Taxpayers lose land tax exemption claim over rental residential orchard

In order for a rural property to be exempt from land tax, it must meet the relevant statutory definition of primary production in those years – which requires the property to have been used for the cultivation of plant or animal goods and must be used mostly for the purpose of profit from this cultivation.

Cultivation of the land

Sam and Francis purchased the 2.12-hectare NSW property in about 1998.

Following its purchase, Violi’s father cultivated crops for sale up until his death in 2015.

In late 2008, Violi purchased over 100 olive trees, which cost him $1,339.12, 100 Tahitian limes and five lemon trees for less than $1,800 in early 2013, and purchased 50 grafted olive trees for $1,625.00 in early 2015.

“He also tended the Rossmore property. Given the nature of fruit and growing cycles, the intensity of his attendance there would vary through the year,” the tribunal said.

“Mr Violi broadly states that he spent significant time irrigating, pruning, and maintaining the trees, and that harvesting periods and work on the property took up almost all his time.”

The tribunal, however, found that Violi became an engineer in 2006 and worked in this role two to three days a week.

“I do not accept that Mr Violi’s time was entirely taken up with tending or working on the property. In each of the Relevant Land Tax Years, Mr Violi was engaged as an employee or contractor in his professional field,” the tribunal said.

The rental

The tribunal found that Sam and Francis rented out the house on the property from at least 2017.

“His income tax returns…show that the gross rent received was substantially higher, between $13,840 and $16,802 for the financial years ended 30 June 2020–2023.”

Further, the tribunal also found that the gross rent received in the 2024 financial year was at least $7,971.

“The income tax returns showed significant maintenance costs for the rental activity, whereas the primary production expenses were very minor,” the tribunal said.

“I consider that the time, labour and resources applied to the rental activity were more significant than the primary production activity.”

The tribunal found that the rental tenancy activity generated significantly more income and incurred significantly more expenditure than the primary production activity at the Rossmore property.

“The fact that substantial sums were also spent on the tenancy suggests that renting out the property was a far more intensive venture than Mr Violi’s evidence indicates,” the tribunal said.

Upon consideration of all evidence, the tribunal determined that the prevailing use of the land in the Relevant Land Tax Years was the residential tenancy activity.

“Though I accept that an activity of primary production was undertaken at the Applicant’s property at Rossmore, the Applicants have not demonstrated this was the dominant or prevailing use of that land.”

Thus, the court dismissed the application and confirmed the land tax assessments for the 2020, 2021, 2022, 2023 and 2024 land tax years.

The case citation: Violi v Chief Commissioner of State Revenue [2026] NSWCATAD 320 (23 October 2026)