Boarding house as going concern?

[Erin Woods]

I am looking at purchasing a boarding house which is being sold subject to existing tenancies as a going concern.

I wish to obtain vacant possession- is it possible to do so but still be considered a sale of a going concern by the ATO. All the existing tenants are in expired leases and the place is in need of refurbishment to optimise rent.

Has anyone ever obtained vacant possession on a boarding house and avoided GST on sale?

 

[jrc]

If you want vacant possession it s no longer a going concern. You will get the Gst refunded if yiu are registered and willbe using the property to carry on an enterprise. You will probably pay some extra stamp duty

 

[pinkboy]

Sounds like you want your cake and eat it too.

Evict tenants on settlement, possibly give inventive to leave and refurbish as they leave.

pinkboy

 

[DaveM]

Who leases the premises, the tenants or a trading entity with a head lease which then operates the rooming house biz

 

[HeadsOnBeds]

I've owned a few, I'd highly recommend keeping the place as is until after settling, maybe run it for a few months to see how it all works and then upgrade each room as you go. One of the great advantages of BHs is that you can slowly fix em up.

How many rooms/tenants?

Check insurance costs, registration and fire compliance. What's the management structure, Some managers leave with change of owner.

I'd be interested to hear what sort of rates you're getting offered?

 

[coastymike]

First question to ask is whether these are commercial residential premises or merely residential accommodation. Read GSTR 2012/6
http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20126/NAT/ATO/00001&PiT=99991231235958 to firstly ask whether they are in fact commercial residential premises and subject to GST in the first place.

Just because it is a boarding house doesn't mean GST applies.

Private Ruling 1011588961883 is an example where the ATO has held that a B&B for example was not subject to GST. It was input taxed.

https://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/1011588961883.htm

 

[Erin Woods]

Brilliant responses from the forumites as usual.

Pinkboy I think you are correct- probably much easier to give notice on settlement.

But did come across the ATO provisions listed by coastymike during a brilliant moment at 2:30am on the 1/15/15. I hadn't found the private binding ruling on it though- thanks!!

Based on ATO guidelines looks like it isn't subject to GST in any case: it meets all the criteria for residential accommodation because all the tenants are on individual leases etc. to be sure though I might apply for a PBR before exchange.

And re: rates- the financing has been the biggest hurdle which is why I am sure st investors run a mile. The rates and terms offered were terrible so I am borrowing against the PPOR to get into the field.