GST and sale of farmland with fruit trees

Is the entity, a fruit grower, making a single GST-free supply of farm land under section 38-480 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells its farm land together with the fruit trees planted on that farm land?

Yes, the entity is making a single GST-free supply of farm land under section 38-480 of the GST Act, when it sells its farm land together with the fruit trees planted on that farm land.

The entity is a fruit grower. The entity holds a freehold interest in farm land upon which it grows fruit trees. The entity is selling its freehold interest in the farm land together with the existing fruit trees. The entity is not including any farming equipment in the sale.

The purchaser intends that a farming business be carried out on the land. The entity has operated a farming business on its farmland for the period of five years immediately preceding the supply.

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

Subdivision 38-O of the GST Act allows the supply of farm land to be GST-free in certain circumstances. Section 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if: • the land is land on which a farming business has been carried on for at least the period of 5 years preceding the supply; and • the recipient of the supply intends that a farming business be carried on, on the land.

In this case, as the supply of the farm land meets all of the requirements in section 38-480 of the GST Act, it is GST-free. However, the issue at hand is whether the fruit trees are included in the GST-free supply of the farm land or whether they are supplied separately.

It is considered that fruit trees and vines that are planted for the purpose of harvesting, pass with the land when that land is sold. A supply of land planted with fruit trees amounts to a single supply.

In this case, as the entity is making a GST-free supply of farm land under section 38-480 of the GST Act, the supply of the fruit trees planted on that farm land is also be GST-free under section 38-480 of the GST Act.