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Edited version of your written advice
Authorisation Number: 1051456352750
Date of advice: 19 November 2018
Ruling
Subject: GST
Question
Is the sale of the Property by the entity a supply of a GST-free going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes.
A supply of a going concern is GST-free where it meets the requirements specified in subdivision 38-J of the GST Act. Section 38-325 of the GST Act states:
(1) The *supply of a going concern is GST-free if:
(a) the supply is for *consideration; and
(b) the *recipient is *registered or *required to be registered; and
(c) the supplier and the recipient have agreed in writing that the supply is of a going concern.
(2) A supply of a going concern is a supply under an arrangement under which:
(a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and
(b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier).
(* denotes a term defined in section 195-1 of the GST Act)
Based on the information provided, all the above conditions would be satisfied on settlement date.
The entity would have carried on the current enterprise until the day of supply (settlement date).
On settlement date, under a contract that confirms the parties’ mutual agreement that the sale is a supply of a going concern, the entity will be supplying all of the things that are necessary for the continued operation of the current enterprise to the purchaser who is registered for GST, for the payment of the agreed consideration.
Consequently, the sale by the entity would be a GST-free supply of a going concern under section 38-325 of the GST Act.
Note: If changes to the arrangement occur at settlement date, all of the requirements of section 38-325 of the GST Act may no longer be satisfied. Where all the requirements of section 38-325 of the GST Act are not satisfied at settlement date, the sale would not be a GST-free supply of a going concern.
This ruling applies for the specified period:
1 September 20XX to 30 June 20XX
Relevant facts and circumstances
The entity carries on a property development enterprise and is registered for the goods and services tax (GST).
The entity is the registered proprietor of the Property.
The entity purchased the Property with the intention of developing the Property into multiple lots for resale.
The entity has been carrying out property development activities in relation to the development of the Property, continuously to date.
The entity has entered into an agreement (Sale Contract) with a purchaser, for the sale of the Property, in consideration for payment of the specified price.
Pursuant to the Sale Contract, the entity will supply the purchaser with the Property, and all the assets (tangible and intangible) which are used for the furtherance of the property development enterprise.
All the contracts, agreements and rights to intellectual property relating to the enterprise will be transferred to the purchaser at settlement date.
The entity continues to carry on the activities of the enterprise and will continue to operate the enterprise until settlement of the sale. At settlement, the entity will provide the purchaser with all the things necessary to continue with the property development enterprise in respect of the Property.
The entity and the purchaser have agreed in writing that the supply is the supply of a going concern.
The purchaser is registered for GST and will remain registered for GST at settlement date.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subdivision 38-J
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)
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