A farm is a significant asset and the value of the associated business is dependent upon how that business is operated by you now, and later, by your children and their children after them.
The farm may constitute the majority of your family wealth and you may have difficulty passing on equal interests to your children, or alternatively you may wish to create a level of separation between yourself and your farm for legal or asset management purposes.
Whether for succession planning or asset structuring, there are a number of reasons why you may want to transfer your farm out of your own name or the entity operating the farming business and to a relative or a family trust. It is possible for such a transfer to be duty free.
Section 56 of the Duties Act 2000 (Vic) provides that the transfer of a farm to a relative or a family trust can be exempt from stamp duty where:
- The land must be used for primary production (which includes the cultivation of produce, the maintenance of animals or poultry, the keeping of bees or fishing for commercial purposes);
- The transferor is either a natural person, a company in which all shares are owned by natural persons who are relatives or a trustee of a trust the beneficiaries of which are relatives; and
- The transferee is a relative of the transferor or is the trustee of a trust, the beneficiaries of which are limited to relatives of the transferor and the terms of which restrict the distribution of the primary production land.
Accordingly, it is possible to transfer your farm into a trust for yourself and for your children and not have to split up or give fixed interests in the farm.
This can assist with addressing the risk to the farm as an asset owned by an operational entity as well as solve the issues with planning for the future of the farm and your family.
It is crucial that all requirements for the exemption are satisfied prior to transferring the farm, as a failure to meet even one requirement can result in the imposition of stamp duty on the transfer.
Pointon Partners have successfully obtained exemptions to stamp duty for the transfer of farms to family trusts and have prepared trust deeds that satisfy the statutory requirements of the Duties Act 2000 (Vic).