IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Commercial Court
Taxation List
S ECI 2023 01540 
S ECI 2023 01541

DELMA INVESTMENTS PTY LTD (ACN 004 457 498)	Appellant	
		
v  		
		
COMMISSIONER OF STATE REVENUE	Respondent	

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JUDGE:	Croft J	
WHERE HELD:	Melbourne	
DATES OF HEARING:	31 July 2024 and 16 August 2024	
DATE OF JUDGMENT:	25 October 2024	
CASE MAY BE CITED AS:	Delma Investments Pty Ltd v Commissioner of State Revenue	
MEDIUM NEUTRAL CITATION:	[2024] VSC 649	

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TAXATION — Land Tax — Appeal against assessment — Primary production exemption — Whether Land was used solely or primarily for the business of primary production — Whether Appellant’s principal business was the business of primary production carried on on the Land — Whether recipient of dividends from non‑trustee proprietary company was normally engaged in a substantially full time capacity in the business of primary production carried on on the Land — Taxpayer not normally engaged in a full time capacity in the business of primary production — Commissioner’s assessments confirmed — Premier Bay Pty Ltd v Commissioner of State Revenue [2024] VSC 447 — Australian Investment & Development Pty Ltd v Commissioner of State Revenue [2023] VSC 741 — Lavender Rain Pty Ltd v Commissioner of State Revenue [2022] VCAT 1264 — Lotus Oaks Pty Ltd v Commissioner of State Revenue [2021] VSC 388 — Annat v Commissioner of State Revenue [2020] VSC 108 — CDPV v Commissioner of State Revenue [2017] VSCA 89 — Commissioner of Taxation v BHP Billiton Finance Ltd [2010] FCAFC 25 — BHP Billiton Finance Limited v Commissioner of Taxation [2009] FCA 276 — Taxation Administration Act 1997, s 106 — Land Tax Act 2005, ss 67, 67B(1)(a)–(b).

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APPEARANCES:
	Counsel	Solicitors	
For the Appellant	Mr M. Y. Bearman and 
Mr S. A. Tisher 	Madgwicks	
			
For the Defendant	Mr D. J. Williams AM KC with Mr D. Morgan	State Revenue Office	

HIS HONOUR:
Introduction 
1	Delma Investments Pty Ltd (ACN 004 457 498) (“Delma” or “the Appellant”) is and was, as at midnight on 31 December 2019 and 31 December 2020, the registered proprietor of the land located at 1181 Merriang Road, Woodstock, Victoria, known as “Oban” more particularly described by certificates of title, volume 11447 folio 812 and volume 11623 folio 750 (together, “the Land”).
2	On 1 September 2021, the Commissioner of State Revenue (“the Commissioner”) issued land tax assessments to the Appellant for the 2020 and 2021 tax years in respect of the Land in the amounts of $1,895,400 for the year ended 31 December 2020 and in the amount of $1,566,900 for the year ended 31 December 2021 (“the Assessments”).
3	An objection was lodged by the Appellant on 30 October 2021 against the Assessments on the ground that the Land was exempt under s 67 of the Land Tax Act 2005 (“LTA”).
4	On 22 December 2022, the Commissioner determined to disallow the objections and provided a Notice of Determination giving his reasons for doing so (“the Determination”).  On 17 February 2023, the Appellant requested the Commissioner to treat its objection as an appeal and cause it to be set down for hearing in this Court, pursuant to s 106 of the Taxation Administration Act 1997 (“TAA”).
5	Proceedings under which an exemption in s 67 of the LTA is being sought are de novo proceedings and are not an appeal in the strict sense of that term, despite being referred to as an “appeal” in s 106(1) of the TAA.
Legislative Provisions and Issues for Determination
6	The LTA imposes land tax in respect of each year on all taxable land in Victoria.  The owner of that land is liable to pay the land tax.  By reason of the definition of “year” in s 3 of the LTA, land tax is assessed based on calendar years, not financial years.  
7	Section 8 of the LTA provides that the owner of the taxable land is liable to pay land tax.  Section 10 defines “owner” as including, amongst other people, a person entitled to land for a freehold estate in possession.  It is common ground between parties that the Appellant was an “owner” for the purposes of the LTA in the 2020 and 2021 tax years.
8	The expression “taxable land” means, under the provisions of the LTA, “land that is not exempt land”.  A number of classes of exempt land are created by the LTA.  Of relevance in the present proceedings is s 67(1)(a) of the LTA which exempts certain land used for the business of primary production, in the following terms:
67 	Exemption of primary production land in an urban zone in greater Melbourne
(1) 	Land is exempt land if the Commissioner determines that—
(a) 	the land comprises one parcel that is—
(i) 	wholly or partly in greater Melbourne; and
(ii) 	wholly or partly in an urban zone; and
(iii) 	used solely or primarily for the business of primary production; and
9	It is common ground that the Land comprised one parcel of land that was wholly in greater Melbourne and wholly in an urban zone.
10	The expression “primary production” is defined by s 64(1) of the LTA as follows:
(a) 	cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state); or
(b) 	the maintenance of animals or poultry for the purpose of selling them or their natural bodily produce; or
(c) 	the keeping of bees for the purpose of selling their honey; or
(d) 	commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear; or
(e) 	the cultivation or propagation for sale of plants seedlings mushrooms or orchids.
11	Section 67(1)(b) prescribes a further requirement that: 
the owner of the land meets the requirements in —
(i) 	…
(ii) 	if the owner is a proprietary company not acting in the capacity as trustee of a trust to which the land is subject – section 67B; or
(iii) 	…
12	Section 67B of the LTA provides that:
(1) 	For the purposes of section 67(1)(b)(ii), the requirements for an owner that is a proprietary company (not acting in the capacity as trustee of a trust to which the land is subject) are that— 
(a) 	the company carries on the business of primary production referred to in section 67(1)(a)(iii); and 
(b) 	the principal business of the company is that business; and
(c) 	all the company's shares are beneficially owned by natural persons; and
(d) 	the company meets the requirements in subsection (2) in relation to the distribution of dividends.
(2) 	For the purposes of subsection (1)(d), the requirements are that—
(a) 	if the company distributes dividends during the relevant period—
(i) 	the dividends were distributed to all the holders of the issued share capital of the company in proportion to their respective paid up shareholdings; and 
(ii) 	50% or more of the dividends were paid to a person or persons— 
(A) 	normally engaged in a substantially full‑time capacity in the business of primary production referred to in section 67(1)(a)(iii); or 
(B) 	whose relative or relatives were normally engaged in a substantially full‑time capacity in the business of primary production referred to in section 67(1)(a)(iii); …
13	Section 64(1) of the LTA defines the term “relevant period” in relation to a proprietary company as meaning, for any point in time, the previous three years or the period since the incorporation of the company, whichever is shorter. 
14	Section 36(1) of the LTA provides that a taxpayer is to be assessed for land tax on land for a tax year on the total taxable value of all taxable land owned by the taxpayer as at midnight on 31 December of the immediately preceding calendar year.  This provision makes it “unambiguously clear that the question of the taxable status of the land in question is to be determined as at the assessment date”.  Depending on the evidence with respect to particular land, one may simply look at “what was occurring on the land on the date in question” or, alternatively, “the ascertainment of the use at that date may depend on additional evidence about what was happening on the land shortly before and/or shortly after the date in question”.  
15	It follows from the provisions of the LTA to which reference has been made that the question in these proceedings is the use of the Land and associated issues as at midnight on 31 December 2019 and 2020, with the ascertainment of that use possibly assisted by looking at the periods around these assessment dates.  In this context, the Appellant puts its case, fundamentally, in terms of reliance on s 67 of the LTA.
16	In relation to the Appellant’s case, which relies on s 67 of the LTA, there are three issues in dispute with respect to the 2020 and 2021 tax years, namely whether: 
(a) 	the Land was used solely or primarily for the business of primary production, being the maintenance of cattle for the purpose of sale;
(b) 	the Appellant’s principal business was the business of primary production it conducted on the Land; and
(c) 	Mr David Douglas (“Mr Douglas”) was normally engaged in a substantially full‑time capacity in that business.
17	Under these provisions, the Appellant must establish each of these matters to succeed in respect of any tax year. 
Evidentiary Issues 
Onus of Proof
18	It is agreed between parties that the Appellant has the onus of proving its case.  This is consistent with the position in s 110 of the TAA and CDPV Pty Ltd v Commissioner of State Revenue (“CDPV”). 
19	As submitted by the Commissioner, the burden of proof is important in land tax cases because the Commissioner is at an evidentiary disadvantage arising from the fact that the taxpayer, and not the Commissioner, knows what happened on the land.  In this regard, he seeks to rely on the following statement in CDPV:
The Commissioner is, as observed in the Commissioner’s submissions, at an evidentiary disadvantage inasmuch as those who are seeking an exemption have within their control almost all of the evidence in relation to what is occurring on the Land and why things were or were not done on the Land. The Commissioner can only really point to objective circumstances with a view to determining the position. Consequently, I accept that, when the Court is faced with a case of this nature, and particularly where, as in this case, the Court is faced with very uncertain evidence, a focus must be maintained on whether the onus has been met.
20	The Appellant is required to prove its case on the usual civil standard, namely “on the balance of probabilities”.  In Federal Commissioner of Taxation v Cassaniti, Steward J stated that:
… the degree or standard of proof required is that which ordinarily applies in civil proceedings.
21	His Honour then quoted with approval the statement of Hunt J in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation:
if the plaintiff succeeds … in weighing down those scales ever so slightly in his favour then he has discharged the burden he carries …
22	However, as observed by the Commissioner, “a focus must be maintained on whether the onus has been met”.  Some caution is required when considering statements that are not supported by, or are inconsistent with, objective evidence.
Oral Evidence 
23	Two witnesses were called by the Appellant in support of its case, Mr Douglas and Ms Sophie Chisholm, both of whom were cross‑examined.  Mr Douglas is a director, shareholder and contractor who has been engaged by the Appellant.  Ms Chisholm is a Senior Manager in the sole and permanent employ of Lipins Partners Pty Ltd, the accountants for the Appellant in this proceeding. 
Delma
24	Delma was registered in 1959 and, at the relevant times, had four directors: Mr Douglas, his sisters Anne and Mary, and John “Jock” Langley, who is the son of Mr Douglas’ late sister.  Mr Douglas, his two sisters and John Langley Senior (Mr Douglas’ brother‑in‑law and the father of John “Jock” Langley) each held 51 of the 204 issued ordinary shares.  In the relevant years, each received dividends in equal amounts.  As observed by the Commissioner, Mr Langley Senior ceased being a director and was replaced by Mr Langley Junior in September 2014.
Delma’s financial status 
25	When Delma recommenced its cattle farming business in 2016, the directors had an intention of earning a profit.  At the time, the Land was exempt from land tax.  Mr Douglas gave evidence that although municipal council rates were high, he believed profits could be achieved with good weather and decent cattle prices.
26	In 2019, council rates for the Land had increased significantly.  Mr Douglas’ evidence was that from that time, it became impossible for Delma’s cattle farming activities to produce a net profit.  In that year, Delma suffered a small gross loss from cattle sales.  However, in other years, including 2020 and 2021, it achieved a small gross profit.  Mr Douglas gave evidence that it nevertheless remained in Delma’s interest to keep the business operating as the income from cattle sales helped with the expenses of running the Land.  Under cross‑examination, Mr Douglas stated that “you aim to make as much as you can”.
27	The Appellant sought to rely on financial statements and income tax returns for 2020 and 2021 as evidence of its financial affairs.  The key features of Delma’s financial affairs in 2020, as highlighted by the Appellant, are extracted below:
(a) 	an opening balance of 40 head of livestock on 1 July 2019 (valued at $45,235);
(b) 	total cost of sales of $50,474;
(c) 	sales of 36 head of cattle for $55,800;
(d) 	a closing balance of nil livestock at 30 June 2020; and
(e) 	a gross profit of $5,326. 
28	The Appellant also seeks to highlight key features of Delma’s financial affairs in 2021, as extracted below:
(a) 	an opening balance of nil head of livestock on 1 July 2020;
(b) 	purchases of 24 cattle for $30,480 in July 2020 plus costs of commission and saleyard expenses of $4,680.44 (total cost of purchases of $35,160);
(c) 	sales of 26 head of cattle for $46,740;
(d) 	a closing balance of nil cattle at 30 June 2021; and
(e) 	a gross profit of $11,580.
29	The Commissioner accepted that Delma was running a primary production business at all relevant times.  Mr Douglas rejected the proposition put to him in cross‑examination that the motivation behind Delma’s minimal operations was not to earn a profit but to keep the weeds down, and do what was necessary to maintain the Land so that it was ready to be sold.
30	Mr Douglas gave evidence that it was necessary to maintain the growth of grass and control weed growth on the Land.  This was partly to mitigate fire risk by controlling the potential fuel load, and also because artichoke thistle, which grew on the Land, was a proscribed weed.  Cattle grazing activities on the Land helped to control weed growth, other than artichoke thistle, which the cattle did not eat.  The alternative was to regularly slash the ground, which Mr Douglas said in his evidence would have been prohibitively time consuming — taking about three hours per acre because of the rocky nature of the Land.  Slashing would have also been a costly exercise which would not have yielded any income to Delma at all.  The artichoke thistle, which was not eaten by cattle, was sprayed with herbicide.
31	Mr Douglas was cross‑examined on the number of cattle carried by Delma, and in particular, why there were only 24 head of cattle purchased in July 2020.  In response, Mr Douglas gave evidence that Delma had been experiencing a “cashflow problem” at the time.  He also said that he had concerns about whether drought would continue, following low rainfall in 2019.  The majority of the funds that Delma received from a land sale in 2015, and a compensation payment for an easement in December 2016 had been loaned out to its shareholders.  Mr Douglas stated that others in his family did not want to lend money to Delma to purchase cattle, but he did.
Oban
32	Delma has owned Oban since 1966.  Oban comprises 310 acres, or 125 hectares.  At the relevant times, Oban was subject to the Donnybrook‑Woodstock Precinct Structure Plan, which was gazetted on 3 November 2017.
33	The Appellant submits that since it was first acquired, Oban has been used for farming activities by the Douglas family.  Allan Douglas, the father of David, Anne and Mary Douglas, was a primary producer his whole life.  Mr Douglas gave written evidence that under his management, Delma owned cows and bulls, and carried out an extensive breeding program.  Delma was issued Property Identification Code (“PIC”) 3WHBK000 some 30 years ago.  
34	In or around 2016, the Appellant recommenced its livestock business.  From 2016 to 2019, the Appellant conducted a breeding program and owned a bull, heifers and steers.  The bull was joined with the heifers and the heifers sold at the point of calving, being the most profitable time to sell them.  The steers were generally held for 10 to 12 months, fattened by approximately 100 kg and sold.
The Development Agreement in 2014
35	On 1 July 2014, Delma entered into a Development Agreement with DF (Woodstock Developments Pty Ltd (“the Developer”), Dennis Family Corporation Pty Ltd and DF (Woodstock) FRR Pty Ltd (“the Development Agreement”).  
36	The Development Agreement provides for the appointment of the Developer by Delma to undertake key steps including and ancillary to the development of the Land.  These steps included obtaining Planning Approval, the development of the Land, including subdivision of lots and advertising, marketing and sales of subdivided lots.  Pursuant to the Development Agreement, the Developer was responsible for all aspects of the development, including obtaining finance and paying for all development costs.
37	The actual development of the Land was conditional upon the Developer obtaining a planning permit.  Delma, under the terms of the Development Agreement, was to have no active involvement in the development of the Land.  Delma retained ownership of the Land, and the Development Agreement provides that the Developer was to be remunerated for its provision of development services.  
38	The Land was anticipated to be developed as part of a larger residential development known as Peppercorn Hill, being undertaken by Dennis Family Group.  Each of the landowners whose land forms part of the Peppercorn Hill development purchased units in a unit trust known as the Consortium Unit Trust and also entered into a contract known as the Consortium Unitholders Agreement.  The Consortium Unit Trust was established to distribute sale proceeds from the sale of subdivided lots by landowners.  It has now been wound up.
39	After the sale of Lot 3 in 2015, the Developer could only access the Land from a yet to be constructed road across properties to the south of the Land.  The construction of this road was unlikely to happen until at least 2028.
Freeway easement across the Land in 2015
40	In 2015, the Victorian government established an easement across the Land to allow for the construction of a new freeway.  A small part of the Land was separated from the remainder of the Land — Lot 3, 1185 Merriang Road (“Lot 3”). 
41	The easement meant that Lot 3 was zoned as “Green Wedge” and was prevented from entitlement to planning approval for housing development.  Lot 3 fell outside the terms of the Development Agreement.  Also, the easement landlocked the Land, cutting off access to the Land from Merriang Road.  Delma was granted access for cattle farming prior to the construction of a freeway, but not for the purposes of property development.  
42	On 23 December 2016, Delma received $6,592,000 from the Victorian Government as a compensation payment for the imposition of the easement. 
43	On 6 March 2015, Delma sold a property it owned at 2140 Merriang Road for $2.5 million.  On 23 May 2015, Lot 3 was also sold by Delma for $800,000.
Cattle farming on the Land since 2016
44	At the relevant times, Mr Douglas was contracted to carry out cattle farming activities on the Land.  Mr Douglas gave evidence that he is a farmer with 45 years of experience, and that in respect of farming, it was in his “blood”.  In his evidence, Mr Douglas detailed a number of his activities in carrying on cattle farming on Land.  These activities included, but were not limited to, checking the health and wellbeing of livestock, checking the dams and bore to ensure there is enough water for the cattle, rotating cattle between six paddocks, and weaning the cattle when first purchased.
45	Mr Douglas gave evidence that he was “purely a farmer”.  As the sole contractor engaged by Delma in its day‑to‑day operations, Mr Douglas gave evidence that he spent on average 24 hours per week, being approximately four hours per day, six days per week, physically working on the Land.  In re‑examination, Mr Douglas conceded that he did not keep a record of the times, but estimated that as a matter of routine, he roughly divided his time equally between two farms.  His evidence was that he would roughly work four hours before lunch and four or five hours after lunch between the two farms, usually six days a week.  This routine, he said, varied form week‑to‑week according to the seasons.
46	Mr Douglas gave evidence that the time he spent working on the Land represented approximately 90% of the physical work necessary for the cattle farming activities, with the balance of physical work, such as weed spraying, being carried out by other contractors and third‑parties.  Additionally, Mr Douglas estimates that he spent about two hours per week working offsite on the administrative or marketing aspects of Delma’s operations.  The physical work undertaken on the Land, as well as the administrative work was, on Mr Douglas’ evidence, all of the work necessary to conduct Delma’s farming operations.
47	When cross‑examined on the diaries that he kept, Mr Douglas readily conceded that they were not helpful in identifying his activities on the Land.  Rather, he said, these were maintained to keep a record of purchases and sales of livestock.  It seems that the few entries in the diaries related to both the Land and the land on Epping Road.
The loans to Delma’s shareholders 
48	Delma made loans to its shareholders at interest in the 2011, 2013, 2016, 2017 and 2018 financial years.  The funds lent for the 2016, 2017 and 2018 financial years included the proceeds of the easement compensation payment, and the sale of Lot 3, as well as 2140 Merriang Road and other properties following the death of Allan Douglas in 2006.  Ms Chisholm gave evidence that any dividend paid by Delma to its shareholders would have been taxable income in their hands up to the highest marginal rate applicable to natural persons.  
49	To avoid the tax implications of declaring a dividend, Delma lent $1,800,000 in the 2016 financial year, $6,200,000 in the 2017 financial year and $400,000 in the 2018 financial year to its shareholders under a loan agreement complying with s 109N of Division 7A of Pt III of the Income Tax Assessment Act 1936 (Cth) (“Division 7A”).  Ms Chisholm gave evidence that this was an attractive means for Delma to return the money to its shareholders for their own use.  Shareholders were not required to make cash repayments of the borrowed funds.  This is because the principal and interest repayments falling at the end of each income year were paid by setting off dividends declared by Delma in each year.  Through the use of the Division 7A loans, the Appellant argues that the income tax on the return of the easement payment and the profits from the land sales could be distributed over seven years at the cost of the interest on the loan over those seven years. 
50	When cross‑examined on matters relating to the Division 7A loans, Mr Douglas rejected the proposition that the loans made to Delma’s shareholders meant that Delma’s main activity was no longer farming but investing.  Mr Douglas said that the character of these transactions did not conform with his “version of commercial”, and said “it’s not as though we were doing it commercially”.
51	Mr Douglas gave evidence that Delma had “no money in the bank” despite the loans.  His understanding appeared to be that the interest payable to Delma by its shareholders was a “book entry” that was not visible to Delma.  Mr Douglas also agreed that Delma declared a dividend to match the interest repayments under the loans, though he did not understand the details of Division 7A.  He stated that despite the interest being “notionally paid” pursuant to the Division 7A loans, Delma did not have “hundreds of thousands of dollars” in cash from the interest to fund cattle purchases.  Mr Douglas said that “there was nothing in the bank until I put some there”, referring to funds that he had personally loaned to Delma.
The Sale of the Land
52	On 8 April 2022, Delma entered a contract of sale for the sale of the Land for $50 million.  The settlement date for the sale is in April 2025.  Mr Douglas gave evidence that in light of the fact that development under the Development Agreement was unlikely to commence until at least 2028, and because three of Delma’s four shareholders were either close to, or over, 70 years of age, no director wished to embark on a long‑term construction project.  Further, from 2019, the Appellant says, the Land could not sustain payments of the increased council rates without shareholder support or external finance.  
53	To assist in paying the council rates, Delma entered into a loan agreement with Masco Pty Ltd (“Masco”), an entity controlled by the Developer, to borrow $600,000.  Additional funds of $300,000 were also loaned to Delma by Mr Douglas, in order to pay rates and other expenses.  Delma later repaid that amount from a further $500,000 borrowed from Masco.  Delma repaid Masco the $1.1 million it had borrowed when the funds deposited as part of the sale of the Land were released.
54	In April 2019, the Developer was granted a planning permit for the Land.  From 2014 to that date, the Developer had taken no other steps to develop the Land.  No other development activities were or have since been conducted on the Land.
55	Mr Douglas agreed that the decision to sell the Land was through necessity, with Delma choosing to “cash out” and take the price of the Land.  The necessity, Mr Douglas said, was that Delma “could no longer afford to keep the property”.  As per Mr Douglas’ evidence, proceeding with the development of the Land may have taken 15 years, and carried the risk of the profits being lesser than the sale price of the Land as well as the opportunity of greater returns.
Mr Douglas’ activities on Epping Road 
56	Mr Douglas resides at the Epping Road property, which is owned by Manorwood Pty Ltd as trustee for the David and Elizabeth Douglas Family Trust.  Mr Douglas owns and controls Manorwood Pty Ltd. 
57	Mr Douglas conducts cattle breeding activities on the Epping Road property as a sole trader.  This enterprise operates as a separate legal entity from Delma’s primary production activities on the Land.  They are conducted on separate land, by separate legal entities, with different PIC numbers and separate financial statements.  Mr Douglas’ business as a sole trader differs from that of Delma, primarily because Mr Douglas conducts a livestock breeding program whereas Delma does not.
58	According to Mr Douglas’ evidence, the cattle farming activities on the Land owned by Delma took more of his time than at Epping Road.  Mr Douglas denied the proposition that his main focus in the relevant land tax years was Epping Road.  In his evidence, he cites multiple reasons for the Land requiring significantly more attention from Mr Douglas than his activities at Epping Road.  One reason was the fact that the Land had many scattered volcanic rocks which made mustering cattle “slow and tedious”.  
Primary production activities on the Land
59	There are three issues to be determined — first, whether the Land was solely or primarily for the business of primary production, second, whether Delma’s principal business was one of primary production of the type carried out on the Land, and third, whether Mr Douglas was engaged in a substantially full‑time capacity. 
Issue 1: The use of the Land — s 67(1)(a)(iii)
Introduction 
60	The first issue is whether the Land was used solely or primarily for the business of primary production at two relevant dates of midnight on 31 December 2019 and midnight 31 December 2020. 
The Commissioner’s Submissions 
61	The Commissioner seeks to rely on the observation of Kennedy J in Annat v Commissioner of State Revenue (“Annat”), outlining indicia that provide assistance in determining whether the Land was “used primarily” for the business of primary production.  The indicia are extracted below:
•	All the circumstances bearing on the degree, extent and intensity of the uses are to be considered, and the question is one of fact and degree to be approached on a broad, common‑sense basis. 
•	This issue is to be determined by looking at all the activities together with the surrounding circumstances of the taxpayer’s evident purpose in carrying out those activities.  
•	The concept of ‘use’ is one of physical deployment of the physical mass with deployment understood as including not only activity but also inactivity deliberately adopted as a means of obtaining advantage from the land.  
•	If there are multiple uses, it is necessary to weigh the respective uses against one another in order to ascertain which is the ‘dominant use’.  The classification is an evaluative task which may be approached in a number of ways.  It involves questions of degree on which minds can reasonably differ.  There are several possible methods of quantification and, except in glaringly obvious cases, no one conclusion will be correct to the exclusion of others.  Hence, figures for income and expenses may not necessarily provide a clear guide as to the relative level of the extent and intensity of the different uses.
•	However, a key question of characterisation is whether the use for primary production was the predominant use of the land so as to impart to the whole of the land the necessary character.
62	The Commissioner also cites the case of CDPV in his submissions.  In CDPV, the Court considered the question of whether the taxpayer met the requirements of the exemption in s 66 of the LTA.  The taxpayer only had to establish that the land in question was used primarily for primary production, rather than the business of primary production.  After surveying authorities, Croft J found that for primary activities to constitute primary production on the land in question, “the relevant activities must not be minimal, slight, spasmodic or token, but must have some degree of substance and intensity to them”.
63	Hence, the Commissioner contends that evidence establishes that cattle farming activities that took place on the Land at the relevant times were “minimal and lacked any real intensity”.  Two matters are sought to be highlighted in support of this argument. 
64	First, the Commissioner points to the number of cattle on the Land.  For short periods within the 2019 and 2020 calendar years, the number of cattle on the Land peaked at 52.  In characterising the use of the land in question at the relevant time, one may look to activities taking place “during a period not overlong and not over short” within which the relevant time falls.  The Commissioner observes that the during the period not overlong and not over short surrounding 31 December 2019, there were only three cattle on the Land, a situation which lasted for more than eight months.  Further, on 31 December 2020, there were only 24 cattle on the Land. 
65	The relatively modest number of cattle on the Land was, the Commissioner says, attributable to the cash flow issues brought about by Delma’s decision to distribute cash payments in 2015 and 2016 to shareholders, rather than using some of it to purchase more cattle.  Alternatively, on the Commissioner’s view, the cash flow issues may have been attributable to Delma’s decision to fund loan prepayments by declaring dividends in the same amounts, rather than allocating a portion of these funds to the purchase of cattle.  The Commissioner acknowledges that Mr Douglas was eager to make further investments into the business, but was outvoted by fellow shareholders.  However, he argues that the relevant consideration is Delma’s corporate intention, which it says was to allow Delma’s “primary production business to wither on the vine”.  Though the other three shareholders and directors of Delma did not give evidence, the Commissioner says that the fact that they decided to not financially support Delma’s ongoing cattle business was consistent with such an intention.  He suggests that the main reasons for this decision were the impending development of the Land, the inability of Delma’s primary production business to earn a profit, and the ages of Delma’s shareholders.
66	The second factor demonstrating that Delma’s cattle farming activities were “minimal and lacked intensity”, the Commissioner says, is Delma’s gross profit from cattle operations.  It observes Mr Douglas’ evidence that Delma made gross profits from cattle of $5,326 in the year ended 30 June 2020 and of $11,580 in the year ended 30 June 2021. 
67	Hence, the Commissioner contends that these two factors “militate strongly” against a finding that Delma’s cattle farming activities bear sufficient degree, extent or intensity to enable a conclusion that the Land was “used primarily” for the business of primary production.  Rather, he submits that the true purpose of cattle grazing activities on the Land was to contain the spread of artichoke thistle, which Mr Douglas recognised, was a legal necessity.  The Commissioner seeks to draw attention to Mr Douglas’ evidence that he considered slashing the grass instead, but the rocky nature of the ground meant that the costs would have been prohibitive.  As a result, he says that Delma’s cattle farming activities were consistent with intending to “make as much money as possible until it could dispose of the Property”.
68	Citing CDPV, the Commissioner observes that weed clearing is not a primary production activity per se, but may be seen as part of an intensive primary production business when the weed clearing occurs incidentally to it.  However, it contends that on these facts, the weed clearing was not merely incidental to Delma’s primary production business but, instead, was a significant driver of the primary production activity undertaken on the Land, partially because it was a legal necessity.  On this approach, the primary production activities comprised the means by which weeds were controlled, and that the modest profit received from doing so was merely a “side benefit”.  The Commissioner submits that the Court should reach a similar conclusion to that in CDPV, where the Court made the following finding:
Mr Horan’s purpose was to control weeds and if so doing by planting a crop some seed was produced which he might use in useful planting in his other farming operations on other land, then this was a bonus – a side benefit.
The Appellant’s Submissions 
69	The Appellant submits that the Court should consider two separate statutory inquiries.  First, whether the Appellant conducted a business of “primary production” as defined in the LTA.  Second, whether the Land was used by the Appellant “solely or primarily for the business of primary production”.
70	It submits that this approach is distinguishable to that proffered by the Commissioner, who argues that Delma did not use the Land with “a sufficient degree, extent or intensity to enable a conclusion that” that the Land was “‘used primarily’ for the business of primary production” and that “the true purpose of the cattle grazing activities in the relevant years was probably keeping the grass down, which Mr Douglas recognised was a legal necessity”.  The Appellant says that this alternative framing, proffered by the Commissioner, conflates two separate statutory inquiries. 
71	The Appellant seeks to rely on the Commissioner’s acknowledgment in its written opening submissions, and in oral argument, of the proposition that the Appellant was conducting a business of primary production as defined in the LTA.  It says that the Commissioner’s concession in this regard should be taken to imply that he accepts that the Land was used accordingly.  The Appellant argues that embedded in the definition of “primary production” is the requirement that the animals or poultry be maintained for the purpose of selling them or their bodily produce.  Hence, the Appellant contends that there is no basis to re‑evaluate Delma’s purpose for carrying on the business.  It also follows, it says, that no occasion arises to consider the question of whether Delma’s activities fell within the relevant definition of primary production, or Delma’s relevant use of the Land.  It argues that Delma’s primary production activities amounted to a primary production business on any view, and that this reason alone supports the wholesale rejection of the Commissioner’s submissions in respect of this issue. 
72	Further, the Appellant points to the Commissioner’s Replacement Outline of Submissions and argues that his reliance on Mr Douglas’ identification of compliance with a “legal necessity” invites a false dichotomy between a business complying with such necessities and the identified statutory purpose.  It says that this argument presupposes an inconsistency which neither necessarily arises nor is likely to arise in any lawfully conducted “primary production” business.  Every business, the Appellant contemplates, must shape its activities to comply with legal necessities.
73	Additionally, the Appellant contends that there is no inconsistency and that the evidence establishes that Delma maintained cattle for the purpose of selling them during both years in dispute to “make as much money as possible”.  Aside from the artichoke thistle, the Appellant argues that there is no evidence to support the proposition that the primary purpose of maintaining the cattle was to eat grass and weeds.  It seeks to highlight Mr Douglas’ oral evidence where he rejected a suggestion to that effect.  It is put by the Appellant that the fact that the cattle ate the grass and weeds, which would otherwise need to be slashed at great cost, was only part of the mechanism by which the cattle were maintained for the purpose for sale.  Moreover, it argues that even if the Court were to find that the cattle were not maintained solely for the purpose of their sale, or the sale of their bodily produce, the Court should find that the cattle were maintained primarily for that purpose.  Hence, it says that it follows that the Land was used primarily for Delma’s business of primary production. 
74	Addressing the Commissioner’s reliance on CDPV, the Appellant argues that the facts are distinguishable.  First, it seeks to emphasise the fact that the operative provision in that case was s 66, and not s 67 of the LTA.  This, it says, meant that the question was whether the use of the land in question met the relevant definition of “primary production”, being “cultivation for the purpose of selling the produce of cultivation”.  It was not contentious in this case, the Appellant says, that the land in question was being used for cultivation, and the issue turned on its purpose instead.  Additionally, it says that alleged share farming agreement was not clearly settled insofar as its terms, or understood between parties, with the terms being described as “most unsatisfactory”.  The taxpayer’s evidence in CDPV was also treated with great caution, and the Court found that evidence about the activities taking place on other land in question was misleading.  The Appellant further seeks to rely on the fact that in CDPV, it was unclear from the evidence whether barley, wheat or some other crop was grown on the land in question, and that no crop had even been sold.  As observed by the Appellant, the Court in CDPV found that the sole director of one of the taxpayers “couldn’t make a go” of land farming, and that the share farmer’s motivation for the land cultivation was to manage a “bad neighbour” problem of keeping other nearby land that he farmed free of weeds, with a potential “side benefit” of selling seed or using it to re‑sow other land he farmed.  The Court found that these matters were determinative of the true purpose of the cultivation activities.  In upholding the decision, the Court of Appeal made the following statement: 
the prospect of sale of the crops was … at best one possible outcome of the cultivation rather than its purpose. As such, the primary use of the land was not cultivation for the requisite purpose.
75	The Appellant contends that the share farmer’s purpose of weed control and managing a “bad neighbour” problem cannot be analogised with Delma’s facts and circumstances in the manner proffered by the Commissioner.  Though it concedes that weed control of itself is not primary production, the Appellant maintains that weed control may be an activity necessarily undertaken as part of a primary production business.  It contemplates the example of a farmer spraying weeds on land that is being cultivated for crops, observing that the weed spraying could not of itself preclude a finding that the land in question was being use for the purpose of primary production.  The Appellant seeks to emphasise that unlike the taxpayer in CDPV who did not sell any crops from the cultivation activities, Delma has maintained and sold cattle in both years in issue as part of the primary production it carried out on the Land since 2016.
76	Similarly, the Appellant says the Commissioner’s reliance upon Annat is misconceived.  It takes the position that Annat was a multiple use case and seeks to highlight that it was conceded in Annat that certain activities on the land in question did not fall within the definition of primary production.  Hence, the Court was tasked with determining whether the primary production uses of the land in question vested the whole land with the relevant character of primary production.  The Court found that they did not.  In arriving at this decision, the Court engaged authorities concerning the determination of the “use” of land, which included those considering the “degree, extent and intensity of the uses”. 
77	The Appellant says that because it is not put by the Commissioner that Delma used the Land otherwise than for the business of primary production, there is no proper occasion for the application of the Annat indicia to these facts.  It argues further that the indicia in Annat were derived from authorities concerning multiple‑use cases and addressing the question of whether a physical use of land for primary production might be so predominant as to vest the entire land with a character of primary production notwithstanding non‑primary production uses on the land in question, or part of the land in question.  The distinguishing feature of Annat, it says, is that the Court’s engagement of authority was not directed at identifying whether a business existed, or directed at an inquiry of whether a sole use of the land in question was in some way insufficient.  Hence, the Appellant submits that the issues engaged in Annat are distinguishable from those presented by the facts at hand. 
78	The Appellant submits that the facts and circumstances in Annat cannot be equated with those of Delma.  It seeks to highlight that the only use of the Land during the years in dispute was the maintenance of cattle for sale, which occurred on the whole of the Land during each year.  This, it says, is supported by the evidence that Mr Douglas assessed the capacity of the Land to support cattle, and that cattle were purchased and rotated on the Land accordingly.  Delma’s business operated with an established cycle of buying, growing out steers for sale and proceeding to sell them.  
79	The Appellant points to Mr Douglas’ evidence about the years of dispute, and submits that these years formed part of Delma’s operating cycle.  As to those years, Mr Douglas  gave that evidence that he assessed that the Land could support one steer per five to eight acres of land.  In his evidence, Mr Douglas canvassed a number of matters upon which this assessment was premised.  First, there was only one bore on the Land and water from this bore was not piped to the rest of the land, meaning that the remaining water was drawn from three rain‑fed dams.  There was no laneway fencing on the Land.  The ground of the Land was rocky and had kangaroos competing for grass and water.  When managing livestock on the Land, active consideration was given to wind, water erosion, pugging and compaction so as to ensure the Land provided resilient pastures and was sustainably managed.
80	The Appellant contests the Commissioner’s characterisation that these matters “militate strongly against” Delma’s activities having substance and intensity.  Rather, it says that they demonstrate that cattle farming was conducted on the Land with such substance and intensity that the Land was capable of supporting.  Hence, it disputes the Commissioner’s submission that the number of cattle on the Land “stand out” as an indicia against the substance and intensity of the cattle farming activity.  Nor does it accept the Commissioner’s argument that Delma’s gross profits from cattle sales comprise a “second striking feature”.  Citing the written evidence of Mr Douglas, it says that the Delma’s gross profits simply followed its established business cycle of the purchase, maintenance and sale of cattle.  The Appellant argues that the Commissioner’s submissions to the contrary impermissibly derogate from the statutory meaning of “use”, by inviting consideration as to whether and how Delma ought to have conducted its business, which it says forms no part of the relevant statutory inquiry.  It cites the following statement of the High Court in Tweddle v Commissioner of Taxation:
It is not suggested that it is the function of income tax Acts or of those who administer them to dictate to taxpayers in what business they shall engage or how to run their business profitably or economically. The Act must operate upon the result of a taxpayer’s activities as it finds them.
81	Finally, the Appellant makes submissions that the recent High Court decision in Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue (“Godolphin”) should not affect its case.  In Godolphin, the High Court considered the application of s 10AA of the Land Tax Management Act 1956 (NSW) which exempts rural land if it is “land used for primary production”.  The High Court found that the relevant question was whether the dominant use of the properties was the maintenance of horses for the purpose of selling them.  The appeal was dismissed because the Court found the land was used to both maintain horses for sale and for horse racing.  The taxpayer in Godolphin did not demonstrate that the maintenance of horses for sale was the dominant use of the land.  The Appellant submits that s 10AA of the Land Tax Management Act 1956 (NSW) is meaningfully different from the requisite provisions in s 67 of the LTA, primarily because the use of the Land in the case of s 67 of the LTA is directed to the “business” of the taxpayer, which it submits, carries its own purpose requirement.  In the absence of submissions from the Commissioner on this point, there is no need to say more about the application of Godolphin to this dispute. 
Conclusions and Findings
82	There is no dispute between the parties that Delma was carrying on a business of primary production as defined in the LTA.  The issue is whether Delma’s cattle farming activities on the Land bore sufficient substance and intensity to enable a conclusion that the Land was “used primarily” for the business of primary production, allowing the operation of the exemption in s 67 of the LTA.
83	Hence, though the principles canvassed by Kennedy J in Annat are helpful in evaluating whether a taxpayer’s land is vested with the relevant character of primary production in instances which multiple land uses are in question, there is no occasion for the application of the Annat indicia to the present facts.  The present facts do not give rise to a multiple‑use case.  It is not put by the Commissioner that Delma used the Land otherwise than for the business of primary production. 
84	I do not accept the submission by the Commissioner that the profits derived by Delma from its cattle farming activities were merely a “side benefit” to the main function of clearing weeds on the Land, which he observes was a legal necessity.  As put by the Appellant, there is no evidence supporting the proposition that the primary purpose of maintaining cattle was to eat grass and weeds, aside from artichoke thistle.  Mr Douglas rejected such a proposition when it was put to him in cross‑examination.  The fact that the cattle inevitably ate grass and weeds, which would otherwise need to be slashed at great cost, was simply part of the mechanism by which cattle were maintained for the purpose of sale.  The fact that Delma was legally required to undertake weed control on the Land was merely a function of its cattle farming business — every business operates within a regulatory regime and must comply with legal requirements.
85	The Commissioner’s reliance on CDPV in this regard is, in my view, misplaced.  The weed control effect of Delma’s cattle farming activities were part of its primary production business, and not analogous to the facts in CDPV, where the motivation of the share farmer in cultivating the land in question was to manage a “bad neighbour” problem, “so that it would not impinge on any other productions in that area”.  In CDPV, the taxpayer had not sold any crops, and the Court of Appeal observed that “the prospect of sale of the crops was … at best one possible outcome of cultivation, rather than its purpose.”  By contrast, Delma had maintained and sold cattle in both years in issue.  
86	I accept the Commissioner’s contention that Delma’s primary production business was a “very modest one”.  Support for this finding is found in the modest number of cattle farmed on the Land, as well as the floundering profitability of Delma.  For over eight months in the period “not overlong and not over short” surrounding 31 December 2019, there were only three cattle on the Land.  As at 31 December 2020, there were only 24 cattle.  The maximum number of cattle on the Land during the 2019 and 2020 calendar years was 52.  This, it seems, is attributable to cash flow problems experienced by Delma that were brought about by its decision to make a distribution to shareholders of the cash payments it received in 2015 and 2016, rather than using some of it to purchase more cattle.  Though Mr Douglas appears to have been eager to invest more money into Delma’s cattle farming business to realise the Land’s potential of running between 40–60 cattle, Delma’s shareholders did not agree to doing so.  Hence, it seems from the evidence that Delma made a decision to avoid scaling‑up its cattle farming business.  Additionally, the gross profits Delma made from cattle were of the relatively modest amounts of $5,326 in the year ended 30 June 2020 and of $11,580 in the year ended 30 June 2021.  
87	As put by the Commissioner, at various points in the relevant land tax years, the number of cattle being raised on the Land fell below the estimated threshold of 40–60 head. However, the Commissioner’s submission in this regard does not answer Mr Douglas’ evidence that the Land was used for cattle farming in a conventional sense to the extent of what he considered to be its capacity.  In his evidence, Mr Douglas highlighted limitations such as the availability of water, the lack of laneway fencing, and the rocky nature of the Land with kangaroos competing for grass and water, which he said, confined the number of cattle that could be sustainably raised on the Land.  Moreover, Mr Douglas gave evidence that these numbers may have been attributable to Delma’s established business cycle which provided for where, when and why cattle were purchased and sold. Hence, the evidence supports the position that Delma did conduct cattle farming with such intensity that the Land was capable of supporting. For the preceding reasons, I am satisfied that Delma used the Land primarily for the business of primary production. 
Issue 2: Delma’s principal business — s 67B(1)(a) and (b)
Introduction
88	The second issue is whether the principal business of Delma was the business of primary production carried on on the Land.  This is directed to the requirements in s 67B(1)(a) and (b) of the LTA.  As proffered by the Commissioner, the first step is to determine the extent of any business or businesses conducted by Delma.  Once this is done, it will be necessary to determine whether the business, or each of the businesses is a primary production business.  If there is a primary production business, it will finally be necessary to decide if that business is Delma’s principal business. 
The Commissioner’s Submissions
89	The Commissioner seeks to canvas a number of general propositions as to the characterisation of a company’s business activities.  First, the Commissioner observes that a company need not conduct any business.  He contemplates the examples of a bare shell company, or where the company’s only activities may be domestic, charitable or otherwise not business‑like in nature.  Similarly, he says, the commercial activities of a company may be so insignificant or lacking in intensity such that it cannot be concluded that the company conducts a business. 
90	Secondly, the Commissioner submits that where a company conducts more than one business, it might be possible that none of those businesses comprise its principal business.  In this regard, he says that the only question for the Court is whether the primary production business is the company’s principal business.  On this approach, the Court need not decide which, if any, of the company’s other businesses is principal.
91	Thirdly, as put by the Commissioner that where a company has two or more businesses, the principal business will not be primary production where one of the others is principal.  Nor will its principal business be primary production where a combination of all its other businesses together mean that the primary production business is not the main business of the company.
92	The Commissioner acknowledges that in some instances, there will be no dispute that the taxpayer conducts a number of business, only one of which is a primary business, meaning that the issue is whether that business is the taxpayer’s principal business.  However, in other cases, he says, the taxpayer will engage in multiple activities, with one being a business of primary production.  In such cases, he contemplates that the question will arise whether those activities constitute another, or other businesses.  Referring to the recent decision of this Court in Premier Bay Pty Ltd v Commissioner of State Revenue (“Premier Bay”), the Commissioner observes that a third category may arise in which the question will be whether certain activities undertaken by a taxpayer are part of the primary production business, or are separate from it.
Primary Production
93	The Commissioner concedes that Delma conducted a primary production business, but describes it as “a very modest one”.  He points to two other activities undertaken by Delma — land development and money‑lending — seeking to characterise each as business that was separate from Delma’s primary production business.  Hence, he contends that when all of Delma’s businesses are considered, it cannot be concluded that its principal business was primary production. 
Land  Development 
94	The Commissioner submits that the relevant evidence establishes that by 2019, Delma was deeply committed to the development of the Land.  He points to the Development Agreement entered into by Delma that required it to grant security over the Land and a right of first refusal to a related party of the Developer.  He seeks to highlight terms of the development agreement.  First, he says that Delma had bound itself to enter into agreements and give consents as reasonably required by the Developer.  Secondly, Delma had licensed the Developer to enter on and occupy the Land in order to undertake the development.  Delma, he says, had agreed that it would continue to meet its obligations under its existing securities.  A breach of any of these and other terms of the Development Agreement would give the Developer a right, through Masco, to compulsorily acquire the Land.  The Commissioner observes that as a result, when Delma subsequently decided to sell the Land, it had to enter into a Deed of Covenant with the Developer and the purchaser pursuant to which it assigned all of its right, title and interest in and under the Development Agreement to the purchaser.  In return for what the Commissioner says was Delma’s only asset of significant value to development purposes, he observes that Delma was entitled to receive 75% of the net revenue of the sale of developed lots on the Land. 
95	The Commissioner  points to Mr Douglas’ concessions under cross‑examination that aside from the shareholder loans, the Land represented a large proportion of Delma’s assets and was its only significant capital asset.  He observes that at 30 June 2020, the balance sheet recorded the value of the Land as $413,410, but a note explained that this was the Land at cost.  For the following year, the value was $447,993.  The Commissioner observes that the Land had evidently not been revalued since Delma entered into the Development Agreement, but infers that the Land would have inevitably appreciated in value considerably and was sold in April 2022 for $50 million estimating that the sale might have generated a profit on development of $155 million.  By contrast, he says, as at 30 June 2020 the cattle were valued at $42,235 and, as at 30 June 2021, they were valued at nil.
96	The Commissioner points to the fact that in 2020, Delma took out a loan of $600,000 from Masco in order to continue the company’s operations.  He says that at this point, the land development business was supporting and paying for the cattle farming business.  He submits that the Court can infer that the loan from Masco was only available because of the pending development activity on the Land and the existence of the Development Agreement.
Money‑Lending 
97	Another significant aspect of Delma’s business, the Commissioner says, was the income it derived from interest paid on loans it had extended to its shareholders.  In the year ended 30 June 2020 this was $245,336 and in the year ended 30 June 2021 it was $153,407.  He points to Ms Chisholm’s concession, under cross‑examination, that the use of Division 7A loans was for the benefit of the shareholders and not necessarily of Delma. He also observes that Mr Douglas acknowledged under cross‑examination that Delma could have used the proceeds of the 2015 land sales and the compensation payment received in 2016 for other purposes including the purchase of other property.  The Commissioner contemplates that any income generated from other uses of that money would have been subject to income tax in the same way as was the income from the Division 7A loans.
Delma’s Principal Business 
98	The Commissioner seeks to rely upon the decision of this Court in Lotus Oaks Pty Ltd v Commissioner of State Revenue (“Lotus Oaks”) considering the principal business requirement in the pre‑2019 amendments to the LTA as they applied to a landholder that was a corporate trustee.  This point‑in‑time version of the LTA required that the landowner’s principal business be primary production of the type carried on on the land and that at least one of the specified beneficiaries of the trust be a natural person who was normally engaged in a substantially full‑time capacity in the business of primary production of the type carried on on the land.
99	The Commissioner cites the following observations of Garde J in Lotus Oaks:
In the second reading speech for the Bill which introduced the new provisions in 2019, the Treasurer said: 
The most stringent requirements apply to land in an urban zone within the boundaries of greater Melbourne: these require the land to be owned by a genuine primary producer, and used by them primarily for a business of primary production. The intention of this stringent test is to prevent people who are land banking in urban areas from accessing an exemption … The amendment strengthens the exemption test to restore the intended connection between the owner of the land and the business conducted on the land … These amendments close unintended scenarios permitted by the broad wording. They will reinforce the intent to help genuine primary producers running a business on their own land, which the vast majority of owners already do. 
As the legislative history shows, the provisions should be construed relatively strictly – it was not the intention of Parliament to exempt all persons carrying on farming activities from land tax. Rather, the exemption has been progressively narrowed. The practice of “land banking” coupled with minor farming is a particular mischief which the Act seeks to counter.
100	The Commissioner observes that the term “land banking”, as used by the Treasurer in the second reading speech quoted above, encompasses the landowner both holding land for future development and not using it for primary production.  It contemplates that the landholder in such instances is frequently a professional developer who has acquired the land in question for the purpose of future development.  However, it also argues that the term may equally apply to a long‑term farmer who commits to a future development on their land and undertakes only minimal farming activities accordingly.
101	The Commissioner seeks to highlight that in Lotus Oaks, the taxpayer had owned the farming properties for over a decade prior to entering into a development agreement in 2015.  As part of this development agreement, the taxpayer appointed a developer, but as observed by Garde J, this did not preclude a finding that that the taxpayer was carrying on the business of residential subdivision.  By the relevant tax years, 2016 and 2017, the taxpayer had received significant income from the sale of developed lots.  Hence, having concluded that residential subdivision was a business of the taxpayer, Garde J considered when the business commenced.  His Honour observed that the element of commitment distinguished activities constituting the carrying on of a business from those activities which are preliminary to it.
102	The Commissioner cites the High Court decision in Spriggs v Commissioner of Taxation (“Spriggs”) which stands for the proposition that when determining whether a taxpayer’s activities fall within the ordinary general meaning of the term “business”, it is necessary to conduct a “wide survey and exact scrutiny” of the taxpayer’s activities.  He seeks to highlight the following passage from the High Court’s decision:
Where it is determined that a taxpayer is conducting a business, the next questions will be the “scope” of that business. It may be that the taxpayer pursues two separate fields of endeavour, which are properly described as two separate businesses or a business and some other non‑business activity. … The question is one of fact, turning upon the degree of connection and interdependence between the activities.
103	In his seeking to apply the indicia in Spriggs, the Commissioner argues that though there is no doubt that Delma conducted a cattle farming business on the Land, that business did not encompass the separate activities of land development and earning interest from shareholder loans.  
104	The Commissioner submits that the decision to enter into the Development Agreement was a separate field of endeavour from engaging in primary production and that the intended effect of the Development Agreement was the eventual termination of the primary production activities on the Land.  On his approach, the Commissioner says that land uses of raising cattle and subdivision or construction are mutually exclusive.  He says that there were at least two ways of exploiting the land including farming, or land development.  He refers to Mr Douglas’ concession under cross‑examination that the development of the Land was effectively inevitable due to the rezoning of the surrounding area, and says that the fact that Delma was effectively compelled to move from one land use to another does not take away from his position that the two were entirely separate activities. 
105	Another separate activity from primary production, the Commissioner says, was earning interest from shareholder loans.  The shareholder loans were made because Delma had sold some land in 2015, and received a compensation payment in 2016 as the result of an easement across its land.  The Commissioner takes the position that the funds could have been applied to many purposes by Delma, such as investing in its primary production business or purchasing another farm, additional cattle or supplies.  Alternatively, he says that the funds could have been invested in an unrelated business or the stock market.  The Commissioner seeks to emphasise that despite there being other options for the use of the funds, Delma decided to distribute the funds to its four shareholders, albeit by way of Division 7A loans rather than unfranked dividends.
106	On the Commissioner’s characterisation, Delma’s decision to distribute the funds to shareholders, though explicable by the impending development of the Land and age of the shareholders, should be taken as a decision to not continue with its business of primary production once it reached its natural end.  He observes that the this decision had negative consequences for Delma’s primary production business because it meant that Delma experienced serious cashflow problems, which Mr Douglas conceded prevented it from even purchasing cattle.  
107	It follows, the Commissioner says, that the money‑lending business was not only separate from, but in key respects inconsistent with, Delma’s primary production business.  He seeks to draw distinction between the facts at hand and those in Premier Bay, where the rent received by the taxpayer was from a related party that conducted similar cattle operations which used the same labour force on the taxpayer’s land.  He argues that here, the interest received by Delma was from a source unrelated to its primary production activities.
108	The Commissioner says that there were three separate activities conducted by Delma during the relevant years, each of which he contends was a business.  He says that the land development activities comprised a “very significant” business that stood to earn Delma “extremely large” profits.  He says that the Delma undertook land development activities in a business‑like manner, demonstrating features such as negotiations and properly drafted contracts.
109	The money‑lending activities are also said by the Commissioner to constitute a business.  He seeks to rely upon the observation of Croft J in Premier Bay that the bare receipt of passive income may comprise a separate business.  Additionally, the Commissioner says, the purported money‑lending business took place with sophisticated accounting advice from Ms Chisholm and stood to generate “significant income” for Delma.
110	The Commissioner acknowledges the contrary argument that the “substance” of the shareholders loans was not a money‑lending business but rather the distribution of profits to shareholders which were structured as Division 7A loans for tax reasons alone.  However, it argues that the use of the Division 7A loans was not for the benefit of Delma, which had no obligation to assist the shareholders by structuring the profit distributions in the way which most suited them.  Further, he says, regardless to their substance, the shareholder loans generated income that Delma was able to use in business.  The practical operation of this arrangement, the Commissioner observed, was that Delma declared dividends equal to loan repayments and hence never received the interest income.  He seeks to emphasise that Delma had no obligation to declare dividends in this manner. 
111	As observed by the Commissioner, the exercise of determining whether Delma’s primary production business was its principal business requires consideration of a number of factors.  He points to a series of authorities in the context of land tax which canvas factors including the labour deployed in each business and the use of the entity’s capital assets.  He submits that where a taxpayer’s land is to be developed, the nature and financial impact of that development may be the critical feature that leads to a conclusion that the taxpayer’s principal business is not, or is no longer, primary production. 
112	The Commissioner seeks to rely upon the decision of this Court in Australian Investment & Development Pty Ltd v Commissioner of State Revenue (“Australian Investment & Development”).  In this case, the land in question had been included within a precinct structure plan.  Prior to and during the relevant years, the landowner had applied to allow for residential development to be undertaken on parts of the land in question.  However, at the relevant times, no developer had been appointed to undertake a development, and the taxpayer had not undertaken any physical development work on the land.  The Court considered the two other activities undertaken on the land — the cultivation of a plant known as cassinia and the agistment of cattle.  The Commissioner seeks to highlight the following extract from the judgment of Croft J:
More significant in the present context was, in my view, the capital appreciation brought about by the PSP in 2012 and by the applications for planning permits made in 2012 and 2014, two of which were granted in the relevant period. This was not a case of a farmer whose land appreciated in value by reason of rezoning or other matters beyond their control. Rather, it involved active steps taken by the landowner. It is true that those steps did not commit the Appellant to undertake the development set out in the plans attached to the applications but they did constitute a clear indication of the Appellant’s intentions and led almost inevitably to the development that is now taking place.
113	The decision of the Victorian Civil and Administrative Tribunal (“the Tribunal”) in Lavender Rain Pty Ltd v Commissioner of State Revenue (“Lavendar Rain”) is also cited by the Commissioner.  In Lavendar Rain, the taxpayer was a family farming company that had entered into a development agreement with a developer.  The taxpayer had also charged its land in favour of the developer.  The development agreement provided that the developer was entitled to develop the land and sell developed lots.  Further, the taxpayer was entitled to receive a portion of the proceeds of sale.  The Commissioner observes that in the relevant tax years, no lots were developed and the taxpayer continued to run cattle on the land and only “modest development activity” occurred on the land.  The Commissioner seeks to highlight the following extract from the Tribunal’s reasons:
consistent with Lotus Oaks, I consider that the business commenced from the time that Lavender Rain committed to the development by entering into the [development agreement] and charging the Relevant Property in favour of the [developer]. As in that case, this is so notwithstanding that any development activity would, necessarily, take place sometime after the [development agreement] was entered into and became unconditional (and even if the Relevant Property was to be developed as the first rather than the last stage).
114	The Commissioner observes that by the relevant dates, Delma’s value was predominantly in its land.  He argues that Delma had committed its land to development and had simultaneously restricted what other activities it could undertake.  Though he acknowledges that Delma was still able to maintain cattle on the Land, he says that it was already conducting a significant business in land development.  This land development business, the Commissioner says, was being conducted by Delma notwithstanding that the proceeds of that business were yet to be realised and the physical development work had been contracted to another entity.  The Commissioner argues that Delma’s only significant asset, aside from the funds on loan to its shareholders, was the Land, which was worth $50 million as determined by a sale less than two years after the dates in question.  The Commissioner argues that the Land did not attain this valuation because of its future potential use in maintaining cattle.  Rather, it says that the Land had that value because it had been committed, pursuant to a land development contract, to be developed for very significant profits.  On the Commissioner’s characterisation, Delma was, for all practical purposes, a cashbox plus the Land.  He seeks to emphasise that the value of the Land almost entirely related to the commercial decision that Delma had made some years earlier to commit to its development.  Similarly, he says that this is underscored by the fact that in 2020, a loan had to be taken out from Masco in order to maintain the solvency of Delma’s cattle farming business. 
115	It is put by the Commissioner that Delma’s position is analogous to that of the taxpayer in Australian Investment & Development.  However, he seeks to emphasise that though the taxpayer in Australian Investment & Development had merely applied for planning permits that did not require the land in question to be developed, here, Delma had gone further by entering into an agreement, which the Commissioner says compelled the development of the Land.  On this basis, the Commissioner contends that the conclusion in Australian Investment & Development that the taxpayer’s principal business was not primary production ought to be reached more easily in this case. 
116	Delma’s other significant asset, the Commissioner says, was the total sum of almost $10 million it had received through 2015 and 2016 on account of land sales and a compensation payout.  He observes that this cash asset was wholly deployed in generating interest income.  The Commissioner seeks to emphasise that the effect of Delma’s choice in this regard, was that the funds were not deployed in the primary production business, despite this choice creating cashflow problems for that business.  The Commissioner refers to the amounts of interest earned by Delma, being $245,336 in the year ended 30 June 2020 and $153,407 in the year ended 30 June 2021, and argues that these amounts dwarfed the income from maintaining cattle.  The Commissioner acknowledges that it may well be the case that Delma did not initially set out to undertake a business of lending money to its shareholders to earn a profit.  However, he argues that is not the point, and argues that Delma chose to become a lender under four loan agreements which he says were on commercial terms and involved Delma deriving very substantial interest income.  The Commissioner contends that Delma did not have to do this, and that given the quantum of interest income earned, the Court should conclude not only that Delma was conducting a money‑lending business, but also that this business was a significant one. 
117	The Commissioner contends that Delma’s primary production business was the least significant of the three businesses that he purports to have been undertaken by Delma.  Alternatively, he says that it was at least was not the principal one.  He argues that this conclusion is grounded in an analysis of the three key factors of income derived from each business, the labour deployed in each business, and the use of Delma’s capital assets.  The Commissioner says that the income disparities are very significant.  So too, he says, is Delma’s deployment of capital — it arguing that the only two assets of note, being the Land, and the almost $10 million in cash, were either already devoted to or had been irrevocably committed to the businesses other than the primary production business.  He submits that it is only the labour deployment that points to the primary production business being principal; but says that this factor is insignificant when considered alongside the other two factors of income and capital.  Hence, the Commissioner submits that Delma cannot satisfy the requirements in s 67B(1)(b) of the LTA. 
The Appellant’s Submissions 
Land Development 
118	The Appellant rejects the Commissioner’s submissions that it was not a genuine producer, engaged in land banking or a farmer who undertook “only minimal” farming activities.
119	The Appellant contends that the authorities proffered by the Commissioner do not provide the support contended for, as they contain material factual differences.  First, it observes that in Lotus Oaks, the development of the Mill Quarter was a “burgeoning business” by 31 December 2014 and an “established and successful business” by 31 December 2016.  It also points to the fact that the taxpayer had registered a trademark for the development project, and received significant income from the sale of developed lots, amounting to more than $3 million in 2017.  It argues that in the present case, by contrast, any physical development activity on the Land was years away at best, and that the was no income being derived from such activity at any relevant time.  
120	The Appellant submits that the facts in Australian Investment & Development are similarly distinguishable.  The Appellant seeks to highlight the fact that in Australian Investment & Development, the taxpayer engaged a town planner to obtain planning permits for the land, some of which were granted.  The taxpayer was found to have taken “active steps” in this process, such as applying for an electricity supply to be provided to a portable planning office constructed on the land, and registering a business name to be used to market the developed land.  The land in issue had multiple uses, and no crops were sold in any of  the years in dispute.  In the present case, the Appellant says, Delma undertook no activity other than its primary production business.  Hence, the Appellant seeks to distinguish the steps undertaken by Delma pursuant to the Development Agreement, from activities undertaken by the taxpayer in Australian Investment & Development, which were found to have “led almost inevitably” to land development.  Rather, the Appellant says, Delma ultimately sold the land as a whole without engaging in any development activity.
121	Turning to the Commissioner’s reliance on Lavender Rain, the Appellant seeks to highlight that, in that case, development occurred following a planning process in which the taxpayer was activity involved, and which involved all other landowners.  The taxpayer’s director had negotiated, on behalf of all land owners, the “selling all of [their] properties to a developer” and the terms of the Development Agreement for all owners.  Further, it observes that the taxpayer was found to be carrying on a consulting services business and separately, a ski competition business, for two of the three years in question.  The Appellant submits that none of these matters, arising in Lavender Rain, has an equivalence in the present case.
122	The Appellant points to factors considered by the Tribunal in Premier Bay Pty Ltd v Commissioner of State Revenue, in reaching the conclusion that the taxpayer was not carrying on a land development business.  The Tribunal in Premier Bay considered the following factors
(a) 	the absence of a partnership agreement between the taxpayer and the developer; 
(b) 	the absence of any real involvement by the taxpayer in the planning process; 
(c) 	that separate development agreements had been entered into between the developer and each land owner; 
(d) 	a reluctance by the taxpayer to grant a mortgage in favour of the developer, and the cessation of the use of the land by the taxpayer only when it was required to do so; and 
(e) 	that no income was derived from land development.
123	The Appellant submits that most of those factors are present on the facts in the present matter.  It observes that the findings in Premier Bay were not disturbed by this Court on appeal.
124	The Appellant observes that Delma did not in fact proceed with any property development at all, and instead entered into a contract to sell the Land in a single transaction.  It points to Mr Douglas’ concession under cross‑examination that “through necessity”, Delma had “cashed out” and taken the price of the Land, leaving the risk of development to somebody else.  It seeks to rely on authority stipulating that the mere realisation of a capital asset is not a business, and that there is “no or trade or business of ‘realizing’”.
125	It is put by the Appellant contends the value of the Land is not relevant in determining whether Delma was carrying on a business of land development.  In support of this proposition, it cites authority providing that  “[t]he mere magnitude of [a] realisation does not convert it into a … business”.  Rather, it says, the “scale of the realisation activities” is the relevant consideration.  In the present case, it says that Delma’s realisation activities comprised only of the contract of sale of the Land together with a transfer of the rights and obligations under the Development Agreement to the purchaser.  Moreover, it points to Delma’s ultimate sale of the Land in an open‑market sale, and observes that no specific allocation of value was applied to any benefit or obligation arising under the Development Agreement.  To the extent that those matters were of any value, it says that any value arising from such a benefit or obligation was simply incorporated into the value of the whole of the Land.
126	Responding to the Commissioner’s written submissions, the Appellant argues that it is unhelpful to attach labels such as “deeply committed” to development, as that may detract from the proper inquiry necessary to characterise whether all the facts and circumstances of the Appellant’s activities comprised a business of land development.
Money‑Lending
127	As to the Division 7A loans made by Delma to its shareholders, the Appellant says that the loans do not meet the indicia of a business.  It contends that there cannot be any proposition that a closely held family company deciding to return extraordinary capital gains of the company to its shareholders by advancing funds by way of loans, pending the repayment of those loans by dividends, being declared comprises a money‑lending business.  In doing so, it points to Mr Douglas’ oral evidence, where he disagreed with Mr Williams KC’s puttage that the Division 7A loans were on commercial terms.  It suggests that if such a proposition were accepted, it would likely have significant implications for the application of the Commonwealth income tax laws.  
128	The Appellant notes that the extraordinary gains that were the subject of the Division 7A loans were not connected with the Appellant’s primary production business.  It observes that the loans represent the sale of Lot 3, 2140 Merriang Road, the compensation for the easement and the sale of other real estate following the death of Mr Douglas’ father, Allan Douglas, in 2006.  On the Appellant’s approach, they should properly be viewed as the return of capital on capital assets.  It argues that on no account should they be viewed as a return of business profits attributable to Delma’s primary production business.  Since they are properly viewed on its approach as the return of capital, the Appellant says that the Division 7A loans do not amount to a business in their own right.
129	The Appellant characterises the Division 7A loans as no more than a tax effective advance of planned future dividends that were declared in a closely held, family company.  The fact that there were four loans, the Appellant says, should only be taken to reflect that there were four shareholders of Delma.  The Appellant argues that because there were four loans for Delma’s four shareholders supports that the loans ought to be viewed as advances upon future dividends, which would need to be made parri passu.  A parri passu distribution is one that ranks equally and without preference.  The Appellant observes that no loans were made to external parties by Delma.  Equally, it says that there is no suggestion that any loans to external parties were proposed.  Nor was there, it says, any suggestion of any further repetitive lending, or any source of funds or activities to raise funds to lend by Delma.  Rather, it contends that the facts and circumstances of the monies lent to return extraordinary capital gains of Delma to its shareholders stand in contradistinction to the Commissioner’s case.
130	The Appellant submits that the Division 7A loans do not answer the ordinary requisites of a business.  It cites the following passage from the decision of Barwick CJ in Fairway Estates Pty Ltd v Federal Commissioner of Taxation: 
[i]n cases upon the application of legislation to control money‑lenders it has been usually said that to carry on the activity as a business, repetition and continuity is necessary, and on occasions the requisites have been described as involving a plan or scheme of activity. 
131	The Appellant also points to the following observations of the High Court in Martin v Federal Commissioner of Taxation:
The onus … is on the appellant to satisfy the court that the extent to which he indulged in betting and racing and breeding racehorses was not so considerable and systematic and organized that it could be said to exceed the activities of a keen follower of the turf and amount to the carrying on of a business.
132	Moreover, the Appellant seeks to rely upon the decision of the Federal Court in BHP Billiton Finance Limited v Commissioner of Taxation.  Gordon J concluded that BHP Billiton Finance, a wholly owned subsidiary of BHP Billiton established to carry on the business of a financier, carried on a business of money lending.  As the Appellant highlights, her Honour made the following remarks about the activities of BHP Billiton Finance: 
over an extended period, Finance not only borrowed and on lent money on numerous occasions to a variety of entities at rates of interest (which the Commissioner did not suggest were less than commercial) but did so on loan stipulated by Finance and where “the rates of interest payable on the money lent were significantly higher than the rates payable on the money borrowed” (see [93] above), thereby generating a substantial profit: Commissioner of Taxation v Bivona (1990) 21 FCR 562, 567‑9. The fact that the loans made by Finance were made to related entities is not determinative: Bivona (1990) 21 FCR 562, 569. 
133	The Appellant observes that Delma never borrowed from external financiers and on lent money on more favourable terms.  Hence it says that the loans from Delma to its shareholders would, by reason of the terms of Division 7A, match any other company performing a return of capital that complied with Division 7A at the minimum interest rate mandated by Division 7A.  The Appellant argues that the fact that loans were made in respect of the sale of four capital assets, including the easement, over many years, does not render Delma a money lender in the sense contemplated by the courts in BHP Billiton.  It points to statements made by Mr Douglas under cross‑examination that he saw the loans as “internal” transactions to the four directors of Delma that did not correspondent with “my [Mr Douglas’] version of commercial”.  The Appellant says that though Mr Douglas was asked about other ways that Delma could have invested the funds from the gains in realising capital assets, he was not asked whether there was any other way that Delma could have returned those funds to its shareholders in a legitimate, tax efficient manner.
134	Finally, the Appellant notes that the funds the subject of the Division 7A loans was unrelated to Delma’s primary production business, and argues that it is not the case that Delma had “hundreds of thousands of dollars” in cash from the interest to fund the purchase of cattle as was suggested by Mr Williams to Mr Douglas in cross‑examination.  The Appellant observes that the interest payable by Delma’s shareholders was a book entry that Delma did not see.  It refers to Mr Douglas’ oral evidence under cross‑examination in support of this proposition.  It seeks to rely upon the following passage from Mr Douglas’ cross‑examination:
when everyone saw that I was putting money in, I think everyone breathed a sigh of relief. Because no one, I don’t — well, the company couldn’t afford to pay the bills …
135	The Appellant seeks to address the Commissioner’s reliance on the quantum of the interest income earned by Delma in support of the argument that the lending comprised a business.  In responding to this argument, it says that the quantum of interest does no more than follow from the prescribed interest rate being applied to the principal sum.  It contends that the quantum of interest neither defines a continuing activity necessary for there to be a business, nor a pursuit of profit.  To that end, it says, the interest payable and paid did not comprise a pursuit of profit by Delma but was mandated by legislation.  It submits that finding otherwise may result in every sufficiently large loan at interest, regardless of how quantum was determined, comprising a money‑lending business.  One of the many unintended consequences of such an outcome, the Appellant suggests, would be that every depositor of such an amount in an interest‑bearing bank account, by that bare act alone, would be conducting a money lending business.
Conclusions and Findings
136	I am satisfied that Delma’s principal business was the business of primary production carried on on the Land.  
137	It is put by the Commissioner that by 2019, Delma was deeply committed to the development of the Land.  He seeks to rely upon the terms of the Development Agreement, a Deed of Covenant between Delma and the Developer, and a loan of $600,000 advanced to Delma by Masco in support of Delma’s cattle farming activities.  He also points to a concession made by Mr Douglas, during cross‑examination that the Land represented a large proportion of Delma’s assets, and was its only significant capital asset.
138	In Lotus Oaks, Garde J considered whether a taxpayer’s residential subdivision activities over the relevant period comprised a business.  His Honour cited the decision of the Full Court of the Federal Court in Statham v Federal Commissioner of Taxation (“Statham”), which considered various authorities in determining whether the realisation of an asset will be on revenue or capital account. It is helpful to note the following observations: 
(a) 	it was well established that the mere realisation of an asset at a profit does not necessarily render the profit taxable;
(b) 	the profit must arise from the carrying on of a business or a profit‑making undertaking or scheme; and
(c) 	the mere magnitude of the realisation does not convert it into such a business, undertaking or scheme, but is relevant in determining whether the facts establish a mere realisation of a capital asset or a business or profit‑making undertaking or scheme.
139	In Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (“Whitfords Beach”), the High Court considered a taxpayer company that had been transformed from a company which held land for the domestic purposes of its shareholders, into a company whose purpose was to engage in commercial ventures with a view to profit.  The Court found that the extensive development and subdivision work undertaken comprised more than the mere realisation of an existing asset, and was work that was done in the course of a business venture.  Gibbs J held that the test was whether the activity was merely a realisation of the taxpayer’s asset, or something done in the carrying on or carrying out of a business.  Mason J noted the distinction between the subdivision of a portion of land into several allotments that might be regarded as the realisation of a capital asset in an enterprising way, and a large‑scale subdivision that involves the laying out and construction of roads, and the provision of parklands, services and other improvements.  His Honour held that the subdivision in question amounted to a development of land to such a marked degree that it was impossible to say it was the merely realisation of a capital asset.  Similarly, Wilson J observed that the character of the land in question had changed significantly, and that a great deal was done to ensure that the land could be sold in residential subdivision.  
140	In my view, Delma was not engaged in a land development business.  It is relevant to note that the proper inquiry is whether, on all the facts and circumstances, Delma’s activities comprised a business of land development in the relevant land tax years.  It is not helpful to assess, divorced from its actual activities, whether Delma was “deeply committed” to land development.  Any substantial development activities to be undertaken by Delma pursuant to the Development Agreement were years away at best.  There was no income being generated from these development activities in the relevant tax years.  In fact, as per Mr Douglas’ evidence, Delma had “cashed out” by selling the Land in a single transaction before any development had taken place — effectively avoiding the obligations and risks associated with land development.  This demonstrates that Delma’s decision to enter Development Agreement was merely intended as a method of realising its substantial capital asset.  The fact that it was drafted and negotiated commercially does not necessitate a finding that it was a business activity.  A number of land sales are settled through sophisticated instruments that are the product of commercial negotiations and drafting.  It does not follow that each of these land sales occurs as part of a land development business. 
141	As to the Commissioner’s reliance on the terms of the Development Agreement, these terms merely represent obligations agreed to by two commercial entities preparing for possible development to be undertaken on the Land.  At best, they can be regarded as precursors to an anticipated land development business.  In a similar sense, the loan of $600,000 extended to Delma by Masco cannot be characterised as the land development business supporting the cattle farming business in the manner put by the Commissioner.  The source of the funding is not determinative on these facts.  These funds were likely applied towards cattle farming, rather than land development activities.  Even if it were accepted that the funds were only available because of pending land development activity on the Land, this would only support a conclusion that in the relevant land tax years, a business of land development was only anticipated.  
142	The expected appreciation in the capital value of the Land cited by the Commissioner is not relevant here, because these gains had not been realised in the relevant tax years.  In circumstances where development activity was yet to occur, the Commissioner’s submission comparing the magnitude of the asset value in the Land, against that in Delma’s livestock, does not support a conclusion that Delma was carrying on a business of land development of the Land.  Regardless, the realisation of a capital asset does not comprise a business activity. 
143	It follows that the extent of Delma’s involvement in the development of the Land is distinguishable from that in Lotus Oaks, where the taxpayer’s development of the Mill Quarter spanned from a “burgeoning business” to an “established and successful business” between the relevant tax years.  It is also distinguishable from the substantial degree of involvement observed by the High Court in Whitfords Beach.  Moreover, the present facts are distinguishable from those in Australian Investment & Development, where the taxpayer had taken several “active steps” towards land development, such as arranging for electricity supply to be provided to a portable planning office, and registering a business name to be used to marketing the developed land.
144	Nor was Delma, in my view, engaged in a money lending business.  Money lenders are generally regarded as carrying on the activity as a business, with repetition and continuity as a necessity, often involving a plan or scheme of activity.  The mere lending of a large sum at interest, in itself, does not constitute a money lending business since it does not necessarily involve the carrying on of the activity in a business‑like manner or for the pursuit of profit.
145	The Division 7A loans were no more than a tax effective advance of planned future dividends that were declared in a closely held, family company.  In this regard, the loans are distinguishable from the money lending business of BHP Billiton Finance considered by Gordon J in BHP Billiton.  Delma did not engage in an established process by which funds were borrowed from external financiers and on‑lent on more favourable terms. Mr Douglas gave evidence that he viewed the loans as internal transactions to the four directors of Delma and did not accept that the transactions were “commercial”.
146	Though, as submitted by the Commissioner, there were a number of alternative investment options available to Delma, Mr Douglas was not asked whether there were mechanisms by which funds could be returned to shareholders in a legitimate tax efficient manner.  
147	In oral submissions, counsel for the Appellant sought to rely on the dicta of Garde J in Lotus Oaks in support of the proposition that the concept of a principal business requires a comparison with other businesses of the taxpayer.  However, on the present facts, Delma was not engaged in any other business activities to which the business of primary production could be compared.  It follows that the only business activity of Delma was its primary production business.
Issue 3: The engagement of Mr Douglas — s 67B(2)
148	Section 67B(2) of the LTA could be satisfied if Mr Douglas were normally engaged in a substantially full‑time capacity in the business of primary production carried on on the Land.  The third issue is whether he was.  The parties engaged with this issue though two matters — the first a factual one, the second a constructional one. 
The Commissioner’s Submissions
149	The Commissioner refers to the evidence of Mr Douglas that he split his working time between two businesses — the one conducted by Delma on the Land, and the separate business which he conducted in his personal capacity at Epping Road.  It appears to be common ground that the engagement at Epping Road does not count towards the full‑time engagement requirement under s 67B(2) of the LTA because it was in respect of a separate business.  The Commissioner says that it is apparent that the two businesses are separate both from the fact that they were conducted by different entities, and also from their different nature. 
150	The Commissioner points to Mr Douglas’ evidence that he worked approximately four hours per day on the Land and four hours per day at Epping Road.  In doing so, he concedes that Mr Douglas was a straightforward witness whose evidence can be generally regarded by the Court as being reliable.  However, he says that there are reasons for thinking that on this question, Mr Douglas may have been exaggerating somewhat, even if only subconsciously.  In proffering an explanation for such exaggeration, he points to the fact that Mr Douglas had been farming on the Land for many years, and that since 2006, the Land has been used continuously for cattle farming under the management of Mr Douglas.  Hence, he says, it is likely that in past years, when there were more cattle and there was no Development Agreement, there was more work to do.  He observes that it may be difficult, four years after the event, for a person to recall how busy they were in December 2019 as opposed to, for example, December 2018.  The Commissioner refers to Mr Douglas’ statement under cross‑examination that his work on the Land and other properties was “very much a routine”.  He asserts that where a person is engaged in the same work over a period of many years, it is difficult not to think and speak in general terms about what that work involves and how long it takes.  On this basis, he argues that a temptation arises, subconscious or otherwise, to attribute the usual state of affairs over the years to the specific time in question without making allowance for variations. 
151	The Commissioner points to the matters below, which he says suggest that the time spent by Mr Douglas on the Land in the relevant years was less than the four hours per day he estimated in his evidence:
(a) 	the farm diaries – which are the only contemporaneous record of Mr Douglas’ time and are therefore the most reliable evidence – have very limited references to work at the Properties and considerably more references to work at Epping Road; 
(b) 	Mr Douglas’ affidavits both avoid confronting the very low number of cattle on the Properties between October 2019 and July 2020. They are written as if the Properties were at full capacity during the whole period in question, whereas the cattle numbers demonstrate that they were not. It is hard to accept that when there were only four steers on the Properties that Mr Douglas did the same amount of work as when there were 52; 
(c) 	the incentive to spend a lot of time on the Properties had gone once it became apparent that the primary production business could not be run profitably from around 2019; and 
(d) 	Mr Douglas lived at Epping Road where he had around 100 cattle. This business was profitable and Mr Douglas considered it to be his principal business. 
152	It is put by the Commissioner that, at the highest, Mr Douglas worked between the two businesses at Epping Road and at the Land equally and that his engagement in the one conducted on the Land was not substantially full‑time.
153	The second argument with which the parties have engaged concerns the novel construction of the words “full‑time capacity” in the LTA.  As the Commissioner observes, the term is not defined in the LTA but connotes “regular participation in the business for a considerable part of the time of the owner” or other relevant person.  The Commissioner argues that the use of the word “considerable” in this formulation is not intended to cut down the meaning of the statutory words “substantially full‑time”.  Rather, it says, it is an acknowledgement that what constitutes full‑time engagement may vary depending on the nature of the work and business in question. 
154	The Commissioner seeks to engage with the Appellant’s written submissions, where the Appellant submits that the substantially full‑time capacity requirement “cannot rise higher than the requirements of ‘the primary production business’ to which it is directed”.  He further notes that the Appellant says that the inquiry into Mr Douglas’ engagement must commence with an inquiry into the overall requirements of the business conducted on the Land.  He observes the Appellant’s argument that since Mr Douglas performed approximately 90% of the physical work necessary for Delma’s primary production business, it is clear that he was normally engaged in a substantially full‑time capacity in that business.  
155	The Commissioner contends that this argument is misconceived and seeks to rely upon the legislative history of the LTA in support.  He refers to a requirement in the LTA prior to 2019 amendments which provided that, for land in the urban zone owned by a proprietary company, a relevant person was “normally engaged in a substantially full‑time capacity in the business of primary production”.  He observes that the requirement was not limited to the business that was undertaken on the land in question.  This meant that as long as the relevant person was a full‑time primary producer, the land in question could be exempt.  However, he observes that following the 2019 amendments, the requirement became engagement in the business of primary production undertaken on the relevant land. 
156	The Commissioner cites Lotus Oaks, where Garde J referred with apparently approval to the Commissioner’s characterisation of this aspect of the 2019 amendments, to exclude “Collins Street farmers”.  It is put by the Commissioner that the Court was correct to identify that the requirement of substantially full‑time capacity is intended to prevent a person who is only a part‑time farmer from having the benefit of the exemption in s 67 of the LTA.  The Commissioner contemplates the example of a taxpayer operating a “hobby farm” that does not require more than a few hours’ work per week, and submits that the Appellant’s construction of s 67 of the LTA would permit such a “Collins Street farmer” to have the benefit of the exemption.  This would mean, the Commissioner says, that the taxpayer would be allowed to maintain an unrelated full‑time career elsewhere.  Moreover, he argues that such an interpretation would have the perverse effect of causing the 2019 amendments to the LTA to loosen the requirements of the exemption in s 67 of the LTA.  He cites comments from the Treasurer that the intention of the new “stringent” text was to strengthen the exemption in order to restore the intended connection between the owner of the land in question and the business conducted on said land. 
157	The Commissioner contends that the construction proffered by the Appellant does not draw any principled line between people like Mr Douglas, who work in multiple primary production businesses, and people who work in a small primary production business while otherwise being employed elsewhere.  He says nothing in text of s 67B(2) of the LTA would justify the identification of such a line. 
158	In a similar vein, it is put by the Commissioner that the Appellant’s submission on construction is contrary to the words of s 67B(2) of the LTA.  He seeks to highlight that the requirement referred to in s 67(1)(a)(iii) of the LTA is that the relevant person is “normally engaged in a substantially full‑time capacity in the business of primary production”.  The key words for present purposes, he says, are “substantially full‑time capacity”.  On the Commissioner’s reading, these words must either attach to the person’s engagement, or to the business of primary production.  It seeks to emphasise that the two may be significantly different.  He asserts that the full‑time engagement of a person is normally understood as encompassing around five eight‑hour days per week, but acknowledges that this may vary.  Alternatively, he says, the full‑time capacity of a business may be much more or less than that.  In this regard, he raises the example of a large‑scale agricultural operation that requires dozens of workers in around‑the‑clock shifts, as opposed to a small cottage industry. 
159	The Commissioner argues that when the words of the exemption in s 67 of the LTA are given their natural meaning and read according to the order in which they are set out in the provision, the words must mean that the person’s engagement must be substantially full‑time.  If this reading is followed, the Commissioner observes that one then turns to the final clause, which raises the question of whether that full‑time engagement is in the relevant business of primary production.  On the Commissioner’s approach, the requirement is only met if this further question is answered in the affirmative. 
160	The Commissioner submits that though Mr Douglas may have been engaged in a substantially full‑time capacity across his two primary production businesses, not all of Mr Douglas’ engagement related to the primary production business carried on on the Land.  Hence, he submits that Delma cannot satisfy the requirements of s 67B(2) of the LTA. 
The Appellant’s Submissions
161	The Appellant seeks to address the Commissioner’s submissions on the proper construction of s 67B(2) of the LTA, which is grounded in an analysis of the legislative history of the provision prior to the 2019 amendments, and the words of s 67B(2) of the LTA.  The Appellant argues that, to the contrary, the legislative history, the 2019 amendments and the words of the provision support its proffered construction of s 67B(2) of the LTA. 
162	The Appellant seeks to emphasise the following statements made in the Second Reading Speech to the 2019 amendments in relation to s 67:
The intention of this stringent test is to prevent people who are land banking in urban areas from accessing an exemption.
163	Also: 
The basic wording of this exemption … permits a number of business scenarios that do not align with the intended policy. For example, the current wording does not prevent the owner of the land claiming the primary producer exemption despite having no other connection to the primary production activity on the land.
164	And: 
The amendment strengthens the exemption test to restore the intended connection between the owner of the land and the business conducted on the land … They will reinforce the intent to help genuine primary producers running a business on their own land, which the majority of owners already do.
165	The above passages, the Appellant says, accord with the statements of Garde J in Lotus Oaks, where his Honour said that the restriction in s 67 of the LTA “was introduced in circumstances where Parliament intended to discourage land speculation and land banking of urban zoned land in greater Melbourne. Minor primary production activity conducted on the land should not give rise to an exemption from land tax”.
166	The Appellant observes that an identified concern with the prior terms of s 67 of the LTA was that a landowner was required to be engaged in some business of primary production on a “substantially fulltime basis”.  Although, it says, the provision did not concern itself with whether that engagement to be in the business of primary production conducted on the land to which s 67 was to be applied.  On the Appellant’s reading, the 2019 amendments to the provision prevent that mischief.  It says that the amendments preclude landowners, or, in the case of companies, natural person shareholders and their relatives, from falling within the scope of the s 67 exemption by being engaged in a “business of primary production” unrelated to the business of primary production being conducted upon the land in issue.
167	It is put by the Appellant that no mischief to which the 2019 amendments are directed arises in the present case.  It observes that Mr Douglas worked on the Land for around 24 hours a week or more, and notes that this was the very land for which it seeks exemption under s 67 of the LTA.  As it highlights, the Appellant does not rely upon Mr Douglas’ work on the Epping Land to contend that s 67B(2) is satisfied.  The Appellant does not accept the Commissioner’s contention that its proffered reading “loosens” the requirements of the exemption.
168	The Appellant contemplates the possibility that a farmer working across two or more unrelated farming businesses on different lands yet fully engaged in all of the work necessary for each of them would result in neither farming business being entitled to exemption under s 67 of the LTA at all, or at best, only one of them being entitled to exemption.  Such a limitation, it submits, would not be supported by the words of the legislation.  The Appellant argues that if such a consequence was intended, it would be expected that Parliament would expressly legislate to that effect.  It observes that there is no suggestion in the explanatory materials that such a consequence was intended. 
169	The Appellant points to the two‑step construction contended for by the Commissioner, and submits that this approach would result in an anterior requirement of full‑time temporal engagement of the relevant person regardless of the requirements of the business conducted upon the relevant land for which exemption was sought.  It says that on this approach, the legislation would effectively prescribe a full‑time engagement on a temporal basis, even if less time was required to conduct the business.  It is put by the Appellant that such an outcome does not find support in the words of the LTA, or the explanatory materials.
170	The Appellant submits that the inquiry as to whether a taxpayer is “normally engaged in a full‑time capacity” is not a standalone test that is devoid of statutory context.  It points to the findings of the Court in Annat and Lotus Oaks which endorsed the observation that “regular participation in the business for a considerable part of the time of the owner” was sufficient.  Contrary to the Commissioner’s submission, it says, those authorities do not operate to reduce the relevant person’s engagement in the business to, what it says, is a mathematical or numerical proposition.
171	The Appellant raises an alternative argument addressing the instance where the Court considered that both the Appellant’s construction and the Commissioner’s proffered constructions were open.  It says in this case, the Appellant’s construction should be preferred as promoting the object underlying s 67 of the LTA, and seeks to rely upon s 35 of the Interpretation of Legislation Act 1958 in support of this proposition.  The Appellant argues that the scheme of the exemption in s 67 of the LTA would be disturbed and unsettled if Mr Douglas was not regarded as satisfying the normally engaged in a substantially full‑time capacity requirement.  It says that this is because it would have the effect of denying the exemption to genuine farmers, who work long hours on the land in question, but also work on other farms.  Additionally, the Appellant says that such a construction would prescribe a temporal engagement which is divorced from the needs of the primary production business conducted on the land in question that is unintended. 
172	The Appellant contends that its proffered construction is consistent with the intended effect of the 2019 amendments to the LTA, in strengthening the integrity of the exemption, since it maintains that Mr Douglas was normally engaged in the requisite substantially full‑time capacity even though his work on the Epping Land is excluded from counting towards this requirement.  In support of this argument, it points to what it says is the clear evidence that the work Mr Douglas performed on the Land “represented approximately 90% of the physical work on the Property necessary for the cattle farming”, being the business of primary production.
Conclusions and Findings
173	In my view, Mr Douglas was not normally engaged in a full‑time capacity in Delma’s business of primary production. 
174	The term “substantially full time capacity” was considered in Damon v Commissioner of Land Tax (Vic) (“Damon”).  Member Gibson considered that the phrase connotes “regular participation in the business for a considerable part of the time of the owner”.  In Annat, Kennedy J considered that Member Gibson’s description was sufficient and that no further precision was appropriate where much must depend on the particular context.  This approach was endorsed by Garde J in Lotus Oaks.  I will proceed by applying the same approach.  As observed by the Commissioner, the use of the word “considerable” in the statement of Member Gibson in Damon should not be taken to read down the meaning of the statutory words “substantially full‑time”, and ought to be taken as directing the inquiry to the relevant facts.
175	Mr Douglas gave evidence that he split his working time between the business conducted by Delma on the Land and the separate business which he conducted in his personal capacity at Epping Road.  This split, Mr Douglas said, comprised about four hours per day on the Land, and four hours per day at Epping Road.  I make no findings as to the Commissioner’s suggestion that Mr Douglas may have been exaggerating the number of hours he spent on each property per day, and am satisfied that he allocated his working time equally between the two businesses.  In any event, it seems that Mr Douglas did not spend the entirety of his working time on either property, and only allocated around 24 hours per week to Delma’s business of primary production carried on on the Land.
176	As observed by Garde J in Lotus Oaks, the 2019 amendments to the LTA intended to exclude “Collins Street farmers” from benefitting from the exemption in s 67 of the LTA.  A Collins Street farmer in this context would likely include a taxpayer who engages in full‑time employment as a professional, and operates a “hobby farm” that does not require more than a few hours’ of work per week.  The amendments did so by directing the inquiry in s 67B to a relevant person’s engagement in the business of primary production undertaken on the land in question, as opposed to their full‑time engagement in primary production more generally.  I accept that Mr Douglas may have been engaged in the business of primary production in a substantially full‑time capacity when considering both Delma’s business on the Land and the Epping Road business.  However, in my view, the engagement of Mr Douglas in the primary production business carried on on the Land cannot be said to have been in a substantially full‑time capacity.  
177	In my view, to find otherwise would be inconsistent with the intended effect of the “stringent” 2019 amendments, and may allow for Collins Street farmers to be included within the scope of the exemption in s 67 of the LTA.  Moreover, to adopt the Appellant’s proffered construction may cause difficulty in distinguishing between people like Mr Douglas, who work in multiple, primary production businesses, and people who work in a small primary production business while being employed elsewhere. 
178	A taxpayer that works across two or more separate lands as part of the same enterprise may be considered as being engaged in a “substantially full‑time capacity” to the extent that the engagement on each land is part of the same business of primary production.  However, Mr Douglas’ engagement in two separate primary production businesses is a distinctly different position. 
Conclusion and orders
179	For the preceding reasons, the Commissioner’s assessments are confirmed. 
180	The parties are to bring in orders to give effect to these reasons. 
181	I reserve the question of costs and will hear from the parties on the issue should that be necessary. 
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