Q. My client is a pharmacist who proposes to purchase the business of an elderly pharmacist who is retiring. The current business is conducted on a small scale from premises owned by the retiring pharmacist. The business will relocate to a nearby shopping centre six weeks after the sale.
The purchaser will not be taking on any of the staff of the existing pharmacist.
Can the GST going concern exemption potentially apply if none of the existing staff are being taken on?
A. The issue of whether staff need to be ‘transferred’ as part of a sale to satisfy the going concern provision in GST Act s 38-385 is discussed by the Commissioner in GST Ruling GSTR 2002/5 at paragraphs 122-130.
In short, if the staff are essential in the sense that they are key personnel, it may be difficult to show that a supply of a going concern is taking place if efforts are not made to employ those staff in the business. For all other staff, this is merely an indicator of whether a supply of a going concern is being supplied. In general, the lack of a transfer of such staff does not determine whether or not the requirements for a supply of a going concern are met.
Accordingly, it will depend primarily on the importance of the staff to the business.
Topic: Corporations law
Q. As a private company, must we keep hard copies of board minutes or will a PDF version be sufficient?
A. Section 251A(1) of the Corporations Act 2001 (the Act) requires companies to keep minute books with records of:
(a) proceedings and resolutions of meetings of the company’s members;
(b) proceedings and resolutions of directors’ meetings;
(c) resolutions passed by members and directors; and
(d) the making of declarations by the director (where the company is a proprietary company with only one director).
Section 1306 of the Act allows books to be kept by electronic means. However, electronic copies must be capable of reproduction in written form.
Minutes of meetings must also be signed by the chairman. Therefore, any electronic copy of the minutes should include a visible signature (eg a scanned copy of the original minutes).
Topic: Superannuation
Q. Our client is a self-managed superannuation fund that is selling two units, which are being used for commercial purposes. One is zoned commercial/residential and our client’s solicitor has advised our client that it can be treated as residential premises with no GST payable on sale. Is this correct?
A. The issues are, first, whether the property meets the definition of ‘residential premises’ in s195-1 of the GST Act and, second, whether the property is supplied ‘predominantly for residential accommodation’, as required by s40-65.
‘Residential premises’ are defined as “land or a building that is occupied as a residence or for residential accommodation; or is intended to be occupied, and is capable of being occupied as a residence or for residential accommodation …”
Since the units have been used for commercial purposes, the second part of the definition seems to be the relevant one (ie whether the property is intended to be occupied and is capable of being occupied as a residence or for residential accommodation). Whether this is the case will depend on the nature of the premises and the purpose for which it is sold.
If the property is sold as ‘residential premises’, there is likely to be a clawback of the input tax credits claimed under Division 129 of the GST Act.
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