Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1051255640568

Date of advice: 20 July 2017

Ruling

Subject: Goods and Services Tax (GST) and the supply of a GST-free going concern

Question 1

Will the supply of the property (including assignment of the lease to the recipient) 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

Entity A owns the land and buildings that have been used in a tourist accommodation centre business.

The tourist accommodation business is owned and run by an associated company, who leases the land and buildings from the Entity A.

While there is no formal agreement for the lease, the trading company has been and is still paying rent for the use of the property and will be assigning the lease to the recipient of the supply under agreement.

The enterprise of leasing will be carried on to the day of sale.

Entity A and the recipient of the supply are registered for GST.

Entity A and the recipient will agree in writing that the supply of the property is of a going concern.

Relevant legislative provisions

Paragraph 9-20(1)(c) of the A New Tax System (Goods and Services Tax) Act 1999

Section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision

A supply is taxable to the extent it is not GST-free or input taxed.

There are no provisions that would result in the supply being input taxed, however, section 38-325 of the GST Act is relevant to your circumstances.

Subsection 38-325(2) of the GST Act provides that a supply of a going concern is a supply under an arrangement which:

In this situation, the enterprise is of leasing pursuant to paragraph 9-20(1)(c) of the GST Act and the lease (a tenancy at will arrangement) will be assigned to the recipient as all of the things that are necessary for the continued operation of the leasing enterprise including the property. Furthermore, the lease will be in place until the day of the supply. In this way the recipient is capable of receiving the benefits of the covenants under the lease. Thus, the supply will satisfy subsection 38-325(2) of the GST Act.

Subsection 38-325(1) of the GST Act provides that a supply of a going concern is GST-free if:

In this instance, the supply is of a going concern of a leasing enterprise and when it is supplied it will be GST-free. As it is supply for consideration, the recipient is registered for GST and the supplier and recipient will have agreed in writing that the supply is of a going concern.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).