GST and the sale of farm land for simultaneous on-sale

Is the entity, an owner of farm land, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells farm land to a purchaser whose intention is to simultaneously on-sell the land to a third party who intends that a farming business will be carried out on the land?

Yes. The entity is making a GST-free supply under section 38-480 of the GST Act. This is because the purchaser's simultaneous on-sale to a third party, who intends that a farming business will be carried out on the land, satisfies the requirement that the purchaser itself intends that a farming business will be carried out on the land.

The entity is an owner of farm land. The entity is selling farm land to a purchaser. The farm land is land on which a farming business has been carried on for more than the five years preceding the sale by the entity.

The purchaser intends to simultaneously on-sell the land to a third party who intends to carry on a farming business on the land.

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

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.

A farming business was carried on, on the land, for the period of five years preceding the supply by the entity to the purchaser. Accordingly, it is necessary to determine whether the purchaser, the recipient of the supply, intends that a farming business be carried on, on the land.

The second requirement of section 38-480 of the GST Act does not specify any period of time within which the intended farming business must commence. It is also not necessary for the recipient to carry on the intended farming business. It is the intended use of the land that is important, not who carries on the intended farming business.

The purchaser's intention is to simultaneously on-sell the land to a third party who intends that a farming business will be carried out on the land. In these circumstances, the ultimate use of the land by the third party who purchases the land from the purchaser may be taken into account in determining the intention of the purchaser. Accordingly, at the time of the supply to the purchaser, the purchaser intended that a farming business be carried on, on the land.

As such, all the requirements in section 38-480 of the GST Act are satisfied and the entity is making a GST-free supply when it sells farm land to a purchaser who intends to simultaneously on-sell the land to a third party who intends that a farming business will be carried out on the land. Note. At the time of the purchase, a farming business has been carried on, on the land for at least five years. When the purchaser sells the land, it is also land on which a farming business has been carried on, on the land for at least five years preceding the supply by the purchaser. This is because the purchase of the land and sale of the land occurred simultaneously. When the purchaser of the land simultaneously on-sells the land to a third party, who intends that a farming business will be carried out on the land, the requirements of section 38-480 of the GST Act are satisfied and the purchaser is also making a GST-free supply.