GST for Agriculture & Farming
Agriculture has some of the most favourable GST provisions in Australia — GST-free farmland sales, substantial fuel tax credits for off-road equipment, and many primary production outputs that are GST-free as basic food. But the rules around livestock, processed products, and farmgate sales require careful attention.
Overview
Most unprocessed primary production outputs are GST-free as basic food — fresh fruit, vegetables, grain, raw milk (after initial processing like filtration), eggs, honey, and unprocessed meat. However, the GST treatment changes as products are processed or transformed. Unprocessed cow's milk is taxable, but milk that has been pasteurised or homogenised is GST-free. Live animals are subject to GST, but meat that has passed authorised inspection for human consumption is GST-free.
Farmland sales can be GST-free if the land was used for a farming business for at least five continuous years immediately before sale and the buyer intends to use it for farming. Temporary breaks in farming (drought, floods, fallow periods) do not break the five-year period. If these conditions are not met, the standard GST rules apply — the sale is taxable if you are carrying on an enterprise.
Fuel tax credits are a major benefit for farmers. Off-road diesel used in tractors, harvesters, generators, irrigation pumps, and other farm machinery qualifies for the full fuel tax credit (approximately 50.3 cents per litre for 2025-26). Unlike heavy road vehicles, farm machinery does not have a road user charge deducted — the farmer gets the full excise back. For a farm using 30,000 litres of diesel per year, this is approximately $15,090 in credits.
Farmers using vehicles primarily on agricultural property for primary production do not need to meet environmental criteria to claim fuel tax credits. This is a specific concession for the agriculture sector. However, fuel used for private or domestic purposes (e.g. a farm ute used for personal errands) must be excluded from claims.
Common items & GST status
The table below shows the GST treatment of common items and transactions in the agriculture & farming sector.
| Item | GST Status | Notes |
|---|---|---|
| Fresh fruit and vegetables | GST-free | Basic food for human consumption |
| Grain and cereals (for food) | GST-free | Wheat, barley, oats, rice — GST-free as basic food |
| Meat (inspected for human consumption) | GST-free | GST-free once it has passed authorised inspection |
| Live animals (livestock sale) | Taxable | Live animals are subject to GST — even if destined for food production |
| Raw milk (unprocessed) | Taxable | Unprocessed cow's milk is subject to GST |
| Processed milk (pasteurised) | GST-free | Milk that has been processed beyond filtration is GST-free |
| Honey | GST-free | Basic food for human consumption |
| Eggs | GST-free | Chicken eggs for human consumption |
| Wool and cotton (raw fibre) | Taxable | Non-food agricultural outputs are taxable |
| Farmland sale (5+ years farming) | GST-free | Must have been farmed for 5+ years; buyer must intend to farm |
| Farmland sale (under 5 years) | Taxable | Standard GST rules apply if 5-year and buyer intent conditions are not met |
| Farm machinery and equipment | Taxable | Capital purchases — claim GST credit as input tax credit |
| Fuel (off-road diesel) | Taxable | GST applies but claim both GST credit and full fuel tax credit |
| Water entitlements and allocations | Taxable | Sale of water rights is a taxable supply |
Common mistakes & traps
These are the most frequent GST errors the ATO sees in the agriculture & farming industry. Avoiding them can save your business from penalties and back-payments.
1Treating live animal sales as GST-free
Live animals (including livestock like cattle, sheep, and poultry) are subject to GST. They are not food for human consumption in their live state. The GST-free treatment only applies once the animal has been slaughtered and the meat has passed inspection.
How to fix it
Charge GST on live animal sales. When selling through a livestock agent or at saleyard auction, the agent will handle GST on the sale price. Ensure your agent is correctly remitting GST.
2Not claiming the full off-road fuel tax credit
Farmers are entitled to the full excise credit for off-road diesel — not the reduced on-road rate. Some farmers under-claim by using the road vehicle rate or not claiming at all.
How to fix it
Use the off-road rate (approximately 50.3c/L for 2025-26) for all fuel used in farm machinery — tractors, harvesters, generators, pumps. Only the reduced rate applies to heavy vehicles on public roads.
3Selling farmland without meeting the 5-year rule
Farmland is only GST-free if it was used for farming for at least five continuous years before sale and the buyer intends to farm. Selling land that was farmed for only three years means standard GST applies.
How to fix it
Before selling, verify the 5-year continuous farming requirement. Document the farming history and include the buyer's farming intention in the contract. If the conditions aren't met, the sale is taxable (or the margin scheme may apply).
4Ignoring GST on farmgate sales of processed products
Farmgate sales of basic food (fresh fruit, vegetables, eggs) are GST-free. But if you process the product — making jams, cheese, smoked meats, baked goods — the processed product may be taxable depending on what it is.
How to fix it
Fresh, unprocessed food sold at the farmgate is GST-free. Processed products follow the standard food rules — confectionery, bakery products, and prepared meals are taxable. Check the ATO food classification for each product.
Input tax credit guide
Which business purchases can you claim GST credits on? This table covers the most common purchases for agriculture & farming businesses.
| Purchase | Credit? | Notes |
|---|---|---|
| Farm machinery (tractors, harvesters) | Yes | Full GST credit on farm equipment purchases |
| Diesel fuel (off-road) | Yes | GST credit PLUS full fuel tax credit — double benefit |
| Seeds, fertiliser, and chemicals | Yes | Farm inputs for primary production |
| Fencing and infrastructure | Yes | Farm fencing, sheds, silos, water tanks |
| Livestock purchased for breeding/production | Yes | GST credit on live animal purchases — GST was charged on the sale |
| Veterinary services | Yes | Vet services are taxable — claim the GST |
| Contract harvesting and shearing | Yes | Subcontractor services for seasonal work |
| Insurance (crop, livestock, farm) | Yes | Business insurance premiums include GST |
| Water allocations purchased | Yes | Water rights purchased are taxable supplies |
| Council rates | No | Local government rates are GST-free |
BAS tips for agriculture & farming
Claim fuel tax credits at the off-road rate
Farm machinery fuel qualifies for the full excise credit at label 7D. Use the off-road rate from the ATO fuel tax credit calculator. Keep fuel purchase records with litres, date, and the machinery the fuel was used in.
Annual BAS lodgment may be available
Primary producers with turnover under $75,000 who have voluntarily registered for GST may be eligible for annual GST reporting. This reduces compliance burden — one BAS per year instead of four.
Track livestock sales through agents carefully
When selling livestock through a saleyard agent, the agent handles GST and provides a recipient-created tax invoice (RCTI). Ensure the agent has your correct ABN and GST registration details. Match RCTI amounts to your BAS.
Use the primary producer tax offset if eligible
While not a GST measure, primary producers may benefit from income tax averaging and the Farm Management Deposits scheme. Coordinate your GST and income tax planning together with your accountant.
Frequently asked questions
ATO sources & references
All information in this guide is based on the following ATO publications and rulings.