Private ruling: GST and the supply of a going concern
Date of advice: 4 August 2016
Published: September 2016

Ruling: Q1: Was Entity A's (the Vendor) supply of its enterprise to Entity B (the Purchaser) a GST free supply of a going concern? | A1: Yes, the supply of the enterprise was a GST-free supply of a going concern under section 38-325 of the GST Act. This is because, on settlement date, the Vendor provided to the Purchaser all of the things that are necessary for the continued operation of the enterprise carried on the enterprise until the day of the supply. In addition, there are clauses in the sale contract whereby the parties agreed in writing that the sale is a supply of a going concern, the sale will be for consideration and that Purchaser will be registered for GST on the day of the supply.

Relevant facts and circumstances: Entity A carried on a GST registered business from ddmmyyyy from premises in Australia. It leased the premise from a related entity, Entity C. The business is one of supplying and servicing Systems. The Purchaser is registered for GST and has entered into an agreement to purchase the business from the Vendor. The Parties entered into the following contracts: • Contract for Sale of Business • A Licence of the business and premises (License One) dated ddmmyyyy. • A second license (License Two) of the business premises which operated from ddmmyyyy to ddmmyyyy. • Put and call Options • Loan Agreement dated ddmmyyyy • A lease of the premises from Entity C to the Purchaser. Sale of Business Contract The business was purchased on the basis of the terms and conditions contained in the Contract for Sale of Business which is attached to Licence One. The sale of the business was for consideration of $X million. Under the contract the following things were supplied: • Plant and equipment including vehicles, computers and wastewater installation plant. • Trading stock • Customer list • Licenses • Business name • Franchisors consent • Employees and • The lease of the premises was assigned under the sale contract Special condition xx provides amongst other things: • The vendor and purchaser agree that the supply of the Business and all things by the Vendor under and in connection with this agreement is a supply of a going concern for the purposes of the GST Act • The vendor carries on an enterprise at the date of this agreement • The Vendor will carry on the enterprise until the Completion of this agreement. On ddmmyyy, the Licensee entered into License Two which ran to ddmmyyy, on which date the Vendor resumed operation of the business until settlement which occurred on ddmmyyyy. License Two mirrors, License One except for the date and the Put and Call option clauses which are only in License One. Both Licences (One and Two) gave the Licensee the right to operate the business from the premises and control of the Vendor's employees for the duration of the licenses. The employees of the Vendor continued to work for it in the premises licensed to the Licensee, but took directions from Licensee for the term of the Licenses. The title and ownership of the business remained with the Vendor during the term of the license agreements. Loan Agreement The Loan Agreement was for the Vendor to partly finance the purchase of the property by the Purchaser, as it was expected that the Purchaser would not be able to obtain finance for the complete payment. Lease agreement The parties entered into a lease agreement which commenced on settlement. The purpose of the lease was to give the Purchaser access to the premises from which it would operate the enterprise.

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