Posted by: Kylie Wilson
From
1 July 2016, significant changes were made to the Duties Act (Qld) in
respect of intergenerational business property transfers for primary producers.
Prior to this change, a transfer of primary production land to the next generation was only exempt from duty to the extent that it was by way of gift and there was no "consideration". In practice, because consideration under the Duties Act includes the assumption of debt, where the next generation refinanced a loan in the course of being gifted the land, the amount of the relevant debt was dutiable.
From 1 July 2016, section
105 of the Duties Act was amended such that the dutiable value of
business property which is used to carry on a primary production business is
taken to be nil. This means that, provided the other requirements of the
relevant part are met, a transfer of intergenerational farming land and
personal property to the next generation will not attract duty, whether debt is
assumed in the course of the transaction or not.
A practical and basic
example of the advantages for primary producers of this change is illustrated
by the case study below.
Duty or no duty?
Jack and Jill are in their
late sixties and wish to retire, giving control of their primary production
property (beef cattle) to their eldest child, which includes primary production
land with a total value of approximately $20 million.
Associated with the
transfer of this property, their son will need to refinance the existing debt
of $5.4 million.
Pre-1
July 2016, the $5.4 million assumption of debt would have been regarded as
consideration with duty payable to the Office of State Revenue of over
$290,000.
The same transaction from
1 July 2016 no longer incurs duty, a saving of well over a quarter of a million
dollars in transaction costs.
Care still needs to be
taken to ensure that all the requirements for the concession are met, in
particular meeting the definition for defined relative (in respect of the
transferor) and ensuring that the transferee does not take the land as trustee
of a trust.
A further budgetary
measure that was announced by the Queensland government at the same time as
this duty change was the grant of up to $2,500 to seek up-to-date and best
practice information on financial management, mitigating climate risks,
succession planning and multi-peril crop insurance options. Detail
on this grant is not as yet fully available but is expected to be announced in
the near future.
If
you have any questions in regard to the changes to duty for primary producers,
please contact Kylie Wilson of our offices.
