Private ruling: GST and the sale of a business as a going concern
Published: June 2012

Ruling: Q1: Is the sale of your business a GST-free supply of a going concern? | A1: Yes, the sale of your business is a GST-free supply of a going concern.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are registered for goods and services tax (GST). Your business is a retailing business operating from premises A and B. Prior to June 2012 you entered into a business sale contract (the Contract) to sell the whole of the business to the purchaser for consideration. The purchaser is registered for GST. You and the purchaser have agreed in writing, in the Contract, that the sale of the business is the supply of a going concern. You consider that all of the requirements necessary for the sale of the business, to be a GST-free supply of a going concern, are satisfied. In accordance with the Contract you are supplying the goodwill, stock in trade, plant and equipment, business names, telephone numbers, web site, premises, existing supply contracts where applicable, supplier lists, business know how, restrictive covenant, stationery and advertising. You will carry on the business until the date of possession is given to the purchaser. Prior to 2000 a lease agreement was entered into between the owners and the lessee, who operated a business from the premises. The legal structure of the lessee has changed to the current structure. You have an informal rental agreement with the owners under which rent is paid monthly in advance, together with agreed outgoings. This is on the basis that you have occupied the premises since before 2002 on essentially the same terms as the original lease where relevant, but with the variation of the monthly rent. You have provided us with a copy of the original lease. The lease is not registered on the title of premises A. The term of the lease for premises B was for a period prior to 2004 and contained various rights of renewal, however, you did not formally exercise these rights. You have remained in occupation of the premises with the agreement of the landlord on the basis of the payment of the agreed monthly rent, together with certain outgoings. You have provided us with a copy of the lease. This lease is also not registered on title. The Contract is subject to and conditional upon the landlords of both premises A and B entering into a written lease, sub lease, under lease or licence with the purchaser on or before the date of possession. The directors of your trustee company are employed by you to manage and operate the business. You have agreed in the Contract to provide the purchaser one week before, and three weeks after settlement, a period of assistance regarding the day to day operations of the business. There is one other employee of the business and arrangements have been made for that employee to take up employment with the purchaser. You own a vehicle which is used by the business and is included in the sale. Your associate owns a vehicle which they used in your business. The non-personal use of this vehicle exceeded 5000km's per annum. The use of this vehicle was a personal decision by your associate. The vehicle is not included in the sale. You do not consider this vehicle as being necessary for the continued operation of the business as the vehicle being supplied is sufficient for operating the business. You own two computers, one of which is very old and antiquated, and is used purely to do general ledger accounting using Quickbooks. This computer is not being supplied with the business as it is not required by the purchaser and the other computer can perform the work done on the older computer. Apart from that mentioned, all other plant and equipment that is used in the business is included in the sale. You have provided us with copies of the Loan agreement, Fixed and Floating Charge agreement and the Guarantee and Indemnity agreement.

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

Reasons for decision: Summary: All legislative references in this ruling are to the A New Tax System (Goods and Services Tax) Act 1999 unless otherwise stated. The 'supply of a going concern' is GST-free where all of the requirements of section 38-325 are met. A 'supply of a going concern' is a supply under an arrangement where: · 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) (subsection 38-325(2)). You carry on a retailing enterprise and consider that you are providing the purchaser with all of the things that are necessary for the continued operation of the enterprise. This includes the goodwill, stock in trade, plant and equipment, business names, telephone numbers, web site, premises, existing supply contracts where applicable, supplier lists, business know how, restrictive covenant, stationery and advertising. Your associate has used their personal vehicle in the business and it is not being supplied, however, you advise that it is not necessary for the operation of the business. The vehicle owned by and used in the business is being supplied. We do not consider that your associate's vehicle is necessary for the continued operation of the business. One of your computers is very old and antiquated. It is not being supplied with the business as it is not required by the purchaser. Your other computer can perform the work previously done by both computers. We do not consider that the computer that is not to be supplied with the business, to be necessary for the continued operation of the business. We accept that you are supplying to the recipient all of the things that are necessary for the continued operation of your enterprise. You are carrying on the business until the date that possession is given to the purchaser. Therefore, as both requirements of subsection 38-325(2) are satisfied, your supply of the business to the purchaser is the supply of a going concern. A 'supply of a going concern' is GST-free if: · the supply is for consideration · the recipient is registered or required to be registered for GST, and · the supplier and the recipient have agreed in writing that the supply is of a going concern (subsection 38-325(1)). The supply of the business is for consideration and the purchaser is registered for GST. Further, you and the purchaser have agreed in the Contract that the supply of the business is the supply of a going concern. Accordingly, as your supply of the business satisfies all of the requirements of section 38-325, the sale of the business will be a GST-free supply of a going concern.

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.