Focus: Stamp duty concession introduced for farm-in arrangements in Queensland
16 June 2015
In brief: The Queensland Parliament has passed legislation introducing a stamp duty concession for transfers of interests in exploration authorities under eligible farm-in agreements. Partner Adrian Chek (view CV), Senior Associate Marc Johnston and Associate Jay Prasad provide a brief update.
How does it affect you?
- Legislation introducing a duty concession for farm-in agreements relating to transfers of interests in exploration authorities under such agreements has been passed by the Queensland Parliament.
- The concession will apply to farm-in agreements entered into from 10:30am on 13 January 2012 (being the time from which transfers of exploration authorities became dutiable in Queensland).
- Taxpayers who intend to enter into farm-in arrangements, or taxpayers who have entered into these types of arrangements in reliance on the Office of State Revenue's existing administrative arrangement, should consider these amendments to the Duties Act 2001 to understand how they may impact on these arrangements.
The Payroll Tax Rebate, Revenue and Other Legislation Amendment Bill 2015 (the Bill) was introduced into the newly constituted Queensland Parliament in March this year as the legislative implementation of the proposed duty concession for farm-in arrangements announced by the Queensland Government on 13 January 2012.1 This is the same date on which the Queensland Government announced the expansion of the duty base to impose duty on direct and indirect transfers of exploration authorities. (Previously, these transfers did not attract duty in Queensland).
The Bill was passed by Parliament on 2 June 2015, and was given Royal Assent on 11 June 2015.
We considered the specific features of the proposed farm-in concession in Focus: Exploring the duty implications of farm-in agreements in Queensland. To summarise:
- The concession only applies to agreements that qualify as either an 'up-front farm-in agreement' or a 'deferred farm-in agreement'. According to the explanatory notes that accompanied the Bill, the concession will not apply to what are termed 'hybrid' agreements that allow for multiple transfers consisting of both upfront and deferred elements.
- In order to be treated as a qualifying farm-in agreement, the farmor must have been granted an exploration authority, even if the person is not yet registered as the holder. According to the explanatory notes that accompanied the Bill, where the farmor has applied for, but not been granted, an exploration authority at the time the agreement is entered into, the agreement will not qualify for the concession (even if the application is subsequently granted).
- The concession operates so that duty on the transfer of an interest in the exploration authority is limited to the consideration paid to the farmor (or a related person of the farmor) to enter into the farm-in agreement, other than the 'exploration amount' committed by the farmee. If there is no consideration other than the exploration amount, there is no duty payable.
- 'Other consideration' may include payments made for mining information. While payments for mining information do not ordinarily attract duty in Queensland, duty will be imposed on such payments made under a farm-in agreement.
The Bill was referred to the Finance and Administration Committee of the Queensland Parliament (the Committee) for stakeholder consultation. The Committee expressed concern regarding the level of consultation that was undertaken in drafting the provisions of the Bill relating to the farm-in concession. It noted:
… there is clearly a need for better communication and consultation on Queensland Treasury's part. The Committee considers that the whole process would have been significantly improved had Queensland Treasury better understood the needs of stakeholders and undertaken more timely and directed consultation.
While these criticisms were drawn out by the Committee in the report to Parliament, they did not translate to any substantive recommendations. Instead, in response to stakeholder concerns, the Committee recommended that the Government clarify particular areas of uncertainty relating to the Bill through education and awareness campaigns, public rulings, and further consultation with peak industry bodies.
The amendments to the Duties Act are taken to have had effect from 10:30am on 13 January 2012.
For taxpayers who have received an assessment of duty made between that time and the commencement date of the amendments on either a farm-in agreement or the transfer of an interest in an exploration authority under a farm-in agreement, the timeframe for objecting to that assessment will be extended to 30 days after commencement of the amendments (as opposed to the usual 60 days after the assessment). The commencement date of the amendments will be taken to be the date on which Royal Assent was given, being 11 June 2015.
Further clarification by the Office of State Revenue on the application of the concession would be very welcome. In the interim, it is critical that taxpayers entering into farm-in agreements in Queensland obtain advice regarding whether the duty concession will apply to their particular arrangements.
- The Revenue and Other Legislation Amendment Bill 2014 introduced by the former Queensland Government lapsed as a consequence of the Queensland general election in January this year. In all material respects the farm-in concession proposed by the new Bill is the same as that proposed by the 2014 Bill.
- Adrian ChekPartner,
Ph: +61 2 9230 4800
- Martin FryPartner, Practice Leader, Tax,
Ph: +61 3 9613 8610
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