Edited version of your private ruling

Authorisation Number: 1012574999887

Ruling

Subject: GST and the sale of a going concern

Question 1

Will the supply of the property and associated enterprises 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)?

Answer

Yes

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

· You are the trustee of a Trust and are registered for goods and services tax (GST).

· You own a freehold property of a large number of acres. A small percentage is allocated to what is classified as wild life refuge: the remaining acres are used to conduct a number of businesses.

· You either lease to, or have an agreement in place with, these businesses for the area required by each business for the proper conduct of its enterprise.

· You have provided a copy of the lease with the operator of one of the businesses which incorporates a number of the other businesses.

· You have been made an offer for the sale of the property along with all the leases and/or agreements applicable to each business.

· You have provided a copy of the contract for sale of land which states under the sub-heading 'Improvements' the following:

o the box next to 'House' has been checked.

o the box next to 'Other' has been checked and also lists a number of other buildings and assets required for the operation of various businesses.

· Under the sub-heading 'Tax information' on the contract for sale:

o the check box for 'GST: Taxable supply' has been checked as 'No'

o The check box for 'GST-free because the sale is the supply of a going concern under section 38-325' has been checked.

· You will assign all of the leases and agreements to the Purchaser.

· You and the purchaser have agreed, in writing, that the supply is a supply of a going concern.

· You will provide all things necessary for the continued conduct of all the businesses situated on the property.

· You will be carrying on the leasing enterprise up to and including the date of the supply.

· There is a residential premises attached to the property but this is wholly and solely used for the specific accommodation.

· The National Parks and Wildlife Act 1974 sates, at section 68, that lands within a wildlife refuge shall be deemed to be dedicated for the purpose of:

o preserving, conserving, propagating and studying wildlife

o conserving and studying natural environments and

o creating simulated natural environments.

· The purchaser is registered for GST.

· You and the purchaser are not related and are dealing with each other at arm's length.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 9-20

Division 38-J

Section 38-325

Subsection 38-325(1)

Subsection 38-325(2)

Section 195-1

Reasons for decision

Issue 1

Question 1

Summary

The supply of the property and associated enterprises, will 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).

Detailed reasoning

Section 9-40 of the GST Act provides that you are liable for GST on the taxable supplies that you make.

A supplier will make a taxable supply if all of the requirements of section 9-5 of the GST Act are met.

Under section 9-5 of the GST Act you make a taxable supply where:

· you make the supply for consideration; and

· the supply is made in the course or furtherance of your enterprise that you carry on; and

· the supply is connected with Australia; and

· you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your case, you will supply the property and associated enterprises to the purchaser. The supply will be made in the course or furtherance of your leasing enterprise. The supply is connected with Australia as the enterprise operates in Australia and you are registered for GST. As such the requirements of section 9-5 of the GST will be met.

The supply will not be an input taxed supply because it does not fall under any of the provisions in Division 40 of the GST Act.

The issue to be addressed is whether the supply of the property and associated enterprises is considered a GST-free supply.

Paragraph 9-30(1)(a) of the GST Act provides that a supply is GST-free, if it is GST-free under Division 38 of the GST Act, or under a provision of another Act.

Subdivision 38-J of the GST Act provides that, if certain conditions are satisfied, a supply of a going concern is GST-free. As such, it is necessary to consider whether the supply will satisfy the requirements of section 38-325 of the GST Act.

A supply is a GST-free supply of a going concern when all the requirements in section 38-325 of the GST Act are satisfied. A two-step approach is required to determine firstly, whether the supply is a going concern and if it is, then whether it is a GST-free supply of a going concern.

A supply of a going concern

The 'supply of a going concern' is defined under subsection 38-325(2) of the GST Act

Subsection 38-325(2) of the GST Act provides that a supply of a going concern is a supply under an arrangement under 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 the supply (whether or not as part of a larger enterprise carried on by the supplier).

Subsection 38-325(2) of the GST Act requires that the elements of that subsection be satisfied in relation to an enterprise.

The term supply of a going concern is a statutory term, which as defined in subsection 38-325(2) of the GST Act requires the following:

· an arrangement

· an identified enterprise

· the supplier supplies all the things necessary for the continued operation of the enterprise; and

· the supplier carries on, or will carry on, the enterprise until the day of supply.

Paragraph 75, GSTR 2002/5 states that two elements are essential for the continued operation of an enterprise:

· The assets necessary for the continued operation of the enterprise including, where appropriate, premises, plant and equipment, stock-in-trade and intangible assets such as goodwill, contracts, licences and quotas; and

· The operating structure and process of the enterprise consisting of the commercial or economic activity relevant to the type of enterprise being conducted, for example, ongoing advertising and promotion.

On the facts provided it is determined that there is an arrangement in place to supply the property and associated enterprises as evidenced by the contract for sale, there is an identified leasing enterprise, you will supply all things necessary for the continued operation of the enterprise and you will carry on the enterprise until the day of the supply.

Thus all the requirements of subsection 38-325(2) of the GST Act have been fully satisfied and the supply is a supply of a going concern.

A GST-free supply of a going concern

Subsection 38-325 of the GST Act provides that the supply of a going concern is GST-free if:

§ the supply is for consideration; and

§ the recipient is registered or required to be registered; and

§ the supplier and the recipient have agreed in writing that the supply is of a going concern.

In your case, the supply will be consideration, the purchaser is registered for GST, and you and the purchaser have agreed in writing that the supply is of a going concern.

Therefore, the supply of the property and associated enterprises will be a GST-free supply of a going concern under section 38-325 of the GST Act.

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