The Goods and Services Tax Act 1999 currently exempts farmland, and businesses that are sold as a going concern, from being treated as a taxable supply and subject to GST.
However, this may not be the case for much longer.
The Government has announced that it will move forward with the proposal of the previous Labour government to end the tax exemption status. It will be replaced with a “reverse charge” arrangement, which will place the burden of the tax with the purchaser.
Although the working details have not been finalised, the Discussion Paper released in 2009 outlined how the reverse charge is envisaged will operate: in most cases, the end result will be the same – no GST will be payable by the purchaser. The GST tax liability will revert to “nil” provided that the purchaser is entitled to full input tax credits, both the vendor and purchaser are registered for GST and agree that GST that the sale can be “reverse charged” to the purchaser.