Land Tax implications

Members may recall a decision of the NSW Supreme Court: Leda Manorstead v Chief Commissioner. This decision related to whether certain land used for primary production qualified for the primary production land tax exemption.

This decision involved a parcel of land that had been rezoned for urban uses, and was subject to a development approval for a residential subdivision, but was nonetheless still in use for primary production (cattle grazing). The property owner had expended $12.4 million on earthworks under terms of the residential subdivision development approval, but no actual building or infrastructure construction was underway and none was imminent. As earthworks were completed, the area was top-dressed and grassed and made available for cattle-grazing.

The Land Tax Management Act provides that land that has been zoned urban is still exempt from land tax if:

¢ the dominant use of the land is for primary production;

¢ it has a significant and substantial commercial purpose or character; and

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

The key issue in the case was whether or not the carrying out of the earthworks a preliminary step to construction was a use of the land, and if so, whether it was the dominant use of land.

The Court concluded that the carrying out of earthworks was sufficient to became the dominant use of a parcel of land, and therefore result in the loss of a land tax exemption.

Leda Manorstead appealed the decision of the Supreme Court and on 29th November 2011 the Court of Appeal handed down their decision by dismissing the appeal. The Court of Appeal confirmed the land tax assessment as the use of the land did not satisfy the requirement that the dominate use of the land was primary production and therefore the land was not exempt from land tax.

The implications of these cases are of great concern to us and the Urban Taskforce will be forming a subcommittee early next year to confirm our policy position on this matter and then actively lobby government for a reasonable resolution.

Members who have land holdings zoned for urban purposes but not used for urban land use may find themselves in a similar situation to Leda and may no longer enjoy the land tax exemption. If this is the case please contact Gilbert de Chalain so that this matter may be raised in an appropriate forum.

The judgment may be accessed from here.