Private ruling: GST and supply of a going concern
Date of advice: 8 February 2016
Published: April 2016

Ruling: Q1: Is your acquisition of the Property a GST-free supply of a going concern pursuant to section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, based on the information you provided, you are acquiring a GST-free supply of a going concern because all the requirements of section 38-325 of the GST Act as follows: • the Vendor is operating a leasing enterprise capable of being supplied as a going concern for GST purposes • the Vendor will be supplying to you the Property with the retail leases intact. Hence, the Vendor will be supplying to you all of the things that are necessary for the continued operation of the leasing enterprise under paragraph 38-325(2)(a) of the GST Act and provided the Vendor continues to carry on the leasing enterprise until completion then the Vendor will be carrying on the leasing enterprise until the day of supply under paragraph 38-325(2)(b) of the GST Act, and • the sale of the Property is for consideration, you, the Purchaser, are registered for GST and you and the Vendor have agreed in writing that the supply is of a going concern, satisfying the requirements of paragraphs 38-325(1)(a), 38-325(1)(b) and 38-325(1)(c) of the GST Act.

Relevant facts and circumstances: You have previously received a GST private ruling which states that you are not acquiring a GST-free supply of a going concern because you and the Vendor have not agreed in writing that the supply is of a going concern. Recently you applied for a private ruling providing a copy of the deed of variation of Contract. The deed of variation provides that you and the Vendor have agreed to vary the terms of the Contract for the sale of land and replace a particular clause with the following: Notwithstanding anything herein contained to the contrary, both parties agree that the sale is the supply of a going concern and GST-free. Your representative confirmed that apart from the replacement of that clause all terms and conditions of the Contract as outlined in the GST private ruling remain the same. The facts and circumstances as outlined in that GST private ruling and which remain the same for the purposes of this ruling are as follows: Both parties are registered for GST. The Contract includes the following: The parties agree that if prior to completion the purchaser serves on the vendor a copy of a Private Ruling, that the supply of the property under this contract is the supply of a going concern, the parties agree that the supply of the property is the supply of a going concern. Between the date of the contract and completion the Vendor may not in respect of any Tenancy: (a) consent to any transfer (except where in the reasonable opinion of the vendor it is obliged to under the Leases; (b) grant any other consent (c) exercise any right of forfeiture or to determine any Tenancy by reason of default of any Tenant; or (d) knowingly waive any breach of covenant, without first obtaining the consent of the purchaser. On completion the Vendor: (a) will be deemed to have assigned to the purchaser the benefit arising after completion of all the Tenants' obligations contained or implied in the Leases except to those relating to the period before completion; and (b) must give to the purchaser a copy of an executed notice of the transfer of the property addressed to the Tenants. Also, on the contract date, the Vendor executed lease agreements (Leases) for each of the retail premises. The Lessees are related entities and are also related to you. All leases have identical clauses which include: • The lease is for a term of X years commencing the day before contract date. • The Leases provide for an option to renew for a further period. • The Leases list the rent payable from the commencement date to the first rent review date. • The Leases lists the permitted use as a retail establishment. • The Leases lists the security deposit payable under the lease. • The following clauses relate to Rent Free Period: The Lessee is entitled to a Rent Free Period commencing on the Commencement Date of the lease for a period of X calendar months. During the rent free period, the Lessee is not required to pay rent and outgoings. However, the Lessee must continue to pay any other monies payable under this lease during the Rent Free Period. If the lease is terminated prior to the end of the Term due to the Lessee's default, the value of the Rent Free Period must be repaid to the Lessor upon demand. • The following clauses relate to the Contract for Sale: • The lessor and lessee acknowledge and agree as follows: • The lessor has entered into a contract for the sale of the property… • If the Contract is rescinded or terminated for any reason, the lessor may at any time terminate this lease by written notice to the lessee. The lessee may not make any claim against the lessor in connection with any termination of this lease pursuant to this clause. • Prior to completion of the Contract the lessee is not permitted to access the property for any purpose other than at reasonable times on reasonable notice for the purposes of inspections, survey and preparing consultants reports, drawings or diagrams in connection with any development application to be made by the lessee in respect of its fitout of the property. • The lessor and lessee agree that the lessee is not required to pay any security deposit before completion of the Contract. A deed of variation varied the sale price and the date of payment of the balance of the deposit.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5. | A New Tax System (Goods and Services Tax) Act 1999 Section 38-325. | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(1). | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(2). | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.