T&S Nominees Pty Ltd v Chief Commissioner of State Revenue

NCAT Administrative and Equal Opportunity|2014-10-03

reasons for decision 1The applicant, T&S Nominees Pty Ltd, seeks an order staying the operation of land tax assessment decisions made by the respondent, the Chief Commissioner of State Revenue, in respect to each of the tax years ended 2012 to 2014 inclusive. For the reasons set out below the application for a stay is refused.

Introduction 2On 2 August 2013, the applicant sought an exemption from land tax in respect of land known as South St, Marsden Park - Lot 37 Dp 262886 (PID 2228622) ("the Land") for the tax years 2012 and 2013 on the basis that the Land was being used for primary production. 3At all material times the Land has been zoned "light industrial". 4At all material times, the Land was leased to Ganian Pty Ltd ("Ganian"), who conducted primary production activities thereon. 5On 5 August 2013, the respondent formed the view that the Land was not exempt and raised land tax assessments for 2012 and 2013 tax years. 6On 22 January 2014, the respondent issued a land tax assessment in respect of the 2014 tax year. 7Under the assessments for the 2012 to 2014 tax years inclusive, the applicant is liable to pay land tax and interest in the sum of $206,341.37. 8By a letter dated 6 March 2014, the applicant objected to the 2012-2013 land tax assessment (5 August 2013) and by a letter dated 24 March 2014, the applicant objected to the 2013-2014 land tax assessment (22 January 2014) (which together are referred to as "the Objection"). 9By a letter dated 14 June 2014 the respondent made a decision to disallow the Objection ("the Decision"). 10On 20 August 2014, the respondent entered caveat AI830280 on the register over the Land to secure payment of the tax liability, but has otherwise not moved to recover monies the subject of the assessments. 11The applicant has applied to the Tribunal for a review of its assessments to land tax for the relevant tax years and that matter is awaiting a hearing. 12In the meantime, the applicant brings these proceedings, pursuant to s.60 of the Administrative Decisions Review Act 1997 ("the Act"), seeking an interim stay of the Decision pending a hearing of the substantive matter in the Tribunal.

Material Relied on at the Stay Hearing 13The applicant relied on an Administrative Review Application form dated 14 August 2014 and received by the Tribunal on that date. That form annexed to it the Decision. 14The applicant also tendered a bundle of documents which included an agreement dated 23 April 2009 between the respondent and Ganian (whereby Ganian was obliged to pay rent to the respondent and Ganian was entitled to charge the respondent for all farming improvements to the Land), Transgrid maps showing electricity easements through the Land together with easement guidelines for third party development, maps showing a creek traversing the Land together with a document entitled controlled activity approvals relating the restriction of use of the Land within 40m of the creek bank, an application for classification of the Land as farmland pursuant to section 515(1) of the Local Government Act 1993 and the caveat placed on the Land by the respondent. 15The applicant relied on written submissions under the hand of Ms Haddad of counsel received by the Tribunal on 18 September 2014. 16The respondent tendered the documents filed pursuant to s.58 of the Act which in summary comprised documents relating to the application by the applicant for primary production land tax exemption, correspondence with the respondent, correspondence regarding re zoning of the land and documents relating to the land tax assessment notices. 17The respondent also tendered evidence with respect to the applicant's application under s.60 of the Act. 18The respondent read an affidavit of Sharon Ruth Gordon dated 30 September 2014 and received by the Tribunal on 1 October 2014 together with its annexures. 19The respondent relied on written submissions dated 30 September 2014 under the hand of Mr Young of counsel and received by the Tribunal on 1 October 2014. 20The parties also addressed the issued orally on 3 October 2014.

The Tribunal's Power to Grant a Stay 21The Tribunal's power to grant a stay as sought by the applicant is contained in s.60 of the Act. 22S.60 of the Act is in the following terms 60 Operation and implementation of decisions pending applications for administrative review (1) Subject to this section, an application to the Tribunal for an administrative review under this Act of an administratively reviewable decision does not affect the operation of the decision under review or prevent the taking of action to implement that decision. (2) On the application of any party to proceedings for an application for an administrative review under this Act of an administratively reviewable decision, the Tribunal may make such orders staying or otherwise affecting the operation of the decision under review as it considers appropriate to secure the effectiveness of the determination of the application. (3) The Tribunal may make an order under this section only if it considers that it is desirable to do so after taking into account: (a) the interests of any persons who may be affected by the determination of the application, and (b) any submission made by or on behalf of the administrator who made the decision to which the application relates, and (c) the public interest. (4) While an order is in force under this section (including an order that has previously been varied on one or more occasions under this subsection), the Tribunal may, on application by a party to the proceedings, vary or revoke the order by another order. 23The Tribunal is only to grant such an order if it comes to the view that the orders sought are appropriate to secure the effectiveness of the determination of the final hearing.

The consideration of s10AA Land Tax Management Act 24As the land is zoned "light industrial", the exemption for land tax is achieved if the applicant is able to satisfy, relevantly in this case, two tests in respect of the usage of the Land: s. 10AA Land Tax Management Act (the "LTMA"), s.88 Taxation Administration Act 1996 ("the TAA"). 25Section 10AA LTMA is in the following terms: 10AA Exemption for land used for primary production (1) Land that is rural land is exempt from taxation if it is land used for primary production. (2) Land that is not rural land is exempt from taxation if it is land used for primary production and that use of the land: (a) has a significant and substantial commercial purpose or character, and (b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made). (3) For the purposes of this section, "land used for primary production" means land the dominant use of which is for: (a) cultivation, for the purpose of selling the produce of the cultivation, or (b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or (c) commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) or the commercial farming of fish, molluscs, crustaceans or other aquatic animals, or (d) the keeping of bees, for the purpose of selling their honey, or (e) a commercial plant nursery, but not a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or (f) the propagation for sale of mushrooms, orchids or flowers. (4) For the purposes of this section, land is "rural land" if: (a) the land is zoned rural, rural residential, non-urban or large lot residential under a planning instrument, or (b) the land has another zoning under a planning instrument, and the zone is a type of rural zone under the standard instrument prescribed under section 33A (1) of the Environmental Planning and Assessment Act 1979 , or (c) the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land. 26The first test is whether the land (whether rural or non-rural) satisfies the definition of "land used for primary production". That is whether or not the dominant use of the land was for the purpose of the maintenance and sale of animals: s.10AA(3)(b) LTMA. The respondent was satisfied that the dominant use of the land was for cattle grazing. 27However, the second test requires that the applicant also satisfy the respondent that the land use was carried out for a significant and substantial commercial purpose: s.10AA(2) LTMA. Before the Tribunal, it was not in issue that the applicant was required satisfied this test as the land had was not zoned as rural land. 28The respondent came to the view that, on the information provided to him, the applicant had failed to discharge its burden. 29In coming to the Decision, the respondent had regard to Maraya Holdings Pty Ltd. V. Chief Commissioner of State revenue [2013] NSWSC; Thomason v. Chief Executive, Department of Lands (1995) 15 QLCR 286; Thomas v Commissioner of Taxation (1972) 46 ALJR 397 and Hope v. Bathurst City Council No. 2 [2979] 2 NSWLR 471. 30In summary, the respondent relied on the fact that Ganian holds the Land on agistment for approximately $1300 per annum and that it invoices the respondent at cost price for any improvements carried out on the land, resulting in, in summary, an approximate loss on the land for the applicant of $4300 per annum. The annual rates for the land are approximately $5600 per annum. The respondent considered that the agistment agreement was not a genuine commercial agreement and that it was in place purely for the opportunity to gain a primary production exemption on the Land and not for the significant and substantial purpose of making a profit. In addition the respondent considered that Ganian's activities were carried out on land valued at approximately $60million and that during the objection period the operation always ran at significant losses (not including payment of the council rates). In the circumstances the respondent decided that the Ganian cattle operations did not meet the "significant and substantial commercial" test and accordingly rejected the applicant's applicant for exemption from land tax.

The Tribunal Hearing 31The applicant accepted before the Tribunal that the test to be applied pursuant to s.60 of the Act was as set out in AHJ v. NSW Trustee and Guardian [2011] NSW ADT 311. It was submitted that, "[i]n practical effect the onus is on the application [sic] to make out a case that it is appropriate for the Tribunal to make such an order (Bentran Pty Ltd v. Sabbarton [2014] NSWCATAP 37 at [9])". However it was submitted on behalf of the applicant that AHJ was limited to its facts and that the facts in this case are significantly distinct. 32In the substantive case, the only factual question to be determined is whether or not the applicant has been able to satisfy the respondent that the rural land use was carried out for a significant and substantial commercial purpose such that 10AA(2)(a) LTMA applies. 33The applicant takes issue with the Decision in the following respects; the agistment agreement is not a genuine commercial agreement and that it is in place purely for the purpose of gaining a primary production exemption on the Land, that Gainian is running at a loss and whilst the agistment agreement is in place the farming operations can never make a profit on the Land, and the zoning of the Land as "industrial" allows other land uses to occur on the Land other than cattle grazing activities. 34The applicant contends that that even though the land is zoned "industrial", it cannot be used for this purpose given the Transgrid easements, the restrictions on the Land imposed by the Water Management Act and the requirement for bridges to be constructed across any easements to enable use of the Land other than for rural activities. The applicant further contends that this matter was not taken into account when the respondent made the Decision. The applicant accepts that zoning is not completely irrelevant but that in this case it has been established that the Land cannot be used for any other purpose other than rural purposes. The respondent accepts for the purpose of this application that the Transgrid easements and water restrictions are as characterised by the applicant. 35Furthermore it is contended by the applicant that there was no evidence upon which the respondent could conclude that the agistment agreement is not a genuine commercial agreement with a purpose other than to gain a primary production exemption on the Land or that Gainian can never run at a profit under the agreement. 36The respondent concedes that whether or not Gainian is making a profit is not determinative as to whether there is a significant and substantial commercial purpose. However, both parties accept that the respondent can take account of that fact. The applicant submits that the conclusion needs to be considered in light of the fact that only a small part of the Land can be used. 37Finally the applicant contends that given that the Land cannot be used other than for rural activities, any obligation on the applicant to pay land tax is a significant detriment to it. In that regard that applicant accepts that that s.60 of the Act requires consideration as to whether or not there has been an irreparable harm to the applicant. 38The applicant contends that irreparable harm includes not only financial loss. This was presumably as there was no evidence before the Tribunal of any financial detriment of the irreparable kind. It was contended that because the applicant is unable to use the Land for any other purpose, the requirement to pay a substantive land tax bill (and to rearrange the applicant's affairs to do so), results in irreparable harm in the relevant sense and the serious question to be tried has more than reasonable prospects of success. 39The respondent undertook before the Tribunal on 3 October 2014 not to commence recovery action against the applicant until the stay decision is decided. 40The respondent submits that given that the respondent has filed a caveat to protects its interests (about which the applicant does not complain), and has not sought to take any other recovery action, the merits of the case are irrelevant as there is no step taken which the Tribunal is being asked to stay or restrain. 41However, in the event that the respondent is not accepted in respect of that matter, submissions were also directed to the merits of the application. The respondent submits that the nature of land tax is such that it is levied on land as at midnight on 31 December each year. It is considered by reference to lots or "parcels" of land. There is no requirement by (or indeed power of) the respondent to apportion areas within that parcel of land; the land is either taxable or exempt. The respondent submits that if the areas of land are such that parts of it are for one purpose only, then it is open to a landowner to apply to the Valuer General of New South Wales to change the identity of the lots and indeed their respective values, based on the size and land use of the land. It is submitted that all the respondent can do in the circumstances is to identify the relevant parcel of land and make a decision as to whether or not it is subject to land tax. 42The respondent submits that, in cases where the land is not rural land, the use for primary production has to be such that it has a significant and substantial commercial purpose or character. The respondent submits that this is a deliberate legislative change so that the mere business of primary production will not automatically lead to an exemption and that it needs to be a significant and commercial operation. Secondly the respondent submits, the operation must been carried on continuously with expectation of profit. The existence of profit in any one year is not decisive and it requires that the operation have a reasonable prospect of profit. In that case, regard has to be had to the nature, intensity, nature of operations, costs, and expenses (including land holding costs), and a judgment is then made as to whether or not the activity being carried out is a significant and substantial commercial purpose. It submits that there is no error in the reasoning of the Decision.

Decision 43It is not disputed that the respondent is in a "special position" with respect to the recovery of unpaid tax, including land tax: see sections 16, 94, 103 and 119 TAA and DFCT v. Richard Walter Pty Ltd (1996) 183 CLR and FCT v. Futuris Corporation (2008) 237 CLR 146 and DCT v. Broadbeach Properties (2008) 237 CLR 473; Print National Australia Pty Ltd v. CCSR [2012[ NSWSC 297. 44The applicant accepts that in the context of this case, s.60 of the Act requires that the applicant establish; first that there is serious question to be tried in respect of the levying of the land tax; and that irreparable loss or harm will be suffered by the applicant before the Tribunal will make such an order: Castlemaine Tooheys Limited v. South Australia [1986] HCA 58; (1986) 161 CLR 148 as cited in this Tribunal in Trasco Pty Ltd v. Chief Commissioner of State Revenue [2014] NSWCATAD 131. 45The respondent contends that its "special position" ought also be taken into account. 46I am mindful that there is yet to be hearing on the substantive merits of this case and, given my reasons, it is not necessary to come to a concluded view on whether or not there is a serious question to be tried in respect of the levying of the land tax. I have come to my conclusion based on whether or not the applicant has established irreparable loss or harm. 47The applicant contended that it could not afford to pay $70,000 per annum land tax for the Land and that irreparable damage will be done to the applicant by having to rearrange its affairs. It contends that undue stress will be placed on the office holders of the applicant and that it is not appropriate for it to have to rearrange its affairs. 48 The respondent submits that the applicant has chosen not to adduce any evidence of its financial position so as to substantiate its contentions concerning irreparable damage to its financial position. 49The respondent also submits that it has done so in circumstances where the uncontested evidence is that the applicant has sold other land for $4,000,000 against a cost price of $635,000 that the unimproved value of the Land is more than $4,000,000 against a cost price of $125,000 and the Land has at all material times been unencumbered. 50Even absent the evidence of substantial means of the applicant, I accept the respondent's contentions that the only irreparable loss or harm that the applicant points to is the submission made that it will have to rearrange its affairs should the respondent move to takes steps to recover the land tax which is currently liable. First, there is no evidence to support that submission and, given the importance of any such evidence to the outcome of this hearing, I am not minded to accept it in the absence of any evidence at all to support it, and second, even if I accepted that submission, without more, a requirement that the applicant is required "rearrange its affairs" is an insufficient basis upon which to make out any case based on irreparable loss or harm. 51Even if I assumed that there is a serious question to be tried in respect of the substantive issue, the applicant has failed to make out its case as to irreparable loss or harm and accordingly the applicant's case for an interim stay is rejected.

Costs 52The respondent seeks its costs of the application. It submits that to the extent no evidence was proffered in support of any irreparable loss or harm, this application should not have been brought. 53The applicant resists such an order. Whilst it conceded that no financial evidence was put before the Tribunal, the Applicant contends that it did not seek to rely on its financial position for this application and thus, the application was not misconceived as the basis upon which the stay was sought was that the applicant took the view that it could succeed by proving that there was serious question to be tried and with good prospects of success given the conclusions reached by the respondent and its reasons articulated in the Decision. 54I accept the respondent's submissions. I find that, absent any evidence of all of irreparable loss or harm, the application was doomed to fail. Indeed, in submissions before me the applicant sought to put its case based on such irreparable loss or harm. I am mindful that orders for costs in this jurisdiction are relatively rare, however, in the circumstances I have articulated, I am prepared to make the order the respondent seeks. In doing so I have regard to s.60 of the Civil and Administrative Tribunal Act 2013.

Orders (1)The application for a stay is refused. (2)The applicant is to pay the respondent's costs of the application for a stay. (3)The matter is listed for directions on 27 January 2015 at 9.30am.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 December 2014

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