Edited version of private advice

Authorisation Number: 1051790809309

Date of advice: 30 March 2021

Ruling

Subject: GST and going concern

Question 1

Is the sale of the whole the Property the Vendor a supply of a GST-free going concern in accordance with Subdivision 38-J of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

All further legislative references are to the GST Act unless stated otherwise.

Answer

Yes. The sale of the whole of the Property by the Vendor is a supply of a GST-free going concern in accordance with Subdivision 38-J. This is because the requirements under section 38-325 are considered satisfied in respect of the sale of the Property by the Vendor.

Question 2

If the answer to Question 1 is "no", is the sale of the portion of the Property that is subject to a lease or licence eligible to be a supply of a GST-free going concern in accordance with Subdivision 38-J?

Answer

N/A

Question 3

If the answer to Question 2 is "yes", is it fair and reasonable for the Vendor to apportion the purchase price of the Property based on area?

Answer

N/A

Relevant facts and circumstances

Background

The Vendor is the applicant of this private ruling.

There are individuals who act as the Deed Administrators of the Vendor.

The Vendor is the registered proprietor of the Property and is the vendor of the Property.

The Property has an area of approximately X hectares.

The Property comprises one real property title.

The Vendor has been registered for GST since XX XX XXXX.

The Vendor is part of a group of companies which was placed into Voluntary Administration. The Vendor subsequently entered into a Deed of Company Arrangement.

The Vendor was a non-operating entity within the group of companies at the time of the Administration. At or around the time the Deed of Company Arrangement was entered into, a number of real estate assets were transferred to the Vendor from other group entities. Since that time, the Vendor has been engaged in the sale, leasing and general management of that property portfolio.

The Contract

On XX XX XXXX, the Vendor entered into a Contract of Sale (Contract) in respect of the Property.

The purchaser named in the Contract (Purchaser) is PPP.

The Contract stipulates that the Purchaser will be registered, or required to be registered for GST at, or prior to, the completion of the Contract.

The purchase price in the Contract is $X (excluding GST).

The parties to the Contract have agreed for completion of the Contract to occur on XX XX XXXX.

In respect of GST, the parties agreed under the Contract that:

(a)  the purchase price is exclusive of GST; and

(b)  the sale is the supply of going concern for the purpose of section 38-325(1)(c) of the GST Act.

Parts of the Property subject to Lease

The Vendor granted a lease (Lease) over a part of the Property to another party (OOO) which was then assigned to LLL by way of a deed of assignment.

The Lease is for a term of X years.

The rent payable under the Lease is nominal at $X per annum, plus GST.

When the Lease expires, the same parts of the Property will be leased to LLL for a term of X years.

The parts of the Property that are leased are illustrated diagrammatically in a Premises Plan that is included in the Lease. There are three separate parts that are leased.

Parts of the Properly subject to a Licence

In addition to the Lease, parts of the Property are presently subject to 3 licences (Licences).

The Licences were all initially between the Vendor and OOO (the tenant under the Lease). Each Licence was then assigned by OOO to LLL, by way of deed of assignment. Each Licence relates to a different part of the Property.

The 3 Licences all commenced on XX XX XXXX, which is the same commencement date as the Lease. All have a term of X years, which also matches the term of the Lease.

The fee payable under the Licences is nominal and $X.

In respect of the first Licence, the licenced area is illustrated diagrammatically in the licence agreement.

In respect of the second Licence, there were a few separate licenced areas. In total, the licenced area is stated to be approximately X ha.

In respect of the third Licence, there is no area shown diagrammatically. The licenced area is stated to be that part of the Property required by OOO to comply with maintenance, regulatory or other obligations during the term - to the extent that part is not already subject to a Licence.

Parts of the Property subject to a Storage Licence

In addition to the Lease and the Licences, part of the Property is subject to a storage licence to HHH (Storage Licence).

The Storage Licence commenced on XX XX XXXX and is for a term of X months.

The Storage Licence Fee is $X per month (plus GST, if applicable).

The licenced area is set out in Item 4 of the Storage Licence.

Total area subject to Lease or Licence

As advised, the total area subject to lease or licence is approximately Y% of the Property. Approximately (1-Y)% of the Property is not subject to any lease or licence.

Continuation of the Leases and Licences

As advised, the Vendor will not seek to terminate any of the existing leases or licences prior to completion of the Contract.

As stipulated in the Contract, the Purchaser will acquire the Property subject to the Leases and Licences.

The Purchaser is obligated to comply with the terms of the Leases and Licences from completion of the Contract.

Active marketing of vacant parts of the Property

The Vendor has agreed that, between exchange and completion of the Contract, the Purchaser may actively market the vacant parts of the Property as being available for lease on behalf of the Vendor. A letter agreement between the Vendor and Purchaser in respect of this arrangement has been made.

This active marketing will continue on behalf of the Vendor until the earlier of:

(a)  the date a new lease or licence is entered in respect of the vacant areas; or

(b)  the date the Contract is completed.

Any active marketing the Purchaser undertakes following Completion will be conducted on the Purchaser's own behalf.

In relation to the marketing of the vacant areas, the Purchaser has contacted a real estate agent and requested that they submit a marketing proposal for the lease of the vacant areas.

Additional information

The Vendor will supply to the Purchaser everything necessary to continue the enterprise of leasing and licencing.

The leased areas, licenced areas and storage licenced areas are mutually exclusive and do not overlap.

The sale by the Vendor to the Purchaser is an arm-length transaction between a non-associated buyer and seller for GST purposes.

The Vendor and OOO are not associates for GST purposes.

The Vendor and LLL are not associates for GST purposes.

The Vendor and HHH are not associates for GST purposes.

As of XX XX XXXX, all of the Leases or Licences referenced in this private ruling remain in place and have not been terminated.

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