Private ruling: Goods and services tax (GST) and sale of farmland
Published: April 2015

Ruling: Q1: Is GST payable on your sale of the land in question to B? | A1: No.

Relevant facts and circumstances: You are registered for GST. You bought a property located in Australia (the land in question) from A under a contract dated (date). You are proposing to sell the land in question to B. C and D lived on the property at (address), which adjoins the land in question since a date that was more than 5 years ago. Accordingly, they are very familiar with the use of the land in question over that period. You confirm that the owners nearby situated on land directly opposite the land in question have for at least as long as C and D have been residing in the area maintained and harvested certain things growing on the land in question for use in conjunction with certain operations. A maintained the things growing on the land in question for many years. The things were harvested from time to time. Much of the plantation still remains on the land in question and you believe it will be commercially harvested by the buyer of the land in question. The plantation operations were significant and the land in question is fitted with substantial underground irrigation. In addition to the plantation operations, you can confirm that there has been livestock agisted on the land in question ever since C and D moved to the area more than 5 years ago. You received a letter from E, who lived in the house on the neighbouring property for over 5 years up until you purchased the land in question. E has confirmed that the land in question was used for agistment during a certain period, which was more than 5 years, and that this was constant within the period E was living on the neighbouring property. E confirmed that local farmers used the land in question for agistment. Since you purchased the land in question less than 5 years ago, you have also used it for your grazing operations together with agistment to a neighbour. The land in question is presently agisted to a neighbour in conjunction with their operations now situated at a certain address. You stated that B confirmed that they intend to continue the use of the land in question for agistment post settlement. In their Statutory Declaration, B confirmed that once they take ownership of the land in question, it will be used for farming purposes such as running their own livestock and agistment for others to run their livestock. B also stated that: • it is their intention to maintain and harvest the plantation currently on the land in question, and • it is their intention to grow small crops on the land and make use of the underground irrigation system that is already in place on the land.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | 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: GST will not be payable on your sale of the land in question because: (a) the land is land on which a farming business will have been carried on for at least the period of 5 years preceding the supply, and (b) the recipient of the supply intends that a farming business be carried on, on the land. | Detailed Reasoning - Detailed reasoning: GST is payable on taxable supplies. An entity makes a taxable supply if it meets the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is *connected with Australia; and (d) You are registered or required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (*Denotes a term defined in section 195-1 of the GST Act) Section 38-480 of the GST Act provides that a sale of land is GST-free if: (a) the land is land on which a *farming business has been *carried on for at least the period of 5 years preceding the supply, and (b) the *recipient of the supply intends that a farming business be carried on, on the land. Subsection 38-475(2) of the GST Act defines 'carry on a farming business'. It states: An entity *carries on a farming business if it carries on a *business of: (a) cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or (b) maintain animals for the purpose of selling them or their bodily produce (including natural increase); or (c) manufacturing dairy produce from raw materials that the entity produced; or (d) planting or tending trees in a plantation or forest that are intend to be felled. Paragraph 3 of Goods and Services Tax Determination GSTD 2011/2 provides the Australian Taxation Office view on the meaning of the five year requirement at paragraph 38-480(a) of the GST Act. It states: 3. The definite article 'the' in the expression 'the period of five years' in paragraph 38-480(a) indicates that the period in which a farming business must be carried on, on the land, is a continuous period of five years immediately before the supply of the land. This is distinct from the expression 'a period of five years preceding the supply' which may refer to any period of five years before the supply of the land. The information you provided indicates that a farming business will have been carried on on the land in question in the 5 years immediately preceding sale. Therefore, the requirement of paragraph 38-325(a) of the GST Act is met. The purchaser intends that a farming business be carried on on the land after sale. Therefore, the requirement of paragraph 38-480(b) of the GST Act is met. As the requirements of section 38-480 of the GST Act are met, the sale of the land to B is GST-free under section 38-480 of the GST Act under such circumstances. Therefore, the sale of the land in question to B is not a taxable supply. Hence, GST is not payable on the sale.