Is a going concern GST-free?
Generally, a sale of a going concern is GST-free if all of the following apply: the sale is for payment. the purchaser is registered or required to be registered for GST. the purchaser and seller have agreed in writing that the sale is of a going concern.
What is a going concern for GST purposes?
A “going concern” refers to an enterprise’s ability to continue trading, with the sale of that business generally eligible to be GST-free if the enterprise is deemed as such. the business is carried on, “up until the day of sale”.
What is the going concern exemption?
The supply of a going concern is GST-free in certain circumstances. The purpose of this exemption is to remove the need for the recipient to obtain additional funds to cover the GST that would otherwise apply. A “going concern” means, in effect, a continuing “enterprise”.
What is a supply of going concern?
A supply of a going concern is a supply under an arrangement under which: (a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and.
Is a sale and leaseback a going concern?
The sale and leaseback of a commercial building is not a going concern, Mr Wolfers said. This type of transaction has been increasingly popular in recent years as companies offload their property assets but offer them for sale with a leaseback to themselves so they can remain as a tenant in the building.
What is meant by a going concern?
Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. If a business is not a going concern, it means it’s gone bankrupt and its assets were liquidated.
What is a going concern concept?
Key Takeaways. Going concern is an accounting term for a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future. Certain expenses and assets may be deferred in financial reports if a company is assumed to be a going concern.
Can residential property be sold as a going concern?
The Seller must be charging VAT on the rental for it to qualify as a going concern. Residential property (other than a Guest House), is exempt from VAT . Even if both parties are VAT vendors, it could never qualify as a going concern.
How do you know if its a going concern issue?
Indicators of a potential going concern problem are:
- Negative trends. Can include declining sales, increasing costs, recurring losses, adverse financial ratios, and so forth.
- Intellectual property.
- Business structure.
What are the main implications of going concern concept?
What is the Going Concern Principle? The going concern principle is the assumption that an entity will remain in business for the foreseeable future. Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.
Why would one want a sale as a going concern?
There are many reasons but the primary one is to allow the buyer to avoid any contingent liability in the business. If you buy the shares of a company, you take over the legal entity, and become responsible / liable for that legal entity going forward – and backwards.
What makes a sale of a going concern GST free?
The GST legislation says that the sale of a going concern will be GST-free if: 1 the sale is “for consideration” 2 the purchaser “is registered, or required to be registered” for GST, and 3 “the supplier and the recipient have agreed, in writing, that the supply is of a going concern”.
Who is responsible for GST on sale of business?
The tax liability risk (in case the ATO does not view the sale as a supply of a “going concern”) ultimately lies with the seller, as the seller is the “supplier” in any transaction that is required to remit GST to the ATO.
When does a business become a going concern?
“the supplier and the recipient have agreed, in writing, that the supply is of a going concern”. The sale of business contract will usually specify that the business (that is, the “supply”) is a going concern when the contracts are exchanged.
When does a supply of a going concern occur?
The ATO says a supply of a going concern occurs when: “a business is sold, and that sale includes all of the things that are necessary for the business to continue operating”, and the business is carried on, “up until the day of sale”.