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Partnership ‘s shares sales incur which kind of GST supply

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Q: A commercial property is owned as tenants in equal shares by two unrelated parties – A and B. Neither A or B are registered or required to be registered for GST individually. They are registered for GST jointly to this property. If A sells its interest in the property to an unrelated third party (not related to A or B), is it a non-taxable supply by a person who is neither registered nor required to be registered?

 

A: The sale of a partner’s interest in a partnership is not an out-of-scope supply, as this would result in a dissolution of the old partnership and the establishment of a new one. So, the effect is that all the assets of old partnership are sold to the new partnership and would be a taxable supply. It may be treated as a GST- free supply of a going concern under s38-325 of the GST Act. Even if the sale is treated as a taxable supply, it would only result in a short-term cash flow disadvantage as the new partnership would be entitled to an equal and offsetting input tax credit for the GST payable on the sale.

Written by Panbo Ye

I help people discover POWERFUL unknowns in Tax Ideas | Wealth Strategies | Retirement Planning | Finance Solutions!

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