Join Australia's most dynamic and respected property investment community

Selling as a going concern

Discussion in 'Commercial Property' started by Rayan, 30th May, 2016.

  1. Rayan

    Rayan Active Member

    Joined:
    15th Dec, 2015
    Posts:
    37
    Location:
    Sydney
    So I am looking at purchasing a commercial strata lot which is for sale with vacant possession, hence being sold subject to GST :(

    Through my enquiries with the agent today, turns out the vendor is selling because after occupying the space himself for a number of years he no longer needs the space (presume changed premises or closed the business).

    I have seen with other sold listings, cases where the vendor will offer a property for sale with leaseback offered for 3 months, hence allowing the property to be sold as a going concern.

    Is this a valid legal method of making the sale GST free?

    Is there a minimum leaseback period required by the ATO?

    Or else, if a property is vacant but being advertised at the time of sale, would that enable the property to be sold as a going concern?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
  3. Rayan

    Rayan Active Member

    Joined:
    15th Dec, 2015
    Posts:
    37
    Location:
    Sydney
    Wow, is it that simple?

    I bought commercial residential premises last year, so have experience now with claiming GST credits, however that property was sold as a going concern.

    I was not aware that you could claim GST incurred in the acquisition of a commercial property against the commercial rent in the first quarter it is let.

    Why does the government bother then? Surely everyone just claims a credit for any GST paid on the contract? Why not make the sale and purchase of all commercial property GST exempt?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    It depends on the circumstances but you may be able to claim GST.
    Its not possible in all circumstances.
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    Many people choose the Going Concern (GC) method as its avoids the financing issues around the GST. The outlay wont be funded by a lender and the time between outlay and claiming GST from ATO can be sometime especially when its audited.

    GC requires that the buyer and seller agree to GC in the contract and that both are registered for GST. Its a shortcut. However is some cases it cannot be used. If you are buying a rental investment commercial unit etc and its currently leased and you acquire it that way then the GC may be OK. However if you buy a unit owned and operated by a business closing down then it may fail. The GC requires the transfer include all the things needed before and after the sale.

    In the example in the OP I suspect GC isnt available as the former owner is vacating surplus space.
     
    Terry_w likes this.
  6. Shady

    Shady Well-Known Member

    Joined:
    20th Aug, 2015
    Posts:
    163
    Location:
    Sydney
    1 its certainly something that happens regularly, im doing up a lease right now for a sale to claim the exemption...Legal? Well, I'm sure it's not in thd spirit of the ruling.

    2. No minimum, it can be an expired lease where the tenant is holding over.

    3. Yes, if the property is being advertised for lease and you intend to lease it out the exemption can still be claimed...as long as the other criteria are met.

    If the ATO decide exemption should not have been claimed they will go knocking on the vendors door looking for their 10%gst so the risk is with the vendor.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    Which they would generally contract the purchaser to pay. so get some good advice.
     
  8. Greyghost

    Greyghost Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,262
    Location:
    Melbourne
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    lol - Good point!
     
    Greyghost likes this.
  10. Omnidragon

    Omnidragon Well-Known Member

    Joined:
    17th Oct, 2015
    Posts:
    414
    Location:
    Victoria
    GC can sometimes can be done by simply putting the place up lease... many precedents, but obviously get your own tax advice on this.

    Well least you'll get a good deal since your counterparty sounds either negligent or plain stupid, so they're hopefully selling below market value.