Edited version of private advice

Authorisation Number: 1052188544527

Date of advice: 02 November 2023

Ruling

Subject: GST - sale of farmland

Question

Is your supply of the property a GST-free sale of farmland under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. Therefore, GST is not payable on your sale of the property.

This ruling applies for the following period

01/07/20XX to 30/06/20XX

The scheme commences on:

2 November 2023

Relevant facts and circumstances

You are registered for GST.

You will sell a property to X.

You will have carried on a farming business on the land for the period of Y years immediately preceding settlement of sale of the property.

X carries on a certain type of business, which is not a farming business.

X will lease out the property to other parties to carry on farming businesses.

X will locate non-agricultural infrastructure on part of the land. However, it does not expect to do so until at least a certain number of years after settlement of sale of the property to it.

X stated twice that they intend that farming business activities be carried out on the property after the time of sale to it.

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 38-480

Reasons for decision

GST is payable on taxable supplies. A supply is not taxable to the extent that it is GST-free.

Section 38-480 of the GST Act states:

The supply of a freehold interest in, or the lease by an *Australian government agency of or the *long term lease of, 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 Y years preceding the supply; and

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

(Items marked with an asterisk are defined in section 195-1 of the GST Act)

You will sell a property to X. This will be a supply of a freehold interest in land.

A farming business will have been carried on on the land for the period of Y years immediately preceding settlement of sale of the land. Therefore, the requirement of paragraph 38-480(a) of the GST Act is met.

X will lease out the land to other parties to carry on farming businesses.

X will locate non-agricultural infrastructure on part of the land. However, it does not expect to do so until at least a number of years after settlement of sale of the property to it.

There is no requirement in section 38-480 of the GST Act that the farming business carried on on the farm land after the time of sale be conducted for a certain minimum length of time.

The requirement of paragraph 38-480(b) of the GST Act is met because the purchaser of the farm land intends that a farming business be carried on on the land after the time of sale.

If X make supplies in the future that are neither taxable nor GST-free supplies, they may be required to make increasing adjustments. However, such adjustments will have no impact upon you as vendor.

As all of the requirements of section 38-480 of the GST Act are met, the sale of the property is GST-free.

Hence, GST will not be payable on the sale of the property.