Goods and Services Tax Industry Issues
Primary Production Industry Partnership

Sale of farmland - farm business v farmed continuously

• Please note that the PDF version is the authorised version of this ruling.
  This publication is extracted from the Primary Production Industry Partnership - issues register. See issue 6.2.1(b) of that register. This publication should be read in conjunction with the related content of that register where further context is required.

This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.

Question

1. Is the sale of farm land GST-free if a farming business has been carried on for 5 years but the land has not been farmed continuously during the five years preceding the sale?

Answer

2. When farming has been carried on for 5 years without any break the requirements of section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) will be met. Where a temporary cessation in daily activities occurs, for example, due to poor weather, or holidays are taken, or land is left fallow etc, this does not mean the farming business has ceased altogether. Accordingly, we can conclude that the intention of the legislation would not be to prevent such farm land from being sold GST-free provided paragraph 38-480(b) of the GST Act is also satisfied.

3. 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.

4. Whether there has been a break in the carrying on of a farming business sufficient to preclude the operation of section 38-480 of the GST Act, in the five years preceding sale will, in each case, be a question of fact.

References