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1 Can Party B, sell the property to Party C as a going concern pursuant to subsection 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 ?

1 No. Question 2 If the sale in question one is not a sale of a going concern, can Party B, sell the property to Party C under the margin scheme pursuant to subsection 75-5 of A New Tax System (Goods and Services Tax) Act 1999 ? Answer 2 Yes This ruling applies for the following periods: : From the tax period commencing 1 July 20XX until the tax period ending 31 December 20XX The scheme commenced on: 1 July 20XX

•                The Property is situated at a place in Australia. •                The Property had commercial structures on it which have been demolished and the sale is now vacant land. •                Party A owned the Property with his spouse as joint tenants before the introduction of the GST regime that commenced on 1 July 20XX. After 20XX, Party A's spouse passed away and he continued to own both shares in the Property until it was sold to Party B with settlement dated after 20XX. •                Attachment One of the ruling application is a copy of a title search indicating the Property description is XYZ. •                Amongst other things, the search reveals Party A and another were joint owners. The dealings on the title begin with a mortgage registered to AAA, in the late 19XX's. The final dealing is in the 19XX's being a lease of the ground and mezzanine floors expiring X Date.

•                Attachment 2 of the ruling application is a copy of the sale agreement from Party A to Party B dated 20XX (the 20XX agreement). It indicates the purchase price was under $XXXX exclusive of GST. Special condition clause Z is a GST clause noting that the sale is GST exclusive. It noted the seller is not registered for GST but would be so registered before settlement. •                Special condition Z of the 20XX agreement relates to a tenancy. The vendor leased premises in part to AAA trading as 'BBB' for $# per month. The lease was to be assigned to the buyer, Party B, at completion. •                An addendum to the contract of sale was created in 20XX (the 20XX addendum). Clause zz is titled 'sale of a going concern'. It clarifies that the parties agree the sale is a sale of a going concern. It adds protections for the vendor to vary the amount under contract to account for additional GST. The 20XX addendum also fixed the settlement date in 20XX. •                Both Party A and Party B were registered for GST and the conditions to satisfy the going concern requirements were met. The going concern being supplied was the leasing enterprise.

•                Party B carries on a property development business, having owned sites located at CCC, (The CCC) and the Property. •                The CCC had numerous development permits with construction and subdivisions carried out. The disposal of the entire parcel of land and buildings at the CCC occurred X date. •                The Property also had multiple development permits. Construction has not commenced on the Property yet. •                Party B engaged (AB) on X date as architects and planning consultants to continue with a project for a mixed-use commercial and residential apartment building on the Property. Development works are continuing with invoices issued X YZ dates. AB will supply architectural plans and liaise with government bodies and services authorities to meet planning scheme obligations. Conditions #1,#2 and #3 attached to the appointment letter require that the copyright and intellectual property remain with AB, but can be novated in writing. This document Attachment 3 of the private ruling application.

•                On ZZ date, Party B entered into a contract (the 20XX Contract) to sell the Property to Party C. This document is Attachment 4 to your private ruling application. •                Consideration for the sale is under $XXXX. •                The 20XX contact indicates it is made free of encumbrances and no tenancies are in place via the reference schedule. •                The special conditions to the 20XX contract, amongst other things, specify that: o        the parties agree it is a sale of the property as a going concern (clause gg), o        that both parties are registered for GST, o        the Seller has and will carry on until the date for completion, the enterprise on the Property, 'being, a property development enterprise to design and develop residential apartments (Enterprise)' (clause gg1). o        the Seller will supply to the buyer, Party C, all of the things necessary for the continued operation of that enterprise. •                As stipulated in the 20XX contract, the sale will include the transfer of all project documentation and intellectual property from the seller to the buyer. This includes:

o        project financial analysis, four sets of design documents, o        concept designs for VV and DD, o        X term sheet setting out key commercial terms, o        X email - Customer contacts, transport options for carparking concessions and Development permits: per clause 00. •                Additional information was provided in relation to the four points immediately above: o        Project financial analysis - This includes the detailed financial modelling for the project, such as projected revenue, operational assumptions, development costs, and commercial outcomes. In addition to the core model, more than twenty detailed financial scenarios were developed and refined over a 24-month period, testing different operating assumptions, room mixes, staging profiles, funding structures, and yield sensitivities. Collectively, this body of modelling demonstrates the financial viability of the enterprise and supports the continuity of the business operations being transferred.

o        Four sets of design documents - comprise the full architectural and planning drawings prepared across multiple stages of the project's development. They include basement layouts, ground-floor retail and lobby configurations, podium-level amenity plans, hotel and serviced-apartment floor plates, residential levels, car-parking layouts, core positioning, fire-safety compliance, and preliminary facade treatments. These drawings show the evolution of the scheme and contain the technical information needed to continue the development without interruption. They also reflect operator-specific requirements from BB and DD, showing room types, key counts, back-of-house areas, communal facilities, pool and amenity locations, and circulation arrangements. Collectively, they form essential intellectual property supporting the ongoing business enterprise.

o        Concept design for BB and DD - This includes the preliminary concept packages prepared for both BB and DD. Each operator has defined brand, layout, and operational standards, and the concept designs were prepared to align with those requirements. They outline room configurations, key counts, communal spaces, back-of-house functions, circulation planning, and operator-specific functional layouts. The concept work was also developed within the parameters of the project's existing planning approval, ensuring the proposed operator models fit within the approved use and development envelope. Together, these designs demonstrate active operator engagement and form part of the business framework being transferred.

o        ZZ term sheet setting out key commercial terms - outlines the proposed management arrangement with XX for operating the development under the BB brand, including a ##-year initial term with a further ## year extension option. It records agreement on the target commencement date, the plan for a multi-key serviced apartment residence complex, and the requirement for construction and operations to meet ZZ brand and technical standards. It also sets out the commercial framework, including technical advisory fees, pre-opening funding obligations, management fee structures, marketing and trademark fees, IT charges, shared-service cost allocations, reserve-account contributions, and income-protection mechanisms such as the Minimum Guaranteed Income for the first three operating years. The document also covers termination provisions, confidentiality, exclusivity during negotiations, governing law, and ZZ ability to contract through an affiliate. These commercial terms demonstrate advanced operator engagement and form an important component of the business enterprise being transferred.

o        ZZ email and customer contacts - communications include customer and partner contact information, discussions, and engagement history relevant to ZZ's involvement in the project. They demonstrate established commercial relationships and contribute to the continuity of the business enterprise. o        Transport options for car-parking concessions - The planning framework allows for a range of car-parking concessions where a development demonstrates appropriate transport integration or where full on-site parking cannot reasonably be provided. In the CBD, this includes the ability to apply reduced on-site parking ratios, utilise short-fall arrangements for missing bays, or make a contribution under the local car-parking contribution plan in lieu of constructing all physical parking spaces. These mechanisms recognise alternative transport use, urban-centre characteristics, and broader planning objectives, and they provide a structured path for developments to meet parking requirements in a flexible and compliant manner that supports the operational needs of the continuing enterprise.

o        Development permit no. ## provides the formal planning approval for the project, authorising the use of the site for ## serviced apartments, including dual-key configurations, together with a ground-floor commercial tenancy and associated parking. It includes specific planning variations, establishes the permitted building envelope, and outlines the design, safety, traffic, landscaping, and operational conditions required for the development to proceed. This approval confirms the lawful basis for the development and forms a fundamental component of the ongoing business enterprise being transferred as a going concern. •                The development permits lapsed due to a down-turn in the property market and factors such as covenants being too restrictive leading costs exceeding budgeted sums.

•                The Contract of 20XX did not include conditions to use the margin scheme. Party B and Party C wish to apply the margin scheme on the sale as settlement has yet to occur. A deed of amendment to the contract will incorporate a term that Party B and Party C have agreed in writing that the margin scheme is to apply. If the amendment is not made before settlement an application for the exercise of the Commissioners' discretion to provide more time to seek approval to apply the margin scheme will be sought. •                The identified enterprise is a property development business. Pursuant to the contract, the seller will assign to the purchaser: o        Title to the property. o        All Government authorities, permits applications and approvals relating to the enterprise. o        All contracts relating to the enterprise. o        All books, reports, plans, drawings and other documents that relate to the operation of the development enterprise. o        Consultants will be retained with all correspondence, plans and documents with the engaged architect - AB also assigned.

•                A copy of a letter from AB property designer to JJJ was provided, setting out, amongst other things, the terms of engagement to prepare a proposal for a mixed-use commercial and residential apartment building on the property. This included the plans for the building, preparing the development plan and engaging with experts on traffic plans. The conditions #,## and ### require that the copyright and intellectual property remain with AB, but can be novated in writing. •                Other documents provided as further information were: Development Permits 1,2 and 3.

A New Tax System (Goods and Services Tax) Act 1999 , section 9-5 A New Tax System (Goods and Services Tax) Act 1999 , section 38-325 A New Tax System (Goods and Services Tax) Act 1999 , section 75-5 A New Tax System (Goods and Services Tax) Act 1999 , section 75-10 A New Tax System (Goods and Services Tax) Act 1999 , section 75-11 Does Division 165 apply to this private ruling? No.

Question 1 Going concern Section 38-325 provides that, if certain conditions are satisfied, a supply of a going concern is GST-free. This means that, in the case of a supply which would otherwise be a taxable supply, or an input taxed supply, the supply is a GST-free supply if it is supplied under an arrangement for the supply to be a going concern. Section 38-325 states: (1) The supply of a going concern is GST-free if: (a) the supply is for consideration; and (b) the *recipient is registered or required to be registered; and (c) the supplier and the recipient have agreed in writing that the supply is of a going concern. (2) A supply of a going concern is a supply under an arrangement under which: (a) the supplier supplies to the recipient all of the things necessary for the continued operation of an enterprise; and (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as part of a larger enterprise being carried on by the supplier) The condition at subsection 38-325(1)(a) is satisfied as the Party B as supplier makes the supply to Party C (the purchaser) for consideration.

The condition at subsection 38-325(1)(b) is satisfied as the 2025 Contract lists at special condition subclause zz. that the purchaser will be registered for GST at the time of settlement. The condition at subsection 38-325(1)(c) is satisfied as the 2025 Contract states at special condition subclause zz that the supplier and the purchaser agree in writing that the supply is of a going concern. The supply must be a 'supply of a going concern' as defined under subsection 38-325(2). Paragraph 20 of Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free? (GSTR 2002/5) provides that an arrangement between a supplier and a recipient for the supply of a going concern does not limit itself merely by the description each party has given themselves in the agreement but by objectively examining the transactions that are made between the parties. Therefore, subsection 38-325(2) is required to be satisfied and subsection 38-325(1)(c) cannot exclusively be relied on. The 20XX Contract satisfies the subsection 38-325(2) requirement that there be an 'supply under an arrangement''. The identified enterprise

Subsection 38-325(2) requires the conditions to be satisfied in relation to an 'identified enterprise'. The relevant enterprise is determined before establishing if all things are supplied by the supplier to the recipient to continue that enterprise. The material provided indicated Party B's enterprise is property development: this is echoed in the 20XX Contract. For the purposes of this ruling, this is the 'identified enterprise'. The property development is in relation to the developing of the land into a mixed residential and commercial premises. We consider Party B commenced a property development enterprise, which may have begun sometime between when the property was acquired in 20XX and when Party B engaged AB in February 20XX. Party B's activities have been somewhat limited: •                Development Permit 1 lapsed. •                Development permit 2 lapsed . •                Development Permit 3 lapsed. Party B decided to engage AB to prepare plans and in September 20XX Party B entered into the sale contract to Party C. All of these activities indicate that there is some activity in the enterprise of developing the property and that it had commenced.

All things necessary Section 195-1 states that the phrase 'carrying on' in the context of an enterprise includes 'doing anything in the course of the commencement or termination of the enterprise'. This definition ensures that activities done in the course of the commencement or termination of the enterprise are included in determining whether the activities of the entity form part of the enterprise. Paragraph 21 of GSTR 2002/5 indicates that subsection 38-325(2) requires the conditions to be satisfied in relation to an 'identified enterprise'. Party B agreed to supply: •                project financial analysis, four sets of design documents, •                concept designs for BB and DD, •                Z term sheet setting out key commercial terms, •                Z email - Customer contacts, transport options for carparking concessions and Development permits: per clause 00. These things may assist Party C to operate their own property development enterprise, but they are not things are capable of continued operation.

The term 'operation of an enterprise' is different to that of 'carrying on an enterprise', and requires something more than things done in the course of the commencement or termination of an enterprise. Continued operation An enterprise must be operating up to when the buyer assumes effective control, which is the date of settlement.This is because paragraph 38-325(2)(a) requires that the supplier supplies to the recipient all of the things necessary for the continued operation of an enterprise. Paragraph 149-151 of GSTR 2002/5 states: 149. The term 'carrying on an enterprise' includes doing anything in the course of the commencement or termination of the enterprise. A supplier may carry on an enterprise to the day of the supply for the purposes of paragraph 38-325(2)(b) during the period of commencement or termination of an enterprise.

150. A supplier is unable to supply all of the things that are necessary for the continued operation of an enterprise unless the relevant enterprise is not only being 'carried on' but is also operating. Where an enterprise engaged in an activity ceases to carry on that activity and the assets are in the course of being sold off, the enterprise is being 'carried on', but is not operating. 151. The activity of leasing a building which has previously been leased to a tenant remains an 'enterprise' of leasing for the purposes of section 9-20 during the period of temporary vacancy when a new tenant is being actively sought by the building owner. However, where a building has not previously been leased to a tenant, but is being actively marketed, an 'enterprise of leasing' is not operating until the activity of leasing actually commences. The activity of leasing commences when at least one tenant enters into an agreement to lease or occupies the building.

In our view, the facts identify that Party B's enterprise was not operating up to the day of supply. Among these facts is a key point that there are no construction contracts in place, no management contracts and there were no development permits in force. The plans prepared by AB may have been capable of novation between the parties but, in our view, this is insufficient to ground the proposition that a property development enterprise was in operation as at the date of supply. As the enterprise is not in operation at the date of supply, the supply is not a going concern. Question 2 If the sale in question one is not a sale of a going concern, can Party B sell the property to Party C under the margin scheme pursuant to subsection 75-5 of the GST Act? Summary As there had not previously been a sale with GST in the price, the sale can be subject to the margin scheme. Detailed reasoning Eligibility to use the margin scheme is set out in section 75-5. It says: Applying the margin scheme (1) The *margin scheme applies in working out the amount of GST on a *taxable supply of *real property that you make by: (a) selling a freehold interest in land; or ...

if you and the *recipient of the supply have agreed in writing that the margin scheme is to apply. (1A) The agreement must be made: (a) on or before the making of the supply; or (b) within such further period as the Commissioner allows. Note: Refusing to allow, or allowing, a further period within which to make an agreement is a reviewable GST decision (see Subdivision 110-F in Schedule 1 to the Taxation Administration Act 1953). (1B) A supply that you make to your *associate is taken for the purposes of subsection (1) to be a sale to your associate whether or not the supply is for *consideration. (2) However, the *margin scheme does not apply if you acquired the entire freehold interest, *stratum unit or *long-term lease through a supply that was *ineligible for the margin scheme. Note: If you acquired part of the interest, unit or lease through a supply that was ineligible for the margin scheme, you may have an increasing adjustment: see section 75-22. (3) A supply is ineligible for the margin scheme if: (a) it is a *taxable supply on which the GST was worked out without applying the *margin scheme; or

(b) it is a supply of a thing you acquired by *inheriting it from a deceased person, and the deceased person had acquired all of it through a supply that was ineligible for the margin scheme; or (c) it is a supply in relation to which all of the following apply: (i) you were a *member of a *GST group at the time you acquired the interest, unit or lease in question; (ii) the entity from whom you acquired it was a member of the GST group at that time; (iii) the last supply of the interest, unit or lease by an entity who was not (at the time of that supply) a member of the GST group to an entity who was (at that time) such a member was a supply that was ineligible for the margin scheme; or (d) it is a supply in relation to which both of the following apply: (i) you acquired the interest, unit or lease from the *joint venture operator of a *GST joint venture at a time when you were a *participant in the joint venture; (ii) the joint venture operator had acquired the interest, unit or lease through a supply that was ineligible for the margin scheme; or (e) it is a supply in relation to which all of the following apply:

(i) you acquired the interest, unit or lease from an entity as, or as part of, a * supply of a going concern to you that was *GST-free under Subdivision 38-J; (ii) the entity was *registered or *required to be registered, at the time of the acquisition; (iii) the entity had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme; or (f) it is a supply in relation to which all of the following apply: (i) you acquired the interest, unit or lease from an entity as, or as part of, a supply to you that was GST-free under Subdivision 38-O; (ii) the entity was registered or required to be registered, at the time of the acquisition; (iii) the entity had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme; or (g) it is a supply in relation to which all of the following apply: (i) you acquired the interest, unit or lease from an entity who was your *associate, and who was registered or required to be registered, at the time of the acquisition; (ii) the acquisition from your associate was without *consideration;

(iii) the supply by your associate was not a taxable supply; (iv) your associate made the supply in the course or furtherance of an *enterprise that your associate *carried on; (v) your associate had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme. (3A) Subparagraphs (3)(g)(iii) and (iv) do not apply if the acquisition from your *associate was not by means of a supply by your associate. (4) A reference in paragraph (3)(b), (c) or (d) to a supply that was ineligible for the margin scheme is a reference to a supply: (a) that was ineligible for the margin scheme because of one or more previous applications of subsection (3); or (b) that would have been ineligible for the margin scheme for that reason if subsection (3) had been in force at all relevant times. Based on the facts provided, the 20XX Contract is not subject to the margin scheme as it is not particularised in the agreement.

Party B will need to obtain agreement from the purchaser, Party C, in writing to apply the margin scheme because subsection 75-5(1) requires it. The agreement must be obtained before the date of settlement. The agreement does not have to be made within the same document as the sale contract. Party B and Party C are both applicants for this private ruling. In the application, it stated the parties may amend the contract prior to settlement. If they did not, they will need to apply for the discretion under subsection 75-5(1A). Subsection 75-5(1A) does allow an opportunity to apply for the exercise of the Commissioner's discretion to allow more time to obtain the purchaser's agreement if the agreement is not made before settlement. If we assume that the parties B and C amended the agreement before settlement, we need to consider the remaining relevant provisions in section 75-5. Subsection 75-5(2) indicates that the margin scheme does not apply if you acquired the entire freehold interest, through a supply that was *ineligible for the margin scheme. Section 195-1 defines the term 'ineligible for the margin scheme' as having the meaning given by subsections 75-5(3) and (4).

Applying the fact that Party B acquired the properties as going concern under the 20XX agreement and its addendum), none of the ineligibility criteria in subsections 75-5(3) and (4) apply. Party B did acquire the Property under the going concern provisions in Subdivision 38-J but paragraph 75-5 (3)(e) does not apply as the supplier to Party B did not acquire the property with GST in the price as they held it prior to the introduction of GST. The margin will be calculated in accordance with subsection 75-10: (1) If a *taxable supply of *real property is under the *margin scheme, the amount of GST on the supply is 1/11 of the *margin for the supply. (2) Subject to subsection (3) and section 75-11, the margin for the supply is the amount by which the *consideration for the supply exceeds the consideration for your acquisition of the interest, unit or lease in question. (3) Subject to section 75-11, if: (a) the circumstances specified in an item in the second column of the table in this subsection apply to the supply; and

(b) an * approved valuation of the freehold interest, * stratum unit or * long - term lease, as at the day specified in the corresponding item in the third column of the table, has been made; the margin for the supply is the amount by which the * consideration for the supply exceeds that valuation of the interest, unit or lease. Subsection 75-10(3) provides a table for setting out when valuations may be used to determine the margin. None of the circumstances in the table apply in this case. As a result, subsections 75-10(1) and (2) will be applied. Subsection 75-10(1) requires that the supply of the property must be a taxable supply in order to apply the margin. Section 9-5 sets out what is a taxable supply: (a)          you make the supply for *consideration; and (b)          the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c)          the supply is *connected with the indirect tax zone; and (d)          you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

'You' in this instance is Party B who is supplying the property for the consideration of under $XXXX meeting paragraph 9-5(a). Party B is a property developer, and it is not in contest that you made the supply in the course of that enterprise satisfying paragraph 9-5(b). The property is located within the indirect tax zone as the land is situated in Australia, satisfying paragraph 9-5(c). Party B is registered for GST, satisfying paragraph 9-5(d). The sale is not GST-free under any provision. The sale contract indicates that it was a going concern, however, the answer to question one above concludes the sale is not a going concern. The property is not input taxed as no residence is situated on the property and as vacant land and thereby potential residential land it will be a taxable supply as Party B meets the conditions in section 9-5. The sale is a taxable supply on completion.

The margin under subsection 75-10(1) is 1/11 of the margin between under $XXXX and under $XXXX which is a negative amount. Please note, if the contract amount does not include adjustments at settlement, these also must be considered for the margin calculation. We have assumed that those adjustments will not change the negative margin. The margin, where negative, is zero per Goods and Services Tax Ruling GSTR 2006/8 Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000 at paragraph 46: If the consideration for the acquisition is equal to or greater than the consideration for the supply, then the margin for the supply is zero. Conclusion: The sale of the property under the sale contract is a taxable supply. You can only apply the margin scheme at 1/11 of the margin between your acquisition and sale of the property if you obtain the written agreement of the purchaser. Should the purchasers agree, the margin is zero.