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Edited version of private advice
Authorisation Number: 1051969852429
Date of advice: 17 May 2022
Ruling
Subject: GST and the supply of a going concern
Question
Can the purchase of the property be treated as a GST-free supply of a going concern in accordance with section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999?
Answer
No.
Paragraph 38-325(1)(c) of the GST Act requires that the supplier and the recipient have agreed in writing that the supply is of a going concern.
The sales contract provides that the sale is a taxable supply and there was no written agreement in place between the purchaser and the vendor which states that the supply is a GST-free supply of a going concern. This paragraph was not satisfied. The sale of the property was not a GST-free supply of a going concern. We therefore have not considered whether the other requirements of section 38-325 have been met.
Relevant facts and circumstances
• A sales contract was entered into for the sale of a property.
• All parties to the contract were registered for GST.
• The sales contract provided that the sale of the property was a fully taxable supply for GST purposes.
Relevant legislative provisions
A New tax System (Goods and Services Tax) Act 1999 Section 38-325
A New tax System (Goods and Services Tax) Act 1999 Subsection 38-325(1)
A New Tax System (Goods and services Tax) Act 1999 Subsection 38-325(2)
Reasons for decision
In the following reasons for decision;
• unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.
A supply is a GST-free supply of a going concern when all of the requirements of section 38-325 are satisfied.
Section 38-325 states:
(1) The *supply of a going concern is GST-free if:
(a) the supply is for *consideration; and
(b) the *recipient is *registered or *required to be registered; and
(c) the supplier and the recipient have agreed in writing that the supply is of a going concern.
(2) A supply of a going concern is a supply under an arrangement under which:
(a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and
(b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier).
Application in this case
Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST free? ("GSTR 2002/5") explains what a 'supply of a going concern' is for the purposes of section 38-325.
Paragraph 182 of GSTR 2002/5 provides that the supplier and the recipient must agree that the supply is a 'supply of a going concern' on or before the day of the supply.
The sales contract provides that the sale is a taxable supply and there was no written agreement in place between the purchaser and the vendor which states that the sale of the property is a GST-free supply of a going concern.