Information current as at 17 November 2025.
When you sell a business that involves property – or you sell commercial property on its own – the GST-free “supply of a going concern” concession can be very valuable. Handled correctly, it can remove the 10% GST impost on the sale price and improve cash flow and stamp duty outcomes. Handled badly, it can leave the vendor with an unexpected GST bill of 1/11th of the price, plus penalties and interest.
For business owners contemplating buying or selling a business, or restructuring how their business and property are held, understanding how the going concern rules interact with property is essential.
What is a GST-free “supply of a going concern”?
Under the GST Act, a supply can be treated as a GST-free supply of a going concern where:
- the supplier provides all of the things necessary for the continued operation of an identified enterprise; and
- the supplier carries on that enterprise until the day of supply; and
- additional statutory conditions are met.
Those additional conditions include that:
- the supply is for consideration
- the recipient is registered, or required to be registered, for GST purposes
- the supplier and recipient agree in writing that the supply is of a going concern.
If any of these elements are missing, the concession does not apply – even if the parties intended a GST-free outcome.
How property fits into the going concern rules
Property often sits at the heart of the enterprise being sold. In many cases, premises are one of the “things necessary” for the enterprise to continue and therefore need to be supplied or otherwise made available to the purchaser under the arrangement.
You will commonly see two types of relevant enterprises in practice:
- Trading enterprises that use the property – for example, a manufacturing business operating from a factory that it owns or leases.
- Leasing enterprises where the property is the business – for example, a landlord of a fully or partly tenanted commercial building, where the enterprise is the leasing activity itself.
For the going concern concession to apply, the supplier must transfer the property interest (or an enforceable right to occupy it) that is actually necessary for the enterprise to continue. If you are also considering development, subdivision or other changes to how the land is used, it is important to factor in the GST position alongside broader tax implications on property development and subdivision.
Selling business property with, or without, the business
Sale of business and business property together
Where the same entity owns both the business and the premises, and both are sold to the purchaser, it is often easier to satisfy the going concern conditions – provided the other elements are met. In particular:
- the business continues to operate up to settlement
- the property (or a long-term lease) is included in the sale
- the contract clearly records the agreed GST treatment, including the going concern clause
- both parties are (or are required to be) registered for GST.
In this scenario, the property is simply one of the “things necessary” for the trading enterprise to continue in the purchaser’s hands.
Sale of business property without the trading business
Sometimes the property is sold separately from the operating business. For example, the vendor might sell the trading business to one purchaser but retain the freehold, or sell the building on to another buyer. In that case, you first need to identify what enterprise is being supplied with the property.
If the property is genuinely leased to tenants and the landlord is carrying on a leasing activity, the supplier may be selling a leasing enterprise that could qualify as a GST-free going concern. If there is no enterprise – such as bare land with no leasing history – the sale is more likely to be a taxable supply of land rather than a GST-free going concern.
When business and property are in separate entities
It is common for the business to sit in one entity and the real estate in another – for example, an operating company and a separate property trust or SMSF. This often results in two parallel transactions:
- the operating entity sells the trading business; and
- the property-holding entity sells or leases the premises to the purchaser.
Each entity must independently consider whether it is making a supply of a going concern. The operating entity may be supplying the trading enterprise, and the property entity may be supplying a leasing enterprise, or simply selling a capital asset. The fact that the group as a whole is handing over “a business with property” does not, by itself, satisfy the statutory requirements.
In larger transactions, it can also be important to compare a direct business sale with a share or unit sale. That analysis will typically involve GST, income tax, capital gains tax and sometimes stamp duty, and may warrant specialist mergers and acquisitions advice.
What if the business property is not part of the deal?
From a GST perspective, property that is essential to the enterprise usually needs to be transferred or made available to the purchaser under an enforceable right as part of the arrangement. Two common variations can cause problems.
Property is not offered for sale or lease
Suppose a café business is sold, but the vendor keeps the building and does not offer to lease it to the purchaser. The purchaser is expected to move the business elsewhere. In this case it may be difficult to argue that all of the things necessary for the enterprise have been supplied, because the premises are fundamental to operating the café and no ongoing right to occupy them is provided.
Property is offered, but the purchaser declines
Alternatively, the vendor may offer both the business and the freehold property, but the purchaser chooses to buy only the business and to source their own premises. Again, because the purchaser is not receiving the premises or an alternative enforceable right of occupation through the arrangement, there is a question whether the supplier has provided all of the things necessary for the enterprise to continue.
The commercial takeaway is that if you are aiming for going concern treatment, you need to think carefully about how the premises are dealt with as part of the overall deal structure.
Leases of premises not owned by the vendor
Frequently, the business premises are leased from a third-party landlord. This raises an important question: does the existing lease need to be assigned to the purchaser for the going concern concession to apply?
In broad terms, the enterprise must have access to suitable premises on and from settlement. That may be achieved by:
- assigning the existing lease to the purchaser; or
- putting in place an alternative enforceable right to occupy suitable premises, such as a new lease negotiated by the purchaser as part of the overall arrangement.
The focus is on whether, at settlement, the purchaser has a legally enforceable right to occupy premises that are actually used in the enterprise, rather than informal assurances.
Periodic tenancies vs tenancies at will
The distinction between a periodic tenancy and a tenancy at will can be critical for going concern purposes.
A periodic tenancy arises where the tenant pays rent by reference to a regular period (weekly, monthly, yearly) and has an ongoing, enforceable right of exclusive possession until the tenancy is properly terminated. This kind of tenancy can often form part of a leasing enterprise, and its assignment may support GST-free going concern treatment.
A tenancy at will, by contrast, is much more precarious. The occupant can usually be required to leave at any time and has very limited security. The ATO’s view is that an assignment of property subject only to a tenancy at will will generally not qualify as a GST-free supply of a going concern.
For landlords and purchasers, the practical message is to understand exactly what tenancy exists, and how it affects the GST outcome, before assuming the concession applies.
Case law: Aurora Developments and property sales
The Federal Court decision in Aurora Developments Pty Ltd v FCT is a frequently cited example in this area. In that case, a large residential development site was sold “en globo” with certain works to be completed before settlement. The contract did not identify the supply as a GST-free going concern, and there was no established leasing or trading enterprise being carried on at the relevant time.
The Court held that the supply was essentially a sale of land, not a supply of a going concern, and GST was payable. The case highlights that you must be able to identify a real enterprise being supplied, and that the contractual documents – particularly any going concern clause – matter. It also reinforces that the vendor carries the risk if the concession is incorrectly claimed and the ATO disagrees.
Practical checklist before you rely on the concession
Before treating a property-related transaction as a GST-free going concern, it is sensible to work through the following questions:
- What enterprise is being supplied? Trading, leasing or something else?
- Are all things necessary being supplied? Including premises, licences, key contracts and goodwill.
- What tenancy exists? Lease, periodic tenancy or tenancy at will – and can it be assigned?
- Will the enterprise continue until settlement?
- Are the statutory conditions satisfied? Consideration, registration and written agreement.
- How is risk allocated? Does the contract deal with the possibility that the ATO may not accept going concern treatment?
Because each transaction is fact-specific, these questions should be considered with the help of a suitably qualified adviser before contracts are signed.
How The Quinn Group can help
Going concern and property transactions sit at the intersection of GST, income tax, capital gains tax and stamp duty. Getting the structure and documentation right at the outset can make a significant difference to your after-tax outcome.
Our integrated team of tax accountants and commercial lawyers can assist with:
- reviewing proposed contracts for the sale or purchase of a business or commercial property
- identifying whether going concern treatment may be available in your circumstances
- modelling cash flow and GST implications for both vendor and purchaser
- comparing business sale, share sale and other acquisition structures
- managing related issues such as capital gains tax on property and business assets.
Whether you are selling a single property or a larger business group, clear advice before you sign can help you avoid surprises and negotiate with confidence.
Book a Consultation
Need tailored advice on GST and your business or property sale? Call 1300 QUINNS (1300 784 667) or +61 2 9223 9166, or contact our team at The Quinn Group to arrange an appointment.
Disclaimer
NEED HELP? This article provides general information and should not be considered legal or tax advice. For personalised guidance, please contact our expert team of tax accountants at The Quinn Group by calling 1300 QUINNS (1300 784 667) or +61 2 9223 9166, or submit an online enquiry form to arrange an appointment.
