Increasing Adjustments - Sale of Going Concern

Take Care when Buying a New Residential or Commercial Property as “a Going Concern”

Sometimes, a vendor of the property will ask you to register for GST in order to avoid payment of GST on new residential or commercial property.  Section 23-10 of the Act allows a person carrying on an ‘enterprise’ to register for GST whether or not the turnover is above the threshold. Leasing property is an ‘enterprise’ regardless of whether the rent is input taxed (s 9-20(1)(c)).

A problem may arise that, in accordance with s135-5 of the ACT, you may be required to pay an increasing adjustment equal to 1/10 of the purchase price. Residential rent is input taxed as per s40-35. That is only in a case that you use the property wholly making supplies that are neither subject to GST nor GST-free.