The Background

Property Developers often acquire agricultural lands on the edge of existing urban areas and hold them as land as a “land bank” for future Developments. Primary production activities such as cattle grazing often continue through leasing or agistment arrangements.

In New South Wales land that is used for Primary Production is generally not subject to land tax. Accordingly, developers have sought to claim an exemption when their “land bank” is being used for primary production.

In recent times the Office of State Revenue (OSR) has imposed more stringent requirements for the primary production land tax exemption. The Land Owner/Developer has had to prove the following things:

1. Primary Production must be the dominant use of the relevant land;
2. The Primary Production must be of a “significant and substantial commercial purpose or character”
3. Primary Production must be carried out for the Purpose of Profit.

The Good News for Developers of Land used for Primary Production

The recent Court of Appeal Decision in CCSR v Metricon QLD Pty Ltd (2017) upheld the Supreme Court’s 2016 decision that property developers can be entitled to rely on the Exemption from Land Tax for land that is being used for primary production.

The Facts of the Case

The property developer held a “land bank” at Terranora in the Tweed Valley. The developer had been actively seeking various approvals for the urban development of the land, but no actual construction or earthworks had been carried out.  The land was being used by professional cattle producers under an agistment agreement.

The Decision

The Court ruled that merely holding land as part of a developer’s trading stock is not a ‘use’ of land, because the trading stock has not yet been used.  The Court accepted that the ‘use’ of the land bank for obtaining planning approvals was not a sufficiently intense use to displace primary production as the dominant use.

What this means for Current Developers

It is now recommended that property developers with Primary Production land review their current land tax bills. This will be especially significant if the exemption has previously been refused by the OSR on the grounds that’s the dominant use of the land is not primary production.

What is means for Future Developers

In the right circumstances, this decision provides a basis for acquisition or continued holding of farm land with the intention of future development without having the associated holding costs associated with land tax.

This information is general in nature and should not be construed as legal advice. Your particular circumstances need to be assessed before actual legal advice can be provided.