Dubai’s Godolphin Stables loses High Court appeal over land tax break
The court has clarified the meaning of ‘dominant use’ when claiming exemptions for primary production land in a ruling against a billionaire’s horse racing stable.
The Godolphin horse racing stable owned by the ruler of Dubai is not exempt from paying land tax on its two properties in the Hunter Valley, the High Court has ruled.
The country’s top court last week unanimously struck down Godolphin’s appeal, holding that Revenue NSW was correct in denying the primary production exemption under the Land Tax Management Act 1956.
It said the stable, owned by billionaire Sheikh Mohammed bin Rashid Al Maktoum, failed to show the dominant use of its properties was for maintaining racehorses to sell them and their produce required by the section 10AA(3)(b) exemption.
“The commissioner contends that this exemption is not applicable to those parcels of land … the commissioner’s contention is correct,” Justices Michelle Gordon, James Edelman and Simon Steward said in their majority judgment.
“[The commissioner] did not accept that the dominant purpose of that use was for the sale of the horses, their progeny or their bodily produce,” they said.
Section 10AA(3)(b) exempts owners of rural land used for primary production from tax if they can show the land has the “dominant use of which is for the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce”.
Godolphin produced evidence showing its two properties, known as Kelvinside and Woodlands, were used in a business for two main purposes: the breeding and selling of thoroughbred horses, as well as racing them for prize money.
It relied on the first purpose to claim its exemption from land tax, arguing it earned most of its income from its sales and its breeding assets were valued higher than its racing assets.
Clarifying the meaning of ‘dominant‘, the court said the section’s wording meant ‘dominant’ qualifies the entire phrase, in a “use-for-a-purpose construction” that “combines an identified use of the land as well as a specified purpose for that use”.
Therefore, the court agreed that a significant use of its properties was animal maintenance to sell animal produce and progeny.
However, distinguishing between ‘significant’ and ‘dominant’ use, the court said Godolphin did not meet the higher threshold of dominant use that was required by the tax exemption.
“[Goldolphin] did not thereby demonstrate that this was the dominant use of the land – that is, so predominant a use as to impart an exempting character of this type to the land as a whole … the appellant had thus failed to prove its case,” the court said.
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