Land Tax and Primary Production Exemptions: A Cautionary Decision for NSW Landowners

May 27, 2025

A recent decision by the NSW Civil and Administrative tribunal, Wylarah Pastoral Co Pty Ltd ATF Tallong Family Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 366 serves as a key reminder that landowners relying on the primary production land tax exemption must ensure their property is predominantly used for commercial primary production activities.

Background of the Case

The case involved Wylarah Pastoral Co Pty Ltd (the Appellant), which owned a rural property in New South Wales. The 9.3-hectare property was used for a mix of activities, including grazing cattle. The landowners sought to claim the primary production exemption from the payment of land tax, arguing that the land was used primarily for the maintenance of cattle for sale.

However, the property was also used for non-primary production purposes. A residence was located on the land. It was rented for $650 per week during the two-year period for which the land tax in dispute was assessed.

The landowners argued that cattle grazing was the dominant activity on the property and should therefore qualify for the land tax exemption.

The Chief Commissioner of State Revenue disagreed, concluding that the property’s use did not meet the requirements for the exemption. The case was then brought before the Tribunal.

Tribunal’s Decision

The Tribunal’s decision hinged on whether the property’s use for cattle grazing constituted the dominant use for commercial primary production. The Tribunal concluded that it did not.

What is clear from the Tribunal is there is no single factor that can determine the dominant use, to the exclusion of other relevant factors. Each case will turn on its own particular facts. However the factors that may be considered to determine the dominant use, include:

• the nature and intensity of competing uses
• the extent of the physical area in which each use takes place
• the time and labour spent for each use
• the money spent or assets deployed for each use
• the value derived from each use.

Key findings in this case included:

• Mixed Uses: The property had multiple uses, and while cattle were kept, they were not the primary focus of the land. Other uses, including private activities, were more significant in terms of land use.
• No Commercial Intent: The Tribunal found that the cattle grazing was not for a commercial purpose. There was insufficient evidence to prove that the cattle were being raised for sale, or for the natural increase of livestock for sale. The property did not demonstrate a business-driven approach to farming. In this case, the only income earned from use of the land during the two land tax years in question was income earned from rental of the residence
• Burden of Proof: The landowners were unable to provide sufficient documentary evidence, such as sale records, tax returns, and grazing management plans, to substantiate their claim that the land was primarily used for commercial primary production.

As a result, the Tribunal upheld the decision of the Chief Commissioner, finding that the property did not qualify for the primary production exemption from land tax.

Why This Case Matters for NSW Landowners

This decision is an important reminder for landowners that the primary production exemption is not easily granted in cases where land is used for mixed purposes.

The case underscores several crucial points:

1. Dominant Use Requirement: The dominant use of the property must be for primary production. If there are other significant uses of the land — such as personal recreation or non-commercial uses — this could disqualify the land from the exemption.
2. Commercial Intent: Landowners must demonstrate a genuine commercial purpose for their primary production activities. Simply keeping livestock for personal or non-business reasons, or as a hobby, will not meet the exemption criteria.
3. Rural Zoning Is Not Enough: Zoning for rural or agricultural use, while an important factor, is not sufficient on its own to qualify for the exemption. The actual use of the land must meet the criteria for primary production. Zoning is a permissive condition, but the dominant use must be consistent with commercial farming or agricultural activities.
4. Evidence is Key: Landowners must be able to provide detailed, supporting evidence to back up their claim for the exemption. This may include:
   • Records of livestock sales and other business-related income;
   • Grazing management plans and stocking rates;
   • Any tax returns or financial documents that show income from primary production

For farmers and landowners, navigating the complexities of land tax exemptions is crucial for ensuring that your property is being used to its fullest potential. If your property has mixed uses, it’s essential to understand how these may impact your eligibility for the primary production exemption.

Contact our property team to see what steps you can take to reduce the risk of an unexpected land tax bill.