Private ruling: GST - sale of farmland
Date of advice: 2 November 2023
Published: 11 December 2023
Ruling period: 01/07/20XX to 30/06/20XX
Date scheme commenced: 2 November 2023

Ruling: Q1: Is your supply of the property a GST-free sale of farmland under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. Therefore, GST is not payable on your sale of the property.

Relevant facts and circumstances: You are registered for GST. You will sell a property to X. You will have carried on a farming business on the land for the period of Y years immediately preceding settlement of sale of the property. X carries on a certain type of business, which is not a farming business. X will lease out the property to other parties to carry on farming businesses. X will locate non-agricultural infrastructure on part of the land. However, it does not expect to do so until at least a certain number of years after settlement of sale of the property to it. X stated twice that they intend that farming business activities be carried out on the property after the time of sale to it.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 38-480

Reasons for decision: Summary: GST is payable on taxable supplies. A supply is not taxable to the extent that it is GST-free. Section 38-480 of the GST Act states: The supply of a freehold interest in, or the lease by an *Australian government agency of or the *long term lease 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 Y years preceding the supply; and (b) the *recipient of the supply intends that a farming business be carried on, on the land. (Items marked with an asterisk are defined in section 195-1 of the GST Act) You will sell a property to X. This will be a supply of a freehold interest in land. A farming business will have been carried on on the land for the period of Y years immediately preceding settlement of sale of the land. Therefore, the requirement of paragraph 38-480(a) of the GST Act is met. X will lease out the land to other parties to carry on farming businesses. X will locate non-agricultural infrastructure on part of the land. However, it does not expect to do so until at least a number of years after settlement of sale of the property to it. There is no requirement in section 38-480 of the GST Act that the farming business carried on on the farm land after the time of sale be conducted for a certain minimum length of time. The requirement of paragraph 38-480(b) of the GST Act is met because the purchaser of the farm land intends that a farming business be carried on on the land after the time of sale. If X make supplies in the future that are neither taxable nor GST-free supplies, they may be required to make increasing adjustments. However, such adjustments will have no impact upon you as vendor. As all of the requirements of section 38-480 of the GST Act are met, the sale of the property is GST-free. Hence, GST will not be payable on the sale of the property.