| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1013090154854
Date of advice: 14 September 2016
Ruling
Subject: Whether the sale of a leased property is the GST-free supply of a going concern
Question 1
Are you carrying on an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, you are carrying on an enterprise of leasing property under paragraph 9-20(1)(c) of the GST Act.
The term 'enterprise' is defined in section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to include an activity, or series of activities, done 'on a regular or continuous basis, in the form of a lease, licence, or other grant of an interest in property'.
You lease on a regular basis the residential flat and two retail shops located on the property.
Question 2
Is the supply of real property (property) by you to the purchaser the GST-free supply of a going concern under section 38-325 of the GST Act?
Answer
Yes, provided the monthly leases on the two retail shops are renewed so that the two retail shops are leased up to settlement date.
Paragraph 107A of GSTR 2002/5 states in part that 'where the identified enterprise is one of leasing, the supply of the property subject to the existing leases to the tenant or tenants is all that is required to satisfy paragraph 38-325(2)(a)' of the GST Act.
The residential flat is leased until a particular date in 20XX. The two retail shops are leased under monthly tenancies. Provided that these monthly leases are renewed so that the two retail shops are leased up to settlement date, the enterprise of leasing the entire property will be carried on until the day of the supply and the requirement in paragraph 38-325(2)(b) of the GST Act is satisfied.
The contract at page 2 states that the sale is a GST-free supply of a going concern under section 38-325 of the GST Act. The contract was made prior to settlement date. As such, the requirement for a written agreement in paragraph 38-325(1)(c) is satisfied.
The supply of the going concern will be GST-free as the requirements of subsection 38-325(1) have been satisfied because:
• the supply is for consideration,
• the recipient is registered for GST, and
• the supplier and recipient have agreed in writing in the contract that the supply is of a going concern.
Question 3
If the supply of the property by you to the purchaser is not fully GST-free, to what extent is the supply a GST-free supply, a taxable supply and an input taxed supply?
Answer
Not applicable as the sale of the entire property is the GST-free supply of a going concern under section 38-325 of the GST Act.
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.
You are registered for GST.
You sold real property located in the indirect tax zone (property) to the purchaser for a particular amount (excluding GST) under a contract of sale (contract) dated on a particular date in 20YY with settlement date (completion date) 42 days later.
The contract named the purchaser as the Trustee for Trust A but you have confirmed that the purchaser is the Trustee for Trust B.
The Trustee for Trust B (purchaser) is registered for GST.
The contract stated at page 2 that for GST purposes the sale was not a taxable supply as it was the GST-free supply of a going concern under section 38-325 of the GST Act. Page 2 of the contract also states that none of the property is an input taxed supply as eligible residential premises.
The property consists of two retail shops and one residential flat.
The residential flat is currently leased under a Residential Tenancy Agreement until a particular date in 20XX.
The two retail shops are currently leased under monthly tenancies without a written lease agreement.
The contract stated in Clause 41.2 that the purchaser is purchasing the property subject to the three leases.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• Section 9-20
• Section 38-325