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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012696473357

Ruling

Subject: GST and sale of properties as a going concern

Question

Will the sale of the Australian properties by the vendor be 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)?

Advice

Yes, based on the information received the sale of the properties by the vendor will be a GST-free supply of a going concern under section 38-325 of the GST Act.

Relevant fact

You are registered for the goods and services tax (GST) and carry on a leasing enterprise by leasing Australian commercial properties to an Australian company.

You have decided to sell these commercial properties and you have entered into sales contracts with an Australian entity (purchaser) who had agreed to purchase them.

In the sales contracts the properties will be sold subject to the tenancies. You and the purchaser agree that each supply you made under a sale contract is either separately or together the supply of a going concern.

You advised the following in the ruling request:

• Each of the properties is currently under lease to the Australian company.

• Prior to the sale completing, you will enter into a new lease agreement with the Australian company to reflect terms that are acceptable to both the purchaser and the Australian company.

• At all relevant times leading up to and on the day of the supply, namely the settlement date, the properties will be the subject of the leasing enterprise.

• The purchaser is registered for GST.

Relevant legislative provisions

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

Reasons for decision

A supply of a going concern is GST-free if all the requirements in section 38-325 of the GST Act are satisfied.

Under subsection 38-325(1) of the GST Act, a 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.

Subsection 38-325(2) of the GST Act provides the definition of a 'going concern'. It states:

    (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 defined term in section 195-1 of the GST Act)

We will now determine whether the supply of the properties under the sales contracts will be supplies of going concerns under subsection 38-325(2) of the GST Act and will be GST-free under subsection 38-325(1) of the GST Act.

Subsection 38-325(2) of the GST Act

From the information received paragraphs 38-325(2)(a) and 38-325(2)(b) of the GST Act are satisfied as:

    a) You as the vendor have entered into sales contracts with the purchasers for the sale of the properties which you are currently leasing. The sales contracts provide that the properties will be sold subject to tenancies and the new lease will operate as a concurrent lease in respect of those tenancies. In this instance you will be supplying all the things necessary for the purchaser to continue carrying on the leasing enterprises that you currently carry on.

    b) You will be carrying on the leasing enterprises until the day of the supply which is the settlement date since you are supplying the properties together with the tenancies.

Accordingly, the supply of the properties will be supplies of going concerns under subsection 38-325(2) of the GST Act.

Subsection 38-325(1) of the GST Act

Based on the information received, all the requirements in subsection 38-325(1) are satisfied are:

    a) You are receiving consideration when selling their properties;

    b) The purchaser is registered for GST; and

    c) You and the purchaser have agreed in writing that the supplies of the properties will be of going concerns.

Accordingly, the supply of the properties by you will be GST-free supplies under subsection 38-325(1) of the GST Act.


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