Overview
- Main two points: Farm businesses are diversifying, but tax policy hasn’t kept up: Farmers are adopting new income streams (like renewable energy projects, environmental markets and land access agreements), but these activities aren’t clearly recognised under current tax rules. This gap is creating financial and compliance challenges: Outdated tax definitions can lead to higher tax liabilities, loss of concessions, added complexity and extra costs, leaving farmers disadvantaged as agriculture evolves.
- This gap is creating financial and compliance challenges, with outdated tax settings leading to higher tax, loss of concessions, added complexity and extra costs for farmers.
Australia’s farmers are embracing new income streams to remain viable, but the nation’s tax system has not kept pace, according to new research released today by AgriFutures Australia.
The report, Assessing the Implications of Emerging Farm Income Streams for Primary Producer Tax Policy, shows modern farm businesses are increasingly hosting renewable energy projects, participating in environmental markets and managing land access agreements, yet many of these activities are not clearly recognised under current tax rules.
AgriFutures Australia Managing Director, Brianna Casey AM said the research confirms what many farmers already know, agriculture is changing, but policy settings around it haven’t shifted in step.
“In 2026, farm businesses look very different to what they did even a decade ago,” Ms Casey said.
“Producers are diversifying into new income streams to manage risk, deal with seasonal volatility and build long-term stability, but when the tax system doesn’t clearly recognise those activities, it can create uncertainty and financial disadvantage.”
More than half of farm income now flows through companies and trusts, meaning many producers no longer qualify for long-standing primary producer tax concessions that were originally designed for sole traders and partnerships.
At the same time, income from activities on agricultural land, including biodiversity credits or renewable energy projects, is often treated inconsistently or falls outside existing definitions of primary production. The result can be higher tax bills, added compliance costs and the need to seek specialist advice outside regional areas.
The research notes that tax complexity affects farms of all sizes and is often caused by external changes, such as energy or infrastructure projects on agricultural land, rather than by farmers’ business decisions.
The report identifies evidence-based options to consider, including changes to the definition of ‘assessable primary production income’, the definition of eligible emissions units within the GST Act and tax treatment of costs related to sustainability.
Ms Casey said the research is particularly valuable for industries exploring new income opportunities.
“More industries are investing in diversification, sustainability and energy-related opportunities as part of long-term resilience,” she said.
“It’s vital that tax policy keeps up with these changes, so producers are supported to innovate and diversify in ways that strengthen their businesses.
