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Edited version of private advice
Authorisation Number: 1051820363396
Date of advice: 26 March 2021
Ruling
Subject: GST and sale of a going concern
Question 1
Is the supply of property by the Trust A to Trust B under the Contract of sale (the Contract) 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, the supply by Trust A to Trust B of the Property under the Contract is a supply of a GST-free going concern under section 38-325 of the GST Act.
Relevantly in this case it is accepted that Trust A continues to operate a leasing enterprise until the time of the supply notwithstanding that the Property is temporarily vacant. This is consistent with the view in paragraphs 149 to 151 of Goods and Services Tax Ruling, GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free?
As the remaining conditions in section 38-325 of the GST Act are also met, the supply of the Property under the Contract is GST-free.
Question 2
Is Trust B entitled to an input tax credit for the acquisition of the property that is made under the Contract?
Answer
No
To be entitled to an input tax credit you must make a creditable acquisition. Under section 11-5 of the GST Act, one of the requirements of a creditable acquisition is that 'the supply of the thing to you is a taxable supply'.
Following our response above, the supply of the property by Trust A is a GST-free going concern to Trust B. Assuch it is not a taxable supply. On this basis Trust B will not make a creditable acquisition and no entitlement to an input tax credit will arise.
This ruling applies for the following period:
1 January 20XX to month ending 31 December 20XX
Relevant facts and circumstances
Trust A acquired a commercial property (the Property) before 1 July 20XX.
Since acquiring the Property Trust A has continued to lease the Property to tenants, however it was vacated late 20XX at which time it was advertised for lease.
At no time has the Property been available for sale and continues to be advertised for lease. However, Trust B expressed an interest in purchasing the Property 'off market'.
Trust A (as Seller) and Trust B (as Buyer) entered into a contract of sale (Contract) for the Property. Under the terms of the Contract the Seller will provide consideration of $XXX.
The Contract shows that the parties have agreed that no GST-applies on the basis that the transaction meets the requirements of a supply of a going concern under the GST Act.
Both Trust A and Trust B are registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 11-5
A New Tax System (Goods and Services Tax) Act 1999 Section 38-325
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