Private ruling: GST and the sale of property
Published: July 2012

Ruling: Q1: Will your supply of the property be a taxable supply? | A1: Your supply of the residential section of the Property will be an input taxed supply of residential property. Your supply of the commercial/retail section of the Property will be a GST-free supply of a going concern.

Relevant facts and circumstances: You are registered for GST. You are registered as proprietors of the property. You hold the Property as joint tenants. The Property consists of: · two separate retail spaces on the ground floor; · commercial space behind one retail space on the ground floor; and · a residential flat on the first floor. Therefore, there are four separate spaces - two retail spaces, one commercial space and one residential space. You propose to sell the Property to an interested purchaser. The Contract of Sale will contain a clause whereby you and the Purchaser will agree that the supplies of the commercial and retail parts of the premises are the supply of a going concern. As at the date of the proposed Contract of Sale in relation to the property and up to and including the settlement date, the Property will be fully leased, that is: · a residential lease in relation to the residential component of the Property · a commercial lease in relation to one retail space, and · a commercial lease in relation to the other retail space and the commercial space. You will assign the various leases to the purchaser (who is registered for GST), in accordance with the proposed Contract of Sale. You will carry on the (leasing) enterprise until the day of the supply.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 , Section 9-20 | 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)

Reasons for decision: Summary: Section 38-325(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the supply of a going concern is GST-free if: · the supply is for consideration; · the recipient is registered or required to be registered for GST; and · the supplier and the recipient have agreed in writing that the supply is of a going concern Supply of a going concern is defined in section 38-325(2) as a supply under an arrangement under which: (a) the supplier supplies 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 supply. Accordingly, in order to constitute a supply of going concern, each of the above conditions must be satisfied. An enterprise is defined in section 9-20(1) of the GST Act as including an activity, or series of activities, done: · in the form of a business · in the form of an adventure or concern in the nature of trade, or · on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. You are carrying on an enterprise that includes leasing of commercial/retail and residential property. The residential property will not be supplied as part of the going concern. You will supply the fully leased commercial/retail property and you will assign the various leases to the purchaser. Therefore, we consider that all things necessary to continue the leasing enterprise that you conduct will be supplied to the purchaser. You will carry on the (leasing) enterprise until the day of the supply. Therefore, you will satisfy the requirements of section 38-325(2) of the GST Act. Based on the facts you will also satisfy the requirements of subsections 38-325(1) of the GST Act. Accordingly, your supply of the commercial/retail sections of the Property will be the supply of a going concern that is GST-free under section 38-325 of the GST Act. The residential section of the Property will not be supplied as part of the going concern. Based on the facts, your supply of the residential flat will be an input taxed supply of residential premises under section 40-65 of the GST Act.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.