A public ruling, when issued, is the published view of the Commissioner of State Revenue (the Commissioner) on the particular topic to which it relates. It therefore replaces and overrides any existing private rulings, memoranda, manuals and advice provided by the Commissioner in respect of the issue(s) it addresses.
Where a change in legislation or case law (the law) affects the content of a public ruling, the change in the law overrides the public ruling—that is, the Commissioner will determine the tax liability or eligibility for a concession, grant or exemption, as the case may be, in accordance with the law.
The growing of orange trees to produce oranges would be considered primary production. The processing of an orange to make juice or the processing of juice into concentrate are further steps in the productive process and constitute secondary production.
The owner of a large rural property intends to develop the land into a housing estate once council approval has been obtained. The land is presently leased to Sam who runs 1,000 head of cattle on the property because it has adequate pasture and water supply.
The present, actual and physical use of the land by Sam for the maintenance of animals (cattle) would be the purpose for which the land is used, rather than the potential future or notional use of the land by the owner.
Once any earthworks or clearing of trees commenced on the land to develop the housing estate, the land would no longer be used solely for the business of primary production.
A large field left fallow as part of a crop-rotation cycle would be considered used for the cultivation of the land despite the current absence of activity on it. The deliberate maintenance of a state of inactivity is, of itself, the specific purpose for which the land is used—that is, the purpose of cultivation of the land, including allowing time for soil regeneration.
The use of small quarters situated on a large sheep station to accommodate shearers employed on the station would be considered a use that was directly related to, and carried out to support, another activity in s.2A(a) to (e) of the Land Tax Regulation—being maintaining animals (sheep)—and carried on for the same business of primary production.
Where land is used as a vineyard for the growing of grapes and a separate part of the land contains a building used as a winery for the pressing and fermentation of the grape juice, the part of the land used as a vineyard will be eligible for exemption under s.53 of the Land Tax Act. The land used as a winery will be ineligible for exemption because it is not a primary production activity.
The Commissioner will apportion the taxable value of the whole land between the part of the land used for the business of primary production (the vineyard) and the use of the part of the land for another purpose (winery).
Gloria uses a property of 4,000 hectares in North Queensland to breed cattle. She has calculated from the average rainfall and productivity of the land that the land would support 500 head of cattle if they are rotated between paddocks and supplemented by feed crops grown on the property.
A severe drought affecting the property has necessitated the reduction of the herd to 300 and the regular purchase of feed to sustain them. The effects of the drought have meant that Gloria has been unable to make a profit for a number of years.
Despite the absence of a profit, Gloria will be considered to be conducting a business of primary production. This is because she is following established commercial principles for the breeding of cattle, and in normal circumstances would expect to make a profit from the sale of the cattle.
Douglas is employed as a doctor in a small rural town. He owns a small property of 5 hectares just outside of town, with a mature grove of 80 oak trees that have been inoculated for the production of truffles.
The trees could produce about 1 kilogram of truffles each, which can retail for between $1,500 and $3,000 per kilogram.
Douglas spends most of his time working as a doctor, but each winter he digs for truffles primarily for use at home to season food. Any additional truffles he finds are sold to local chefs.
While the land has the potential to produce truffles in sufficient number to conduct a business and make a profit, Douglas is not extracting them in those quantities and has not established a sufficient market or system of extraction and storage for the activities to be considered commercial.
The production, use and sale of truffles are more indicative of a hobby or recreational activity than the conduct of a business.
Amelia intends to use heavily forested land as a fruit orchard. She commences land-clearing activities for its future use.
The activity of clearing the land in preparation for its use as a fruit orchard would not be considered the conduct of a business of primary production.
Kim and Evon are owners of a 5-hectare block of rural residential land that they use to conduct a nursery business involving the sale of decorative plants.
The decorative plants are planted from seeds or seedlings in pots and bags, sized according to their stage of development. The plants are watered and fertilised, and in some cases kept in hot houses to promote their growth.
Once the plants have reached a sufficient age and bloomed or otherwise achieved a saleable condition, they are tended under shade cloth and protected from harsh weather pending delivery to retailers.
Kim and Evon apply to the Commissioner for exemption from land tax. In support of their application, they provide:
The evidence provided supports the decision that the land is being used solely for the business of primary production involving the prescribed activity of cultivating or propagating plants for the purpose of selling the plants.
Commissioner of State Revenue
Date of issue: 29 June 2018
|Public Ruling||Issued||Dates of effect|
|LTA053.1.2||29 June 2018||30 June 2018||Current|
|LTA053.1.1||30 June 2010||30 June 2010||29 June 2018|