Edited version of your written advice

Authorisation Number: 1013059643254

Date of advice: 28 July 2016

Ruling

Subject: Supply of a going concern

Question 1

Is the proposed sale of vacant land a supply of a going concern pursuant to section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act), when supplied subject to existing lease by the Vendor to the Purchaser?

Answer

Yes. Based on information provided, the proposed sale of vacant land presently subject to a lease will be a GST-free supply of a going concern under section 38-325 of the GST Act. This is because, on settlement date, the supplier will supply to the purchaser all of the things that are necessary for the continued operation of a leasing enterprise, being the property and the current lease. In addition, there will be clauses in the final version of the contract of sale to reflect an agreement in writing that the sale is a supply of a going concern and, the supplier will carry on a leasing enterprise until the day of the supply (settlement date).

Question 2

Can the supplier determine the value of taxable supply of the Additional lot by apportioning the sale price in accordance with physical areas of the Additional lot and the Leased lot?

Answer

Yes, provided that the relative price of different lots, on a per-square-metre basis, does not vary between the Additional lot and the Leased lot.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The going concern

• The Vendor is registered for GST.

• The Vendor carries on an enterprise of leasing vacant land at a particular location (Property). The Vendor owns the Property and is presently leasing it pursuant to a lease agreement (Lease). The Lease provides for a lease term of 10 months for a consideration plus GST, per calendar month.

• The Vendor is not carrying on any other enterprise other than the identified leasing enterprise at the Property.

• The Vendor has executed an Option deed with the Purchaser. The Purchaser will exercise their call option prior to option expiry, to acquire the Property.

• The Purchaser is registered for GST.

• Upon exercise of the call option a contract of sale will be executed between the Vendor and the Purchaser in respect of the Property pursuant the Option deed.

• At the time of applying for this private ruling a draft contract of sale has been provided. However, the final executed version of the contract of sale will -

• Stipulate a total purchase price, plus GST if any, for the purchase of the Property;

• Reflect that the Vendor and the Purchaser agree that the supply of the Property is a supply of a GST-free going concern of a leasing enterprise;

• Reflect that the supply is subject to existing Lease.

• The Vendor will continue to carry on the leasing enterprise in respect of the Property until the day of settlement.

• The settlement is anticipated by late-20XX, during which time the Property is subject to the Lease.

Subdivision - The travelator lot

• In addition to the Property identified as the leased lot, the Option deed includes for sale another smaller lot (Additional lot).

• At the time of applying for this private ruling there has been an application to alter the current leased lot, however, not yet approved by the relevant Land Titles Office. The proposed subdivision will -

• Contain the entire area of the leased lot;

• Contain the Additional lot, an area of vacant land on which a chattel will be installed in the future;

• Continue the legal rights created in the Lease pertaining to the leased lot;

• The Additional lot is currently vacant land and it is adjacent to the leased lot;

• The Additional lot accounts for approximately 1% of the total area being supplied pursuant to the Option deed and the final version of the contract of sale.

• The applicants have requested the Commissioner to confirm that -

• As the Additional lot is not subject to current Lease it does not form part of supply of a going concern and, therefore, the Additional lot is a taxable supply; and

• The Vendor can determine the value of that taxable supply by apportioning the sale price in accordance with physical areas of the Additional lot and the leased lot;

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 sections 9-5, 38-325.