Buying or Selling a Business as a Going Concern

GST would normally be payable on the sale and purchase of a business.

However, if a business is sold as a 'going concern', the sale is exempt from the normal requirement that the seller charges and the buyer pays GST on the price. A going concern means a continuing enterprise.

Advantages for the Buyer & Seller
There are several advantages of using the going concern exemption.

Firstly, this exemption removes the need for the purchaser to obtain additional funds to cover the GST that would otherwise apply.

Secondly, there is a real stamp duty saving where the GST does not need to be charged on the sale. The reason for this is that the stamp duty is charged on a price which includes GST where GST is chargeable. The purchaser will therefore be benefited if the transaction is treated as GST-free.

Thirdly, the seller may be able to claim GST credits on supplies where GST credits could not otherwise be claimed. An example of this is a residential building that is tenanted.

A seller could claim GST credits on associated legal and selling expenses that would not otherwise be possible.

ATO View
A buyer and seller may agree the sale is a sale of a going concern but the ATO may disagree with the parties.

To avoid this problem: