The national pastime of withholding land from use and enforcing scarcity has been boosted in the NSW Supreme Court when developer Metricon won a land tax case against the Chief Commissioner of State Revenue.

Metricon successfully argued grazing a few cows to keep the grass down on land it had bought for residential development made it a primary producer and exempt from land tax.

Metricon did not buy Terranora to raise cattle – it is a building firm, not a grazier. Their intent is crystal clear.

This ugly precedent will embolden englobo landbanking Australia-wide and needs to be appealed to protect the integrity of State Land Tax and government revenues.

Matthew Cranston at the AFR explains:

Metricon bought a farm in Terranora, NSW, in 2008 for $60 million, spent $2.2 million on consultants planning its “Altitude Aspire” residential development and engaged in some residential letting on the property.
The company was charged land tax on the property for five years which Metricon  objected to on the grounds that the property’s dominant use was agriculture. Metricon said it should have received a land-tax exemption over that time.
Justice White of the NSW Supreme Court set aside most of the land-tax assessments after weighing up the activities conducted on the property. He held that, “on balance”, the primary production use was the most dominant.

Land tax is assessed on the market value of land holdings. This is the only meaningful criteria for measuring land tax liabilities and the distortions due to blanket exemptions like primary production and principal residence twist land use and behaviour.

State revenue offices value land with the biennial market valuations performed to determine council rates.

How can I claim everyone loses when Metricon just saved itself some tax – surely they won something?

Developers lose when they are deflected from putting land to use by building on it. Metricon invested $60 million in the Terranora land eight years ago. Their capital deployed to construction would have turned ten or a dozen times by now, generating profits, economic activity and buildings for us all to use. Metricon shareholders should be angry at such a poor use of the balance sheet.

Land tax is a small but insistent deterrent to long-term landbanking. Restoring it’s integrity by removing the myriad exemptions will drive land into use – and the cattle onto fresh pasture.