Farmers with cellar doors and fruit stands should beware huge tax bills from the NSW Government, according to peak body NSW Farmers – but the government implies it’s all a storm in a teacup.

Late last month, NSW Farmers reported an increase in farmers being forced to pay up to $300,000 in land taxes for diversifying their businesses with small farmgate sales and agritourism experiences.

Typically, farmland has been exempted from these taxes as it has been used to produce food and fibre for the nation, the organisation says, but spokesperson John Lowe said it was clear farmers were now being penalised for selling what they grew.

“It’s become harder to make a living on the land – and that means farmers have had to adapt and diversify to simply survive,” Mr Lowe said.

“Governments have encouraged this activity as a means to spread risk and deal with drought, natural disaster and other challenges.

“But now, we’ve been punished for innovating, diversifying, and opening our doors to our friends in the cities – and it could spell the end for many of our family farms.”

Minister for Finance Courtney Houssos, whose portfolio has led the changes, understands the challenging conditions for farmers.

“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,” Ms Houssos told Dubbo Photo News.

“I meet regularly with producers and industry peak bodies to understand how the NSW Government can support the integral role they play in their communities and the wider economy,” the minister added.

“It's encouraging to see producers look for new opportunities to grow their business in the face of difficult economic conditions and natural disasters.”

No legislative changes relevant to the exemption have been made in more than 20 years according to information supplied by the department, and recent NSW Civil and Administrative Tribunal decisions have affirmed if a competing use is greater than primary production (for example, selling wine rather than growing and selling grapes), the exemption does not apply.

State Member for Dubbo Electorate, Dugald Saunders MP, described the situation as “yet another shameful [government] cash grab” and a slap in the face for regional NSW.

“Not only will it have a devastating impact on producers and growers, but also the families they feed and the communities they support,” Mr Saunders said.

“It’s extremely disappointing that the premier would rather punish farmers than help them diversify and build resilience.

“Like all businesses, producers need to be able to pivot, and that’s something the government should be encouraging.”

Echoing Mr Lowe’s views, Federal Member for Parkes, Jamie Chaffey MP, also suggested the NSW Government was looking for opportunities to penalise the state’s farmers.

“These are not people who are asking for a handout [but who are] seeking to make their farm income more sustainable.

“The harder you work, the more you are penalised in this state – and in this country – under Labor governments."