High Court resolves land tax dispute

6 June 2024

In a decision of interest for revenue law practitioners, this week the High Court of Australia unanimously dismissed an appeal brought by Godolphin Australia Pty Ltd against the NSW Chief Commissioner of State Revenue in respect of a land tax assessment.

Godolphin Australia Pty Ltd v NSW Chief Commissioner of State Revenue [2024] HCA 20 concerned the proper construction of S10AA of the Land Tax Act, which exempts from land tax land used for primary production. Under the Act, "Land used for primary production" involves a "dominant use" test of the relevant land.

Godolphin operates a significant equine thoroughbred breeding and racing operation on land in NSW. Its operations include breeding thoroughbreds, selling horses, and "covering" mares. It sells approximately 70% of the thoroughbreds it produced. Godolphin relied upon this use of the land to claim its exemption from land tax. Godolphin also uses the land to conduct its racing operation. Although the racing business (which is not primary production) was typically run at a loss, it was a "highly intensive and expensive" operation involving significant use of the relevant land and Godolphin's staff.

On the appropriate approach to construction of the statute, the Court drew a distinction between "use" and "purpose". Godolphin advanced a construction in which "use" applied to both the "maintenance of animals" in its racing operations as well as its breeding for the purpose of sale operations. The Court preferred the approach of the Court of appeal, in which the purpose of the use is the appropriate test.

The Court (Gordon J, Edleman J and Steward J) held that "where land has more than one use, for a given use to be dominant it must exhibit such predominance as to impart to the whole of the land the necessary exempting character." Although Godolphin successfully demonstrated that a significant use of the land was for primary production, it did not demonstrate that this was "so predominant a use as to impart an exempting character"

Justin Gleeson SC
, Sudarshan Kanagaratnam and Celia Winnett appeared for the Commissioner of State Revenue, instructed by NSW Crown Solicitor.

Bret Walker SC, James Emmett SC, and Dana Levi appeared for Godolphin.

Link to judgment