Thoroughbred Breeders Australia and Aushorse Marketing have won a significant and timely victory, convincing the Australian Tax Office (ATO) to reverse a ruling that threatened to undermine the international market in locally-bred horses.

The decision follows intense lobbying of state and federal governments and comes as the local industry gears up for next month’s Gold Coast Magic Millions Yearling Sale.

Until August 2013, horses purchased for export did not attract GST so long as they shipped out within a year, during which time they could be broken-in and receive basic education, such as barrier trials.

But in an unanticipated decision, the ATO ruled last year that to break a horse in and to trial it was to alter its status or “use” it.  Such a change of status made its owner liable for GST.

This ruling was made despite many South East Asian countries requiring horses to be broken-in and barrier trialled before their arrival.

With 11.5% of all yearlings sold in 2014 being purchased for export, this decision threatened to undermine the overseas buyers bench at the upcoming yearling sales.

The ruling was also likely to damage the businesses of the many farms and studs across Australia that provide agistment and break-in those yearlings purchased for export.

“Clearly, if foreign buyers decided to stay away from our sales, this would have had a major impact on turnover at Australia’s domestic auctions, particularly for yearlings,” said TBA and Aushorse Chief Executive Tom Reilly who led the approach to government that has resulted in the GST being removed.

“With less active bidders, results across all lots would likely have been dragged down. Such a downturn would have led to workers being laid off by stud farms as revenues fall, but many farms and rural businesses would have been hit doubly hard.  This is a huge win for the local industry leading into the yearling sales, which should be popular with buyers from overseas again.”

Reilly and his team from Aushorse/TBA worked with the state governments of Victoria, Queensland and NSW before making their compelling case in Canberra.

After a review of the issue which began at the end of November, the ATO last week informed Aushorse and Thoroughbred Breeders Australia that it would reverse its ruling on GST.  This means that overseas buyers can have their horses broken-in and barrier trialled without being liable for GST.

“I would like to thank the team in Barnaby Joyce’s office, Senator John Williams, Shadow Agriculture Minister Joel Fitzgibbon, former Victorian Premier Dr Denis Napthine, Queensland Racing Minister Steve Dickson and Troy Grant, Racing Minister in NSW, for their support,” he said.

“Shortly after visiting Canberra the ATO informed us they were conducting a review of their decision and we worked with a team there to make sure they had all the information they needed to understand the ramifications of levying this tax.”

During last season 362 yearlings (180 Inglis, 182 Magic Millions) were sold for almost $38 million to overseas buyers who intended to export them.

Figures from all sales show the average price of a yearling for export was $105,000, around 16% greater than the overall average.

The ATO’s latest decision also helps establish a level playing field between Australia and New Zealand where horses that are exported are exempt from their 15% GST.

The ATO has made its new ruling retrospective, meaning all horses bought at the 2014 yearling sales with be GST free if exported within a year.