Rural succession planning remains a major focus of the Australian agricultural sector. With over half of Australia’s rural enterprises owned by Baby Boomers who are nearing retirement, implementing a transfer of farming property and rural enterprises to family members is firmly in the minds of those looking to plan for the future.
In Queensland, there has long been a duty concession available when a farm that is used to carry on a primary production business is gifted to the children or grandchildren of the existing owners. A similar duty exemption is also available on the gift of a partnership interest or units in particular family unit trusts that hold primary production business assets to lineal descendants.
While this concession is accessed regularly, the limitation has always been that the transfer had to be from an ancestor to their lineal descendant.
But the reality for many families within the agricultural sector is that their succession planning involves transfers between other family members (for example, from sibling to sibling or uncle to nephew), instead of just cases where properties are handed down from mum and dad to the children. Previously there was no stamp duty concession in these circumstances.
CHANGES TO THE QUEENSLAND DUTIES ACT
As part of the 2014-2015 Budget, the Queensland State Government announced changes to widen the availability of the stamp duty concession for intergenerational transfers of primary production land and business assets.
The amendments, which took effect from 1 July 2014, broaden the scope of these exemptions by removing the requirement that the recipient of the property be a direct lineal descendant of the transferor. This means that the concession will now be available for transfers to a wider range of family members – including spouses, grandparents, siblings, aunts, uncles, nieces and nephews.
While the changes are welcome and provide greater flexibility for succession planning for primary production businesses, it is important to understand that:
- the transfer must still be by way of gift. Where any consideration for the business property passes between the transferor and transferee, the duty exemption will not be available to the extent that consideration is provided.
Importantly, if the property is subject to an existing mortgage and the acquirer assumes liability under that mortgage, the assumption of that liability will be treated as consideration for the transfer, and
- the duty exemption will not extend to transfers to companies or trusts (even if controlled by members of the family group that fall within the range of eligible recipients). This is a significant limitation to the exemption – particularly in circumstances where, in a broader tax and estate planning context, it is often advantageous to have these types of business assets held through discretionary trusts.
These limitations should not overshadow the importance of the changes and the greater succession planning possibilities that are now available to families within Queensland’s agricultural sector.