TAX FILES
Land Tax and the Primary Production Exemptions BERNIE WALRUT, MURRAY CHAMBERS
T
he Land Tax Act 1936 (SA) (LTA) provides land tax relief for land used in the business of primary production.1 However, it distinguishes between land used for primary production outside what is described as the defined rural area (DRA)2 and land within the DRA. Where the land is outside the DRA and used in the business of primary production it is exempt if a number of basic conditions are satisfied. In the case of land in the DRA, there are additional requirements to be satisfied before the relief is available. One very recent decision of the Court of Appeal of Commissioner of State Taxation v Takhars [2021] SASCCA 58 and an earlier Full Court decision of Commissioner of State Taxation v T & S Liapis Pty Ltd [2021] SASCFC 152 now provide some guidance on a number of the requirements for the primary production business use relief, and in particular in respect of land in the DRA. Basic Requirement The basic requirements for the relief are that the land is not less than 0.8 hectare in area and the Commissioner is satisfied that the land is used wholly or mainly for the business of primary production.3 The business of primary production is also defined to mean the business of agriculture, pasturage, horticulture, viticulture, apiculture, poultry farming, dairy farming, forestry or any other business consisting of the cultivation of soils, the gathering in of crops, the rearing of livestock or the propagation and harvesting of fish or other aquatic organisms and including the intensive agistment of declared livestock.4
DRA Land If the land is within the DRA then one of the following six alternatives must be satisfied for the land to be exempt. The first is that a sole owner, who is a natural person must be engaged on a substantially full-time basis (either on their own behalf or as an employee)5 in a relevant business. The second is that the land is owned jointly or in common by two or more natural persons at least one of whom is
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engaged on a substantially full-time basis6 in a relevant business and any other owner who is not so engaged is a relative of an owner so engaged. The third is where the land is owned solely, jointly or in common by a retired person, the retired person was, prior to his or her retirement, engaged on a substantially full-time basis7 in a relevant business and the co-owner or co-owners of the land (if any) are relatives of the retired person. The fourth is that the land is owned solely or by tenancy in common by the executor of the will, or the administrator of the estate, of a deceased person, the deceased person was, prior to their death, engaged on a substantially full-time basis8 in a relevant business and a close relative of the deceased person is currently engaged on a substantially fulltime basis9 in a relevant business. The fifth is that the land is owned by a company, or by two or more companies, or by a company or companies and one or more natural persons, and the main business of each owner is a relevant business. The sixth alternative is where the company is the owner of the land and one of three further requirements is satisfied. A natural person owns a majority of the issued shares of the company and is engaged on a substantially full-time basis10 in a relevant business. The next is that two or more natural persons own in aggregate a majority of the issued shares of the company and each of them is engaged on a substantially full-time basis11 in a relevant business. The final requirement is two or more natural persons who are relatives own in aggregate a majority of the issued shares of the company and at least one of them is engaged on a substantially fulltime basis12 in a relevant business. A relevant business is one in relation to land used for primary production if the business is a business of primary production of the type for which the land is used or a business of processing or marketing primary produce and the land or produce of the land is used to a significant extent for the purposes of that business.13
A person is a relative of another person if they are spouses or domestic partners, one is an ascendant or descendant of the other, or of the other’s spouse or domestic partner, one is a brother or sister of the other or a brother or sister of the other’s spouse or domestic partner or one is an ascendant or descendant of a brother or sister of the other or of the other’s spouse or domestic partner.14 A domestic partner of a person is a person who lives with the person in a close personal relationship.15
Liapis In Commissioner of State Taxation v T&S Liapis Pty Ltd16 the taxpayer owned 1.5 hectares in the Hills face zone on which it conducted an olive grove. It was contented by the taxpayer that the majority shareholder worked full time on the land of the company and that the company was engaged in the business of primary production. The olive production was described as low and generally the business was run at a loss, though it was expected that once the olive trees fully matured and full production is achieved, a profit would also be achieved. The Commissioner disputed that the majority shareholder was engaged full time in a relevant business and the company was conducting a business. The Commissioner submitted that the company was in effect engaged in a hobby. At first instance the trial judge found that the olive grove was conducted as a business,17 it was a matter of fact and degree.18 At first instance and on appeal the relevant factors as to whether the activity constituted a business were described as “a purpose of making a profit; repetition and continuity; the activity being conducted in an organised, businesslike or systematic manner; the size of the operation; and the activity being conducted in the same manner as recognised businesses”.19 In respect of the prospect of making a profit, it was said “that a prospect of making a profit is an indicia of a good or successful business, rather than an indica of a business simpliciter”.20
