Goods and Services Tax Industry Issues
Primary Production Industry Partnership

Farmed for five years but not immediately prior to the sale

• 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 6.2.2 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 five years but not for the five years immediately prior to the sale?

Answer

2. 'Carrying on' an enterprise, as defined in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), includes doing anything in the course of the commencement or termination of the enterprise (section 195-1 of the GST Act).

3. 'Preceding' is not defined in the Act. According to the Macquarie Concise Dictionary, 'precede' means 'to go before'.

4. Paragraph 38-480(a) of the GST Act refers to the period of five years preceding the supply. It does not say a period of five years. If it was the latter, then any period of five years before the sale would suffice. Therefore, the period of five years must mean immediately before the supply and consequently, the sale would not be GST-free in circumstances where the farming business had been carried on for a five year period, but not immediately preceding the sale.

References