Opinion Number. 754



Key Legislation


The Commissioner of Taxation

The Commissioner of Taxation has forwarded the following memorandum for advice:

Prickly Pear Selections are securable in Queensland under the following terms and conditions:

The area of a Prickly Pear Selection must not exceed 2560 acres. The term of lease is twenty-five years, divided into two periods, the respective lengths of which are declared by the notification opening the land for selection. During the first period the lease is subject to a peppercorn rent, and the prickly pear on the selection must during that period be eradicated in not less than equal proportions each half-year. The notified purchasing price must be paid in equal annual instalments during the second period. The land from which the prickly pear has been eradicated must be maintained clear till the end of the term of lease. The respective periods may be shortened at the option of the selector by accelerated eradication of the prickly pear or payment of the purchasing price of the land, but two years must elapse after the eradication has been completed before a deed of grant can be obtained. In the case of selections subject to the condition of personal residence a deed of grant cannot, under any circumstances, be obtained until five years of the term have elapsed.

In the case of very badly infested land the opening notification, instead of declaring a purchasing price to be paid by the selector, may offer a bonus to be paid to him in equal instalments as the eradication is effected, and two years after the eradication is completed, provided the land has been maintained clear, the selector will be entitled to receive a deed of grant without any payment except the deed fees.

No condition of improvement, other than the eradication of prickly pear, is attached to Prickly Pear Selections, but the selector is liable to his neighbours to join them in fencing their common boundaries. The selector is only required to reside if his selection is obtained under the Group System or if the condition of personal residence was imposed by the notification opening the land for selection, or if he secured priority by offering that the condition of personal residence should apply. The liability to reside ceases after five years.

The question has been raised as to whether a selector would be liable for land tax on the unimproved value of the land at the date of alienation, i.e. with the pear absent, if he improves land while leasing it and buys it at the end of his leased term.

It is arguable that for the making of the improvement a due equivalent was secured in the protected use of the land for the term of lease and the right to buy without competition at a price below what the land would bring in the open market.

The question then arises, did the owner 'acquire' the improvement {vide definition of 'improved value' in the Land Tax Assessment Act 1910-1914). He certainly acquired land which had been improved and which improvements the Crown indirectly paid for. The point upon which I am in doubt is as to whether the present owner who has received some compensation for the work he did as lessee can now claim that he should be credited with the value of the improvements in tax.

By section 3 of the Land Tax Assessment Act 1910-1914 'unimproved value' means the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements (if any) thereon or appertaining thereto and made or acquired by the owner or his predecessor in title had not been made.

I do not think that it will be disputed that the eradication of prickly pear is an improvement. For the purposes of the above definition it must be an improvement made or acquired by the owner or his predecessor in title.

This improvement was undoubtedly made by the owner, and I do not think that because it was made when the owner was lessee it is any the less an improvement for the purposes of the definition.

Neither do I think that the fact that the owner when lessee was paid for making the improvement or the fact that he obtained the land at a reduced price on account of making an improvement is material for the purpose of deciding whether the eradication is an improvement within the meaning of the definition.

For the purposes of the definition, the points to be taken into consideration are:

  1. the value of the land in the open market;
  2. the value of the improvements;
  3. whether the improvements are on or appertaining to the land and were made or acquired by the owner or his predecessor in title.

In my opinion, the present owner is entitled to deduct as an improvement the value represented by the eradication of the prickly pear notwithstanding that he has received some compensation for carrying out the improvement.

[Vol. 14, p. 487]