Family farm exemption

A transfer of all, or part, of a family farm may be exempt from duty if the transfer meets certain conditions.

Refer to this page on our website for more information on the family farm exemption .

Unless stated otherwise, all section numbers are references to the Duties Act 2000.

1.  Family farm exemption (section 56)

The family farm exemption may apply to a transfer of dutiable property which is an estate in fee-simple, a life estate or an estate in remainder in primary production land.

In general terms, the family farm exemption permits farms to be transferred to relatives, family companies or trusts without incurring duty. The transferor must be a natural person, company or trustee within certain defined categories (see point 5) and the transferee must be a natural person or a trustee within certain defined categories (see point 6).

The Commissioner of State Revenue must also be satisfied that the transfer does not arise from arrangements or a scheme devised for the principal purpose of taking advantage of the exemption.

2.  Primary production (section 3)

Primary production is the use of land primarily for:

  • Cultivation for the purpose of selling the produce from it (whether in a natural, processed or converted state), 
  • The maintenance of animals or poultry for the purpose of selling them, their natural increase or bodily produce, 
  • The keeping of bees for the purpose of selling their honey, 
  • Commercial fishing, including the preparation for commercial fishing or storing or preserving fish or fishing gear, 
  • The cultivation or propagation for sale of plants, seedlings, mushrooms or orchids.

3.  Primary production land (sections 65, 66 and 67 of the Land Tax Act 2005)

Primary production land is:

  • Section 65 - land outside greater Melbourne that is used primarily for primary production, or
  • Section 66 - land comprising one parcel that is:
    • Wholly or partly within greater Melbourne but not within an urban zone, and
    • Used primarily for primary production, or
  • Section 67 - land comprising one parcel that is:
    • Wholly or partly within greater Melbourne and also within an urban zone, and
    • Used solely or primarily for the business of primary production, and
    • The owner of the land is a person specified in section 67(2) of the Land Tax Act 2005.

‘Greater Melbourne’ has the same meaning as ‘metropolitan area’ as defined in section 201 of the Melbourne Metropolitan Board of Works Act 1958. “Urban zone” means a zone under a planning scheme in force under the Planning and Environment Act 1987. If you are unsure whether property is within greater Melbourne or an urban zone, please contact the municipality in which the property is located.

4.  Relative (section 3)

Relative means a natural person and:

  1. A child or any lineal descendant of the person or of the partner of the person,
  2. A parent or any lineal ancestor of the person or of the partner of the person,
  3. A brother or sister of the person or of the partner of the person,
  4. The partner of the person or a partner of any person referred to in paragraph (a), (b) or (c),
  5. A child of a brother or sister of the person or of the partner of the person,
  6. A brother or sister of a parent of the person or of a parent of the partner of the person.

5.  The transferor (section 56(2))

In order for the family farm exemption to apply, the transferor must be:

  1. A natural person, or
  2. A trustee for a natural person, or
  3. A company(not acting in the capacity of trustee under a trust) all the shares in which are owned by natural persons who are relatives of each other, or
  4. A trustee under a discretionary trust, the capital beneficiaries of which are limited to natural persons who are relatives of each other, or
  5. A trustee under a fixed trust, the beneficiaries of which are limited to natural persons who are relatives of each other.

A capital beneficiary of a discretionary trust is a person or a member of a class of person who, under the terms of the trust deed, the whole or any part of the capital of the trust can be vested:

  • By exercise of a power or discretion in favour of the person, or
  • If a discretion conferred under the trust is not exercised.

A fixed trust is a trust under which the identity of the beneficiaries and the quantum of their interests are ascertained.

6.  The transferee (section 56(3))

In relation to a natural person transferor referred to in (a), (b) or (c) in point 5 (‘X’), the transferee must be:

  1. A relative of X, or
  2. A trustee under a fixed trust, the beneficiaries of which are limited to the beneficiaries specified below, or
  3. A trustee under a discretionary trust the terms of which do not allow the distribution of the whole or any part of the capital of the trust comprising the primary production land to any person or body other than the beneficiaries specified below.

If the transferor is a company, the transferee must be a natural person shareholder of the company. A fixed trust is a trust under which the identity of the beneficiaries and the quantum of their interests are ascertained.

The beneficiaries of the fixed or discretionary trust at (b) and (c) above must be limited to:

  1. A present or future relative of X,
  2. A charitable institution, or
  3. A combination of (i) and (ii), or
  4. A combination of (i) and X, or
  5. A combination of (ii) and X, or
  6. A combination of (i), (ii) and X.

A charitable institution is a corporation or body of persons associated for charitable purposes.