Non-primary production income is any assessable income you earn that does not come from a primary production business as defined in the Income Tax Assessment Act 1997. In practice that covers most of what Australians earn: salary and wages, interest, dividends, rental income, capital gains, and profits from any business that is not farming, fishing, or forestry. The label matters because primary producers get specific tax concessions, and how much non-primary production income you earn can shrink or remove those concessions.
What Counts as Non-Primary Production Income
Non-primary production income is a catch-all. If the money did not come from cultivating plants or fungi, raising animals for sale or their produce, making dairy from your own raw materials, fishing, pearling, or tree farming and felling, it sits on this side of the line. The most common sources are:
- Salary and wages from employment, wherever you work.
- Interest from savings accounts, dividends from shares, and distributions from managed funds.
- Rent from residential or commercial investment property.
- Capital gains from selling shares, investment property, or other assets.
- Business income from retail, consulting, trades, ride-sourcing, or any activity outside the primary production categories.
- Freelance and contractor fees earned outside those categories.
- Certain taxable government payments and grants.
The split is done by activity, not by person. A farmer who also runs an equipment repair shop reports two streams: the farm revenue as primary production income, and the repair shop revenue as non-primary production income.
How the Line Is Drawn
Subsection 995-1(1) of the ITAA 1997 defines a primary production business as one involving cultivating plants or fungi, maintaining animals for sale or bodily produce, manufacturing dairy from your own raw materials, fishing or pearling, or tree farming and felling in a plantation or forest.1Australian Taxation Office. Taxation Ruling TR 97/11 – Income Tax: Am I Carrying on a Business of Primary Production? The definition also covers transporting felled trees to the place where they are first milled or processed.
Two things trip people up. First, the activity has to be a business, not a hobby. The ATO looks for repeated and continuous activity, a genuine profit intention, and businesslike operation with proper records and a separate bank account.2Australian Taxation Office. Are You in Business A few backyard chickens sold at a loss to neighbours will not qualify. Second, the statutory list is exhaustive. If your activity does not fit one of those categories, the income is non-primary production, however rural or land-based the work feels.
Income Averaging Thresholds
Income averaging smooths the tax impact of fluctuating farm income by spreading earnings across up to five years, so a bumper year does not push you into a much higher bracket than a steady income would.3Australian Taxation Office. Income Averaging Whether your non-primary production income joins in depends on its size:
- Under $5,000 in taxable non-primary production income: included in full, so your whole taxable income benefits from averaging.
- Between $5,000 and $10,000: a reduced amount is included, calculated by subtracting your taxable non-primary production income from $10,000. Any primary production loss is also subtracted, and the result cannot go below zero.
- $10,000 or more: your non-primary production income is excluded entirely, and only your primary production income is averaged.3Australian Taxation Office. Income Averaging
A farmer earning $15,000 in rent averages only farm earnings. A farmer whose only other income is $3,000 in bank interest averages everything. If your off-farm income is growing, the $10,000 line is worth watching, because crossing it changes the tax outcome.
Farm Management Deposit Eligibility
Farm Management Deposits let primary producers set aside pre-tax income in good years and draw it down in lean years, shifting taxable income between financial years. Eligibility has a firm cap tied to non-primary production income: your taxable non-primary production income in the year of deposit must be no more than $100,000.4Australian Taxation Office. Farm Management Deposits Scheme
Other conditions apply too. You have to be an individual (partners and trust beneficiaries qualify, companies do not), you must be carrying on a primary production business in Australia when you make the deposit, and your total FMD balance across all accounts cannot exceed $800,000. The deduction claimed cannot exceed your taxable primary production income for the year, and the deposit must be held for at least 12 months to keep its tax benefit.4Australian Taxation Office. Farm Management Deposits Scheme
A farmer with $95,000 from an off-farm investment portfolio can still use FMDs. At $101,000 the deduction disappears for the year. Near that threshold, the timing of asset sales, rental receipts, or other income can decide the outcome.
Non-Commercial Loss Rules and the $40,000 Exemption
The non-commercial loss rules stop people from using losses in a side business to reduce the tax owed on wages and investment returns. If your business activity costs more than it earns, the loss is generally deferred and carried forward rather than offset against other income in the same year.5Australian Taxation Office. What Is a Non-Commercial Loss? Individuals can offset the loss straight away only if they pass one of four tests: $20,000 in assessable income from the activity, a tax profit in three of the past five years, real property worth at least $500,000 used in the business, or other assets worth at least $100,000 used in the business.6Australian Taxation Office. Four Tests Even then, if adjusted taxable income is $250,000 or more, the loss defers unless the Commissioner exercises discretion.7Australian Taxation Office. The Income Requirement
Primary producers get a separate concession that turns on non-primary production income. If you carry on a primary production business and your assessable income from other sources is less than $40,000, you can offset the loss immediately without passing any of the four tests. The ATO calls these excepted business activities.5Australian Taxation Office. What Is a Non-Commercial Loss?
A farmer earning $38,000 from a part-time town job who loses $12,000 on the farm can offset the loss against the wages. At $45,000 in wages, the same farmer would have to pass one of the four tests to claim the deduction.
Reporting Non-Primary Production Income
On an individual tax return, primary production business income and non-primary production business income go in separate sections. Both myTax and the supplementary paper return require you to distinguish primary production business income from other business income.8Australian Taxation Office. myTax 2025 Net Income or Loss From Business Other business income covers gross sales of trading stock, earnings from services, rent from a rental property business, ride-sourcing earnings, insurance recoveries, subsidies, and similar receipts.
Salary and wages, interest, dividends, rent from investment property, and capital gains have their own sections and are automatically treated as non-primary production income. The reporting duty is to keep primary production results separate from everything else, because the ATO uses that split to calculate averaging and to test eligibility for concessions like FMDs.
Calculating Your Net Figure
Net non-primary production income is your total non-primary production assessable income minus the deductions connected to earning it. Work-related expenses, investment property costs, depreciation on business assets, and similar deductions all reduce the net figure, which then combines with your other income to set your total taxable income and marginal rate.
Deductions matter beyond the headline tax bill. FMD eligibility uses a $100,000 ceiling on taxable non-primary production income, and the income averaging shade-out runs from $5,000 to $10,000 of taxable non-primary production income. A legitimate deduction against your non-primary production earnings can be the difference between keeping a concession and losing it. If you want to claim everything you are entitled to, keep separate records for each income stream.