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  • Chapter 11. Supply of going concerns: farm ins and farm outs

    For source of ATO view, refer to

    MT 2012/1 - Miscellaneous taxes: application of the income tax and GST laws to immediate transfer farm-out arrangements and

    MT 2012/2 - Miscellaneous taxes: application of the income tax and GST laws to deferred transfer farm-out arrangements

    What are farm ins and farm outs?

    An entity owns a licence to explore for minerals in a particular geographical area- a 'Tenement'. The licence is essentially a right to explore or mine minerals in a particular geographical area.

    The effect of a farm out is that the tenement owner (T1) supplies a right for the other entity (T2) to explore or mine the land at their expense (T1 is farming out to T2, or T2 is farming in to T1's tenement). The licence holder would not normally expend or receive any money for the farm out.

    Industry arguments

    Industry argues that the supply of an interest in a tenement is a going concern under Subdivision 38J of the GST Act.

    ATO view

    The ATO view on GST and going concern in this situation is expressed in MT 2012/1 and MT 2012/2.

      Last modified: 01 Sep 2015QC 16450