Imminent Changes to Going Concerns and the Treatment of GST

Mar 25, 2014

What’s to come?

In December 2013, it was announced by the Assistant Treasurer that the Federal Government plans to make changes to the current GST-free treatment of going concerns and farming businesses.

These proposed changes are in line with the Board of Taxation’s recommendations that were made back in December 2009. 

It is intended that these changes will be implemented “sometime in 2014”, and consequently a “reverse charge” mechanism will replace the current GST-free treatment of going concerns and farming business.

What does this mean?

Currently, a transaction can be deemed GST-free if certain requirements are met, such as:

Under the current law for the GST-free treatment of going concerns and farmland there are two (2) clear benefits:

  1. The purchaser does not need to source additional funds to cover the GST amount; and
  2. Transfer (stamp) Duty is reduced as it is payable on the GST exclusive price of the transaction.

Should the proposed changes be introduced in 2014 as suggested, it is intended that a “reverse charge” mechanism will replace the current system.  It is anticipated that this will mean:

Is this a good thing?

There are some concerns that these changes will negatively affect purchasers, for example:

It is important to note that these changes are not yet law.  A draft bill is yet to be released, and so we are uncertain as to what the final changes will be.  We will update you as more information comes to hand.  In any event, it is anticipated that when the proposed changes are introduced that a transitional period will be allowed.

Please feel free to contact us here at TVP Law if you would like to discuss these proposed changes or if you would like us to review any Contracts that you may be involved with for a going concern or farming business.

The content in this article is intended to provide a general guide to the subject matter only.  Specialist advice should be sought for your specific circumstances.