GST Free?


This example illustrates how Rationale is used to map the arguments in a piece of reasoning typical of the everyday cases handled by solicitor.   Many aspects of Rationale are utilised in the example.

The example is based on a real case, but it has been fictionalised in various ways.

Note: this is an example only.  It is not legal advice.  If you have a legal issue  in this area, you should obtain your own proper legal advice.



The Smiths purchased a small farm. The land had been used as a farm for many years prior to the purchase.  After the purchase, the Smiths leased the land to another local farmer, who used it to graze cattle.

Normally in Australia, sales of land are subject to 10% Goods and Services Tax, and this tax is generally paid by the purchasors.  However one section of the GST Act exempts the sale of farmland from GST if it had been in use for farming for at least five years, and the purchasors intend that a farming business be carried on, on the land.   The Act also says that agistment (the leasing out of land for the purpose of grazing) is not a farming business.

Some months later, the Smiths’ accountant was preparing their tax return, and noted that they had not paid GST in connection with the purchase.  The accountant wrote the following:

Clause 3 of the Contract of Sale makes you as purchasors of the land liable to pay any GST payable by the vendor.  By this clause you warranted that GST would not be payable on the basis that the land was to be purchased as a going concern for the purpose of primary production.  A limited review of the law suggests that agistment is not a primary production activity and that therefore the ‘going concern’ has been interrupted and GST has been rendered payable.

The Smiths consulted their lawyer, who advised that the Smiths are not, in fact, liable.  According to the lawyer, a careful analysis of the relevant clause of the GST Act, plus a subsequent Australian Tax Office interpretative decision, make it clear that the Smiths were entitled to the exemption provided by s.38-480.

The Argument

The essence of the lawyer’s argument is as follows.  It is true that the Smiths themselves are not carrying on a farming business (since agisting is not itself a farming business).  However, the lessee is carrying on farming business on the land; and according to the ATO’s interpretative decision, the relevant clause of the ACT is satisified as long as SOMEONE carries out farming on the land.  It doesn’t have to be the the new owners themselves.

That captures the core idea – but if you’re feeling like you don’t quite follow the nuances and twists and turns of this piece of legal argument, it might help to have it laid out clearly in a step-by-step fashion.

The reasoning is made fully explicit in this argument map:

GSTfree.rtnl (To load the file in Rationale, just click on it.  Alternatively, if you are reading this using the inbuilt browser in Rationale v.1.3+, just drag the link onto the workspace.)

GSTFree.pdf is a pdf version, if you would like to look closely at an image of the map.



This example illustrates a number of important aspects of mapping legal arguments in Rationale:

  • Classic legal argument patterns – fact/law (in a couple of places), and satisfaction/consequences.
  • The basic argument structure is the rebuttal of the accountant’s objection by objecting to an assumption the accountant had made.
  • The use of basis boxes – Publication, for sections of the Act; Common Belief, for claims which both sides accept; and Quote.