The AAT has affirmed the Commissioner’s decision that a sale of various properties (“the land”) by a taxpayer was not a GST-free supply of a going concern but rather, was a “taxable supply” for GST purposes. It did not accept that statutory declarations made by the taxpayer and the purchaser constituted an agreement in writing that the supply was of a going concern “at or before the time that the supply [was] made” to meet the condition in s 38-325(1)(c) of the GST Act.
In June 2006, the taxpayer, a property developer, sold the land to the purchaser for $3.5m via a standard contract form. Settlement occurred the following month. The taxpayer did not report the sale for GST purposes. Rather, the taxpayer lodged its BAS for the September 2006 quarter on 13 November 2006 and claimed a GST refund for id=”mce_marker”,870 for purchases. In November 2010 after an audit, the Commissioner issued a “Notice to repay overpaid refund amounts and pay unpaid indirect tax” for the September 2006 quarter pursuant to s 105-50 of Sch 1 to the TAA. The Commissioner determined the GST payable on the sale was $318,182. In May 2011, the purchaser and the directors of the taxpayer each signed statutory declarations declaring that at the time of the contract and settlement, the land was “purchased as a going concern”. The taxpayer submitted the sale of land was a GST-free supply of a going concern under s 38-325 of the GST Act and that the s 105-50 notice was invalid.
The Tribunal held the sale of the land by the taxpayer was not a GST-free supply of a going concern, and therefore, the sale was a taxable supply and the taxpayer was liable for the GST payable on the supply under the GST Act. The Tribunal was of the view that in order to satisfy the condition in s 38-325(1)(c), the agreement that the relevant supply was of a going concern must be made on a timely basis and, more particularly, at or before the time the supply was made. The Tribunal found no evidence of a written agreement between the parties, at the date of supply or at settlement, that the sale of the land was a supply of a going concern. Further, it held the statutory declarations were not evidence of an agreement in writing at or before the time the supply was made. The Tribunal also held the s 105-50 notice was valid. In conclusion, the Tribunal found the taxpayer had not discharged its onus of proving the assessment was excessive.
(AAT Case [2013] AATA 154, Re Brookdale Investments Pty Ltd and FCT, AAT, Ref No: 2012/0427, Walsh, SM, 20 March 2013.)
[LTN 57, 25/3/13]
[FJM Note: There is a point that might still have succeeded, which is that all s38-325(1)(c) requires is that the parties agree in writing, to do all the things set out in s38-325(2) that constitute a ‘supply of a going concern’ (viz: sell all of the things necessary for the continued operation of the enterprise, and continue the enterprise until the day of the supply) rather than taking the legislation as meaning that the parties must also elect into the special GST-free treatment (available for a ‘supply of a going concern’). Literally, the Act only requires that the parties agree in writing to do the substantive things that constitute the supply of a going concern.]