Farm Trusts | Stamp duty relief on farm transfers in South Australia

Farm transfers
As with any successful business, in farming, you need appropriate operating and asset holding structures.  With these in place you will be able to build the foundations for a prosperous business and plan for future succession.  For these reasons we often recommend special purpose trusts known as ‘farm trusts’ as a means of protecting farm assets and providing tax structuring options to the modern farming family. 

What is a farm trust? 

A farm trust is a discretionary trust that is used to own land for primary production while also providing flexibility so the property can eventually be transferred to other family members.  Asset protection, tax efficiencies, and ‘controlled succession planning’ are the key benefits of a farm trust. Owning land in a farm trust: 

  • Protects the land from third-party claims made against you personally, for example, if you go bankrupt.  Because the trust owns the farmland, the assets owned by the trust cannot be sold in order to satisfy an individual’s personal debts; 
  • Allows the trustee to stream income to a range of beneficiaries to minimise tax.  The trust owns the farm assets and the income earned by the trust each year can be divided between family members who are the beneficiaries of the trust.  Since different tax rates apply to each person, the trustees can take this into consideration when making distributions; and 
  • Allows for controlled succession.  Trust assets are not considered to be part of your personal estate and therefore control of these assets is passed outside of your Will.  If your Will is challenged, trust assets cannot form part of the claim.

A specially tailored farm trust deed is required to ensure that these protections and controls are in place.

Is a farm trust right for you?  If you aren’t sure, or if you are ready to put one in place, call us on 1300 654 590 or email us. We can advise you on the next steps. 

Stamp duty concession 

Most farmers do not start with a clean sheet.  Many farms will be owned and operated by various sole traders, partnerships, companies, and existing (but unsuitable) family trusts.  To access the benefits of a farm trust, ownership will have to be transferred to the farm trust.  Section 71CC of the Stamp Duties Act 1923 (SA) (the Act) permits farming land to be transferred exempt of stamp duty, if certain criteria are met, including: 

  • The land is used for the business of primary production.  This is a defined term and includes a range of activities including agriculture, viticulture and fishing; 
  • The land is not less than 0.8 hectares in area;  
  • A business relationship existed between the transferor and transferee for at least 12 months before the date of the transfer; 
  • The main business of the transferor is primary production;  
  • A family relationship exists between a transferor and a transferee; and 
  • The reason for the transfer is not to take advantage of this exemption. 

If land is being transferred to a farm trust, it is essential the trust deed is drafted very carefully to ensure this stamp duty exemption applies when the land is transferred to the trust. In order to utilise this strategy, it is critical that the specific criteria listed above are met by the farming enterprise and those involved in it.

Are you ready to transition to a farm trust structure? We can help. Call us on 1300 654 590 or email us to get started. We have helped several farming families transition to the farm trust structure and successfully utilise the stamp duty exemption.

How we can help 

There are many things to consider when it comes to the operation and ownership of your farming business.  Whether a farm trust is suitable for you is just one aspect.  We act for many farming families advising them about business structuring, succession planning and tax. Call us on 1300 654 590 or email us and let us help you put your farming business on the right footing going forward.

Some super useful resources!

Check out these useful resources about how we can assist farming businesses with business structuring, succession planning and tax:

Who gets the farm?

How to pass on the farm

How to successfully pass on your farm to your children

Should you hold farm land in Super?

Farm Leases – is a handshake good enough?

Farmers, how can you protect yourself if a customer doesn’t pay?    

 

The information contained in this post is current at the date of editing – 19 June 2024.

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