Private ruling: Goods and services tax (GST) and sale of property
Date of advice: 2 May 2016
Published: June 2016

Ruling: Q1: Will your sale of property X be a GST-free supply of a going concern? | A1: Yes. This supply will be a GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) 1999 Act because: • you will supply all of the things necessary for the continued operation of your leasing enterprise; and • you will carry on the leasing enterprise up to the time of settlement of sale; and • the sale of the property is for consideration; and • the purchaser is registered for GST; and • you and the purchaser have agreed in writing that the sale of the property is the supply of a going concern.

Relevant facts and circumstances: You are registered for GST. You own a commercial property located in Australia (property X). You currently lease the property to X pursuant to a lease dated (date). The permitted use of the property under the lease is a specified use. The term of the lease is a specified number of years, expiring on a specified date. The rent payable under the lease was initially a specified amount per annum plus GST. The rent is increased annually by a fixed percentage. The lessee under the lease has the option to renew the lease for a period of a specified number of years at the end of the first term of the lease and a further specified number of years thereafter. The property is located in a particular zone pursuant to the local council plan. Permitted uses in the zone are predominantly commercial in nature including specified uses. On a certain date, you entered into a contract for sale in respect of the property. The purchaser is registered for GST. The agreed settlement date is a certain date. Pursuant to a condition of the sale contract, the property is sold subject to the existing tenancy. Accordingly, on the anticipated completion of the sale contract, the lease will be binding on the new registered proprietor and the lessee. A condition provides that the purchaser must not approach the lessee under the lease to seek to vary the terms of the lease without your consent. The purchaser has not sought your consent to approach the lessee in this regard. The sale contract provides that the sale of the property is a supply of a going concern. The box next to the statement 'GST-free because the sale is the supply of a going concern under section 38-325' on the front page of the contract has been marked with a cross. The contract provides that if the contract says the sale is the supply of a going concern then the parties agree that the sale of the property is a supply of a going concern and the vendor must, between the contract date and completion, carry on the enterprise conducted on the land in a proper and business-like manner.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 38-325