Land Tax Appeal Dismissed - Dominant Purpose Exemption

A recent high court case (Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue [2024] HCA 20) concerned two parcels of land and whether on the proper construction of the Land Tax Act, they should be exempt from land tax.

The properties were used in a business which involved the breeding and sale of horses (and their natural increase and bodily produce) as well as the racing of horses. The owner believed that certain parcels of each property were exempt from land tax on the basis that each parcel is rural land "used for primary production" and that the "dominant use" of each parcel was for "the maintenance of animals ... for the purpose of selling them or their natural increase or bodily produce".

The Commissioner of Taxation believed that this exemption was not applicable to those parcels of land. He agreed that the parcels were being used to maintain horses; however, did not agree that the dominant purpose of that use was for the sale of the horses, their progeny or their bodily produce.

The Court considered that the question here is not simply whether the use of maintenance of animals –can then be characterised as for a purpose of sale. Rather, the question is whether that use of the properties can be characterised as having the character of a dominant use for the purpose of selling animals, progeny and produce. The Court found that the dominant use was for horse racing.

The parcels of land in question were largely used for the horse racing aspects of the business with the Court stating “On the facts, the breeding for racing purpose could never be described as "merely a means to the fulfilment" of or merely "incidental" or "wholly ancillary" to the exempt purpose. The maintenance of the horses for racing purposes was manifestly its own use for its own purpose and not ‘maintenance of animals for the purpose of selling them or their natural increase or bodily produce’.

Takeaway: The use of the land and the purpose for that use must be for an exempt purpose