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Edited version of your written advice
Authorisation Number: 1051299372650
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Ruling
Subject: Sale of commercial property as going concern
Question
Will the sale of your commercial property located at X which consists of Lot A and Lot B be a GST-free supply of a going concern under section 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, your 'supply of a going concern' under section 38 of the GST Act will be GST-free provided that on the day of the supply (settlement date), you will be:
● supplying all of the things that are necessary for the continued operation of the current enterprise. This includes the supply of Lot B which, while not essential to the continued operation of the business, is still used in your enterprise (paragraph 166 of Goods and Services Tax Ruling GSTR 2002/5: Goods and services tax: when is a 'supply of a going concern' GST-free?),
● supplying to a purchaser who is registered for GST, for agreed consideration,
● supplying under a contract that confirms your mutual written agreement the sale is a supply of a going concern, and
● having carried on the current enterprise until the day of the supply.
Note: If changes to your arrangements occur all of the requirements of section 38 of the GST Act may no longer be satisfied. The sale of the property would then not be a GST-free supply of a going concern, and would become a taxable supply subject to GST.
This ruling applies for the following periods:
1/07/2017 to 30/06/2018
Relevant facts and circumstances
You are registered for Goods and Services tax (GST).
You are intending to sell your commercial property situated at X which consists of two Lots, Lot A and Lot B.
A commercial building with basement parking is constructed on Lot A which is leased to Y (Tenant) under a X year lease. Lot B is a car park and adjoins Lot A. A vehicular ramp connects the two Lots. Lot B is not subject to a lease but is used by the Tenant for car parking.
The two Lots are used in conjunction, operate as a single property and are being sold as a single transaction.
It was a term of the lease proposal that the Tenant could use Lot B as a car park at no cost until notified by you otherwise and that you would endeavour to provide one month’s notice if the car park would no longer be available. Under the previous lease, there was a provision that the Tenant had the right to use Lot B as a car park however Lot B was not recorded as the leased premises and no rent was payable for that use.
You own no other adjoining land and have no realistic alternative uses for Lot B. You submit that allowing the Tenant to use Lot B as an additional car park makes commercial sense as it makes leasing Lot A a more attractive option for tenants.
You intend to keep using both Lots on the same respective basis up until the date of settlement.
Relevant legislative provisions
Section 38 of the A New Tax System (Goods and Services Tax) Act 1999