Edited version of your written advice

Authorisation Number: 1012911654698

Date of advice: 16 November 2015

Ruling

Subject: GST and going concern

Question

Whether the sale by the taxpayer of a commercial property comprising vacant commercial premises and leased commercial premises is a supply of a going concern for goods and services tax purposes.

Answer

The taxpayer makes a taxable supply of the vacant commercial premises and a GST-free supply of a going concern of the leased commercial premises, provided the conditions in sections 9-5 and 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 are satisfied respectively.

Relevant facts and circumstances

The taxpayer is the registered proprietor recorded on one Torrens title of land comprising vacant commercial premises and other premises leased to tenants.

The taxpayer appoints a real estate agent to sell the land.

Because of market conditions, the vacant commercial premises have not been tenanted for a number of years. The taxpayer has not refurbished these premises and has not been actively marketed them to find new tenants.

The other premises are leased to a number of tenants.

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 9-80

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

Reasons for decision

In this reasoning, unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999.

Enterprise of leasing

For GST purposes, we consider that the taxpayer is carrying on leasing activities on a regular or continuous basis with the premises. That is, the taxpayer uses those premises in carrying on a leasing enterprise under paragraph 9-20(1)(c).

Contract to sell all premises

For GST purposes, if the taxpayer enters into a contract to sell the land in its entirety (including the vacant commercial premises), we consider that the taxpayer makes two supplies under the contract as follows. These supplies may have different GST consequences.

Supply of an enterprise within a larger enterprise

For GST purposes, we consider that at the time of the contract, the taxpayer carries on regular and continuous activities in the form of leases of the tenanted premises.

For these premises, the taxpayer carries on identifiable leasing activities although these tenanted premises form a part of the larger leasing enterprise (including the vacant commercial premises) the taxpayer carries on.

Therefore, we consider that the taxpayer carries on a separate leasing enterprise of these premises (excluding the vacant commercial premises) within a larger leasing enterprise of all premises (including the vacant commercial premises).

In these circumstances, if the taxpayer carries on those leasing activities until the day of settlement, we consider that the taxpayer makes a supply of a number of things under the contract at the time of settlement. Those leasing activities and the respective premises supplied under the contract can be characterised as one 'supply of a going concern' under subsection 38-325(2).

Provided the conditions in subsection 38-325(1) are satisfied, the supply of these premises is a GST-free supply of a going concern.

The vacant commercial premises

For GST purposes, as the taxpayer has not undertaken leasing activities to seek tenants for the vacant commercial premises, although the Trustee uses these premises in the larger leasing enterprise, we consider that the taxpayer merely supplies the purchaser under the contract with an asset under paragraph 9-10(2)(d). If the conditions in section 9-5 are satisfied, the taxpayer makes a taxable supply of the vacant commercial premises.