ATO Interpretative Decision

ATO ID 2001/100 (Withdrawn)

Goods and Services Tax

GST and sale of farmland where sale has caused a break in farming
FOI status: may be released

The ATO view for this issue is covered in the Primary Production Industry Partnership Issue Register - Issue 6.2.3 - Sale of farm land - temporary cessation of farming activity.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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), despite the fact that the entity ceases its farming business as a consequence of the sale?

Decision

Yes, the entity is making a GST-free supply of farmland under section 38-480 of the GST Act, despite the fact that the entity ceases its farming business as a consequence of the sale.

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; however, there has been a recent break in the farming activities as a consequence of the sale process.

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 immediately preceding the supply (as per paragraph 38-480(a) of the GST Act), despite a temporary cessation in the activities of the farm due to the sale process.

It is considered that a temporary cessation in farming activities due to the sale and transfer of the farming business will not prevent the supply from being GST-free under section 38-480 of the GST Act. Therefore, as the entity has met the remaining requirements of section 38-480 of the GST Act, the supply is GST-free.

[NOTE: The five-year requirement outlined in paragraph 38-480(a) of the GST Act may not be satisfied where there has been a conscious decision to cease farming. This is a question of fact that must be determined on a case by case basis.]

Date of decision: 11 August 2000

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

Related ATO Interpretative Decisions
ATO ID 2001/98 ATO ID 2001/99

Other References:
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

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