Edited version of private ruling

Authorisation Number: 1011666021302

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Ruling

Subject: goods and services tax (GST) and sale of farm land

Question

Are you entitled to a reimbursement from the Australian Taxation Office (Tax Office) of the amount you paid as GST to the Tax Office, on your sale of the property?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You sold a property located in Australia (the property).

You paid an amount as GST to the Tax Office, on your sale of the property.

You have not reimbursed a corresponding amount to the purchaser.

You reported the amount paid as GST to the Tax Office in a certain activity statement.

You carried on a cattle farming business on the property for at least the period of 5 years preceding the sale of the property.

The intention of the purchaser at the time of purchase of the property was unclear. The purchaser had not formed a definite intention at the time of purchase of the property that a farming business would be carried on, on the property.

Over the past so many months or so, it has become quite evident that a farming business is being carried on, on the property

The purchaser was not registered or required to be registered for GST when it purchased the property.

Reasons for decision

Summary

You are not entitled to a reimbursement of the amount you paid as GST to the Tax Office, as GST was payable on the sale of the property.

Detailed reasoning

Under certain circumstances, where a taxpayer incorrectly pays GST to the Tax Office, the taxpayer can obtain a refund of that amount.

In accordance with subsection 105-65(1) of Schedule 1 to the Taxation Administration Act 1953, the Tax Office is not required to repay such amounts where the taxpayer has not reimbursed a corresponding amount to the purchaser.

We shall firstly consider whether you incorrectly paid GST to the Tax Office.

GST is payable by on your taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

a) you make the supply for *consideration; and

b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

c) the supply is *connected with Australia; and

d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

(*Denotes a term defined in section 195-1 of the GST Act)

In your case, you satisfied the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you supplied the property for consideration and you made the supply in the course or furtherance of a cattle farming enterprise that you carried on. Additionally, the supply was connected with Australia, as the property is located in Australia and you are registered for GST.

There are no provisions in the GST Act or any other Act under which your sale of the property was an input taxed supply.

Therefore, what remains to be determined is whether your sale of the property was a GST-free supply.

In accordance with section 38-480 of the GST Act, a sale 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 property in question was land on which a farming business had been carried on for at least the period of 5 years preceding the supply. Therefore, the requirement of paragraph 38-480(a) of the GST Act was satisfied.

The purchaser had not formed a definite intention at the time of purchase of the property that a farming business would be carried on, on the property. Therefore, the requirement of paragraph 38-480(b) of the GST Act was not satisfied.

As not all of the requirements of section 38-480 of the GST Act were satisfied, you did not make a GST-free supply under that provision.

There are no other provisions in the GST Act under which your sale of the property was GST-free.

Hence, as all of the requirements of section 9-5 of the GST Act were satisfied, the sale of the property was a taxable supply, and therefore, GST was payable on the sale of the property.

As GST was payable on the sale of the property, you are not entitled to a reimbursement from the Tax Office of the amount you paid as GST to the Tax Office, on your sale of the property.