Case D3

Judges: FE Dubout Ch

G Thompson M
N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 28 January 1972.

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G. Thompson (Member): I am satisfied on the evidence that this taxpayer during the years ended 30 June 1967 and 1968 bona fide carried on the business of primary production. His activities were normally characteristic of those to be expected of a mixed farmer and grazier. He actually put into practical operation the expert advice he received from an agricultural scientist and from other experienced and successful farmers and graziers. I gained the impression that the taxpayer held a genuine interest in farming.

2. In my opinion, this reference is not governed by the somewhat difficult case of
Southern Estates Pty. Limited v. F.C. of T. (1967) 117 C.L.R. 481 where it was held that expenditure incurred by the taxpayer in improving the land by preparing it for primary production was not an allowable deduction under sec. 75(1) of the Act. The Court held that by so preparing the land with the intention of entering into primary production, the taxpayer was not ``engaged in primary production'' within the meaning of sec. 75(1). That case is distinguishable from the present reference, in that the taxpayer did actually graze some beasts, and grew a crop on arable land, albeit unsuccessfully because of drought conditions. The fact that he did not make a profit cannot militate against him.

3. Many subsequently successful businesses have most humble beginnings, and many commence with one single transaction. It is apposite to recall that the Chief Justice, Sir Garfield Barwick, held in
Fairway Estates Pty. Ltd. v. F.C. of T. (1970) 70 ATC 4061 that in the case of an alleged moneylender there can be a course of business although there is nothing more than an intention to carry on the business and a single transaction in pursuance of that intention. His Honour was also a member of the Court which decided the case of Southern Estates Pty. Limited (supra). As I read the evidence, the present reference is an a fortiori case in favour of the taxpayer. Although it might be argued that the present taxpayer's efforts at primary production did not amount to a great deal during the years in question, his activities were such as to reflect a desire to succeed in the business of farming and grazing. He intended subsequently to expand, which he has now apparently done.

4. A case such as the present where the issue is whether a taxpayer is carrying on the business of primary production is pre-eminently a question of fact to be decided against the background of certain established principles; Cf. Case B59
70 ATC 277 , where some general principles relevant to the matter were discussed by members of this Board. Since I have formed a high opinion of the credibility and reliability of the taxpayer as discerned from his evidence, I have no hesitation in finding that he has satisfied the test of whether or not he was actually engaged in the business of primary production. In my opinion, this taxpayer must succeed.

5. I therefore join in allowing the taxpayer's objection and in the proposed order that his assessments be amended accordingly.