Land tax – a win for property developers

Posted on February 20th, 2017

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In a win for property developers, on 10 February 2017 the NSW Court of Appeal upheld a previous decision of the Supreme Court allowing a property developer the benefit of the primary production exemption from land tax (Chief Commissioner of State Revenue v Metricon Qld Pty Ltd).

Metricon had acquired a substantial land holding for approximately $60 million, which had been rezoned ‘Urban Expansion’ allowing for residential development. During the relevant period, Metricon sought development approval and paid approximately $2.2 million in consultant’s fees in preparing plans and reports in support of the development. Metricon also during this period agisted the land for cattle grazing for a rental of approximately $30,000.00 per annum.

The issue in the proceedings was whether the land was being used for primary production during the relevant period and therefore exempt from land tax.

The Chief Commission did not dispute the land was used for cattle grazing during the relevant period however, argued that primary production was not the ‘predominant use’. It argued this use was outweighed by a competing use of ‘land banking’ or ‘land development’ due to the steps taken by Metricon in pursuing development of the land in the course of its business as a property developer.

The Court held that the steps taken by Metricon did not amount to ‘use’ of the land as it is the physical use of the land which is relevant. It also held that an intended future use does not become an actual use simply because substantial moneys and resources are applied towards that future use.

A property developer will therefore not lose the primary production exemption from land tax simply due to its future intention to develop land or steps are taken in furtherance of that future development.

Michael McGrath Director at Mullane & Lindsay Solicitors NewcastleMichael McGrath is a Director at Mullane & Lindsay Solicitors and practises extensively in commercial and property transactions and advice. If you require any assistance in these areas please contact Michael McGrath or contact our Newcastle or Sydney office. 

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