Part 2 of our series decision of Lotus Oaks Pty Ltd as trustee for the Bozzo Family Trust v Commissioner of State Revenue [2021] VSC 388 looks at the former requirement in section 67 of the Land Tax Act 2005 (Vic) (Act) which required the principal business of the Bozzo FT to be of the type carried on on the subject land. Part 1 of our series examined the requirement in section 67 of the Act which necessitates the principal business of a landowning entity seeking the primary production land tax exemption to be farming. Part 3 of our series will consider the ‘substantially full-time engagement’ requirement.
The background facts of this decision are set out in Part 1 of this series.
Primary production “of the type” requirement
The undisputed evidence was that over the Relevant Period, canola, barley, and wheat were grown on the Wyndham Vale land in rotation for the purposes of sale.
It is noted that cultivation of crops fall under category (a) of the definition of primary production in section 64(1) of the Act.
The Bozzo FT contended that the cultivation of crops on the Wyndham Vale property formed a material part of a wider farming business which could be described as grain, cattle and sheep farming across three properties in Victoria and New South Wales.
The Bozzo FT also submitted that the farming activities were integrated in a number of ways indicative of only one business and the “type” of primary production carried on on the Wyndham Vale property should be characterised as the growing of crops and the grazing of livestock for sale, or alternatively as the growing of crops as part of a wider mixed farming business.
The Commissioner disagreed with the Bozzo FT’s submissions submitting that former section 67 of the Act called for the identification of the type of business carried on on the land based on the primary production activities in fact conducted on the land.
The Commissioner also submitted that in any event, the business of primary production carried on on the Wyndham Vale property was not integrated with the other farms.
The Court found that should the Bozzo FT’s contentions be accepted, it would import a legal fiction into the otherwise simple task of determining the type of primary production carried on on the subject land.
In doing so, the Court also outlined that the exemption must be construed narrowly so as to uphold the purpose of discouraging land banking and refused to accept the Bozzo FT’s submission that category (a) of the definition in section 64(1) of the Act extended to the cultivation of livestock and animals.
The “of the type” requirement no longer applies to the current provisions of sections 67 to 67F of the Act. However, the analysis of the “of the type” requirement is still useful in considering the nature of different primary production activities and whether a taxpayer carries on multiple primary production businesses or a single primary production business.
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E pbroderick@sladen.com.au
Continue reading - Part 3: Substantially full-time engagement requirement
