Farmland

Selling or leasing farmland

When you sell farmland, your sale is GST-free if the sale is of a freehold interest, and:

• the land was used for a farming business for at least the period of 5 years immediately before the sale
• the buyer intends it to be used for a farming business.

A sale of farmland includes all fixtures attached to the land, including:

• residential property
• fences
• shearing sheds
• workers' cottages
• dams.

These fixtures form part of the land, so they are included in any GST-free supply of the land. The main residence is included, provided the private use of the residence doesn't cause the land to lose the essential characteristics of farmland.

A lease of farmland that meets these criteria is also GST-free if it:

• is long-term, or
• is by an Australian Government agency

A lease is considered long-term if:

• it is for at least 50 years
• it is renewed or extended and expected to continue for at least 50 years after the renewal or extension date
• the terms of the lease (or renewal) are substantially the same as those under which the supplier held the property (unless the supplier is an Australian Government agency).

Subdivided farmland

Sales of subdivided land that was farmed for at least 5 years will be GST-free if the sale is of a freehold interest, and the:

• land can be used for residential purposes
• sale is made to an associate of the landowner without payment or for payment that's less than the market value of that piece of land.

A lease of subdivided farmland is also GST-free if these conditions are met and the lease is either:

• by an Australian Government agency, or
• a long-term lease.

The sale of farmland, together with certain assets that form part of an enterprise may, in some cases, be seen as a sale of a going concern and may be GST-free.

If you sell farmland and don't meet these conditions, the sale may be taxable and you may be liable for GST on the sale.

Using farmland for another purpose

If you purchase a GST-free going concern or farmland that includes residential property (for example, leased residential property) you may need to adjust (increase) the GST for any non-creditable purposes the land is used for.

The 'increasing adjustment' is usually worked out as:

10% × the sale price × the proportion of non-creditable use.

If the proportion of non-creditable use changes over time, you may need to make additional increasing or decreasing adjustments.