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:
- 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
- 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:
- cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or
- maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or
- manufacturing dairy produce from raw material that the entity produced; or
- 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.