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Edited version of private advice
Authorisation Number: 1051855213561
Date of advice: 22 June 2021
Ruling
Subject: GST and sale of a rural property
Question
Were you, the named entity, making a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sold the land located at the specified address in Australia (the Property)?
Answer
No, you were not making a taxable supply under section 9-5 of the GST Act when you sold the property. You were not registered for GST at the time of settlement nor required to be registered for GST at that time.
Relevant facts and circumstances
You acquired a property, as tenants in common. The Property was purchased as GST free farmland under section 38-480 of the GST Act as you intended to operate a farming enterprise on the land.
You formed a partnership on the purchase date of the Property and the Partnership used the Property to operate a farming enterprise as well as the B&B from the date of purchase.
The Partnership applied for an ABN and registered for GST with effect from 1 July 20XX.
The property consists of XX acres of land, which is zoned rural. As well as the land used as farmland it contained a X bedroom house with X bedrooms and a kitchen and lounge room which the purchasers lived in and operated a small B&B.
The farming business and B&B turnover was approximately $XX,XXX and $X,XXX per annum respectively. You cancelled the GST registration with effect from 1 XXXX 20XX.
You estimated the farmland to be valued at $XXX,XXX and the house located on the property at $XXX,XXX.
You then decided to sell the property and began marketing the property for sale. The property settled on Xth of XXXX 20XX. As per Special Condition R of the executed contract:
The seller and the buyer agree that both the purchase price for the property and the purchase price for the machinery and livestock are inclusive of GST (if any). The property will be supplied as GST-free farm land in accordance with section 38-480 of the a new tax system (goods and services tax) act 1999 (GST Act). For the avoidance of doubt, if the Commissioner of Taxation does not accept the GST-free treatment for the supply of the property, no additional consideration will be payable by the buyer to the seller in respect of GST. In respect of any taxable supply made under or in connection with this contract, the seller will provide the buyer with a tax invoice.
The sale price was $XXX,XXX.
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 Section 23-5