“Keeping it in the Family” - Expanded Duty Concession For The Transfer Of Family Farms
There has been a further extension on the transfer duty (more commonly called ‘stamp duty’) concession for the transfer of family businesses of primary production that was released on 23 December, 2016. The great news is that this concession now covers Water Allocations!
Before explaining the new part of this concession, it is worth summarizing the concession for those that are not familiar with it.
The concession is for those families wanting to keep their farm in the family and most commonly, pass it onto the next generation for them to own and run.
It applies to land used primarily to carry on a primary production business (cane, grain and cattle land) and personal property used to carry on the business (plant and equipment such as unregistered tractors, implements and other farming machinery).
To get the concession, the key requirements are:
The seller is a defined relative of the buyer. Defined relative is a parent, grandparent, brother/sister, nephew/niece, child/grandchild, aunt/uncle or the spouse of any of these;
The seller conducts the business (ie. running the farm), and
The buyer intends to carry on the business (whether alone or with others).
If there is residential land (the farm house) included on the farm or next to it, this is also duty free if you want to transfer it to another member of the family (eg. From parents to son/daughter).
The concession has continued to evolve over the last few years. Originally it only applied to “gifts” between parents and their children (eg. No money changing hands). Now the seller can receive money from the buyer in exchange for the farm and the duty concession can still apply (so no duty is payable).
Example: Mum and Dad run the family farm. They have a $200,000 mortgage owing on the farm. They have agreed to sell the farm to their son in exchange for $200,000 (to pay out the mortgage). The son is eligible to claim the concession so that this transfer is duty free.
As noted above, the concession now also applies to Water Allocations!
This is great news as most farms in the region have Water Allocations allowing for irrigation or to water stock from the nearby water ways and bores.
Prior to the 23 December change the value of the Water Allocation was still dutiable. This meant that you would need to obtain a valuation from a Real Estate Agent or Valuer and have to pay duty on the market value of the Water Allocation.
We recently were involved in a family transfer from parents to children where we had this exact situation arise. Luckily the extension of the concession came into existence which saved our client $1,000 in transfer duty!
The concession unfortunately does not apply to registered farm vehicles. Vehicle registration duty is a separate duty payable to the Queensland Government so any registered farm vehicles (eg. registered tractors or farm utes) need to have duty paid before they are transferred over to the buyer. However, it is worth noting that there is a separate exemption that applies to vehicles used solely in a primary production business where the gross vehicle mass is over 6 tonnes.
Please give one of our rural team a call if you want more advice on this topic.