Jane Crisp, Paul Vamvouklis, and Daniella Sukkar analyse a recent NSW case regarding future intended use of land for the purposes of land tax.
The New South Wales (NSW) Court of Appeal has dismissed an appeal by the Chief Commissioner of State Revenue (Commissioner) in which the Commissioner argued that he would look to the future intended use of land in determining whether the land qualifies for a primary production exemption from land tax. The case represents a significant victory for NSW greenfield property developers in their running battle with the Commissioner over the application of the primary production exemption.
The land tax exemption is available where it can be shown that the ‘dominant use’ of land is for primary production. However, in recent years, the NSW Commissioner has refused the exemption and retrospectively imposed land tax on property developers who have acquired primary production land for the purpose of redevelopment but have not yet commenced development activities on the land. This is despite the fact that land has continued to be used for primary production.
In the case of Chief Commissioner of State Revenue v Metricon Qld Pty Ltd, the NSW Court of Appeal rejected the Commissioner’s argument that in assessing whether the exemption was available in the present turned on what the land was intended to be used for in the future. The Court of Appeal held that Metricon’s holding of the land as part of its stock-in trade did not amount to a ‘use of land’ and therefore did not preclude the availability of the exemption if the land was presently being used for primary production. The decision will also thwart the Commissioner’s attempts to appeal the January decision in Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue (No. 2) as the decision handed down by the primary judge in Leppington is consistent with the Court of Appeal’s decision in Metricon.
The decision may now prompt other property developers in similar circumstances to revisit their land tax assessments where a primary production exemption has been refused.
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