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The main impact of the introduction of a GST on the primary production industry is that, due to the abolition of the Wholesale Sales Tax regime, primary producers are not entitled to any tax exemption when acquiring goods and services for use in their businesses.
However, primary producers registered for GST purposes are able to claim input tax credits for GST in all purchases of goods and services for use in their business.
It should be stressed that although under the sales tax system, primary producers can purchase certain goods sales tax exempt, those exemptions are limited to goods for use mainly (more than 50%) in primary production (or in some ancillary activities). Therefore, for example, a primary producer cannot buy stationery or a computer for use in their business sales tax exclusive. Under the GST system, registered primary producers will be able to claim input tax credits for all purchases that are made by their businesses.
Note: There are some restrictions in claiming input tax credits for motor vehicles purchased in the period 1 July 2000 to 30 June 2002 where:
- in the period 1 July 2000 to 30 June 2001, no input tax credit can be claimed
- in the period 1 July 2001 to 30 June 2002, only 50% of input tax credit will be allowed
Sales by primary producers are taxable, except for exports and food for human consumption which are GST-free.
Assume that a livestock carrier has been commissioned to deliver livestock to saleyards. GST would be included in the freight charge and payable by the owner of the livestock. The sale of livestock is subject to GST. The owner of the livestock would then be entitled to claim an "input tax credit" on the amount of GST that they have paid. This account will offset GST collected on livestock sales when they lodge their GST return (provided they have received a tax invoice).
Special issues for primary producers
It should be noted that GST does not necessarily cause a cost increase, but does alter the cash flow circumstances of entities and individuals. This is because previously, there was no sales tax imposed on goods produced by primary producers. However, there is GST charged on acquisitions, which is refundable. It is up to each producer to register for GST and to claim input tax credits, or to apply for a refund of GST on purchases made in producing goods. Due to seasonal variations in income and expense flows, this could ultimately be a significant issue for primary producers who are now required to manage their cash flow more stringently.
Farming land
The supply of farming for potential future use as residential property is GST-free if:
- the land is subdivided from farm land on which the supplier has carried on a farming business for at least 5 years and;
- the supply is made to an associate for little or no consideration
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