Land tax is imposed annually on the total land value of all taxable land owned in NSW. However, land that is used for primary production is exempt.
Qualifying for the primary production exemption is not a straight forward process. The Office of State Revenue (OSR) has implemented increasingly strict guidelines surrounding what land qualifies.
Under the Land Tax Management Act 1956 (NSW), land that is zoned rural and is used for primary production qualifies for the exemption. However, land that is not zoned rural must pass a stricter test. Not only must non-rural land be used for primaryproduction, it must also:
- have a significant and substantial commercial purpose or character; and
- be engaged in for the purpose of profit on a continuous or repetitive basis.
Determining whether an operation has a “significant and substantial commercial purpose or character” may take into account:-
- The size of the herd;
- productivity of the operation;
- attempts made to improve the land/operation; and
- time spent conducting the operation.
The requirement that the primary production “be engaged in for the purpose of profit” does not mean the operation must in fact be profitable, however, it has been suggested that a lack of profit can be used as evidence of a lack of a profitable purpose.
The starting point in demonstrating that land qualifies for the primary production exemption is to keep thorough records for the land. This may include detailed trading records, buy/sell records etc. Historical records detailing past use of the land are also useful in demonstrating that the primary production use has been engaged in “on a continuous or repetitive basis.”
At Everingham Solomons we have the expertise to assist land owners with in dealing with land tax issues as well as with any other dealings with the OSR.
If you have any questions regarding the primary production land tax exemption, please do not hesitate to contact the experienced team at Everingham Solomons because Helping You is Our Business.
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