• Legal database
Legal database

ATO Interpretative Decision

ATO ID 2001/99 (Withdrawn)

Goods and Services Tax

GST and sale of farmland where land not farmed for preceding 5 years
FOI status: may be released
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a farm operator that is selling its farmland, making a GST-free supply of that farmland under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where a farming business has been conducted on the land, but not for the five years immediately preceding the sale?

Decision

No, the entity is not making a GST-free supply of farmland under section 38-480 of the GST Act, where a farming business has been conducted on the land, but not for the five years immediately preceding the sale. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a farm operator that holds a freehold interest in farmland. The entity is selling its freehold interest. The purchaser intends that a farming business be carried out on the land. The entity has operated a farming business on its farmland for a period of five years, but not for the five-year period immediately prior to the sale.

The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons For Decision

Subdivision 38-O of the GST Act allows the supply of farmland to be GST-free in certain circumstances. 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 5 years preceding the supply; and
(b)
the recipient of the supply intends that a farming business be carried on, on the land.'

Of particular importance in this case is the meaning of the phrase 'preceding the supply' in paragraph 38-480(a) of the GST Act. The word 'preceding' is not defined in the GST Act. As such, it is necessary to examine the everyday meaning of that word. The Macquarie Dictionary (1997) states that, amongst other things, precede means: 'to go before, as in place, order, rank, importance or time'.

Paragraph 38-480(a) of the GST Act refers to 'the' period of five years preceding the supply. If the provision said 'a' period of five years preceding the supply, then any period of five years before the sale would suffice. As such, the word 'the' specifically refers to the period of time immediately before the supply.

Consequently, the entity will not be making a GST-free supply of farmland under section 38-480 of the GST Act, as the farming business has not been carried on for the five-year period immediately preceding the supply.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.

Date of decision:  11 August 2000

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   Subdivision 38-O
   section 38-480
   paragraph 38-480(a)
   Division 40

Related ATO Interpretative Decisions
ATO ID 2001/98 ATO ID 2001/100

Other References:
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales; and Primary Production Newsletter No.2 - 23 May 2000

Keywords
Goods and services tax
GST free
GST farm land
Supply of land

Business Line:  GST

Date of publication:  12 July 2001

ISSN: 1445-2782

history
  Date: Version:
  11 August 2000 Original statement
You are here 18 November 2005 Archived

Back to top