• Farmland

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    Selling or leasing farmland

    When you sell farmland, your sale is GST-free if both:

    • the land was used for a farming business for at least five years immediately before the sale
    • the buyer intends that it be used for a farming business.

    A lease of farmland is also GST-free if the above conditions are met and the lease is by an Australian Government agency on a long-term lease.

    A long-term lease is a supply by lease, hire or licence:

    • for at least 50 years, or a renewed or extended lease is expected to continue for at least 50 years after the option to renew is exercised or the extension is granted
    • unless the supplier is an Australian Government agency, the terms of the lease, hire or licence (or renewal of same) as they apply to the recipient are substantially the same as those under which the supplier held the premises.

    A sale of farmland includes all fixtures attached to the land, including residential premises, fences, shearing sheds, workers' cottages and dams. As these fixtures form part of the land, they are included in the GST-free supply of the land. The main residence is included, provided the private use of the residence is not so significant that it causes the land to lose the essential characteristics of farmland.

    Subdivided farmland

    A sale of land subdivided from land which has been farmed for at least five years will be GST-free if both:

    • it is permissible to use the land for residential purposes
    • the sale is made to an associate of the landowner without payment or for payment that is less than the market value of that piece of land.

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

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

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

    If you sell farmland and you do not meet the above 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 premises (for example, leased residential premises) you will have an increasing adjustment of GST for any non-creditable purpose the residential premises are used for.

    The amount of the increasing adjustment is usually worked out as follows:

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

    You may need to make subsequent increasing or decreasing adjustments if this proportion of non-creditable use changes over time.

    Example: Making an increasing adjustment

    Bill purchases farm land GST-free for $500,000. As well as using the land to carry on a farming business, Bill intends to build a house ( that is new residential premises) on part of the land and rent it out. The rent of the house is expected to represent 20% of Bill’s entire business. Bill therefore has an increasing GST adjustment of:

    10% × $500,000 × 20% = $10,000.

    End of example

    See also:

      Last modified: 20 Nov 2017QC 21960