Primary production land - apply to disaggregate goods and water entitlements

Unless stated otherwise, all section numbers are references to the Duties Act 2000.

Disaggregation

Generally where separate items of dutiable property, such as land/s and goods, are transferred under one arrangement, duty is charged on the aggregated value of the land/s and goods under section 24 of the Act. However dutiable transactions of primary production land and goods held or used in connection with such land are not aggregated providing that the land continues to be used for primary production after the transactions. Disaggregation does not apply to fractional interests in land.

Primary production goods (section 10(1)(d))

Goods are dutiable if they are the subject of an arrangement that includes a dutiable transaction over an estate or interest in land, such as an estate in fee-simple. However goods are not dutiable if they are:

  • Goods that are stock-in-trade.
  • Materials held for use in manufacture.
  • Goods under manufacture.
  • Goods held or used in connection with primary production.
  • Livestock.

The following goods are not considered to be held or used in connection with primary production:

  • Goods used for domestic purposes by the farmer and their family.
  • Bedding or furniture used by persons engaged to assist in primary production.

The following items are normally considered to be fixtures rather than primary production goods:

  • Sheds, fences and gates.
  • Tanks and silos.
  • Pumps, fans and switchboards.
  • Milk vats and milking plant.
  • Systems permanently attached or resting in position such as for electricity, gas, hot water, heating, air conditioning, refrigeration, cooling, alarms, security, feeding, drinking, water fogging, auto wash or irrigation.

If it is claimed that any items of this type are not fixtures, a submission hould be provided explaining the basis of the claim. Provide the following information for each item:

  • The function of the item.
  • How the item is secured or connected to the land, for example, nuts and bolts, welding.
  • Whether the item is located within a building or structure.
  • How long the item has been secured or connected to the land.
  • Whether it is common practice to move the item.
  • The process required to remove and transport the item.
  • The degree of any damage that would be caused to the item, and any building or structure within which the item is located, if it was removed.
  • Whether the item has any significant economic life remaining.

More information on goods held or used in connection with land is available in Revenue Ruling DA-054.

Primary production land (sections 65, 66 and 67 of the Land Tax Act 2005)

Primary production land is:

  • Land outside greater Melbourne that is used primarily for primary production (section 65).
  • Land comprising one parcel that is:
    • wholly or partly within greater Melbourne but not within an urban zone, and
    • used primarily for primary production (section 66).
  • Land comprising one parcel that is:
    • wholly or partly within greater Melbourne and also within an urban zone,
    • used solely or primarily for the business of primary production, and
    • the owner of the land is a person specified in section 67(2) of the Land Tax Act 2005 (section 67).

‘Greater Melbourne’ has the same meaning as ‘metropolitan area’ as defined in section 201 of the Melbourne Metropolitan Board of Works Act 1958. ‘Urban zone’ means a zone under a planning scheme in force under the Planning and Environment Act 1987. If you are unsure whether property is within greater Melbourne or an urban zone, please contact the municipality in which the property is located.

Primary production

Primary production is defined as:

  • Cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state).
  • The maintenance of animals or poultry for the purpose of selling them or their natural increase or bodily produce.
  • The  keeping of bees for the purpose of selling their honey.
  • Commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear.
  • The cultivation or propagation for sale of plants, seedlings, mushrooms or orchids.

Evidence of market value

For transfers where the vendor and the purchaser are associated or related persons, evidence of market value of the property must be provided by a:

  • letter of appraisal from a licensed real estate agent, or
  • a valuation by a certified practising valuer who is a member of the Australian Property Institute or by a member of the Real Estate Institute of Victoria with sworn valuer accreditation.

Related person

Related persons include, but are not limited to:

  • Natural persons who are relatives.
  • Companies that are related bodies corporate.
  • A natural person and a company where the person is a majority shareholder or director of the company or of a related body corporate of the company.
  • A natural person and a trustee if the natural person is a beneficiary of the trust (not being a public unit trust scheme) of which the trustee is a trustee.
  • A company and a trustee if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme) of which the trustee is a trustee.

Where the transferor and transferee are related persons and the transaction is not eligible for the family farm exemption evidence of the market value of the transaction must be provided.

Water entitlements

More information about water entitlements is available on our website.

Non-dutiable water entitlements

Unbundled water entitlements (northern Victoria)

  • High reliability water share.
  • Low reliability water share.
  • Delivery share.
  • Water use licence.

Water entitlements not yet unbundled

  • Water right (irrigation) (southern Victoria).
  • Take and use licences on regulated streams (southern Victoria).
  • Take and use licences on unregulated streams (northern and southern Victoria).
  • Groundwater licences (northern and southern Victoria).

Dutiable water entitlements

  • Stock and domestic allowance (southern Victoria).

Apportionment of dutiable and non-dutiable components

Where the consideration for a dutiable transaction includes non-dutiable water entitlements, the consideration must be apportioned between the land and improvements, and the non-dutiable water. Depending on the date of contract, the following methods are available:

  • Self apportionment method.
  • Base value method.
  • Valuation method.

Self apportionment method

This method applies to:

  • All contracts entered into on or after 1 July 2007.
  • All contracts thathich settle after 1 July 2007 involving unbundled Victorian water.

Under this method the parties provide their own values for water and the SRO will generally accept these if the resulting value for the land and improvements reflects its market value taking into account the land’s accessibility to water and any existing irrigation infrastructure.

Base value method

This method applies to all contracts entered into before 1 July 2007 involving water rights (irrigation) or take and use licences on regulated streams.

To avoid the cost and inconvenience of obtaining a valuation, parties can adopt values that have been set for certain water entitlements in various water zones. 

A valuation will be required where:

  • the State Revenue Office believes that the apportionment made by the parties results in an inadequate value for the land and improvements, or
  • the parties are related and the transfer is not exempt under the family farm provisions of the Duties Act.

Valuation method

This method applies to:

  • Contracts entered into before 1 July 2007 for which the base value method cannot be used ie unregulated streams.
  • All contracts entered into both before and after 1 July 2007 where a party wishes to establish the value of the land and improvements, not including the water, by way of a formal valuation.
  • All contracts in which the State Revenue Office forms the view that the self apportionment method has resulted in an inadequate value for the land and improvements.
  • All transfers involving related parties to which the family farm exemption does not apply. The valuation must be from a certified practicing valuer who is a member of the Australian Property Institute or a member of the Real Estate Institute of Victoria with sworn valuer accreditation.

More information about the correct methodology for valuation are on our website.

If you require more information on water trading zones, please contact the relevant water authority.