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Hobby Farm Sales and GST

Initiate Registered Tax Practitioner

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Replies 1

I have a problem with conflicting information regarding GST and Hobby Farm Sales from one "Hobby Farmer" to another. Hobby Farm being a rural land lot of 40 hectares and under, not earning a taxable income but just running a few horse, cows, goats or sheep to keep surplus grass under control. Some experts consider all such sales to be subject to GST payable by the vendor at settlement. Other are of the opinion that there is no GST payable on the transfer. Both vendor and purchaser not registered or eligible to register for GST.

I also asume that any capital gains made by the vendor can be rolled over providing the next hobby farm purchased meets the same asset provisions applicable to a CGT roll-over provision. 

I would like to know what others tax professionals think, and what the ATO position is on this.

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Most helpful response

ATO Community Support

Replies 0

Hi @PeterFisher7,

 

GST at settlement is for new or potential residential land.  By the sounds of it the hobby farm isn't new. GST at settlement wouldn't apply.

 

If the vendor is not registered for GST, they can't charge GST.

 

I think the confusion perhaps comes from where the land is more than two hectares, (4.94) acres.  For CGT purposes you can choose any two hectares to be exempt from CGT.  If the property is used to earn an income, the exemption doesn't apply.

 

Unfortunately, Hobby farmers can't use the CGT roll over provisions.

 

Take care and stay safe.

1 REPLY 1

Most helpful response

ATO Community Support

Replies 0

Hi @PeterFisher7,

 

GST at settlement is for new or potential residential land.  By the sounds of it the hobby farm isn't new. GST at settlement wouldn't apply.

 

If the vendor is not registered for GST, they can't charge GST.

 

I think the confusion perhaps comes from where the land is more than two hectares, (4.94) acres.  For CGT purposes you can choose any two hectares to be exempt from CGT.  If the property is used to earn an income, the exemption doesn't apply.

 

Unfortunately, Hobby farmers can't use the CGT roll over provisions.

 

Take care and stay safe.