GST Exemption On Sale Of A Going Concern

The sale of a going concern may be exempt from GST if certain criteria are met as noted below:

• The recipient is registered or required to be registered for GST & both the supplier & recipient have agreed in writing that the supply is of a going concern.
• The supplier must supply all the things necessary for the continued operation of an enterprise & the supplier carries on or will carry on the enterprise until the day of supply.
• If goodwill is present & capable of being supplied, it must be supplied as one of the things necessary for the continued operation of the enterprise. If goodwill arises from the personal attributes of an individual, it will meet the necessary criteria for the supplier to agree to introduce existing customers to the recipient.

An expired lease or a short term tenancy may be capable of assignment. Even if there is not a formal lease in place the supplier may under certain circumstances be able to supply the premises necessary for the continued operation of the business. The lessor in these circumstances must agree to supply the premises as a going concern. The supplier can facilitate a new lease or new premises respectively in order to supply the necessary premises.

Supply of a leasing enterprise
The sale of leased premises can be the supply of a going concern.

It should be noted that the GST exemption does not apply if the sale is made to an exiting tenant as the owner is incapable of supplying the tenant the benefit of the leasing covenant.
If commercial property was previously leased to a tenant, it will remain as an enterprise during the period of temporary vacancy when a new tenant is being actively sought by the owner.

When a building has not previously been leased but is actively being marketed, an enterprise of leasing is said not to be in operation until the activity of leasing actually commences.