Veterans’ Entitlements (Primary Production Concession) Principles 2025

This instrument, the Veterans’ Entitlements (Primary Production Concession) Principles 2025, is a legislative instrument made under paragraphs 52ZZZQ(j), (k), (l) and (m) of the Veterans’ Entitlements Act 1986 (the Act). It sets out decisionmaking principles that bind the Repatriation Commission when it exercises certain discretions under Division 11A of Part IIIB of the Act, which deals with concessional primary production trusts. Mechanically, the instrument replaces the previous principles contained in Schedule 7 to the Veterans’ Affairs (Legislative Instrument Remaking Exercise) Instrument 2014, which is repealed by section 3A. The new principles do not create new rights or obligations directly for veterans; rather, they prescribe how the Commission must go about making particular determinations that affect the application of the means test for veterans who have interests in primary production enterprises through trusts or companies.

The instrument is structured into six parts. Part 1 contains preliminary matters including the name, commencement, authority, repeal and definitions. The commencement date is the later of the day after registration or the day after the Veterans’ Entitlements (Attributable Stakeholders and Attribution Percentages) Principles 2025 commences, creating an interlocking commencement condition. Part 2 addresses when paragraph 52ZZZF(1)(f) of the Act can apply to an individual and a controlled private trust, effectively allowing the Commission to treat an individual as having a long-term connection with primary production despite a recent interruption. Part 3 sets the criteria for reducing the value of a specified asset owned by a company or trust by a liability, but only if that liability arose from a genuine arms-length transaction with strict documentary requirements. Part 4 deals with determining that an asset owned by a controlled private company or trust is not controlled by an individual for the purposes of the concessional primary production trust provisions. Parts 5 and 6 allow the Commission to apply a lower percentage than 100% when calculating the adjusted net value of a controlled asset or the net income attributed to an individual from a primary production enterprise, subject to consideration of whether the individual is an attributable stakeholder.

Each part is explicitly tied to a specific determination power in the Act and requires the Commission to consider certain facts and apply the cross-referenced decisionmaking principles in the Veterans’ Entitlements (Attributable Stakeholders and Attribution Percentages) Principles 2025. The instrument does not prescribe outcomes; it prescribes the process of reasoning. It imposes a methodological burden on the Commission, forcing it to examine long-term connections, arm’s length transactions, and attribution percentages rather than applying arbitrary or blanket rules.

The instrument draws on several technical concepts from the Act, and its operation hinges on understanding them. A "concessional primary production trust" is defined in section 5Q of the Act, but the instrument uses it as a status that triggers certain concessional treatment for assets held through trusts relating to primary production. A "controlled private trust" and "controlled private company" are defined in section 52ZO of the Act. These are entities where the individual (or their spouse) has a controlling interest under the Act’s attribution rules. The instrument refers to “first primary production enterprise” as defined in paragraph 52ZZZF(1)(b) of the Act, which is the specific enterprise that the individual has an interest in through a trust or company.

“Test time” is defined in subsection 52ZZZF(1) of the Act: it is the time at which the Commission assesses whether the individual satisfies the conditions for concessional treatment. The concept of "long-term connection with primary production" is central to Part 2. Under section 6(2), an individual is taken to have that connection if for a period of 20 years (continuous or accumulated), the individual or their spouse has been involved in carrying on one or more primary production enterprises, contributed a significant part of their labour, and derived directly or indirectly a significant part of their income from those enterprises. The 20-year period can consist of multiple periods totalling 20 years, which is generous but still imposes a high threshold. The "interruption" referred to in section 6(1) is a reason why the individual cannot satisfy the three-year continuous involvement test in subparagraphs 52ZZZF(1)(e)(i)-(iii) at the test time.

"Genuine arm's length transaction" in Part 3 is defined by section 9(2): the transaction must relate to an arrangement that relates to the specific business activities of the company or trust; must not be with or relate to an arrangement with a person who is a minor (with a carve-out for 16-17 year-olds not full-time students who are engaged in an occupation); and must be under a written agreement signed by each party and witnessed by an independent person. This is a high documentary bar. Importantly, subsection 9(3) allows the transaction to be with the sole attributable stakeholder of the entity, meaning self-dealing is not automatically fatal, provided the written agreement requirements are met.

"Attributable stakeholder" is a concept from the Act and the companion principles. The instrument repeatedly requires the Commission to consider whether the individual is likely to be considered an attributable stakeholder of the company or trust that owns the asset or carries on the enterprise, and to have regard to the decisionmaking principles in the Veterans’ Entitlements (Attributable Stakeholders and Attribution Percentages) Principles 2025. That instrument contains parts on determining that an individual is not an attributable stakeholder (Part 2), asset attribution percentage (Part 3), and income attribution percentage (Part 4). The current instrument does not replicate those rules; it incorporates them by reference.

The instrument directly binds the Repatriation Commission as the body that must apply these principles when making determinations. The individuals who are affected are veterans and their spouses who have interests in primary production enterprises through controlled private companies or trusts, and who seek concessional treatment of those assets or income under the Act. Specifically, the instrument applies to individuals who at the test time have a controlled private trust or company that owns an asset used in primary production (Part 2), who need to reduce the value of an asset by a liability (Part 3), who seek a declaration that an asset is not controlled by them (Part 4), who need a lower adjusted net value of a controlled asset (Part 5), or who need a lower percentage of net income attributed to them from a primary production enterprise (Part 6). In practice, this affects veterans who are farmers, graziers, or involved in other agricultural enterprises structured through trusts or companies, particularly family entities. Spouses are explicitly included in the long-term connection test (section 6(2)) and in the definition of controlled entities.

The instrument also affects the entities themselves: the controlled private companies and trusts that own assets or carry on primary production enterprises. Under Part 3, a liability of such an entity can reduce the value of a specified asset, but only if the liability satisfies the genuine arms-length transaction criteria. That imposes a compliance burden on the entity to have written agreements signed and witnessed, which may be more onerous than typical informal family arrangements.

The Veterans’ Entitlements (Attributable Stakeholders and Attribution Percentages) Principles 2025 is also affected, as this instrument relies on it. The companion principles must be in force for this instrument to commence (section 2(b)). Practitioners advising veteran clients need to be familiar with both instruments as a package.

The broader effect is on the administration of the veterans’ means test. By specifying decisionmaking principles, the instrument reduces the Commission's discretion and provides a framework for consistent treatment. However, the framework is complex and fact-intensive, shifting the compliance burden onto veterans and their advisors to gather the necessary evidence, especially the 20-year connection history and the written agreements for liabilities. The instrument does not affect the general public or non-veteran primary producers.

The instrument imposes duties on the Repatriation Commission, not on individuals. The Commission must comply with the decisionmaking principles set out in each Part when making the specified determinations under the Act. For example, under Part 2, when determining whether to apply paragraph 52ZZZF(1)(f), the Commission must consider whether the individual has had a long-term connection with primary production as defined in section 6(2) and whether there has been an interruption causing the three-year test to fail. Under Part 3, before reducing the value of a specified asset by a liability, the Commission must consider whether the liability arose from a genuine arms-length transaction meeting the criteria in section 9. Under Parts 4, 5 and 6, the Commission must consider whether the individual is likely to be an attributable stakeholder and have regard to the companion principles. These are mandatory considerations; the Commission cannot ignore them.

Individuals have a right to seek these determinations from the Commission. The instrument does not create a new right of review, but the underlying Act provides for review of Commission decisions under the Veterans’ Entitlements Act. If the Commission fails to apply these principles correctly, an affected individual may challenge the decision on the grounds that the Commission did not comply with the legislative instrument.

The instrument also confers a limited right in section 9(3): a transaction with the sole attributable stakeholder of the company or trust is not automatically excluded from being a genuine arms-length transaction, provided the other requirements are met. This allows related-party transactions to qualify, which is important for family farming structures where the veteran may be the sole stakeholder.

However, the instrument does not guarantee that any particular determination will be made in the veteran’s favour. The principles are framework rules, not outcome determinative. For instance, even if the individual meets the 20-year connection test, the Commission still has the discretion to decide whether to apply paragraph 52ZZZF(1)(f). The use of “must consider” indicates a procedural duty, not a substantive entitlement.

The instrument also incorporates by reference the companion principles. This gives the individual a right to have the Commission apply those principles when considering attribution. But it also means the veteran must be prepared to argue under those principles, which may involve detailed evidence about control and economic benefits.

This instrument does not itself create any penalties or offences. It is a procedural instrument that guides the Commission’s decisionmaking. Enforcement mechanisms would come from the broader administrative law framework and the Veterans’ Entitlements Act 1986. If the Commission makes a determination that fails to comply with these principles, the veteran may seek merits review by the Veterans’ Review Board and then the Administrative Appeals Tribunal, or judicial review in the Federal Court under the Administrative Decisions (Judicial Review) Act 1977 or the Constitution. The instrument is legislative, so a failure to take into account a mandatory consideration is a ground of review.

There is no specific enforcement power given to any regulator. The instrument is binding on the Commission as a matter of law; if the Commission ignores it, the resulting decision may be set aside. For individuals, there is no direct penalty for non-compliance because the instrument does not impose obligations on them. However, if a veteran provides false or misleading information to the Commission in relation to these principles, other provisions of the Act or criminal law (such as the Criminal Code offences for providing false information to a Commonwealth entity) may apply. Those are outside the scope of this instrument.

The instrument’s effect on enforcement is indirect: it creates clear criteria that, if not met, mean the determination cannot go the veteran’s way. For example, if a liability is not supported by a written agreement signed and witnessed, the Commission cannot consider it as reducing the asset value under Part 3. That is a de facto barrier, not a penalty. The consequence is denial of the concession, not a fine.

The instrument also interacts with the companion principles. If the Commission fails to have regard to those principles as required, that may also be a reviewable error. The enforcement mechanism is ultimately the same: challenge the decision. The instrument raises the standard of evidence and reasoning required from the Commission, thereby increasing the likelihood that adverse decisions will be properly justified, but also increasing the compliance burden on veterans to provide the sort of evidence the Commission needs to consider.

This instrument operates within the framework of the Veterans’ Entitlements Act 1986, specifically Division 11A of Part IIIB which deals with concessional primary production trusts. It is made under paragraphs 52ZZZQ(j), (k), (l) and (m) of that Act, which empower the Commission to make principles for the determinations covered in Parts 2 to 6. The instrument does not amend the Act; it supplements it by specifying how the Commission must exercise its powers. It must be read together with the Act, particularly the definitions in sections 5Q and 52ZO, and the substantive provisions in sections 52ZZZF, 52ZZZH, 52ZZZJ, 52ZZZK and 52ZZZL.

The instrument also explicitly interacts with the Veterans’ Entitlements (Attributable Stakeholders and Attribution Percentages) Principles 2025. That companion instrument is incorporated by reference in Parts 4, 5 and 6. The current instrument requires the Commission to have regard to Part 2 (Determination that individual is not attributable stakeholder) of the companion instrument in sections 11(3), 13(4) and 15(4). In Part 5, the Commission must also have regard to Part 3 (Determination of asset attribution percentage) and in Part 6, to Part 4 (Determination of income attribution percentage). Thus, the two instruments form an interlocking code. The commencement condition in section 2(b) ensures they commence together.

The instrument repeals Schedule 7 to the Veterans’ Affairs (Legislative Instrument Remaking Exercise) Instrument 2014. That repeal means the previous principles are replaced. Anyone relying on the old instrument must now look to this one. The interaction with other Commonwealth legislation is limited. The income and asset concepts may intersect with the Social Security Act 1991 or the Income Tax Assessment Act 1997, but the instrument does not modify those laws. For example, “tax year” is used in Part 3 but defined by reference to the entity’s tax year, presumably under tax law. The definition of “minor” in section 9(4) includes a specific carve-out for 16-17 year olds in full-time occupations, which differs from the general age of majority for other purposes. This definition is unique to this instrument and overrides any general meaning.

The instrument’s interaction with state laws is negligible, though some state laws may affect primary production enterprises (e.g., water rights, land titles). Those are outside its scope.

This instrument is a remake of previous principles. Section 3A repeals Schedule 7 to the Veterans’ Affairs (Legislative Instrument Remaking Exercise) Instrument 2014. That Schedule presumably contained the earlier version of these principles. The instrument does not provide a detailed amendment history of the earlier instrument, but the effect is that as of its commencement, the new principles apply. The instrument itself has not been amended; it is the initial version. Future amendments would be made by subsequent legislative instruments under the same enabling provisions.

The instrument’s commencement is conditional on the companion principles commencing. That is an unusual feature: it ensures that the cross-references in Parts 4-6 are operational. There is no provision for retrospective amendment; the instrument applies from its commencement date.

Given the instrument is made in February 2025, it is recent. Practitioners should note that the previous Schedule 7 principles may have been in force for many years, and any decisions made under those principles remain valid unless overturned. The new principles are not merely procedural changes; they introduce substantive new criteria, especially the detailed requirements for genuine arms-length transactions (section 9) which were likely less formalised before. The 20-year long-term connection test in section 6 is similar to previous provisions, but the language about “interruption” and the calculation of the period as either continuous or aggregated total of 20 years is now explicit.

There is no mention in the instrument of any transitional provisions or savings for existing determinations. That could create uncertainty for individuals who had arrangements under the old principles that do not meet the stricter new requirements.

The instrument itself has no litigation history because it was just made in February 2025. However, the underlying provisions in the Act and the predecessor principles may have been litigated. The instrument does not refer to any cases, and the deep dive cannot invent them. It is possible that cases concerning “concessional primary production trusts” and “controlled private trusts” under the Act exist in the Federal Court or the Administrative Appeals Tribunal, but the instrument gives no indication. The detailed definitions in the instrument (e.g., the definition of “minor” in section 9(4) which includes a student carve-out) may be the subject of future interpretive disputes, particularly whether a person who turns 18 during a course of study ceases to be a minor for that purpose.

The requirement for a written agreement signed by each party and witnessed by an independent person in section 9(2)(c) is likely to spawn disputes about what constitutes an “independent person”. The instrument does not define independence; it is left to the Commission or a reviewing body to determine. Similarly, the concept of “specific business activities” in section 9(2)(a) may be litigated if the Commission takes a narrow view.

Part 2’s long-term connection test requiring a “significant part of his or her labour” and “significant part of his or her income” - neither “significant” is defined. That invites argument about thresholds. Veterans who have been involved in primary production part-time or who derive only a modest portion of income may find the Commission interpreting “significant” in a way that excludes them. Litigation could clarify whether “significant” means more than 50% or something less.

Overall, the instrument is likely to generate litigation primarily around the factual findings required, rather than the legal principles. The companion principles on attributable stakeholders may also be litigated. The current instrument’s repeated direction to have regard to those principles ensures they will be read together, so litigation on one will affect the other.

Several features of this instrument could catch out unwary veterans and their advisers. First, the commencement condition in section 2(b) means the instrument does not start until the companion principles commence. That creates a period of uncertainty: after registration, the instrument is made law but not yet in force. Practitioners must check the companion instrument’s commencement status.

Second, the long-term connection test in section 6(2) requires a 20-year period of involvement in primary production. However, subsection 6(1) says the Commission must consider the interruption that prevents satisfaction of the three-year test before the test time. The 20-year period can be aggregated (multiple periods totalling 20 years). But note that for the 20-year test, the individual or their spouse must have contributed a significant part of their labour and derived a significant part of their income from the enterprise. If the veteran has had gaps in involvement (e.g., years of military service), those gaps do not break the 20-year aggregate, but they may reduce the total. The instrument does not say whether the 20 years must be before the test time or can include periods decades earlier. A literal reading suggests any period at any time before the test time, which could allow a veteran who farmed for 20 years in their youth, then left for a military career, to still qualify. But the Commission may interpret “long-term connection” as requiring some currency.

Third, the genuine arms-length transaction requirements in Part 3 are strict. Section 9(2)(c) requires a written agreement signed by each party and witnessed by an independent person. Oral or even written but unwitnessed agreements will not suffice. The instrument does not allow for curing later. The transaction must also relate to an arrangement that relates to the specific business activities of the company or trust (section 9(2)(a)). That might exclude loans for non-business purposes, even if the veteran intends to use the funds for primary production later. The provision allowing a transaction with the sole attributable stakeholder (section 9(3)) is helpful, but it still requires the written agreement. Family members often transact informally; this could disqualify many liabilities.

Fourth, the definition of “minor” in section 9(4) includes a student (aged 16-17 in full-time study) and excludes 16-17 year olds engaged full-time in an occupation. That is a narrow carve-out. Transactions with a minor (under 18, including students) cannot be genuine arms-length (section 9(2)(b)). This could catch family arrangements where a child under 18 is a beneficiary of a trust.

Compliance with this instrument falls into two distinct categories: compliance by the Repatriation Commission in making determinations, and compliance by veterans and their entities in securing concessional treatment.

For the Repatriation Commission: The Commission must ensure that its decision-makers are trained on the six-part structure and the mandatory considerations. For each type of determination, the case officer must create a record showing that they have considered the specified matters. For example, for a determination under Part 2, the file must note whether the individual had a long-term connection per section 6, and why the interruption caused the three-year test to fail. For Part 3, the file must note whether the liability arose from a genuine arms-length transaction and the supporting documents (written agreement, signatures, witness). For Parts 4-6, the file must note the consideration of the companion principles and the likelihood of attribution. The Commission should also develop internal guidelines for interpreting “significant” in section 6 and “independent person” in section 9.

For veterans and advisers: To obtain a favourable determination, the veteran must proactively gather evidence. For Part 2: compile records of involvement in primary production over a 20-year period, including labour contributions and income derivation (tax returns, financial statements, ATO records, witness statements). If there has been an interruption, document the reasons (e.g., military service, illness, drought). The 20-year period need not be continuous, but each period must satisfy the three criteria (involvement, labour, income). Keep records of any controlled private trust or company that holds the primary production enterprise.

For Part 3: for any liability that the veteran wants to use to reduce asset values, ensure the entity has a written agreement that is signed by the liable party and the entity, and witnessed by an independent person (not a relative or employee, ideally a lawyer or JP). The agreement must relate to the specific business activities of the entity - i.e., the purpose of the loan or liability should be stated as being for primary production purposes. Avoid transactions with minors under 18 (except those in full-time occupations aged 16-17). If the veteran is the sole attributable stakeholder, the transaction can still qualify if the written agreement is in place.

For Parts 4-6: the veteran needs to engage with the companion principles to determine whether they are likely to be considered an attributable stakeholder of the entity. That may require a detailed analysis of control and benefit. If the attribution percentage is low, provide that analysis to the Commission to support a lower adjusted net value or income percentage.