The obligation to pay GST depends on whether the seller is registered (or required to be registered) for GST purposes. If the seller is not registered and not required to be registered, then generally no GST will be payable on the contract. If the seller is registered they are obliged to pay the GST to the Australian Tax Office, unless some special exemptions apply.
If the buyer is registered for GST, they can claim the GST component in their next business activity statement. This can cause a cash flow problem for the buyer in having to fund the GST even if only for a short period. Stamp duty is also increased because it is payable on the purchase price inclusive of the GST.
A “GST-free” concession may apply to the business contract. If the seller supplies to the buyer all the things that are necessary for the continued operation of an enterprise and the seller carries on the enterprise until the date of completion, and the parties agree in the contract to claim the “going concern concession”, then this concession may apply.
This means that no GST is payable and the seller is obliged to provide all things to enable the buyer to continue the business. In most businesses, this will include supplying a fixed term lease of the premises, although in certain businesses such as a pie van, a lease of the business premises need not necessarily be required to enable the business to continue to trade.
It is vital that you take advice from your accountant over the GST implications before signing the contract.
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