In the sale of a Real Estate Agency there is no doubt that the sale is a “going concern” whereby no GST is applicable to the sale.
In the case of the sale of a Rent Roll only there remains conjecture in regards to whether it is a “going concern” or not and therefore whether GST is applicable in the sale.
Having spoken to the Australian Tax Office (ATO) previously they were clear that for a sale to be defined as a going concern there are 3 factors which would define its suitability.
For it to be a going concern the buyer would be required to take the premises, the staff that operate the rent roll and the equipment used to function the business.
Or does it…….
A number of accountants argue that the definition uses the words “if necessary” and if the buyer already has premises, staff and equipment then it is not necessary.
The problem is should the ATO choose to take action at any time the risk is always with the Seller. A contract can include special conditions whereby should a Court judgement in the future rule that the GST was applicable and must be paid, the Buyer by this time may no longer be in operation, may have moved overseas, gone into receivership or faced some form of tragic circumstances since the purchase and is now not contactable or able to be held accountable to the contract. Therefore the Seller would face the cost of the payment of gst.
Another issue may also be, should the ATO decide a fine is to be imposed for not paying the GST at the time, who pays the fine?
It is our position at REAS that a sale of a Rent Roll is not a going concern and that GST is applicable to the sale. The Buyer will then claim the GST back in their next BAS and be refunded (assuming they are registered for GST).
Should however, the Accountants for both the Seller and Buyer agree that the sale is a going concern and GST is not applicable we are happy for the contract to reflect the advise provided to their clients. However, both parties must agree.
For more information regarding gst please click here – https://reas.com.au/is-gst-applicable-in-the-sale-of-a-rent-roll