You're likely to make a capital gain or capital loss when you sell (or otherwise cease to own) a working farm. Capital gains are subject to capital gains tax, with a discount for individuals and trusts, and concessions for small businesses.
If your home is part of the working farm, you may be eligible for a partial main residence exemption.
Farmland you sell is GST-free if both of the following apply:
- the land was used for a farming business for at least five years immediately before the sale
- the buyer intends to use it for a farming business.
A lease by an Australian government agency or a long-term lease of farmland is also GST-free if the above conditions are met. A long-term lease is a lease for 50 or more years or a lease that is likely to continue for at least 50 years because of renewals or extensions provided for in the lease.
The sale of subdivided land used for a farming business for at least five years is GST-free if both of the following apply:
- it's permissible to use the land for residential purposes
- the supply is made to an associate of the supplier – such as a relative or a closely connected company or trust – for less than market value.
If you sell farmland and you don't meet the above conditions, the sale is taxable and you're liable for GST on the price.
A capital gain on the sale of a working farm is subject to capital gains tax, while selling, leasing or subdividing a working farm is GST-free in some circumstances.