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Transfer Requirements where Property Owned by Company or Trust
Transfer requirements where sugarcane farm owned by a private company
VEA ?
Where a designated private company owns the sugarcane farm or sugarcane farms and relevant sugarcane farm assets it is necessary to first transfer the sugarcane farm(s) and relevant sugarcane farm assets from the company to the sugarcane farmer. The sugarcane farmer can then transfer the sugarcane farm(s) and relevant sugarcane farm assets to the eligible descendants as a transfer between natural persons in order to take advantage of RASF.
Transfer of shares in company not sufficient
Where a designated private company owns the sugarcane farm(s), there must be a transfer of legal title of the land before participation in RASF is permitted. Transfer of the private company shares by the sugarcane farmer to an eligible descendant is not sufficient. To participate in the scheme the transfer of the property must be between natural persons.
Sugarcane farm owned by a trust
Where the sugarcane farm(s) is owned by a designated private trust, it is possible for the sugarcane farmer to qualify for RASF by transferring their trusteeship of a private trust to the eligible descendant(s). Under trust law, a trustee is the legal owner of land held within a trust. Alternatively, the trustee may choose to transfer the sugarcane farm(s) and relevant sugarcane farming assets to the sugarcane farmer, who then transfers them to the eligible descendant(s).
Sugarcane farmer who is trustee or beneficiary
A sugarcane farmer who is a trustee of a trust that owns the sugarcane farm and sugarcane farm assets has an eligible interest in the sugarcane farm(s). A retiring sugarcane farmer who was a beneficiary only and not a trustee did not satisfy the rules relating to qualifying sugarcane farmer.
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RASF definitions
Section 5PAA VEA
Business structures and trusts
According to Section 52ZZA of the VEA, a company is a designated private company at a particular time if the company:
- satisfies at least 2 of the following conditions in relation to the financial year that ended immediately before that time:
-
gross operating revenue is less than $25 million;
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gross assets at the end of the financial year are less than $12.5 million;
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the company has fewer than 50 employees at the end of the financial year, or
- the company came into existence after the end of the financial year that ended immediately preceding that time, or
- the company is a declared private company (DPC) ,
and the company is not an excluded company.
According to subsection 5PAA(1) of the VEA, a sugarcane farm is a farm that is used predominantly for the purposes of a sugarcane farm enterprise .
According to subsection 5PAA(1) of the VEA, relevant sugarcane farm assets in relation to a sugarcane farm, means any relevant farm asset or assets that are a produce of, or are used for the purposes of, a sugarcane farm enterprise.
According to section 52ZZB of the VEA, a trust is a designated private trust unless:
the following conditions are satisfied, that is the trust:
-
units are held by 50 or more persons, and
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the trust was not created, continued in existence or operated under a scheme that was entered into or carried out for the sole or dominant purpose of enabling any individual/s to avoid Division 11A (means test of private companies and private trusts), section 52ZZB of the VEA or the equivalent section of the Social Security Act, or
- the trust is a complying superannuation fund: or
- the trust is an excluded trust.
Trustee has two meanings depending on the context, (i) and (ii).
(i) a person who looks after someone else's affairs
According to section 202 of the VEA, a trustee is a person appointed by the Commission to administer the financial affairs of a pensioner who may be incapable of managing their own affairs for reasons such as:
- age,
- infirmity,
- ill health, or
- improvidence.
These criteria include circumstances where a pensioner has a psychiatric disorder or a mental illness as a result of alcohol or drug addiction.
A trustee can be appointed, with or without the consent of the pensioner and once appointed, a trustee has full control of the pension payment.
(ii) a person responsible for administration of a trust
According to section 52ZO of the VEA, trustee has the same meaning as in the Income Tax Assessment Act 1997.
Eligible interest in a sugarcane farm
Eligible interest in a relevant sugarcane farm asset
A sugarcane farmer holds an eligible interest in a sugarcane farm if they:
- have a legal estate or interest in the sugarcane farm, or
- have a transferable legal right or a transferable licence to occupy the farm for a particular purpose of the sugarcane farm enterprise, or
- have an equitable estate or interest in a farm, as mortgagor of the legal estate or interest in the farm; or
- are a shareholder in a private company that owns or holds a pastoral lease over the farm land.
Refer to subsection 5PAA(5) for the full definition.
Qualifying sugarcane farmer – 15 years continuous involvement
Qualifying sugarcane farmer – 20 years involvement
A person is considered to be a qualifying sugarcane farmer if they have:
- held an eligible interest in the farm for a continuous period of 15 years and the farm has for the last two years and since 29 April 2004 been a sugarcane farm, or
- acquired an eligible interest in the sugarcane farm before 29 April 2004 and had an active involvement in the farm or the farming industry in Australia for any period or periods totalling at least 20 years.
During either period the person or their partner must have derived a significant part of their income and contributed a significant part of their labour to the development of a sugarcane farm for at least the last two years.
Refer to subsections 5PAA(3) and 5PAA(4) for the full definition.