Kiddle v Deputy Federal Commissioner of Land Tax [1920] HCA 17; (1920) 27 CLR 316 (22 March 1920)

Lewis Kiddle and Another Appellants; and The Deputy Federal Commissioner of Land Tax Respondent.

The appellants are the owners of (inter alia) certain lands comprised in Carabost Station holding, consisting of 20,057 acres of freehold, conditionally purchased and additional conditionally purchased lands, of which the unimproved capital value has been assessed for the purpose of land tax for the years 1914-1918 at the sum of £24,068, being at the rate of 24s. per acre. An appeal was instituted against each year's assessment, and when the appeals came on for hearing it was agreed between the parties that all the appeals should be heard together, and that I should fix one sum as the unimproved value of the lands in question for the five years covered by the appeals, having regard to the fluctuations in the prices of labour and material between 1914 and 1918. Of the total area of 20,057 acres, a portion consisting of 15,366 acres is improved to practically its full capacity, and the balance (4,691 acres) is country which, having once been partially improved by ringing the timber, has been allowed to go back, owing to failure to continue the process of destroying the timber, until it has reached the condition in which it stands at present. In that condition it is useless for any practical purpose, and the cost of improving it by destroying the timber would, in my opinion, be at least equal to the value of the land when so improved. It was contended on the part of the respondent that this "reverted" area should be disregarded in arriving at the value, whether improved or unimproved, of the rest of the subject area, and that when the unimproved value per acre of the improved portion of the estate had been ascertained, the same value per acre should be attributed to the reverted area. In my opinion this contention cannot be maintained. The assessments against which the appeals are brought are assessments of the unimproved value of a parcel of 20,057 acres at £24,068, and the question to be decided is what is the unimproved value of this parcel as a whole, to be ascertained according to the method prescribed by the Act and recognized by the decisions as proper to be applied in determining the unimproved value of land. Moreover, the contention of the Deputy Commissioner involves the proposition that the "unimproved value" of a parcel of land, as defined by the Act, may be greater than its "improved value," as so defined; but I think it is clear from the provisions of the Act that it was never intended that land tax should be payable in respect of a "value" greater than the total amount which could be obtained by a sale of the land in question, in the condition in which it is found at the date of assessment. Moreover, I think it is unsound to regard a parcel of land, the unimproved value of which has to be ascertained, as consisting of a number of parcels, the unimproved value of each of which may be ascertained separately. It is, of course, permissible in ascertaining the improved value of land to consider whether the land would sell for more in its existing condition, if subdivided, than if sold in one parcel; but in the present case it is clear that the subdivision of the subject area into two portions, as suggested by the respondent, would not result in any increase in the price which might be expected to be realized on a sale of the property as a whole, it being clear that the reverted area could not be sold by itself for more than a nominal amount, if at all. I propose therefore to deal with these appeals by finding the "improved value," as defined by the Act, of the whole area, and deducting from that amount the sum which represents the "value of improvements," as defined by the Act. The result gives the "unimproved value" for the purposes of the Act. I adopt this method as the only one available in this case; for, though evidence has been given of certain sales of land in an unimproved condition in the neighbourhood, I am not satisfied that any of such sales affords a standard of value of unimproved land which it would be proper to apply to the area now under consideration.

The expert witnesses called for the respondent arrived at the unimproved value of the land in question by analysing the result of the sale of an adjoining property known as "Humula," the assumption being that the unimproved value of the land now under consideration was the same as that comprised in Humula. I think the direct method of dealing with the subject land is preferable as being less liable to error. At the request of both parties I inspected the subject land and adjoining country after hearing the evidence, and in arriving at the value of the timber improvements I have applied to the evidence given before me the results of my observation of both improved and unimproved country on this visit.

The Improved Value.—In my opinion the safest method to adopt in the valuation of a pastoral property is to base the value on the carrying capacity (see Fisher v. Deputy Federal Commissioner (N.S.W.)[1]). Both parties accept £3 15s. as the value in this locality of country that will carry one sheep. In my opinion, the average carrying capacity expressed in terms of sheep may be taken as 12,800. The improved value on this basis is £48,000.

Value of Improvements.—The improvements may be divided into four classes: (a) fencing, (b) other structural improvements, (c) improvements due to timber treatment, and (d) improvement caused by making ready for the plough land which had undergone timber treatment and by planting willows. With regard to each of these items, it is necessary to find the added value which such improvement gave to the land at the date of valuation irrespective of the cost of the improvement, but not exceeding the amount that should reasonably be involved in bringing the unimproved value of the land to its improved value as at the date of assessment. In the present case the improvements which have to be valued are not, in my opinion, excessive; or, in other words, I think all such improvements were reasonably necessary to develop the property to its full carrying capacity, and to enable it to be used to full advantage and so to acquire its present improved value. The question to be solved in ascertaining the value of improvements for the purpose of arriving at the unimproved value is what part of the improved value of the land is attributable to the improvements to be valued. Presumably, a purchaser of the land, if he considered this question at all, would determine that the amount to be attributed to value of improvements would be equal to the amount which he gained or saved by reason of the improvements having been made, he being thereby relieved from the necessity of making them. This amount would be found by ascertaining the amount which it would cost to make the improvements in question at the relevant date, including a proper allowance for loss of interest on all outlay during the period which must elapse before such outlay became fully productive, and by deducting from the sum so ascertained a proper allowance for depreciation or partial exhaustion of the improvements.

[His Honor then dealt with the value of the improvements in detail and found that it amounted to £27,982. He also found that the proper amount to be allowed for loss of interest was £3,336. Deducting these two amounts from £48,000, he found that the unimproved value of the property was £16,682, and he ordered the assessments to be amended accordingly.]

Appeals allowed. Assessments to be amended accordingly. Respondent to pay costs of appeals.

Solicitors for the appellants, Metcalfe & Dangar, for J. Beacham Kiddle, Melbourne.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

High Court of Australia

Kiddle v Deputy Federal Commissioner of Land Tax [1920] HCA 17; (1920) 27 CLR 316 (22 March 1920)

HIGH COURT OF AUSTRALIA