Victorian Court of Appeal denies land tax exemption appeal
Victorian Court of Appeal denies land tax exemption appeal
Victorian Court of Appeal confirmed the Commissioner of State Revenue’s decision to deny a Primary Production Land Tax Exemption (PPE) in the case Australian Investment & Development Pty Ltd v Commissioner of State Revenue [2025] VSCA 47.
On 12 February 2016, the Victorian Commissioner of State Revenue assessed land in Diggers Rest, Victoria for the 2014, 2015, and 2016 land tax years. The taxpayer objected to these assessments but was unsuccessful. In 2023, they appealed to the Victorian Supreme Court (Trial Division), which ruled in favour of the Commissioner.
Following the 2023 ruling, the taxpayer applied for leave to appeal. However, in March 2025, the Victorian Court of Appeal denied their application. This decision, unless appealed to the High Court, concludes the matter.
How and where does the PPE practically apply?
The PPE is contained within Part 4, Division 2 of the Land Tax Act 2005 (Vic), which defines primary production as including:
- 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.
The PPE’s eligibility requirements differ under the Land Tax Act, based on where the land is located. The primary production land will either be:
- outside Greater Melbourne
- in Greater Melbourne but not in an urban zone
- in an urban zone in Greater Melbourne.
Generally, it is easier to qualify for the PPE if the land is outside Greater Melbourne. If the land is within Greater Melbourne, especially in an urban zone, the standards and scrutiny by the Commissioner are much higher. Qualifying for the PPE is relatively straightforward for rural land used primarily for primary production, but it becomes more complicated and demands higher standards when dealing with land situated within the urban zones of Greater Melbourne.
Why did the Court deny the appeal?
The Court of Appeal considered, among other factors, whether:
- the land was used primarily for the business of primary production
- the Taxpayer’s main undertaking was primary production
- the Taxpayer’s sole shareholder normally engaged in substantially full-time capacity in the business of primary production
- that the land was situated in an urban zone in Greater Melbourne.
When reviewing all the evidence, the Court determined that the Taxpayer failed to prove that primary production was their main business activity during the relevant tax years. This finding alone was sufficient to reject the Taxpayer’s claim for land tax exemption under the PPE. The Court highlighted the stringent requirements for land within an urban zone in Greater Melbourne and agreed with the previous judgment that the Taxpayer did not demonstrate that the land was primarily used for primary production. Similarly, the Court found no compelling evidence that the Taxpayer was engaged in primary production on a nearly full-time basis.
How does this ruling affect you?
Land tax is a significant and increasing cost to landholders in Victoria, with the Victorian Government having lowered thresholds and raised rates as a budget repair measure. As the tax is based on unimproved value, the impact of land tax can be particularly significant for large unimproved parcels.
Importantly, with the extension of the Vacant Residential Land Tax (VRLT) to the entire State in 2025, exemption for primary production land will also mean exemption from VRLT.
How can BDO help?
BDO’s experienced indirect tax specialists can provide tailored support to help primary production landowners navigate complex state-based regulations, ensure compliance, and minimise costs. Our state tax specialists provide expert support in land tax compliance, including corresponding with state-based revenue authorities, ruling applications, procedural guidance and refund opportunities.
Victorian landowners can gain substantial benefits by identifying available emptions from general land tax, such as through the PPE. These exemptions also ensure the land is not subject to VRLT, maximising potential savings for Victorian taxpayers.