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      GST-Free Supply and Going Concern

      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? Someone told me that B&B is similar to hotels and motels, which is 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 my understanding of this accurate?

       

      Explanation:

      That analysis is good 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 is 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.