In May 2012 the Commissioner published over 30 private rulings on the Register dealing with GST issues.

This month I focus on a private ruling which finds that the sale of farming land to a property developer will be GST-free pursuant to s 38-480 of the GST Act, notwithstanding that the purchaser’s intention was to develop the land.

Private Ruling No.1012128336865 – GST and the sale of farm land

The facts of the application can be shortly stated:

• the vendor entered into a contract of sale to sell its farming property to the purchaser.  The vendor acquired the land prior to 1 July 2000 and carried on a farming business for the land five years and will continue to carry on the farming business until completion of the sale.
• the purchaser is a property developer and the contract of sale is dependent upon Council’s approval of the purchaser’s subdivision plans.  Completion of the sale is 14 days after the plan of subdivision is registered
• the purchaser is required under the contract of sale to grant to the vendors a licence to allow the vendors to continue to occupy the property after completion of the sale and to continue their farming business.  Either party may terminate (for any reason) the licence by giving 60 days notice in writing.

The private ruling finds that the sale will be GST-free because “the recipient of the supply intends that a farming business be carried on, on the land”.  The ruling found that the licence agreement indicates the purchaser’s intention to continue the farming business (it not being necessary that the purchaser carry on the farming business themselves).

The ruling is interesting because it accepts that it is sufficient that the purchaser’s intention to carry on farming need only be one of a number of concurrent intentions, and arguably a secondary intention (to the purchaser’s main intention of developing the property).  There is also no timing requirement in s 38-480. Accordingly, taken to its extreme, it would arguably be sufficient that the vendor have a licence agreement to carry on farming for one day after settlement. Of course, the anti-avoidance provisions in Division 165 may have a role to play in such circumstances.  Nevertheless, the stamp duty savings to the purchaser under this arrangement would likely be significant (as well as potential reductions in finance costs of the GST component of the price).

The ruling does note the potential scope of the adjustment provisions in Division 129 and Division 135 if the purchaser ultimately uses the land for input taxed purposes (i.e., residential leases).  However, if the land is developed for sale, those adjustment provisions should not arise.

LIST OF RULINGS

Taxable Supplies

• GST and supply of access to an online software product by non-resident recipients – whether supply of access to an online software product by designed of software to recipients that are not in Australia a taxable supply  or GST-free – server located in overseas country and owned and operated by non-resident entity – whether supply connected with Australia
• GST and supply of licence – whether supply of licence to access website to resident entities and to non-resident entities subject to GST
• GST and time-sharing levies – whether annual levies imposed on members of a time-sharing scheme are consideration for a taxable supply or an input taxed supply for the interest in a time-sharing scheme under s 40-5(1) of the GST
• GST and supply for No consideration – whether A (not for profit entity) makes a taxable supply when it receives money from B for C to supply airline tickets as part of a tour package and for incidental costs for services supplied by other entities
• GST and supplies to a non-resident – whether GST is payable on the supply of sales support services to parent company
• GST and supply of training services to a non-resident – whether the supply of training services to an offshore company a taxable supply where the training is conducted in Australia – whether it makes a difference that uses own machinery or offshore company’s machinery
• GST and reimbursement of expenses – whether GST is payable on the reimbursement received from the applicant’s client for the expense of a permit levy incurred by applicant as agent for client

Real Property

• GST and sale of real property – whether the sale of proposed vacant blocks from subdivided land initially used for residential leasing subject to GST – whether enterprise carried on – whether sale of block taxable if sold with our without residential dwelling
• GST and supply of accommodation in serviced apartments – whether the supply of accommodation in specified serviced apartments an input taxed supply of accommodation in residential premises
• GST and the sale of farm land – whether the sale of farm land to property developer GST-free under s 38-480 of the GST Act
• GST and supply of residential premises – whether the supply of residential premises an input taxed supply
• GST and supply of going concern – whether the supply of a beneficial interest in property a GST-free supply of a going concern – whether agreed in writing that the sale was the supply of a going concern
• GST and property development – whether X and Y are carrying on an enterprise in regard to the construction of units on property they jointly own
• GST and supply of a going concern – whether applicant entitled to input tax credits on purchase of property subject to lease – parties agreed that supply of a going concern
• GST and the supply of new residential premises – whether the transfer of 100% of the legal interest in land and premises from A (government department responsible for the supply of community housing) to B for no consideration under the terms of a Project Deed a taxable supply

Other

• GST and the importation of goods into Australia – whether GST payable on goods which are imported by Y but sold to X before being entered for home consumption
• GST, Division 81 and fees paid to the Australian Government Agency – whether fees paid to an Australian government agency in relation to particular services precluded from being consideration pursuant to s 81-10(1) of the GST Act
• Cancellation of GST registration and revision of activity statements – whether the Commissioner will allow the applicant to back-date cancellation of GST registration and revise previous BASs to nil
• GST and the importation of product canisters – whether the importation of a product to be added to food during manufacturing process subject to GST or a non-taxable importation
• GST and importation – whether importation of gold a taxable importation – whether entitled to claim input tax credits for the importation