Private ruling: GST-free supply of a going concern
Date of advice: 31 March 2016
Published: May 2016

Ruling: Q1: Was the supply by Entity B 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 B 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 B carried on an enterprise of granting of a licence to operate a retail business, which was capable of being supplied as a going concern for GST purposes • Entity B sold to the Purchaser the goodwill of the Business and other Licensed Assets and its rights under the Business Licence. As such, Entity B 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 B 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 and circumstances: Entity B granted Entity A a licence to operate a retail business (Business) on the terms of the deed of licence (Business Licence). The Business Licence contains the following: Entity B was carrying on a retail business at the Property. Entity B granted Entity A, a licence to enter and use the premises together with a licence to use certain items of plant and equipment, fittings and fixtures and goodwill (Licenced Assets) so as to conduct the retail business. Entity A pays to Entity B the occupation fees in respect of the right to occupy the premises and in respect of the right to use the plant and equipment, fittings and fixtures, and goodwill. The Entity B owned the Property, which consisted of a number of separate retail tenancies. Tenancy A (Business Premises) was leased by Entity A from the Entity B on the terms set out in the Business Licence. 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 to the Purchaser on the terms set out in the Business Contract. The Business Contract also contains the following clauses: The Purchase Price is comprises a number of components. Entity B and Entity A (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. Entity B, as the lessor of the Business Premises, consent to the assignment of the Occupation Rights by Entity A to the Purchaser. 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 Completion must be effected contemporaneously with the completion under the Interdependent Contracts. The Interdependent Contracts are: • the sale contracts for the sale of a number of properties including the Property • the Other Business Contract Simultaneous with the sale under the Business Contract, Entity B agreed to sell the Property to the Buyer, an entity related to the Purchaser, on the terms set out in the property contract (Property Contract). Completion of the Business and Property Contracts occurred recently. The Entity B carried on their leasing/licensing enterprise up to the completion date. The Entity B, Entity A and the Purchaser are all registered for GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 38-325. | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(1). | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(2).