A taxpayer was unsuccessful in claiming a primary production land tax exemption before the New South Wales Civil and Administrative Tribunal.

On review, the taxpayer was not successful in discharging its obligation to prove that primary production was the dominant use of its land.

The recent New South Wales Civil and Administrative Tribunal decision of T & A Skills Care Service Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAD 18 demonstrates the importance of a taxpayer discharging its evidentiary burden in claiming the primary production exemption for land tax.

Background

The Taxpayer owned a property in Badgerys Creek, New South Wales and claimed a primary production exemption on the basis that the dominant purpose and use of the land was to cultivate bamboo for the sale of timber and (from 2021) to breed and maintain goats.

The land was zoned rural land for some of the land tax years in question (2019 and 2020) but became non-rural land for the 2021 and 2022 land tax year.

Legislation

Rural land that is used for primary production is exempt under subsection 10AA(1) of the Land Tax Management Act 1956 (NSW).  Under subsection 10AA(3), land used for primary production means:

“land the dominant use of which is for –

1. the cultivation, for the purpose of selling the produce of cultivation; or

2. the maintenance of animals … for the purpose of selling them or their natural increase or bodily produce …”

If primary production land is not rural land, under subsection 10AA(2), there is an additional test that the use of the land

1. has a significant and substantial commercial purpose or character, and

2. is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).

Therefore, the less restrictive test applied to years 2019 and 2020 and the more restrictive test applied for 2021 and 2022.

Decision

Judy Sullivan, Senior Member held that for each of the relevant years, T & A Skills Care Service Pty Ltd had not been able to prove that the dominant use of the land was for primary production.

Under the Taxation Administration Act 1996 (NSW) – the Tribunal stands in the shoes of the Chief Commissioner, but the taxpayer has the onus of proving its case.

The Taxpayer in particular, relying on the evidence of the director, could not show that there were sales made during the relevant time and did not give detail on what occurred on the land on a year-by-year basis by the Taxpayer or third parties.  Further, there were a lack of documentary evidence relating to the commerciality, organisation or operation of a primary production business.

Therefore, the Tribunal was not satisfied that there was sufficient evidence to show that there was a bamboo timber business, a goat breeding business or other primary production operations.

Take home message – gather and keep primary production evidence

This case illustrates the importance of gathering and maintaining primary production evidence, in particular independent third party evidence, of the operation of a primary production business. This could include invoices from suppliers and sales, photos, business plans and a record of the activities undertaken on the land and how they relate to the primary production activities.

In our experience, farm owners are best placed to meet their burden of proof (in establishing primary production activities and/or business) when they gather and keep such evidence well in advance of any Revenue Authority review.

It is also important for farm owners to know the primary production land tax exemption requirements in their particular states and for their particular farms. For example, in Victoria, the primary production land tax exemption requirements are much stricter for urban zoned land that is inside Greater Melbourne.

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Please contact us for advice on primary production land tax or any other State Tax issues.

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

Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au

Meera Pillai
Associate
T +61 3 9611 0179
E mpillai@sladen.com.au