Pitcher Proficies - December 2024

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P I T C H E R PROFICIES

Understanding the Impact of Queensland’s

Pharmacy Business Ownership Act 2024

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

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

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

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

ReviewingOwnershipStructures

Queenslandpharmacyownersshouldreassesstheircurrent ownership arrangements to ensure compliance with the newrequirements.Belowisabreakdownofhowdifferent ownershipstructuresmaybeaffected:

1.Individual/SoleTrader

Pharmacistsoperatingasasoletradermustconfirmthey: Arepractisingpharmacists;and HoldmaterialinterestsinnomorethanfiveQueensland pharmacies.

Thesameappliestopartnershipsofindividuals.

2.PrivateCompanywithindividualshareholder(s)

Allcompanydirectorsandshareholdersmustbepractising pharmacists or close adult relatives of a practising pharmacist. Additionally, no individual may hold material interestsinmorethanfiveQueenslandpharmacies

3.Discretionary(Family)Trusts

Beneficiariesofdiscretionarytrustsareconsideredtoholda materialinterestinthepharmacybusiness Asthisincludes allpossiblebeneficiariesofthetrustandnotjustthosethat have received profit distributions, trust deeds will require amendment to limit the beneficiaries to practising pharmacistsandtheircloseadultrelatives.Forexample: Ifparentsownpharmaciesthroughtrustsnamingtheir 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. Restructuringordeedamendmentsmayberequired.

4.DiscretionaryTrustsdistributingtoCompanies

Companies cannot hold a material interest and therefore mustberemovedasabeneficiaryofapharmacybusiness owned via a trust Trusts wishing to continue distributing profitstocompaniesordistributetotheminthefuture,will needtorestructureallorpartofthepharmacybusinesstoa company Whilethismaytriggercapitalgainstax(CGT)and transferduty,availableconcessionsmaymitigatecosts.

5. Company with corporate shareholder(s) who may or maynotactastrusteeofatrust

Like the point above, a company, either acting in its own rightorastrusteeforatrust,cannotbeashareholderofa company that owns a pharmacy business The pharmacy business would either need to be restructured out of that companyorfacilitateachangeinshareholder(s)

Again, this may trigger CGT and transfer duty, though, availableconcessionsmaymitigatecosts

6.Companywithindividualshareholder(s)whomayact astrusteeofatrust

Privatecompaniesmaystillhaveatrustasashareholder, providedthat:

Thetrusteeofthetrustisaneligibleperson(asdefined above);and

Thebeneficiariesoftheshareholdertrustarelimitedto eligiblepersons.

7.UnitTrusts

Unit holders are deemed to have material interests in a pharmacy business and must comply with ownership requirementsaspreviouslyidentified Companies,including those acting as trustees, can therefore not serve as unit holdersastheyarenoteligiblepersons.Affectedunittrusts will be required to restructure the pharmacy business and/orchangetheunitholders.Again,thismaytriggerCGT and transfer duty, though, available concessions may mitigatecosts

8.Partnerships

Each partner’s ownership structure must align with the eligibilityandmaterialinterestrulesasidentifiedabove

DutyExemptionsforComplianceTransactions

TheQueenslandGovernmenthasissuedaPublicRulingto provideexemptionsfromtransferduty,landholderduty,or corporatetrusteedutyforeligibletransactionsundertaken tocomplywiththe2024Act Keydetailsinclude:

Theexemptionappliesfrom1January2025andlasts foroneyear(fortransactionsinvolvingeligiblepersons) ortwoyears(fornon-eligiblepersontransactions)from thecommencementofthe2024Act

Transactions must primarily be to achieve compliance with the 2024 Act (Purpose Test), with minor or incidentalpurposespermissible.

A material interest holder must continue to hold a materialinterestimmediatelyfollowingthetransaction and if the interest is held in a different capacity (e.g. shareholder/beneficiary), look through provisions will needtobeapplied

Applicationsfordutyexemptionmustbesubmittedtothe Commissioner,withfurtherdetailsforthcoming.

TherewerealsochangesmadeinSeptember2020tothe DutiesAct2001toprovideanexemptionfromtransferduty forthetransferofassets(egapharmacybusiness)from soletraders,partnershipsanddiscretionarytruststoa companystructure.UnlikethePublicRuling,eligibilityfor thisexemptionincludesasset(notmorethan$10m)and turnover(notmorethan$5m)tests

Supporting Pharmacy Owners Through Change

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

For expert guidance, contact us today

Norman Thurecht Managing Partner

e. nthurecht@pitcherpartners.com.au

Mark Nicholson

e. mnicholson@pitcherpartners.com.au

Felicity Crimston Partner

e. fcrimston@pitcherpartners.com.au

Robert Hughes Partner

e. rhughes@pitcherpartners.com.au

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