The Australian Taxation Office (ATO) has
acknowledged at a recent National Tax Liaison Group GST sub-group
meeting that the supply of a partly constructed building subject to
agreements for lease with third parties may be a supply of a going
concern for GST purposes. However, the ATO has not stated this
change in view in a document that is publicly binding on the
Previous ATO view
It is not uncommon for a property developer (Developer A) to
want to sell a partly constructed building to another developer
(Developer B). If Developer A has signed up tenants for the new
building, then the parties may want to treat the sale as a supply
of a going concern for GST purposes. This ensures no GST is payable
on the sale and reduces stamp duty. For a supply to be a GST-free
supply of a "going concern":
the supply must be a supply of an "enterprise"
the supplier must carry on that enterprise until the day of the
the supplier must supply all of the things necessary for the
continued operation of that enterprise
the supply must be for consideration (whether monetary or
the purchaser must be registered or required to be registered
for GST, and
the supplier and recipient must have entered into a written
agreement for the supply to be a GST-free supply of a going concern
before the day of the supply.
Historically, the ATO has been of the view that the supply of a
partly constructed building sold subject to agreements for lease
with third parties would not be a supply of a going concern. This
was primarily because the ATO did not think that the activities of
leasing had commenced as at the date of the supply.
What does this change in ATO view mean for you?
If you want to sell a partly constructed building and you have
entered into agreements for lease with third parties for that
building, then you may agree that the supply is a GST-free supply
of a going concern, provided that all of the requirements of
section 38-325 of the GST Act are satisfied (refer above). Deacons
would recommend that, until the change in ATO view is confirmed by
the ATO in a document that is binding on the ATO, that you should
consider obtaining a GST Private Ruling if you want to treat the
sale as a GST-free supply.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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