Primary production land exemption denied due to insufficient evidence

Each jurisdiction across Australia has a primary production land tax exemption.  The requirements of those exemption are similar. For example, in Victoria, the general test is that the land must be primarily used for primary production. While in New South Wales the dominant use of the land must be for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce. In determining whether the land use is the primary or dominant one, courts give weight to the evaluation and comparison of the scale, extent and intensities of each competing use of the land.

The decision of 1735 Pty Ltd v CCSR [2020] NSWCATAD 186 (1735) shows the importance of record-keeping and evidence in proving the dominant use of land. Failure to provide accurate records will result in farm land being subject to land tax.

In 1735, the applicants claimed a primary production exemption on the basis that the dominant use of the land (Land) was for the maintenance of beef cattle for the purpose of selling them. However, the Tribunal was not satisfied by the ‘unclear and conflicting’ evidence provided by the applicants and thus held that the land was not entitled to primary production exemption and subject to land tax.

The Tribunal considered the evidence to be ‘unclear and conflicting’ for the following reasons:

  • The evidence as to the intensive use of the Land mistakes the Land for several other parcels of land. The cattle referred to in the applicants’ submission were actually grazed on the Land and several other parcels of land during the tax years.

  • The applicants submitted evidence on the carrying capacity of the land. However, the expert report submitted stated that insufficient information was provided to allow the actual carrying capacity of the land to be estimated.

  • There was insufficient information to allow the expert to form an opinion on the actual use of the land in each of the relevant tax years.

  • The expert report was partly based on unsubstantiated oral information and certain calculations were based on hypothetical assumptions.

  • The applicants did not provide any records on the number of cattle grazed each year and simply relied on the recollections of the witness. However, the Commissioner provided clear documentary evidence on the cattle activities.

The Tribunal gave examples on the kind of evidence that should be provided to discharge the onus of proof, including:

  • Details of the land area devoted to cattle;

  • Written records of the number of cattle grazed in each tax year (eg. breeding records, weight growth records, purchases and sales records, animal history records);

  • Information regarding the carrying capacity of the land;

  • Details of the amount of work done on the land (eg. monetary value of particular activities);

  • Details of the size and intensity of the grazing activity on the land; and

  • Records of the operations of the cattle business (eg. business plan, budget, income statements).

Examining and challenging primary production land tax exemptions is high on the agenda of revenue authorities at the moment. As can be seen in this case, evidence is key for substantiating a claim for a primary production land tax exemption.  It is, therefore, not only important to understand the specific requirements of the applicable primary production land tax exemption but it is also vitally important that owners of farm land collect and keep evidence of their primary production activities.

To discuss this further or for more information please contact:

Phil Broderick
Principal
T +61 3 9611 0163  l M +61 419 512 801   
E: pbroderick@sladen.com.au     

Denise Tan
Senior Associate
T +61 3 9611 0160  | M +61 438 714 965
E: dtan@sladen.com.au      

Laura Spencer
Senior Associate
T +61 3 9611 0110
lspencer@sladen.com.au

Lucy Liang
Graduate Lawyer
E lliang@sladen.com.au

Phil Broderick