Edited version of private ruling

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Ruling

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

Question

Is GST payable by you on your sale of the property?

Answer

Yes.

Relevant facts and circumstances

On a certain date, two individuals were appointed as joint and several receivers and managers to a certain entity (the trustee) pursuant to a registered mortgage and a fixed and floating charge. The receivers in their capacity of receivers to the trustee are referred to as 'you' elsewhere in this ruling.

Among the assets of the trustee was a parcel of land (the property).

The trustee is registered for GST.

The trustee is not a member of a GST group.

You are registered for GST in your capacity of receivers and managers of the trust.

The property has a vineyard and there is an irrigation system on the property. Most of the vineyard plantings had died by the time you were appointed as receivers and managers.

There is no house on the property.

You sold the property at public auction on a certain date.

You sold the property pursuant to a fixed and floating charge.

The vendor stated on the sale contract is (trustee name) (receivers and managers appointed).

The purchasers of the property intend that a farming business be carried on, on the property after sale.

Reasons for decision

Summary

GST is payable by you on your sale of the property, as all of the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) would have been satisfied had the trustee sold the property.

Detailed reasoning

GST is payable by you where you make a taxable supply.

In accordance with subsection 58-5(1) of the GST Act, subject to Division 58 of the GST Act, any supply by an entity in the capacity of a representative of another entity that is an incapacitated entity is taken to be a supply by the other entity.

In accordance with subsection 58-10(1) of the GST Act, a representative of an incapacitated entity is liable to pay GST that the incapacitated entity would, but for section 58-10 of the GST Act or section 48-40 of the GST Act, be liable to pay on a taxable supply to the extent that the making of the supply to which the GST relates is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs.

Incapacitated entity is defined in section 195-1 of the GST Act to include an entity that has a representative.

Representative is defined in section 195-1 of the GST Act to include a receiver.

You are the representatives of an incapacitated entity, as you are the receivers of the trustee

Section 48-40 of the GST Act deals with GST groups. Section 48-40 of the GST Act is not relevant to your case because the trustee is not a member of a GST group.

Your sale of the property falls within the scope of your (the representative's) responsibility or authority for managing the incapacitated entity's (the trustee's) affairs. Therefore, you would be liable to pay any GST that the trustee would, but for section 58-10 of the GST Act, be liable to pay on this supply if it was a taxable supply.

You make a taxable supply where you satisfy the requirements of section 9-5 of the 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, the trustee would have satisfied the requirements of paragraphs 9-5(a),

9-5(c) and 9-5(d) of the GST Act if it had made the supply, by way of sale, of the property.

That is, the sale of the property was for consideration, and this supply is connected with Australia, as the property is located in Australia. Additionally, the trustee is registered for GST.

Based on the information available, we conclude that the trustee was carrying on a farming business on the property. Therefore, the trustee's sale of the property would have been a supply made in the course or furtherance of an enterprise that the trustee carried on had it sold the property. Hence, the requirement of paragraph 9-5(b) of the GST Act would have been satisfied if the trustee had sold the property.

There are no provisions in the GST Act under which the trustee's sale of the property would have been an input taxed supply had it sold the property.

Therefore, what remains to be determined is whether the trustee's sale of the property would have been a GST-free supply had it sold the property.

Section 38-480 of the GST Act provides that 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 recipient of your supply of the land intends that a farming business be carried on, on the land. Therefore, the requirement of paragraph 38-480(b) of the GST Act is satisfied.

Considering that most of the vineyard plantings had died by the time you were appointed receivers and managers, we conclude that a farming business was not carried on, on the land for the period of at least X years preceding your supply of the property. Therefore, the requirement of paragraph 38 480(a) of the GST Act was not satisfied.

As not all of the requirements of section 38-480 of the GST Act were satisfied, the trustee would not have made a GST-free supply of the property under that provision had it sold the property.

There are no other provisions in the GST Act under which the trustee's sale of the property would have been a GST-free supply had it sold the property.

Therefore, as all of the requirements of section 9-5 of the GST Act would have been satisfied had the trustee sold the property, the trustee's sale of the property would have been a taxable supply had it sold the property. Hence, GST is payable by you on your sale of the property.