ATO Interpretative Decision
ATO ID 2001/98 (Withdrawn)
Goods and Services Tax
GST and Sale of farmland after temporary cessation in farmingFOI status: may be released
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The ATO view for this issue is covered in the Primary Production Industry Partnership Issue Register - Issue 3.2.1(b) - Sale of farm land - Farm business v farmed continuously.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 there has been a temporary cessation in the farming of the land during the five years preceding the supply?
Decision
Yes, the entity is making a GST-free supply of farmland under section 38-480 of the GST Act, where there has been a temporary cessation in the farming of the land during the five years preceding the supply.
Facts
The entity is a farm operator that holds a freehold interest in its 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 the period of five years immediately preceding the supply.
During that five-year period, several events caused the entity to temporarily cease the daily activities of the farming business. The land was left fallow for a period of two months, poor weather forced farming activities to cease for six weeks, and holidays were taken for a period of two weeks every year.
The entity is registered for goods and services tax (GST).
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.'
The issue in this case is whether a farming business has been carried on for at least the period of five years preceding the supply despite temporary cessations in the activities of the farm. The temporary cessation of daily activities to leave the land fallow, take holidays and for poor weather does not mean that the farming business has ceased altogether. The intention of paragraph 38-480(a) of the GST Act is not to preclude such farmland from being sold GST-free.
Therefore, as the entity has met the remaining requirements of section 38-480 of the GST Act, the supply is GST-free.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
Subdivision 38-O
section 38-480
paragraph 38-480(a)
ATO ID 2001/99 ATO ID 2001/100
Other References:
Primary Production Newsletter No. 2 - 23 May 2000
Keywords
Goods and services tax
GST free
GST farm land
Supply of land
ISSN: 1445-2782
| Date: | Version: | |
| 11 August 2000 | Original statement | |
| You are here | 18 November 2005 | Archived |