Private ruling: Acquisition of a GST-free going concern
Published: October 2013

Ruling: Q1: Is the acquisition of the assets and tenements of the joint venture Interests in respect of a mine, as governed by the sale and purchase agreement (the Agreement), a creditable acquisition under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No; because the acquisition was a GST-free supply of a going concern, the requirements of section 11-5 of the GST Act are not satisfied.

Relevant facts and circumstances: You have purchased assets and tenements of a mining operation and are registered for goods and services tax (GST). The Seller operates mines and undertakes associated activities in various locations. The Seller has made a decision to sell the operating mine located in Australia. The mining operation is made up of a mine and joint venture interests. The Seller Group does not operate as a grouped GST joint venture with a joint venture operator. The mining operation is defined to include the following: 1. the Sellers' interest in the tenements; 2. the Plant and Equipment; 3. the Properties; 4. the minerals in circuit; 5. the Stock; 6. the Supplies Inventory; 7. the Records; 8. the right to goods and services to be supplied to the operations after completion 9. the benefit of the Sellers' interest in contracts; 10. the benefit of the Sellers' interest in operational authorisations used exclusively in connection with the Assets; 11. the Sellers' interests in the joint ventures; and 12. all other rights, title, interests and assets of the Seller used exclusively in the operations; other than Excluded Assets. The Excluded Assets include assets of the Sellers that are unconnected with the enterprise that is being sold and are not generally necessary for the continued operation of the mining operation. All transferring contracts that relate exclusively to the operations will be transferred to you pursuant to the Contract. Where Excluded Contracts are necessary for the continued operation of the enterprise being supplied, the Seller will facilitate the entry into a new agreement between you and the third party supplier pursuant to the contract. You will assume liabilities relating to the Assets and Employees, which includes employee entitlements, trade payables, contractual liabilities, environmental bonds and rehabilitation liabilities. The consideration for the sale of the Assets is the payment of the Purchase Price and the assumption of the Assumed Liabilities. The acquisition was a GST-free supply of a going concern under section 38-325 of the GST Act.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 7-1 | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-10 | A New Tax System (Goods and Services Tax) Act 1999 section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 11-20 | A New Tax System (Goods and Services Tax) Act 1999 section 38-325 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Detailed Reasoning - The basic rules: Section 7-1 of the GST Act provides that entitlements to input tax credits arise on *creditable acquisitions. Under section 11-20 of the GST Act you are entitled to claim input tax credits for any creditable acquisition that you make. Section 11-5 of the GST Act defines a creditable acquisition by stating: 11-5 What is a creditable acquisition? You make a creditable acquisition if: a) you acquire anything solely or partly for a *creditable purpose; and b) the supply of the thing to you is a *taxable supply; and c) you provide, or are liable to provide, *consideration for the supply; and d) you are *registered, or *required to be registered. (*Asterisked terms are defined in the Dictionary under section 195-1 of the GST Act) In order to make a creditable acquisition all of the requirements of section 11-5 of the GST Act must be satisfied. Goods and Services Tax Ruling GSTR 2008/1 GST: when do you acquire anything or import goods solely or partly for a creditable purpose? (GSTR 2008/1) explains some factors that provide guidance in determining whether an acquisition is for a creditable purpose. | Detailed Reasoning - Acquisition: Section 11-10 of the GST Act gives the meaning of acquisition and provides that an acquisition is any form of acquisition whatsoever and includes an acquisition of goods and services, a receipt of advice or information, acceptance of a grant, assignment or surrender of *real property, or an acceptance of a grant, transfer, assignment or surrender of any right. The acceptance of the assets and obligations under the Agreement is an acquisition for purposes of the GST Act. | Detailed Reasoning - Acquisition for a creditable purpose: Section 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. You are acquiring the assets and obligations which will be used in carrying out your enterprise of mining. Accordingly you satisfy subsection 11-5(a). | Detailed Reasoning - The supply to you is a taxable supply: Section 9-5 provides that a supply is not a taxable supply to the extent that it is GST-free. Because the supply to you was a GST-free supply of a going concern under section 38-325 of the GST Act, the acquisition was not a taxable supply. Subsection 11-5(b) is not satisfied. Because subsection 11-5(b) is not satisfied you have not acquired a creditable acquisition. Accordingly you are not entitled to claim input tax credits under section 11-20 of the GST Act. Goods and Services Tax, acquisition of a GST-free going concern