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Edited version of your written advice

Authorisation Number: 1051281437717

Date of advice: 12 September 2017

Ruling

Subject: GST and the supply of a going concern

Question

Is the sale of a property that consists of several shops the sale of a GST-free supply of a going concern?

Answer

Yes. The sale of a property that consists of several shops will be a GST-free supply of a going concern where the following conditions are satisfied:

According to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the supply of a going concern is a supply made under an arrangement where:

    - 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 the supply.

The enterprise that you have been carrying on is that of a leasing enterprise. Accordingly, if you assign the interest in all of the leases that will be in place as at the time of entering into the sale contract the first requirement will be satisfied. If you continue to lease these shops until the day of settlement, and continue to advertise the vacant properties until the day of settlement the second condition will also be satisfied.

The Commissioner considers that, where rental properties have become vacant and the entities market such properties for sale the leasing enterprise to have continued. Accordingly the fact that there are some shops that are currently vacant does not preclude the sale being considered as a supply of a going concern if the shops have been marketed for rental from the time they became vacant.

If between now and the time of settlement you find tenants for those shops that is currently vacant, the interest in those leases must be assigned to the purchaser in order for the requirements of a going concern to be satisfied.

In conclusion, if the sale meets the following conditions the sale will be GST-free:

    - the supply is for consideration (such as a sale price);

    - the purchaser is registered or required to be registered for GST;

    - you and the purchaser agree in writing that the sale is a supply of a going concern;

    - you will carry on the leasing enterprise until the day of settlement (including continue to advertise the vacant shops for lease); and

    - you will assign the interest in the leases that you have in place to the purchaser.

Relevant facts and circumstances

You own a property that consists of several commercial shops (shops).

Currently some of the shops are being leased to third parties and some are have been vacant for a few months. However, you have advertised the shops that are vacant for lease from the time that these shops became vacant.

You intend selling the property to another party for a particular amount with settlement due on a particular date.

Relevant legislative provisions

Section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999