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Edited version of your written advice
Authorisation Number: 1013139529475
Date of advice: 16 February 2016
Ruling
Subject: GST and the sale of farmland
Question
Will you make 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.
Relevant facts and circumstances
You are registered for GST.
You purchased a Property.
You have been using the Property for farming for more than five years and will continue to do so up until the Property is sold.
There is an old dwelling on the Property.
You are now selling the Property to decrease your workload.
The purchaser of the Property intends that a farming business be carried on, on the Property.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-475(2)
A New Tax System (Goods and Services Tax) Act 1999 Section 38-480
Reasons for decision
ATO Interpretative Decision (ATO ID) 2001/291 Goods and Services Tax GST and Sale of Farmland provides guidance on when the sale of farmland will be GST-free.
Section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the supply of the freehold interest in 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 term 'farming business' has the meaning given by subsection 38-475(2) of the GST Act which provides that an entity carries on a farming business if it carries on a business of:
(a) cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment
(b) maintaining animals for the purpose of selling them or their bodily produce (including natural increase)
(c) manufacturing dairy produce from raw material that the entity produced, or
(d) planting or tending trees in a plantation or forest that are intended to be felled.
There is an old dwelling on the Property. Relevantly, Issue 6.2.1(a) of the Primary Production Industry Partnership - issue register states:
Land includes all fixtures attached to the land. The standard test for determining whether an object is a fixture is whether the object was affixed to the land with the intention of becoming a permanent feature of that land. This would include residential premises, fences, shearing sheds, workers cottages and dams. Since fixtures form part of the land, they will be included in the GST-free supply where the requirements of section 38-480 of the GST Act are met.
You have been carrying on a business of farming. This activity falls within the definition of 'farming business' in subsection 38-475(2) of the GST Act. You have been carrying on that farming business on the Property for more than five years and will continue to do so until the Property is sold. As such, you will satisfy the requirement in subsection 38-480(a) of the GST Act.
The purchaser intends that a farming business be carried on, on the land satisfying the requirement in subsection 38-480(b) of the GST Act.
Therefore, as both the requirements of section 38-480 of the GST Act will be satisfied, you will make a GST-free supply of farmland. There will be no GST on the sale of the Property.