The ATO continues to muddy the waters on GST, with the withdrawal of the draft addendum to GSTR 2002/5. The intention of the addendum was to clarify when an “enterprise of leasing” commercial property is operating, thereby creating a GST-free supply of a going concern.
The draft addendum indicated that where a building that had been leased is vacant, there would still be an “enterprise of leasing” and the vendor would be able to make a tax free supply (supply of a “going concern”) provided the vendor was actively seeking a new tenant.
For a building which had not previously been leased, there could be no “enterprise of leasing” until the “activity of leasing” actually commenced. This was defined as time at least one tenant entered into an actual lease (as compared with an agreement for lease) or occupied the building under a periodic tenancy.
With the withdrawal of the draft addendum, the view contained in paragraph 151 of GSTR 2002/5 is unchanged, and the Tax Office therefore considers that the activity of leasing commences when at least one tenant enters into an agreement to lease or occupies the building.
In simple terms, the sale of a vacant building or any other commercial property will continue to attract GST on the sale price.
Rhys Donnellan, Clearpoint