You are required to pay duty when you transfer property from one person to another, unless an exemption applies.
The transfer of all or part of a family farm may be exempt from duty if the transfer meets certain conditions relating to the land, the transferor and the transferee. To receive this exemption, the land must be primary production land and there must be a familial link between the transferor and the transferee.
The transfer must not be part of a tax avoidance scheme. If it is, the exemption does not apply.
This exemption is separate and distinct from the exemption from duty available for young farmers (under the age of 35) buying their first farm.
The family farm exemption applies to land that is primary production land for land tax purposes. Different conditions apply, depending on where the land is located relative to greater Melbourne.
For the purposes of this exemption, primary production means:
- cultivating land for the purpose of selling the produce of such cultivation, including in a natural, processed or converted state
- maintaining animals or poultry for the purpose of selling them, their offspring or bodily produce
- keeping bees for the purpose of selling their honey
- commercial fishing, including preparing for such fishing or storing or preservation of fish or fishing gear, or
- cultivating or propagating plants, seedlings, mushrooms or orchids for sale.
Maintaining animals or growing crops for personal benefit only is not primary production for land tax exemption purposes. There must be a sale of the products resulting from the primary production activity.
Land outside or partly within greater Melbourne but not in an urban zone
The land must be used primarily for primary production if it is:
- entirely outside of greater Melbourne, or
- entirely or partly within greater Melbourne but not within an urban zone.
Land is primarily used for primary production when the primary production activity is the main activity conducted on the land and the main way of making an income from the land.
The primary production activity does not need to be performed by the owner of the land.
Land within greater Melbourne and an urban zone
The land must be used solely or primarily for the business of primary production if it is in an urban zone of greater Melbourne. The land must also meet certain ownership requirements.
In general terms, a business of primary production means you use your land to conduct one or more of the primary production activities described above. You must perform these activities as a viable undertaking carried on in a business-like manner with a reasonable expectation of returning a profit rather than for recreation or as a hobby.
To receive this exemption, there must be a familial link between the transferor and the transferee.
The transferor can be a natural person(s), a trustee for a natural person, a company or a trust.
The transferee can be a natural person or a trust (not a company).
If the transferor and transferee are natural persons, they must be relatives of each other.
Related natural persons are relatives of each other. A person is a relative, even if they are deceased. A relative means any of the following:
- Child or more remote lineal descendant (grandchild, great-grandchild, or similar) of the person or the partner of the person. A child includes a legally adopted child or an illegitimate child. If it is a stepchild or step-grandchild, then they must be a direct lineal descendant of the spouse of the transferor to qualify as a relative (not all stepchildren or step-grandchildren are regarded as relatives under the definition).
- Parent or more remote lineal ancestor (such as grandparent, great-grandparent or similar) of the person or the partner of the person.
- Brother or sister (siblings) of the person or the partner of the person.
- Partner of the person or a partner of any person referred to above in 1, 2, or 3 (i.e. of a child, grandchild, parent, grandparent, sibling or sibling-in-law, etc). A partner includes a person’s spouse or domestic partner, irrespective of gender).
- Child of a brother or sister (niece or nephew) of the person or of the partner of the person.
- Brother or sister of a parent (uncle or aunt) of the person or of a parent of the partner of the person.
The exemption allows the transferor to be a:
- natural person, or
- company in which all the shares are owned by related natural persons (i.e. relatives of each other), or
- trustee for a:
- natural person
- discretionary trust of which the capital beneficiaries are limited to related natural persons (i.e. relatives of each other)
- fixed trust of which the beneficiaries are limited to related natural persons (i.e. relatives of each other).
Capital beneficiaries of a discretionary trust means a person, or a member of a class of person, in whom the whole or any part of the capital of the trust estate may be vested or remain vested:
- in the event of the exercise of a power or discretion in favour of that person, or
- in the event that a discretion conferred under the trust is not exercised.
The transferee can be a natural person or the trustee of a fixed or discretionary trust.
If the transferee is a natural person, they must be one of the following:
- relative of the transferor
- shareholder in the transferor company in which all of the shareholders are relatives of each other, or
- beneficiary under the transferor trust.
If the transferee is the trustee of a trust, certain conditions apply (see below).
If the transferee is the trustee of a fixed or discretionary trust then the beneficiary, or all the beneficiaries if there is more than one, of the trust must be a relative of the natural person connected to the transferor. Accordingly, if the transferor is:
- a natural person, the beneficiary of the transferee trust must be a relative of that natural person
- a trust, the beneficiaries of the transferee trust must be relatives of the beneficiary (and if more than one, all the beneficiaries) of the transferor trust
- a company, the beneficiaries of the transferee trust must be relatives of the shareholders of the company.
The trust deed cannot contain a variation clause that would permit the distribution of the family farm, or any part of it, to parties other than relatives or charitable institutions. In these circumstances, you cannot receive the exemption.
The exemption still applies if a trust can be varied to include additional relatives as entitled to a distribution of a family farm.
Apply for this exemption
From 1 July 2017, you must use the Digital Duties Form to claim this exemption.
The transfer can be lodged using Duties Online if the transfer is between natural persons. If a trust is involved, a copy of the duly stamped trust deed must also be lodged with these documents.
Find out more about our Digital Duties Form.