Selling commercial property as a going concern: the GST, and what you actually walk away with

A tenanted commercial building can usually be sold GST-free as a going concern if four conditions hold at settlement: the buyer is registered for GST, you both agree in writing, the leases pass to the buyer, and the building is still being leased on the day. Miss one and GST of one-eleventh of the price may be owed, and the contract decides whether that comes out of your pocket or the buyer’s.

Most vendors hear “going concern” once, from their agent, and assume the GST is dealt with. For a sale whose proceeds are already committed to new premises, a bridge or a debt, it’s worth a closer look. The GST position is the single biggest line on the settlement statement that can move after the contract is signed.

When is a commercial property sale a going concern?

The ATO’s guidance on selling a going concern sets out the conditions. Applied to a leased building, they look like this:

Condition	What it means for a tenanted building	Where it goes wrong
The sale is for payment	A normal sale contract	Rarely an issue
Buyer registered (or required to be) for GST	Registration in place on the settlement date	Buyer buying in a new entity that hasn’t registered yet
Written agreement it’s a going concern	A going concern clause in the contract	Clause left out, or a contract that says “plus GST” with nothing else
All things necessary supplied, and the enterprise carried on until the day of supply	The building, the leases and the tenancy documents all pass to the buyer; tenants stay in place	Vacant possession given, a tenant leaves and the space isn’t remarketed, or a lease is only signed at settlement

The key idea is that you’re selling a leasing enterprise, not just a building. The ATO is clear that a sale of property on its own isn’t a going concern. A vacant building, or an owner-occupied building with no lease in place, will generally be a taxable sale.

What if the building is only partly tenanted?

This is the most common grey area. The ATO says a partly tenanted building can still qualify if the vacant part is either actively marketed for lease or under repair or refurbishment, and the leases and agreements are included in the sale.

So if a tenancy falls vacant during the campaign, keep the leasing agent working on it right up to settlement and keep a record of that marketing. Pulling the “For Lease” sign because “the buyer will sort it out” can cost you the exemption.

What about my own business as the tenant?

Many owners hold the building in one entity (a family trust or SMSF, say) and trade from it through their company. If there’s a genuine lease from the owner to the trading company, and that lease passes to the buyer, there’s a leasing enterprise to sell. If the business simply occupies the building without a lease, there usually isn’t.

A sale-and-leaseback where the lease is only granted at settlement is the case most worth testing with your accountant before you sign. If there’s real doubt, a private ruling from the ATO can settle it before the money moves.

Do I charge GST when selling commercial property if it isn’t a going concern?

Usually, yes. The ATO’s page on selling commercial premises explains that a GST-registered vendor selling commercial premises as part of its enterprise is generally liable for GST, unless the going concern exemption applies or the margin scheme can reduce it.

The margin scheme rarely helps a typical commercial vendor. According to the ATO’s eligibility rules, you can’t use it if you bought the property in a fully taxable sale, and you and the buyer must agree in writing before settlement. It mainly comes into play for buildings held since before 1 July 2000 or bought under the margin scheme. So, going concern vs margin scheme for commercial property: for most leased buildings, the going concern exemption is the one that matters.

One thing that doesn’t apply: the GST at settlement withholding regime, where buyers send GST straight to the ATO, covers new residential premises and potential residential land. On a taxable commercial sale, the GST normally reaches you at settlement, and you pay it on your BAS. That timing creates the trap we cover below.

Who pays if the going concern exemption fails?

This is where most of the money is. The vendor is the one liable to the ATO for GST on the sale. If the exemption fails, say because the buyer’s registration lapsed or a tenant left and the space wasn’t marketed, the ATO looks to you for one-eleventh of what you received, whatever the contract says about who “should” pay.

What the contract decides is whether you can get that money back from the buyer:

• Price “plus GST”, with a recovery clause. The usual approach in standard commercial contracts. The price is GST-exclusive, the parties agree it’s a going concern, and if the exemption fails the buyer must pay the GST on top. You’re made whole, as long as the buyer can pay.
• Price “inclusive of GST”, or no recovery clause. If the exemption fails, the GST comes out of the price you already have. On a $3.3m sale, that’s $300k.

Ask your lawyer three questions before exchange: is the price GST-exclusive, does the contract let me recover GST if the going concern treatment fails, and does the buyer warrant that it’s registered and will stay registered until settlement? Then check the buyer’s GST status yourself on ABN Lookup shortly before settlement.

If your next purchase is already relying on these proceeds, it’s sensible to check your options for covering the gap while you’ve still got time to choose.

A worked example: three GST outcomes, three different exits

Illustrative figures only. The tax reserve is a made-up accountant’s estimate.

A company owns a two-tenancy office building and has agreed to sell it for $3.3m. It has already settled on a larger warehouse using a bridge, taking peak debt to $2.6m across both properties. The building’s loan to discharge is $1.2m, selling costs are $66k, and its accountant suggests holding $150k back for income tax on the gain.

	A: GST-free going concern	B: Taxable, “plus GST” contract	C: Taxable, GST-inclusive price
Cash from buyer at settlement	$3.3m	$3.63m	$3.3m
GST owed to the ATO	$0	$330k	$300k
Less discharge and selling costs	$1.266m	$1.266m	$1.266m
Less tax reserve	$150k	$150k	$150k
Usable net proceeds	$1.884m	$1.884m	$1.584m
End debt on the warehouse ($2.6m peak)	$716k	$716k	$1.016m

Column B is the trap. The settlement statement shows $330k more cash than column A, and it’s tempting to put all of it against the bridge. But that money belongs to the ATO, payable with the BAS for the period. Spend it and the company has swapped a bridge for a GST debt. Since 1 July 2025, the general interest charge on ATO debts is no longer tax deductible, so that’s an expensive swap.

Column C is the case to plan for if there’s any doubt about the going concern position and no recovery clause. The difference is $300k of end debt: enough to turn a comfortable long-term loan into a tight one. A careful lender will want the C column to work, or to see the contract wording and tenancy evidence that rules it out.

Try your own figures in the bridging calculator, and see peak debt and end debt for how to read the result.

What should the vendor check between exchange and settlement?

Going concern status isn’t fixed at exchange. It has to hold on the day of settlement, so treat the gap between the two as a period to keep under watch:

1. At exchange: confirm the going concern clause, the GST-exclusive price and the recovery clause. Get a copy of the buyer’s ABN and GST registration.
2. Through the settlement period: keep the tenants in place and keep marketing any vacant space. Don’t agree to early vacant possession or a lease surrender without advice.
3. Four weeks out: confirm your clearance certificate has issued. Since 1 January 2025 the buyer must otherwise withhold 15% of the price, whatever the property’s value.
4. The week before: recheck the buyer’s GST registration on ABN Lookup, and confirm lease assignments, bonds and bank guarantees are ready to hand over.
5. After settlement: report the sale on the right BAS with your accountant, and park any GST collected in a separate account until it’s paid.

Income tax is a separate line again. Our guide to CGT when selling business premises covers the small business concessions and when that bill actually lands.

What does this mean if the sale is your exit?

A commercial sale makes a strong exit because the contract fixes both the price and the date. But a lender, like a careful engineer, works on the load the pier will actually carry. For a sale exit, that means the net proceeds in the slow case, not the headline price.

Before borrowing against the sale, have these ready:

• The signed contract, with the GST and going concern clauses marked.
• The tenancy schedule, current leases and evidence that any vacancy is being marketed.
• The buyer’s GST registration and finance status.
• Discharge figures for the loan on the building.
• Your accountant’s note on the GST position and the expected tax reserve.

If you haven’t sold yet and are deciding the order of moves, our guide on whether to sell first or buy first shows how the GST position fits into that choice.

Your building is sold. Let’s make the far side hold.

Getting the going concern position right protects money you’ve spent years building in that property. The next step is making sure your new premises, your bridge or your debt don’t depend on a figure that could move by a tenth before settlement.

That’s the kind of two-event gap we look at every day. An enquiry takes around 60 seconds, and simply asking leaves your credit file untouched: no credit check happens at this stage. We don’t send your details to a pile of lenders, so you won’t get a run of calls from people you’ve never heard of. One real person reads what you’ve sent, looks at the sale, the contract and the timing, and calls you to talk it through.

Please fill in the form accurately: the sale price, the settlement date, the loan on the building, and whether the contract treats the sale as a going concern. Getting those right means we can match the right structure first time.

Find out where your sale leaves you →