Case M50

MB Hogan Ch

P Gerber M
GW Beck M

No. 3 Board of Review

Judgment date: 30 July 1980.

M.B. Hogan (Chairman)

I have read the decisions of my two colleagues and agree in the conclusion they have reached that this taxpayer was not in the relevant years of income engaged in carrying on a business of primary production.

2. The only activity in the two years under consideration was confined to a small part of a block of land which ultimately became the house block. So far as any form of primary production was concerned, the activity was confined to the planting of a

ATC 350

limited range of fruit-trees and a few vines which would be no more than sufficient for ordinary domestic use. Because of the lack of water on the block, the taxpayer devised and spent some funds on the installation of an ingenious water collection and irrigation system to meet the needs of the planted trees and vines - all of this being done on week-ends, public holidays and annual leave. The taxpayer did not during the years under review reside on the property. In the years under review, there was no evidence of any production from the limited plantings undertaken. Subsequent to the years under review, the taxpayer, having sold a half-interest in the house block of 1.965 hectares to his wife, erected with the funds so generated, a house on the block, proximate to the trees and vines planted and to a substantial shed which he had completed in December 1976. In his return, the taxpayer described the shed for depreciation purposes as a ``Tractor Shed'' but the evidence is that the taxpayer did not have a tractor on the property in the relevant years.

3. It is clear from this evidence that the tree and vine plantings in the years of income were not in any way comparable with the plantings described by Walsh J. in
Thomas v. F.C. of T., 72 ATC 4094 and there was no evidence of any reasonable commercial expectation of a yield from the trees (by way of financial returns) of the dimensions which caused Walsh J. in that case to accept that the taxpayer was carrying on a business of primary production. True, the taxpayer advanced with his objection projections of expected yields from developments yet to be undertaken which might be described as ``of a significant amount'' (p. 4100 Thomas' case supra) but these had no relation to the operations that had been established in the years of income such as was the position in Thomas' case.

4. Further, though the operations being on a very small (almost experimental) scale might be thought to compare with the operations undertaken by the taxpayer in
Ferguson v. F.C. of T. 79 ATC 4261, it was not ``a preliminary business'' (p. 4266) carried on in such a way as to establish a basic operation ``so as to enable him to engage in the final business that he intended ultimately to undertake''. On the evidence of the projections embraced in his notices of objection, the taxpayer intended to carry on business as a grower of small crops ``... tomatoes, beans, zucchinis, that sort of thing...'' as he described it in his evidence at the hearing. It was proposed that the water for these crops would be provided by pumping from the river - a remote prospect as will be seen from the detail in Dr. Beck's decision - not by some extension of the ingenious irrigation system devised for the trees and vines. That irrigation system cannot be seen as a type of pilot system for a much larger system intended ultimately to be installed and used in the course of ``the final business'' to be carried on.

5. Accordingly, I would confirm the Commissioner's assessments.

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