Sugarcane Farmer must be a Qualifying Sugarcane Farmer

Definition of a qualifying sugarcane farmer

The person must be a qualifying sugarcane farmer at the date of transfer of the sugarcane farm to the eligible descendant. A person is a qualifying sugarcane farmer if:

• the person has had a continuous period of 15 years eligible interest in a farm before the gift, and during that 15 years the person or their partner:

• has contributed a significant part of labour and capital to the development of a sugarcane farm, and
• has derived a significant part of income from that sugarcane farm, and
• the farm has for at least two years and at all times since 29 April 2004 been a sugarcane farm, or

• acquired an eligible interest in a sugarcane farm before 29 April 2004 and the person, or their partner, has had a [glossary:20-year involvement in farming:DEF/20 year involvement in farming] for any period in Australia:

• contributing a significant part of labour to a farm enterprise, and
• deriving a significant part of their income from the farm enterprise, and
• during at least the last two years, the contribution of labour and derivation of income has been in respect of a sugarcane farm enterprise.

Example of requirement to contribute significant labour and derive significant income

A sugarcane farmer purchased his farm in 1989 and planted sugarcane. From 2000 to 2002, the farmer worked full-time in off-farm employment, but continued to work on the farm after hours, and continued to receive a small income from his sugarcane farm. For the period 2002 till 2005, all of his labour was contributed to the sugarcane farm. The farmer retired in 2005 and gifted the farm to his daughter. The farmer is a qualifying sugarcane farmer because:

• he has continuously owned a farm for at least 15 years, and
• during the period of ownership, the significant part of his income, labour and capital was related to the farm, and
• contribution of his labour and capital and the income he derived was from a sugarcane farm for at least the last two years.

Significant part of income

A significant part of income is determined in relation to the individual, or both members of a couple individually. A significant part is considered to be 50% or more. The income used in determining a significant part of farm income is the gross income (i.e. income before expenses). The Department of Agriculture, Fisheries & Forestry have also advised that a temporary (less than a year) reduction in the proportion of income derived from sugarcane farming to below 50% is acceptable.

Partner's income irrelevant

For members of a couple, if one member of a couple is otherwise eligible and can establish that a significant part of his/her income is from sugarcane farming, it is irrelevant what proportion of the partner's income comes from sugarcane farming.

Significant part of labour

A significant part of labour is determined in relation to the individual, or both members of a couple individually. Each case must be determined on its unique circumstances. Factors that may be taken into account include but are not limited to:

• whether the person is working the farm full time
• if the person is undertaking full time study on a course related to farming (including various business management related courses)
• if the person has other jobs apart from working the farm
• time put into administration and business matters regarding the farm.

Significant part of capital

A significant part of capital is also determined in relation to the individual, or both members of a couple individually. Each case must be determined on its unique circumstances. Factors that may be taken into account include:

• personal borrowings taken out to finance farm operations
• guarantees given by the person on business borrowings
• contribution of income from other sources to support farm operations
• contribution of personal capital (eg inheritances) to farm operations
• any rearrangement of personal investments to make available more capital for farm operations.

Example of exception

Due to a downturn in the sugar industry, a sugarcane farmer has undertaken employment on a nearby cattle farm so that less than 50% of his time has been spent working on the sugarcane farm and less than 50% of his income has been earned on the sugarcane farm. If the farmer could demonstrate that normally he would meet the definition of a qualifying sugarcane farmer (i.e. that normally over 50% if his time was spent farming sugarcane and over 50% of his income would be earned from the sugarcane farm), then he or she would qualify. However, if the majority of his contributed labour and income derivation was from something other than farming for a period of time exceeding one year then he would not qualify.

Effect of acquiring adjoining parcels of land during the 15-year period

A person is considered to own the sugarcane farm property in Australia for 15 years where he or she initially owned only a part of the currently existing sugarcane farm enterprise. For the purposes of RASF, the sugarcane farmer can be considered to have owned the entire sugarcane farm for 15 years if the sugarcane farmer owned a parcel of land 15 years ago and subsequently acquired adjoining parcels of land that at the time of transfer make up the sugarcane farm enterprise. If there is any gap during which the person (or the person's partner) does not own a farm during the 15 years, qualification under this criterion is not met, even if the gap is just 1 day.

Investors

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

Sugarcane farm managers

Sugarcane farm managers who acquired ownership of the sugarcane farm before 29 April 2004 are regarded as qualifying sugarcane farmers if they establish that they have been involved with farming for 20 years.