Farming families have long understood the benefits of planning and properly implementing the handover of the family farming business from one generation to the next. Often, this hand over involves a payment to the older generation to help fund retirement. Unfortunately, it has been the case that the transfer of some essential business assets or the exchange of money (or other consideration) would result in the need to pay State duty.
In a move that is likely to be very welcomed in farming areas, the Queensland government has broadened the duty concessions available for the intergenerational transition of family farming businesses.
The Duties Act 2001 (Qld) (Duties Act) provides a duty concession for transfers of land and certain assets of a farming business between family members for the purpose of continuing to carry on the family farming business. Importantly, this concession is limited under the Duties Act to transfers made by ’gift’ and did not cover all types of farming business assets. Importantly it does not cover common business assets such as business names, water entitlements, brands and debtors, even if those assets are related to the family farming business.
Pending legislative amendment, the changes will be given effect by administrative arrangements set out in Queensland Office of State Revenue Ruling DA105.3.1 which will apply to transactions entered into on or after 12 October 2016.
The ruling has the effect of the existing family farming business duty concession to include:
- transfers made for valuable consideration; and
- any transfer of ‘business property’.
In order to rely on the extended concession the following criteria must be met:
- the transferor or person directing the transfer is a ‘relative’ (as defined in the Duty Act) of the transferee;
- the transferee takes the transfer in their personal capacity (i.e. not as a trustee);
- the relevant farming business to which the business assets relate must be carried on the ‘relative’ transferring the business assets; and
- the farming business is intended to be carried on by the transferee.