Client: A private company owned a large piece of rural land. They sold part of it before under a special tax rule for farmland. Now they're planning to subdivide the rest into two parts: one big and one small with an old, unusable house and some farm equipment. The small part has never been used. Here are the questions:
Will the company have to pay GST when they sell the small, 3ha piece? Can they still use the special tax rule for farmland for the big, 57ha piece as long as it stays like farmland?
Advisor: Here's what I think:
The sale of the small, 3ha piece will be taxed because it's not residential property (which has different tax rules) and it's not farmland that's actively used for farming. However, if the buyer plans to farm there and it's been farmed for the past 5 years, then the sale might be tax-free.
Yes, the company can still use the special tax rule for farmland for the big, 57ha piece as long as it stays farmland and the buyer plans to farm there.
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