Private ruling: A sale of a going concern.
Date of advice: 24 February 2020
Published: March 2020
Ruling period: From the period 1 May 20XX to 30 November 20YY

Ruling: Q1: Was the Vendor's supply of the Property to the Purchasers under the Contract GST-free as the supply of a going concern pursuant to section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 , (GST Act)? | A1: Yes. The supply of the property with a leasing enterprise was the sale of a going concern as the requirements under section 38-325 of the GST Act were met.

Relevant facts and circumstances: · There are two purchasers as tenants in common · The vendor is the private ruling applicant. · The vendor was the registered proprietor of the property. · The purchasers have acquired the Property as tenants in common. · The sale contract for the property was executed in ZZ date. · The purchase price is stated in the contract to be $X. The improvements were stated to include a house. · The original sale would have been input taxed because the sale is of eligible residential premises as per the sale agreement. · This GST treatment was varied under a subsequent deed of variation. · The vendor obtained development approval for the property from the council. · The purchasers were obligated to undertake all works necessary in order to extend the development approval. · The purchasers arranged for an associated company, YY, to undertake works on the property. Those works included the demolition of the existing residential premises and the commencement of construction of new residential premises. · As a consequence of the demolition of the existing residential premises, the supply of the property on completion would not have been an input taxed supply. · The parties subsequently agreed that the property would be leased to YY. The commercial reasons for this were as follows: (a) to formalise the site access arrangements which were implicit but not expressly stated in the sale agreement; (b) to compensate for the prolonged period over which YY had access, bearing in mind completion had been delayed; and (c) to provide for ongoing site access in the event completion was further delayed. · The vendor and purchasers entered into a deed of variation of the sale contract. · In respect of GST, the parties varied the contract and agreed that the vendor's supply of the Property would be a GST-free supply of a going concern. · Pursuant to the deed of variation, the vendor formalised the lease with YY in respect of the property. · The lease was executed and commenced in Z date. · Pursuant to the lease, YY may carry out works in connection with the development approval. · The rent payable under the lease is $XY per month (excluding GST, which is payable as an additional amount at 10%). · Rent was paid as a lump sum. · The end date for the lease is Z+ date. It ensures YY continued to have access to the site in the event there were any further delays to completion. The lease may continue on holdover after its initial end date.

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