This case involves the question of whether land owned by the taxpayer is eligible for exemption from land tax as land used for primary production.
The parcel of land the subject of this proceeding (the 'subject land') is an area of just over 72 hectares situated about 2km from the town of South West Rocks in the Kempsey Shire on the far north coast of NSW. In the years in question it comprised two lots: Lot 35, (about 68 hectares) and Lot 36 (about 3 hectares) in DP 1167775. The property identification was PID 3667249.
The subject land is zoned partly RU2 (rural landscape - 14 hectares), partly E2 (environmental conservation approximately 31 hectares) and partly R1 (general residential - 24 hectares). Both Lot 35 and Lot 36 have more than one zone.
The subject land was purchased in 2012 by Teebee Holdings Pty Ltd ("the taxpayer") as trustee for the Teebee Property Trust ("the Property Trust"). The director of the taxpayer is Mr A.B. Tall.
The previous owner of the land (a Mr Laut through his entity) apparently planted trees on part of the land. The tree planting apparently happened after an earlier venture involving the planting and cultivation of tea trees on the land had failed. Trees grew on the land during the land tax years in question here. Until about June 2014 Mr Laut parked some earthmoving equipment on the land and used a shed on the land for storage.
The taxpayer lodged a development application and plans for subdivision for part of the land zoned R1 to create 29 residential lots, but the application has been refused by the planning authority.
In 2015 the taxpayer transferred Lot 35 to itself as trustee of a complying superannuation fund - the AB Tall Bennett & Co Pty Ltd Staff Fund ("the Superannuation Fund").
In 2016 a boundary adjustment was made which made added a small part of Lot 36 to Lot 35 and as a result there was a new deposited plan (DP 1214499) but the lot numbers remained the same. In 2016 the Valuer General assigned new property identification numbers to the lots as follows: Lot 35 - PID 3921478 and Lot 36 PID 3921479.
By agreement (the terms of which were not in evidence) between the Property Trust and the Superannuation Fund the taxpayer as trustee of the Property Trust continued to manage the trees growing on Lot 35 on behalf of the Superannuation Fund.
The subject land was initially treated as exempt from land tax as land used for primary production. In January 2016 the Chief Commissioner assessed the taxpayer to land tax for the 2013-2016 land tax years. The taxpayer objected. The objection was disallowed. The taxpayer applied to the Tribunal for review. The Tribunal derives its jurisdiction to hear and determine the application and review the assessments from s.96 Taxation Administration Act 1996.
The taxpayer's position is that the land is used for tree farming and that this constituted the dominant use of the land during the land tax years in question (2013 - 2016). Section 10AA(1) LTMA provides as follows:
"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."
Section 10AA(3) LTMA relevantly provides:
"(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…"
The meaning of "dominant use" is the ruling, prevailing or most influential use of the land (Leda Manorstead Pty Ltd v CCSR [2010] NSWSC 867 at[ 69] upheld on appeal).
Rural land was defined in s10AA(4) LTMA in the 2013/2014 land tax years as follows:
"(4) For the purposes of this section, land is "rural land" if:
(a) the land is zoned "rural", "rural residential", or "non-urban" or under a planning instrument, or
(b) the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land.
and in the 2015/2016 land tax years as follows:
"(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.
There is also a "commerciality" test to be satisfied. Section 10AA(2) provides:
"(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) (b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made)."
As mentioned above, the subject land is within three different zones. A question which arises is whether each zone needs to be considered separately as to its dominant use or whether the parcel should be considered as a whole.
Some helpful guidance is provided by Triston v CCSR ([2017] NSW CATAD 100). In that case there were three lots in the parcel of land totalling 3.75 hectares combined, each of which was dual zoned. Part of each lot was zoned RU2 (rural landscape) and part of each parcel was zoned R2 (low density residential). In the 2011 land tax year 95% of the subject land in Triston was used for horse breeding.
It was held in Triston that the dominant use of the land in the 2011 land tax year was for primary production. The use was "not insignificant" and there was no relevant competing use (Triston paragraph 40).
However it was also held that the land was not "rural land" as defined in s10AA(4) because it was not entirely zoned rural. The Tribunal said at paragraph 44:
"To accept as "rural land" a parcel of land only part of which carries a rural zoning would necessarily give rise to uncertainty about the point at which partial zoning satisfies the requirement. For the legislature, fully cognisant of the possibility of dual zoning, not to have included some qualifier - whether "principally", or "mainly" or something of the sort - suggests that only a single rural zoning covering the entire parcel will satisfy the test. On that basis it follows that none of the lots under consideration here, each of them carrying dual zoning, can be characterised as "rural land". That means s10AA(2) [the "commerciality" test- discussed later] must also be satisfied".
Accordingly the Tribunal applied the commerciality test to the entire parcel consisting of the three lots and held that the commerciality test was not satisfied.
It will be noted that in Triston each lot carried dual zoning. That is the case here as well. Therefore the commerciality test will apply to the parcel of land as a whole in this case.
If the whole of the subject land is not zoned rural then it is not "rural land" as defined in s10AA(4). Accordingly, both the dominant use and commerciality tests must be applied.
It would not assist in achieving certainty if the dominant use test were applied zone by zone where a parcel of land has dual zoning one of which is not rural. This is because even if there was dominant use of the part of the land zoned rural in the parcel, the commerciality test applies to the whole parcel accordingly to Triston. The dominant use test and the commerciality test (if the land is not rural land) should operate consistently on the parcel as a whole. Indeed this was the approach taken in Triston in the 2012-2015 land tax years where only 5% of the area of the whole parcel was used for nursery activity, and this was held to be an insignificant and practically de minimis use of the land during those land tax years. The Tribunal concluded that the dual zoned subject land did not have a dominant use at all during those years (see Triston para 34).
The taxpayer submitted that notwithstanding the actual zoning that the subject land here should be treated as zoned "non-urban" (a term which is not defined) and thus as rural land because it was not in a single zone and the subject land does not have an "urban" quality to it.. The actual zoning of the land cannot, in my view, be displaced by reference to the qualities of the land which arguably could give the land a non urban character. The taxpayer further argued that the Chief Commissioner should exercise his discretion in s10AA(4)(c) LTMA and treat the whole of the parcel as rural notwithstanding that it is only partly zoned rural and partly zoned environmental conservation and partly residential. The taxpayer's case was that the words of s10AA(4)(b) LTMA in 2013-2014 and s10AA(4)(c)LTMA in 2015-2016 speak about land being in "a" zone which should be read in the singular. This does not, in this context, meet the requirements of the s 8 of Interpretation Act 1987 or general principles of interpretation that the singular includes the plural (see e.g. Pearce and Geddes Statutory Interpretation in Australia 8th Ed. Pars 6.39-6.41).In my view there is no room for an exercise of discretion here because the discretion only applies when the land is not within a zone. Here all of the land is within one zone or another and the discretion in my view is applicable only in circumstances where land is for some reason (for example due to error) not zoned at all.
[2]
DOMINANT USE
In the present case the issue of whether the dominant use of the subject land is the cultivation of trees in a tree farm for the purpose of sale needs to be addressed first.
The decision in Metricon (Metricon v Chief Commissioner of State Revenue [2016] NSWSC 332; upheld on appeal CCSR v Metricon Pty Ltd [2017] NSWCA 11) establishes that references to use of the land refers to present use of the land. Therefore the potential use of land for subdivision and housing development can be put to one side at least until the relevant approvals are granted and some work to develop land begins. His Honour Barrett AJA(Macfarlan and Ward JJA agreeing) summarised his view of the meaning of "use" as follows:
"In summary, I am of the opinion that the concept of "use" relevant to s 10AA as a whole (and s 10AA(3) in particular) - a concept in which the preposition "for" plays a central role - is one of physical deployment of Isaacs J's "concrete physical mass" in pursuance of a particular purpose of obtaining present benefit or advantage from it, with deployment understood as including not only activity but also inactivity deliberately adopted as a means of obtaining such actual and present advantage from the land; and with purpose understood as objectively ascertained purpose. There is no requirement that immediate productive return be achieved, as long as some benefit or advantage accrues. In a s 10AA(3) case, each "use" considered in the search for "dominant use" must be of the character I have described. Otherwise, the necessary process of comparison cannot sensibly be undertaken."
However it is well established that a 'token' use will not suffice. In Greenville Pty Ltd v Commissioner of Land Tax (1977) 7 ATR 278 it was held that the planting of one and a half acres of pumpkins on a parcel of 160 acres (which was formerly a golf course) did not mean that the land was primarily used for cultivation for the purpose of selling the produce of such cultivation. Helsham J said (At 280) :
"I do not think the question: what is the main use of the land, is to be answered by pointing to the only activity on the land. An activity going on the land does not necessarily characterise the use of the land as a whole, so that one can say the land is primarily used for that activity….For in no real sense at all was the land in question here being used at the relevant time primarily for cultivation…If it was a real use, rather than a token or colourable one, as I must assume it was, the degree of use does not in all the circumstances and at the relevant time endow the land comprised in the golf course with the character of being used primarily for growing pumpkins, nor enable me to say that in substance and looked at as a whole the land was being used for this activity."
In this case it is question of weighing the facts regarding the relative quantum of uses of the land against any non-use in determining whether the primary production use (cultivation of trees for purpose of sale) is the dominant use.
Here the competing uses are either tree farming or the storage of earthmoving equipment (in the 2013 and 2014 land tax years). In the 2015 and 2016 land tax years the question is whether tree farming is regarded as the dominant use. In each case this must be balanced with a consideration of how much the land is physically unused for any of these activities.
The evidence about the uses of the subject land suffers from a lack of precision about exactly what the extent of those uses was.
The evidence regarding the storage of earthmoving vehicles in the 2013 and 2014 land tax years came from Mr Tall (affidavit of 22 August 2017 paragraph 2) and from Mr S MacDonald (affidavit of 22 August 2017 paragraph 24). The equipment belonged to the previous owner of the land (Mr Laut) or an entity of his. The equipment had apparently been stored on the land when Mr Laut or his entity owned the land.
Mr Laut was permitted to continue to store the equipment on the subject land by the taxpayer by an agreement in the form of a deed (Exh ABT-5) under which Mr Laut would slash between the rows of trees planted on the land approximately twice each year in lieu of rent. This occurred during the 2013 and 2014 land tax years and was terminated in July 2014 when Mr Laut suffered medical problems. Mr Laut did not give evidence. This was explained by Mr Tall on the basis that Mr Laut was elderly, in poor health, and Mr Tall felt uncomfortable asking for his testimony when he (Mr Tall) had acquired the subject land as a "distressed sale".
I would not draw an adverse inference from the lack of evidence from Mr Laut in these circumstances.
The stored earthmoving equipment consisted of a grader, a slasher, a backhoe, a tractor and a truck (see affidavit of Mr S McDonald 22 August 2017 paragraph 24) and were parked near a shed close to the road boundary of the land at Waianbar Street.
Doing the best I can from fairly indistinct aerial photographs, assisted to some extent by the evidence, I infer that the area of land used for the storage of earthmoving equipment is negligible in comparison to the size of the subject land, occupying at most probably a couple of hundred square metres out of a total of 73 hectares.
Economically the taxpayer had the benefit of saving the cost of slashing while the equipment was stored on the subject land. Evidence from a summary of tree farming work (Exh ABT-21) about the cost of slashing shows that this represented a cost saving of approximately $13,000.00 to $15,000.00 per annum in the 2013 and 2014 financial years.
The Chief Commissioner's counsel submitted that the storage use could be considered the dominant use of the land during the 2013 and 2014 land tax years.
However given the relatively small area used for storage (and the lack of positive income generated - as opposed to a saving in cost) I am not able to accept that the storage use was the dominant use of the subject land during the first two land tax years.
The evidence concerning the use of the land for tree farming is in some respects contradictory and unsatisfying. Mr Tall in his affidavit dated 28 April 2017 stated that he had been advised by the vendor that the property contained 8,000 trees.
When cross-examined about this at the hearing he corrected his statement and said that the vendor's solicitor had told him that there were 5,000 trees on the subject land. He went on to say that he had not conducted a stock-take of the trees when the land had been acquired (although he testified he had been running his own businesses since he was 22 years old (see his affidavit of 28 April 2017 paragraph 5)). He also said that he had not organised for any new planting of trees to occur. Indeed he seemed to know very little about the trees on the land.
The taxpayer submitted that it was contractually obliged to continue tree farming on the land by the agreement for the purchase of the land. I do not think this is correct. The clause concerning continuation of tree farming was for GST purposes, and only required the purchaser to warrant that it is intended to carry on a Farming Business on the Property and would have that intention at the time of supply of the property (para 46.4 contract for the sale of land dated 13 August 2012 Exh ABT- 3).
There are some copies of photographs in evidence (e.g. Exh ABT-13 p338). The quality of the aerial photographs in particular is of very low resolution. One can discern scarification of the earth into what appear to be parallel rows covering part of the land. No real indication of the presence or absence of trees in those rows can be seen or inferred.
There are some slightly better quality photos included in the affidavit of Mr Tall of 28 April 2017 (Exh ABT-4) apparently taken by Mr Laut depicting some raised earthen rows and what appear to be saplings planted on them with water lying in-between the rows. These photos do not really assist the taxpayer in satisfying its burden of proof.
Of somewhat more assistance are reports from third parties prepared for the taxpayer. In October 2016 the taxpayer received a report from a surveyor (Mr M Rogers) concerning the subject land which is Exh ATB 13. Mr Rogers' report states that at the time of the report 9.21 hectares of the land are planted to trees from his detailed survey and that on examination of a "scanned image" there is shown a further 4.15 hectares that are "likely" to be planted to trees which were not identified in his detailed survey, and that a further prepared area of 12.39 hectares which may or may not have been under cultivation or planted with trees at some time.
The kernel of Mr Rogers' evidence is that the Tribunal can only be certain from a third party that 9.21 hectares is planted to trees (a little over 12% of the area of the parcel). Mr M Rogers did not give evidence. His report was prepared after the relevant dates for the tax years.
There was a further report and proposal by a Mr D Louden, a registered landscape architect, dated May 2013 (s58 Docs Tab32D).
Mr Louden in that report states that 3 stages of development of the subject land are anticipated, the first being "Re-establishing Farm Operations" (s58 Docs p.692).Mr Louden goes on to say (s 58 Docs p.695) that "The area of the existing tree farm and proposed improvements contain almost exclusively of [sic] Mixed Sedge Heath association" and names 3 species of Rushes.
Mr Louden also mentions some trees located on the subject land as Tall Open Forest, Mid to Tall Open Woodland to Forest, Woodlands and Shrublands (s58 Docs p.695) without further detail.
Interestingly, he goes on to advise on the commerciality test for land tax purposes (s58 Docs p.701).
There is in evidence another report by Mr Louden (Exh ABT-7) which summarises to some extent his May 2013 report. In it Mr Louden proposes "Progressive replanting to replace failed plants is proposed in the short term to re-establish viable farm operations" (underlining added).He also says there are about 16 ha of "Cleared areas where trees have been planted (assumed furrowed areas seen on the aerial excl EPZ)" (Exh ABT-7 p.309). It seems Mr Louden did not physically measure the area by visiting it. He says the total arable area for tree farming was about 28 ha.
Mr Louden was not called to give evidence and I think that I can draw an adverse inference from the unexplained failure to call Mr Louden who (with his apparent expertise and familiarity with the subject land) could have provided welcome clarification of the position in 2013.
Mr Tall testified that the taxpayer determined not to follow up Mr Louden's proposal to re-establish and expand the tree planting operation due to the cost and long payback period. As stated earlier Mr Tall also testified that no further planting occurred on the subject land during the land tax years in question. The result of the evidence of both Mr M Rogers and Mr Louden is that at best only a small portion of the parcel was planted with trees. Mr Tall did not do a stock-take at the time the subject land was acquired. He simply accepted a statement about the number of trees on the land but was somewhat unsure and gave different evidence by affidavit and at the hearing.
In July 2016 Mr Tall commissioned the caretaker of the property (Mr J Rogers) to count the trees, at least those whose height exceeded 2 metres in some cases. Mr J Rogers' tree count is attached to an affidavit of his dated 22 August 2017. The tree count revealed that there were only 598 trees planted in 71 rows. There may have been more which were under 2 metres but that number is not stated.
In circumstances where I can only be reasonably confident that only 9 or so hectares out of 73 is used for tree activities and only 598 trees could be counted in 2016, I do not consider that the dominant use of the subject land is for tree farming (i.e. the cultivation of the land for the purpose of sale). In my view the land is in very large part unused.
Furthermore I am not satisfied that the taxpayer has met its burden of proof that the cultivation of the trees is the for the purpose of sale. The relevant evidence, such as it is (s58 Docs Tab 32E), indicates a loose, informal and probably unenforceable "agreement" between the taxpayer and an associated development company (SWRD) for the development company to possibly purchase the trees for use in any development it may do in the future at a market price. This "agreement" is discussed in more detail below. Otherwise the end use of the trees is unclear. Mr Tall says the trees could be used for furniture or as firewood but there is no business plan which would assist in reaching a view that the trees or the wood in them will be sold. In CDPV Pty Ltd v Commissioner of State Revenue [2016] VSC 322 it was held that a tenant on rural land was not cultivating wheat for the purpose of sale but rather to control weeds and any sales were really just a side benefit. It seems to me here that the few trees on the land are being cultivated for a purpose other than for sale. If sales can be made then that will be an added bonus.
My finding that the subject land was not dominantly used for cultivation for the purpose of sale of the trees or the wood in them disposes of this case. In case I am wrong on the dominant use test I address the other submissions made on behalf of the taxpayer.
[3]
COMMERCIALITY TEST
As the land is not zoned rural in its entirety the use of the land must satisfy the commerciality test in s10AA(2) quoted above (Triston). The evidence relevant to the commerciality test is sketchy. The evidence about the size of the area actually planted with trees (9 to possibly 16 ha) is set out above. The number of trees in the June 2016 tree count (598) is also set out above.
The value of the trees is uncertain. The accounts of the taxpayer for the year ended 30 June 2014 (s58 Docs Tab 32H p.722) show the value of trading stock as $70,400.00. The affidavit of Mr Tall dated 28 April 2017 paragraph 36 states the present value of the trees at $247,000.00 without disclosing the basis of the figure. These figures appear to be a director's estimate of value based on unstated assumptions and not supported by any valuation evidence from any expert. The evidence of Mr Tall indicates that he has little knowledge of what trees are actually on the land or of their value.
There is no business plan in evidence (apart from the rejected 2013 proposal of Mr Louden to expand the tree operations ATB tab 7 & section 58 documents tab 32D). Mr Tall gave evidence (affidavit of 28 April 2017 para 35) of an oral forward sale agreement of trees to SWRD which is an associated development company with a document (s 58 Docs Tab 32D) said to reflect its terms even though the document was prepared for another potential joint venture with another party. This evidence is of doubtful value and I am unable to confidently rely on it. This is because it is conditional, uncertain and probably unenforceable (the document provides that SWRD agrees to purchase at fair market price such trees from the "tree farm" as are suitable to SWRD "as/if/as/when the purchaser requires such trees in pursuance to it undertaking subdivision of land within close proximity" to the "tree farm". I note that only one of the species anticipated to be required by the purchaser (subject to its project(s) proceeding) is growing on the land (Broad Leaved Paperbark)). There is provision in the document (which I would not call an agreement but rather an outline of a potential relationship) for the taxpayer to source trees from other suppliers.
There is some evidence of steps being taken to improve the business outlook for the tree growing activities: for example the preparation of a plan by Mr Louden in May 2013 to re-establish a viable tree farm - which was not implemented; discussions in 2013 with other nursery operators to either manage the tree growing activities or possibly to purchase the trees produced but which did not result in any concluded agreement.
The amount of work put in to manage the growing trees is limited to the caretaker spending 1 hour per week at the land; twice-yearly slashing between the rows; and some weed control performed pursuant to orders made by the local council. The slashing involves about 14 days a year of work and associated expense, and I recognise this is not insignificant.
The commerciality test in s10AA(2) of the LTMA was discussed in Maraya Holdings Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 23 at [77] to [91] and on appeal to the Court of Appeal [2013] NSWCA 408 at [48] to [60]. It was further elaborated in some detail in Vartuli v Chief Commissioner of State Revenue [2014] NSWSC 678 particularly at [108] to [119], and [129]; upheld on appeal [2015] NSWCA 372.
To summarise, in considering whether the use of the land satisfies the commerciality test it is necessary to consider the evidence about the following factors:
the intensity of the operation being conducted, including the size and carrying capacity of the land;
the number of trees and their quality and species.
the resources committed to the operation including the land, the man hours, plant and equipment etc;
the profitability or expectation of profit including the history of the operation, the reasons for any lack of profit;
the rate of return on capital value - this may or may not be useful. It was not regarded as useful in Vartuli [2014] NSWSC 678 at [88], [90] and [137];
whether any profit contributed to the user's income in a real and not trifling way (Vartuli [2014] NSWSC 678 at [129]).
Having regard to these various factors in my view 598 assorted trees (according to the count) growing on 9.21 hectares in a parcel of 73 hectares requiring 1 hour per week of caretaking, 14 days per annum of slashing; and weed control as necessary, with no sales and no evidence they will ever be profitable cannot be said to be a significant and substantial commercial enterprise. It is also very difficult to say that the operation is carried on with a view of profit when it seems (even allowing for the long-term nature of tree growing) the losses will continue into the foreseeable future. If there were profits I am unable to say if they would make a meaningful contribution to the taxpayer's income as there is no evidence to rely on, but I would doubt they would do so.
There was evidence from a consultant (Mr Simon Smith) by a report/email of 24 January 2013. He was engaged by Mr Tall and his report is Exh ABT- 6. Mr Smith concluded that the financial results of the tree farm on various assumptions about the value of timber when harvested ("stumpage") are such that tree farming "would generate a significant negative NPV [net present value] over 20 years" even assuming the stumpage price increased ten-fold. Mr Smith concludes that the tree farming business is "marginal" and a "sub-optimal retirement investment". The unaudited accounting documents of the taxpayer (s 58 Docs Tab 32H and Exh ABT 12) show losses in each of the 2014-2016 land tax years, and objectively it seems very unlikely that an overall profit will ever be made when the 598 trees are sold.
[4]
OTHER SUBMISSIONS
The taxpayer made two other submissions which relate to the assessments connected with the transfer of Lot 35 to Teebee Holdings Pty Ltd as trustee of the Superannuation Fund in late 2015, and the boundary change to it in 2016. It will be recalled that the taxpayer is trustee of the Property Trust and the Superannuation Fund.
Those arguments are available to be made before the Tribunal by the taxpayer as it is not limited to the grounds set out in its objection (s100 Taxation Administration Act).
The first submission was that the notice of assessment for Lot 35 for the 2016 land tax year was invalid on the ground that the taxpayer was not referred to in its capacity as trustee of the Superannuation Fund but instead was referred to as trustee for the Property Trust.
The taxpayer's name as owner of the land on the notice of assessment was correct. The "error" if it be such was the capacity in which the owner was acting.
In my view nothing substantive turns on the "incorrect" reference to the taxpayer's capacity in the notice of assessment. So long as the notice of assessment identifies the taxpayer by its correct name as owner, the assessment is in my view valid. The Chief Commissioner may have no knowledge of the capacity in which the taxpayer is owner of the land. If there is a reference in an assessment to the taxpayer's capacity as trustee for a particular trust it is a matter of convenience. A person holding land as trustee is best placed to know in what capacity the land is held. If the Chief Commissioner makes an error the trustee is responsible for correcting the record. However it is now clear that the trustee of the Superannuation Fund was the owner of Lot 35 (before it was augmented by a part of Lot 36 which part in my view became owned by the Superannuation Fund on registration of the plan of subdivision in March 2016 - before that though it had equitable rights they were conditional and it could not be classified as an owner) prior to 31 December 2015 which is the relevant date for determination of liability for land tax in the 2016 land tax year. It is appropriate that new assessments be issued to recognise the two capacities in which the taxpayer was the owner, and any valuation changes as a result of the "division" of ownership. I would therefore remit the assessment to the Chief Commissioner for reassessment of the taxpayer in its capacity as trustee of the Property Trust (Lot 36), and the Superannuation Fund (Lot 35) for the 2016 land tax year.
The second submission connected to Lot 35 and its transfer to the Superannuation Fund involved the issue in mid - 2016 by the Valuer General of new notices of valuation of Lot 35 back to 2012. In March 2016 a small part of Lot 36 was consolidated with Lot 35 by a boundary change. This led to the action of the Valuer General and the issue of new PIDs (Property Identification Numbers) because the lots were different and in a different deposited plan number.
Until March 2016 Lot 35 and Lot 36 were in the same deposited plan and had a single PID. The assessments under challenge in these proceedings were issued before then on 26 January 2016 and the new valuations were issued by the Valuer General for the years 2012-2016 on 9 June 2016 with a new PIDs. So at the time the assessments were issued the reference was to the correct PID. The taxpayer's submission was that these 'backdated' valuations with the new PIDs was conclusive evidence of the taxable value of the value of the land (s14 CC(3) Valuation of Land Act 1916 'VOLA'- which provides
"(3) An entry in the Register [of Land Values] as to a land value, allowance or apportionment factor ascertained under this Part is conclusive evidence of the ascertaining of the value, allowance or factor on the date shown in the entry".) and rendered the 2016 notice of assessment for Lot 35 to the taxpayer as trustee for the Property Trust rather than as trustee for the Superannuation Fund, invalid.
As mentioned the notice of assessment when it was made referred to the correct PID and the taxpayer by its correct name although the capacity in which the taxpayer acted was not correct. I think that the taxpayer's argument is sufficiently answered by the Chief Commissioner's submission that the 'backdating' of the valuation and issue of new PIDs does not affect the validity of the assessments made before those actions. In particular the explanation for the Valuer General's action is that it was done to make a separate valuation on subdivision (consolidation of a part of Lot 36 into Lot 35 effective March 2016) under s27B VOLA. The valuation document explicitly states "As the date valuation was made is after the valuing year the land value shown above may not be the land value used for land tax purposes" (Exh A- Respondent's Tender Bundle Tabs 5-8). A similar approach can be applied to the identification of the land for land tax purposes. The action of the Valuer General after assessments have been made should not have the effect of rendering them invalid. The conclusion is that the challenged assessments are valid.
[5]
INTEREST
The taxpayer also submitted that interest at market and premium rates should be remitted. There does not appear to be any good reason to remit the market rate of interest. No exceptional circumstances have been established. The taxpayer further submits that the premium rate of interest should be remitted. However there is no compelling evidence as to why this should occur. Mr Tall appears to have relied on his understanding of how Mr Laut was treated for land tax, rather than taking care to obtain appropriate advice. Some net remission of 2013 interest has already been implemented.
[6]
ORDERS
1. The Application is dismissed in respect of the 2013-2015 land tax years and the assessments confirmed.
2. The assessment for 2016 is set aside and remitted to the Chief Commissioner for the issue of new assessments to the taxpayer reflecting its ownership of the land in the capacity of trustee of two trust funds as at 31 December 2015.
3. An application for leave to apply out of time was not opposed and is granted.
[7]
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: 20 November 2017