Tab 2 of 5 · GST
GST and the sale of a business as a going concern
A business sold as a going concern is GST-free only if every one of the ATO’s conditions is met: a written agreement before the sale, a buyer registered or required to be registered for GST, everything needed to keep the business running supplied, the seller running it until the day of sale, and payment. The ATO’s ruling on the subject adds that calling a sale a going concern in writing does not, by itself, make it one.
General information about how the GST rules are written, not tax advice on any purchase. The official place to check is the ATO, including its ruling GSTR 2002/5.
Why a buyer cares
GSTR 2002/5, the ATO’s public ruling on going concerns (dated 16 October 2002 and since revised; the ATO’s legal database holds the consolidated version), gives the buyer’s side in one sentence: the rule means the buyer “does not have to obtain additional funds to cover the GST that would otherwise be included in the price”.
The words matter. The ATO’s plain-language page on the sale of a going concern (last updated 12 July 2023) calls one “a business that is operating and making a profit”. The ruling warns that the ordinary meaning of the term “does not necessarily correspond to the statutory definition”, and it is the statutory definition the ruling works through.
The five conditions, beside the Act
The ATO puts it this way: “The sale of a business as a going concern is GST-free if all the following apply”. Each line sits on a paragraph of section 38-325 of the GST Act.
| The ATO’s wording | The Act, s 38-325 |
|---|---|
| “Before the sale, the buyer and seller agree in writing that the sale is of a going concern.” | “the supplier and the recipient have agreed in writing that the supply is of a going concern” (paragraph (1)(c)) |
| “The buyer is registered or required to be registered for GST.” | “the recipient is registered or required to be registered” (paragraph (1)(b)) |
| “Everything necessary for the business to continue operation is supplied to the buyer.” | “all of the things that are necessary for the continued operation of an enterprise”, supplied by the seller (paragraph (2)(a)) |
| “The seller carries on the business until the day it is sold (date of settlement).” | “the supplier carries on, or will carry on, the enterprise until the day of the supply” (paragraph (2)(b)) |
| “Payment is made for the sale.” | “the supply is for consideration” (paragraph (1)(a)) |
What the ruling adds
GSTR 2002/5 sets out the Commissioner’s view of how those words apply. Five of its points bear on a buyer.
The writing has a deadline
The two parties must agree that the supply is a going concern “on or before the day of the supply”. And where everything is handed to a registered buyer but nothing was agreed in writing, the ruling says “there will not be a GST-free ‘supply of a going concern’”.
The writing is not enough on its own
A written agreement “will not conclusively determine” that there is a going concern if the other requirements are not met, for example if not everything needed to run the enterprise is supplied.
Registration has to be in place, not applied for
For a buyer who is not required to register but chooses to, the ruling says “the mere lodging of an application to be registered will not satisfy” that condition. The registration must take effect on or before the day of the supply.
How the premises can pass
Many businesses run from leased premises, and the ruling says the seller can supply the lease either by assigning it or by surrendering it and helping the buyer into a lease of the same premises by the day of the supply.
An asset alone is not a going concern
Where what is supplied is “merely an asset used in an activity” carried on as an enterprise, its supply is not the supply of a going concern.
The ruling notes that a buyer who intends to make supplies that are neither taxable nor GST-free may be required to make an initial increasing adjustment under section 135-5 of the GST Act. It does not discuss those adjustments itself, so this is a question for the ATO or a tax adviser.
Registering in time
Because the buyer’s registration is one of the conditions, the ATO’s registration rules come into play early. As its registering for GST page states them (last updated 14 September 2026):
- an ABN is needed before registering for GST
- registration is required when a business or enterprise has a GST turnover of $75,000 or more, or when a new business expects to reach that threshold in its first year of operation
- registration is also required, whatever the GST turnover, for taxi or limousine travel for passengers (including ride-sourcing), and the page lists other cases too, such as a non-profit organisation with a GST turnover of $150,000 a year or more
- for a business that fits none of the page’s cases, registering is optional, and one that chooses to register generally must stay registered for at least 12 months
- once registration is required, it has to happen within 21 days.
The buyer’s ABN is on the registrations tab, the contract on the contract tab, and the records behind the sale on the checks tab.
On the seller’s side of a going-concern sale, the ATO notes that a seller may be able to claim input tax credits for GST paid on expenses relating to the sale.