Land tax exemption for primary production may be available for property developers and land bankers

Property developers and land bankers holding land for future development have had great difficulties obtaining exemption from land tax by using that land for primary production. Examples of these difficulties can be seen in the cases Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366 and Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378, in which attempts to argue for a land tax exemption were unsuccessful.

High burden on landowners to prove primary production is dominant use

In those decisions, the court found that the exemption from land tax for primary production was only available where the dominant use of the land was for primary production. The exemption was not available where the dominant use of the land was land banking or preparation for future development.

Those court decisions imposed a high burden on the landowner to prove that primary production was the dominant use of the land, as opposed to some other use of the land.

Metricon decision relaxes standard of proof required of landowners for land tax exemption

The New South Wales Court of Appeal recently found in the case Chief Commissioner for State Revenue v Metricon QLD Pty Ltd [2017] NSWCA 11 that land held for future development but currently used for primary production was exempt from land tax.

The previously high burden imposed by the court to prove that primary production was the dominant use of the land to obtain the land tax exemption appears to be lowered to some extent by this decision.

Steps property developers and land bankers can take

The Metricon decision provides an opportunity for property developers and land bankers with land used for primary production to reassess their position.

First, if the exemption from land tax for primary production has been refused, it would be timely to review prior and current land tax assessments and seek expert advice from your solicitor.

Secondly, property developers and land bankers should ensure that the dominant use of the land is primary production, so that the exemption from land tax remains or becomes available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.