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Edited version of your written advice
Authorisation Number: 1012656895373
Ruling
Subject: Goods and services tax (GST) and the gifting of subdivided farmland
Question 1
Is the gift to your family member of a block of farmland subdivided for residential purposes subject to the goods and services tax (GST)?
Answer
No, the gift to your family member of a block of farmland subdivided for residential purposes is not subject to the GST.
Relevant facts and circumstances
• You have been registered for GST for a period greater than five years.
• You have carried on an ongoing agricultural enterprise for that period.
• You have subdivided a small number of residential blocks of land from your farm.
• You intend to gift one of these residential blocks to a family member.
• The family member will not provide any consideration either in cash or kind for the gift of this residential block.
• The family member has no connection or involvement in your farming enterprise.
• The family member intends to retain this subdivided residential block as a long term investment.
• The other residential blocks of land subdivide from your farm are to be sold on the open market to provide funds for your retirement.
• All of the residential blocks of land subdivided from your farm have been developed to the standard required to meet the planning requirements of the local council, and in addition they have also had telephone connections installed.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-475
Reasons for decision
Subsection 38-475(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the supply of a freehold interest in or the long term lease of, potential residential land is GST-free if:
a. the land is subdivided from land on which a farming business has been carried on for at least five years; and
b. the supply is made to an associate of the supplier of the land without consideration or for consideration that is less than the GST inclusive market value of the supply.
It is understood that your land has been used to carry on your farming enterprise for a period of greater than five years duration. As a consequence, the requirement in part (a) of subsection 38-475(1) of the GST Act is satisfied as the land in question has been subdivided from land on which a farming business has been carried on for at least five years.
Further, in gifting this land to your family member for no consideration, the requirement in part (b) of subsection 38-475(1) of the GST Act is satisfied as the supply is made to an associate of the supplier of the land without consideration.
As a consequence, in gifting this land to your family member you will make a GST-free supply of a freehold interest in potential residential land.