The defects and strain of GaN(0001) films as virtual substrate on Si(111) with step-graded Sc2O3(111)/Y2O3(111) buffers were investigated by means of transmission electron microscopy. The misfit dislocation network identified in the interfaces nearly fully compensates the lattice mismatch. Inversion domains and pinholes occur within the closed GaN film. The atomic structure of the inversion domain boundaries is identified. Major parts of the films were found to be N-polar. Threading dislocations were formed as remains from the coalescence of initial GaN islands. Furthermore, the formation of small cubic inclusions is found to be restricted to the vicinity of the interface only.