Note: THIS SCHEME CLOSED on 31 July 2001 and the following INFORMATION is FOR HISTORICAL PURPOSES ONLY.
A farmer wishing to access RAFS must transfer the legal title to their farm (1.1.F.100) and farm assets to an eligible descendant/s (1.1.E.60) by gifting them. The transfer MUST be completed by 30 June 2001. This topic explains the issues associated with this provision.
The farmer and their partner MUST transfer all of their farm assets to the eligible descendant/s by gifting. The qualifying interests (1.1.Q.30) in the following assets MUST be transferred:
These are the ONLY assets that can be transferred for the purposes of RAFS.
Example 1: If the farmer sells the farm and gifts the proceeds to an eligible descendant, RAFS cannot apply to disregard the gift of the proceeds from the deprivation provisions.
Example 2: A farmer who gifts their shares in a private company that owns the farmland, cannot access the scheme.
Example 3: A farmer sells the farm to a descendant with the price to be paid by instalments. S/he is not eligible for RAFS on the grounds that s/he has sold and not gifted his/her assets. The amount of the unpaid instalments is not an asset that can be disregarded under RAFS.
The farmer, and their partner if applicable, MUST dispose of ALL relevant farm assets as well as their qualifying interest in the farmland.
Explanation: One of the aims of RAFS is that older farmers retire from farming, thus they must dispose of all their farming interests.
ALL other property and farm assets MUST be transferred, including any farm encumbrances (1.1.E.108) or shares that are taken into account in calculating the net value of the farm enterprise.
Examples: Mortgages and overdrafts associated with the property, and shares or units held in farming co-operatives essential to the running of the farm.
Exceptions: The following table outlines the exceptions to this rule:
If the farmer retains ownership of…
an asset with the intention that it will be used now for private purposes,
Example: A motor vehicle.
the asset is no longer considered a farm asset, and should be included as a personal asset of the retiring farmer.
the dwelling house and curtilage on the farm, that is, up to 2 hectares of land surrounding the house,
the house is no longer considered a farm asset, and should be included as a personal asset of the retiring farmer. The farmer can retain a life interest, freehold or leasehold (only farms under a pastoral lease) interest.
The farmer may hold deposits in certain schemes that do not allow transfer to another person. In this case, the deposits MUST be withdrawn on retirement. Once withdrawn, the cash is NOT a farm asset, and CANNOT be disregarded if it is gifted.
Example: Income Equalisation Deposits and Farm Management Deposits.
If the farmer or farming couple own or have shares in more than one farm, they need to divest ALL of those interests and properties to satisfy the divestment provision.
Policy reference: SS Guide 184.108.40.206 RAFS - Farmer Retains an Interest in the Home
The farmer MUST transfer the legal title over their farmland to the eligible descendant/s, not just a beneficial interest in the farm.
Example: A farmer who has contracted the farm to an eligible descendant will not meet the transfer criteria.
Transfer of legal ownership should be confirmed by obtaining a copy of the certificate of title for the land or by providing sufficient evidence that the required steps have been undertaken under the relevant State land law (1.1.R.140).
If the property is owned under general law, the land must be converted to a Torrens title before transfer of legal title is taken to be complete.
Explanation: Ownership of private land in Australia is held under either the Torrens system or general law. Certificates of title can only be issued under the Torrens system.
If the farm was owned by a private company (1.1.C.220), it must first be transferred from the company to the farmer, along with the farm assets. The farm and assets are then transferred to the eligible descendant/s to meet this provision.
Explanation: This facilitates a transfer between 2 natural persons.
Policy reference: SS Guide 220.127.116.11 Trust Issues for RAFS
If a farm is held in a family trust, the farmer meets this provision by transferring either:
Explanation: The trustee of a trust is the legal owner of land held within a trust.
Policy reference: SS Guide 18.104.22.168 Trust Issues for RAFS
A farmer may have entered an agreement to sell the farm before 15 September 1997, although legal interest in the farm may have not transferred yet.
Example: A farmer who arranges a sale to his daughter, with payment in instalments. The transfer of legal title does not occur until payment of the final instalment.
Farmers in this situation have the option of cancelling the contract, and gifting the balance of the farm. In this case they can access RAFS, but only from the date of legal transfer, NOT the date of the first sale agreement. Applicants in this situation should be urged to seek legal advice about their options before taking any action.
The date that the transfer is affected is the date that legal title is passed under the relevant State land law (1.1.R.140). This appears on the certificate of title or other suitable evidence from the State Land Titles Office. If multiple transactions are involved, the date of the final transaction is used as the date of transfer.
Example: If a farmer transfers the farmland, then business equipment and subsequently the livestock they will have disposed of their equitable interest but not the legal title. The transfer of legal title is a separate transaction involving registration with the Land Titles Office, and the date of this final transaction is the date of transfer.
Before the date of legal transfer, the farmer's pension can be assessed under the normal provisions. It is possible that the farmer may be entitled to receive a reduced rate of payment using these provisions. When legal transfer occurs, a reassessment can be made under RAFS.
If the assessment is made under the normal provisions prior to the legal title being transferred, the forgone wages provisions CANNOT be used as well as RAFS.
Last reviewed: 13 May 2013