Private ruling: sale of a leased property
Published: March 2012

Ruling: Q1: I s the sale of the leased property a GST-free supply of a going concern for the purposes of section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes



Reasons for decision: Summary: Taxable Supply Under section 9-5 of the GST Act, an entity makes a taxable supply if: · it makes a supply for consideration; and · the supply is in the course or furtherance of an enterprise that it carries on; and · the supply is connected with 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. The sale satisfies all the criteria in section 9-5 of the GST Act for a taxable supply. The sale of the lease is not an input taxed supply because the lease is on a commercial property. The next issue to consider is whether the sale could be GST-free as a supply of a going concern. Supply of going concern A supply is a GST-free supply of a going concern if it satisfies all the requirements of section 38-325 of the GST Act. Goods and Services Tax Ruling GSTR 2002/5 outlines the Australian Taxation Office's view on a supply of a going concern for the purposes of section 38-325 of the GST Act. We enclose a copy for your reference. The statutory term 'supply of a going concern' is defined in subsection 38-325(2) of the GST Act. Paragraph 9 of GSTR 2002/5 states: The term 'supply of a going concern' is a statutory term which is defined for the purposes of Subdivision 38-J in subsection 38-325(2): (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 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 part of a larger enterprise carried on by the supplier) The first requirement for a going concern is that the supplier must be carrying on an enterprise and are selling the enterprise to the purchaser as a going concern enterprise. In your case you carry on an enterprise of leasing a commercial property and you are selling the lease together with the leased property to the purchaser for consideration under an arrangement of a going concern. Under the arrangement, you are supplying all things necessary (including the leased property) for the continued operation of the lease to the purchaser and you will continue to operate the lease till the settlement date. We consider as you are supplying the leasing enterprise to the purchaser as a going concern arrangement, the supply satisfies all the requirements in subsection 38-325(2) of the GST Act However a supply of going concern is only GST free if the supply satisfies the criteria set out in subsection 38-325(1) of the GST Act. Paragraph 12 of GSTR 2002/5 states: Subsection 38-325(1) provides: (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. You supply the leasing enterprise for consideration and the purchaser is registered for GST. In addition, you and the purchaser have agreed in writing that the supply is a supply of a going concern. Therefore we consider that the supply satisfies all the criteria in subsection 38-325(1) of the GST Act and is therefore GST-free.

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. | You are registered for goods and services tax (GST). | You carry on an enterprise of leasing commercial properties. | You enter into a contract to sell a leased property as a going concern. | You are making the supply for consideration. | In addition you are supplying all of the things necessary for the continued operation of the leasing enterprise. | You will be carrying on the leasing enterprise until the settlement date.