Pitcher Proficies - December 2024

December 2024

PITCHER

PROFICIES

Understanding the Impact of Queensland’s Pharmacy Business Ownership Act 2024

by Robert Hughes The Pharmacy Business Ownership Act 2024 (2024 Act) received Royal Assent on 28 March 2024 and is slated to take effect by 1 July 2025. This new legislation modernizes the framework for pharmacy business ownership in Queensland, aligning it more closely with the ownership rules of other states, namely New South Wales and Victoria.

Key changes under the 2024 Act include: 1. Ownership of and interests in pharmacy businesses: Introduction of the concept of a "material interest" in pharmacy businesses.

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Pharmacy Business Ownership Council: Establishment of a statutory body to oversee pharmacy business ownership compliance.

3. Licensing Framework: Mandatory licensing pharmacy business ownership in Queensland.

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4. Proposed fee framework: A tiered fee framework reflecting the complexity of pharmacy ownership structures.

5. External control of pharmacy business: a non-owner must not control how pharmacy services and medicines are provided This article focuses on the ownership and material interest provisions and their implications for Queensland pharmacy owners.

Ownership and Licensing Requirements Under the 2024 Act, individuals must hold a pharmacy business licence to own a pharmacy in Queensland.

Licenses are restricted to eligible persons, defined as: A practising pharmacist A corporation whose directors and shareholders are all practising pharmacists A corporation whose directors and shareholders are a combination of practising pharmacists and close adult relatives (spouse or adult child) of practising pharmacists The 2024 Act also introduces the concept of a material interest in a pharmacy business, which is defined as: An interest as a shareholder of an owner of the business (i.e. a shareholder of a company which owns a pharmacy business); An interest as a beneficiary of a trust which an owner of the business is trustee (i.e. a beneficiary of a trust which owns a pharmacy business); Another interest in the business, other than an interest of the owner of the business, that entitles the person who holds the interest to receive consideration that varies according to the profits or takings of the business.

Material interests are restricted to practising pharmacists and their close adult relatives.

Reviewing Ownership Structures Queensland pharmacy owners should reassess their current ownership arrangements to ensure compliance with the new requirements. Below is a breakdown of how different ownership structures may be affected:

Again, this may trigger CGT and transfer duty, though, available concessions may mitigate costs.

1. Individual / Sole Trader

Private companies may still have a trust as a shareholder, provided that:

Pharmacists operating as a sole trader must confirm they: Are practising pharmacists; and Hold material interests in no more than five Queensland pharmacies.

6. Company with individual shareholder(s) who may act as trustee of a trust

The trustee of the trust is an eligible person (as defined above); and The beneficiaries of the shareholder trust are limited to eligible persons.

The same applies to partnerships of individuals.

7. Unit Trusts 2. Private Company with individual shareholder(s) All company directors and shareholders must be practising pharmacists or close adult relatives of a practising pharmacist. Additionally, no individual may hold material interests in more than five Queensland pharmacies.

3. Discretionary (Family) Trusts Beneficiaries of discretionary trusts are considered to hold a material interest in the pharmacy business. As this includes all possible beneficiaries of the trust and not just those that have received profit distributions, trust deeds will require amendment to limit the beneficiaries to practising pharmacists and their close adult relatives. For example: If parents own pharmacies through trusts naming their adult child as a beneficiary, and the child owns additional pharmacies, the adult child’s total material interests must not exceed the five-business cap.

Restructuring or deed amendments may be required.

4. Discretionary Trusts distributing to Companies Companies cannot hold a material interest and therefore must be removed as a beneficiary of a pharmacy business owned via a trust. Trusts wishing to continue distributing profits to companies or distribute to them in the future, will need to restructure all or part of the pharmacy business to a company. While this may trigger capital gains tax (CGT) and transfer duty, available concessions may mitigate costs.

5. Company with corporate shareholder(s) who may or may not act as trustee of a trust Like the point above, a company, either acting in its own right or as trustee for a trust, cannot be a shareholder of a company that owns a pharmacy business. The pharmacy business would either need to be restructured out of that company or facilitate a change in shareholder(s).

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Unit holders are deemed to have material interests in a pharmacy business and must comply with ownership requirements as previously identified. Companies, including those acting as trustees, can therefore not serve as unit holders as they are not eligible persons. Affected unit trusts will be required to restructure the pharmacy business and/or change the unit holders. Again, this may trigger CGT and transfer duty, though, available concessions may mitigate costs.

8. Partnerships Each partner’s ownership structure must align with the eligibility and material interest rules as identified above.

Duty Exemptions for Compliance Transactions The Queensland Government has issued a Public Ruling to provide exemptions from transfer duty, landholder duty, or corporate trustee duty for eligible transactions undertaken to comply with the 2024 Act. Key details include: The exemption applies from 1 January 2025 and lasts for one year (for transactions involving eligible persons) or two years (for non-eligible person transactions) from the commencement of the 2024 Act. Transactions must primarily be to achieve compliance with the 2024 Act (Purpose Test), with minor or incidental purposes permissible.

A material interest holder must continue to hold a material interest immediately following the transaction and if the interest is held in a different capacity (e.g. shareholder/beneficiary), look through provisions will need to be applied.

Applications for duty exemption must be submitted to the Commissioner, with further details forthcoming.

Supporting Pharmacy Owners Through Change

There were also changes made in September 2020 to the Duties Act 2001 to provide an exemption from transfer duty for the transfer of assets (e.g. a pharmacy business) from sole traders, partnerships and discretionary trusts to a company structure.Unlike the Public Ruling, eligibility for

Navigating the complexities of the 2024 Act requires careful planning. Pitcher Partners are ready to assist pharmacy owners in evaluating their current ownership structures and implementing tailored strategies to ensure compliance with the new requirements.

this exemption includes asset (not more than $10m) and turnover (not more than $5m) tests.

For expert guidance, contact us today.

Norman Thurecht Managing Partner e. nthurecht@pitcherpartners.com.au

Mark Nicholson Partner e. mnicholson@pitcherpartners.com.au

2022 EDITION 3

Making business personal

Felicity Crimston Partner e. fcrimston@pitcherpartners.com.au

Robert Hughes Partner e. rhughes@pitcherpartners.com.au

Adelaide | Brisbane | Melbourne | Newcastle | Perth | Sydney Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539.

Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.

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