Tax Insights | Land tax – let’s get physical- Metricon appeal case summary

The following is a case summary of the recent New South Wales Court of Appeal decision in Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 (10 February 2017).

Tax Insights

For readers seeking immediate gratification, we set out below five tax insights we derive from the Metricon appeal case:

  1. The Metricon appeal case represents a resounding victory for New South Wales taxpayers. Moreover, having regard to the principle of judicial comity, we expect inferior Courts in other states to follow the authority set down by the Metricon appeal case.

  2. Taxpayers presently embroiled in land tax disputes have great impetus to review their case strategy and to narrow the scope of contested issues now that “intangible use” (or “passive use”) of land is irrelevant in the context of the primary production exemption.

  3. For those taxpayers who are considering the merits of challenging land tax assessments – there is no better opportunity than now to agitate an objection or administrative review given the tide of judicial authority lies in favour of taxpayers.

  4. The optimism we express above should be tempered with our expectation that there will now be an even greater emphasis by revenue authorities in putting taxpayers to rigorous quantitative proof on establishing the requisite dominant use before granting primary production exemption. In cases where land development is commencing or gaining traction, we expect considerable attention will be paid towards identifying the cross-over line from which physical land development activities preclude primary production use from constituting the dominant use of the subject land.

  5. There may be a material risk to State land tax revenue as a result of the Metricon appeal case, which we anticipate will culminate in two future land tax developments, the first of which will be an application for special leave to the High Court, and subject to its outcome, legislative reform to the primary production exemptions to protect the States’ revenue base. This simply reinforces our opinion that taxpayers are encouraged to review their land tax positions with haste in order to take advantage of the outcome of the Metricon appeal case.

Discussion of legal principles at play

The Metricon appeal case has a significant impact in land tax matters involving the assessment of whether primary production use is the “dominant use” amongst several competing uses of land.

The leading judgment was delivered by Barrett AJA with McFarlan and Ward JA in agreement.  Importantly, this decision overturns a recently developing line of land tax authority in New South Wales (which found favour in the primary decision of the Metricon case, the Bellbird Ridge case and earlier this month in the Leppington Pastoral Company land tax case), which permitted the assessment of “intangible use” of land in assessing competing uses of land.

In our view, the key legal principles arising from the Metricon appeal case may be summarised as follows:

  1. The expression “use” in the context of the land tax primary production exemption is not the same as that considered by the Courts in other statutory contexts.
  2. A developing line of land tax authorities established that it was permissible to assess “intangible use” of land as competing uses to primary production use – the unanimous Court of Appeal unequivocally rejected that proposition.
  3. Property development “use” (indeed, any use) must involve a physical use of land in the sense of its “concrete physical mass” before it constitutes a “use” in the analysis of competing uses.  The Court held that it was significant that the legislation required the consideration of physical primary production activities in assessing competing uses of land.
  4. Land development activities which involve minimal physical use of land may be preparatory directed towards a future use of land as opposed to a present use for actual and present advantages.
  5. The question of ascertaining the “dominant use” requires comparison in a quantitative way between the prescribed primary production uses and non-use.

As a result of these principles, our earlier case summaries of the Metricon and Leppington Pastoral Company cases must be read with caution and with the benefit of the Metricon appeal case.

For example, although an assessment of intangible uses is no longer permitted, the Metricon appeal case confirms that the quantitative analysis favoured by Justice White in the primary decision (and other subsequent land tax cases) is required in determining the dominant use of land; thus, taxpayers ignore the judicial guidance on the precision and scope of evidence from such cases at their peril.

As indicated earlier above, we believe it is inevitable that the Metricon appeal case will be appealed or otherwise enacted out of existence; regardless of the outcome, we welcome legal certainty in the development of the jurisprudence concerning the scope and application of the land tax primary production exemption.


This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article.



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