SA State Budget: Good news for family farms

The State Government in this year’s State Budget has announced new measures will be enacted to extend the current stamp duty exemption that applies on the transfer of certain family farm land to include land held in family companies. Family farm transfers to or from family companies in addition transfers to or from individuals and trustees will now be exempt from stamp duty subject to the existing criteria being met.

The existing criteria to access the ‘family farm’ or primary production concession in section 71CC of the Stamp Duties Act 1923 include:
• the land is more than 0.8 hectares and used wholly or mainly in a business of primary production;
• the land is used by the person transferring it in a business of primary production at the time of the transfer; and
• for a period of 12 months immediately prior to the transfer there has been a business relationship between the person transferring the land and the person to whom the land is transferred with regards to the land.

Currently the exemption only applies where the land used in a family farm is held directly by natural persons and trustees for natural persons. The exemption has no application in respect of land held in a corporate entity. Many older family farms have land held in corporate entities, particularly those where land was acquired prior to the introduction of the capital gains tax in 1985. The lack of concession available to these families has inhibited if not removed their ability to restructure their farm enterprises to help them to manage our rapidly changing commercial environment.

The current state of the law has meant that family farming property held in a company, has been subject to full duty on any restructure within the family group other than where shares are dealt with in a shareholder’s estate. This has disadvantaged farmers with land in corporate structures compared with those using other entities to hold land.

The term ‘family company’ is to be defined in the legislation. The previous administration first proposed this change with a very limited legislated definition of a ‘family company’. How the definition will be drafted by the current State Government is not clear from the information available in the budget papers. It is hoped that the legislation when drafted defines a family company in such a way as to include companies in which the shareholders are family members or trustees for family members.

It is good to see that the current State Government has recognised the issues for family farms and will introduce measures to overcome the disadvantage faced by some farming families. The measures seek to create consistency and equality in the application of stamp duty concessions to primary production business in South Australia regardless of the legal structures involved.