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Edited version of your written advice
Authorisation Number: 1051377998129
Date of advice: 19 July 2018
Ruling
Subject: GST and property
Question
Was your supply of Lot n at a specified address in Australia a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, your supply of Lot n at the specified address was a taxable supply under section 9-5 of the GST Act.
Relevant facts and circumstances
You (ABC Pty Ltd) acquired approximately <specified number of acres> of land in Australia before ddmmyyyy. The address of the property is <specified address>. There is no house on the property.
You were registered for GST.
The property was used for primary production as a business activity until ddmmyyyy. You ceased farm produce sales before ddmmyyy due to individual A’s illness. A is your director and managed your business. There were no animals being maintained for the purpose of sale after ddmmyyyy.
Your GST registration was cancelled effective from ddmmyyyy.
After ddmmyyyy you derived some income from agisting animal. In the years ended ddmmyyyy and ddmmyyyy you derived agistment income of $ per year. You granted a licence on a continuous basis to agist animals on your land in the years ended ddmmyyyy and ddmmyyyy. However, there was no agistment activity in the year ended ddmmyyyy.
You entered into a put and call option on ddmmyyyy with regard to the sale of the property. The put and call option was varied a number of times on a number of dates. You entered into a sale contract on ddmmyyyy as a result of the put and call option. Settlement occurred on ddmmyyyy.
In mmyyyy you applied to be registered for GST. Your backdated GST registration took effect on ddmmyyyy. You were still registered for GST at the time of settlement on ddmmyyyy.
The land was sold to a GST registered entity. The sale was not the sale of a going concern. The sale was to an arm’s length party. The land is not land on which a farming business has been carried on for at least the period of five years preceding ddmmyyyy. In addition, the recipient of the supply of the land did not intend that a farming business be carried on, on the land.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-5(a)
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-5(b)
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-5(c)
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-5(d)
A New Tax System (Goods and Services Tax) Act 1999 section 38-475
A New Tax System (Goods and Services Tax) Act 1999 section 38-480
Reasons for Decision
● All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise specified.
● All terms marked by an *asterisk are defined terms in the GST Act.
Section 9-5 provides that 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 the indirect tax zone (ie 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.
For the supply of your property to be a taxable supply, all of the requirements in section 9-5 must be satisfied.
You satisfied all the requirements of section 9-5.
Your supply was for consideration. Your supply was made in the course or furtherance of your cattle sales or agistment enterprise. In addition, your supply was connected with Australia and you were registered.
Furthermore, your supply was not GST-free nor input taxed.
We note for your information that for a supply of subdivided farmland to be GST-free, under section 38-475, it must satisfy a number of conditions. One of the conditions is that the supply must be made to an associate of the supplier of the land. You do not satisfy this requirement because your supply was to an arm-length party. Therefore, your supply was not GST-free under section 38-475.
In addition, the supply of a freehold interest in land is GST free under section 38-480 if two conditions are satisfied. The conditions are as follows:
(a) 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
(b) the recipient of the supply intends that a farming business be carried on,
on the land.
In your case the land is not land on which a farming business has been carried on for at least the period of five years preceding ddmmyyyy. In addition, the recipient of the supply of the land did not intend that a farming business be carried on, on the land. Therefore, your supply was not GST-free under section 38-480.
It follows, as you were registered for GST, effective ddmmyyyy, your supply of the property, on the ddmmyyyy, satisfies all the elements under section 9-5 and is a taxable supply.