the first way in which the applicant put it its case - that there was a clear and uninterrupted transition from sheep farming to canola cultivation, the Commissioner points out that there is no evidence before me that the sheep farming described by Mr Harrison is properly to be described as giving rise to an exemption for primary production. It is for the applicant to prove this, and it cannot be assumed.
Secondly the activity being previously carried out - that is sheep farming -was carried out by a completely different entity unrelated to applicant in any way, and also completely unrelated to canola production.
The Commissioner submitted that there being no correlation between these two types of activity, it was impossible to describe the land as being fallow or there being a hiatus in the activity of the land, because both of these concepts were based upon fact situations where activity of the same type had both preceded and post-dated the hiatus or fallow period.
The Commissioner submitted that if one were to look at the second way in which the applicant put its case - that is that the work of cultivation of canola had commenced prior to the assessment date and was continuing after the assessment date save for a period required because it was not yet time to plant canola, then that proposition was not actually supported by the evidence of Mr Burns.

[51]

I accept that in an appropriate case, evidence of the intention of the taxpayer or occupier of the land can legitimately be used to assist in properly characterising the actual use of the land.
I am however not persuaded that the concepts of land lying fallow or of a hiatus or interruption to land use have any application to the first way in which the applicant puts its case regarding Beattys Road.
I have not been referred to any case in which these concepts have been applied in any other way than in explaining a break between two comparable periods of the same type of primary production. I take the view that it is an illogical and strained use of the concept to apply it to render the sheep farming of Mr Harrison part of the primary production relied upon.
As to the second way in which the argument is put, I accept that it is arguable that if there is evidence of Canola farming of a real and substantial, not token, nature in the lead up to the assessment date, then the concepts of land lying fallow or hiatus may potentially have some application.
I however do not need to go so far as to decide this point, as I have determined to reject the evidence of Mr Burns on this issue.
It is true that Mr Burns referred in his witness statement to aspects of use of the land in late November and early December 2010. Even if I accepted the description he gives in his witness statement, I have real doubts about whether that level of activity could be characterised as anything other than token, or in the words of Saville, "slight, intermittent and spasmodic".
However when he was cross-examined in the hearing before me Mr Burns certainty about when he had done work on the land and what sort of work it had been completely evaporated.
He was very vague about when he had been on the land and what he had done on the land.
He remembered meeting Mr Mondous who was the representative of the applicant at some point. He thought he'd met him after he'd signed the agreement but he was not able to say when he'd signed the agreement.
He appeared to be saying that because he was managing 21 different farms at the time he was not clear as to exactly what work he was doing on this particular land and when. He answered many questions in general terms, describing his usual practice rather than describing what he had actually done on the property.
One of the examples of this was when he was taken to his own email, sent to the owner's agent, Helen Sheedy on 13 January 2011 listing works to be done on the land in terms which seemed to suggest that no work had yet been undertaken. He was unable to provide a credible account of the circumstances surrounding the sending of this email. He was unable to say definitely if any of this work had been done before the assessment date.
He said that he could remember spraying the land but he didn't know when.
He said he remembered putting lime down and the cultivation of the land but he was unable to say in his evidence when that was. He said he couldn't remember picking up loose stones on the property but he thought that would be the first thing that he did.
He said that he didn't keep separate accounts for those parcels of land as distinct from the many other parcels not owned by the applicant which he also farmed.
Overall the evidence of Burns was flimsy and his answers inconclusive. Although it was not specifically put to him on cross examination that this evidence was so inconsistent with his witness statement as to cast serious doubt on the accuracy of that statement. This conclusion is inescapable.
When that vagueness in the evidence is combined with the vagueness of the written contractual arrangements between Mr Burn's company and the applicant, the inevitable conclusion is that the applicant has not established as a matter of fact that any, let alone any substantial primary production activity took place on the Beatty's Road land in the period before March 2011.
The applicant submitted that given that there was unchallenged evidence of Mr Burns and Mr Harrison which was not inherently improbable, I should accept that evidence in the absence of evidence to the contrary.
I find that the evidence given by Burns was improbable in some respects - particularly as to the circumstances of signing of the agreement, and further as to his lack of specific recollection of the timing of activities performed by him on the land. But even so, the burden of proof is on the applicant to persuade me that the exemption applies.
I find from the evidence that I am not positively satisfied that Mr Burns did do any work on the property until well after the end of December 2010. I am therefore not able to be satisfied that cultivation of the canola crop began prior to 31 December 2010.
This means that the notions of fallow, interruption or hiatus are not relevant because those concepts each presuppose that there has been some primary production activity proven on the land which is being interrupted.
As to the concept of unused land, I accept the Commissioners contention that the question for me is not whether or not the land is unused. The question is whether cultivation has commenced.
Given the findings I have made in respect of the evidence of Grant Burns, the bare evidence that he or Agricultural Resources, or the taxpayer, intended that a canola crop be ultimately planted on the land cannot be used to fill the gap in the evidence that otherwise exists. I find there to be no foundation justifying the use of evidence in that way because there is no credible evidence of actual use of the land at the assessment date.

[52]

In relation to the Taylors road land the applicant concedes that at the time of purchase of the land the Taylors Road land was not fit for farming without removal of the overgrown vegetation covering the land.
The applicant says that this could not be done until April 2011 because it required installation of a firebreak and burning off. This could not be done because of the fire danger period over Christmas 2010.
He submitted that the evidence showed that the Taylors road land was being prepared for primary production in the following respects.
Firstly he relied upon the preparations for the contract between the owner and agricultural resources that Burns was trying to reach an agreement with the applicant about the preparation of that land for the growing of canola. Secondly he said that the fact that a burn off could not happen at that time of the year meant that that he was unable to plant the canola, but also this property was to be used for winter cropping and I should find it was lying fallow until it could be so planted.
The applicant concedes that ultimately no primary production actually took place on the land, but submits that the fact situation outlined above compels a conclusion that as at the assessment date the Taylor's Road land was being prepared for primary production.
And the applicant says if I am not persuaded from the evidence that the Beatty's Road land was actually used primarily for primary production in the relevant period, it should be exempt pursuant to section 68 as land being prepared at the relevant time for use for primary production.
In making this submission the applicant once again relies on the evidence of Grant Burns as to the entering into of the agreement. The applicant also relies upon the physical removal of sheep from the property and Burns evidence that he was locating parts of the Beatty's Road land on which canola could grow.
The Commissioner says that even on the applicant's own contention the land at Taylors Road was not being prepared for use primarily for primary production because there is no evidence of any such preparation of the land itself.
The Commissioner says that section makes it clear that the preparation must be physical preparation of the land. The Commissioner submitted that whatever was made of the agreement between the owner and agricultural resources, that agreement could not be classified as preparation under section 68 because preparation under that section means physical preparation rather than preparation in the sense of arranging for appropriate legal formalities. The same argument is put as to the arrangements made to remove Mr Harrison's sheep from land.
Further the Commissioner points to the fact that on cross examination Mr Burns was shown photographs of the Taylors land and he recognised them to be photos showing a similar state to the state the land was in at the relevant time. Those photographs clearly show no preparation for cultivation.
In relation to each parcel of land, the Commissioner says that even though Mr Burns may have been planning or preparing in a general sense to use the land, he was not as at the 31 December 2010 actually physically preparing the land for cultivation.
I accept the Commissioner's arguments in relation to both the Beatty's Road land and the Taylors Road land. First, as to the suggestion that each of these parcels of land was lying fallow prior to a period of cultivation, I accept that this concept can only be appropriately used where a fallow period occurs between two continuous periods of exempt land use.
Given the findings I have made in respect to the evidence of Grant Burns, and the way in which evidence of intent can properly be used, the applicant's other arguments in relation to both these parcels of land fall away.
Even had his evidence been accepted it is my view that it amounts to little more than evidence of token preparation, or preparation which can be described as slight intermittent and spasmodic.
Given the findings I have made as to this and also the inapplicability of the concepts of fallow and hiatus where there is no evidence of otherwise continuous land use, the application for exemption of each parcel of land under section 68 also fails.

Rainn Pty Ltd v Commissioner of Land Tax - [2016] VCAT 402 - VCAT 2016 case summary — Zoe

At a glance

Court

Decision date

Source

Judgment (52 paragraphs)

Rainn Pty Ltd v Commissioner of Land Tax (Review and Regulation) [2016] VCAT 402 (17 March 2016)

Parties

Legislation Cited (3)

Cases Cited (1)