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Edited version of your written advice
Authorisation Number: 1012768555853
Ruling
Subject: GST and the supply of a going concern
Question
Will your supply of a commercial property with relevant assets be a GST-free supply of a going concern for the purposes of section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes.
Your supply of the property will be a GST-free supply of a going concern.
This because, on settlement date, you will be providing the purchaser with all of the things that are necessary for the continued operation of a leasing enterprise, being the premises and the continuing leases and licences.
In addition, you will continue to carry on the leasing enterprise until the day of the supply.
Finally, there will be a clause in the contract for sale indicating that you and the purchaser have agreed in writing that the sale is a supply of a going concern, the sale will be for consideration and the purchaser is registered for GST.
Further information
Division 135 of the GST Act provides that the recipient of a supply of a going concern has an increasing adjustment to take into account the proportion (if any) of supplies that will be made in running the concern and that will not be taxable supplies or GST-free supplies.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You are the owner of a commercial property which comprises of various buildings.
You are carrying on a leasing enterprise and you conduct no other enterprises on this property.
You have entered into a Contract of Sale of Real Estate (Contract) with a purchaser to sell the Property for a specified sum. You have supplied a copy of this Contract.
The contract states that this is a sale of a going concern.
The farm land is leased to another entity for a fixed period. The lease may then continue on a monthly basis on the same terms. You have provided a copy of the Deed.
The surrounding area is leased to another entity. There is an option for a further X years. You have provided a copy of the Agreement.
You have provided an extract of the Lease.
The farm house has been licenced to an individual for some time. The Licence terminates on the earlier of cancellation, termination, or rescission of the Contract. You may terminate this Licence upon either completion or termination of the Contract. If the licence is not terminated at completion of the Contract the licence is granted to the individual as a monthly license.
All of these leases/licences will be in place at and following settlement.
As part of the land sale transaction, various pieces of equipment needed to maintain the leased areas as a landlord are also being transferred to the purchaser under a separate Agreement.You have provided a copy.
Completion of the assignment and transfer of the assets must occur on the settlement date of the Property pursuant to the Contract. Only the equipment being supplied by you that is used by you in the leasing enterprise will form part of the sale of the going concern. This equipment includes:
• quad bike to inspect the property
• ride on mower to maintain lawn areas
• four wheel drive tray truck to assist in moving items around the property to carryout maintenance
• tractor used for repair and maintenance
The Purchaser is registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 38-325