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This edited version has been archived due to the length of time since original publication.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: 1012453627539

Ruling

Subject: GST and sale of a property

Question

Will you be making a GST-free supply of farmland under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you sell the property?

Answer

Yes, the sale will be a GST-free supply of farmland under section 38-480 of the GST Act, provided that all of the requirements of the section are satisfied at the time of the supply.

Relevant facts and circumstances

You are registered for GST.

You purchased a block of rural land situated in Australia (the property) after 1 July 2000.

You have used the property for farming purposes.

You propose to sell the property, and the proposed purchaser intends to also use the property for farming purposes.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 7-1

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Section 38-480

Reasons for decision

Section 7-1 of the GST Act provides that GST is payable on taxable supplies.

Under section 9-5 of the GST Act, you make a taxable supply if:

    (a) you make the supply for consideration

    (b) the supply is made in the course of carrying on an enterprise

    (c) the supply is connected with Australia, and

    (d) you are registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Section 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if:

    · the land is land on which a farming business has been carried on for at least the period of five years preceding the supply, and

    · the recipient of the supply intends that a farming business be carried on, on the land.

Where not all of the land is used for farming purposes, it is necessary to determine whether farming is the predominant activity of all the activities carried out on the land (including any private use) and as such, whether the land has the essential characteristics of farmland.

Some of the indicators that the ATO considers relevant in determining whether the land has the essential characteristics of farmland are outlined in paragraph 7 of the public ruling Goods and Services Tax Industry Issues - Primary Production Industry Partnership - Sale of farmland - section 38-480 of the GST Act, which is available on our website at www.ato.gov.au (enter 'Sale of farmland - section 38-480 of the GST Act' in the search box on our home page and select 'legal database'). These factors include:

    · the area of land used for farm business purposes in relation to the total area of land

    · the value of the land used for farm business purposes in relation to the total value of the land

    · what is the current zoning of the land and are there any rezoning applications

    · does the market value indicate the land is more viable for use as a farm or for other purposes.

At the time of sale, if a farming business has been carried on, on the property continuously during the five years preceding the sale and the purchaser intends that a farming business is to be carried on, on the property in the immediate or foreseeable future, then the sale of the property will be a GST-free supply of farmland under section 38-480 of the GST Act.


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