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Edited version of your written advice
Authorisation Number: 1012746411856
Ruling
Subject: Supply of a going concern
Question
Will your supplies of the property and the business (B&B) be GST-free supplies of going concerns under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes - As both supplies individually will satisfy the requirements of subsections 38-325(1) and (2) of the GST Act, they can each be supplied individually as a supply of a going concern for the purposes of section 38-325 of the GST Act. Accordingly, the simultaneous supply of the partnership's leasing enterprise and the Trust's B&B enterprise will be GST free supplies under section 38-325.
Relevant facts and circumstances
The partnership owns the property (the Property), which is leased to the trustee for the family trust (the Trust).
The Trust carries on a bed and breakfast enterprise (B&B) at the property.
You intend to sell the property and the B&B at the same time.
The draft sale of land contract (land contract) contains the following relevant items:
• The supply will be for consideration, although no amount has been agreed as yet.
• Under standard clause 34.7, (b) the parties agree the supply of the property is the supply of a going concern; (c )(i) between the date of the contract and the date for completion the vendor will carry on the enterprise; (d) the purchaser warrants that, as at the date for completion, they will be registered or required to be registered under the GST Act.
• GST: The GST Table specifies that the sale is a sale of a going concern.
• Under special condition 1, the contract is conditional upon the contemporaneous completion of the sale of the B&B.
• The lease schedule specifies that the property is leased to the Trust. The lease expires on ddmmyy, with an option to renew for a further 3 years.
The draft sale of business contract (business contract) contains the following relevant items:
• The supply will be for consideration, although no amount has been agreed as yet.
• Under standard clause 3.3, (a) the purchaser warrants that, as at the date for completion, they will be registered or required to be registered under the GST Act; (b) the buyer will provide written proof of such registration; (d) the seller must carry on the business as a going concern until the completion.
• GST: The GST Table specifies that the sale is a sale of a going concern.
• Under special condition 1, the contract is conditional upon the contemporaneous completion of the sale of the Property.
• Schedule A to the business contract contains extensive lists of the plant and equipment, furniture and fittings to be supplied. In addition to these physical assets, you will supply non-physical assets such as your website, booking systems, email and social media addresses.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 38-325
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