The sale of a going concern is GST-free if all of the following apply:
- Payment is made for the supply,
- The purchaser is registered for GST,
- The buyer and seller have agreed in writing that the sale is a going concern,
- The supplier supplies all the things necessary for the continued operation of the business, and
- The supplier carries on the business until the day of supply.
If the GST going concern exemption can be applied to the purchase of a business or commercial property then the 10% GST will not be added to the purchase price. So, for example if the GST going concern exemption applies to the purchase of a $1,000,000 commercial building then the sale price will be $1,000,000.
Without the GST going concern exemption, the purchaser would pay $1,100,000 for the building, but receive a GST refund of $100,000, leaving a net cost of $1,000,000.
The tax saving with this strategy is that under the GST going concern exemption stamp duty is payable on the $1,000,000 acquisition price versus $1,100,000 where GST is levied. As stamp duty rates can be more than 5% of an asset’s purchase price applying the GST going concern exemption would save $5,000 in stamp duty for the purchaser of a $1,000,000 commercial property.