SDI Group Pty Ltd and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2012/0733)
Judgment date: 2 November 2012
Date published: 10 December 2012

Summary of decision:
Outlines the ATO's response to this case which concerns whether a vendor (supplier) and purchaser (recipient) had agreed in writing on or before settlement that a property was sold as a going concern and thus was a GST-free supply.

Overview of facts:
When a contract for sale of a property was entered into, the supplier (taxpayer) was leasing it to a tenant on a monthly basis under an expired lease. The particulars of sale did not include the words 'plus GST' nor did the contract make reference to the property being 'the supply of a going concern'. However, the supplier and recipient had intended that the property be sold tenanted and as a going concern. The supplier pointed to the latter by reference to the issue by it of a purported tax invoice on the day of the contract which stated 'No GST (Sold as a going concern)'. Prior to settlement the supplier made the same clear in a Goods Statutory Declaration. | The property settled 12 months after the contract was signed by the recipient. The Commissioner did not accept that the documents evidenced that the supplier and the recipient had 'agreed in writing' that the supply [the sale] was a 'supply of a going concern' for the purpose of paragraph 38-325(1)(c) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and assessed the supplier to GST. | Issues decided by the tribunal | Paragraph 181 of GSTR 2002/5 states the ATO view that: " The term" agreed in writing' means that the supplier and the recipient have made a mutual declaration in such form that clearly evidences that they agree that the supply, being the supply under an arrangement of everything necessary for the continued operation of an enterprise, is a 'supply of a going concern' ." | Further, paragraph 182 of GSTR 2002/5 states the ATO view that the parties must agree on or before the day of the supply. | In this case, the ATO was of the view that there was insufficient evidence of there being an agreement in writing between the parties that the supply was of a going concern because the contract was silent on the point, there was no other separate document setting out such an agreement, and the contemporaneous correspondence between the parties did not constitute an agreement between the parties that the supply was of a going concern. Further, the ATO took the view that the correspondence in fact showed there to be dissention between the parties about whether the supply was of a going concern, and hence there was no agreement at the date of the supply that the supply was of a going concern. In regard to the purported tax invoice, the ATO took the view that it was a unilateral document prepared by the supplier into which the recipient had no input. | The Tribunal took a different view of the evidence. | In relation to the purported tax invoice, the Tribunal noted, at [31], that while the tax invoice was generated solely by the supplier's accountant, it had been requested by the recipient. and that: ' It is not impossible to infer that the document, requested by one party from the other party, reflected the parties' mutual intentions and was therefore something more than unilateral. The document was ... in the purchaser's possession at the time it executed the contract of sale on 13 December 2009.' | In other words, when the recipient executed the document it had both the contract and the purported tax invoice, which had been issued at its request, with the latter stating the supply to be of a going concern. | The Tribunal held that the correspondence: • '... confirms what the applicant states was the mutual intention of the parties when the contract of sale was entered into in December 2009. It was the mutual intention of the parties that the contract reflects the supply of a going concern' , at [37]. • '... showed the purchaser required the contract reflect that the supply was one of a going concern and that ' any disagreement between the parties at this point in the transaction reflected uncertainty or confusion as to how this objective could be achieved' , at [40]. | • '... confirms what the applicant states was the mutual intention of the parties when the contract of sale was entered into in December 2009. It was the mutual intention of the parties that the contract reflects the supply of a going concern' , at [37]. • '... showed the purchaser required the contract reflect that the supply was one of a going concern and that ' any disagreement between the parties at this point in the transaction reflected uncertainty or confusion as to how this objective could be achieved' , at [40]. | The Tribunal accepted the contract, the invoice, the Goods Statutory Declaration, and the letters exchanged between solicitors for the parties meant the supplier and recipient had 'agreed in writing' that the supply (the sale) was a supply of a going concern for the purpose of the GST Act and was thus GST-free.

Issues decided:
Paragraph 181 of GSTR 2002/5 states the ATO view that: " The term" agreed in writing' means that the supplier and the recipient have made a mutual declaration in such form that clearly evidences that they agree that the supply, being the supply under an arrangement of everything necessary for the continued operation of an enterprise, is a 'supply of a going concern' ." Further, paragraph 182 of GSTR 2002/5 states the ATO view that the parties must agree on or before the day of the supply. In this case, the ATO was of the view that there was insufficient evidence of there being an agreement in writing between the parties that the supply was of a going concern because the contract was silent on the point, there was no other separate document setting out such an agreement, and the contemporaneous correspondence between the parties did not constitute an agreement between the parties that the supply was of a going concern. Further, the ATO took the view that the correspondence in fact showed there to be dissention between the parties about whether the supply was of a going concern, and hence there was no agreement at the date of the supply that the supply was of a going concern. In regard to the purported tax invoice, the ATO took the view that it was a unilateral document prepared by the supplier into which the recipient had no input. The Tribunal took a different view of the evidence. In relation to the purported tax invoice, the Tribunal noted, at [31], that while the tax invoice was generated solely by the supplier's accountant, it had been requested by the recipient. and that: ' It is not impossible to infer that the document, requested by one party from the other party, reflected the parties' mutual intentions and was therefore something more than unilateral. The document was ... in the purchaser's possession at the time it executed the contract of sale on 13 December 2009.' In other words, when the recipient executed the document it had both the contract and the purported tax invoice, which had been issued at its request, with the latter stating the supply to be of a going concern. The Tribunal held that the correspondence: • '... confirms what the applicant states was the mutual intention of the parties when the contract of sale was entered into in December 2009. It was the mutual intention of the parties that the contract reflects the supply of a going concern' , at [37]. • '... showed the purchaser required the contract reflect that the supply was one of a going concern and that ' any disagreement between the parties at this point in the transaction reflected uncertainty or confusion as to how this objective could be achieved' , at [40]. • '... confirms what the applicant states was the mutual intention of the parties when the contract of sale was entered into in December 2009. It was the mutual intention of the parties that the contract reflects the supply of a going concern' , at [37]. • '... showed the purchaser required the contract reflect that the supply was one of a going concern and that ' any disagreement between the parties at this point in the transaction reflected uncertainty or confusion as to how this objective could be achieved' , at [40]. The Tribunal accepted the contract, the invoice, the Goods Statutory Declaration, and the letters exchanged between solicitors for the parties meant the supplier and recipient had 'agreed in writing' that the supply (the sale) was a supply of a going concern for the purpose of the GST Act and was thus GST-free.

ATO view of decision:
This finding was open to the Tribunal on the evidence in this case and does not differ in principle from the requirements outlined in GSTR 2002/5. | The Tribunal appears to have accepted the evidence of the supplier's General Operations Manager that: • The supplier prepared a document labelled a tax invoice dated 12 December 2009 which stated "NO GST (SOLD AS A GOING CONCERN)" at [18]. • The document had been requested by the recipient's representative at [31]. • The document was in the possession of the recipient at the time the recipient executed the contract on 13 December 2009 at [31]. | • The supplier prepared a document labelled a tax invoice dated 12 December 2009 which stated "NO GST (SOLD AS A GOING CONCERN)" at [18]. • The document had been requested by the recipient's representative at [31]. • The document was in the possession of the recipient at the time the recipient executed the contract on 13 December 2009 at [31]. | The Tribunal then went on to find at paragraph [31] that it is '... not impossible to infer that the document, requested by one party from the other party, reflected the parties' mutual intentions and was therefore something more than unilateral . | The ATO believes it is the Tribunal's view that, at the time the recipient executed the contract, the parties intended and agreed in writing that the supply was of a GST-free going concern. Further, by the time of settlement, the parties had confirmed, through further correspondence, that intention. | We also believe that the decision does not support a view that unilateral documents are sufficient to constitute an agreement in writing as contemplated by paragraph (c) of subsection 38-325(1) of the GST Act.

Administrative treatment:
Implications for ATO Precedential documents (Public Rulings & Determinations etc) | Nil | Implications for Law Administration Practice Statements | Nil

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 s 38-325
Case references: Case 12/2009 2009 ATC 1-016 Midford v Deputy Commissioner of Taxation [2005] AATA 623 2005 ATC 2189 (2005) 60 ATR 1009 Ultrarad Pty Ltd v Health Insurance Commission [2005] FCA 816
Subject references: GST exemption Supply of a going concern Requirement for agreement Requirement for the agreement to be in writing