Stamp Duty Exemption on Family Farm Transfers and other Stamp Duty Relief
Posted on September 25, 2015
Following the State Budget on 18 June 2015, the Statutes Amendment and Repeal (Budget 2015) Bill 2015 was introduced to State Parliament. The main purpose of this Bill is to give effect to the changes announced in the State Budget.
Included in the Bill is Section 45, which amends section 71CC of the Stamp Duties Act, 1923. This creates a clear stamp duty exemption in line with the practice of the Commissioner of State Taxation with regard to transfers of family farms involving trusts. In particular, the changes confirm that transfers from and to trusts (family discretionary trusts, unit trusts and superannuation funds) by farmers can be exempt from stamp duty.
For many years until late 2013, the Commissioner interpreted Section 71CC to allow the exemption for transfers from a trust, to a trust, or between trusts as long as the beneficiaries of the trusts were limited to the range of natural person relatives defined in the Stamp Duties Act. In 2013, the Commissioner received advice that the exemption could not be applied to transfers involving trusts which have more than one beneficiary. This disqualified use of discretionary family trusts and other trusts from the exemption. In response, on 16 December 2013 the Commissioner published Revenue Ruling SDA007, which notified a scheme outside the Stamp Duties Act to provide relief from stamp duty in the manner and in accordance with the practice of many years.
The Bill therefore provides for an exemption from stamp duty in accordance with this practice. Similar to the scheme under Revenue Ruling SDA007, the proposed amendments in the Bill allow the Commissioner to require nomination of which individual beneficiary or beneficiaries under a trust are the natural persons who have the necessary business relationship.
Even before publication of SDA007, we were pleasantly surprised by the Commissioner’s liberal and pragmatic approach to the family farm stamp duty exemption. In our experience, the Commissioner gave good effect to the policy supporting the exemption, namely to exempt intergenerational transfers of farming land for succession purposes where both the transferor and transferee have been in a business relationship in farming the land for at least 12 months. Over the years, we advised on many varied situations, some of which were in a grey area in terms of ticking all of the boxes needed for the exemption. We have often advised clients to obtain an advance ruling from the Commissioner before entering into a transaction in one of these grey areas and found out that in many cases the exemption was applied.
KEY MESSAGE
Our key message to clients is, even though the circumstances may be unusual and do not fit neatly within the black letter of the law, it is worth putting together a submission that may result in a favourable outcome.
SUMMARY
In closing, we also commend the South Australian Government on a number of the other changes announced in the State Budget, in particular, the abolition of stamp duty from 18 June 2015 on transfers of business assets (other than real estate), unlisted share transfers, the progressive abolition of stamp duty on transfers of non-residential real estate and the 2018 abolition of stamp duty on transfers of units in private unit trusts.
Until the Bill is passed, “exempt” transactions entered into after 18 June 2015 have been assessed with full duty, which has been refunded immediately by way of a “gift”.
Stamp duty is a significant expense and impediment to commercial transactions and purchases and transfers of real estate. The exemption from stamp duty on a number of transactions is a welcome initiative.
Should you require any additional information concerning these matters, or advice on any transactions, please contact Joe Subic.
