Private ruling: GST and sale of a going concern
Date of advice: 11 April 2017
Published: May 2017
Ruling period: NA
Date scheme commenced: NA

Ruling: Q1: Was the sale of your enterprise the sale of a going concern? | A1: Yes. The sale of your enterprise was the sale of a going concern. | Q2: Do you lodge the gross or net amount after paying an amount as commission to the sales facilitator? | A2: You need to lodge the gross amount on your business activity statement. The commission paid to the sales facilitator is for a separate supply of services provided to you. You are entitled to claim input tax credits of 1/11 of whatever you paid as commission to the sales facilitator.

Relevant facts and circumstances: You sold your enterprise as a sale of a going concern. You paid an amount as commission to the entity facilitating the sales of your enterprise.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 sections 9-5, 11-5, 11-15, 11-20 & 38-325.

Reasons for decision: Detailed Reasoning - 1. Going concern: Under subsection 38-325(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) a 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. In this case the supply was for consideration, the recipient is registered for GST and you and the supplier have agreed in writing that the supply is a supply of a going concern. Subsection 38-325(2) of the GST Act provides that 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 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 the supply (whether or not as a part of a larger enterprise carried on by the supplier). According to the facts provided all things necessary for the continued operation of the identified enterprise were supplied to the recipient. Further, you carried on the enterprise until the day of the supply. Therefore, the supply of the identified enterprise was a GST-free supply of a going concern and no GST is to be remitted on the sale of the enterprise. | Detailed Reasoning - 2. Taxable supply: You mentioned you had to pay 20% commission for facilitating the sale. Section 9-5 of the GST Act provides that an entity makes a taxable supply if the supply is for consideration, the supply is made in the course or furtherance of an enterprise that the entity carries on, the supply is connected with the indirect tax zone (Australia) and the entity is registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. In this case the sales facilitator is registered for GST, made a supply of selling services to you for consideration; the supply was made in the course or furtherance of the sales facilitator enterprise, and is connected with the indirect tax zone. The sales facilitator supply was neither GST-free nor input taxed. Therefore, their supply was a taxable supply. | Detailed Reasoning - Creditable acquisition: Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act states that a creditable acquisition is one where an entity acquires anything solely or partly for a creditable purpose, the supply of the thing to the entity is a taxable supply, the entity provides, or is liable to provide consideration for the supply and is registered or required to be registered. Under section 11-15 of the GST Act an entity acquires a thing for a creditable purpose to the extent that it makes the acquisition in carrying on its enterprise. However, it does not acquire a thing for a creditable purpose to the extent that the acquisition relates to a supply that would be input taxed or is of a private or domestic nature. Therefore, as the commission you refer to relates to consideration you provided for a creditable acquisition you are entitled to claim 1/11 of whatever you paid to the sales facilitator as input tax credits.