Private ruling: GST and supply of property as a going concern
Date of advice: 14 February 2022
Published: May 2022
Ruling period: 1 June 20XX till quarter ending 31 December 20XX
Date scheme commenced: 1 June 20XX

Ruling: Q1: Is the supply by the Vendor to the Buyer of the Property a 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)? | A1: Yes. The supply by the Vendor to the Buyer of the Property is a GST-free supply of a going concern. Relevantly in this case it is accepted that the Vendor continues to operate a leasing enterprise until the time of the supply notwithstanding that part of the property (Warehouse 2) is temporarily vacant. This is consistent with the view in paragraphs 149 to 151 of Goods and Services Tax Ruling, GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free ? As the remaining conditions in section 38-325 of the GST Act are also met, the supply of the Property under the Contract is GST-free.

Relevant facts and circumstances: The Vendor carries on an enterprise which consists of leasing the Property and is registered for GST, effective 1 July 20XX. The Vendor and the Buyer enter a contract of sale (Contract) for the supply of the Property. The Property consists of two buildings known as Warehouse 1 and Warehouse 2 and at the time that the Contract was executed, Warehouse 1 and Warehouse 2 were leased to two commercial tenants (referred to as Tenant 1 and Tenant 2). As such the Contract provided that the Purchaser acknowledged that the Property was to be sold subject to the tenancies. With respect to Warehouse 1, Tenant 1 entered a 5-year lease with the Vendor which was continuing at the time of settlement of the Contract. With respect to Warehouse 2, the formal lease between the Vendor and Tenant 2 ended prior to settlement of the Contract, however Tenant 2 continued to occupy Warehouse 2 on a periodic tenancy. This periodic tenancy allowed the tenant to continue in possession on the same terms as the previous lease until either party provided 4 weeks' notice to terminate the periodic tenancy. Following the vacation of Tenant 2 from Warehouse 2, the Vendor and its external leasing agent, were required to undertake various end of lease activities. The final inspection was completed by the leasing agent prior to settlement of the Contract. In addition, when the tenant unexpectedly terminated the periodic tenancy, the Vendor was undertaking work on Warehouse 2. These works continued up till settlement of the Contract to ensure that the Property met the required leasing standards for commercial properties, such that a new lease could commence in respect of Warehouse 2. This resulted in a temporary vacancy in respect of Warehouse 2 such that Warehouse 2 was vacant on the date of settlement under the Contract. The Buyer is registered for GST and the parties have agreed that under the Contract the supply of the Property is a going concern.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 9-5 | A New Tax System (Goods and Services Tax) Act 1999 38-325