Private ruling: GST-free sale of a going concern
Date of advice: 31 March 2021
Published: May 2021
Ruling period: 1 July 20XX to 30 June 20XX

Ruling: Q1: Is the sale of the Property a GST-free sale of a going concern in accordance with section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes

Relevant facts and circumstances: The Company is the registered proprietor of the Property. The Company is the owner of the liquor licence associated with the Property (Liquor Licence) and the gaming machine entitlements. The company is registered for GST. There is a current tenant who occupies part of the Property. The company has been the registered proprietor of the Property since creation of the Property since 20XX. The part of the Property not the subject of a lease is vacant. The balance of the Property is made up of several other shops. The Company was party to a leasing agreement with 2 leasing agents in respect of the Property. On xx xxx xxxx, the Company entered into a contract to sell the Property to and entity at a price of $00,000,000. The contract of sale provides: • the Property is sold to the Purchaser, subject to existing tenancies • the Purchaser has purchased the Property subject to existing tenancies; and • the contract of sale states that the sale is a GST-free sale of a going concern. The contract of sale also includes the following clauses; • The parties agree that the sale of the assets under this contract is a supply of a going concern for the purposes of the A New Tax System (Goods and Services tax) Act 1999 . Additional information provided showed: • The properties continued to be activity marketed up to and after the settlement date of the contract of sale. The Purchaser is registered for GST.

Relevant legislative provisions: Section 38-325 of a New Tax System (Goods and Services Tax) Act 1999 | Subsection 38-325 (1) of a New Tax System (Goods and Services Tax) Act 1999 | Subsection 38-325 (2) of a New Tax System (Goods and Services Tax) Act 1999

Reasons for decision: Summary: Section 38-325 of the GST Act provides that, if certain conditions are satisfied, a supply of a going concern is GST-free. This means that, if in the case of a supply which would otherwise be a taxable supply, or an input taxed supply, the supply is a GST-free supply if it is supplied under an arrangement for the supply of a going concern. 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 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). All these elements must be satisfied in order for the supply to be GST-free sale of a going concern. Based on the facts provided, the three elements in subsection 38-3325(1) of the GST Act are satisfied at the time that the supply is made. That is, the supply of the Property was for consideration, the purchaser of the Property is registered for GST and both the vendor and the purchaser agreed in writing that the supply of the Property is a going concern. Next, consideration needs to be given on whether the requirements of subsection 38-325(2) of the GST Act are satisfied. Goods and Services Tax Ruling, Goods and services tax: when is a supply of a going concern GST-free? (GSTR 2002/5) discuses a supply of a going concern for the purposes of section 38-325 of the GST Act and explains when the supply of a going concern is GST-free. Paragraphs 72 and 73 of GSTR 2002/5 explain that the things that are 'necessary' for the continued operation of an enterprise will depend on the nature of the enterprise carried on and the core attributes of that enterprise. 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. Pursuant to the contract of sale, the vendor is selling a commercial property which includes various separate shops. Even though only part of the Property is tenanted the vendor continued to actively market the empty shops until the date of settlement and the Property continued to be actively markets up to and after settlement to ensure the continued operation of the enterprise. Rights and agreements were included in the sale, including the liquor licence and the gaming machine entitlements, the lease and improvements, fixtures and fittings. As a result, the supply of the Property as detailed in the contract of sale, and the supplementary evidence provided, meets the requirements of subsection 38-325(2) of the GST Act. As the requirements of both subsection 38-325 (1) and (2) of the GST Act are satisfied the sale of the Property is a GST-free sale of a going concern.