Primary producers in Melbourne will soon be faced with a greater likelihood of paying land tax on their farms due to the proposed reform, and narrowing, of the primary production land tax exemption as proposed in the State Taxation Acts Further Amendment Bill 2019.

In summary, the proposed amendments, which impact land in Greater Melbourne that is urban zoned from 31 December 2019 onwards (ie the 2020 land tax year), include:

The owner of the land must carry on a business of primary production and must use the land in question solely or primarily for that primary production business. This is a subtle change to the current provisions that only require the owner to carry on the business of the type carried on the land. This change has the potential to be significant for farmers that hold multiple parcels of farm land.
A relevantly connected person must be normally engaged substantially full time in that primary production business. Again, this is a subtle, but important change, as the current provisions only require the person to be so engaged in the business of the type carried on the land.
For individuals that own farm land, they, or their relative, must carry on the business of primary production themselves - in addition to being substantially engaged full time in that business.
For companies that own farm land, the ownership requirement for full time farmers has been reduced from 60% to 50%.
There will be no look through for fixed trusts (including implied or constructive trusts) or unit trusts – such trusts must satisfy the fixed trust/unit trust requirements.

As a result of these changes, it will be more difficult than ever for urban zoned land in Greater Melbourne to qualify for the primary production land tax exemption. Where it is expected that farm land in Greater Melbourne will be rezoned to an urban zoning in the coming years, then owners of such land should carefully examine their ownership, and primary production business, structures to ensure they will continue to retain the primary production land tax exemption once that rezoning occurs.

Existing owners of urban zoned farm land in Greater Melbourne, who currently receive the primary production land tax exemption, should review their current structure to see if the proposed changes will affect their ability to continue to qualify for the exemption.

If you have any further questions about land tax, please contact our specialist team at:

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E: pbroderick@sladen.com.au

Denise Tan
Senior Associate
T +61 3 9611 0160 | M +61 438 714 965
E: dtan@sladen.com.au

Laura Spencer
Senior Associate
T +61 3 9611 0110
lspencer@sladen.com.au