Tax Bites: GST going concerns – don’t forget the business premises

Division 38-J of the GST Act provides that the supply of a going concern is a GST free supply.

Division 38-J states that in order for a supply to represent the supply of a going concern, the supply must be for consideration, the recipient of the supply must be registered for GST, and the supplier must supply all things necessary for the continued operation of an enterprise.

In any given transaction therefore, the key question often becomes whether the supplier is supplying the recipient all things necessary for the continued operation of an enterprise. GSTR 2002/5 outlines the ATO’s views on this issue.

The supply of business premises is a key component relating to the supply of a going concern. On this point, GSTR 2002/5 makes some important statements relating to the supply of premises.

Where the business that is being supplied is required to be conducted from customised premises (eg a manufacturing business with assembly-lines), the particular business premises from which the business is conducted will need to be supplied (by sale or lease) together with the business in order for the supply to represent a going concern.

Where the business is not required to be conducted from customised premises but nevertheless is still a type of business that needs business premises to operate from (eg a retail clothes store), business premises still need to be supplied (by sale or lease) with the business in order for the supply to represent a going concern.

In GSTR 2002/5, the ATO state that where the recipient is not supplied with business premises as part of the transaction (eg due to the recipient intending to operate the business from different premises or due to the recipient intending to operate the business from their own business premises), it is the ATO position that the supply will not represent the supply of a going concern.

GSTR 2002/5 makes it clear that only very limited types of businesses will not need business premises to be supplied in order for the transaction to still constitute a going concern. These will be businesses that operate outdoors (eg a personal training business) or from home.

If you have any further questions, please do not hesitate to contact Tim Olynyk on (03) 9810-0700 or at tim.olynyk@banksgroup.com.au.

Talk to us…

Banks Group is an association of independent firms that operate in Melbourne, Sydney, Perth and Auckland under the same trading name. Neither the Melbourne Banks Group, Sydney Banks Group, Perth Banks Group or Auckland Banks Group are partners or agents of each other and shall not be liable for any act or omission of each other. Liability limited by a scheme approved under Professional Standards Legislation

MAG_WEB

All services are provided as a Corporate Authorised Representative of Magnitude Group Pty Ltd (ABN 54 086 266202, AFSL 221557).

Count_WEB

Financial Planning Services provided as an authorised representative of Count Financial Limited ABN 19 001 974 625 Australian Financial Services Licence Holder Number 227232 a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Count is a Professional Partner of the Financial Planning Association of Australia Limited. Count advisers are authorised representatives of Count. www.count.com.au

"Please note that any taxation and accounting services are not endorsed nor the responsibility of Count Financial Limited".