Applicant's evidence
9The applicant tendered an undated statement (part Exhibit A2, also attached to the application for review filed 30 July 2012) . As the statement contains a good deal of comment and argument as well as propositions of fact, only the factual propositions will be summarised here. After some introductory paragraphs, the applicant stated that when he had purchased the land in August 2008, the previous owner had always rented out the house and had at some time engaged in the horticultural production of flowers.
10 The purchase price was $955, 000, of which primary production assets and land accounted for between $750,000 and $800,000. Since purchase, he had invested at least $100,000 in primary production assets, while only $10,000 had been spent on rental house improvement.
11In relation to horticulture production, he had intended to lease out approximately 1600 square metres of horticulture greenhouse structures already on the property, but about a month after purchase, while he was negotiating with a potential lessee, a severe wind storm blew the roof off the buildings, making it impossible to lease them. The applicant's insurer paid to the resulting claim only after 13 months and following and a decision of the Insurance Ombudsman on 11 December 2009 (part Exhibit A2). In his dispute with the insurance company the applicant said he had been required to leave the igloo greenhouses in their damaged condition as evidence.
12 His intention from the outset had been to graze livestock on the land, but before that could be done the property needed approximately $20,000 of earthmoving and $50,000 of fencing work, as the previous fences had been destroyed by bushfires and lack of maintenance. In addition to being a major project, this had also required the co-operation of neighbours.
13Once the fencing was in place, a herd of cattle and goats had been built up. Considerable time is required, however, for purchase, fattening and breeding to the point where livestock sales can commence. He said he had been informed by the Office of State Revenue (OSR) that livestock were considered for the exemption only if livestock sales exceeded gross rent. The applicant believed that was impossible to achieve in the early years, given the nature of livestock grazing.
14His claim in relation to farming of fish products as a ground for exemption included the preparation for that activity. After buying the property he purchased a commercial quantity of fingerlings (juvenile silver perch) and yabbies for stocking the large dams on the land. These had been left to breed and grow out, and for that reason there had not yet been any sales of the output.
15As to the keeping of bees for the purpose of selling honey, shortly after buying the property he invested in eight hives containing millions of bees. He also registered as a beekeeper and purchased equipment, and a large number of jars. With eight hives he thought he could produce hundreds of litres of honey per year, making it in his view a commercial undertaking beyond the keeping of one or two hives as a hobby. In apiary the number of hives is increased by partitioning some bees and introducing a new queen bee. That had been his intention for developing the business.
16Although he did harvest some honey initially and supplied it to family and friends (free of charge in the case of family), all the hives were lost early on because of "swarming" and black beetle infestation.
17Given the inherent risks of primary production, especially on small holdings such as this, his strategy and business plan had been to diversify into a number of primary production activities so that successes and failures would balance out. He considered the renting of the house to be one of those income streams for his farm business plan . He believed that this diversification strategy had jeopardised his case for exemption by giving OSR the impression that he was not serious about his farming activities.
18He also believed that new purchasers such as himself were being discriminated against by OSR's alleged practice of using purchase as a trigger for a land tax assessment, while long-term owners who had not engaged in primary production for many years were continuing to enjoy the benefit of the exemption.
19In his oral examination- in- chief, Mr Reolon said he had been extensively seeking a rural property for 10 years before purchasing the land in question. He had initially wanted to lease out the igloo greenhouses and had a prospect willing to pay $300 per week for them. Alternatively, he could have managed them himself. But the windstorm had blown off between 60 and 70 per cent of the total roofing, and mainly from the best and most modern greenhouses.
20He then decided not to invest further in the property until the land tax issue was resolved, but in September 2012 he was told that the documentary records he had supplied to the respondent and his legal advisers had been mislaid.. During 2011 and 2012 he was solely engaged in his primary production activities and had no income other than the house rental.
21Referring to his 2011 income-tax return (Exhibit A1), Mr Reolon said he had placed further beekeeping on hold after the loss of the hives, pending resolution of the land tax question. The return claimed a sum for the purchase of the yabbies and perch fingerlings as investment in aquaculture, but the fish and yabbies needed between two and three years to mature and also required the establishment of infrastructure. At present the fish were up to 30 cm long and stocks were growing. But again, the applicant had not invested in harvesting the products pending the outcome of the land tax question. In the meantime the stock would continue to increase.
22The return also claimed an amount for earthworks needed before the fire-destroyed fences could be replaced. Obtaining the approval of neighbours required some time, and in one instance he had been forced to approach the relevant government authority to have the matter resolved. This total investment in fencing, tools and labour was $80,000, which he said showed that he was serious about raising livestock.
23The applicant referred to an aerial photograph of the property (part Exhibit A2) that had been taken before he had acquired it. The house was shown as a small black dot in the lower left-hand corner of the picture. Two greenhouses had been added after the photograph was taken. Also shown were the machinery shed, another shed and the cool room. Another shed near the round dam housed a three-phase electric pump for the dam. The pump delivered water to two long pipes at right angles with taps every 3 or 4 m to which irrigation lines could be attached in either direction. By these means he could irrigate up to 90 percent of the property. He also installed three large troughs for the cattle.
24The applicant referred to the livestock purchase receipts, return of land and stock, equipment purchases and asset register (part Exhibit R1) and stated that the property at the time of purchase included some $250,000 worth of agricultural infrastructure.
25Asked by Mr El-Hage in cross-examination about his statement that the only work he had performed in 2011 and 2012 was for primary production, the applicant said he had resigned from his other position and dedicated himself to the property and to resolving the land tax question. That issue had caused him to put his plans on hold because although the amounts involved were not large, being between $6,000 and $8,000, he preferred to clarify the matter, which was stressful and time-consuming. Apart from that he spent eight or nine months clearing trees and generally cleaning up the property. From September 2012 he obtained employment as a project manager to raise more money. His business plan had not foreseen any liability for land tax because he thought he would be exempt as a primary producer.
26Although he had not deferred 100 percent of the capital work on the property, he had not developed the full automated potential on which he had planned. The loss of the greenhouse roofs and the bee hives had also come as a surprise. He had proposed to purchase a new 200 acre farm but had not done so because he now placed the land tax risk at the top of his priorities.
27He was then asked about the addresses he had given in various documents. His 2011 income-tax return gave his address as being at St Clair. That was his parents' address and he had lived with them for most of 2011, except when he had undertaken contract work for MLC at North Sydney and had leased an apartment at Waverton, as the contract involved a good deal of travel. In 2010 he owned a property at Narrabeen, but after disposing of it had lived for a period with his parents, except when he was overseas for two or three months during that time. He was not sure about his places of residence in 2008 and 2009 as he had moved 16 to 20 times in the last 20 years, and would need to check with his wife. He declined to do so, however, as she was on the day of the hearing consulting a medical specialist about a delicate pregnancy and he did not wish to stress her.
28The applicant said he was not a "farmer born". He held a Bachelor of Business degree in accounting and had worked as a project manager, developing plans and organising resources. His corporate and business career had seen him working for the Commonwealth Bank for three years in their Comsec division full-time as well as periods with Westpac, the Sydney Futures Exchange, Sydney Water, Oakton Consultants, FNZ (a New Zealand software supplier), Societe Generale, AAPT, Vodafone and Louis Vuitton, among others.
29The income from shares shown in his 2011 income-tax return (Exhibit A1) derived mainly from share trading, chiefly on his own account, but certain other figures related to dividends. He was qualified as a share trader but currently holds no shares, although maintaining a trading account. The manner in which $23,578 interest had been apportioned between primary production and the rental property was a matter determined by his accountant, and he relied on her. The accountant had also decided to list "stockbroking or trading" as his main business. He had given Maroota as the address of his stockbroking business as he had a small office in a shed on the property where he keeps all his business documents. He does this to avoid problems with mail forwarding when moving. The 2011 return showed zero income from primary production because at that time he was establishing the infrastructure and the cattle were maturing.
30In relation to his 2010 tax return he said that his business model involved treating the whole farm as one business with separate income streams. At his accountant's suggestion, later returns had separated them.
31Counsel pointed out that his 2009 tax return gave his main business as "share trading". That, he said, did not include the Comsec income, only his personal trading. His purchases of shares for trading involved large sums because he aimed at a large turnover with smaller profit margins. Nevertheless a loss had been incurred. Sometimes he would not trade for a year, depending on the state of the economy and other circumstances.
32His statutory declaration of 5 July 2012 (Exhibit R3) was intended to set out his responsibilities as owner of the property. To simplify his business he would have terminated the lease, had one of the tenants not been suffering from cancer. He had made the statutory declaration as he had been asked to confirm that the tenancy was still operative. Originally the tenants had only the use and occupation of the house, but he allowed them to walk over the property and use it for walking their dogs. He had offered to lease the greenhouses to them but they were unable to take up the offer. Now the remaining tenant uses only the house and the shed.
33Mr El-Hage pointed out to the witness that his Hotmail record showed 481 e-mails in relation to share trading but only six in respect of the farm, and this in an account he had held for 14 or 15 years. The witness agreed but said it was not his practice to separate his e-mails under topics and, as could be seen, his inbox contained 850 messages.
34The applicant affirmed that he could not have leased the greenhouses while the dispute with the insurance company was pending, nor had he been able to carry out repairs to them as he judged that he should leave one igloo in its damaged condition. Nevertheless the invested $200,000 in the property. The land tax dispute had also affected his business.
35He also agreed that he had worked in corporate positions for about 20 years, although also doing concreting for a friend at various times and farm work in 2011 and 2012, and had worked full time with Comsec until January 2011, and then with FNZ. Nevertheless it was also his practice to go and work on the farm. His 2010 and 2011 tax returns had given his home address as St Clair, although he had also lived at Waverton during that time. Those returns also stated his main business as share trading, together with salaried work, as did his 2009 return.
36His returns for 2010 and 2011 correctly stated that he had received no primary production income, but he was expecting cattle sales to be realised in 2012. The $126 received for honey sales in the 2009 tax year represented his first sales when he was still learning, but in the event proved to be his only sales. He had been overseas for two or three months in 2010 and agreed that the bees had probably died during his absence. Nobody had been taking care of the farm while he was away, but it would not have been viable to engage someone because he wanted the farm to be a low maintenance operation. It was not, however, merely a hobby while he was working and engaging in share trading, as much work was needed and the early years were a "hard slog". He had worked every weekend on the property for the last four years, and it was necessary to check on the cattle every night. As a result the farm was now unrecognizable and was the best kept in the area. It was not unusual for farmers to hold a job off the farm. The Land had reported that one of Australia's leading beef producers also operated a trucking business.
37Asked if he had received any training in farming before 2008, the applicant replied that he had for the previous 10 years searched for a suitable farming property. He had completed a rural fencing course, joined the beekeepers' association and gained experience in aquaculture and other matters. He had also conducted a great deal of research.
38When it was put to him that between 2008 and 2010 his main occupation and sources of income were as a business analyst and share trader, he replied that he had held the farm for only one month in 2008. Then he had been involved in investing in the property, collecting the livestock herd and related matters. Long lead times were involved, requiring patience and sustained management. It was a risky and challenging business requiring a great deal of time. He had rented out the house on the property, but so had the primary producer before him. The tenants had only used the property, apart from the house, for walking around and walking their dogs.
39On 17 April 2013, the adjourned date of the hearing, the applicant tendered a statutory declaration by his wife Melissa Eleni Reolon dated 10 April 2013. The respondent objected to it on the ground that the applicant had closed his case and that the deponent was unavailable for cross-examination. The document was admitted over that objection as Exhibit A5. In it Mrs Reolon stated that she and the applicant were on an overseas trip from 6 July 2010 to 17 August 2010. While overseas they were still awaiting permission from the three sets of neighbours for consent to the construction of their boundary fences. It was consequently not possible at that time to have livestock on the property. They also did not consider engaging a caretaker for the bee hives or the aquaculture.
40Mrs Reolon added that the tenants "John and Rocky" still occupy the house under the original lease, and that she and Mr Reolon visit the farm seven days a week, twice a day to check on the well-being of the livestock, to fill troughs, supply extra feed and for general maintenance.
41Attached to the statutory declaration were two photographs showing part of the property and some cattle, together with Mr Reolon and his daughter.
42The tendency of Mr Reolon's evidence to mingle matters of fact with extensive submissions and attacks on the respondent and its legal advisers has been noted above. A further problem was a pervasive vagueness about dates, a real difficulty in an exemption case such as this when the dates on which acts were done or activities were begun or finished is important, and indeed crucial.
43For example, he said that in 2010 he was overseas with Mrs Reolon (as she now is) for "two or three months", whereas his wife's statutory declaration states that the trip was from six July 2 17 August, or a little more than five weeks. Again, he was highly critical of the Crown Solicitor's Office (CSO) request for further particulars dated 8 October 2012 which pointed out that "it is not entirely clear to my client what primary production activities took place on the land, and during what period". Yet after a direction by the tribunal dated 5 December 2012 to reply to the respondent's request for particulars, which among other things sought the dates on which the various activities had started as well as the farm PIC number, the applicant sent a reply that left blanks for the starting dates of beekeeping, goat activities, fencing work and cattle activities, and the concluding date of fencing work. He also left a blank for the PIC number and dismissed as "ridiculous" a question about the percentage of the land used for beekeeping.
44The respondent called no oral evidence at the hearing but relied on the s 58 documents (Exhibit R1) and other documentary exhibits.
45After the hearing had concluded, and following consultations with the parties, certain additional correspondence between the parties was taken into evidence as Exhibit ADT 1.