Australia: Is your transfer of farming property between family members in Western Autralia eligible for the duty exemption?

Last Updated: 2 February 2017
Article by Emma Leys

A TIMELY REMINDER ABOUT THE CONDITIONS FOR ELIGIBILITY FOR THE DUTY EXEMPTION ON TRANSFER OF FARMING PROPERTY BETWEEN FAMILY MEMBERS.

The duty exemption for transfer of farming property between family members in Western Australia is not a new exemption, but to be eligible for it there are a number of conditions to satisfy.

It is imperative to ensure you meet all necessary conditions for eligibility before taking any steps to transfer or part with possession of your farming property to a family member. Failure to meet the conditions can result in duty being assessed and payable, the cost of which can be prohibitive.

Conditions for eligibility

The transfer between family members of farming property is exempt from transfer duty, but only if:

  • Each transferor was using the farming property in the business of primary production immediately before the transfer takes place; AND
  • At the time when the liability for duty on the transaction arose, each transferee intends to continue to use the farming property in the business of primary production.

If the family farm is owned instead by a company that is owned by family members, the transfer of shares between family members may also be exempt from landholder duty.

Some of the relevant definitions and questions to carefully consider for eligibility, include:

  • Is the property being transferred "farming land"?
    If not, the exemption will not be allowed.
  • Is every "transferor" using the "farming property" in the business of "primary production" immediately before the transfer takes place?
    If not, the exemption will not be allowed.
  • At the time of entering into any agreement for the transfer, does each "transferee" intend to continue to use the "farming property" in the business of "primary production"? If not, the exemption will not be allowed.
  • Is the "transferor" the trustee of a unit trust or a discretionary trust?
    Note: the definition of "transferor" excludes land held by the trustee of a unit or a discretionary trust from the exemption.
  • Is any part of the transferred farming property leased to a third party?
    Note: Land may be treated as being used in the business of primary production even where some, but not all, of the land is leased to another person, however, this only applies where the lessee is using the leased land solely or predominantly for the purposes of silviculture or reafforestation.
  • Is each entity that will be using the farming property in the business of primary production related to the transferor and transferee, as is relevant?
    Note: It is not relevant whether a transferor was using, or a transferee intends to continue using, the farming property in the business of primary production personally or through an entity or through a combination of entities to which the transferor or transferee is related. What is relevant, is that they must be related. The definition of "related entity" is therefore relevant.
    Further note however, due to the definition of "family member" in the Duties Act (WA), the transferor cannot be related to themself. As such, there are a number of common transfer scenarios between 'family members' (particularly, for example, certain transactions involving trusts, shareholders of a company, partners of a partnership etc), where the duty exemption will not be allowed. The OSR website sets out a number of common examples where the exemption will not be allowed (and duty will be payable), because they are not a "related entity".
  • Did the transferor acquire the farming property, interest in the farming partnership or shares in the farming corporation, in the past 5 years?
    Note: Where duty was not charged on an exempt family farm transaction and another transaction occurs within a period of 5 years for the same farming property, duty is chargeable on the subsequent transaction even though it would otherwise be considered an exempt family farm transaction.

These are only some of the relevant issues to take into consideration for eligibility for the exemption. For full details as to the requirements and the meaning of the various defined terms, you should refer to the Office of State Revenue (OSR) website and/or seek legal advice.

How to apply

To apply for the exemption from duty, the transferees must complete the "Exempt Family Farm Transactions" Application Form (available from the OSR website), and lodge it at OSR together with the relevant transaction record for the transaction (ie the offer and acceptance and/or transfer of land, or a transfer duty statement), for assessment.

You will also be required to lodge with OSR copies of any relevant title searches for the property; income tax returns (or latest financial accounts) of any individual or entity currently farming the property; copies of any relevant trust deed and/or partnership agreement; a company extract (search) from ASIC for any company involved; and a copy of any lease agreement (if the property is leased).

In our experience, due to current caseloads at OSR the timeframe for them to assess such applications (or duty) on these matters at present, can take up to approximately 6 months. Finalising the registration at Landgate of a transfer of farming property if seeking the duty exemption, cannot occur until OSR assesses the application.

Example case study

A father owned a farming property on which he operated a farming business. As a succession plan, the father handed over possession of the farming property to his sons – who then split the property between themselves and commenced farming their respective portions under their own separate entities.

No transfer of land forms (or any other documents) were signed at the time of handing over possession of the farming property, to document the transfer of ownership to the sons. Several years later, when documenting the respective transfers of land to the sons, applications for exemption of duty were lodged at OSR for assessment.

There is a risk that the duty exemption will not apply in this instance, because the father (as transferor) was not carrying on the farming business immediately before he transferred the land to his sons.

This matter highlights the importance of obtaining legal and financial advice prior to any dealings with your farming property. The delay in documenting the transfer of ownership of the farming property in this scenario, may result in duty being payable.

Seek advice

It is important to properly understand exactly what is required by OSR in order to be eligible for this duty exemption, otherwise you risk having duty assessed and payable.

It is strongly recommended that you seek financial and legal advice in relation to any dealings with your farming property, not just for transfers of the property between family members. Such advice is recommended:

  • prior to purchasing a farming property, to ascertain what is the best entity in which to purchase, for your particular family circumstances – and properly setting up any relevant partnership, company or trust arrangements;
  • in relation to succession planning for your family farming business, and transfer of the business and/or property;
  • for Estate planning purposes;
  • as soon as possible following the death of any one of the owners;
  • prior to transferring a farming property (to either a family member or unrelated party); and
  • prior to handing over possession of the farming property to any family member or third party, for the conduct of the farming business.

For advice on whether your farming property transfer between family members is eligible for the duty exemption, please contact partner Emma Leys on 08 9321 3755.

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Kott Gunning is a proud member of

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions