“I am ready to retire but can’t afford to spend hundreds of thousands of dollars on stamp duty to transfer the land to my children – what do I do?”

Stamp Duty Concession

1. What is stamp duty and do I have to pay it when I transfer the farm to my children?

There are 2 words that often scare people and put them off transferring farming land from one generation to the next.

Stamp duty is a state-based, once off tax that is payable by the purchaser when purchasing or receiving real property. If not handled correctly, the transfer of farming land to your children (or a trust they control) may result in a large stamp duty bill.

Fortunately, there are some concessions available which can result in the transfer of farming land between family members being exempt from the need to pay stamp duty.

Kelly Kelly Legal have decades of experience in advising clients on whether they are eligible for these exemptions.

2. Family Farming Concession

There are essentially five main criteria that must be satisfied for farming land to be stamp duty exempt.

In short, they are as follows:

• The land must be used for the business of primary production;
• The size of the land must not be less than 0.8 hectares;
• A pre-existing business relationship must have existed between the transferor and the transferee for a period of at least
• 12 months prior to the transfer;
• The main business of the transferor must be primary production; and
• A family relationship must exist between the transferor and transferee.

3. How does this work in practice?

This exemption could as part of a farming family’s succession plan (e.g. where the older generation is looking to retire and/ or hand over control of the farm to the younger generation).

An example of where the exemption might apply is in the following scenario:

• John is the dad of Henry. John has worked on the farm for his whole life and owned it in his sole name. John wants to move the farming land into a trust where Henry is the sole trustee as part of the family succession plan. Henry is 30, and has worked on the farm since he was 25, being paid a wage by the farm. The land is more than 0.8 hectares in size and used for primary production.

In this situation John and Henry would be able to show they had a pre-existing business relationship through Henry’s payslips for the last five years. Similarly, John would be able to show his main business (as the transferor) is primary production through his tax returns. Lastly, there exists a family relationship as father and son.

For land worth $2,000,000 would ordinarily attract stamp duty of $103,830 whereas if the exemption applies, there would be no duty payable at all.

Kelly Kelly Legal are farming law experts who can provide prompt advice in relation to your individual situation. Call one of our experts today.

Authors: Kelly Morgan and Joey Nunan