Private ruling: GST-free supply of a going concern
Date of advice: 1 April 2016
Published: May 2016

Ruling: Q1: Was the supply by Entity A to the Purchaser on completion of the business contract a GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the supply by Entity A under the terms of the Business Contract was a GST-free supply of a going concern because all the requirements of section 38-325 of the GST Act were satisfied as follows: • Entity A operated a business, which was capable of being supplied as a going concern for GST purposes • Entity A sold to the Purchaser certain assets of the Business. As such, Entity A supplied to the Purchaser all of the things that are necessary for the continued operation of the identified enterprise under paragraph 38-325(2)(a) of the GST Act • Entity A continued to carry on the enterprise until completion of the Business Contract and satisfied the requirement under paragraph 38-325(2)(b) of the GST Act, and • the supply is for consideration, the Purchaser is registered for GST and both parties agreed in writing that the supply is of a going concern, satisfying the requirements of paragraphs 38-325(1)(a), 38-325(1)(b) and 38-325(1)(c) of the GST Act.




Relevant facts: Entity A operated the Business under licence from and using the assets owned by the Entity B, on the terms of the business license. | The business license confirms that Entity B, the owner of the business, has granted entity A an exclusive license to use the assets and to operate the business and a license fee is payable. | The business premises are leased from an unrelated third party. | Under the terms of the business contract, Entity A agreed to sell assets it owns and used in carrying on the Business including its rights under the business licence. | The Entity B agreed to sell the goodwill of the Business and other Licensed Assets and its rights under the Business Licence on the terms set out in the Business Contract. | The Business Contract contains the following clauses: | Entity B and Entity A (Vendors) agree to sell and the Purchaser agrees to purchase the Business Assets on the Completion Date. | The business contract outlines how the purchase price is calculated. | The Vendors must remain in possession of the Business Assets and will continue to manage the Business as a going concern up to and including the Completion Date. | The Vendors must apply to the Lessor to grant a lease to the Purchaser at Completion as and from Completion on terms acceptable to the Purchaser. | The Vendors and Purchaser must do all things and assign all documents that may reasonably be required to procure the granting of the lease and any necessary consents. | The Vendors assign their respective rights under the Business Licence to the Purchaser as and from the Completion Date. | Entity B and the Purchaser agree that the sale of the Business Assets owned by Entity B together with the assignment of their rights under the Business Licence constitutes the supply of a going concern as defined in the GST Act. | Entity A and the Purchaser agree that the sale of the Business Assets owned by Entity A together with the assignment of their rights under the Business Licence constitutes the supply of a going concern as defined in the GST Act. | The Vendors covenant that they will continue to carry on the going concern until the Completion Date. | Completion of the agreement is subject to completion of the Interdependent Contracts and must be effected contemporaneously with the completion under the Interdependent Contracts. | Completion of the Business Contract occurred on dd/mm/yyyy. | The Entity A operated the business up to the completion date. | The Entity B, Entity A and the Purchaser are all registered for GST.