The Acting Commissioner of Land Tax has forwarded the following memorandum for advice:

The question has been raised that timber growing on land is not part of the land, and therefore its market value, if any, at the 30th June in each year, assuming the timber was then on the land, should not be included as part of the unimproved value of the land.

The argument has been advanced that a forest of timber with a marketable value is in the same class as a crop of wheat, in that both derive their main existence from the land. Also, that as a crop of wheat sold with land would be treated as an improvement and not part of the unimproved value of the land, so the value of the forest of timber should be excluded from the assessable unimproved value of the land.

The only difference between the forest of timber and the crop of wheat appears to be that the wheat was planted and cultivated by man, whereas the forest of timber was planted by Nature.

In the case of pastoral properties timber is sometimes specially planted by the owners so as to form shelters for stock. Here again the only difference between the virgin forest and the plantations is that the former was planted by Nature and the latter by man.

This question also involves the question whether herbage and grass on land is part of the land to be included in the unimproved value of the land.

There is timbered country, and there is plain country on which timber has never grown but which is well covered with natural grasses belonging to the same kingdom of Nature as the timber.

When land has been specially planted with grass by the owner, the work done is treated as an improvement and is not included in the assessable unimproved value of the land.

Apart from the definitions of 'unimproved value' and 'value of improvements' in the Land Tax Assessment Act 1910-1914 there would appear to be some little difficulty in treating growing timber as land.

When grown by man it is an improvement. When grown by Nature it is also apparently an improvement, but the question then arises, is it an improvement made or acquired by the owner or his predecessor in title within the meaning of the definition of 'unimproved value' and therefore deductible under the definition of 'value of improvements'?

I should be glad to know whether there are any authorities on the question whether timber is land, and if not, whether in your opinion, the law requires timber growing naturally on land to be treated as part of the land for purposes of the Land Tax Assessment Act, or whether, if an improvement, it would be an improvement 'acquired by the owner or his predecessor in title'.

Section 3 of the Land Tax Assessment Act contains definitions of 'improved value', 'unimproved value' and 'value of improvements'.

From these definitions it is clear that the unimproved value plus the value of improvements is the improved value (see Morrison v. Federal Commissioner of Land Tax 17 C.L.R. 498).

The value of the improvements is the added value which the improvements give to the land at the date of valuation irrespective of the cost of the improvements. It is plain that the value of the improvements is the present enhancement of the value of the land attributable to the operations of man upon the land the benefit of which still continues, including in some cases improvements not actually effected upon the land itself, but appertaining thereto.

Any operation of man on land which has the effect of enhancing its value comes within the definition of improvements (see Morrison's Case at p. 503). The unimproved value of land is, therefore, the improved value less the value of improvements made by man on the land.

In the case of land covered with natural timber, this timber, not being planted by man, is not an improvement within the meaning of the definitions contained in the Act, and the value of that timber constitutes part of the unimproved value of the land. Where, however, the timber has been planted by man and the value of the land is thus enhanced, the added value given to the land by the timber constitutes part or the whole (as the case may be) of the value of the improvements on the land.

Unless the contrary intention appears land includes everything growing or placed upon it, and the value of the land as it stands includes the value of these things. The unimproved value is the value so arrived at less the added value given to the land by things growing or placed thereon by the hand of man.

In my opinion, natural timber growing on land is not an improvement within the meaning of section 3 of the Land Tax Assessment Act 1910-1914, and the value of that timber (if any) constitutes part of the unimproved value of the land.

[Vol. 15, p. 234]