Since June 2013 the Queensland State Government has applied a stamp duty exemption for farm-in arrangements under an administrative arrangement designed to encourage exploration activity in the state. New draft legislation which proposes amendments to the Queensland Duties Act 2001 was introduced on 26 November and seeks to enact this administrative arrangement which had previously been introduced by Public Ruling DA000.12.1.
In summary, transfers of exploration tenements under farm-in agreements will remain exempt from duty to the extent that the consideration for the transfer is ‘exploration expenditure’, which includes amounts spent on both exploration and development of the tenement. However, duty will be payable to the extent any other consideration is paid under the farm-in agreement, such as an up-front premium to enter into the farm-in agreement or a reimbursement of exploration costs previously incurred by the tenement holder.
The proposed amendments also include detailed technical compliance requirements. For example, the availability of the exemption appears limited to farm-in agreements where the parties agree to transfer an interest in a tenement only when a specific (pre-agreed) amount of exploration expenditure is incurred on the exploration project. They do not, for example, exempt a transfer of an interest in an exploration tenement where the trigger for that transfer is achieving an exploration milestone or the completion of particular items of exploration no matter what the expenditure incurred to achieve that milestone or events may have been.
McCullough Robertson is currently preparing submissions to the Queensland Government in relation to the draft legislation, setting out the various commercial and compliance issues associated with the limited availability of the exemption in practice.
While the proposed legislative amendments are welcomed, they also further highlight the importance for farm-in agreements to be negotiated, structured and drafted in a way which ensures access to the various revenue concessions and exemptions available to them.