Private ruling: GST and the purchase of a property as a going concern
Published: January 2013

Ruling: Q1: Is the purchase of the Property a purchase of a GST-free going concern? | A1: No

Relevant facts and circumstances: Entity A signed a contract to purchase a property in Australia as a nominee of entity B (You). You did not provide an ABN for either entity A or entity B. You advised that: · entity B had no ABN and was not registered for GST · both you and the vendor disagreed on whether there was a supply of a going concern · because of this disagreement the sale did not proceed and you forfeited your deposit. The contract does not contain a clause that the supply would be a GST-free going concern. You obtained an opinion from a barrister where he provides at clause 12 that: ….The absence of a sale of business agreement … is ineffective for the purposes of section 38-325 because the contract alone did not amount to, or give rise to, a supply of a going concern.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 38-325 .

Reasons for decision: Summary: Section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that for there to be a GST-free supply of a going concern the supply must meet all of the following criteria: · There must be a supply for consideration · The recipient must be registered or required to be registered for GST · the supplier and the recipient have agreed in writing that the supply is of a going concern and · the supply occurs under an arrangement under which: · the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and · 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). In your case: · there was no supply of the property or the enterprise, · nor was the recipient registered for GST · nor was there an agreement in writing or an agreement during the sale process that the supply would be a GST free going concern Therefore as the sale did not proceed, there could not have been a supply by the Vendor of a GST-free supply of a going concern as per section 38-325 of the GST Act.

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