Private ruling: GST-free going concern
Date of advice: 12 February 2016
Published: April 2016

Ruling: Q1: Is the acquisition of the Property by you, an acquisition of a GST-free going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: At the date of issue of this private ruling you are not registered for GST. However on the basis of the information provided, your projected annual turnover will exceed the GST threshold of $75,000 and you are required to be registered for GST. Accordingly as the remaining requirements under section 38-325 of the GST Act will be met, the acquisition of the Property will be a GST-free going concern.

Relevant facts and circumstances: You are not registered for goods and services tax (GST) and do not have an Australian Business Number (ABN) as at the date of issue of this private ruling. In 200X you entered into a call option to purchase four parcels of contiguous land (the Property) from the Vendor. The Property comprises several commercial premises which have been leased out to several tenants by the Vendor who conducted a leasing enterprise on the Property on a continuous and regular basis. When you sought to exercise the call option, the Vendor refused to complete the contract to transfer the Property to you. As a consequence you commenced legal proceedings in the Supreme Court against the Vendor. By these proceedings you sought specific performance of the call option. The matter went to trial, and on to appeal. On appeal the Full Court held that you had validly exercised the call option and that you were entitled to purchase the Property, and that the Vendor was obliged to transfer it to you on payment of the purchase price. The Vendor died and their widow was appointed his Executrix and assumed responsibility in respect of the conduct of the proceedings. Subsequently, you entered into a Deed of Settlement with the Executrix and the late Vendor's child. By reason of the Deed of Settlement, you were effectively given a second option to purchase the Property on certain conditions. Settlement is to occur on a future date if you choose to exercise the option. Annexed to the Deed of Settlement is a Contract for Sale of Real Estate (Sale Contract). The Sale Contract is to govern the sale transaction in the event that you exercise the option. The Sale Contract provides that you and the Vendor agree that the supply of the Property to you is a supply of a going concern. The Sale Contract also specifies that the purchase price is inclusive of GST. The Sale Contract also provides that the Property is sold subject to property leases. The Executrix of the estate of the late Vendor will continue to conduct the leasing enterprise up to and including the day of the supply of the Property to you. On or before the date of settlement of the Sale Contract, you will be supplied with all of the things that are necessary for the continued operation of the leasing enterprise. You intend to exercise your option to purchase the Property and proceed to settlement on or before the critical date of dd/mm/yyyy.

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