Buying a Business as a Going Concern

When buying or selling a business, there are many factors that need to be considered, and a significant one is ensuring that the business is “supplied to the buyer” as a “going concern” for the purposes of the GST legislation.

If the business is sold as a “going concern” the sale and purchase of the business is exempt from GST. In order to qualify for the exemption, the following criteria must be met:

  1. Both the seller and buyer must be registered for GST.
  1. The sale contract must expressly specify that the sale of the business is as a “going concern”.
  1. The seller must supply “all things necessary” for the continued undisrupted operation of the business. This includes the business premises (unless the business is a mobile business).  Generally, where the business premises are leased, the lease must be assigned to the buyer as at the date of supply, or alternatively a new lease must be entered into between the lessor and the buyer, and the old lease between the lessor and the seller must be surrendered.
  1. The business must continue trading as normal until the day it is “supplied to the buyer”, i.e., the settlement date, or the date on which the buyer assumes effective control and possession of the business.
  1. The buyer must be in a position on the day of supply, i.e., the settlement date, to continue trading. Whether the buyer in fact continues trading or not after the day of supply is irrelevant.

If the above criteria are met, then the transaction should qualify for the exemption, and there should be no GST payable on the transaction.

If you have any queries regarding “going concerns”, call us on 9422 8111.