We have had a lot of inquiries from clients who have bought some rural land and want to;

  1. know more about  the advantages to being a primary producer
  2. know how  to qualify and benefit.

Most of these inquiries stem from information they have heard from others, they are not sure what the benefits are exactly nor what they need to do to qualify.

Step 1 is you need to be a bone fide business first.

You are a primary producer if you run a business of plant or animal cultivation, fishing or pearling, or tree farming or felling.

This ATO ruling is the best way to understand the indicators and read examples of what is required to run a primary production business;

      1. whether the activity has a significant commercial purpose or character; this indicator comprises many aspects of the other indicators (see paragraphs 28 to 38);
      2. whether the taxpayer has more than just an intention to engage in business (see paragraphs 39 to 46);
      3. whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity (see paragraphs 47 to 54);
      4. whether there is repetition and regularity of the activity (see paragraphs 55 to 62);
      5. whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business (see paragraphs 63 to 67);
      6. whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit (see paragraphs 68 to 76);
      7. the size, scale and permanency of the activity (see paragraphs 77 to 85); and
      8. whether the activity is better described as a hobby, a form of recreation or a sporting activity (see paragraphs 86 to 93).

You or someone else renting your land could be using the land for primary production, often people own the land themselves but set up a separate entity to run the business.

A separate business entity allows for better tax planning and asset protection.

Now if you have set up a business then the entity you are using would be expected to look like a business e.g. it is likely to have:

    • business registrations like a ABN,
    • a bank account,
    • a business name on most occasions,
    • a business-like manner in its approach and
    • an intention and probability to make money.


A good indicator of a genuine business is the research you undertake to determine your land will be viable for a business e.g.

  • If your growing crops did you have the soil tested for that crop,
  • OR if you are running cattle instead, an agronomist may review your land and determine the number of head of cattle it can sustain,
  • Then;
      1. Did you check the demand in the market for your product,
      2. What equipment and other preparation is needed,
      3. Will the amount you produce yield a profit and when?

If you are a primary production business then concessions may be accessible e.g.

  • Your land may be exempt from land tax if it is zoned rural and the dominant purpose of primary production. If primary production land (PPL) is not rural land, its use must also satisfy additional tests which determine whether the primary production undertaking is carried out for genuine commercial and profit purposes (the “commercial tests”).
  • Farmers can access cheaper registration for their trucks under the primary producer concession, but to be eligible their trucks are not to be used on a commercial basis.
  • You may access FMD (farm management deposits) to smooth your income and tax payments i.e.
      1. You can set aside pre-tax income in one financial year to draw from in future years when you need it, the income deposited in an FMD account is tax deductible in the year the deposit is made.
      2. The FMD becomes part of your taxable income in the year it is withdrawn (repaid).
      3. You can hold FMDs with multiple banks and credit unions. However, you, individually,  must not hold more than $800 000 in FMDs at any point in time.
      4. Each deposit or withdrawal must be a minimum of $1,000, unless you are withdrawing the full balance of the account.
      5. You can claim a deduction for FMDs made in a financial year, however, your total deduction cannot exceed your taxable primary production income for that year.
      6. You must hold the deposit for a minimum of 12 months to retain the tax benefits. However, exemptions may apply.


So the takeaway here is that a working farm may have some advantages that a holiday home does not, but running a business is not as relaxing as visiting your country retreat.

The grey line is the expenses required in the upkeep of a rural property and the desire for many people to want them to be a tax deduction.

This may be a flawed pursuit as a deduction eventually is supposed to be offset against some income, although many start businesses make a loss many people fail to consider the ATO’s non-commercial losses rules.


For most people it is the transition from hobby to business that used to starts these inquiries, now we see this more on the purchase.

Please call if you would like to discuss this further.