GST on purchase of Farmland for non Farming activity in Victoria?

Discussion in 'Accounting & Tax' started by Stewart Hunt, 16th Jul, 2019.

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  1. Stewart Hunt

    Stewart Hunt New Member

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    Looking to purchase a property in Victoria (over 100 acres). No dwelling (just a shed).
    Property has been owned by the vendor for the last 16 years. The vendor installed plantations of Blackwood and Shiny Gum on parts of the property. They live in Perth and have done for a number of years. Only 36 acres is cleared and this is mowed and baled once per year. Don't know if they are registered for GST or if they are required to be. Can't imagine they would have a turnover over $75K pa. The vendor has included the "farming business" clause to get around section 38-480 of the GST Act. We have not yet signed the contract.
    We do not intend farming the property. We intend using it as initially as a hobby farm and will eventually retire on the property after building a dwelling.
    I am concerned that if we sign the contract and subsequently don't carry on a farming business, we may be liable to pay GST on the purchase price.
    Any thoughts?
    Cheers. Stew.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I would be concerned too.
     
  3. Yasharora

    Yasharora Member

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    agreed, it will create an issue for you
     
  4. Beano

    Beano Well-Known Member

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    when you have the contract drawn up have the contract including GST.
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Is that possible if the vendor is not registered for GST?

    The purchaser can't buy as a going concern if the sale doesn't meet all of the requirements of the ATO definition for a going concern. This would include both purchaser and vendor being registered for GST. - Linky

    Tax and legal advice should be sought before signing the contract.
     
    Last edited: 17th Jul, 2019
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If the contract is inclusive of GST and there is GST on the sale that would mean the vendor would need to pay it.
     
  7. Mike A

    Mike A Well-Known Member

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    The sale of farmland can be GST free if the purchaser intends to use the land in a farming business (section 38-480 GST Act 1999).

    Doesn't sound like you intend to use the land in a farming business. The sale of the property will probably mean they meet the turnover threshold for that year unless the property is sold for less than $75k.

    Get solid legal advice.
     
    Last edited: 17th Jul, 2019
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  8. Stewart Hunt

    Stewart Hunt New Member

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    Contract states "includes GST (if any)". It's the "if any" that concerns me. The part that follows describes the section 38-480 farming exemption. My understanding is that if the vendor doesn't turn over $75,000pa then they shouldn't need to be registered for GST, and as such there should be no GST payable, but they are getting advice that may contradict this.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The land would be over $75k surely.
     
  10. Stewart Hunt

    Stewart Hunt New Member

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    Sure the Land is valued at over $75K but my understanding (although I could be wrong) is that the $75K was for annual turnover not sale price.
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If sold it would be part of turn over.

    But if the price is inclusive of gst perhaps you have nothing to worry about as either way what you would pay is the same. Just look out for other clauses and use a lawyer not a conveyancer
     
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  12. Mike A

    Mike A Well-Known Member

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  13. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    GST may not be a concern due to :

    1. Going concern basis may be used
    2. Vendor may not be registered for GST (although a sale of land could affect the turnover threshold)
    3. GST free supply as Mike indicated

    Definitely one to ask the lawyer to check
     
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