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Edited version of private advice
Authorisation Number: 1051641157549
Date of advice: 27 February 2020
Ruling
Subject: GST on the sale of farm land
Question
Is the sale of the farm land GST-free under section 38-480 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) despite farming activities having temporarily ceased due to the drought?
Answer
Yes - the sale of the farm land sale is GST-free as it satisfies section 38-480 of the GST Act. Supplies of farm land will be GST-free under section 38-480 of the GST Act if two requirements are met. The requirements are:
a) The land was used for a farming business for at least five years immediately before the sale; and
b) The buyer intends to carry on a farming business on the land
Note: the supply will be GST-free when you meet the above conditions regardless of whether you are, or are not, registered for GST.
Issue 6.2 of the Primary Production Industry Partnership - issue register (QC 16510) deals with farm land. The Commissioner has expressed his view in 6.2.1(b). Under Sale of farm land - farm business v farmed continuously, it states that where a temporary cessation in daily activities occurs (for example due to bad weather) this does not mean the farming business has ceased altogether.
However, if a conscious decision to cease farming is implemented, then we may be able to conclude that there has been a break and the 5 year requirement would not be satisfied.
In this case, as the partnership will continue to maintain the property (even without stocks), it is our view that you are not making a conscious decision to cease farming activities, and are instead responding to severe weather conditions out of your control.
Accordingly, the sale of the farm land will be GST-free provided paragraph 38-480(b) of the GST Act is also satisfied.
This ruling applies for the following period:
1 July 20XX to 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You own a property that is used for your primary production business.
You are registered for GST.
You want to sell several lots of adjoining land as a single parcel.
The lots are either owned by you or owned by each of the partners individually.
The partners individually are not registered for GST.
Severe drought may force you to sell your remaining primary production stocks.
You will continue to maintain the property in case the drought ceases.
There is a possibility no stocks will remain on the farm at the time of property sale.
Settlement of the property will take place within a year.
It is highly likely that the purchaser will continue a primary production business.
Relevant legislative provisions
Section 380-480 of A New Tax System (Goods and Services Tax) Act 1999