Land Tax Assessment with David Brown Consulting.
David Brown Consulting has the relevant skills and knowledge to act as an expert witness in legal proceedings concerning land tax assessments under the Land Tax Management Act 1956.
Recent activities of the Australian Tax Office (ATO) signal an increase in their interest in enforcing the land tax obligations of New South Wales landowners and farmers under the Land Tax Management Act 1956.
What does the law say?
Under Section 7 of the Land Tax Management Act 1956, land tax “…is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act).”
However, Section 10AA of the Land Tax Management Act 1956 (the Act) provides an exemption from land tax for ‘rural land’ that is used for ‘primary production’.
What is ‘rural land’?
Under Section 4 of the Act land is ‘rural land’ if:
the land is zoned rural, rural residential, non-urban or large lot residential under a planning instrument, or
the land has another zoning under a planning instrument, and the zone is a type of rural zone under the standard instrument prescribed under the Environmental Planning and Assessment Act 1979, section 3.20, or
the land is not within a zone under a planning instrument but the Chief Commissioner is satisfied the land is rural land.
What is ‘primary production’?
Under Section 3 of the Act land used for ‘primary production’ if the dominant use of the land is for:
cultivation, for the purpose of selling the produce of the cultivation, or
the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, or
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
the keeping of bees, for the purpose of selling their honey, or
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
the propagation for sale of mushrooms, orchids or flowers.
Note that the above land uses must be the dominant use of the land. This is an aspect of the legislation that requires a close inspection of the land uses on a property or farm, and is a key source of disagreement, and possibly error, regarding the ATO’s land tax assessment.
Further, Section 2 of the Act holds that land not zoned rural land must also satisfy the significant and substantial commercial character test and the profitability test.
Some influential case law includes Leda Manorstead v Chief Commissioner of State Revenue [2010] NSWSC 867, and Cornish Group Pty Ltd & Anor v Chief Commissioner of State Revenue [2009] NSWADT 191.
The role of an expert witness in land tax litigation
Some landowners and farmers may find themselves the recipients of an adverse land tax determination by the ATO that puts their businesses and livelihoods at risk.
Once the pathways to appeal a tax liability have been exhausted, proceedings before the courts maybe the last line of defence for a farmer with an adverse land tax determination.
With proceedings afoot, a party’s legal team will benefit from an experience agricultural consultant (similarly, farm business advisor) that can provide the court with expert evidence regarding the nature, extent, commerciality and profitability of the primary production land uses.
In particular, an agricultural expert witness with a thorough knowledge of complex agricultural bioeconomic systems will be able to assist the court consider and compare the nature, scale and intensity of the various uses of the land in both a physical and economic sense in order to determine its dominant use. They can assist the court understand the temporal and spatial linkages between different components of the primary production system; the time, skill and effort required to maintain the primary production system; and the considerable volatility in production, expenditure, and income that farm businesses experience year-to-year, all of which will affect a courts decision regarding a parties liability under the Land Tax Management Act 1956.
Conclusion
If you are party to legal proceedings concerning a land tax determination, David Brown Consulting has the knowledge and expertise to act as an expert witness and ensure the court arrives at fair and just outcomes that account for the risk, complexity and volatility that constitutes primary production systems.
