Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1051364340875

Date of advice: 20 April 2018

Ruling

Subject: Sale of farmland

The sale of the property satisfies all the requirements in section 38-480 of the GST Act. As such, the vendor made a GST-free supply of farm land to the purchaser.

Question

Is the sale of the property GST free under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?

Answer

Yes

Relevant facts and circumstances

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 sections 38-475 and 38-480.

Reasons for decision

Subdivision 38-O of the GST Act allows the supply of farm land to be GST-free where its requirements are met. Section 38-480 of the GST Act states:

Therefore, for the sale of farm land to be GST-free, the above requirements must be satisfied.

In this case, the vendor has been carrying on a business of growing grapes for sale. The vendor has been carrying on that business on the land more than five years before sale so this requirement is met.

The purchaser as recipient of the supply intends that cattle will be grazed for sale on the land and also that a horticulture business will continue to be operated on the land.

As such, it is necessary to determine whether the vendor's horticultural business activities amounted to a 'farming business' as per the first requirement in section 38-480 of the GST Act.

The phrase 'farming business' is defined for the purposes of the GST Act. Subsection 38-475(2) of the GST Act states:

In this case, the vendor has been carrying on a business of growing grapes for sale. This activity falls within the definition of 'farming business' in paragraph 38-475(2)(a) of the GST Act as growing grapes is a horticultural activity that involves ‘cultivating or propagating plants‘. It therefore follows that the vendor’s supply of the land satisfies the requirements of paragraph 38-480(a) of the GST Act.

Furthermore, the purchaser, as recipient of the supply, has indicated an intention that a horticulture business will continue to be operated on the property.

Additionally, the purchaser has indicated an intention that cattle will be grazed on the property. This intention suggests that other activities to be carried on, on the land, may also fall within the definition of a ‘farming business’ as grazing cattle for sale involves 'maintaining animals for the purpose of selling them or their bodily produce …' pursuant to paragraph 38-475(2)(b) of the GST Act.

The purchaser’s intentions regarding the use of the land for grapes growing and cattle grazing satisfy the requirement of paragraph 38-480(b) of the GST Act that the recipient intends that 'a farming business' be carried on, on the land.

The activities intended by the purchaser to be carried on, on the land, are confirmed in a copy of the lease over the land that the purchaser has entered into, as lessor, with a third party. This is documentary evidence that the purchaser intends that the land will be used to carry on a farming business.

Accordingly, as the requirements in section 38-480 of the GST Act are satisfied, the vendor made a GST-free supply of farm land to the purchaser.


Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).