Tax Alert - Vic Land Tax exemption for leasing land in primary production business

Lowe Lippmann Chartered Accountants

Vic Land Tax exemption for leasing land in primary production business


The Victorian Supreme Court has allowed a taxpayer’s successful appeal from a decision of the VCAT and found that it was entitled to an exemption from land tax under section 67 of the Land Tax Act 2005 (Vic) on the basis that the land was used by the taxpayer primarily production land.

 

Section 67 provides an exemption for land located wholly or partly in greater Melbourne, that is wholly or partly in an urban zone, where the Commissioner determines that land held by the trustee of a discretionary trust is used solely or primarily for a business of primary production.

 

The taxpayer, the corporate trustee of a discretionary family trust, was assessed in the 2018 and 2019 land tax years for land tax on the land, which it leased to a Partnership made up of some of the family members.

 

In determining the principal business of the taxpayer, at the Tribunal level (leading to the Supreme Court decision) there was a comparison of the gross income, labour employed, and capital employed in each respective business.

 

The Tribunal found that Mr. M (the key individual involved in the activities on the land, a director of the corporate trustee and one of the partners in the Partnership) undertook the majority of the taxpayer’s cattle farming activity himself and was ordinarily engaged in the business of breeding cattle for sale in a substantially full-time capacity.

 

The Supreme Court considered that the rental payments made to the taxpayer were simply the mechanism for allocating revenue from the sale of cattle to the taxpayer (including that the taxpayer was also engaged in the relevant activities).

 

As such, this resulted in the Supreme Court finding that the taxpayer was “carrying on one integrated primary production business” and the rent received by the taxpayer from the Partnership arose from the taxpayer’s primary production business.  The fact that the taxpayer and the Partnership held separate identities did not take away from this conclusion.

 

The Supreme Court also noted that the lease arrangement “was merely instrument designed to allocate revenue from primary production cattle business on land to the taxpayer”.


Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation


Tax Alert - Further guidance on new proposed changes to Division 296 from 1 July 2026

October 19, 2025
Further guidance on proposed changes to Division 296 from 1 July 2026 Earlier this week, we released a Tax Alert ( click here ) after the Government announced some significant changes to the proposed superannuation rules to increase the concessional tax rate from 15% to an effective 30% rate on earnings on total superannuation balances ( TSB ) over $3 million – known as Division 296. These proposed superannuation rules were set to commence on 1 July 2025, but the Government has now announced significant changes that will delay the start date until 1 July 2026 and apply to the 2026-27 financial year onwards.

Tax Alert - Chalmers backs down on Superannuation reform

October 13, 2025
In response to continuing criticism and significant industry feedback, Treasurer Jim Chalmers has announced substantial revisions to the proposed Division 296 tax. The government has decided not to apply the tax to unrealised capital gains on members superannuation balances above $3 million. The removal of the proposed unrealised capital gains tax is undoubtedly a welcome change. Division 296 was initially set to take effect from 1 July 2025. The revised proposal, effective from 1 July 2026, still imposes an additional tax but now only on realised investment earnings on the portion of a super balance above $3 million at a 30 percent tax rate To recover some of the lost tax revenue, the Treasurer announced a new 40 percent tax rate on earnings for balances exceeding $10 million. It is also anticipated that both tax thresholds will be indexed in line with the Transfer Balance Cap. We will provide more details and guidance on the new proposal as they become available.

Practice Update – October 2025

October 3, 2025
ATO interest charges are no longer tax deductible – What you can do As we explained in our Practice Update for September, general interest charge ( GIC ) and shortfall interest charge ( SIC ) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: GST; PAYG instalments; PAYG withholding for employees; and FBT. However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.
More Posts