Posted on December 17, 2014 by Sue Puckeridge

What constitutes a ‘centre of activity’ for business rating purposes?

The correct categorisation of land for council rating purposes is critical to the financial operation of local government and has the potential to have a significant financial impact on property owners. A recent decision of the Land and Environment Court (‘the Court‘) demonstrates that the Court is willing to adopt a wide rather than narrow interpretation of what constitutes a ‘centre of activity’ for the purposes of categorising land within the business category. The case is of interest to both councils and ratepayers subject to a business rating.

A council must categorise land for rating purposes under section 514 of the Local Government Act 1993 (‘LGA‘). Land is categorised as business if it does not fall into the category of residential, farm and or mining land. Section 529(2)(d) permits a council to determine a business sub-category according to a ‘centre of activity’.

In Barrak Corporation Pty Ltd v Parramatta City Council [2014] NSWLEC 177  the Court was asked to consider whether a Commissioner had correctly determined whether land was within a ‘centre of activity’. The Court dismissed the appeal and upheld the Commissioner’s reasoning on all grounds of appeal.

Facts

The appellant owned land in Harris Park from which it operated a restaurant (‘Land‘). The Land had been categorised as business with a ‘Business CBD’ sub-category since 1995.

The appellant made an application to Parramatta City Council (‘the Council‘) to recategorise the Land to Business General.  The Council refused the application on the basis that the Land was well inside the current Business CBD area and the dominant use of the Land was for the purpose of business, notwithstanding changes to the zoning of the Land over the years.

Commissioner Pearson, when the matter was first heard made several findings amongst which included the following:

• in assessing an application to vary the rating category of land under s525(3) of the LGA, the test is whether there are reasonable grounds to determine that the Land does not fall within the category nominated by the applicant,
• while the zoning of land is a relevant consideration in determining the categorisation of land for rating purpose, the rating subcategories depend upon actual use and spatial criterion and do not necessarily need to reflect the zoning.
• having regard to the particular circumstances of the zoning in Parramatta, the particular provisions reflect an area which ‘has a central core, a surrounding commercial and business area, and an area at the fringe in which the property is located’ (Barrak Corporation Pty Ltd v Parramatta Council [2014] NSWLEC 1077 at [86]).

On appeal, Biscoe J found no legal error in the Commissioner’s reasoning, accepting that a ‘centre of activity’ could be homogeneous or more diverse encompassing a variety of land uses and the reference to a ‘concentration’ of activities in the note to s529(2)(d) should not be read too narrowly – ‘depending on the facts, a centre of activity for a category or a sub-category may comprise areas of varying intensity which radiate out and which may answer the descriptions core, middle and fringe. In a sense, the core represents a paradigm and the characteristics deteriorate as one moves away from the core. Determination of a centre of actvity in this context requires an evaluation of the facts…’ (at [95]).

Implications

Whether land is within a centre of activity needs to be assessed on the facts but the Court has demonstrated that it will adopt a broad rather than narrow intrepretation of the term ‘centre of activity’.

The decision is also an indication that the concept of ‘centre of activity’, as contained in the Department of Local Government (‘the Department‘) policy document ‘Council Rating and Revenue Raising Manual‘ (2007) needs to be treated with caution and may be too narrow. This document provides that it is the Department’s view that the words ‘centre of activity’ refer to ‘an area of land (usually comprising more than one parcel of rateable land) at which a complex of ‘business’ activities are carried on in a fairly concentrated manner with a high degree of congruity and homogeneity, having regard to the geographic cohesion of the land, the use to which it is put, and the comparative independence and self-relatedness of the activity or activities carried on in the area (eg a business centre or industrial estate).’

Commissioner Pearson refused to read down s529(2)(d) by reference to this policy, although the decision of the Court in Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2009] NSWLEC 109 took a different approach. Nothing in Biscoe J’s judgment would suggest disagreement with Commissioner Pearson’s position.