Family farms are an important feature of Australian rural life. As TAIT KELLER from RMB Lawyers explains, intergenerational transfers of family farms are exempt from stamp duty in most cases:
Farmers who own and manage properties that have been farmed by their family, sometimes for generations, should have a succession plan for the transfer of the property to the next generation if they want the family to continue to farm the family asset.
Since 1994, farming families have been able to claim relief from stamp duty on the transfer of farms to younger generations. Section 274(1) of the Duties Act 1997 (NSW) provides that duty is not chargeable in respect of a transfer or agreement for the sale or transfer of land, a lease of land or a transfer or assignment of a lease in respect of land that is used for primary production.
The policy is obviously designed to encourage younger members of farming families to stay on the farm and to allow older members to retire without the burden of duty.
A number of conditions need to be met before the exemption applies.
The term “land used for primary production” means, briefly: land cultivation, for the purpose of selling the produce; maintenance of animals (including birds) for the purpose of selling them or their natural increase or bodily produce; commercial fishing or the commercial farming of fish, molluscs, crustaceans or other aquatic animals; keeping bees for selling honey; some commercial plant nurseries: and the propagation for sale of mushrooms, orchids or flowers.
Under section 274(1)(a) of the Act, the transferor of the land used for primary production, or the person directing the transferor, must be a member of the family of the transferee of the land. Subsection 6 of section 274 provides the various categories of family members.
The subject land must be used in a primary production business before and after the land transfer.
When family farms pass between generations such as from father to son, the family’s primary production business will often have been carried on by the father and/or son prior to the transfer, and by the son alone after the transfer. However, it is not uncommon for the business to be carried on by an associated private company or a trading trust.
Provided the above elements are present, the transferee will not be liable for stamp duty on the transfer.
intergenerational transfers can involve complex taxation considerations and it is important to get professional advice, your first step should be to contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website. It costs nothing to ask us about your rights.