Updated on 19 January 2026
What is the “going concern exemption” to GST?
When a business or commercial property changes hands, Goods and Services Tax (GST) doesn’t always apply. Under certain conditions, the sale can qualify for the “going concern” exemption — meaning the transaction is GST-free. This exemption is designed to make it easier for businesses to be transferred smoothly from one owner to another.
Understanding the “Going Concern” Exemption
The going concern exemption under the A New Tax System (Goods and Services Tax) Act 1999 allows a supply of goods or services made in the course of carrying on a business to be GST-free, provided the business is supplied as a whole, functioning enterprise.
In plain terms, a “going concern” means the business is capable of continuing to operate without significant interruption or change. This includes the transfer of all assets, contracts, licences, and other essentials needed to keep the business running.
The aim of the exemption is to avoid double taxation and ensure the transaction doesn’t trigger unnecessary GST when a buyer is acquiring an entire business, not just individual assets.
How does the “going concern exemption” apply to the sale of commercial property?
The “going concern exemption” applies to the sale of commercial property when the property is sold together with a business that is being carried on at the property. In this case, the supply of the property is considered to be part of the transfer of the going concern, and is therefore exempt from GST. The exemption applies if the following conditions are met:
- The property and business are supplied together as one transaction.
- The buyer intends to continue operating the business after settlement.
- The seller was operating the business immediately before the sale.
- The buyer provides a written declaration stating they are purchasing the business and property to continue running it.
- All assets, leases, and agreements necessary to continue the business are included in the sale.
In many cases, the “business” being carried on is the leasing activity itself – for example, where the property is fully tenanted, and the vendor acts as landlord. In this situation, the ongoing lease is treated as part of the going concern.
If these conditions are met, the sale is GST-free. If the property is sold separately or the buyer doesn’t intend to continue the business, GST will apply.
Can you provide examples of the “going concern exemption” as they relate to the sale of commercial property?
Yes, here are a few examples of how the “going concern exemption” applies to the sale of commercial property:
- Restaurant sale: A restaurant owner sells both the building and the restaurant business. The buyer intends to continue operating it in the same way. → The sale qualifies for the going concern exemption.
- Hotel sale: A hotel and its operations are sold as a package to a new owner who continues running it. → Also exempt from GST under the going concern rules.
- Tenanted commercial property: A commercial building with existing tenants is sold, and the buyer becomes the new landlord. → The sale is GST-free, as the leasing activity itself is a continuing business.
- Vacant property sale: A commercial property is sold without tenants or an ongoing business. → No exemption applies — GST is payable because there’s no going concern to transfer.
In short, the exemption only applies where the business (or the leasing enterprise) continues without interruption from one owner to the next.
What about when commercial property is sold subject to a lease? Does an existing lease on the sale of commercial property satisfy the going concern exemption?
Yes, an existing lease can satisfy the going concern exemption, provided specific conditions are met.
To qualify:
- The property and the lease must be supplied together.
- The tenant’s business continues operating without interruption.
- The buyer acquires the property as a landlord under the existing lease.
- Both parties agree in writing that the sale is a going concern (often recorded in a Special Condition of the contract).
If these elements are in place, the transaction is GST-free. However, if the lease ends before settlement, or if the buyer doesn’t intend to maintain the leasing arrangement, the exemption no longer applies.
What documents are required to evidence that the sale of commercial property was subject to the going concern exemption?
To demonstrate that a sale qualifies for the going concern exemption, the following documentation is usually required:
- A written agreement confirming that the property and business are being sold together as a single supply.
- A written declaration from the buyer confirming their intention to continue the business.
- Evidence that the business was operational at the time of sale — such as financial statements, tax returns, or trading records.
- Proof of the transfer of key assets, licences, and leases.
- Copies of relevant contracts or lease agreements where applicable.
Maintaining clear, written evidence is crucial – as the Australian Taxation Office (ATO) may require documentation to confirm the sale qualifies as GST-free.
Why the Going Concern Exemption Matters
The exemption can significantly improve cash flow for both buyers and sellers by removing the upfront GST cost on large commercial transactions. For investors, it helps maintain consistent lease income and avoids disrupting tenants during ownership transfers.
However, the rules are highly technical. If the transaction is structured incorrectly or documentation is incomplete, the ATO may deny the exemption – leaving one party unexpectedly liable for GST.
Need Help With a GST-Free Commercial Sale?
If you’re buying or selling commercial property and want to ensure the transaction qualifies for the going concern exemption, Haitch Conveyancing can help.
Our experienced property lawyers and conveyancers can:
- Review your contract and advise on GST clauses.
- Draft special conditions to ensure compliance with the exemption.
- Assist with buyer declarations and supporting documentation.
- Coordinate with your accountant or tax adviser to avoid GST issues at settlement.
📞 Call us on (03) 8590 8370 to get tailored advice for your commercial property transaction.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.
