Our clients bought a motel in regional Victoria – the land from one company, the trading business from another. They wanted to buy through two companies of their own. Both contracts were marked as a sale of a going concern, which puts the GST risk on the buyer if the sale does not actually qualify. The structure had to be right before anything was signed, because neither contract allowed a nominee.
An overview of the matter at a glance.
Two related private companies, interstate buyers
Commercial conveyancing - freehold and business purchase
Motel with a licensed restaurant
Regional Victoria
Both contracts settled on the same day, going concern intact
Two sellers, two contracts, and a buyer who needed to be two companies
Our clients live interstate. They were buying an operating motel with a licensed restaurant attached, in a regional Victorian town. It was not one purchase but two. One company owned the land and held it as trustee of its own trust. A second, related company ran the motel as its tenant on a month-to-month lease and was selling the business, the plant and equipment, the goodwill and the forward bookings.
The first letter from the vendors’ solicitors, enclosing the draft contract, raised the point that decided the shape of the whole transaction. Both sales were to be treated as GST-free supplies of a going concern. That works where two sellers each supply their enterprise to one recipient, on the same day, with everything the recipient needs to keep both enterprises running — which meant the land had to come across with the lease intact and neither contract could be assigned or novated. If there were to be two separate buyers, they wrote, the contracts would need further amendment.
There were going to be two buyers. Our clients’ accountant wanted the business held in a company of its own, separate from the company that would hold the land as trustee of their family trust. That is a sensible structure for a business like this one, but it changed the GST analysis from two sellers and one buyer to two sellers and two buyers.
It also had to be settled before signing. Both contracts deleted the nominee provision and barred any transfer, assignment or novation of the purchaser’s interest. Once the contracts were executed, whoever was named as purchaser was the purchaser, and there would be no fixing it later.
Four issues decided whether these acquisitions would hold together.
General condition 19.2(d) of the standard Victorian contract of sale of land says that where the particulars of sale specify the supply is of a going concern and the supply, or part of it, does not satisfy section 38-325 of the GST Act, the purchaser must pay the GST to the vendor in addition to the price. The box does not create the exemption. It allocates the risk of the exemption failing, and it allocates it to the buyer. The business contract carried the same risk but not on the same terms: its GST clause excused the purchaser where the failure was caused by the vendor breaching its own warranty to carry on the business as a going concern until settlement. The land contract has no equivalent carve-out. Two contracts, one transaction, two different GST risk positions — worth knowing which one you are signing.
Section 38-325 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) requires the supplier to supply all of the things necessary for the continued operation of the enterprise and to carry it on until the day of supply, the recipient to be registered or required to be registered for GST, and the parties to agree in writing that the supply is of a going concern. It works supplier to recipient. With two sellers and two buyers there are two separate supplies, and each has to satisfy the section on its own — which meant working out what enterprise each seller was actually supplying.
Special conditions in both contracts deleted the nominee right and prohibited any transfer, assignment or novation of the purchaser's interest. That is standard in commercial contracts and it is there for a reason: substituting a related entity after exchange is one of the ways a going concern claim comes apart. It also meant the client had one chance to name the right entities, and that chance was before execution.
A motel comes with obligations that do not appear on a title search - liquor licensing, food premises registration, pool and spa compliance, fire safety, maintenance contracts, booking systems and forward bookings. Those checks mattered because the purchaser bought the property in its present condition, subject to faults and defects, based on its own inspections and enquiries. General condition 31 still required the vendor to deliver the property in the same condition as at the day of sale, but under the January 2024 contract used here, only up to $5,000 could be held by a stakeholder for a condition claim. That mechanism was removed from the September 2025 edition.
What we did on each acquisition, from contract through to title.
We settled which company would take the land and which would take the business, checked the trust deed and the ASIC records against the names going on the contracts, and had both contracts amended and reissued. Neither contract permitted a nominee, so this could not wait until after exchange.
Each contract now names the other buying company and is conditional on the other contract being entered into at the same time and completed at the same time. An unremedied default under either one gives the innocent party rights under both. That is what kept two sales reading as one transaction.
The lender had started its valuation but had not issued formal approval, and the finance date and the balance of the deposit fell due together. We asked for a two-week extension, obtained the vendor's written consent, and confirmed both contracts unconditional in writing the day approval came through.
We asked the vendors for the fire safety report, a current test and tag report, the asbestos position, the pool and spa barrier compliance certificate, the plant and equipment maintenance contracts and supplier list, the booking system and domain details, and a current liquor licence with the PIN needed to lodge the transfer.
The final inspection found defective flooring in a number of rooms. We ran it under general condition 31 rather than against the as-is special condition, and landed an allowance at settlement instead of the much larger holding the client first wanted, which the contract capped. Both purchases then completed in one PEXA workspace.
10% – the GST that would have been payable on top of the price if the going concern had failed.
The freehold and the business settled on the same day, in the same PEXA workspace, funded by one drawdown. The GST-free going concern treatment held on both contracts – not because a box was ticked, but because the buying entities were correct at execution and the two contracts were drafted to stand or fall together. Using the published rate rather than the client’s figures: GST is 10 per cent of the price, and general condition 19.2(d) makes it the purchaser’s to pay, in addition to the price, if section 38-325 is not satisfied.
The flooring was dealt with as an allowance at settlement rather than by a delay. Settlement moved by less than a week and no penalty interest was paid. On the January 2024 edition that governed this contract, general condition 33 charged the Penalty Interest Rates Act 1983 (Vic) rate plus two percentage points, which was 12 per cent a year; on the September 2025 edition the two point uplift is gone and the rate is the statutory 10 per cent. After settlement we lodged the notices of acquisition with the council and the water authority, and the notice of trust acquisition with the State Revenue Office – required by section 46K of the Land Tax Act 2005 (Vic) within one month of acquisition, and a step that quietly exposes trustee buyers to a backdated land tax surcharge when it is missed.
Six things worth knowing before you sign anything in Victoria.
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