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Edited version of private advice
Authorisation Number: 1012681690446
Ruling
Subject: GST and the supply of a going concern
Question
Was your supply of the Property a GST-free supply of a going concern?
Advice/Answers
Yes
Relevant facts and circumstances
You are registered for GST.
You owned commercial property in Australia.
The Property is leased to Entity A, with the lease originally set to expire on ddmmyyyy.
There were ongoing negotiations with the tenant for them to purchase the Property from you.
The negotiations resulted in the following transactions:-
1. the expiry date of the lease was amended, and.
2. the Property was sold, for $xxxx, with the amended lease in place, to Entity B as trustee for Entity C.
This ruling is only concerned with the second transaction, ie the sale of the property.
The GST table in the Contract of Sale specifies that the sale is the sale of a going concern.
The Settlement occurred on ddmmyyyy.
Entity C is registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999, Section 9-20
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)
Reasons for decision
In this ruling,
• unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website www.ato.gov.au
Subdivision 38-J deals with supplies of going concerns.
A supply of a going concern is defined in subsection 38-325(2) as a supply under an arrangement under which:
(a) the supplier supplies 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 supply.
Accordingly, in order to constitute a supply of going concern, each of the above conditions must be satisfied.
An enterprise is defined in section 9-20(1) of the GST Act as including an activity, or series of activities, done:
• in the form of a business
• in the form of an adventure or concern in the nature of trade, or
• on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.
You were carrying on an enterprise that included leasing of commercial property.
You supplied the Property, with the amended lease in place, to the purchaser.
Therefore, we consider that all things necessary to continue the leasing enterprise that you conducted were supplied to the purchaser.
You carried on the (leasing) enterprise until the day of the supply.
Therefore, your supply of the Property satisfied the requirements of section 38-325(2).
Subsection 38-325(1) provides that the supply of a going concern is GST-free if:
(a) the supply is for consideration;
(b) the recipient is registered or required to be registered; and
(c) the supplier and recipient have agreed in writing that the supply is of a going concern
On the facts provided, your supply of the Property satisfied the requirements of section 38-325(1).
As your supply of the Property satisfied the requirements of subsections 38-325(1) and (2), your supply of the property was a GST-free supply of a going concern for the purposes of section 38-325 of the GST Act.