Issue 3 of our State Taxation Series considers primary production land (PPL) and the exemption available under section 65 of the Act.
More particularly, this issue looks at the definition of “primary production” under section 64 of the Act and the exemption contained in section 65 of the Act for land situated outside greater Melbourne.
Definition of primary production
Section 64 of the Act defines “primary production” as—
(a) cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state); or
(b) the maintenance of animals or poultry for the purpose of selling them or their natural increase or bodily produce; or
(c) the keeping of bees for the purpose of selling their honey; or
(d) commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear; or
(e) the cultivation or propagation for sale of plants seedlings mushrooms or orchids;
It is crucial to note that the mere existence of evidence indicating primary production activities taking place will not be sufficient to satisfy “primary production” for the purposes of section 64 of the Act.
In fact, it will be observed that each of the definitions do not only contain reference to the relevant PPL activity, but also incorporates the fundamental requirement that such PPL activity be conducted for the purpose of sale.
The inquiry of whether a person engages in any of the defined PPL activities takes place at midnight on 31 December of the relevant land tax year.
The Courts have held however, that it is too narrow to inquire only at midnight, with such assessment to be based during a period not overlong and over-short of the relevant date, with a reasonable period typically stated as constituting six months before and after the relevant date.
Exemption of primary production land outside greater Melbourne
Section 65 of the Act states:
(2) If a part of any land outside greater Melbourne is used primarily for primary production that part is exempt land even if an activity other than primary production is carried on on any other part of the land.
To attract the exemption in section 65, a cardinal requirement is that the land must be used primarily for primary production.
It is widely understood that this requirement of “primarily” is not satisfied if the relevant PPL activities undertaken are minimal, slight, spasmodic or token.
On the contrary, to satisfy the requirements in section 65, it must be shown that the PPL activities have some degree of substance and intensity to them.
The ascertainment of the purpose of the PPL activity carried out and whether that purpose is one that can be recognised as the primary use of the land is not linear.
When regard is made to the fact that a taxpayer bears the onus of proof (especially so in PPL matters), it is all the more imperative that information put forward to the State Revenue Office adequately and accurately represents your factual circumstance based on the applicable law.
Our State Taxation Team at Pointon Partners regularly provides advice on primary production matters and have also successfully assisted numerous clients with PPL disputes and reviews undertaken by the State Revenue Office.