Rural customers and primary producers

Most rural homes and farms have more land on 1 title than city homes. To be fair, the assets test rules are different for these properties.

Assets test for rural customers

Blocks over 2 hectares

Normally only 2 hectares of land on the same title as your main home are exempt from the assets test. If you’re a rural customer, all the land on this title may be exempt if you or your partner either:

This applies to both you and your partner. If you cease to be a couple, it applies to whoever lives in the home.

Extended land use test

To meet this test you need to be using the land to make an income, if possible. This could mean either:

  • you or a family member are running a farming business on the land
  • leasing the land to someone else for a commercial rate of return
  • having little or no scope to earn income from the land.

When applying the extended land use test we consider all of the following:

  • where the land is
  • your family situation, for example caring responsibilities
  • your health
  • if any of your family have their own house on the land
  • if the land supports you and your family or a younger generation of your family
  • any commercial land use
  • any scope for commercial land use
  • environmental issues, like a drought
  • if the land combines 2 or more blocks or titles.

Examples

Example 1

Bob is single and 65. He owns 30 hectares on a single title. He’s lived there all his life and runs it as a dairy farm. As long as Bob keeps working the farm to its potential, the whole property is exempt from the assets test. Any other business assets aren’t exempt, such as stock and sheds.

Example 2

Betty and Jim moved to their 5 hectare, single title rural residential block 21 years ago. The block is scrubby, with no water. There’s not much scope to earn income from it and the council won’t let them subdivide it. This means the whole property is exempt from their assets tests.

Example 3

Jenny is 85 and has lived on her 100 hectare single title farm for the past 40 years. She can’t run the farm on her own any more. Her son John and his family live in another house on the land. John earns his living from running the farm. The whole property is exempt from Jenny’s assets test.

If you don’t pass the test

The normal rules about private land use will apply. This means your assets test won’t include either:

  • your home
  • up to 2 hectares of land on the same title that can’t be land you use for a business.

Your assets test will include the rest of the land.

Primary production businesses

This is where you get income directly from either:

  • farming crops or animals
  • fishing or forestry
  • making dairy products.

If you’re in this kind of business we may do all of the following to determine your income:

  • add up all your assets you use to keep it going, like land, equipment and stock
  • add up all your liabilities that relate to it, like debts and wages
  • count them as 1 asset and 1 liability.

If you have excess debt on one primary production asset, we can use it to reduce the assessed value of another.

If you use an asset for something else as well as primary production, it’s still a business asset if that’s its main use. If there is a liability over the asset, we can deduct a share of the liability.

Forgone wages

Farmers often transfer ownership of the farm to a family member when they retire.

If you do this and don’t get a fair price in return, it may be a gift. This means the value of the farm land and other assets will still count in your assets test.

You can reduce this value if the person you transfer the farm to either:

  • is your close relative
  • has made unpaid contributions to the farm that count as forgone wages.

What counts as forgone wages

Forgone wages only cover contributions by the farmer’s close relatives aged 15 or older, in the form of either:

  • unpaid farm work
  • unpaid care for the farmer
  • improvements to the farm.

We can’t include any time you spent share farming or in a partnership as a forgone wage contribution period.

Unpaid work

This includes either:

  • farm record and account keeping
  • farm hand work
  • other tasks that the farm would have had to pay an outside worker to do.

Unpaid care

This is a high level of personal care for at least 12 months, including:

  • cooking and feeding
  • dressing and undressing
  • showering and toileting.

Normal housework and chores don’t count as unpaid care.

Improvements

Improvements may include some or all of the following:

  • building new fences, dams and sheds
  • planting vines and trees that produce a crop
  • buying livestock and equipment.

We don’t consider the following to be improvements:

  • higher market value over time
  • repairs
  • planting trees that don’t crop, such as windbreaks
  • proposed capital expenditure.

Claiming forgone wages

You can do this if you transfer the farming land to a close relative. This can be either:

  • directly to your close relative
  • from you to their trust
  • from your trust or company to theirs
  • from your trust or company to them.

Forgone wages only apply to the transfer of the farming land, plant, stock and equipment. If you transfer other assets and you don’t get a fair value, gifting rules apply.

What you need to prove

When you claim forgone wages you need to be able to prove all the following to us:

  • that you’ve transferred ownership or control of the trust or company that owns the farm to a close relative
  • that your relative worked for the farm for little or no wages
  • that your relatives work helped you as the farm’s owner, or the controller of the trust or company that owned it.

How to prove it

Useful documents to help you prove your claim for foregone wages include:

  • details of all the times when the new owner did unpaid work or unpaid care
  • details of the value of any improvements contributed
  • documents to support this, such as tax returns and receipts
  • details of how the property has operated over the years.

We may also ask the new owner for a statement about their forgone wages.

How we value unpaid work

To get a figure for the value of unpaid work we use the following method:

  • work out a wage from Australian Bureau of Statistics average weekly earnings figures
  • subtract tax of 20% of wages over $10,000
  • subtract 10% of annual wages to cover other job related costs.

Underpaid work

To get this figure we subtract what the farm paid from the normal wage. For instance, if the farm paid 75% of the award wage, the extra 25% is forgone wages.

How we value unpaid care

We use the cost of paying a local provider for the same level of care. This could be either:

  • a home help service
  • a care at home service
  • a food delivery service like Meals on Wheels.

Page last updated: 20 September 2019