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Authorisation Number: 1051251904325
Date of advice: 14 July 2017
Subject: GST and going concern
To what extent is the sale of 'Business Assets’ by the Vendor treated as a sale of a going concern for GST purposes?
The sale of 'Business Assets’ by the Vendor is treated wholly as a sale of a going concern for GST purposes.
This is because the supply of the Business Assets to the Purchaser is for consideration, the Purchaser is registered for GST, and both parties have agreed in writing that the sale is a GST-free supply of a going concern. Accordingly, subsection 38-325(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) is satisfied.
Additionally, on settlement date, the Vendor has supplied to the Purchaser all of the things that are necessary for the continued operation of the identified enterprise, being the Business Assets and that the Vendor carries on the identified enterprise until the day of supply (settlement) as required by subsection 38-325(2) of the GST Act.
Relevant facts and circumstances
● The Vendor is the registered proprietor of land (the Property).
● The Vendor owns and operates a restaurant business from the Property. The restaurant business is the identified enterprise for GST purposes.
● The whole of the Property has been used by the Vendor for operating the restaurant business.
● The Vendor’s Business Assets include the restaurant business and the Property.
● A number of individuals formed a partnership (the Purchaser).
● Pursuant to a contractual agreement (the Agreement) as exchanged between the parties, the Purchaser agreed to purchase the Business Assets from the Vendor for an amount of money apportioned as follows:
(a) as to the Land $X;
(b) as to the Goodwill $Y;
(c) as to the remaining Business Assets (excluding the Land and the Goodwill) $Z.
● The remaining Business Assets for which $Z was apportioned towards as consideration, refers to all the assets listed under the definition of 'Business Assets’ in the Agreement (but excluding Land and Goodwill).
● 'Business Assets’ is defined in the Agreement.
● All things necessary for the continued operation of the identified enterprise are being sold under the arrangement (this includes: premises, plant and equipment, licences, goodwill and intellectual property).
● The Vendor will continue to carry on the identified enterprise until the day of settlement.
● The Vendor and the Purchaser have agreed under the Agreement that the supply by the Vendor of the Business Assets are the supply of a going concern for the purposes of section 38-325 of the GST Act and that the supply is GST-free for the purposes of the GST Law.
● 'Completion’ referred to in the Agreement is the 'settlement’ of the transaction.
● The Agreement provides that completion will be a certain date or such other date as agreed by the parties in writing. The Vendor and Purchaser subsequently agreed to defer the settlement date. Evidence in support of the deferral has been provided to the ATO.
● The Purchaser has applied for an ABN. Evidence in support of this has been provided to the ATO.
● The Purchaser has applied to be registered for GST and will be registered before settlement.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-325.