- The family farm often represents a farmer’s most valuable asset. Intergenerational transfers can involve complex taxation considerations.
- Revenue NSW has issued Revenue Ruling DUT 050 ‘Transfer of Primary Production Property between Family Members’ which for the first time provides welcome guidance on section 274 of the Duties Act 1997 (NSW).
- An exemption may apply where land is held by a company owned by a discretionary trust.
- ‘Control’ for the purposes of carrying on a business is explained.
The value of Australian farmland has risen significantly over the past 20 years at an average compound annual growth rate of 7.6% (Rural Bank, Australian Farmland Values Report 2021). Consequently, the family farm often represents a farmer’s most valuable asset. Section 274 of the Duties Act 1997 (NSW) provides an intergenerational exemption from NSW duty on the sale, transfer, lease or lease assignment of primary production land where certain conditions are met. This exemption has existed since 1994. Originally the conditions of the exemption were contained in Treasurer’s Guidelines but in 2005 the guidelines were codified into law as section 274. The policy behind the duty exemption is to encourage younger members of farming families to stay on the farm and to allow older members to retire without the burden of duty.
Revenue NSW has recently issued Revenue Ruling DUT 050 ‘Transfer of Primary Production Property between Family Members’ (‘Ruling’) which for the first time provides guidance on section 274. This is extremely welcome since parts of section 274 are quite obscure.
Conditions of the section 274 exemption
The conditions which need to be met before the exemption applies are:
- the land must be used for primary production or form an integral part of the primary production business (‘land requirement’);
- the transferor, or the person directing the transferor, is a member of the family of the transferee (‘identity of transferor’);
- the land was used for primary production in connection with a business carried on by the transferee, or by a member of the transferee’s family, (whether alone or with others) immediately before the transaction (‘identity of the person conducting primary production business on the land’); and
- the business is to continue to be carried on by the transferee (whether alone or with others) after the transaction (‘continuity of business’).