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Edited version of private advice
Authorisation Number: 1051812611005
Date of advice: 4 March 2021
Ruling
Subject: GST and going concern
Question
Was Entity A's sale of a Development Site to Entity B (the Buyer) a GST-free supply of a going concern under section 38-325 of A New Tax System (Goods and Services Tax) Act 1999?
Answer
Yes.
Entity A's supply of the Development Site was a GST-free supply of a going concern under section 38-325 of the GST Act.
This is because, on settlement, Entity A provided the Buyer all of things that are necessary for the continued operation of the property development enterprise, being:
• The vacant Development Site.
• Planning permit.
• Planning approvals.
• Constructions drawings.
• Novated agreements with various project consultants.
• Assigned Agreement for Lease with Entity C.
In addition, Entity A continued to carry on the property development enterprise until the day of the supply, including the following activities:
• Finalise and issue the Control Plan.
• Engage architect to prepare design suite of documentation.
• Finalise facility scope, receive Quantity Surveyor advice and manage Town Planning approvals process.
The requirements under subsection 38-325(2) are satisfied.
Finally, there is a clause in the Contract indicating that Entity A and the Buyer have agreed in writing that the sale is a supply of a going concern, the sale will be for consideration and the Buyer is registered for GST.
The requirements under subsection 38-325(1) are satisfied.
Relevant facts and circumstances
Entity A strategically seeks and purchases sites for the purposes of developing those sites by constructing a standalone building or building complex.
Entity A (the Seller) entered into a Contract of Sale with Entity B (the Buyer) for the sale of the Property for $X (exclusive of GST) (the Contract) on dd/mm/yyyy. A copy of the Contract has been provided. Settlement occurred on dd/mm/yyyy.
The Seller and Buyer are registered for GST.
The Property is comprised of two lots:
a) Lot A
b) Lot B
A planning permit has been granted to Entity A for the development of a specific building complex.
Entity A and Entity B have agreed that the supply of Lot A will be a supply of a going concern (cl.X of the Contract) and that the supply of Lot B will be a taxable supply (cl.X of the Contract) for GST purposes.
Entity A have entered into an Agreement for Lease (AFL) with Entity C dated DD/MM/YYYY to lease a building within the building complex upon completion of the building complex.
Entity A have engaged various consultants to provide specific technical advice for the development of Lot A.
Entity A will supply the Buyer on settlement:
• The vacant Lot A.
• Planning permit.
• Planning approvals.
• Constructions drawings.
• Novated agreements with various project consultants.
• Assigned AFL with Entity C.
The following agreements with the consultants are novated to the Buyer as part of the sale process in accordance with the Novation Agreement (copy provided):
|
Architect |
(named w) |
|
Structural and Civil Engineer |
(named x) |
|
Combined Services Engineer |
(named y) |
|
Building Surveyor |
(named z) |
The AFL was assigned to the Buyer via the Purchaser Deed dated DD/MM/YYYY (copy provided).
Between entering into the Contract and settlement, Entity A has continued to conduct the specified activities.
• Design Team review and approve Building Plans.
• Continued involvement in Town Planning Approvals strategy for facility.
• Ongoing discussions / design refinement with Architects.
• Reviewed planning advice regarding Council's Design Guide.
• Prepare Sketch Plan to allow preparation of Control Plan.
• Reviewed the Quantity Surveyor estimate for development of the facility.
• Held briefing session with Partners to undertake full detailed review of scope and cost for the development.
• Design consultation completed for incorporation into Control Plan.
• Finalise and issue Control Plan.
• Engage architect to prepare design suite of documentation.
• Finalise scope, receive Quantity Surveyor advice and manage Town Planning approvals process.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 38-325