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Edited version of your private ruling
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Ruling
Subject: GST and sale of a going concern
Question 1
Can a corporate trustee be accepted as making an acquisition on behalf of a trust where there was no disclosure of the role of the trustee in the sale/purchase contract?
Answer
No, where the facts demonstrate that the acquisition was made by a corporate trustee in its own capacity and in the absence of evidence to prove otherwise, the Commissioner cannot accept that the acquisition was made on behalf of a trust.
Question 2
Is the sale of your commercial property (the Property) a supply of a going concern which is GST-free?
Answer
No, your sale of the Property is not a supply of a going concern.
Relevant facts and circumstances
· You are registered for GST.
· You were the owner of the Property.
· The Property has been leased to an existing tenant.
· You sold the Property under a sale contract.
· The sale contract was made out to a purchaser (the Trustee).
· The sale contract consists of two separate pages, one page being signed by you and the other signed by the Trustee.
· The Trustee is not presently registered for GST.
· As advised, the intended purchaser of the Property was supposed to be a trust (the Trust) for which the Trustee acts as trustee notwithstanding the parties set out under the sale contract. At the time of exchange of the sale contract, there was no clause or statement stating that the purchaser is the trustee of the trust.
· The Trust is currently registered.
· The page of the sale contract signed by the Trustee stipulates by marking that the supply of the Property is a "taxable supply". The page of the sale contract signed by you stipulates by marking that the supply of the Property is "the supply of a going concern". As advised, the real estate agent was the person who completed these markings.
· At the request of your solicitors, a copy of the Trust Deed was provided showing that the Trust Deed had been executed on a date before the date of exchange of the sale contract.
· Notwithstanding that the supply of the Property was treated as a "taxable supply" as stipulated on the page of the sale contract signed by the Trustee, you and the Trust now agree that the sale is the supply of a going concern as marked on the page of the contract signed by you.
You submit that:
The Trust appears to have met the requirements of section 38-325 of the GST Act regarding the supply of a going concern in that:
· A current lease is in place for the purchaser to continue with leasing the shop;
· The shop has been leased up until the day of sale;
· The sale is for consideration;
· The Trust is registered for GST;
· You and the Trust now agree that the sale is the supply of a going concern.
While the trust is registered for GST and the Trustee is currently not, it's not unusual where the intention is for the company only to act as the trustee, and the trust carries on a business.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 38-325
Reasons for decision
Question 1
You have asked as to whether a corporate trustee can be accepted as making an acquisition on behalf of a trust where there was no disclosure of the role of the trustee in the sale/purchase contract.
Our advice is that where the facts demonstrate that the acquisition was made by a corporate trustee in its own capacity and in the absence of evidence to prove otherwise, the Commissioner cannot accept that the acquisition was made on behalf of a trust.
Question 2
(All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless stated otherwise and words denoted by asterisks are defined in section 195-1 of the GST Act)
Subdivision 38-J is about supplies of going concerns.
Section 38-325 states that:
(1) The *supply of a going concern is GST-free if:
(a) the supply is for *consideration; and
(b) the *recipient is *registered or *required to be registered; and
(c) the supplier and the recipient have agreed in writing that the supply is of a going concern.
(2) A supply of a going concern is a supply under an arrangement under which:
(a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and
(b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier).
Therefore, for a supply to be a GST-free supply of a going concern all the requirements of section 38-325 must be met.
In this case, the recipient of the supply is the Trustee as stipulated in the sale contract. However, the Trustee is not registered for GST.
In addition, you and the Trustee have not agreed in writing that the supply of the Property is of a going concern as the pages of the sale contract signed by you and the Trustee respectively show conflicting GST treatment of the supply.
Paragraphs 181 and 182 of Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free? (GSTR 2002/5) provides that:
181. The term 'agreed in writing' means that the supplier and the recipient have made a mutual declaration in such form that clearly evidences that they agree that the supply, being the supply under an arrangement of everything necessary for the continued operation of an enterprise, is a 'supply of a going concern'.
182. The supplier and the recipient must agree that the supply is a 'supply of a going concern' on or before the day of the supply.
In this case the page of the sale contract signed by the Trustee stipulates that the supply of the Property is a "taxable supply" and the page of the sale contract signed by you stipulates that the supply of the Property is "the supply of a going concern". Furthermore, no contemporaneous evidence has been made available to us to evidence an agreement in writing between you and the Trustee or the Trust that the supply of the Property is of a going concern.
As such, your supply of the Property does not satisfy all the requirements of section 38-325 and is therefore not a supply of a going concern.
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