Disclaimer This edited version has been archived due to the length of time since original publication.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 private ruling
Authorisation Number: 1012094810816
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: GST and supply of land
Question 1
Is the part sale of farmland to a government entity subject to GST?
Answer
Yes.
Relevant facts and circumstances
You operate a farm.
You are registered for GST.
Your farm is some XX hectares in size, with your principle place of residence located on the same property.
X hectares of the farmland (not including the principle place of residence or adjacent domestic land) has been acquired by an entity.
Documentation provided to the Australian Taxation Office (ATO) include:
o A Contract for the sale of land - 2005 edition;
o Deposited Plan Administration Sheet which shows a plan of land to be acquired.
The entity has paid the vendors for the land.
Settlement took place by way of a contract of sale.
The entity does not intend to conduct business activities on the acquired land.
The business was not sold as a going concern.
A letter has been provided to us the entity stating that it is intended that negotiations commence in the hope of reaching agreement on the transaction.
The entity has advised your tax agent that the land sale was an owner initiated negotiated agreement.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 9-5
Section 9-40
Division 38
Division 40
Reasons for decision
It must be determined if the land was compulsorily acquired by a government entity. If the land was supplied to the government entity as part of a regular conveyance of land, then it is likely to constitute a taxable supply.
Subsection 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on a taxable supply. Section 9-40 of the GST Act requires you to pay GST on any taxable supply you make.
Section 9-5 of the GST Act duly defines taxable supplies as follows:
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.
(Terms marked with an *asterisk are defined at section 195-1 of the GST Act).
The Commissioner's view on the meaning of 'supply' is set out in Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9).
GSTR 2006/9 sets out a number of propositions to assist in analysing a transaction to identify a supply. Paragraph 222 of GSTR 2006/9 relevantly states:
222. Where the parties to a transaction have reduced their understanding of the transaction to writing, that documentation is the logical starting point in determining the supplies that have been made. An examination of any relevant documentation and the surrounding circumstances, which together form the total fact situation, is also important in determining whether the documentation captures the nature of a transaction for GST purposes.
We have examined the contract you signed with the government entity. The contract provides for consideration. The supply is made in the course or furtherance of an enterprise that you carry on, the supply has taken place in Australia and you are registered for GST.
None of the provisions of Division 38 (GST-free supplies) or Division 40 (input taxed supplies) of the GST Act applies to this scenario.
The supply of the land by you to the government entity is therefore a taxable supply.
You initially submitted that the sale of the land by you was made as a result of a compulsory acquisition. However, you did not provide us with any evidence to support this submission. The Commissioner in paragraphs 80 to 90 of GSTR 2006/9 outlines his view on Compulsory Acquisitions of land. We have not been presented with any evidence of a gazettal notice or similar statutory notice issued by the government entity. Furthermore, there is no evidence that any compensation was provided to you for any loss suffered by you as a result of an extinguishment of your rights in this land. Instead, you are selling this land by your own volition. We are of the view that your circumstances are similar to the circumstances outlined in paragraph 91 of GSTR 2006/9, which states:
91 It may transpire that, before a compulsory acquisition under a statute is made, an owner and an authority enter into negotiations that result in the owner selling land under a standard land contract. The land in this case is not vested in the authority through the compulsory acquisition process. Instead, the interest in the land transfers as a result of settlement of the contract and execution of a transfer instrument. As such, the owner makes a supply of land to the authority.
For these reasons we are of view that you made a supply of land to the government entity by your own volition rather than the land being compulsorily acquired by it. As such, the GST Act applies, and you have made a taxable supply.