Chief Commissioner of State Revenue v Metricon QLD Pty Ltd [2017] NSWCA 11

Date of judgement 10 February 2017 Proceeding No. 2016/127945
Judge(s) Ward JA, McFarlan JA, Barrett AJA
Court or Tribunal Court of Appeal of NSW
Legislation cited Administrative Decisions Tribunal Act 1997

Environmental Planning and Assessment Act 1979

Land Tax Management Act 1956

State Revenue Legislation Further Amendment Act 2005

Valuation of Land Act 1916
Catchwords TAXES AND DUTIES – land tax – exemption of land the “dominant use” of which is “for” certain primary production activities – Land Tax Management Act 1956 (NSW) s 10AA(3) – where farmland acquired with a view to residential development and subdivision – where some steps taken toward realisation of that purpose – cattle raising activities conducted on the land – certain areas also the site of tenanted houses – whether land subject to any present “use” by way of “land banking” or “residential development” – whether residential use or cattle raising use was the “dominant use” of certain areas – whether the concept of “use” relevant to s 10AA(3) is confined to physical use or extends to “intangible use”.
Cases cited Assessor of Area # 10-Burnaby/New Westminster v Intracorp Developments Ltd 2000 BCCA 121; (2000) 137 BCAC 63

Bellbird Ridge Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1637

Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259

Bosa Development Corp v British Columbia (Assessor of Area #12 Coquitlam) (1996) 30 BCLR (3d) 263

Commissioners of Taxation v Trustees of St Mark’s Glebe [1902] AC 416; [1902] UKPC 21

Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493; [1957] HCA 15

Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1; [1959] UKPC 5

Federal Commissioner of Taxation v St Hubert’s Island Pty Ltd (1978) 138 CLR 210; [1978] HCA 10

Dwyer v Calco Timbers Pty Ltd (2008) 234 CLR 124; [2008] HCA 13

Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; (2014) 96 ATR 875

Golosky v Golosky (unreported, NSWCA, 5 October 1993)

Greenville Pty Ltd v Commissioner of Land Tax NSW (1977) 7 ATR 278

Kirela Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (No 2) [2004] NSWLEC 68; (2004) 132 LGERA 90

Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366; (2011) 85 ATR 775

Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 9

Metricon Qld Pty Ltd v Chief Commissioner of Taxation (No 2) [2016] NSWSC 332; [2016] ATC 20

Minister Administering the Crown Lands Act v NSW Aboriginal Land Council

 (2008) 237 CLR 285; [2008] HCA 48

New South Wales v The Commonwealth [1923] HCA 34; (1923) 33 CLR 1

New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50

Pioneer Concrete (Qld) Pty Ltd v Brisbane City Council (1980) 145 CLR 485; [1980] HCA 1

Rainn Pty Ltd v Commissioner of State Revenue [2016] VSCA 338

Ryde Municipal Council v Macquarie University (1978) 138 CLR 633; [1978] HCA 58

Shell-Mex and BP Ltd v Clayton [1955] 1 WLR 982

Sandhurst Holdings (Australia) Ltd v Commissioner of State Revenue (2009) 25 VR 59; [2009] VSCA 167

Saville v Commissioner of Land Tax [1980] 12 ATR 7

Singer v Berghouse (1994) 181 CLR 201; [1994] HCA 40 at 212

Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545

The Council of the Town of Gladstone v The Gladstone Harbour Board [1964] Qd R 505

Thomason v Chief Executive, Department of Lands [1995] QLAC 4; (1995) 15 QLCR 286

Background

In the Supreme Court of NSW, the taxpayer, Metricon QLD Pty Ltd (“Metricon”), sought review of land tax assessments issued for the 2009 to 2013 tax years, on the basis that it was entitled to an exemption from land tax as the dominant use of the subject land was for primary production, namely the maintenance of cattle, pursuant to section10AA(3) of the Land Tax Management Act 1956 (“LTMA”). The Chief Commissioner argued that the dominant use of the subject land was commercial land development. In the alternative, the Chief Commissioner argued that the dominant use of certain lots of the subject land was for residential rental use.

On 31 March 2016, His Honour Justice White handed down his decision. His Honour held that, while "use" in the LTMA was not necessarily confined to a physical use, it must be a current use and not acts taken, or benefits derived, in respect of a future intended use. Relevantly, His Honour found that holding the subject land as part of its stock in trade or land bank was not a “current” use of the land, and that work done, and expenses incurred, by consultants as part of Metricon's commercial land development, being the residential subdivision, were only a use of the land insofar as the land was physically used in carrying out those activities to obtain the requisite development approvals. His Honour found that, in respect of 153 Mahers Lane, the dominant use of that land was as a residential rental property for the 2009 land tax year. His Honour was otherwise satisfied that the dominant use of the subject land for the relevant tax years was for primary production. His Honour set aside the assessments in this regard.

The Chief Commissioner appealed the decision of Justice White to the Court of Appeal. Metricon lodged a Notice of Contention in the Court of Appeal, arguing that His Honour erred in finding that “use” in s.10AA was not confined to physical use.

Decision

Barrett JA (with whom Ward JA and McFarlan JA agreed) considered the leading High Court and Appellate cases in other statutory contexts regarding the meaning of “use” (including Council of the City of Newcastle v Royal Newcastle Hospital; Ryde Municipal Council v Macquarie University; Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue; Ferella v Chief Commissioner of State Revenue and Thomason v Chief Executive, Department of Lands [1995] QLAC 4). His Honour noted that caution should be taken when relying on cases in which “use” is employed in a different statutory context, however accepted that “use”, in relation to land, has a core meaning, concerned with examination of activities undertaken on the land in question.

Having regard to the statutory text of section10AA, His Honour observed that, as distinct from the majority of exempting provisions in section 10 of the LTMA, section 10AA is concerned only with the use to which the land is put and not the identity or attributes of its owner. Each of the primary production activities listed in section 10AA(3) involve deliberate physical acts in relation to the land. While the authorities support the notion that land may be used without physical activity, this presents a difficulty when trying to compare uses, as required when determining which is the dominant use of land, as there is no meaningful method of comparative quantification. Accordingly, His Honour found that it is the physical concept of land that is relevant to the interpretation of section10AA(3), being use relevant to “the concrete physical mass” that is land (New South Wales v The Commonwealth (1923) 33 CLR 1).

His Honour therefore found that the concept of “use” in section 10AA is one of physical deployment of “the concrete physical mass” that is land in pursuance of a particular purpose of obtaining present benefit or advantage from it, which may also include the deliberate maintenance of a state of inactivity for a specific purpose (in accordance with the Royal Newcastle Hospital case).

In this regard His Honour considered that the view of Justice White at first instance (and in subsequent decisions in Bellbird Ridge Pty Ltd v Chief Commissioner of State Revenue and Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue) that use is not confined to physical use of the land should not be accepted. In respect of “land banking” this of itself is not a use of the land, as mere holding with intention to sell at a future point is not the source of a present benefit or advantage. In respect of the engagement of and expenditure on consultants, His Honour found that there was no deployment of the land in pursuance of a purpose obtaining present benefit and advantage.

The Court dismissed the appeal and ordered the Appellant pay the Respondent’s costs.

Link to decision

Chief Commissioner of State Revenue v Metricon QLD Pty Ltd [2017] NSWCA 11

Last updated: 20 March 2017