Port Lincoln Lawyer Mia Dalcollo discusses stamp duty and how it applies to family farms.
You’re excited. You’ve signed a contract to purchase a new home and have finally agreed on a purchase price. You approach a solicitor to handle the transaction and WHAM… they tell you about stamp duty. Stamp duty is not a fun topic.
The government calculates stamp duty using an ad valorem rate which means the duty is calculated based on the consideration of the transaction. Essentially, the more expensive your house is, the more you have to pay in stamp duty. For example, if you are purchasing a house for $500,000 you will need to pay $21,300 in stamp duty. However if your house is only $250,000, the stamp duty would be $8,955.
This is when the farmers out there start sweating… The thought of their million dollar farm being subject to stamp duty is not a pleasant one. But have no fear! The topic of stamp duty for farmers will bring on a smile, not unwanted perspiration. The stamp duty laws are significantly different in relation to family farm transfers. Farmers, put your hands together for section 71CC of the Stamp Duties Act 1923 (SA).
Section 71CC allows an exemption of stamp duty for farm transfers between relatives. That’s right, NO stamp duty is payable under these transactions. That means you can transfer your million dollar farm to a family member and not have to pay stamp duty! Before you start rejoicing, there are obviously some conditions on this exemption which we need to discuss:
What constitutes a ‘farm’?
Your farm needs to be wholly or mainly for the business of primary production and is not less than 0.8 hectares in area.
Who is my ‘family’ under the Act?
– Your spouse;
– Your children and the children of your spouse (including grandchildren and great-grandchildren);
– The spouses of your children and the children of your spouse (including the spouses of grandchildren and great-grandchildren);
– Your parents and your spouse’s parents (including grandparents and great-grandparents);
– Your siblings and your spouse’s siblings; and,
– Your nieces and nephews and your spouse’s nieces and nephews (including grand nieces and nephews and great-grand nieces and nephews).
– Your spouse includes your domestic partner i.e. de facto relationships
It is also important to note that the exemption does not apply to transfers involving the deceased estate of a family member. Therefore if the transferor or transferee is an executor, the exemption will not apply.
What if my relative doesn’t work on my farm?
Unfortunately you must have had a business relationship with the family member for at least 12 months immediately before the date of the transfer. This means the person you are transferring the farm to must have been in some business relationship with you. Evidence of this relationship includes a share farming agreement, partnership agreement, employment history or the provision of assistance in running the business.
What if my farm is held within a family trust or self-managed super fund?
The exemption still applies if the farm is being transferred to/from a trust. However you will need to stipulate the beneficiaries under the trusts who have a pre-existing 12 month business relationship with one another. This is explained better with an example:
Reg and Raylene own a farm in the name of R & R Family Trust. Reg and Raylene are the beneficiaries of the trust together with their children. One of Reg and Raylene’s children Geoff, has worked on the family farm for many years. Reg and Raylene want to transfer the farm to Geoff and his wife Gina. Geoff and Gina want to purchase the farm in the name of their family trust, G & G Family Trust. Geoff and Gina are the beneficiaries of their trust, together with their children. When the transfer is lodged, it is outlined that Geoff has had an existing 12 month business relationship with his father Reg in relation to the farm being transferred. The exemption will apply and no stamp duty is payable.
However the exemption would not apply if the beneficiaries of the trust are not natural persons or not relatives of the transferor. Using the above example, if the beneficiaries of the G & G Family Trust included Geoff, Gina, their children, and a charity, the transaction would not be exempt and stamp duty would be payable. The beneficiaries of the G & G Family Trust need to be actual people, not organisations or companies, and relatives of Reg and Raylene.
What about trustee companies?
Transfers involving trustee companies will still attract the exemption as long as the beneficiaries of the trust are natural persons and relatives of the transferor, and a pre-existing 12 month business relationship is present.
So the government doesn’t charge me anything on a family farm transfer?
You don’t get away totally scot free, but pretty close. The transfer document still needs to be lodged at the Lands Titles Office which attracts a $155.00 filing fee.
How do I arrange to receive the exemption?
Your solicitor will arrange this as part of the conveyancing process. So sit back, relax, and start smiling about stamp duty!