Conditions for the GST-free supply of a going concern

Q: A client owns a bed-and-breakfast (B&B) business with four adjacent properties used for guest accommodation. The business makes $200,000 a year. They want to sell the business and properties for $1.6 million ($1.5 million for the properties and $100,000 for the business). Will this sale be subject to GST? Can they get an exemption for selling the business as a "going concern" because the properties are essential for the business?

A:

Cici's analysis is correct. Since the conditions outlined meet the requirements of the GST Act s 38-325, the sale could proceed as a GST-free supply of a going concern. However, this exemption wouldn't apply if the business was run by a different entity from the one that owns the properties. The conditions for a GST-free supply of a going concern are:

1. The sale must involve payment (which seems to be the case here).
2. The buyer must be registered for GST or required to be registered.
3. Both parties must agree in writing that the sale is a going concern.
4. The seller must provide everything necessary for the business to continue operating.
5. The seller must run the business until the sale date.

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