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Edited version of your written advice
Authorisation Number: 1012737859273
Ruling
Subject: GST and supply of a going concern
Question
Will the sale of the property 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, the sale of the property will be a GST-free supply of a going concern under section 38-325 of the GST Act provided the purchaser is registered for GST at the time of the supply.
You are carrying on a leasing enterprise. Your sale of the property will be a supply of a going concern as you will supply it subject to existing tenancies which will enable the purchaser to carry on the enterprise. Furthermore, you will continue to carry on the enterprise until the day of the supply.
Your supply of the property will be for consideration. You and the purchaser will, upon entering into the contract, agree in writing that the sale is of a going concern. If the purchaser is registered or required to be registered for GST at the time of supply, the sale of the property will be GST-free.
Where the purchaser is not required to be registered but chooses to register to obtain the benefit of section 38-325 of the GST Act, the mere lodging of an application to be registered will not satisfy the requirements for a supply of a going concern to be GST-free. The effective date of registration of the purchaser must be on or before the day of supply.
Relevant facts and circumstances
You are registered for GST.
Several years ago, you purchased the property comprising separate residential dwellings on separate titles.
At the time of acquisition, the dwellings were not new residential premises; and there have been no substantial renovations done in the last 5 years that would make them new residential premises.
You acquired the property with the intention of developing it into an apartment building. Despite obtaining a Development Approval and undertaking some preliminary service works, you decided not to proceed with the development. The dwellings remain intact.
All dwellings are currently tenanted. The tenancies are managed by a real estate agent.
You are now selling the property under one contract subject to existing tenancies. The property is now actively advertised for a real estate agent.
The contract for sale of the property contains a clause which provides that:
• the parties agree that the sale of the property is a supply of a going concern;
• the vendor must carry on the enterprise conducted on the land until the completion date;
• if the purchaser is not registered by the completion date, the purchaser will pay a retention sum which will be paid back to the purchaser if it serves a notice within 3 months of completion that it is registered.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-325.
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