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Farmer Must be a Qualifying Farmer

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Definition of a Qualifying Farmer

VEA?

The person must have been a 'qualifying farmer' at the date of transfer of the farm to the eligible descendant. A qualifying farmer was a person who had a 'qualifying interest' in the farm(s) and:

  • acquired that qualifying interest before 15 September 1997 and the person, or his or her partner,  had a [glossary:20 year involvement in farming:DEF/20 year involvement in farming] for any period in Australia:
Effect of acquiring adjoining parcels of land during the 15 year period

A person would have been considered to own the farm property in Australia for 15 years where he or she initially owned only a part of the currently existing farm enterprise. For example, for the purposes of RAFS the farmer could be considered to have owned the entire farm for 15 years if the farmer owned a parcel of land 15 years ago and subsequently acquired adjoining parcels of land that at the time of transfer made up the farm enterprise.

Investors

Generally, investors could not demonstrate that they had contributed a significant part of their labour to the farm enterprise or derived a significant part of their income from the farm enterprise. This is because investors often have a primary occupation and/or source of income to which they devote their time and efforts other than primary production.

Farm managers

Farm managers who acquired ownership of the farm before 15 September 1997 were regarded as qualifying farmers if they establish that they had been involved with farming for 20 years.


A farmer holds a qualifying interest in a farm if they:

  • have legal ownership of the farm land;
  • hold a pastoral lease over the farm land;
  • hold an equitable interest in general law land which is mortgaged; or
  • are a sharefarmer in a private company that owns or holds a pastoral lease over the farm land.

Refer to section 5P(5) of the VEA for the full definition.

 

 

In considering whether a 'significant part' of the person's labour was related to the farm, the general rule will be that at least half of the person's working hours were involved. The entire period is examined as a whole.

RAFS example: A farmer purchased his farm in 1982. From 1993 to 1995 the farmer worked full time in off-farm employment, but continued to work on the farm after work and on weekends, and continued to receive a small income from his farm. For the remainder of the period, all of his labour was contributed to the farm. The farmer retired in 1998 and gifted the farm to his daughter. The farmer is a qualifying farmer because he has continuously owned a farm for at least 15 years, and during that time the significant part of his income, labour and capital was related to his farm.

RASF example: A sugarcane farmer purchased his sugarcane farm in 1988. From 1999 to 2001 the farmer worked full time in off-farm employment, but continued to work on the sugarcane farm after work and on weekends, and continued to receive a small income from his sugarcane farm. For the remainder of the period, all of his labour was contributed to the sugarcane farm. The sugarcane farmer retired in August 2004 and gifted the sugarcane farm to his daughter. The sugarcane farmer is a qualifying sugarcane farmer because he has continuously owned a sugarcane farm for at least 15 years, and during that time the significant part of his income, labour and capital was related to his sugarcane farm.

 

 

For RAFS and RASF, a farmer or sugarcane farmer needs to derive a significant part of their income from their relevant farming enterprise in order to fulfil the requirements for a qualifying farmer and qualifying sugarcane farmer respectively.

When determining whether a person derived a significant part of their income from farming or sugarcane farming, gross (before expenses) income figures should be used. The general rule will be that at least half of the person's income was involved. The entire period is examined as a whole.

An indication of a family member's major source of income can be obtained from the farmer's tax return or the farm or sugarcane farm business tax return.

 

 

In considering whether a 'significant part' of the person's labour was related to the farm, the general rule will be that at least half of the person's working hours were involved. The entire period is examined as a whole.

RAFS example: A farmer purchased his farm in 1982. From 1993 to 1995 the farmer worked full time in off-farm employment, but continued to work on the farm after work and on weekends, and continued to receive a small income from his farm. For the remainder of the period, all of his labour was contributed to the farm. The farmer retired in 1998 and gifted the farm to his daughter. The farmer is a qualifying farmer because he has continuously owned a farm for at least 15 years, and during that time the significant part of his income, labour and capital was related to his farm.

RASF example: A sugarcane farmer purchased his sugarcane farm in 1988. From 1999 to 2001 the farmer worked full time in off-farm employment, but continued to work on the sugarcane farm after work and on weekends, and continued to receive a small income from his sugarcane farm. For the remainder of the period, all of his labour was contributed to the sugarcane farm. The sugarcane farmer retired in August 2004 and gifted the sugarcane farm to his daughter. The sugarcane farmer is a qualifying sugarcane farmer because he has continuously owned a sugarcane farm for at least 15 years, and during that time the significant part of his income, labour and capital was related to his sugarcane farm.

 

 

According to subsection 5P(1) of the VEA, a farm enterprise means an enterprise carried on within any of the agricultural, horticultural, pastoral or aquacultural industries.

 

 

For RAFS and RASF, a farmer or sugarcane farmer needs to derive a significant part of their income from their relevant farming enterprise in order to fulfil the requirements for a qualifying farmer and qualifying sugarcane farmer respectively.

When determining whether a person derived a significant part of their income from farming or sugarcane farming, gross (before expenses) income figures should be used. The general rule will be that at least half of the person's income was involved. The entire period is examined as a whole.

An indication of a family member's major source of income can be obtained from the farmer's tax return or the farm or sugarcane farm business tax return.