Edited version of private advice

Authorisation Number: 1051949505238

Date of advice: 21 February 2022

Ruling

Subject: GST and sale of land

Question

Is the sale of the identified land by the Vendor to the Purchaser a GST-free supply of farmland under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

This ruling applies for the specified period.

The scheme commences on the specified date.

Relevant facts and circumstances

•                    The entity (You) is registered for the goods and services tax (GST).

•                    You are the registered proprietor of land situated in Australia (the Property).

•                    You acquired the Property more than 15 years ago.

•                    The Property is zoned RU1 Primary Production.

•                    The Property is vacant land, and the total land area has been utilised for farming and agistment purposes during your ownership, for a continuous period of more than 15 years.

•                    You yourself have not carried out any farming activities on the land.

•                    You have entered into agreements with tenants to allow them to have their livestock on the Property to conduct their farming business. The tenants were primary producers, and the Property has been used by them to conduct their primary production businesses. The land has been put to no other use than grazing livestock and there has been no real break in time between agistment tenants over the whole period of ownership. There was only one change of tenant during that time.

•                    You (as the Vendor) and the Purchaser entered into a contract for the sale and purchase of the Property (the Land Contract).

•                    At the date of settlement, the Property contained XX heads of livestock, was fully fenced, watered, contained stockyards and ramp for livestock work and management.

•                    The XX heads of livestock were grazing on the Property under an existing long term agistment arrangement until and including the day of settlement to the new owner. The livestock under the agistment agreement were removed by the farmer late on the day of settlement.

•                    The Property was sold for an agreed price with no current council application associated with the Property.

•                    You have taken necessary steps to be satisfied that the Purchaser's intention at the time of acquisition of your Property is to continue livestock farming operations. This is evidenced in a letter dated prior to settlement, in which the Purchaser has expressed its intention that a farming business consisting of livestock farming be carried on, on the land, upon the acquisition of your Property.

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 38-475 (2)

A New Tax System (Goods and Services Tax) Act 1999 section 38-480

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Section 9-40 of the GST Act provides that GST is payable on a taxable supply.

You make a taxable supply if you meet the requirements of section 9-5 of the GST Act, which states:

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 indirect tax zone; 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.

(*Denotes a term defined in section 195-1 of the GST Act)

All the above requirements must be satisfied for a supply to be a taxable supply.

GST-free sales of farm land

Section 38-480 of the GST Act states that the supply of a 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 on that land; and

(b) the *recipient of the supply intends that a farming business be carried on, on the land.

Section 195-1 of the GST Act states, 'farming business has the meaning given by subsection 38-475(2).'

The relevant category of farming business defined in subsection 38-475(2) of the GST Act to consider is 'maintaining animals for the purpose of selling them or their bodily produce (including natural increase)'.

On the facts, the land would be land on which a farming business has been carried on for the last five years preceding the supply of the land at settlement date. Requirement (a) in section 38-480 would be satisfied.

On the facts, requirement (b) in section 38-480 would also be satisfied. Requirement (b) must be satisfied having regard to the intention of the recipient of the supply. In this case, in acquiring the Property the recipient has confirmed in writing to the vendor that it intends that a farming business be carried on, on the Land.

Consequently, the sale of the land by the Vendor to the Purchaser will be a GST-free supply of farm land under section 38-480 of the GST Act.