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Edited version of your written advice
Authorisation Number: 1051519536149
Date of advice: 20 May 2019
Subject: GST and going concern
Question
Does the sale of the Property constitute a GST-free ‘supply of going concern’ pursuant to section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
All further legislative references are to the GST Act unless stated otherwise.
Answer
Yes, the sale of the Property constitutes a GST-free ‘supply of going concern’ pursuant to section 38-325. This is because the requirements under section 38-325 are satisfied in this case.
Relevant facts and circumstances
● The Vendor and the Purchaser are both registered for GST.
● The Vendor acquired the Property as a GST-free supply of a going concern in XXXX 20XX and the entire Property was leased at that time.
● The Vendor and the Purchaser entered into a Call Option Deed (Call Option) over the Property on XXXX 20XX and the Call Option expires within 18 months of the execution of the Call Option.
● Level 1 of the Property is currently leased to Y as to one half share, and Y and X as to the remaining one half share (the Lessees) for a four year term.
● The Ground Floor of the Property is not currently tenanted and is being actively marketed for lease by the Vendor before completion.
● The Ground Floor of the property was subject to a lease which ended in XXXX 20XX but the tenant stayed on for a further three months under the holdover clause through until XXXX 20XX. There has not been a tenant since then, although the vendor has been trying to lease the premises.
● The purchase contract includes a GST clause.
● In line with the Vendor's ‘best endeavours’ promise in special condition of the Contract, the Vendor will until completion, market the Ground Floor for Lease.
● The Vendor is currently marketing the Ground floor through their leasing agent in line with its obligations to use its best endeavours to continue to carry on its leasing enterprise until Completion.
● If the Lessee terminates the Lease before completion, the Vendor will, until completion, also market Level 1 for Lease.
● The Purchaser has exercised the Call Option and the parties exchanged sales contracts for the Property on XXXX 20XX.
● The nominated purchase price for the Property is $X (Price).