Background
The taxpayer owned land in Donnybrook (the Land) from 1991, on which a family home was built and cattle were bred.
In 2014, the taxpayer and the owners of the neighbouring lands entered into a Development Agreement (DA) with a developer to develop their collective properties pursuant to a Precinct Structure Plan (PSP). The PSP was approved in February 2016 and the DA became unconditional on or around November 2017. The Land, as a result, fell within an urban zone for land tax purposes from the 2017 land tax year onwards.
The Land was assessed for land tax for the 2017–2019 land tax years.
The taxpayer objected to the assessments on the basis that the Land should be exempt from land tax under s67 of the Land Tax Act 2005, the exemption for land in an urban zone used solely or primarily for the business of primary production.
The Commissioner subsequently accepted that for the 2017–2019 land tax years, the Land was used solely or primarily for a business of primary production and Mr Worn Senior and Mrs Worn (who owned more than 60% of the shares in the company during that time) were normally engaged in a substantially full-time capacity in that business.
The Commissioner contended, however, that the exemption did not apply because the principal business and main undertaking of the taxpayer was not the business of primary production. This is due to the company also receiving income relating to consultancy services and the operation of a ski competition, as well as the entry by the taxpayer (and the owners of neighbouring properties) into a development agreement with a developer for the development of the property and surrounding properties.
Decision
The Tribunal found for the Commissioner, confirming the assessments and broadly finding that the taxpayer was carrying on a:
- business of primary production during the relevant land tax years
- business of providing consulting services for the 2017 and 2018 land tax years
- ski competition business for the 2017 and 2018 land tax years
- land development business during each of the relevant land tax years.
The Tribunal found that based on gross income, the most significant business was the consulting services business for the 2017 and 2018 land tax years, and the land development business for the 2019 land tax year. For the 2017–2019 land tax years, based on labour employed, the most significant business was the primary production business, and based on capital employed, the most significant business was the property development business. As the taxpayer’s most significant business varied depending on the basis on which these businesses were examined, it could not be said that the primary production business was the taxpayer’s principal business for any of the relevant land tax years.
