Private ruling: GST and the divestment of a forestry enterprise
Published: June 2012

Ruling: Q1: Is the supply of the freehold properties (except the residential properties) owned by Entity A to the buyer a GST-free supply of farmland pursuant to section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the supply is a GST-free supply of farmland. Issue 2 | Q2: Is the supply of the residential properties owned by Entity A to the buyer an input taxed supply of residential premises pursuant to section 40-65 of the GST Act? | A2: Yes, the supply is input taxed. Issue 3 | Q3: Is Entity B's supply of X% of the share capital in Entity D to the buyer an input taxed supply pursuant to Item 10 in Regulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)? | A3: Yes, the supply is input taxed. Issue 4 | Q4: Is the assignment by Entity C of an interest in the leases, together with the relevant assets owned by Entity C, to the buyer, a supply of a going concern pursuant to section 38-325 of the GST Act? | A4: Yes, it is a supply of a going concern. | Q5: Is the assignment by Entity B of an interest in the leases, together with the relevant assets owned by Entity B, to the buyer, a supply of a going concern pursuant to section 38-325 of the GST Act? | A5: Yes, it is a supply of a going concern.

Relevant facts and circumstances: The corporate group Entity X is a listed company with a number of principal divisions. Entity X's business consists of the management of a large number of managed investment schemes and certain other plantations. Entity B is a wholly owned subsidiary of Entity X. It is a business that has established and managed plantations on behalf of private investors under managed investment schemes. Entity C is the responsible entity for many of these schemes. Entity B owns Y% of the share capital in Entity D. Entity A is also a wholly owned subsidiary of Entity X. It owns plantation land and leases most of the land (other than the residential properties) to Entity C. Entity C then leases this land to growers under the managed investment schemes. The aforementioned entities do not form a partnership or a joint venture. The buyer made a successful bid to acquire some (but not all) of the plantation assets currently owned by Entity B and Entity A and some of the forestry assets held by Entity C in its capacity as responsible entity for the managed investment schemes. The Sale and Purchase Agreement The parties entered into the Sale and Purchase Agreement (SPA). Under the SPA, the Entity X parties will sell and the buyer will purchase the plantation assets used by the Entity X parties to carry on the forestry enterprise. The SPA is subject to a number of conditions, including, but not limited to, Foreign Investment Review Board approval, third party consents required for the assignment of the property leases and obtaining relevant court orders. GST Warranties The SPA includes the provisions relating to the application of the GST legislation. It provides that any amount referred to in the SPA is expressed on a GST exclusive basis and if a supply is determined by the Commissioner of Taxation to be a taxable supply, then the buyer must provide to the seller an additional amount equal to the amount of GST payable on the taxable supply. The SPA also provides that the parties acknowledge that they have formed the view that no GST is payable in respect of the supply of the freehold properties on the basis that it is a GST-free supply of land on which a farming business has been carried on; nor is GST payable on the residential properties on the basis that it is an input taxed supply of residential premises. The SPA states that the 'parties agree that the supply of the plantation assets constitute the supply of a going concern and is accordingly GST-free.' The SPA also provides that the buyer warrants that it is registered or required to be registered for GST and will remain so until the completion date. The Forestry Assets The 'Forestry Assets' for purchase in the SPA are owned by a number of entities on the date of completion: · Freehold Properties, owned by Entity A · X, owned by Entity B; · Y, owned by individual growers but may also be sold to Entity B depending on the terms of the Sub Lease Surrender Deeds, described below; · Z, owned by Entity C or individual growers, depending on terms of agreement; · W, owned by Entity C; · Property leases, assigned to Entity B and Entity C; · Shares in Entity D, owned by Entity B; · Contracts (including harvesting and haulage contracts), owned by Entity B; · Business records, owned by Entity B; · Plant and equipment, owned by Entity B; · Intellectual property rights, owned by Entity B; · Grazing and other licences, owned by Entity B; · Water licences, owned by Entity B; · Transferring employees, owned by Entity B; · Stock, owned by Entity B; · Business software, owned by Entity B; · Environmental authorisations, owned by Entity B; and · Seedling nursery assets, owned by Entity B. The SPA provides that the 'Forestry Assets', together with the assets owned by Entity D, comprise the assets directly used by the sellers in the forestry business they conducted over the specific months leading up to the completion of the sale. The character of the land transferred under the SPA Freehold assets -agricultural freehold land consisting of 39 individual freehold properties, on which are situated: · Plantation assets; · Forestry facilities - agribusiness assets; and · Residential properties - a total of Y rural residential dwellings located on the plantations, most of which are currently tenanted to third parties for residential accommodation. Leasehold assets -land leased by Entity C and Entity B from third party landlords on which is situated plantations in various stages of growth. The freehold assets Entity A is the owner of the freehold assets. Entity A leases the freehold assets (other than the residential properties) to Entity C and Entity B, who then lease this land to growers under the managed investment schemes. Of the specific number of individual titles on the freehold properties, Entity A has owned X of these properties for a period of at least five years from the date of the private ruling application. Entity A acquired the remaining Y freehold titles within the last five years; however, they were purchased as a GST-free supply of farmland under section 38-480 of the GST Act and have been used for the purposes of tending trees for felling since. The freehold land is leased from Entity A to Entity B and Entity C under lease. Under the SPA, these leases must be surrendered before the completion of the sale. Additionally, the grower subleases must also be surrendered under the Sub Lease Surrender Deeds, described below. The residential premises The residential premises are located on a number of the plantations on the freehold properties. They are listed in the SPA. These residential premises are likely to be transferred on the same title as the plantations; however, some residential premises may be subdivided from the plantations and will thus be on separate titles. All of the residential premises are leased to third party tenants. The leasehold assets Entity C and Entity B lease this land from third party landlords under lease. This land is then subleased to growers under the managed investment schemes. Under the Sub Lease Surrender Deed, the grower subleases are to be surrendered on the day before the completion of the sale. The Entity X parties will continue to carry on the plantation enterprise until the completion of the sale. This period is expected to be relatively short. Under the SPA, Entity B is required to procure the execution of the lease assignment by the relevant party for each of the leases. These leasehold assets will then be assigned to the buyer. If the consent of a third party landlord to the assignment of a lease is refused or cannot be obtained by the parties, then the parties and the buyer will negotiate to find an alternative arrangement in which the buyer can obtain appropriate tenure rights. Land and Management Agreements & Lease and Management Agreements Entity B and Entity C entered into Land and Management Agreements or Lease and Management Agreements (LMAs) with individual growers in regards to particular plantations. The LMAs provide that Entity B or Entity C grants a leasehold interest in the land; that Entity C is to provide services including initial services, annual services and harvesting services; and that the grower is to carry on a long term commercial afforestation business. These services were provided for fees that were also stipulated in the LMA. Entity C outsources the provision of these services to Entity B. Under the LMAs, the grower was obligated to plant, establish, cultivate and manage trees on the leased land, and from time to time, harvest or sell areas of the tree crop. The grower was also generally required to do all things which may be usual or necessary for carrying on the business of running a tree farming business. The LMAs between the growers and the relevant parties will be surrendered one day prior to completion of the sale.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 38-325 | Section 38-480 | Section 40-5 | Section 40-65 | A New Tax System (Goods and Services Tax) Regulations 1999 | Regulation 40-5.06 | Regulation 40-5.03 | Regulation 40-5.09

Reasons for decision: Summary: The supply of the freehold properties owned by Entity A to the buyer is a GST-free supply of farmland pursuant to section 38-480 of the GST Act because a farming business has been carried on on the land for over five years and the buyer intends to continue a farming business on the land. The supply of the residential premises on the plantation titles will be an input taxed supply, requiring apportionment to calculate appropriate input tax credits. | Detailed Reasoning - Detailed reasoning: Section 38-480 of the GST Act states that: The supply of a freehold interest in, or the lease by an *Australian government agency of or the *long term lease of, land is GST-free if: (a) the land is land on which a *farming business has been *carried on for at least the period of 5 years preceding the supply; and (b) the *recipient of the supply intends that a farming business be carried on, on the land. A farming business is defined in subsection 38-475(2) of the GST Act as a business of: (a) cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or (b) maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or (c) manufacturing dairy produce from raw material that the entity produced; or (d) planting or tending trees in a plantation or forest that are intended to be felled. * Denotes a term defined in the GST Act. In this case, Entity A owns a specific number of individual freehold titles. On these titles a business of 'planting or tending trees in a plantation that are intended to be felled' is carried on. The farming business has been carried on for at least five years on Y of the freehold titles, as Entity A has owned the properties for over five years and has leased the properties to Entity B and Entity C. These parties then sublease the properties to growers who conduct the farming business. Despite being purchased in the previous five years, the remaining eight freehold titles have still had a farming business carried on, on them, as they were originally purchased by Entity A as GST-free supplies of farmland. For the purposes of section 38-480 of the GST Act, it is the use of the land that is relevant, not the ownership. However, some of the specific number of freehold titles also include land that is used for residential purposes. The residential premises are on the same title as the plantation land on which the farming activity is being carried on. It is understood that some of these residential properties may be subdivided from the plantations. However, all of the residential premises will remain on the same titles as the plantations except in the case where they are subdivided, in which case they will become separate titles. Generally, in the situation where residential premises are included on the same title as farmland, it is recognised that not all of the land is used for farming purposes. For the purposes of section 38-380 of the GST Act, farming must be the predominant activity carried out on the land. In other words, the land must have the essential characteristics of farmland. The other activities, such as leasing residential premises to third parties, cannot be so significant that the land cannot be considered farmland. Some of the indicators that the Commissioner considers relevant in determining whether the land has the essential characteristics of farmland are: · Whether there is a business as opposed to a hobby being carried on; · The size and scale of the activities; · Whether there is a profit making purpose and prospect of profit; · The commercial purpose and viability of the activities; · The business plan; · The current zoning of the land; and · The market value of the land. In this case, it is evident that a farming business is carried on, on the land considering the size and scale of the activities, the commercial purpose of the activities, and the viability of the enterprise. Although not all of the land is used for farming, as residential premises are leased to third parties and will be included in the title of some of the plantations, farming is the predominant activity carried out on the land. Furthermore, there is no private or any other commercial use of the land that is so significant that the land cannot be considered farmland. As a farming business has been carried on, on all of the specific number of titles of freehold property held by Entity A for the last five years, the requirement in paragraph 38-480(a) of the GST Act is satisfied. The buyer intends that a farming business continue to be carried on, on the land after the completion date. As the buyer is part of a broader group, and is in the business of growing and developing timber for felling and sale, paragraph 38-480(b) of the GST Act is also satisfied. The residential premises that are included on the title of the plantations would normally have been included in the GST-free supply of farmland to the extent that the predominant activity carried out on the land remained the farming activity. However, the Entity X parties have elected to treat the supply of the residential premises as an input taxed supply. Therefore, Entity A will have to apportion the extent to which it is entitled to input tax credits relating to the GST-free supply of farmland to account for the non-creditable supply of residential premises. For guidance on apportionment methods, see Goods and Services Tax Ruling GSTR 2006/4 Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose. Accordingly, the sale of the freehold properties by Entity A to the buyer will be a GST-free supply of farmland under section 38-480 of the GST Act, except for the residential premises, which will be input taxed. | Summary: To the extent that the residential properties are on separate titles or treated differently to the supply of farmland, they will be an input taxed supply of residential premises pursuant to section 40-65 of the GST Act. | Detailed Reasoning - Detailed reasoning: Section 40-65 of the GST Act states: (1) A sale of *real property is input taxed , but only to the extent that the property is *residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). (2) However, the sale is not input taxed to the extent that the *residential premises are: (a) *commercial residential premises; or (b) *new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998. * Denotes a term defined in the GST Act. In this case, a number of the aforementioned specific number of freehold titles, also include residential premises. To the extent that the residential premises are on the same title as the plantations and the farming activity is the predominant activity on the land, those residential premises would normally be included in the GST-free supply of farmland. However, as the Entity X parties have elected to treat the supply of the residential properties as an input taxed supply, and in circumstances where the residential premises are on separate titles to the plantations, they will be input taxed under section 40-65 of the GST Act. It is an input taxed supply of residential premises because the residential properties are currently leased to third party tenants, they are being used for residential accommodation, they are not commercial residential premises, nor are they new residential premises. Therefore, the sale of the residential premises by Entity A to the buyer will be input taxed under section 40-65 of the GST Act. Therefore, no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply. | Summary: The supply of share capital will be an input taxed financial supply pursuant to subregulation 40-5.09(3) of the GST Regulations. | Detailed Reasoning - Detailed reasoning: Section 40-5 of the GST Act states: (1) A *financial supply is input taxed . (2) Financial supply has the meaning given by the regulations. Subregulation 40-5.09(1) of the GST Regulations states that: The provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply if: (a) the provision, acquisition or disposal is: (i) for consideration; and (ii) in the course or furtherance of an enterprise; and (iii) connected with Australia; and (b) the supplier is: (i) registered or required to be registered; and (ii) a financial supply provider in relation to supply of the interest. A financial supply provider in relation to the supply of the interest is defined in subregulation 40-5.06(1) of the GST Regulations to be: An entity, in relation to the supply of an interest that was: (a) immediately before the supply, the property of the entity; or (b) created by the entity in making the supply… Subregulation 40-5.09(3) of the GST Regulations lists the interests which relate to financial supplies. Of relevance to this case, Item 10 in subregulation 40-5.09(3) includes: Securities, including: (a) a debenture described in paragraph (a), (b), (c), (e) or (f) of the definition of debenture in section 9 of the Corporations Act 2001 ; and (b) a document issued by an individual that would be a debenture if it were issued by a body corporate; and (c) a scheme described in paragraph (e), (i) or (m) of the definition of managed investment scheme in section 9 of the Corporations Act 2001 ; and (d) the capital of a partnership or trust In this case, Entity B is making a supply of X% of the share capital of Entity D to the buyer. The supply is for consideration. The supply is made in the course or furtherance of an enterprise, as it is a transaction made as part of conducting a business. The supply is connected with Australia, as Entity D is an Australian entity. Thus, the requirements in paragraph 40-5.09(1)(a) are satisfied. Entity B is registered for GST and is a financial supply provider in relation to the interest, as immediately before the supply, the share capital of Entity D was the property of Entity B. The requirements in paragraph 40-5.09(1)(b) of the GST Regulations are also satisfied. Therefore, the supply of the share capital fits within Item 10 of subregulation 40-5.06(3) of the GST Regulations. Hence, Entity B's supply of X% of the share capital of Entity D to the buyer is input taxed. Therefore, no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply. It is beyond the scope of this private ruling to consider eligibility for a reduced input tax credit. | Summary: Entity C's supply of the property leases and timber will be a supply of a going concern pursuant to section 38-325 of the GST Act because it supplies everything necessary for the continued operation of the forestry enterprise and will carry on the enterprise until the day of supply. | Detailed Reasoning - Detailed reasoning: Section 38-325 of the GST Act states: (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). * Denotes a term defined in the GST Act. In this case, the supply is for consideration, as the purchase price for the leasehold assets is specified in the SPA. The SPA provides that the buyer 'warrants that it is registered or required to be registered for GST and will remain so until the completion date', thus paragraph 38-325(1)(b) is satisfied. The supplier and recipient have also agreed in writing that the supply of the forestry assets is to be a supply of a going concern, as per the SPA. Therefore, the requirements in subsection 38-325(1) of the GST Act are satisfied. The additional requirements in subsection 38-325(2) will now be considered. | Detailed Reasoning - A supply under an arrangement: Paragraph 19 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) stipulates that the term 'supply under an arrangement' includes a supply under a single contract or supplies under multiple contracts which comprise a single arrangement. However, the supplies made under the arrangement must relate to the same enterprise, that is, the 'identified enterprise'. It is clear that there is a 'supply under an arrangement' in this case, as there are multiple contracts between the Entity X parties and the buyer that relate to a single arrangement - the divestment of most of the forestry enterprise. | Detailed Reasoning - The identified enterprise: Subsection 38-325(2) requires the conditions be satisfied in relation to an 'identified enterprise'. The term 'enterprise' is defined in section 9-20 of the GST Act as 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; … * Denotes a term defined in the GST Act. Paragraph 32 of GSTR 2002/5 also provides that a supply of all things necessary for the continued operation of an activity which is part of an enterprise cannot be a 'supply of a going concern' unless the conduct of the activity is itself an 'enterprise' as defined in section 9-20 of the GST Act. Thus, the following are indicators that part of an enterprise is being carried on in the form of a business: · A degree of autonomy; · A separate management structure; · A system of internal user charging; · A separate budget; and · Agreements with internal service providers or external customers. In this case, Entity C leases the land from third party landlords or Entity A and then subleases the land to growers. These activities indicate that Entity C is operating a 'leasing enterprise' under paragraph 9-20(1)(c) of the GST Act. Yet, Entity C's obligations under the LMAs with growers include a number of management activities in its role as responsible entity of the managed investment schemes, which indicates a more active role in the management of the forestry services. However, the LMAs between the growers and Entity C will be surrendered before the completion of the sale. Thus, the growers' rights to the property will be extinguished and they will no longer be conducting forestry activities on the land. Despite this, Entity C will still hold the leasehold interest in the land and the interest in the timber, in addition to the right to fell the timber. It is clear that in such forestry enterprises, the level of activity in relation to the enterprise varies depending on the stage of growth of the trees. The trees on the leasehold properties are currently at a stage where the activities of establishing the plantations or felling the timber are not required. The main activities required of Entity C in relation to the plantations include tending to the plantations, supervision and minimal maintenance procedures. Entity C warrants that it will continue holding the leasehold properties and conducting any forestry activities as required. Thus, to the extent that Entity C does so, it conducts a forestry enterprise. A separate forestry enterprise is conducted for each project that Entity C has an interest in, to the extent that each project has a degree of autonomy, a separate budget, and separate agreements with internal service providers or external customers, and Entity C actively engages in forestry activities in relation to each project. Thus, the 'identified enterprise' for the purposes of section 38-325 of the GST Act is a 'forestry enterprise'. | Detailed Reasoning - All of the things that are necessary for the continued operation of an enterprise: Paragraph 72 of GSTR 2002/5 provides that the term 'necessary' incorporates every attribute of an enterprise that is essential for the continued operation of the 'identified enterprise'. The things that are 'necessary' will depend on the nature of the enterprise carried on and the core attribute of that enterprise. GSTR 2002/5 stipulates that two elements are essential for the continued operation of an enterprise: · The assets necessary for the continued operation of the enterprise including, where appropriate, premises, plant and equipment, stock-in-trade and intangible assets such as goodwill, contracts, licences and quotas; and · The operating structure and process of the enterprise consisting of the commercial or economic activity relevant to the type of enterprise being conducted, for example, ongoing advertising and promotion. In this case, Entity C is supplying the property leases and the interests in the trees on the plantations subject to the leases, those being the forestry assets it has an interest in. Attached to the interests in the trees on the plantations is also the inherent right to fell those trees when required. In the context of the stage of development of the plantation, these assets are the key assets required. As forestry activities required on the plantations vary with the development of the trees, so too would the assets reasonably required. Paragraph 72 of GSTR 2002/5 provides that a 'thing' is necessary for the continued operation of an 'identified enterprise' if the enterprise could not be operated by the recipient in the absence of the thing. As the identified forestry enterprise cannot be operated without the interest in the leasehold properties or the interests in the trees, the assets supplied by Entity C are necessary for the continued operation of the forestry enterprise. 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. Paragraph 78 of GSTR 2002/5 provides that the means of operation of the relevant enterprise must be supplied. The agreement between the Entity X parties and the buyer provides that the Entity X parties must use reasonable efforts to keep available the services of their officers and employees and preserve their relationships with customers, suppliers, licensors, licensees and others having business dealings with the Entity X parties in connection with the assets. In this regard, Entity C also supplies the operating structure and process of the enterprise, as the recipient is placed in a position to continue the operation of the enterprise in the future. Thus, all the things that are necessary for the continued operation of an enterprise are supplied. | Detailed Reasoning - The supplier carries on the enterprise until the day of the supply: In this case, Entity C will surrender the grower subleases before the completion of the sale. The growers will cease conducting their routine activities on the land prior to supply. However, as explained above, Entity C will continue the ongoing maintenance and management of the plantations and it retains the relevant assets in which to continue the operation of the forestry enterprise. Due to the stage of growth of the plantations, it is expected that these maintenance activities will be minimal. Entity C warrants that it will continue to carry on the forestry enterprise until the day of supply. The time period between the surrender of the grower subleases and the completion of the sale may be short. However, paragraph 136 of GSTR 2002/5 provides that an enterprise can be carried on for the purposes of section 38-325 of the GST Act even if it is only carried on for a day before the supply. Hence, Entity C will be carrying on the enterprise until the day of supply, despite surrendering the grower subleases, to the extent that it continues to conduct the forestry enterprise in accordance with the terms of the SPA. As all the requirements of section 38-325 of the GST Act are satisfied, the assignment by Entity C of an interest in the leases, together with the relevant assets owned by Entity C, to the buyer, will be a supply of a going concern pursuant to section 38-325 of the GST Act. | Summary: Entity B's supply of the property leases and the relevant assets will be a supply of a going concern pursuant to section 38-325 of the GST Act because it supplies everything necessary for the continued operation of the plantation enterprise and will carry on the enterprise until the day of supply. | Detailed Reasoning - Detailed reasoning: The analysis of this section will be substantially similar to the analysis for Question 1 of Issue 4. The requirements in subsection 38-325(1) of the GST Act are satisfied because, in this case, the supply is for consideration. The SPA provides that the buyer 'warrants that it is registered or required to be registered for GST and will remain so until the completion date', thus paragraph 38-325(1)(b) is satisfied. The supplier and recipient have also agreed in writing that the supply of the assets is to be a supply of a going concern, as per the SPA. Therefore, the requirements in subsection 38-325(1) of the GST Act are satisfied. The additional requirements in subsection 38-325(2) will now be considered. | Detailed Reasoning - A supply under an arrangement: It is clear that there is a 'supply under an arrangement' in this case, as there are multiple contracts between the Entity X parties and the buyer that relate to a single arrangement - the divestment of most of the forestry enterprise. | Detailed Reasoning - The identified enterprise: In this case, Entity B leases the land from third party landlords and then subleases the land to growers. These activities indicate that Entity B is operating a 'leasing enterprise' under paragraph 9-20(1)(c) of the GST Act. The LMAs between Entity B and the growers indicate that Entity B is the 'lessor' (as defined in the LMA itself), while Entity C provides the 'forestry services' listed in the schedule. However, Entity C engages Entity B to provide the 'forestry services' on the plantations. The services, of which the maintenance, supervision and conduct of activities relating to forestry are included, are provided by Entity B under an agreement with Entity C. Entity C's obligations are thus as lessor of the land and to provide the forestry services in respect of the land. So, to the extent that Entity C subleases the land to growers and provides the 'forestry services', it is conducting a 'forestry enterprise'. However, the LMAs and subleases between Entity C and the growers will be surrendered before the completion of the sale. Thus, the 'forestry enterprise' as previously carried on will cease. After the LMAs and subleases are surrendered, Entity C warrants that it will continue to carry on the forestry enterprise until the day of supply. The time period between the surrender of the grower subleases and the completion of the sale may be short. However, paragraph 136 of GSTR 2002/5 provides that an enterprise can be carried on for the purposes of section 38-325 of the GST Act even if it is only carried on for a day before the supply. So, after the surrender of the LMAs and subleases, Entity C begins a 'forestry enterprise' to the extent that it continues to actively engage in forestry activities on the plantations. Thus, the 'identified enterprise' for the purposes of section 38-325 of the GST Act is a 'forestry enterprise' to the extent that Entity C actually engages in such activities between the time of surrender of the LMAs and subleases and the completion of the sale. As the plantations are at a stage of development that does not require constant maintenance, the forestry activities required of Entity C are expected to be nominal. | Detailed Reasoning - All of the things that are necessary for the continued operation of an enterprise: In this case, Entity C is providing the relevant assets to the buyer. These assets clearly include things that are necessary for the continued operation of the enterprise, as the assets include things such as water licences, stock, plant and equipment and business records. Additionally, paragraph 58 of GSTR 2002/5 recognises that many enterprises operate from leased premises; thus, the supplier may supply a lease by assignment as a 'thing' that is necessary for the continued operation of an enterprise. 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. Paragraph 78 of GSTR 2002/5 provides that the means of operation of the relevant enterprise must be supplied. In this case, the forestry assets that Entity C has an interest in also include transferring employees, intellectual property rights, software and authorisations. The supply of these assets will put the recipient in a position to carry on the enterprise. Furthermore, the agreement between the parties provides that the Entity X parties must use reasonable efforts to keep available the services of their officers and employees and preserve their relationships with customers, suppliers, licensors, licensees and others having business dealings with the Entity X parties in connection with the assets. In this regard, Entity C also supplies the operating structure and process of the enterprise. Thus, all the things that are necessary for the continued operation of an enterprise are supplied. | Detailed Reasoning - The supplier carries on the enterprise until the day of the supply: In this case, Entity C will surrender the grower subleases before the completion of the sale. The growers will cease conducting their routine activities on the land prior to supply. However, as explained above, Entity C will continue the ongoing maintenance and management of the plantations as it retains the relevant assets in which to continue the operation of the plantation enterprise. Entity C warrants that it will continue to carry on the plantation enterprise until the day of supply. The agreement between the parties provides that the Entity X parties must use reasonable endeavours to ensure that the business is conducted materially in the ordinary course. The time period between the surrender of the grower subleases and the completion of the sale may be short. However, paragraph 136 of GSTR 2002/5 provides that an enterprise can be carried on for the purposes of section 38-325 of the GST Act even if it is only carried on for a day before the supply. Hence, Entity C will be carrying on the enterprise until the day of supply. As all the requirements of section 38-325 of the GST Act are satisfied, the assignment by Entity C of an interest in the leases, together with the relevant assets owned by Entity C, to the buyer, will be a supply of a going concern pursuant to section 38-325 of the GST Act.

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