Farm families earning income from cellar doors, farm stays or wind turbines on their properties could still be subject to the government’s proposed trust tax, despite an exemption for farming income, the National Farmers’ Federation (NFF) has told a Senate inquiry.
The Labor government has proposed introducing a minimum 30 percent tax on discretionary trust income from July 2028 as part of a sweeping tax reform package.
Income from farming itself is exempt. But the NFF’s submission warned that “owning or operating a farm does not itself provide an exemption.”
Specifically, the peak body said income from activities such as leasing farmland, processing produce, agritourism, hosting renewable energy projects and some environmental schemes might still be taxed.
Non-Primary Production Income Not Exempt
NFF’s general manager for trade and economics, Charlotte Wundersitz, told the Senate Economics Legislation Committee on Nov. 5 that about one in three farm trusts earn some income from outside farming, making up about 18.9 percent of their net business income.
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“Many modern farms earn a mix of primary production and non-primary production income,” she said.
“The more diversified the farm businesses, the less benefit they will have from this primary production exemption.”
Liberal Senator Kerrynne Liddle gave the example of a grape grower who also produces wine and operates a cellar door. Wundersitz agreed that income generated from wine sales would not qualify for the farming exemption if the business operated through a trust.
The NFF’s submission noted that farmers “have been encouraged by governments and industry best practice to diversify their businesses” as a way to prepare for drought.
Wundersitz also said many farm families keep their land in one trust and run the business through another.
The federation believes farming income remains exempt when transferred between family trusts but has asked Treasury to confirm this interpretation, saying farmers need certainty.
NFF Backs Government’s Tax Reforms
NFF CEO Michael Guerin said the exemption for farming income “must be retained” because farm incomes rise and fall with the seasons, natural disasters and markets, and family trusts help farms pass from one generation to the next.
Removing or narrowing it would create significant uncertainty for farming families, he said.
The NFF said there were about 37,000 discretionary trusts in the agriculture, forestry and fishing sectors, meaning as many as one in two farm businesses may use this structure. In the 2023–24 financial year, almost all of these trusts were associated with small or micro businesses, or reported no income or a loss.
Asked by Liddle whether its members would be better off if the NFF opposed the tax altogether, Guerin said they would not, adding that the federation’s submission described the reform as a step in the right direction.
Wundersitz noted the government has also allowed farms to move their non-farming activities into a separate company or trust without extra income tax, while keeping farming income in the family trust.
However, she said it would be wrong to suggest that farm businesses would be unaffected by the changes and urged Treasury to set up an ongoing group involving the Tax Office, tax professionals and farming groups to resolve problems as they arise.
