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Edited version of your written advice

Authorisation Number: 1051285661259

Date of advice: 20 September 2017

Ruling

Subject: GST and GST-free supply of a going concern

Question 1

Is the supply of the property by the vendor the supply of a GST-free going concern?

Answer

Yes.

Relevant facts and circumstances

The vendor is selling a property which is leased under licence.

The vendor will assign all their rights under the license at the time of supply.

In the event that the licence is terminated for any reason prior to settlement the vendor must then enter into a replacement lease or licence procured by the purchaser on substantially similar terms to the previous one.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-325.

Reasons for decision

Summary

Yes.

Detailed reasoning

Going concern

Under subsection 38-325(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) a supply of a going concern is GST-free if:

According to the facts provided all conditions mentioned under subsection 38-325(1) will be satisfied at settlement.

However, for a supply to be a supply of a going concern subsection 38-325(2) of the GST Act also needs to be satisfied.

The statutory term 'supply of a going concern' is defined in subsection 38-325(2) of the GST Act as a supply under an arrangement under which:

Until the day of the supply

In this case the vendor will carry on the licensing of the land until the day of the supply.

All of the things necessary

For the vendor to make a supply of a going concern it needs to be determined whether the vendor supplies to the buyer all of the things that are necessary for the continued operation of the identified enterprise under paragraph 38-325(2)(a) of the GST Act.

Goods and Services Tax Ruling GSTR 2002/5 explains what is a supply of a going concern.

GSTR 2002/5 considers the meaning of the phrase all of the things that are necessary for the continued operation of an enterprise. In particular, paragraphs 73, 74 and 75 of GSTR 2005 state:

In this case the vendor will assign to the purchaser from settlement, all of its rights under the licence.

In the case that the licence is terminated for any reason prior to the settlement of a stage and it is a condition precedent that the purchaser has to find a replacement on substantially similar terms to the licence and the vendor enters into an agreement with the new licensee or tenant prior to settlement then we will consider this to be one of all of the things necessary supplied by the vendor for the supply to be considered a GST-free supply of a going concern.


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