You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.
Authorisation Number: 1051255640568
Date of advice: 20 July 2017
Subject: Goods and Services Tax (GST) and the supply of a GST-free going concern
Will the supply of the property (including assignment of the lease to the recipient) be a GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Relevant facts and circumstances
Entity A owns the land and buildings that have been used in a tourist accommodation centre business.
The tourist accommodation business is owned and run by an associated company, who leases the land and buildings from the Entity A.
While there is no formal agreement for the lease, the trading company has been and is still paying rent for the use of the property and will be assigning the lease to the recipient of the supply under agreement.
The enterprise of leasing will be carried on to the day of sale.
Entity A and the recipient of the supply are registered for GST.
Entity A and the recipient will agree in writing that the supply of the property is of a going concern.
Relevant legislative provisions
Paragraph 9-20(1)(c) of the A New Tax System (Goods and Services Tax) Act 1999
Section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
A supply is taxable to the extent it is not GST-free or input taxed.
There are no provisions that would result in the supply being input taxed, however, section 38-325 of the GST Act is relevant to your circumstances.
Subsection 38-325(2) of the GST Act provides that a supply of a going concern is a supply under an arrangement which:
● the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise, and
● the supplier carries on, or will carry on, the enterprise until the day of supply.
In this situation, the enterprise is of leasing pursuant to paragraph 9-20(1)(c) of the GST Act and the lease (a tenancy at will arrangement) will be assigned to the recipient as all of the things that are necessary for the continued operation of the leasing enterprise including the property. Furthermore, the lease will be in place until the day of the supply. In this way the recipient is capable of receiving the benefits of the covenants under the lease. Thus, the supply will satisfy subsection 38-325(2) of the GST Act.
Subsection 38-325(1) of the GST Act provides that a supply of a going concern is GST-free if:
● the supply is for consideration, and
● the recipient is registered or required to be registered for GST, and
● the supplier and the recipient have agreed in writing that the supply is of a going concern.
In this instance, the supply is of a going concern of a leasing enterprise and when it is supplied it will be GST-free. As it is supply for consideration, the recipient is registered for GST and the supplier and recipient will have agreed in writing that the supply is of a going concern.