Selling a business
Tax checklist for selling a going concern
If the business that you are selling is being sold as a going concern it will be GST Free providing it meets with the requirements set out in Section 38-325 of the GST Act. Relevant details of this act will also be found in Goods and Services Tax ruling GSTR 2002/5
Question 26 of the Application for a GST Private Ruling will ask for the following information.
Details about the business (or enterprise) being sold.
Paragraphs 21-29 & 30-40
What type of business is being sold as a going concern? You will need to provide full details in order to directly identify the business being transferred. If the business is part of a larger oganisation you will need to provide details about this and demonstrate the company structure.
Paragraphs 19-20
You must describe fully the nature of which the business is being supplied. You must give full details about who is selling, who is buying, and also the method of transfer, for example transfer, sub contract, or assignment.
You will be required to supply copies of all the documents relating to the sale or transfer of the business/enterprise. This will generally include the heads of terms, memorandum of sale, and contract of sale. If you do not have final copies available at the time of lodgment you should supply draft copies. If doing this it is important to notify the tax office of any differences between the draft and final copy.
The Seller (vendor)
Full details about the vendor will need to be supplied, this will include full name and contact information and ABN. If there is more than one person involved in the supply or transfer you will need to submit full details for each person.
The Purchaser
You must provide full details of the person buying the business, as before if this is more than one person full details for each person must be given.
Paragraph 186
You will need to know if the purchaser is registered for GST.
Paragraph 184
If the answer is no, will the business activity require them to be registered?
All things necessary for the continued operation of the business.
Paragraph 72-130
Are you supplying the purchaser with everything that they require to continue operating the business in exactly the same way?
Describe any assets which are not being supplied and also an explanation of why you believe that they are not necessary in order for the business/enterprise to be operated in the same way.
If relevant you should also describe any assets which are included in the sale but are not necessary for the continued operation of the business.
These are some of the things which would be considered necessary for the continued operation of the business.
Plant & Equipment
Goodwill Premises
Licenses and Permits
Restrictive Covenants
Intellectual Property
Franchises
Employee skills and knowledge
Vendor carrying on the business
Paragraph 161
Will the vendor carry on running the business until the date of transfer? If the transfer has already taken place did the vendor operate until the date of transfer?
Consideration
How much is, or was the consideration for the business?
Agreement
Paragraph 178-185
Have the seller and vendor made an agreement (in writing) that the business is being transferred as a going concern?
Example Agreement Clause
[The Vendor] and [the Purchaser] agree that the supply of [describe the enterprise being supplied] pursuant to this Agreement is the supply of a going concern for the purposes of section 38-325 of the GST Act and that the supply is GST-free for the purposes of the GST law.
[The Vendor] will supply to [the Purchaser] all of the things necessary for the continued operation of the enterprise for the purposes of that section and [the Vendor] will carry on the enterprise until the day of the supply.
The supply is for consideration, and [the Purchaser] warrants that it is registered or required to be registered for GST.
For the purpose of this clause the following words have the following meaning or meanings: ‘GST’ means the tax that is payable under the GST law and imposed as goods and services tax as set out in the GST Act.
GST Act’ means the A New Tax System (Goods and Services Tax) Act 1999, as amended, or if that Act does not exist for any reason, any other Act imposing or relating to the imposition or administration of a goods and service tax in Australia.
‘consideration’; ‘enterprise’; ‘GST-free’; ‘GST law’; ‘registered’; ‘required to be registered’; ‘supplier’; ‘supply’; and ‘supply of a going concern’ have the respective meanings given to each of those terms in the GST Act.
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