Conditions for the GST-free supply of a going concern
Scenario:
I operate a bed-and-breakfast (B&B) business. The most significant asset is four adjacent properties that are used to provide accommodation to guests. Stays are less than 28 days and the business has an annual turnover of $200,000. I am looking to sell the business and the four properties. Will the sale of the properties ($1.5 million) and business ($100,000) together as $1.6 million be a taxable supply and subject to GST? Can the going concern exemption apply given that the properties are paramount to running the business? In someone's view, B&B are relatable to hotels and motels, which are deemed by the ATO to be commercial premises. Therefore, the business premises will be commercial residential premises. Because the property is a necessary requirement to run the business and the other criteria of this exemption are met, the sale of the business will be the sale of a going concern and exempt from GST. Is abovementioned statement correct？
Explanation:
That view is correct because the conditions outlined met the GST Act s 38-325, the sale could proceed as a GST-free supply of a going concern. However, this would not be possible if the business was conducted in a separate entity from the one that owns the properties. The conditions for the GST-free supply of a going concern are:
- *The supply must be for consideration (appears in the case)
- *The purchaser is registered or required to be registered for GST
- * The parties agree in writing that the sale is apply of a going concern
- *The seller supplies all of the things necessary for the continued enterprise operation, and
- * The seller carries on the enterprise up to and including the date of sale