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In 1535 Hen­ry the 8th intro­duced the anti-tax avoid­ance leg­is­la­tion known as the Statute of Uses, which relat­ed to finan­cial respon­si­bil­i­ties — or, land tax — result­ing from the own­er­ship and use of land.  So began the prac­tise of land own­ers engag­ing lawyers to look for ways in which to avoid their land tax oblig­a­tions — and five hun­dred years lat­er, this prac­tise real­ly hasn’t changed con­sid­er­ably.

The Office of State Rev­enue (OSR) has, in recent years, cracked down on prop­er­ty devel­op­ers look­ing to claim tax exemp­tion by assert­ing land is being used for pri­ma­ry pro­duc­tion. A recent court deci­sion, how­ev­er, has put the OSR in its place and set a prece­dent which will be of inter­est to devel­op­ers.

In the case of Chief Com­mis­sion­er of State Rev­enue v Met­ri­con QLD Pty Ltd, the court con­clud­ed that Metricon’s use of land for cat­tle graz­ing was the ‘dom­i­nant pur­pose’ of the land and there­fore not sub­ject to land tax — since pri­ma­ry pro­duc­tion is tax exempt. This deci­sion was made despite steps tak­en by Met­ri­con to pre­pare the land for devel­op­ment.

Met­ri­con — a prop­er­ty devel­op­er and build­ing com­pa­ny — had been ‘land bank­ing’ land around Ter­ra­no­ra, in north-east­ern NSW, since 2008.  Over the years, Met­ri­con had paid con­sul­tan­cy fees and tak­en oth­er actions that were con­sis­tent with get­ting the land ready for devel­op­ment, how­ev­er, in the mean­time the com­pa­ny was using the land for cat­tle graz­ing.

The Chief Com­mis­sion­er argued that Metricon’s hold­ing of the land meant that the ‘dom­i­nant pur­pose’ of the land was prop­er­ty devel­op­ment, not pri­ma­ry pro­duc­tion — and claimed that land tax should there­fore apply. How­ev­er, the Court con­clud­ed that ‘use’ should be defined as the phys­i­cal deploy­ment of an asset (ie land) for the pur­pose of obtain­ing a present ben­e­fit or advan­tage from it, and is not to be deter­mined by ref­er­ence to plans for future use, or to the iden­ti­ty of the person/company using the land.  On this basis, the land was being used for pri­ma­ry pro­duc­tion and was not liable to land tax.

This is an impor­tant deci­sion for prop­er­ty devel­op­ers who may be con­sid­er­ing how to use land pri­or to devel­op­ment or sale. With the large amount of devel­op­ment cur­rent­ly being under­tak­en in Port Mac­quar­ie and sur­rounds, devel­op­ers may wish to con­sult us regard­ing the most tax effec­tive use of their land — just as prop­er­ty own­ers have been doing since 1535.

For more infor­ma­tion in rela­tion to this mat­ter, please con­tact Hadyn Ori­ti, Part­ner, on (02) 6583 0449.

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