Private ruling: GST and Going Concern
Date of advice: 29 July 2016
Published: September 2016

Ruling: Q1: Will your supply of the Property, pursuant to a Contract of Sale, be a supply 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: Yes, your supply of the Property will be a GST-free supply of a going concern under section 38-325 of the GST Act. This is because, on settlement date, you will be providing the purchaser all of the things that are necessary for the continued operation of a Licencing enterprise, being the Property and the Licence to Occupy. In addition, you will continue to carry on the Licencing enterprise until the day of the supply. Finally, there is a clause in the Contract of Sale indicating that you and the Purchaser have agreed in writing that the sale is a supply of a going concern, the sale will be for consideration and the Purchaser is registered for GST.

Relevant facts and circumstances: You are the registered owner of the Property. The Property is vacant land. You are registered for GST. Under a Licence to Occupy, you License a portion of the Property (the Premises) to Entity A for access to food sources for their animals. The cultivation of the product has been carried out on the Property from the time that you acquired the latter in XXXX. These activities were carried on prior to XXXX and most likely since well before XXXX. In return, Entity A pays you an annual licence fee of $XX for the rights to occupy and use the Premises. You also grant Entity A, under the Licence to Occupy, a right of access. There is one access point (gate) on the property that Entity A uses in order to access the licensed food source areas. However, there is no designated path / track within the unlicensed area which Entity A must use in order to get to the licensed area. Entity A has access rights over all parts of the unlicensed area (uncultivated land). The primary purpose of the uncultivated land (excluding the Premises [as defined]) on the Property is to act as a natural buffer for the plantations. The buffer is deliberately left uncultivated in order to minimise dust, chemical overspray, smoke and fire damage to the plantations. The fact that these parts of the land have not been planted reflects this use and the importance of a buffer to the plantations. The uncultivated land also provides Entity A with access to the plantations (that is, Entity A drives its vehicles around all parts of the unlicensed area in order to access the plantations). In addition to providing access rights to Entity A and acting as a buffer to the plantations, the uncultivated land excluding the Premises (as defined) is also used to store Entity A's harvested product. Further, the plantations are required to go through a maintenance process. As such, Entity A also uses the uncultivated land excluding the Premises (as defined) to store its machinery during the process (that is, maintenance equipment). Other parts of the Property contain native vegetation and watercourses that are necessary for the sustainability of the plantations. You intend to sell the Property to a prospective purchaser and are in the process of finalising the Put and Call Option Agreement ('Agreement') for the sale of the Property. You assign your rights and interests under the Licence to Occupy to the purchaser. The Contract for Sale provides that you and the prospective purchaser agree to apply the GST-free supply of a going concern exemption to the transaction and you will continue to license the Property to Entity A until the day of settlement. The Contract for Sale provides that the prospective purchaser warrants it is registered for GST. Entity A, remains in occupation of the Property after expiration of the Licence to Occupy and you have not required possession of the Property. Accordingly, the Licence to Occupy has continued to operate on a month to month basis pursuant to the Licence to Occupy. You have not terminated the monthly Licence with Entity A. You did not purchase the Property from an associate. You have allowed the animals of a neighbouring farmer to graze on the land on an ad hoc basis pursuant to the Licence to Occupy.

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