Edited version of private advice

Authorisation Number: 1052407720327

Date of advice: 20 June 2025

Ruling

Subject: GST: property - GST-free supply of a going concern

Question

Was your sale of the property located at the property under the contract of sale (the contract), along with all your rights, title and interest in the development consents, novated contracts and agreements for lease, a GST-free supply of a going concern pursuant to section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, your sale of the property was a GST-free supply of a going concern of a continuing property development enterprise.

This ruling applies for the following period:

DDMMYYYY

The scheme commenced on:

DDMMYYYY

Relevant facts and circumstances

You are the former registered proprietor of property located at the property.

You acquired the property on relevant date.

You have been registered for GST since relevant date.

You originally planned to demolish existing buildings at the property and to redevelop the site as a mixed-purpose complex (the project) comprising:

   • a relevant structure;

   • relevant number residential apartments;

   • a shared retail/commercial ground floor podium; and

   • relevant number carparks.

You carried on a property development enterprise at the property and undertook works to facilitate that property development by:

   • obtaining development approvals;

   • conducting preliminary works;

   • entering into a minor works construction contract with the contractor;

   • negotiating and entering into agreements for lease for the commercial space;

   • entering into a deed of grant of easement;

   • entering into a voluntary planning agreement;

   • lodging an affordable housing application;

   • entering into a development management agreement; and

   • engaging various consultants to -

      - advise on the project,

      - prepare the relevant reports, and

      - prepare the relevant applications to obtain the necessary approvals for the project.

Delays with the development

On relevant date you entered into an agreement for lease with relevant tenant.

You had been developing the property during your period of ownership and had obtained some reports and sought a number of development consents and approvals between relevant dates. However, you suffered setbacks that were outside of your control, and which delayed both the demolition of buildings at the site, as well as the completion of various other development works.

The first of these setbacks occurred on relevant date when relevant setback. As a consequence of the relevant setback, you had to suspend development at the property and you were unable to sell apartments off-the-plan.

In relevant month and year you lodged a modification application with relevant shire council, to alter the original mix and layouts of the residential apartments. The modification application was approved in relevant month and year.

Subsequently, in relevant month and year, the relevant government entity announced amendments to the relevant planning policy. You decided to pursue a new DA under the amended scheme.

On relevant date you engaged relevant business as development manager and project manager under a development management agreement.

On relevant date you entered into an agreement for lease with relevant tenant.

In relevant month and year you lodged a new development application which was prepared in accordance with the amended scheme. Under the amended scheme, the allocation of at least relevant percentage of the gross floor area to affordable housing qualified the development for a relevant percentage increase in the permissible floor space ratio.

On or around relevant date your associated developer entered into a minor works construction contract with relevant company for the provision of demolition services in relation to the development and works commenced under that contract.

You actively engaged with the relevant government department in relation to requisite approvals under the redesigned development for the construction of relevant number residential apartments.

Relevant number of the apartments will now be classified as affordable housing and will be operated by a community housing provider and made available to the general market. The affordable housing apartments will be rented to prospective tenants who qualify under the affordable housing scheme rules.

A display suite was being refurbished, and design development was well advanced when on relevant date you entered into a contract of sale (contract) of the property with relevant purchaser, for consideration in the amount of relevant amount.

On relevant date you and the purchaser entered into an early works construction contract with relevant company for the provision of investigative and design work, electrical preparation work, excavations and piling for the project at the property.

To ensure continuity of the project post-settlement, you and the purchaser amended and restated the development management agreement, novating your rights and obligations to the purchaser, and reappointing relevant company in order to continue the provision of the development management services and the project management services for the project over the period from exchange to beyond settlement.

Delays to the demolition of existing buildings at the property which you had planned to complete in relevant year, were attributable to relevant setback. As a consequence of the relevant setback no demolition was able to take place prior to settlement, which had been scheduled for relevant date.

Relevant clause of the contract provided that you must lodge a private ruling application prepared by the purchaser, in relation to the nature of the supply as a going concern.

Settlement of the contract occurred on relevant date.

Pursuant to relevant clause of the contract all of your rights, title and interest in the development consents; plans, specifications, documents, reports, and intellectual property; novated contracts with the demolition contractor, construction contractor and development manager; and agreements for lease with relevant tenants, transferred to the purchaser at settlement as a going concern

The purchaser was registered for GST at the time of settlement.

Practical completion of the development is set for relevant date.

A relevant period easement in gross and public positive covenant for relevant number public car parking spaces is to be granted to relevant shire council at a rate of relevant rate, following the completion of the project.

Development works undertaken and reports commissioned prior to sale and settlement

The current development consent was activated with demolition and infrastructure works being undertaken under this consent.

The timeline below details reports you obtained and other development activities you undertook from the time that you commissioned a land survey in relevant month and year, up until settlement of the sale of the property in relevant month and year:

Comprehensive table of relevant works and reports

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 Division 40

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 38-325

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Taxable supply

Section 9-40 of the GST Act provides that goods and services tax (GST) is payable on taxable supplies.

Section 9-5 of the GST Act provides that you make a taxable supply if:

   (a) you make the supply for consideration; and

   (b) the supply is made in the course or furtherance of an enterprise that you carry on; and

   (c) the supply is connected with the indirect tax zone (Australia); and

   (d) you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The circumstances in which a supply is GST-free or input taxed are found in Divisions 38 and 40 of the GST Act respectively.

In this case, you entered into a contract of sale (contract) to sell property situated at relevant address (the property).

There are no provisions in the GST Act under which your supply of the property was input taxed under Division 40.

We will now consider whether the supply of the property was GST-free pursuant to section 38 of the GST Act. A property sale will be a GST-free supply of a going concern where all of the requirements of section 38-325 of the GST Act are met.

Going concern

Subdivision 38-J of the GST Act provides that, if certain conditions are satisfied, the 'supply of a going concern' is GST-free. This means that, in the case of a supply which would otherwise be a taxable supply, or an input taxed supply, the supply is GST-free if it is supplied under an arrangement for the 'supply of a going concern'.

Specifically, section 38-325 of the GST Act provides as follows:

   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).

The supply of everything necessary for the continued operation of an enterprise will only be a 'supply of a going concern' where the enterprise is carried on by the supplier until the day of the supply.

All of the activities of the identified enterprise must be active and operating on the day of the supply. The activities must be capable of continuing after the transfer to new ownership.

The identified enterprise and section 38-325

Paragraphs 38-325(2)(a) and (b) of the GST Act require the conditions to be satisfied in relation to an 'identified enterprise'.

According to paragraph 29 of 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) the 'identified enterprise' is the enterprise for which the supplier must supply all of the things that are necessary for its continued operation. Section 9-20 of the GST Act defines 'enterprise' as follows:

   (1) An enterprise is an activity, or series of activities, done:

      (a) in the form of a *business; or

      (b) in the form of an adventure or concern in the nature of trade; or

      (c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

   ...

We note paragraph 9-20(1)(c) of the GST Act applies to an 'enterprise within an enterprise' being the lease with relevant entity. However, we consider that you are also conducting activities in the form of a business of property development under paragraph 9-20(a) of the GST Act.

Paragraphs 177 to 179 of Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) discuss the main indicators of carrying on a business, with reference to the principles in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? (TR 97/11):

Indicators of a business

   177. To determine whether an activity, or series of activities amounts to a business, the activity needs to be considered against the indicators of a business established by case law.

   178. TR 97/11 discusses the main indicators of carrying on a business. Based on that discussion some indicators are:

      (a) A significant commercial activity

      (b) A purpose and intention of the taxpayer to engage in commercial activity

      (c) The activity is or will be profitable

      (d) The recurrent or regular nature of the activity

      (e) The activity is carried don in a similar manner to that of other businesses in the same or similar trade

      (f) Activity is systematic, organised and carried on in a businesslike manner and records are kept

      (g) The activates are of a reasonable size and scale

      (h) A business plan exits

      (i) Commercial sale or product and

      (j) The entity has relevant knowledge or skill.

   179.There is no single test to determine whether a business is being varied on.

In your case, the 'identified enterprise', or the relevant enterprise within the definition of section 9-20(1)(c) of the GST Act, is the activity of developing the project at the property, that is, a mixed-purpose complex comprising:

   • relevant structure;

   • relevant number residential apartments;

   • a shared retail/commercial ground floor podium; and

   • relevant number carparks.

The table in the facts setting out the activities you conducted from Year to Year evidence that you meet the factors at paragraphs 177-179 listed above. Overall, the facts of the case suggest that the indicators set out in paragraph 178 MT 2006/1 are present to a sufficient degree to warrant the conclusion that you are carrying on a business.

Marketing, news articles and commentary published online all demonstrate that the redevelopment is ongoing.

Paragraphs 72-107 of GSTR 2002/5 discuss various components that may comprise 'all of the things necessary' for the continued operation of a business being sold under an arrangement. Paragraph 78 states:

   78. The business, or operating structure and process of an enterprise is difficult to define and will always be a matter of fact and degree in a particular context. The structure and processes used by the supplier in the operation of the relevant enterprise must be supplied by the supplier to the recipient if the recipient is to be placed in a position to continue to operate the enterprise in the future. That is, the means of operation of the relevant enterprise must be supplied.

Paragraph 116 of GSTR 2002/5 explains, regarding intellectual property:

   116. Where intellectual property exists and is one of the things that is necessary for the continued operation of the enterprise which is the subject of the arrangement, the benefit of the intellectual property must be supplied to the recipient under the arrangement.

In your case, you acquired the property with the intention of undertaking a development project on the land. You commenced and progressed the required activities to develop the project but sold the property before completing the development to pursue other opportunities.

Along with the property itself, you provided the purchaser with copies of all development consents, approvals, plans, designs, assessments, reports, covenants, intellectual property, and other documents in connection with the property in your possession; including novated contracts for demolition, works, construction, development management and project management; and agreements for lease with relevant number commercial tenants.

You continued to undertake various development activities up until the date of settlement.

Therefore, you supplied to the recipient all of the things that are necessary for the continued operation of your property development enterprise and you carried on that enterprise until the day of the supply.

For the above reasons, we consider that your supply under the arrangement met the applicable criteria for a supply of a going concern pursuant to paragraphs 38-325(2)(a) and (b) of the GST Act.

Finally, we turn to the remaining requirements for a going concern outlined in paragraphs 38-325(1)(a), (b) and (c).

In this case, your supply was for consideration in the amount of relevant amount, satisfying paragraph 38-325(1)(a).

The recipient purchaser was registered at the date of settlement, satisfying paragraph 38-325(1)(b).

The parties agreed in writing, pursuant to relevant clause of the contract, that the sale of the property would be treated as the supply of a GST-free going concern, subject to the outcome of this application. This satisfies paragraph 38-325(1)(c).

Conclusion

In your case, your sale of the property satisfied all the criteria under both sections 38-325(1) and 38-325(2) of the GST Act. Therefore, the supply of the property development enterprise was of a GST-free going concern.