Decision impact statement

Debonne Holdings Pty Ltd v Commissioner of Taxation

Court Citation(s):
[2006] AATA 886
2006 ATC 2467
64 ATR 1154

Venue: Administrative Appeals Tribunal
Venue Reference No: WT 2004/382
Judge Name: Downes
Judgment date: 19 October 2006
Appeals on foot:
No

Impacted Advice

Relevant Rulings/Determinations:

• GSTR 2002/5

Subject References:
GST
GST free
GST supply of a going concern
Agreement in writing
Supply
Enterprise
Business
Supply of goodwill

Brief summary of facts

•

Taxpayer was seeking an input tax credit for the cost of land acquired pursuant to purchase of a hotel.

•

Sale to taxpayer was made pursuant to 2 separate but interdependent contracts; one for sale of "business" (goodwill, plant, trading stock etc), other for sale of land on which hotel stood.

•

The contract for sale of "business" expressly stated [i.e. in clause 24(ii)] that "the sale of the business was the sale of a going concern". The expression "the business" used in the opening words of the business contract specifically referred to "goodwill ... and plant, furniture, fixtures, fittings, chattels, stock in trade and other assets described in the particulars hereto" but did not include the land. However, clause 24(i) of the business contract stated that "the terms used here (presumably including "supply of a going concern") have the same meaning as those used in the GST Act".

•

The contract for the sale of the land was silent on the question of "going concern" and provided that the purchase price included any GST liability for which the vendor might be liable.

Issues decided by the court or tribunal

1. The sale of the assets evidenced by the business contract alone (i.e. without the land) did not amount to the supply of a going concern for the purposes of s.38-325(2) of the GST Act.

2. The word "business" as used in clause 24(ii) of the business contract was intended to refer to the entire hotel enterprise (including the land) and not just the assets described as being supplied pursuant to the separate "business" contract (i.e. goodwill, fixtures, fittings, chattels, plant, stock in trade etc).

3. In the circumstances clause 24(ii) amounted to a sufficient agreement in writing that the supply was of a going concern for the purposes of s.38-325(1)(c) of the GST Act.

4. (by implication) the reference to "supply of a going concern" in s.38-325(2) is the supply of the entire enterprise which comprises the "going concern" rather than to just the individual assets comprising the enterprise.

5. The supply of an enterprise itself is a supply in the course or furtherance of that enterprise and thus not GST free unless it is the supply of a going concern or is the subject of some other specific exemption

Tax Office view of Decision

The decision is not inconsistent with anything contained in the relevant Public Ruling.

Administrative Treatment

Implications on current Public Rulings & Determinations

There are no implications with respect to any current Public Rulings or Determinations.

Implications on Law Administration Practice Statements

There are no implications for any current Law Administration Practice Statements.

Legislative References:
(ANTS) Goods and Services Act 1999
Section 38-325

Case References:
Midford v DFCT
[2005] AATA 623
2005 ATC 2189
60 ATR 1009

HP Mercantile Pty Ltd v Commissioner of Taxation
143 FCR 553
2005 ATC 4571
60 ATR 106