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Edited version of your written advice
Authorisation Number: 1013087534802
Date of advice: 13 September 2016
Ruling
Subject: GST-free supply of a going concern
Question
Is the supply by the Property to the Purchaser a GST-free supply of a going concern pursuant to section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Advice/Answers
Yes. The supply of the Property with leases intact by you to the Purchaser is a GST-free supply of a going concern because all the requirements of section 38-325 of the GST Act are satisfied as follows:
• You will supply to the Purchaser the leasing enterprise consisting of the Property with the leases intact. Hence, we consider that all things necessary for the continued operation of the leasing enterprise will be supplied under the arrangement (paragraph 38-325(2)(a) of the GST Act).
• The requirement of paragraph 38-325(2)(b) of the GST Act will also be met as you, the vendor, warrant that you will carry on the enterprise of leasing the Property until Completion of the sale. Further, all the lettable areas that are currently vacant were previously leased and you will actively market these areas for lease until the day of the supply.
• The supply of the Property will be made for consideration. Hence, the requirement of paragraph 38-325(1)(a) of the GST Act will be met.
• The Purchaser represents and warrants that it is registered for GST and that it will be registered for GST at Completion. Hence, the requirement of paragraph 38-325(1)(b) of the GST Act will be met.
• You and the Purchaser have agreed in writing that the supply of the Property is a supply of a going concern for the purposes of the GST legislation. Hence, the requirement of paragraph 38-325(1)(c) of the GST Act will be met.
Relevant facts
You are carrying on a leasing enterprise from the Property and are registered for GST.
The Property comprises a number of commercial premises.
You propose to sell the Property to the Purchaser under a Sale Contract that was executed recently.
The sale price is a certain amount of money.
The Sale Contract provides that the Property is sold subject to the Tenancies (as per the schedule attached to the Sale Contract).
The Sale Contract provides that on Completion the seller is deemed to have assigned to the buyer and the buyer is deemed to have taken an assignment of the tenancies and the benefit of guarantees and indemnities in or which relate to the tenancies.
A number of new business leases will be entered into before completion of the Sale Contract between you as lessor and Entity X as lessee.
All the lettable areas of the Property that are currently vacant were previously leased and you will actively market these areas for lease until the day of the supply.
A clause in the Sale Contract provides that both parties agree that the sale of the Property is a supply of a going concern. Furthermore, you warrant that:
(a) you will carry on the enterprise constituted by the Property until Completion, and
(b) you are supplying all things necessary for the continued operation of the enterprise constituted by the Property.
A clause in the Sale Contract provides that the Purchaser represents and warrants that it is registered for GST and that it will be registered for GST at Completion.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 38-325.
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(1).
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(2).
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-325(1)(a).
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-325(1)(b).
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-325(1)(c).
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-325(2)(a).
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-325(2)(b).
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