Farm succession planning or transition of the farm business to the next generation, usually involves a transfer of farmland somewhere in the process. To date, the transfer of farmland owned prior to the commencement of Capital Gains Tax (CGT) in 1985, has been relatively simple, with the major consideration being the Stamp Duty exemptions available for transfer down the generations.
However, the introduction of CGT plus the rapid increase in land values of late, has presented some major challenges in planning transfers of farmland.
This has illustrated the importance of long term strategic planning and collaboration between clients and their professional advisors, when deciding in whose name or entity farm acquisitions should be made. Failure to address this issue seriously when purchasing farmland, will lead to sub-optimal outcomes in the future, when land is eventually transferred or sold to a different party.
Many clients do not now qualify as a “Small Business” for CGT purposes, as both their net assets are over $6 million and their turnover exceeds $2 million. New superannuation rules introduced on 1 July 2017, also make it more difficult to offset capital gains through contributions to superannuation.