GST payable on purchase of commercial property?

D

depreciator

My turn to ask a question or two.
I'm looking at buying a commercial property - just a small one.
It will be bought in my name - yes, yes, I know.
Now, the contract states that it is 'GST free because the sale is the supply of a going concern'. There is a tenant in situ on an expired lease and I want to keep him (but get him on a lease, of course).
1. I imagine the purchase will only be GST free if I am registered for GST. Can someone confirm?
2. If the vendor is NOT registered for GST (and I suspect they aren't) , I assume GST won't come into the picture at all. Am I right?

Thanks,
Scott
 
If you have done an asic (ABR.gov.au) search the name you are searching may be the trustee name, the trust if it owns the property may be registered?
 
Get your lawyer to read the contract to see if it changes anything but the general obligation to pay gst ifnotstated is with thr vendor i believe.
 
starter said:
Get your lawyer to read the contract to see if it changes anything but the general obligation to pay gst ifnotstated is with thr vendor i believe.
Click to expand...

Correct - any GST obligation on sale will be the vendors problem unless the contract allows for them to recover it from you.
 
any GST obligation on sale will be the vendors problem unless the contract allows for them to recover it from you.
Click to expand...

It does. There is a clause in the contract - in the Special Conditions. But I suspect it is pretty standard.

It says in part: '...if the ATO determine at any time that the the sale is not the sale of a going concern, then upon the vendor providing to the purchaser evidence of his liability to the ATO...and providing to the vendor a Tax Invoice...'

But if the vendor is not registered for GST - and I just confirmed with the ATO they are not, they won't have a liability to pay it and won't be able to provide me with a tax invoice to that effect.

That's just my reading of the situation, though.

And it will be the sale of a 'going concern' because I want the tenant to stay and he desperately wants to stay, too.
 
Just becauase the vendor isnt registered doesnt mean they wont have a GST liability. If the ATO determine they should have been registered then they will make the pay it. They still have to give you a valid tax invoice which will then entitle you to claim a GST credit from the ATO for the same amount of the liability so it is a net zero transaction to both of you.

You will have to be registered for GST for the going concern GST exemption to apply. Read here for more info:

http://www.ato.gov.au/businesses/content.aspx?doc=/content/00198744.htm&page=20
 
depreciator said:
And it will be the sale of a 'going concern' because I want the tenant to stay and he desperately wants to stay, too.
Click to expand...

Can't you just make the purchase subject to the tenant entering into a new formal lease agreement which will confirm the going concern nature of the sale?
 
It's definitely going to be an ongoing concern - they'll be dragging that tenant out kicking and screaming on settlement day.
But for a purchaser to claim the GST exemption in that case, the purchaser would need to be registered for GST. And I'm not.

But theoretically, the vendor won't be able to charge GST because they are not registered for GST.
It would appear, though, that despite this if the ATO decides for whatever reason GST is payable, I'll end up having to pay it.

That's what I have gleaned, anyway. I guess I'll be registering for GST.
 
I have seen instances where it has been the selling/managing agency which has been changing the gst on behalf of a non-registered owner.

There'll be one less issue if you're registered.
 
Try to get that clause deleted? Get your solicitor to point out that the risk should lie with the Vendor on GST because you have no way of being able to be sure that they're not registered for GST and so the risk of relying on that exemption should lie with them.

But do get registered for GST, just a heads up that it can take a while. We had a similar situation recently and I think it took 6 weeks to get GST registration. In the end we didn't need it as we were able to convince the vendor to drop the GST clause from the contract.
 
Being registered will allow you to oncharge and claim any gst paid on your expense side. If the current owner isn't registered, they aren't charging the tenant gst on the outgoings.
 
Very true Scotty. However, for us the effort to fill in the extra paperwork outweight the advantage of being able to reclaim GST. Especially since the tenant was liable for pretty much all expenses anyway!
 
I bit the bullet and asked my acct to register me for GST just in case. I thought it might be quicker if he did it - maybe they have a special tax agent portal.
He put through the application Friday and I was registered Monday.
I'll de-register after 6 months of so.
 
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