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Edited version of your written advice
Authorisation Number: 1012737377007
Ruling
Subject: GST and supply of a going concern
Question 1
Is the sale of your cartage business a GST free supply of a going concern?
Answer
Yes.
Relevant facts and circumstances
You are registered for GST.
You have contracted with the purchaser to sell your cartage business.
The supply of this business is for consideration.
The purchaser is also registered for GST.
You and the purchaser have agreed in writing that the supply (business) is of a going concern.
The sale includes everything that the purchaser will need to carry on the business such as handover training and introductions to suppliers and key contacts.
You will be operating the business up to and including the day of sale.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 - section 9-5
A New Tax System (Goods and Services Tax) Act 1999 - section 38-325
Reasons for decision
In this reasoning, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise specified.
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 for GST, and
c) the supplier and the recipient have agreed in writing that the supply is of a going concern.
Based on the facts supplied, the requirements of subsection 38-325(1) will be satisfied. Therefore, where the supply also meets the requirements of subsection 38-325(2) it will be a GST-free supply of a going concern.
Subsection 38-325(2) provides that a supply of a going concern is 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 the larger enterprise carried on by the supplier).
Identified enterprise
Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a supply of a going concern GST-free? (GSTR 2002/5) provides guidance on the requirements to be met for a supply to be a GST-free supply of a going concern.
Paragraph 29 of GSTR 2002/5 explains that subsection 38-325(2) requires the identification of an enterprise that is being carried on by the supplier (the 'identified enterprise'). The identified enterprise must meet the requirements of subsection 38-325(2).
As you are carrying on an enterprise of cartage (the identified enterprise) the requirements under paragraphs 38-325(2)(a) and 38-325(2)(b) must be satisfied in relation to this enterprise for there to be a sale of a going concern.
Supply of all things necessary for the continued operation of an enterprise
Paragraph 72 of GSTR 2002/5 explains that the things that are necessary for the continued operation of the enterprise will depend on the nature of the identified enterprise being carried on. In this case, the things that are necessary for the ongoing operation of the business are the cartage vehicle and the contacts necessary to obtain products and make supply to customers.
Therefore, the supply of your vehicle together with the supplier and customer contacts is the supply of all things necessary for the continued operation of the cartage business.
Supplier carries on enterprise until day of supply
You will carry on the enterprise until the day of supply.
Accordingly, you will satisfy paragraphs 38-325(2)(a) and (b).
As all the requirements for section 38-325 will be satisfied, the supply of the cartage enterprise will be a GST-free supply of a going concern.