Private ruling: Going concern
Date of advice: 24 July 2025
Published: 22 September 2025
Ruling period: xx March 20YY to xx March 20YY
Date scheme commenced: 1 March 20YY

Ruling: Q1: Was the supply of the property described in the facts by way of sale entered into by the parties on xx March 20YY 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: No. The sale was not of a going concern as you had not commenced the identified enterprise of leasing and the sale was not subject to any leases. The identified enterprise of property development commenced in or about 2005, but you changed your intention to operate the development enterprise and as a result you did not supply all of things necessary to operate that enterprise to the purchaser or operate it until the date of supply.

Relevant facts and circumstances: The description of the scheme is based on information provided by you in the following documents, which are to be read in conjunction with the facts as set out below: • Development Application (DA) • "Heads of Agreement" • Proposed Lease A • Draft Lease • Proposed Lease B • Letter of Intent • Offer to Lease Company A Pty Ltd are trustee for Trust B. Trust B (you) is registered for GST. You are not part of a GST group. On xx March 20YY, you acquired land (Property) via the Trustee of Trust B. You purchased the land in a joint venture arrangement but hold the land in your own right since 20YY. The Property acquisition settled on XX July 20YY. Your intention when purchasing the property was to hold the land with an overarching purpose to develop the site as a retail shopping centre and lease to commercial tenants. You financed the property through a bank loan. All other development costs to the date of sale were funded with equity. You engaged consultants to assist with the preparation of the development application to council being architects, town planners, surveyors, building contractors and traffic engineers. You obtained a development application (DA) commencement consent Council. The description of the development application states: The removal of trees and vegetation including threatened species, site preparation and excavation works, the construction and use of a 1-2 storey shopping centre with 812 basement & at-grade car parking spaces, building & business identification signage, landscaping & associated services. The uses include two major retailers, a mini major, specialty retailers, food & drink premises, pharmacy, medical centre & a childcare centre. The proposal includes provision of a new signalised vehicle access point off xxx Rd. This is a threatened species development, and is accompanied by a Species Impact Statement prepared by ERM. This is classified as 'Integrated Development' under s91 of the EP&A Act 1979 & an activity approval is required under the Water Management Act 2000. There was no construction contract drafted or executed for the development. You removed the existing pipe work and associated infrastructure and installed new pipework and infrastructure outside the proposed building envelope. You removed the easement burdening the land that ran with the former pipes and pits etc. Granted a new easement over the pipes and pits etc as installed outside the building envelope. On xx 20YY, an "Opinion of cost report" for the proposed xx Shopping Centre was prepared. The project cost was estimated. You completed storm drainage redirection works on the property in November 20YY. Council approved a deferred development consent stating "unless physical commencement occurs, this consent will lapse on xx May 20YY. You were in the process of preparing a further Development Application (DA) relation to the property. This was not submitted to council prior to completion of the sale of the Property. You chose to sell the land as the proposed retail development site was considered a non-core asset to xx pipeline and investment portfolio and was also not strategically located for the business. On xx March 20YY You entered into a contract of sale to sell the property as vacant land with a DA in place. This agreement is described as the Contract of Sale in this GST private ruling. The contract of sale is a 20YY edition contract for the sale and purchase of land. The Contract of Sale provides that: • The purchaser is xx (the Purchaser). • The purchase price is $xxx exclusive of GST. • The Vendor and Purchaser agree that the supply of the property is not a taxable supply, as it is a supply of a going concern in accordance with section 38-325 of the GST Act. • The margin scheme will not apply. • The special conditions of the contract facilitate the sale of the going concern: Relevant special conditions: Clause xx is a definitions clause. Amongst other things, it defines 'Development Documents' to mean all correspondence, plans drawings, submissions, specifications, designs, and other documentation forming part of the development consent or prepared in connection with or in contemplation of the Development Consent (whether completed or incomplete) in the Vendor's possession or custody'. Clause xx provides for warranties. At subclause xx the vendor warrants that at completion there are no current leases or agreements for lease in respect of the property. Subclause xx the vendor makes a sole development disclosure it has obtained the development consent. Subclause xx 'Development Consent' the vendor transfers all right title and interest in the development consent and the Development Documents. Clause xx is a GST clause. Subclause xx states that the parties agree that the sale of the property is a sale of a going concern It requires the purchaser to be registered for GST per subclause xx Subclause xx requires the vendor to carry on their enterprise until the day of supply, and to provide the purchaser all things necessary for the 'continued operation of the enterprise conducted by the vendor on and in connection with the property'. Subclause xx requires the purchaser to pay the GST if the sale is not a going concern. Clause xx is about preservation of property. It states that from the contract date to completion the vendor must: (i) not complete any construction works at the property (i) not materially or substantially damage the Property... The sale of the Property settled on xx 20YY (settlement date). The purchaser is registered for GST. The property has remained vacant land from the time you purchased it to the day of supply, xx 20YY. The sale was not subject to any existing leases. Leasing activities You were involved in discussions with tenants on commercial leasing opportunities since circa 20YY for the various schemes that had been explored. You commenced negotiations with potential commercial tenants to occupy the premises in the proposed development. Discussions and negotiations had progressed to a stage where draft Heads of Agreement and contracts had been drawn up for consideration by both the Vendor and the potential tenants as follows: • You engaged in negotiations by way of a Letter of Intent in relation to retailing leasing. The offer of lease was only legally binding if all the conditions were met including Board Approval. These conditions were not met. No agreement for lease was prepared or signed by both the Lessor and Lessee. • On xx September 20YY, you received an offer to lease the premises In the letter a condition of the offer was for a written acceptance by the landlord for five (5) business days from the date of this letter. You did not accept this offer. • You provided A letter for a proposed lease. Under heading " Key Dates" Table 1: Key dates Milestone Event Sunset Date Provide the lessee with the EA Report xxx Development Approval xxx Achieve Substantial Construction of the lessor Works xxx Substantial Completion of the lessor Works xxx If the lessor fails to meet the Sunset Dates for any of the Milestone Events set out above, the Lessee may exercise any of the rights it is entitled to exercise under the Agreement for lease including the right to terminate the Agreement for lease. The offer of lease is only legally binding if all the conditions are met including the approval of Board and ACCC Clearance. These conditions were not met. • You engaged in further negotiations by way of a "Draft Lease" Draft terms of leasing were outlined in the draft lease. The Draft Lease was not signed by either party. A letter of offer stated: Page1: This offer is subject to the Lessee securing: (a) Approval by the board (or sub-committee) and the board of the Lessor (Lessor's Board Approval; and (b) If necessary or desirable, as determined by the lessee, the Lessee receiving written advice from the Australian Competition and Consumer Commission (ACCC) to the effect that the ACCC has no objection to, or does not propose to take any action in respect to, the proposed leasehold interest (ACCC clearance) Under heading " Key Dates" Table 2: Key dates Milestone Event Target Date Sunset Date Substantial Completion of the lessor Works (Date for substantial completion) xxx xxx Practical Completion of the lessor Works xxx xxx The Lessor must meet the Milestone Events set by the Required Dates set above. Per Clause xx entitled" Documentation" states: The full agreement for lease and lease to be entered into between the Lessor and the Lease will incorporate theses terms and otherwise be on the same terms as the Standard Agreement for Lease. A copy of these standard documents is enclosed. Page xx: Heading " Legally Binding" in full states: "It is the intention of the parties that upon the Lessor's acceptance of this letter the parties will be legally bound and the terms and condition of this letter will amount to an enforceable agreement between the parties subject only to the Board Approval of both parties and ACCC Clearance" The offer of lease is only legally binding if all the conditions are met including the approval of Board Approval and ACCC Clearance. These conditions were not met. There were no agreements for leases entered into by prospective tenants or occupation of the land (prospective building) during the negotiation period. There were no commercial leasing agreements in place at the time of the sale (the time of supply).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 38-325(1) | A New Tax System (Goods and Services Tax) Act 1999 section 38-325(2) | A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Division 40

Reasons for decision: Summary: Please note that in these reasons for decision all references to statutory provisions are to the A New Tax System (Goods and Services Tax) Act 1999 unless otherwise stated. Section 38-325 provides that, if certain conditions are satisfied, a supply of a going concern is GST-free. This means that, in the case of a supply which would otherwise be a taxable supply, or an input taxed supply, the supply is a GST-free supply if it is supplied under an arrangement for the supply to be a going concern. Section 38-325 states: (1) The supply of a going concern is GST-free if: (a) the supply is for consideration; and (b) the *recipient is registered or required to be registered; and (c) the supplier and the recipient have agreed in writing that the supply is of a going concern. (2) A supply of a going concern is a supply under an arrangement under which: (a) the supplier supplies to the recipient all of the things necessary for the continued operation of an enterprise; and (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as part of a larger enterprise being carried on by the supplier) The condition at subsection 38-325(1)(a) is satisfied as the supplier makes the supply to the purchaser for consideration. The condition at subsection 38-325(1)(b) is satisfied as the Property Sale Contract lists a condition that purchaser will be registered for GST at the time of settlement. The condition at subsection 38-325(1)(c) is satisfied as the Property Sale Contract states that the supplier and the purchaser agree in writing that the supply is of a going concern. The supply must be a 'supply of a going concern' as defined under subsection 38-325(2). Paragraph 20 of Goods and Services Tax Ruling GSTR 2002/5: when is a 'supply of a going concern' GST-free? (GSTR 2002/5) provides that an arrangement between a supplier and a recipient for the supply of a going concern does not limit itself merely by the description each party has given themselves in the agreement but by objectively examining the transactions that are made between the parties. Therefore, subsection 38-325(2) is required to be satisfied and subsection 38-325(1)(c) cannot exclusively be relied on. Subsection 38-325(2) requires the conditions to be satisfied in relation to an 'identified enterprise'. The relevant enterprise is determined before establishing if all things are supplied by the supplier to the recipient to continue that enterprise. Paragraph 22 of GSTR 2002/5 states: The term 'enterprise' is defined in section 9-20 as an activity, or series of activities, done: • in the form of a business; or • in the form of an adventure or concern in the nature of trade; or • on a regular or continuous basis, in the form of a lease, licence, or other grant of an interest in property; or... From the information provided, the supplier conducts an enterprise through the operation of a business at the property. | Detailed Reasoning - All things necessary: The term 'enterprise' is defined for GST purposes in section 9-20 and includes, among other things, an activity or series of activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property (paragraph 9-20(1)(c)). Section 195-1 states that the phrase 'carrying on' in the context of an enterprise includes 'doing anything in the course of the commencement or termination of the enterprise'. This definition ensures that activities done in the course of the commencement or termination of the enterprise are included in determining whether the activities of the entity amount to an enterprise. Paragraph 21 of GSTR 2002/5 indicates that subsection 38-325(2) requires the conditions to be satisfied in relation to an 'identified enterprise'. The term 'operation of an enterprise' is different to that of 'carrying on an enterprise' and requires something more than things done in the course of the commencement or termination of an enterprise. An enterprise must be operating up to when the buyer assumes effective control. | Detailed Reasoning - Continued operation: This is because paragraph 38-325(2)(a) requires that the supplier supplies to the recipient all of the things necessary for the continued operation of an enterprise. Paragraph 149-151 of GSTR 2002/5 states: 149. The term 'carrying on an enterprise' includes doing anything in the course of the commencement or termination of the enterprise. A supplier may carry on an enterprise to the day of the supply for the purposes of paragraph 38-325(2)(b) during the period of commencement or termination of an enterprise. 150. A supplier is unable to supply all of the things that are necessary for the continued operation of an enterprise unless the relevant enterprise is not only being 'carried on' but is also operating. Where an enterprise engaged in an activity ceases to carry on that activity and the assets are in the course of being sold off, the enterprise is being 'carried on', but is not operating. 151. The activity of leasing a building which has previously been leased to a tenant remains an 'enterprise' of leasing for the purposes of section 9-20 during the period of temporary vacancy when a new tenant is being actively sought by the building owner. However, where a building has not previously been leased to a tenant, but is being actively marketed, an 'enterprise of leasing' is not operating until the activity of leasing actually commences. The activity of leasing commences when at least one tenant enters into an agreement to lease or occupies the building. | Detailed Reasoning - Your Contentions: You submit the following: The supply of a going concern also requires that the supply is under an arrangement where: a) The supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and b) The supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier). We have specifically identified that enterprise as a development enterprise and/or a leasing enterprise. The Taxpayer also provided the Purchaser with everything that was necessary to enable the Purchaser to proceed with the activities undertaken prior to sale (i.e., the engagements with the external consultants were passed on to the Taxpayer, etc.) Furthermore, the site provided to the Purchaser already had a DA granted for the site. Further evidence that all things necessary for the continued operation of the enterprise (or enterprises) conducted by the Taxpayer were provided is that fact that the Purchaser has in fact continued these activities by retaining and utilising some of the same contractors engaged by the Vendor. These contractors comprise part of the key engagements required for the continued operations, with the same prospective tenants. The Taxpayer was in discussions with the commercial tenants immediately prior to sale. To facilitate the continued progression of the negotiations after the sale of the Property, the Taxpayer provided the Purchaser with copies of the draft heads of agreement between the Taxpayer and the commercial entities it had been engaged with. In addition, for the purpose of facilitating communication and ease of transition from the Taxpayer to the Purchaser (in their capacity as lessors operating a leasing enterprise), the Taxpayer communicated the sale to each entity, inviting them to take the opportunity to pursue the same commercial endeavours they had been in the process of with the Taxpayer. Therefore, it is evident that the Taxpayer provided everything necessary for the continued operation of the leasing enterprise. The supply of the Property was the supply of a going concern as the Purchaser was provided with the opportunity to essentially "step into the shoes" of the Taxpayer by continuing to carry out the same enterprising activities This can be evidenced by the provision of the following to the Purchaser: • Introductions to key external relationships and engagements with external contractors. • Provision of contact details of prospective tenants; and • Disclosure of progress and status of negotiations with prospective tenants including the provision of draft heads of agreement, etc. The Vendor had continued these operations right up to the date of the supply (i.e. they had continued to engage external consultants, undertake steps to advance the development and negotiate and liaise with tenants. Therefore, the supply of the Property should be a supply of a GST-free going concern. | Detailed Reasoning - Application to your case: From the facts you presented, the supply will be for consideration, you are registered for GST. As noted above, we accept that subsection 38-325(1) is satisfied. The issues to be considered concerns whether all things necessary for the continued operation of an enterprise have been supplied (paragraph 38-325(2)(a)) and whether that enterprise is carried on until the day of the supply (paragraph 38-325(2)(b)). In Aurora Developments Pty Ltd v. FC of T [2011] FCA 232 ( Aurora Developments ) Greenwood J explains (at paragraph 253) that subsection 38-325(2): ...can only operate in circumstances where an "enterprise" has been identified comprised of particular activities (or a particular activity). An enterprise has content not just an objective. Once the content of the enterprise is isolated, a supply of a going concern arises if an arrangement is shown to subsist under which Aurora supplies to Australand all of the things that are necessary for the continued operation of that enterprise as forensically isolated and Aurora carries on or will carry on that enterprise until the day of the supply. As stated above facts, the potential identified enterprises you put forward in your contentions could be stated as the development of the land or a leasing enterprise. In relation to the requirements in subsection 38-325(2), it is necessary to consider: (i) whether you were operating either a development or leasing enterprise (as part of a larger property development enterprise) and continuing to operate that enterprise upon entering into the contract for sale; (ii) if you were continuing to operate the enterprise, whether all things necessary for the continued operation of that enterprise have been supplied to purchaser (paragraph 38-325(2)(a)); and (iii) if you continued to operate that enterprise until the day of the supply (paragraph 38-325(2)(b)). | Detailed Reasoning - (i) Whether you were operating an enterprise: The issue requires consideration of the facts. It is accepted that you had commenced a property development operation in relation to property at some point in 20YY when you acquired the property. You applied for and obtained a development approval in 20YY for a retail shopping centre, carried out storm drainage works, removed and installed pipework and removed/replaced the easement burdening the pipes in 20YY. These are things that could be carried out as part of your property development enterprise. These are also steps that could be carried out by a landowner seeking to sell the property with a development approval in place. The development approval was due to expire in xx 20YY and you had begun preparing a new development approval application prior to sale. In relation to the property development, your activities since you acquired the property are limited. There is no clearing of the land, or construction taken place other than the drainage. The configuration of the land is virtually identical to the property when you acquired it as the land continues to be covered in trees and foliage. As a result. we consider that activities you undertook were wholly to obtain the DA and improve and sell the property. In relation to your stated identified enterprise of leasing, your activities seeking to lease parts of the property as undertaken were not sufficient to satisfy the requirements of a leasing enterprise. Whilst you were involved in discussions and negotiations for leasing of commercial premises you did not enter into an agreement to lease with any tenant. You did not have any binding arrangements in place with a tenant of any kind at the time of settlement. Where a building has not previously been leased to a tenant, but is being actively marketed, an 'enterprise of leasing' is not operating until the activity of leasing actually commences. The activity of leasing commences when at least one tenant enters into an agreement to lease or occupies the building. (See Paragraph 151 of GSTR of Goods and Services Tax Ruling GSTR 2002/5). As you did not commence the leasing enterprise, we do not need to consider this potential enterprise further except to say that had the enterprise commenced, alt things necessary for a leasing enterprise could not have been provided as you provide a warranty in the sale contract special condition subclause xxx that the sale is not subject to any leases | Detailed Reasoning - (ii) Whether all things necessary for the continued operation of that enterprise have been supplied: GSTR 2002/5 (paragraph 72) explains that the term 'necessary' incorporates every attribute of an identified enterprise that is essential for its continued operation. In relation to the property/project development enterprise, it is relevant to consider its nature and core attributes. In this case, the facts indicate that you supplied to the Purchaser the land along with the development approval (DA). The DA that you supplied included approval of future development and construction work including the construction of and use of a 1-2 storey shopping centre with xx basement and at-grade carparking spaces, building and business identification signage, landscaping and associated services. While there is a supply of some things that the purchaser requires to continue with the proposed project development such as the land itself, the facts do not indicate that there is a supply of the operating structure and process of the enterprise consisting of the commercial or economic activity in relation to the project development (see paragraph 75 of GSTR 2002/5). That is, the facts do not indicate the supply of anything in the nature of ongoing business operations, marketing, construction, project development contracts that would relevantly distinguish the supply as one of a going concern. Rather it was a supply of assets being the land developed to a certain stage and 'development documents' as defined in clause xx of the special conditions. The fact that the contract prohibits the vendor from contract date to make any changes to the land adds weight to the point that the purchaser is free to operate their own enterprise post settlement. Although the issue of when an enterprise is operating is not really dealt with in Aurora Developments paragraph 260 of the decision suggests that something more than a piece of partially developed land with development plans is needed to satisfy the going concern provisions: A supply of the project enterprise within the business enterprise to a recipient together with an assignment of all contracts with end buyers off-the-plan, an assignment of the drawings and plans, the supply of all things necessary to continue the project enterprise and the carrying on by the supplier of the project enterprise until settlement or the day of supply, would be likely to satisfy the notion of a supply of a going concern. | Detailed Reasoning - (iii) Whether you continued to operate that enterprise until the day of the supply: In relation to the issue at (iii), Xxxx in Xxxx Developments held that the day of the supply was the day of settlement. This conclusion is considered to apply equally to the circumstances of this case. To satisfy this requirement it is necessary for you to continue operating the project development enterprise until settlement. It is considered that this aspect of the requirement is not satisfied as the development approval, storm drainage works, pipe works and easement which are primarily relied upon in relation to operating an enterprise, were completed years prior to the purchaser acquiring the land and completed prior to settlement. It is not considered that this outcome is altered even if you had general governance obligations typically undertaken by a vendor in relation to real property (for example, maintenance of the property from contract date to settlement). | Detailed Reasoning - Conclusion: In this case the Commissioner considers, the facts do not support a conclusion that you have met the requirements of subsection 38-325(2) in relation to either potential identified enterprise. Consequently, the sale is not a sale of a going concern. | Detailed Reasoning - Taxable supply: Section 9-5 of the GST Act provides that you make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with the indirect tax zone (Australia); and (d) you are registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. As discussed above the supply of the land under the sale of land contract is not GST-free under Division 38. The supply is not input taxed under Division 40. In this case, you entered into a Contract of Sale to sell property. Turning to the remaining conditions of a taxable supply, you supplied the property for consideration, satisfying paragraph 9-5(a). The supply is made within the indirect tax zone, satisfying paragraph 9-5(c). You were registered for GST when the sale occurred which satisfies paragraph 9-5(d). Only paragraph 9-5(b) remains for consideration, that is, whether you supplied the property in the course of your enterprise. You supplied the property in the course of your property development enterprise but the sale was made in the termination of the enterprise. The enterprise ceases with the activity of selling the property, as' carrying on' an enterprise is defined in section 195-1 to include 'doing anything in the commencement or termination of the enterprise'. That is, the activity of sale of the property is included in carrying on the enterprise, but the enterprise is not capable of being carried on by the purchaser. This distinction is discussed at paragraphs 149-150 of GSTR 2002/5 reproduced above. Therefore, the sale of the property is prima facie a taxable supply as none of the exclusions under section 9-5 of the GST Act apply in this case.