Private ruling: GST - sale of a going concern
Date of advice: 24 February 2022
Published: May 2022
Date scheme commenced: XX Month 20XX

Ruling: Q1: Is the sale of the commercial property a GST free sale of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where there is a lease in place at the date of the settlement? | A1: Yes, the sale of the commercial property will be a GST free sale of a going concern under section 38-325 of the GST Act.

Relevant facts and circumstances: X (you) are registered for GST. You are carrying on an enterprise of rental or leasing a commercial property at X. There is one lease in place on this property. You are in the process of selling the above tenanted commercial property to a third party for consideration. You will supply to the purchaser all of the things necessary for the continued operation of an enterprise which includes an existing lease agreement with tenants in this property. You will carry on the enterprise until the day of settlement. You and the purchaser will agree in writing that the supply is of a going concern by the time of settlement. On further clarification you stated that: • There is currently a X year lease with Xly payments • The lease will be in place when the property is settled. • The lease will be transferred to the purchaser at settlement. • The purchaser is registered for GST. • Some of the clauses that you are proposing to include in the contract for the sale in writing is a lease transfer and the sale will be a sale of a going concern.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-325(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-325(2)

Reasons for decision: Summary: Subsection 38-325(1) of the GST Act provides that 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. All the requirements in subsection 38-325(1) of the GST Act must be satisfied for the sale of the commercial property under the sale contract to be a GST-free supply of a going concern . | Detailed Reasoning - Supply is of a going concern: The requirement for a supply to be a GST-free supply under section 38-325 of the GST Act is the supply must be a supply of a going concern. Subsection 38-235(2) of the GST Act states 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). Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST free? (GSTR 2002/5) explains what a 'supply of a going concern' is for the purposes of section 38-325. A supply is defined in section 9-10. The term 'supply under an arrangement' includes a supply under a single contract or supplies under multiple contracts which comprise a single arrangement. However, the things supplied under the arrangement must relate to the same enterprise, that is, the enterprise referred to in paragraphs 38-325(2)(a) and (b) (the 'identified enterprise'). In addition, paragraph 29 ofGSTR 2002/5 notes that subsection 38-325(2) requires the identification of an enterprise that is being carried on by the supplier (the identified enterprise). This is the enterprise for which the supplier must supply all of the things that are necessary for its continued operation. Also, the supplier must carry on this enterprise until the day ofthe supply, whether or not as part of a larger enterprise. The term 'enterprise is defined in section 9-20 as an activity, or series of activities, done: • in the form of a business; or • in the form of an adventure or concern in the nature of trade; or • on a regular or continuous basis, in the form of a lease, licence, or other grant of an interest in property; or • [...] Paragraph 72 and 73 ofGSTR 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. Paragraph 151 of GSTR 2002/5 also provides that the activity of leasing a commercial property, which has been leased to a tenant remains an 'enterprise' of leasing for the purposes of section 9-20 of the GST Act. • From the facts provided: • You will carry on a leasing enterprise when leasing the commercial property and this is the property that is subject to sale under the sale contract. • The lease of the commercial property will be in place at the time of the sale contract and there is currently a X year lease with Xly payments. • The lease will be in place when the property is settled. • The supply of the commercial premises is for a consideration. • The purchaser is registered for GST. • You and the purchaser will agree in writing that the sale of the commercial property is sale of a going concern and there is a lease in place. As such, the requirements in subsection 38-325(1) of the GST Act are satisfied. Based on the above, we consider that you will still carry on the leasing enterprise at the time ofsettlement. Thus, the requirements in subsection 38-325(2) of the GST Act will be satisfied. In conclusion, section 38-325(1) and (2) of the GST is satisfied as the sale will be of a sale of a going concern.