By Stephanie Gardiner in Orange
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Under the shade of a weeping willow on the banks of a sparkling dam, wine lovers can look out across a sprawling national park while sipping chilled Chardonnay.
Members of the Wombat Crossing Vineyard, in the heart of the NSW Hunter Valley wine region, can also stay in a cosy lodge with a fireplace, aptly named The Burrows.
With grape-growing a notoriously perilous business, producer Ian Napier knew he had to branch out and offer single-vineyard wine, tastings and accommodation to diversify his income.
"Blind Freddy can see that grapes are not a product that is in high demand," he tells AAP.
"You have to add value to them if you are to do any good."
The business was humming along when, in August 2023, Mr Napier was hit with a notice from Revenue NSW saying his property may be subject to land tax as its predominant use was no longer primary production.
The department then sent an assessment in 2024 saying he owed five years' worth of land taxes, a levy from which growers are generally exempt as they produce food and fibre.
Mr Napier spent more than $100,000 in legal fees challenging the finding in the NSW Civil and Administrative Tribunal, which ruled in favour of the revenue office.
The tribunal found the land tax exemption only applied if the cultivated product itself ‒ grapes ‒ was sold.
It ruled that the primary use of the land was instead wine production and sales, in part based on an analysis of income from wine sales compared to grape sales.
Mr Napier says the state government's “avaricious land tax grab” is penalising producers for exactly what they're encouraged to do: innovate and diversify.
“This goes to the heart of many small wine-making businesses,” he says.
“I could have achieved the same result by pulling out all of my vineyards, buying grapes, having a winemaker turn them into wine and then selling the wine.
“Is that what we really want to achieve?
“Do we want primary producers to... get rid of the primary production bit and just focus on the piece that actually makes money?”
Mr Napier's case has become something of a canary in the coalmine for other small producers around the state.
An apple orchardist, who turned inferior fruit into juice and sold it, lost a tax exemption after Revenue NSW found the land was not predominantly used for primary production.
A cherry and apricot grower was threatened with penalties after launching a popular “pick-your-own” venture, which was deemed to be a competing use of the land.
Grading and packing of the produce at the farm was classified as “processing”, which also affected the tax exemption.
That assessment was ultimately overturned due to the short fruit harvesting and tourist season.
NSW Farmers recently issued a warning to small and medium producers ‒ including those with cellar doors and fruit stands ‒ saying they appear to be firmly in the sights of the revenue office.
The organisation is calling on the government to broaden the meaning of primary production in the state's tax legislation, which hasn't changed for decades.
It argues the law is a disincentive for farmers to add value to their produce and diversify their income in a sector increasingly prone to disruption from weather, disasters and geopolitics.
“We want to see a system that is a bit fairer,” NSW Farmers business, economics and trade committee chair John Lowe tells AAP.
“We want to see our farmers having the opportunity to... make a buck and be able to diversify and reinvent agricultural production without getting penalised the moment they step over an imaginary line.”
The primary producer definition could be expanded to include income generated from converting produce into a value-added product, NSW Farmers' position paper says.
That would bring NSW closer in line with other states like Victoria, which recognises produce in a “natural, processed or converted state”.
Agritourism could also be considered a legitimate primary production activity under the proposed changes.
While some farmers are accusing the government of opportunistic revenue-raising, Finance Minister Courtney Houssos has previously told parliament the law has long been consistently applied.
Ms Houssos says she regularly meets with producers to understand the support they need.
“It's encouraging to see producers look for new opportunities to grow their business in the face of difficult economic conditions and natural disasters,” she adds via a statement to AAP.
“Under the current legislation, producers who diversify their activities will still continue to receive the primary production land exemption as long as primary production remains the dominant use of the land.”
Revenue NSW officials met with farmers throughout 2025, with further talks planned for 2026.
Land tax thresholds are due for review in 2027.
– With AAP