Fruit, cattle, chickens, mineral water, a cafe and two rentals on one block. Dominant use decides the exemption.
Your client owns rural land. They grow fruit, graze cattle, keep chickens. They also run a cafe, lease a cottage, and bottle mineral water.
Is the dominant use primary production? E-Synergies.Com Pty Ltd [2026] NSWCATAP 103.
The facts
Rural land in NSW used for seven activities [14]. Growing bamboo and native trees. Fruit, vegetables, herbs and roots. Grazing cattle. Keeping chickens. Bottling mineral water. Operating a cafe. Residential leasing of a cottage and villa.
The taxpayer claimed the primary production exemption under s 10AA of the Land Tax Management Act 1956 (NSW). The Chief Commissioner assessed land tax for 2020 to 2025. The 2020-2024 assessments were issued retrospectively in October 2024. A nil assessment had issued for 2019 [51]. The taxpayer was self-represented [20].
The decision
The exemption requires the dominant use of land to be for primary production under s 10AA(3). Physical use of the land: Metricon [2017] NSWCA 11.
The Tribunal examined land area, nature and intensity of each use, time and labour, and financial return [16]. The cafe was dominant for 2020-2021. Residential leasing was dominant for 2022-2025 [16]. Primary production activities were real but not dominant. The Appeal Panel dismissed the appeal. Three points stand out.
First, s 9 of the Taxation Administration Act 1997 (NSW) limits reassessments to five years. But these were initial assessments; no prior assessment had issued for 2020-2024. The Appeal Panel found no statutory time limit on issuing an initial assessment [55]. Fairness arguments have no place in administrative review [55]. Estoppel does not lie against a fiscal authority [83].
Second, the onus is on the taxpayer under s 100(3) of the Taxation Administration Act [52]. The financial records did not apportion expenses between uses. Bunnings receipts and fuel were not allocated to specific activities [28]. The onus was not discharged.
Third, on-farm diversification can be fatal. Neither the cafe nor the residential leasing falls within s 10AA(3). Combined, they overwhelmed the primary production activities.
The practitioner takeaway
If your client’s rural land has mixed uses, the exemption turns on dominant use. Not any use. Not significant use. Dominant use.
Three things before the next land tax year. Separate the financial records and apportion expenses by activity; if the Tribunal cannot match an expense to a use, it cannot count it. Assess the intensity; a cafe generating more revenue than cattle may tip the balance even if cattle occupy more land. And do not rely on a nil assessment as comfort. If no assessment has issued, the Chief Commissioner can come back later with an initial assessment. Land values will have increased [54].
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.