GST and Going Concern Exemption

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GST and Going Concern Exemption

GST status whether you are buying or selling a business or commercial property is an important concern for both parties. Normally, the sale of a “going concern” will qualify for an exemption from GST but one important element of the exemption is that both parties need to be registered for GST.

The vendor is liable for GST should the ATO investigate the transaction and find that the exemption did not apply.

Most contracts for sale of commercial property or a business where the going concern exemption is applied will include a “clawback” special condition relating to GST. This means that the purchaser provides an ongoing indemnity to the vendor for any subsequent GST liability arising from the transaction.

In addition, the standard conditions in a sale also provide that should the purchaser not be registered for GST at settlement, they will provide an extra 10% payment which will be held by the agent for up to three months pending confirmation of GST registration.  This may prove a significant additional cost for the purchaser (if for example, there is some delay in registration).

So, if you are considering buying a commercial property or business, you should discuss your GST status with your accountant and allow plenty of time for registration before the proposed settlement date.

*This is general advice only. You should consult your professional advisers about your particular circumstances.

By | 2018-01-21T06:07:58+00:00 6 November 2014|Business Law, GST|0 Comments

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