Edited version of private advice

Authorisation Number: 1052084455290

Date of advice: 10 February 2023

Ruling

Subject: GST - sale of commercial property

Question

Was the sale of the property, located at the specified address in the indirect tax zone with the existing childcare centre (the Property), by you the GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. You were making the GST-free supply of a going concern pursuant to section 38-325 of the GST Act when you sold the Property. This is because the Commissioner has determined that your supply satisfied the requirements outlined in this provision. Therefore, your supply was GST-free.

This ruling applies for the following period:

1 July 20XX - 30 June 20XX

The scheme commenced on:

XX December 20XX

Relevant facts and circumstances

The relevant asset and development plan

You are registered for GST.

On a specified date, you acquired the land.

Purchase costs of the Land including the purchase price, transfer duty, fees and charges for each lot were provided.

You carried out a land development project on the Land which consists of subdivision and development of commercial premises (the Premises) as well as X number of new townhouses.

On a specified date, you through a town planning and urban design services provider submitted your application and plans to the local council for the proposed development and construction of the Premises and townhouses on the Land.

On a specified date, you were granted approval for your planning application and issued a favourable determination on the proposed development.

According to the proposed strata plan and site plan contained in the planning approval, you would first amalgamate the blocks of the Land and then subdivide the Land into X lots and construct the Premises on proposed Lot X of the Land and the townhouses on the other proposed lots.

The planning approval contains a list of conditions.

On a specified date, you executed an agreement with a specified construction company to construct the Premises on the Land for a specified sum.

At the time of the ruling application, it was anticipated that the construction of the Premises would be completed and ready for occupancy in a specified month and year.

Leasing activities

On a specified date, you signed an authority to act as leasing agents with a real estate agent to find a tenant for the proposed Property.

In a specified month and year, a real estate agent introduced the tenant, an independent entity, (the Tenant), to you.

On a specified date, you (as Landlord) entered into an Agreement for Lease (Agreement for Lease) with the Tenant to lease the Property to the Tenant.

On and from the Commencement Date, the landlord will grant and the tenant will take a lease of the Property for the agreed term of the lease subject to the terms and conditions specified in the draft lease agreement.

Agreed term of the lease between you and the Tenant is X years plus an option term of X years.

The Lease will be executed prior to the settlement of the sale of the Property.

Executed lease

On a specified date, you executed a lease (the Lease) between yourself (as Landlord) and the Tenant for the lease of the Property located in the indirect tax zone

The term of the Lease is X years together with an option term of X years. Commencing from a specified date.

Sale contract

On the specified date, you (as the Seller) executed the Sale Contract with the Buyer to sell the Property with the Premises being constructed, for consideration.

The Sale Contract is subject to and conditional on the proposed survey strata plan being registered.

The buyer acknowledges and agrees that it purchases the Property subject to the lease and the terms and conditions contained in it. Further, from settlement, you will assign and is deemed to have assigned (to the extent to which it is able) the lease and the benefit of all guarantees and indemnities in, or which relate to, the lease.

The Sale Contract states that the parties (you and the buyer) agree that for the purpose of section 38-325 of the GST Act, the sale of the Property under the contract is a supply of a going concern, being a leasing enterprise, and that the parties intend that such supply will be GST free under section 38-325 of the GST Act.

The Sale Contract provides that the Seller warrants that:

(a)  at settlement it will be registered for GST;

(b)  it will continue to conduct its enterprise in the same manner and as a going concern until settlement; and

(c)   it will supply to the Buyer at settlement all of the things necessary for the continued operation of your enterprise which is the subject of this contract.

Date of settlement was a specified date.

Other matters

You are registered for GST.

The Buyer registered for GST prior to settlement of the Property.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection9-10

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-20

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)