Private ruling: GST-free going concern
Date of advice: 10 March 2016
Published: May 2016

Ruling: Q1: Is the acquisition of the Property by Entity B, an acquisition of a GST-free going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Section 38-325 of the GST Act states: 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. 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 a part of a larger enterprise carried on by the supplier). (Words denoted by asterisks are defined in section 195-1 of the GST Act) Given the facts as per below, the acquisition of the Property by Entity B, is an acquisition of a GST-free going concern under section 38-325 of the GST Act.

Relevant facts and circumstances: You are not registered for goods and services tax (GST) and do not have an Australian Business Number (ABN) as at the date of issue of this private ruling. In 2007, Entity A entered into a call option to purchase four parcels of contiguous land (the Property) from the Vendor. The Property comprises several commercial premises which have been leased out to several tenants by the Vendor who conducted a leasing enterprise on the Property on a continuous and regular basis. When Entity A sought to exercise the call option, the Vendor refused to complete the contract to transfer the Property. As a consequence Entity A commenced legal proceedings in the Supreme Court against the Vendor. By these proceedings Entity A sought specific performance of the call option. The matter went to trial, and on to appeal. On appeal the Full Court held that Entity A had validly exercised the call option and that it was entitled to purchase the Property, and that the Vendor was obliged to transfer it to you on payment of the purchase price. The Vendor died and his/her widow was appointed his/her Executor and assumed responsibility in respect of the conduct of the proceedings. Subsequently, Entity A entered into a Deed of Settlement with the Executor and the late Vendor's child. By reason of the Deed of Settlement, Entity A was effectively given a second option to purchase the Property on certain conditions. Settlement is to occur on a future date if Entity A chooses to exercise the option. Annexed to the Deed of Settlement is a Contract for Sale of Real Estate (Sale Contract). The Sale Contract is to govern the sale transaction in the event that you exercise the option. The Sale Contract provides that the Vendor and the Purchaser agree that the supply of the Property is a supply of a going concern. The Sale Contract also specifies that the purchase price is inclusive of GST. The Sale Contract provides that the Property is sold subject to property leases. The Executor of the estate of the late Vendor will continue to conduct the leasing enterprise up to and including the day of the supply of the Property to Entity A. On or before the date of settlement of the Sale Contract, Entity A will be supplied with all of the things that are necessary for the continued operation of the leasing enterprise. Entity A's representative wrote to the Australian Taxation Office (ATO) requesting for a private ruling in relation to the acquisition of the Property and the GST-free supply of a going concern. The ATO issued a private ruling (first ruling) in response to this request. Subsequent to the issue of the first ruling, Entity A's representative notified the ATO that Entity A intends to nominate, in accordance with certain clauses of the Sale Contract, Entity B as the purchaser of the Property. Entity B is registered for GST. Entity A's representative have requested for a new private ruling given this nomination.

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