When GST Applies to Rural Land Transactions

Posted 30-03-2021
Written by admin 101

The Goods and Services Tax can apply to the sale of rural land under certain circumstances. RMB Lawyers Partner and rural property specialist HUW EDWARDS explains:

The Goods and Services Tax (GST) legislation provides the sale of farming land to be exempt from GST provided that:

  1. the land being sold is land on which a farming business has been carried on for at least five years prior to the sale; and
  2. the purchaser of the land intends that a farming business be carried out on the land.

However, it can be difficult to determine whether the exemption applies in circumstances where the vendor is selling a part of his or her farming land to one of the many purchasers of small rural landholdings. 

The threshold for the purchase is not high; it does not require that the purchaser have a certain turnover.

What it does require is that the purchaser give a warranty that they intend the dominant use of the land be for the business of:

  1. cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or
  2. maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or
  3. manufacturing dairy produce from raw material that the entity produced; or
  4. planting or tending trees in a plantation or forest that are intended to be felled.

Clearly, the addition of a 10 percent GST could have a significant impact on the cost of the land, so it important that all parties to a sale are aware of the implications.

RMB Lawyers has experienced practitioners who can advise you on this aspect of rural property transactions.