Essential Guide: The categorisation of land for rating purposes

With the end of the financial year approaching, local councils are likely to receive an increase in the number of queries regarding the levying of rates and the categorisation of land under the Local Government Act 1993 (NSW) (LG Act) for rating purposes.

This essential guide briefly sets out some of the relevant principles and legislation to be applied in relation to the categorisation of rateable land, and the options open to landowners if they think their land has been incorrectly categorised.

How is land categorised?

There are 4 primary categories of rateable land: farmland, residential, mining and business.[1] These categories may, in turn, at a council’s discretion, be divided into sub-categories in accordance with section 529 of the LG Act. 

Generally speaking, land will be categorised by reference to its “dominant use”. For example, if the dominant use of land is for “residential accommodation”, it will be categorised as “residential”[2], and if the dominant use of land is for mining, it will be categorised as mining.[3]

In relation to the “farmland” category, in addition to farming being the dominant use of the land, the farming use must also have the following characteristics:

• it must have a significant and substantial commercial purpose or character, and

(b) it must be engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).

These additional requirements applying to the farmland category have the effect of excluding “hobby farms” from being categorised as farmland.

The “business” category is the “default” category. Section 518 of the LG Act states that land is to be categorised as business if it cannot be categorised as one of the other categories. Therefore, when categorising land, a council should in the first instance determine whether the land can be categorised as either farmland, residential or mining. If it can’t, only then should the land be categorised as business.

Determining the dominant use

The first task in categorising rateable land will be determining its “dominant use”. This is a question of fact and degree[4] to be determined based on the available evidence about the use of the relevant land.  While each categorisation decision will need to be determined on its own facts, the Court has developed the following general principles which are relevant when inquiring into the “dominant use” of a parcel of land:

1. the task of determining the dominant use of land for rating purposes must be approached differently to the characterisation of the use of land for the purpose of determining permissibility under the Environmental Planning and Assessment Act 1979 (EPA Act).  For rating purposes, the focus of the enquiry is on the actual physical activities being carried out on the land at the relevant time, rather than on the purpose served by those activities. For example, land which is in the process of being developed for the purpose of “residential accommodation”, will not be used for “residential accommodation” for the purpose of categorisation until such time as the land is actually used as residential accommodation. This is notwithstanding, that, for the purpose of the EPA Act, the use of the land during the construction phase may be characterised as being for residential accommodation.[5]  

• where there are multiple uses of land, the decision maker must consider each of the competing uses in the context of the rateable parcel as a whole to determine which use is “dominant”.[6]  

• it may be necessary to consider the use of land in the broader context of its use over multiple years. A hiatus in the use for a period may not, when considered in its broader context, mean that a prior use of land has ceased or been abandoned.[7]  

• where land is merely “held” for a particular purpose but is physically used for some other purpose the physical use will be given greater weight in determining the dominant use.[8]  

• the purpose of the acquisition of land does not dictate the “dominant use”.[9]  

Vacant land

Where land is vacant and cannot be categorised as either farmland, residential or mining, then that land is to be categorised:[10]

• if the land is zoned or otherwise designated for use under an environmental planning instrument—according to any purpose for which the land may be used after taking into account the nature of any improvements on the land and the nature of surrounding development, or

• if the land is not so zoned or designated—according to the predominant categorisation of surrounding land.

What options does an affected landowner have if they are dissatisfied with a categorisation decision?

If a person disagrees with the categorisation of their land, they may apply to the Council for either:[11]

• a review of a declaration that the person’s land is within a particular category, or

• to have the person’s rateable land declared to be within a particular category.

If the Council receives such an application, it must declare the land to be within the category nominated in the application unless it has reasonable grounds for believing that the land is not within that category.[12]

If the Council has not determined the application within 40 days, it is taken to have declared that the land is to be within its existing category.[13]

If a person, after making an application under section 525 of the LG Act, is dissatisfied with either the date on which a declaration of category is specified to take effect, or the declaration of a category made in response to that application, that person may appeal to the Land and Environment Court challenging the Council’s decision.[14] Any such appeal will need to be commenced within 30 days of the decision.

An appeal to the Land and Environment Court under s 526 of the LG Act is a “merits review” of the Council’s original decision. This means that the Court will stand in the shoes of the Council and re-make the decision based on the material before it, including any new evidence arising since the Council’s original decision.

Conclusion

In conclusion, the categorisation of land for rating purposes is an important function of Local Councils which can have a significant impact in local communities,

Councils should ensure they have a sound evidentiary basis to inform their categorisation decisions to mitigate the risk of categorisation decisions being successfully challenged in court. Affected landowners should inform themselves of their right to have categorisation decisions reviewed, and act promptly to ensure their appeal rights do not lapse if they are dissatisfied with a categorisation decision.

If you have any questions about the categorisation of land for rating purposes, please reach out to Alice Menyhart or Tomas Bush from our Planning, Environment & Local Government team.

---

[1] LG Act, s 514.

[2] LG Act, s 516(1)(a).

[3] LG Act, s 517.

[4] Peabody Pastoral Holdings Pty Ltd v Mid-Western Regional Council [2013] NSWLEC 86; (2013) 211 LGERA 337 [88].

[5]  Bayside Council v Karimbla Properties (No 3) Pty Ltd [2018] NSWCA 257 [115] – [123].  

[6] Mangoola Coal Operations Pty Ltd v Muswellbrook Shire Council [2021] NSWCA 46 [77].

[7] Mangoola Coal Operations Pty Ltd v Muswellbrook Shire Council [2021] NSWCA 46 [40] and [43].

[8] Peabody Pastoral Holdings Pty Ltd v Mid-Western Regional Council [2013] NSWLEC 86; (2013) 211 LGERA 337 [61].

[9] Peabody Pastoral Holdings Pty Ltd v Mid-Western Regional Council [2013] NSWLEC 86; (2013) 211 LGERA 337 [72].

[10] LG Act, s 519.

[11] LG Act, s 525(1).

[12] LG Act, s 525(3).

[13] LG Act, s 525(6).

[14] LG Act, s 526(2).

---

Find out more about our Planning, Environment & Local Government services