5539

Q&As and counting

November 2018

GST - Sale of business and property - Going concern

November 2018
Other
Victoria

Asked

GST QUESTION.

A Company owns the freehold.
Entity of A Company owns the business.
There was never a written lease , but the business entity pays rental
to the landord entity.

Both business and freehold are sold together but Purchasers use different entities
to purchase.

All parties are GSt registered

Need the owner of the Freehold collect GST on the sale?

Answered

Thank you for the question.

The question seems to suggest that Company A is the landlord and Company A2 is the tenant and that Company B and Company B1 are purchasers.

Presumably Company A is selling the freehold to Company B and Company A1 is selling the business (informal lease) to Company B1.

On that basis:

The real estate contract needs to provide that the sale is subject to the informal lease to Company A1. This contract will be the sale of a going concern.

The business contract needs to provide that the vendor's rights pursuant to the informal lease are being assigned to the purchaser. This contract will be a separate sale of a going concern.

It is preferable to use TWO contracts to record this transaction.

Regards

Mentor

Other
Victoria