Commissioner issues Decision Impact Statement for SDI Group Pty Ltd

Yesterday the Commissioner issued a Decision Impact Statement for the decision of the Tribunal in SDI Group Pty Ltd and Commissioner of Taxation [2012] AATA 763 where the Tribunal 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.  My post discussing the decision can be found here.

Before the Tribunal 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 prepared by the vendor referring to the sale being of a going concern 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.

In the Decision Impact Statement the Commissioner accepts that the finding of the Tribunal was open on the evidence and considers that the decision does not differ in principle from the requirements in GSTR 2002/5 ‘Goods and services tax: when is a ‘supply of a going concern’ GST-free.  Paragraph 181 of the Ruling states as follows:

The term ‘agreed in writing’ means that the supplier and the recipient have made a mutual declaration in such form that clearly evidences that they agree that the supply, being the supply under an arrangement of everything necessary for the continued operation of the enterprise, is a ‘supply of a going concern’.

Before the Tribunal, the concern of the Commissioner appeared to be that the applicant could not point to a document evidencing an agreement in writing which was signed by the purchaser, the only documents available having been prepared and executed by the supplier.  The Decision Impact Statement deals with the finding of the Tribunal that the parties nevertheless “agreed in writing” that the sale was of a going concern as follows:

The ATO believes that it is the Tribunal’s view that, at the time the recipient executed the contract, the parties intended and agreed in writing that the supply was of a going concern.  Further, by the time of settlement, the parties had confirmed, through further correspondence, that intention.

We also believe that the decision does not support a view that unilateral documents are sufficient to constitute an agreement in writing as contemplated by paragraph (c) of subsection 38-325(1) of the GST Act.

I would agree with the Commissioner’s view that “unilateral documents” are not sufficient to constitute an agreement in writing.  However, what the decision of the Tribunal does appear to establish (and is arguably accepted by the Commissioner in the Decision Impact Statement) is that it is not necessary that each party actually sign a written agreement that the sale is of a going concern and that a document prepared by only one party may be sufficient to “evidence” an agreement in writing.  This may particularly be the case where such a document is provided by one party to the other party prior to settlement – for example, a tax invoice, a statutory declaration for stamp duty purposes, a settlement statement or even simply a letter of confirmation from the vendor.