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Duty is payable under the Duties Act 2000 (the Act) when property is transferred from one party 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 and there is a familial link between the transferor and the transferee and the transfer is not part of a tax avoidance scheme. 

Note: this exemption is separate and distinct from the exemption from duty that is available for young farmers (under the age of 35) buying their first farm. 

Exempt land

The exemption applies to land that is used for primary production as referred to in ss. 65-67 of the Land Tax Act 2005. Different conditions apply, depending on the location of the land.

For land that is not in an urban zone of greater Melbourne, the exemption applies to land used primarily for primary production. 

For land that is wholly or partly in an urban zone of greater Melbourne, the exemption applies if the land is used solely or primarily for a business of primary production. 

In 2014, the definition of greater Melbourne was aligned with the urban growth boundary

Urban zone means a zone under a planning scheme in force under the Planning and Environment Act 1987 of a type declared under s.64(2) of the Land Tax Act 2005 to be an urban zone.

Primary production

For the purposes of this exemption, primary production means:

  • Cultivating land for the purpose of selling the produce of such cultivation, 
  • Maintaining animals or poultry for the purpose of selling them or their natural increase or bodily produce, 
  • Keeping bees for the purpose of selling their honey, 
  • Commercial fishing, including the preparation for such fishing and the storage and preparation of fish and fishing gear, or 
  • Cultivating or propagating for sale, plants, seedlings, mushrooms or orchids 

Transferors

The exemption allows the transferor to be a:

  • Natural person (a term used to distinguish a person from a company, trust or institution),
  • Company in which all the shares are owned by related natural persons, or 
  • Trustee for a 
    • natural person
    • discretionary trust of which the capital beneficiaries are limited to related natural persons
    • fixed trust of which the beneficiaries are limited to related natural persons 

Transferor of urban zone land

For land that is wholly or partly in an urban zone of greater Melbourne, the transferor must meet a number of further conditions.

The land must be eligible for the primary production exemption available under s67 of the Land Tax Act 2005. As such, if the transferor is:

  • A sole, natural person:
    • s/he is normally engaged in this business in a substantially full-time capacity, or
    • His or her relative is normally engaged in this business in a substantially full-time capacity and no other person is normally so engaged

  • More than one natural person:
    • all least one of the landowners must normally be engaged in the business in a substantially full-time capacity, the other landowner(s) are relatives of a person normally so engaged and no other person is normally engaged, or
    • a relative of all the landowners is normally engaged in this business in a substantially full-time capacity and no other person is normally engaged in the business.
  • A company (not acting as trustee):
    • its principal business must be the type of primary production performed on that land, and all the shares must be held beneficially by natural persons. Where dividends have been paid in the three years preceding the transfer, they must have been paid to the shareholders in proportion with their shareholdings, and at least 60 per cent of the dividends must have been paid to persons normally engaged in a substantially full-time capacity in that business. If no dividends were declared during the three years preceding the transfer, ordinary shares representing more than 60% of the paid up capital of the company (excluding shares entitled to a fixed rate of dividend) must have been beneficially owned for that period by persons normally engaged in a substantially full-time capacity in the business of primary production.
  • A trustee of a trust (other than a discretionary or superannuation trust):
    • its principal business must be the type of primary production performed on that land, and
    • at least one of the beneficiaries, or a relative of one of the beneficiaries, must be normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land
  • A trustee of a discretionary trust:

    • its principal business must be a type of primary production performed on that land, with

    • at least one of the specified beneficiaries being a natural person, and

    • each specified beneficiary who is not a natural person being either:

      • a charitable institution,

      • a company (all of the shares in which are owned by one or more of the specified beneficiaries who are natural persons), or 

      • a trustee of a trust (all of the beneficiaries of which are specified beneficiaries of the discretionary trust who are natural persons), and

    • at least one of the specified beneficiaries, or a relative of one of the specified beneficiaries, must be normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land. 
  • A trustee of a superannuation trust:

    •  all the members or beneficiaries of the trust must be relatives, and

    • at least one member or beneficiary must be normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.

You can read more about the requirements of the primary production exemption under s67 of the Land Tax Act 2005.

Transferees

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 a:

  • Relative of the transferor. This includes a relative of a deceased partner of the transferor,
  • Shareholder in the transferor company, or
  • Beneficiary under the transferor trust

If the transferee is a trustee, certain conditions apply.

Transferee trusts

If the transferee is the trustee of a fixed or discretionary trust then the beneficiary (or all the beneficiaries if 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 corporation, the beneficiaries of the transferee trust must be relatives of the shareholders of the corporation

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.

Relatives

A relative, in relation to a natural person who wishes to transfer a family farm, means:

  • Child or remoter lineal descendant (grandchild, great-grandchild, or similar) of the person or of the partner of the person, 
  • Parent or remoter lineal ancestor of the person or of the partner of the person, 
  • Brother or sister of the person or of the partner of the person, 
  • Partner of the person or a partner of any person referred to above, 
  • Child of a brother or sister of the person or of the partner of the person, or
  • Brother or sister of a parent of the person or of a parent of the partner of the person 

For the purposes of the family farm exemption, if the transfer involves a trust then all beneficiaries of the trust must be relatives of each other. Similarly, if the transfer involves a company (acting in its own right) then all shareholders must be relatives of each other. 

Answers to common questions

  • A child includes a legally adopted child or an illegitimate child, 
  • A partner includes a person’s spouse or domestic partner (irrespective of gender), 
  • A stepchild or step-grandchild must be a direct lineal descendant of the spouse of the transferor to qualify as a relative (so not all stepchildren or step-grandchildren are regarded as relatives under the definition), 
  • A niece or nephew of the transferor qualifies as a relative, 
  • A farm transferred to a relative who has never worked on it and who does not intend to, is exempt only if it is located wholly or partly outside an urban zone of greater Melbourne, 
  • The transfer of a family farm from a company (which beneficially owns the land) to shareholders or relatives of the company’s shareholders is exempt provided the shareholders are all related natural persons, 
  • The exemption is not available if the trust deed entitles a party that is not a relative or charitable institution to a distribution of a family farm, and
  • The exemption will still apply 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.

Read about our digital duties form.