High Court dismisses Dubai billionaire's horse stud tax loophole

The NSW Hunter thoroughbred horseracing stable, owned by Dubai's billionaire ruler Mohammed bin Rashid Al Maktoum, claimed two properties near Scone and Denman were exempt from rural land tax under the state government's laws because their "dominant use" was for primary production.

However, the courts ruled the dominant use of the land was for Godolphin's horseracing activities, not primary production, and therefore could not claim the tax exemption.

Godolphin was challenging five years of land tax assessment by NSW Revenue - worth $1.438 million - claiming the two properties were "land used for primary production, the maintenance of animals or for the purpose of selling them or their bodily produce".

Although the NSW Chief Commissioner of State Revenue accepted parts of the land were being used to maintain horses, he did not accept that the dominant purpose of that use was for the sale of the horses.

Godolphin contested the decision in the Supreme Court, arguing it ran an "integrated" thoroughbred breeding and racing operation, and it was unnecessary to decide whether use for any one such purpose was the dominant use.

The Supreme Court ruled in the stud's favour, judging both parcels of land were used for primary production and exempt from land tax.

However, the commissioner succeeded in appealing against the decision, with a majority of the NSW Court of Appeal deciding that the correct test required the word "dominant" to qualify the "use-for-a-purpose".

Godolphin appealed the decision in the High Court, who dismissed the claim and order the horse stud to cover the case's legal fees.

It its decision, the High Court upheld the Court of Appeals ruling and said the "use-for-a-purpose" construction argued by Revenue NSW was correct.

"Further, that a significant use of the land was for breeding horses, [Godolphin], fell short of demonstrating that the 'dominant use' of the land was for the purpose of selling them or their natural increase or bodily produce," the court stated.

"It could not be said that the land was being used 'primarily' for farming."

The court noted at Kelvinside, a property of about 907 hectares, had 20 stallion boxes and a stallion covering area, which would hold about a dozen stallions during breeding seasons.

"These stallion-related activities occupied only about 10 per cent of one of the four parcels comprised in Kelvinside," the court stated.

Court documents reveal the average revenue from the sale of covering services and sale of horses was about $34.9 million, while the average from racing prize money was about $19.6 million, which were ruled to be two distinct business operations.