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Qualification Provisions for the Primary Production Concession

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Background of primary production concession

    

VEA ?

Concessional primary production trusts

Section 52ZZZF VEA

VEA ? (go back)

The provisions for the Primary Production Concession relate specifically to controlled primary production trusts. Primary producers who meet certain income and asset requirements will be allowed to retain a limited appointorship role in the primary production trust, and not have the primary production assets or income attributed to them only if:

  • the appointor (and their spouse) do not have any other position in the trust, including income or capital beneficiary, and
  • they have very limited powers as appointor.

This concession allows a primary producer, such as a farmer, to retire and hand control of the primary production assets and income to their successor while retaining a right of veto in case of the proposed sale or break-up of those assets.

Qualification provisions criteria for primary production concession

    

VEA ?

Value of entity assets

Section 52ZZZI VEA

Net value of assets

Section 52ZZZH VEA

Adjusted net value of assets

Section 52ZZZK VEA

When asset is controlled by an individual

Section 52ZZZJ VEA

Concessional primary production trusts

Section 52ZZZF(6) VEA

Adjusted net primary production income

Section 52ZZZL VEA

Net income of primary production enterprise

Section 52ZZZM VEA

Permissible reductions of income from carrying on a primary production enterprise

Section 52ZZZO VEA

Concessional primary production trusts –definition of group

Section 52ZZZF(7) VEA

VEA ? (go back)

All of the following sets out the criteria that must be satisfied if an attributable stakeholder of a controlled primary production trust wishes to qualify for this concession:

  • more than 70% of the trust's assets (excluding the net value of the principal residence of the individual and their spouse) are used wholly or principally for carrying on the primary production enterprise,
  • the total adjusted net value of assets that are:
  • owned or controlled by the individual and their spouse,
  • used wholly or principally for the purposes of carrying on a primary production enterprise,

is less than the primary production attribution threshold,

  • the trustee concerned dies, resigns or becomes subject to a legal disability, or
  • in accordance with a statutory law relating to the appointment of trustees, and
  • at the time the concession is claimed a provision is inserted into the trust deed to the effect that the individual and their spouse are able to veto or direct the decision of a trustee only:
  • in relation to the sale of land used for the purposes of carrying on the primary production enterprise, or
  • in relation to the sale of fishing rights or timber rights used for the purposes of carrying on the primary production enterprise, or
  • in accordance with a statutory law relating to the appointment of trustees, and
  • at the time the concession is claimed neither the individual nor their spouse, is or is capable of becoming a trustee of the trust,
  • at the time the concession is claimed, a group in relation to the individual and their spouse is not able to vary the trust deed of the trust, and
  • at the time the concession is claimed neither the individual nor their spouse benefits, or is capable of benefiting under the trust, either directly or through interposed companies, business partnerships or other trusts.


Most private trusts have a person/s in the position of appointor, who have the power to:

  • dismiss and appoint a trustee,
  • veto a trustee's decision,
  • exercise control over the trustee in another manner, or
  • change the trust deed.

Primary production enterprise means a business in Australia that consists of primary production.

For a primary production trust arrangement to qualify for the primary production concession, more than 70% of the net value of the asset of the trust (excluding the net value of the principal home of the farmer if it is owned by the trust and on the primary production land) must relate to assets used wholly or principally for the purpose of carrying on a primary production enterprise.

 

 

Primary production enterprise means a business in Australia that consists of primary production.

For a primary production trust arrangement to qualify for the primary production concession, more than 70% of the net value of the asset of the trust (excluding the net value of the principal home of the farmer if it is owned by the trust and on the primary production land) must relate to assets used wholly or principally for the purpose of carrying on a primary production enterprise.

 

 

According to section 52ZZZK of the VEA, for the purposes of subdivision K, the adjusted net value of an asset that is owned by:

  • an individual is 100% of the net value of the asset,
  • an entity that is a company or trust and the entity is a controlled private company or trust in relation to the individual:
  • a lower percentage if the Commission determines in writing otherwise, or

  • a business partnership—the individual's share of the net value of the asset.

The Commission must comply with any relevant decision-making principles.

 

 

The primary production threshold is the amount given in section 52ZZZF(6) of the VEA.

 

 

According to section 52ZZZL of the VEA, the adjusted net primary production income within subdivision K for a particular tax year is the sum of, where a primary production enterprise is being carried on by:

  • an individual, 100% of the net income of that primary production enterprise,
  • a company being a controlled private company in relation to the individual throughout that tax year
  • 100% of the net income of that primary production enterprise, or

  • a lower percentage if the Commission determines otherwise,

  • a business partnership of which the individual was a partner throughout that tax year:

  • The Commission must comply with any relevant decision-making principles.

 

 

Primary production enterprise means a business in Australia that consists of primary production.

For a primary production trust arrangement to qualify for the primary production concession, more than 70% of the net value of the asset of the trust (excluding the net value of the principal home of the farmer if it is owned by the trust and on the primary production land) must relate to assets used wholly or principally for the purpose of carrying on a primary production enterprise.

 

 

Trustee has two meanings depending on the context, (i) and (ii).

(i) a person who looks after someone else's affairs

According to section 202 of the VEA, a trustee is a person appointed by the Commission to administer the financial affairs of a pensioner who may be incapable of managing their own affairs for reasons such as:

  • age,
  • infirmity,
  • ill health, or
  • improvidence.

These criteria include circumstances where a pensioner has a psychiatric disorder or a mental illness as a result of alcohol or drug addiction.

A trustee can be appointed, with or without the consent of the pensioner and once appointed, a trustee has full control of the pension payment.

(ii) a person responsible for administration of a trust

According to section 52ZO of the VEA, trustee has the same meaning as in the Income Tax Assessment Act 1997.

 

 

A reference in section 52ZZH of the VEA, to a group in relation to an individual is a reference to:

  • the individual acting alone,
  • an associate of the individual acting alone,
  • the individual and one or more associates of the individual acting together, or
  • 2 or more associates of the individual acting together.