Private ruling: GST
Date of advice: 4 October 2017
Published: February 2018

Ruling: Q1: Will the proposed sale of the property be a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the proposed sale of the property will be a GST-free supply under section 38-480 of the GST Act, if the purchaser intends that a farming business be carried on, on the land.

Relevant facts and circumstances: ● You are an entity; you carry on an enterprise of leasing and you are registered for the goods and services tax (GST). ● You intend to sell a property that you purchased more than X years ago. ● The property has been used by third parties to carry on their farming business on the land. The land has been used as grazing land for cattle grazing. ● You have leased the property to a number of lessees who have all been conducting a farming business on the land. ● For the last five continuous years and prior, up until now, in return for monthly payments, you have leased the property to a number of separate entities who have utilised the land for grazing cattle that are maintained for sale as part of their farming business. ● All the lessees in the past five years and for as long as the land has been owned by you, have used the land for grazing cattle. The cattle were held as stock for the lessees’ farming business and were sold by them as beef cattle. ● During the period of your ownership, you have had several lessees on the land, and always with a new lessee taking over the next day from a previous lessee: ● You intend to continue the above leasing arrangement until the day of settlement if you sell the property. ● The property consists of land and a building (a working shed). ● The area which the building occupies is under one percent of the whole property. The building on the property is not currently included in the lease agreement. The lessee conducts the farming business on the remainder of the land. ● You currently have a potential purchaser who has indicated that they intend to continue to utilise the land for a farming business to be carried on, upon purchase of the land.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 38-475(2) | A New Tax System (Goods and Services Tax) Act 1999 section 38-480

Reasons for decision: Summary: The sale of farmland is GST-free if the conditions of section 38-480 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Supplies of farmland will be GST-free under section 38-480 of the GST Act if: ● the land is land on which a farming business has been carried on for at least the period of five years preceding the supply; and ● the recipient of the supply intends that a farming business be carried on, on the land. It is the use of the land that is relevant, not the ownership. As long as a farming business is being conducted on the land and has been so for at least five years immediately before the sale, it does not matter who has been conducting it. Based on the facts in the present case, the requirement that the land is land on which a farming business has been carried on for at least five (5) years preceding the supply may be satisfied. The sale will be GST-free under section 38-480 of the GST Act where it is made to a purchaser who intends that a farming business be carried on, on the land upon purchase of the land. Land includes all fixtures attached to the land. The building (working shed) attached to the land is a fixture and forms part of the land. It will be included in the GST-free supply of the land where the requirements of section 38-480 of the GST Act are met.