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Land Tax Exemption - Primary Production Land

Property Law: 03 February 2023

The State Revenue Office issued two new Land Tax Revenue Rulings on 22 December 2022 concerning the exemptions from land tax available for primary production land (LTA- 010) and primary production land within an urban zone (LTA- 011).

The Rulings have not assisted greatly in clarifying when land tax will or will not be payable. That is not the fault of the SRO but of the complicated regime established under Division 2 of Part 4 (sections 64 to 67D) of the Land Tax Act 2005 (which has not changed since 2019).


Whether or not land will be exempt depends first, upon its location - either within or outside "greater Melbourne.

If located outside greater Melbourne, land which is "used"primarilyfor "primary productionis exempt land (section 65).

Each of the above expressions in paratheses and italics has a definition which must be considered before a taxpayer can be certain about the exemption. The first of these is particularly problematic: "greater Melbourneis defined in section 64 by cross-reference to:

  1. the whole of those Municipalities which are listed in Part 1 of Schedule 2 to the Act; and
  2. those parts of the Municipalities listed in Part 2 of Schedule 2 which fall within the "urban growth boundary.

The Act directs you to the relevant municipal planning scheme in order to ascertain the whereabouts of the urban growth boundary. The SRO website contains a map but it lacks detail sufficient to determine the status of individual properties near the boundary.

The position is further complicated by changes made to the urban growth boundary. The SRO map referred to above and a map showing the boundary before it was amended on 18 June 2014 are available on the SRO website. Clause 15 of Schedule 3 to the Land Tax Act 2005 provides that land which was outside the growth boundary before the boundary changes will in some circumstances remain exempt despite now being within the boundary.

Within but not Urban

Where land is located wholly or partially within greater Melbourne, there are further definitions to be considered:

  • the exemption is separately assessed for each parcel.
  • the land will be exempt land if no part of the parcel is within an urban zone(section 66).

To determine what constitutes an urban zone, the Act directs you to those zones (under the relevant planning scheme ) which have been declared, by Order published in the Government Gazette, to be an urban zone. Urban zones change over time. The most recent list can be found in Gazette S 589 dated 28 December 2018.

Within and urban

Where a parcel of land is wholly or partly within greater Melbourne and is also wholly or partly within an urban zone and is used solely or primarily for the "businessof primary production, the owner of the land must also meet eligibility requirements in order for the land to be exempt land (section 67).

There are different eligibility requirements for the different types of owners - natural persons, proprietary companies, superannuation trustees, trustees of discretionary trusts etc. (sections 67A to 67D). The essence of these requirements is that there must be a direct connection between the landowner, the business of primary production and the subject land. There are no additional eligibility requirements for public companies.

Importantly the "businessrequirement means that agistment properties will not qualify for the exemption if the parcel is inside greater Melbourne and in an urban zone. Similarly, land used for hobby farms, recreation or sporting activities will not qualify.

Section 65 applies automatically. However, if the parcel is wholly or partially within greater Melbourne, an application for exemption must be made under sections 66 and 67.

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