Tribunal finds that parties agreed in writing that a sale was of a going concern

On Friday the Tribunal handed down its decision in SDI Group Pty Ltd and Commissioner of Taxation [2012] AATA 763 where it found that the applicant (vendor) and the purchaser of commercial property had satisfied the requirement that the parties agree that the sale was a supply of the going concern, notwithstanding that no such agreement was provided for in the Contract of Sale.

The case is very much restricted to its facts, but the decision arguably conflicts with the Commissioner’s stated view in GSTR 2002/5 that the term “agreed in writing” in s 38-325 means “that the supplier and the recipient have made a mutual declaration in such form that clearly evidences that they agree that the supply…is a supply of a going concern”.  This is because there was nothing actually signed by the purchaser to the effect that the agreement was the supply of a going concern, and the Tribunal found that it in the particular circumstances certain “unilateral documents” under the hand of the vendor were sufficient.

The facts can be summarised as follows:

  • in December 2009 the applicant and the purchaser executed a contract of sale for the sale of commercial property. At the time there was a tenant of the property on a monthly lease – the contract was expressly subject to the lease.  The Contract did not refer to the property being a going concern.
  • After the contract was signed, there was a dispute between the parties as to whether the sale was a going concern due to there being a only a monthly lease only.
  • Prior to, or at settlement, the applicant provided the purchaser with a tax invoice which contained the words “NO GST (SOLD AS A GOING CONCERN)” and a Goods Statutory Declaration in which the Box was ticked “Yes” in answer to the question “Does the contract relate to the sale of a going concern?”

The Commissioner contended that the parties had not “agreed in writing” that the sale was the supply of a going concern, and that the tax invoice and Statutory Declaration were “unilateral documents”.

The Tribunal found in favour of the applicant on the basis that there was sufficient evidence that the applicant and purchaser agreed in writing that the supply involved a going concern – indeed the Tribunal found that the parties had “incorporated an agreement in writing that the supply involved a going concern”.  The requirement for the agreement to be “in writing” was satisfied by a combination of the contract of sale, the tax invoice and the Statutory Declaration.

The Commissioner’s concern appeared to be that the applicant could not point to a document evidencing an agreement in writing which was signed by the purchaser – the Commissioner accepts that such an agreement need not be found exclusively in the Contract of Sale. One way of looking at the Tribunal’s decision is that by the purchaser proceeding with settlement after receiving the tax invoice and the Statutory Declaration, that the purchaser, by conduct, agreed that the sale was of a going concern in accordance with those documents.  Such an agreement is arguably still an agreement “in writing”, as it is evidenced by the written terms of the tax invoice and the Statutory Declaration. It remains to be seen whether the Commissioner appeals the decision on the basis that an agreement will only be “in writing” where a document evidencing the agreement is executed by both parties.

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