Debonne Holdings Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (WT 2004/382)
Judgment date: 19 October 2006
Date published: 18 December 2006

Summary of decision:

Overview of facts:
• Taxpayer was seeking an input tax credit for the cost of land acquired pursuant to purchase of a hotel. • Sale to taxpayer was made pursuant to 2 separate but interdependent contracts; one for sale of "business" (goodwill, plant, trading stock etc), other for sale of land on which hotel stood. • The contract for sale of "business" expressly stated [i.e. in clause 24(ii)] that " the sale of the business was the sale of a going concern ". The expression " the business " used in the opening words of the business contract specifically referred to " goodwill ... and plant, furniture, fixtures, fittings, chattels, stock in trade and other assets described in the particulars hereto " but did not include the land. However, clause 24(i) of the business contract stated that " the terms used here (presumably including "supply of a going concern") have the same meaning as those used in the GST Act ". • The contract for the sale of the land was silent on the question of "going concern" and provided that the purchase price included any GST liability for which the vendor might be liable. | • Taxpayer was seeking an input tax credit for the cost of land acquired pursuant to purchase of a hotel. • Sale to taxpayer was made pursuant to 2 separate but interdependent contracts; one for sale of "business" (goodwill, plant, trading stock etc), other for sale of land on which hotel stood. • The contract for sale of "business" expressly stated [i.e. in clause 24(ii)] that " the sale of the business was the sale of a going concern ". The expression " the business " used in the opening words of the business contract specifically referred to " goodwill ... and plant, furniture, fixtures, fittings, chattels, stock in trade and other assets described in the particulars hereto " but did not include the land. However, clause 24(i) of the business contract stated that " the terms used here (presumably including "supply of a going concern") have the same meaning as those used in the GST Act ". • The contract for the sale of the land was silent on the question of "going concern" and provided that the purchase price included any GST liability for which the vendor might be liable. | Issues decided by the court or tribunal | 1. The sale of the assets evidenced by the business contract alone (i.e. without the land) did not amount to the supply of a going concern for the purposes of s.38-325(2) of the GST Act. | 2. The word "business" as used in clause 24(ii) of the business contract was intended to refer to the entire hotel enterprise (including the land) and not just the assets described as being supplied pursuant to the separate "business" contract (i.e. goodwill, fixtures, fittings, chattels, plant, stock in trade etc). | 3. In the circumstances clause 24(ii) amounted to a sufficient agreement in writing that the supply was of a going concern for the purposes of s.38-325(1)(c) of the GST Act. | 4. (by implication) the reference to "supply of a going concern" in s.38-325(2) is the supply of the entire enterprise which comprises the "going concern" rather than to just the individual assets comprising the enterprise. | 5. The supply of an enterprise itself is a supply in the course or furtherance of that enterprise and thus not GST free unless it is the supply of a going concern or is the subject of some other specific exemption

Issues decided:
1. The sale of the assets evidenced by the business contract alone (i.e. without the land) did not amount to the supply of a going concern for the purposes of s.38-325(2) of the GST Act. 2. The word "business" as used in clause 24(ii) of the business contract was intended to refer to the entire hotel enterprise (including the land) and not just the assets described as being supplied pursuant to the separate "business" contract (i.e. goodwill, fixtures, fittings, chattels, plant, stock in trade etc). 3. In the circumstances clause 24(ii) amounted to a sufficient agreement in writing that the supply was of a going concern for the purposes of s.38-325(1)(c) of the GST Act. 4. (by implication) the reference to "supply of a going concern" in s.38-325(2) is the supply of the entire enterprise which comprises the "going concern" rather than to just the individual assets comprising the enterprise. 5. The supply of an enterprise itself is a supply in the course or furtherance of that enterprise and thus not GST free unless it is the supply of a going concern or is the subject of some other specific exemption

ATO view of decision:
The decision is not inconsistent with anything contained in the relevant Public Ruling.

Administrative treatment:
Implications on current Public Rulings & Determinations | There are no implications with respect to any current Public Rulings or Determinations.

Legislative references: (ANTS) Goods and Services Act 1999 Section 38-325
Case references: Midford v DFCT [2005] AATA 623 2005 ATC 2189 60 ATR 1009 HP Mercantile Pty Ltd v Commissioner of Taxation 143 FCR 553 2005 ATC 4571 60 ATR 106
Subject references: GST GST free GST supply of a going concern Agreement in writing Supply Enterprise Business Supply of goodwill