Can the purchase of the property be treated as a GST-free supply of a going concern in accordance with section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 ?
No. Paragraph 38-325(1)(c) of the GST Act requires that the supplier and the recipient have agreed in writing that the supply is of a going concern. The sales contract provides that the sale is a taxable supply and there was no written agreement in place between the purchaser and the vendor which states that the supply is a GST-free supply of a going concern. This paragraph was not satisfied. The sale of the property was not a GST-free supply of a going concern. We therefore have not considered whether the other requirements of section 38-325 have been met.
• A sales contract was entered into for the sale of a property. • All parties to the contract were registered for GST. • The sales contract provided that the sale of the property was a fully taxable supply for GST purposes.
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)
In the following reasons for decision; • unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act. A supply is a GST-free supply of a going concern when all of the requirements of section 38-325 are satisfied. 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 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). Application in this case Goods and Services Tax Ruling GSTR 2002/5
Goods and services tax: when is a 'supply of a going concern' GST free? ("GSTR 2002/5") explains what a 'supply of a going concern' is for the purposes of section 38-325. Paragraph 182 of GSTR 2002/5 provides that the supplier and the recipient must agree that the supply is a 'supply of a going concern' on or before the day of the supply. The sales contract provides that the sale is a taxable supply and there was no written agreement in place between the purchaser and the vendor which states that the sale of the property is a GST-free supply of a going concern.