Case R1

Judges: MB Hogan Ch
P Gerber M

GW Beck M

Court:
No. 3 Board of Review

Judgment date: 22 December 1983.

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Dr. G.W. Beck (Member)

This taxpayer, an A-grade diesel mechanic and fitter, was employed by a government agency in a provincial centre in October 1979 when he found an appealing house on 40 acres for sale in what had once been a small rural town, but which was now almost completely depopulated. He and his wife owned a house in a provincial city some hundreds of kilometres distant although at that time they were living in a house provided by the employer at the place of work. They paid a deposit on the house-on-forty-acres and immediately took up residence there, paying rent to the vendor until they were able to pay the balance of the purchase price in March 1980 following the sale of the house they owned in the distant provincial city. The matter in dispute in this reference is whether the taxpayer and his wife carried on a primary production business on the land acquired during the tax year ended 30 June 1980.

2. The taxpayer said that late in 1979 he was introduced to a man from the Department of Primary Industries who suggested that they ``put leucaena in, and so we set about it and got hold of some seed and we put in a dozen trees, just hand cultivating, and tried to see if they were going to be good''. It subsequently emerged that the dozen trees were not planted until August 1980 although, he said, ``We started working the ground in about January/February of 1980''.

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ATC 106

It has to be observed that one could dig over enough ground to plant twelve leucaena taking the greatest care in an hour and, if it was necessary to fence them, that would hardly take one afternoon. He did also carry out some killing of wattle with hormone and ``upgraded a bit of fencing'' prior to 30 June 1980. He also bought a testing kit and tested pH of the soil where he hoped to grow leucaena.

3. The avowed intention was to produce leucaena seed which the taxpayer expected to have a ready sale. In 1980-81 tax year he planted half a hectare with leucaena seed and in 1981-82 year another half hectare. At the date of the hearing he had, therefore, planted one hectare and he told the Board there should have been 2,016 trees in that area. Due to his inability to give the trees necessary attention (because of his other work commitments) and because of drought, there were only 224 established trees at that time. I present these facts concerning the years subsequent to 1980 because, although I consider the taxpayer optimistic in his expectations as to the final outcome of his leucaena venture, I have no doubt that he was serious in his intention of commencing a primary production business from late 1979.

4. As Lord Buckmaster said in
J. & R. O'Kane & Co. v. I.R. Commrs. (1919-1922) 12 T.C. 303 at p. 347 ``the intention of a man cannot be considered as determining what it is that his acts amount to'' and, so far as this decision is concerned, I cannot go beyond a consideration of what the taxpayer did in the year ended 30 June 1980. I have no hesitation in concluding that what was done on the property in that year falls a long way short of carrying on business. The reasons are the same as those set out in Case Q64,
83 ATC 333 .

5. I confirm the assessment.

Claim disallowed