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Edited version of your written advice
Authorisation Number: 1051209299051
Date of Advice: 19 April 2017
Ruling
Subject: GST and going concern
Question 1
Is the acquisition of the Property by the Purchaser from the Vendor a creditable acquisition under section 11-5 of the GST Act?
Answer
No, based on information provided, the acquisition of the Property by the Purchaser is not a creditable acquisition because that supply to the Purchaser was not a taxable supply. Accordingly, paragraph 11-5(b) of the GST Act is not satisfied and the acquisition is not a creditable acquisition.
The supply of the Property to the Purchaser is for consideration, the Purchaser is registered for GST, and both parties have agreed in writing that the sale is a GST-free supply of a going concern. Accordingly, subsection 38-325(1) is satisfied.
Additionally, on settlement date, the Vendor has supplied to the Purchaser all of the things that are necessary for the continued operation of a leasing enterprise, being the property and the surrender of the current lease so that Purchaser could install a new, preferred, tenant. Notwithstanding that the leasing agreements are varied, we are of the view that the Vendor has carried on the enterprise of leasing until the day of supply (settlement) as required by subsection 38-325(2) of the GST Act.
Accordingly, the supply of the Property to the Purchaser was a GST-free going concern and cannot be a taxable supply. Therefore, as the acquisition by the Purchaser was not acquisition of a taxable supply, the acquisition is not a creditable acquisition.
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.
The Purchaser acquired the Property as a GST-free going concern under section 38-325 of the GST Act.
Purchaser has been registered for GST during the relevant time and is seeking a confirmation from Commissioner that the supply of the Property to it was a supply of a GST-free going concern.
The enterprise supplied to the Purchaser was an enterprise of leasing, carried on by the Vendor which leased the Property to the original tenant.
The contract of sale between Vendor and Purchaser stipulates that the sale is a GST-free supply of a going concern.
The original tenant preferred to stop short (surrender) their existing 5-year lease with the Vendor. The surrender was conditional on the Vendor entering a contract for sale with the Purchaser for the sale of the Property.
Accordingly, on the day of the settlement, the original tenant entered the Deed of Surrender of Lease with the Vendor, surrendering their lease for a fee; the last day of occupancy was to be 11 days later, at which time the original tenant's interest in the lease would be extinguished.
The Purchaser preferred to install a new tenant and they entered a lease one day before the settlement. This lease agreement did not involve the Vendor in any way but it synchronised with the surrender by original tenant so that new tenant would start occupancy one day after original tenant vacated.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 38-325.
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