The NSW Supreme Court refused an exemption from NSW land tax for the owners of land in NSW that was used for cattle grazing with a herd of up to 40 cattle because the Court concluded that the farming operations did not have sufficient commercial purpose or character.
The NSW Land Tax Act provides an exemption from land tax where the land is used for primary production and it is:
• Zoned “rural”, “rural residential” or “non-urban”;
• The Chief Commissioner is satisfied it is rural land; or
• The primary production has “significant and substantial commercial purpose or character” and is for “the purpose of profit on a continuous or repetitive basis”.
The land did not meet the zoning criteria and was valued at $26.6m in 2009.
A beef industry expert testified that 42.6 kg of beef per hectare was “a very low output of beef”, the operation was not commercially viable and that the farmer would have been better off ceasing the operation, apart from the land tax savings.
The Queensland legislation is worded differently and provides the primary production exemption for land “that is used solely for the business of agriculture, pasturage or dairy farming” and is subject to a certain ownership restrictions. However, the relevant Queensland Guidelines set out the factors to determine the existence of a business and that includes “whether the activity has a significant commercial purpose or character” and “whether there is an intention to make a profit as well as the [actual] profitability of the activity”.
Care should be taken when claiming the land tax exemption to ensure that your primary production activities are indeed business like and with an adequate planned or actual profit.
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