A lot has changed since the pandemic began, and many are finding solace in a move to the country.
I'm Sophie Paras from Argon Law and in today's video we’ll explore the GST farmland exemption.
The farmland exemption has become more relevant in recent years with many buyers choosing to purchase rural residential blocks. Often when you purchase a rural property, you will find a GST farmland exemption clause in the contract. It is important to note these clauses only apply in certain circumstances, and if the following criterion is not met, in most instances you as a purchaser will be required to pay GST in addition to the purchase price.
The farmland exemption applies when the land you are purchasing has been used for a farming business for at least 5 years immediately prior to the sale and when you as the buyer intend to continue to use the land as a farming business. It is important to note that the farming activities need to be for a commercial purpose. It may not be sufficient to agist a few cattle or to a have a hobby farm. You must run the business in a business-like manner to be considered as carrying on a business.
The criteria for a farming business are strict. If a portion of the farmland is used for other purposes, such as tourist accommodation or horse agistment, then an adjustment will need to be made to remove that portion of the land from the exemption. The size, scale and permanency of the activity will also need to be considered.
The GST farmland exemption can be a complicated area in the sale and purchase of rural land, so, If you would like more information, please contact Argon Law.