Edited version of your private ruling

Authorisation Number: 1011933025367

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Sale of land

Question 1

If the property is sold to a purchaser for the purpose of grazing the purchaser's livestock, would you be able to sell it as a GST-free supply of a going concern?

Answer 1

No, you will not be able to sell the property as a GST-free sale of a going concern.

Question 2

If the property is sold for any other purpose, would the sale be subject to GST?

Answer 2

Yes, GST would apply to the sale. GST on the sale will be 1/11^th the sale price.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

· You are an entity and you provide community services.

· You are not registered as a charity by the Australian Taxation Office (ATO).

· You have an Australian Business Number (ABN) and are registered for the goods and services tax (GST).

· You purchased land to provide a community service. You will continue this activity until you sell the land.

· Prior to your acquisition of the land it was used for farming activity. There was no agistment undertaken by the previous owner.

· The land was sold to you as a taxable supply.

· Apart from the activities of community service, you also provided the land for agistment.

· The only reason why you undertook agistment is to keep the grass down.

· You receive an income from agistment. You will also continue this activity until you sell the land in order to keep the grass down.

· You now intend to sell the land as access to the land is unsuitable for your activities.

· You will sell the land for its market value.

· The prospective sale of the land to a purchaser would fall into two categories: (a) either for use grazing purchaser's own livestock or (b) for non-farming activities such as recreational purposes.

· You want a response in plain non-technical language to enable people in your organisation to understand the ruling.

Reason for the decisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with tax laws relating to GST. The supply of a going concern is explained in the GST Act. According to the GST Act, a "supply of a going concern" is an arrangement between the seller and a buyer to sell an enterprise that the seller is carrying on.

An enterprise can be any activity that an organisation carries on. For example, the provision of community services would be an activity that can be considered as an enterprise. Another would be agistment. According to what you have told us, you have two enterprises - one of providing community services and the other of undertaking agistment.

If you enter into an arrangement to sell one of your enterprises as a going concern, then, you have to supply all things necessary for the buyer to carry on that enterprise should the buyer wish to carry on that enterprise after the sale. Further, you will have to carry on the enterprise of agistment until the day of the sale.

For the sale of the enterprise of agistment to be a going concern, you have to provide the land and be able to transfer any agreement you have with the owner of livestock to continue to allow agistment on the land at the time you sell the property. Such an arrangement would be a "supply of a going concern" under the GST law.

For the supply of a going concern to be GST-free the following conditions have to be satisfied:

· you must sell it for some consideration (for example payment of money), and

· the buyer must be registered (or required to be registered) for the GST, and

· you and the buyer must agree in writing that the supply is that of a going concern.

Therefore, if you sell the land to a buyer who wants to graze his own livestock in the land, it would not be a supply of a going concern. It is not a supply of a going concern because you would not be transferring any current agreement you have for agistment to the buyer. The buyer is going to graze his own livestock, which is not agistment.

We then come to the issue whether the sale of the land is taxable for GST purposes.

You make a taxable sale if you are registered or required to be registered and:

· you make the sale for payment

· you make the sale in the course of operating your business

· the sale is connected with Australia.

A sale is not a taxable sale if it is GST-free or input taxed sale.

In your case, you are registered for the GST, the sale you make will be for payment, you will be selling the land in the course of operating your business and the sale is connected with Australia because the land you are selling is in Australia.

Further, the sale would not be GST-free because it is not a going concern (as shown above) and it is not farm land because you were not carrying on any farming on the land. The sale of land is not input taxed.

Therefore, if the property is sold, it would be a taxable supply. You will have to remit an amount of GST equal to 1/11^th of the price for which you would sell the land.

Please note that we have explained the reasoning for our decision in plain language as requested. The more detailed legal explanations are contained in the public rulings and publications issued by the Australian Taxation Office.

We have enclosed the following publications for your information and they form part of this private ruling issued to you.

1. GST for small business

2. GST and property

3. Common GST errors and property

4. Goods and services tax: when is a 'supply of a going concern' GST-free? (GSTR 2002/5)

5. Miscellaneous Taxation Ruling: The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1)