ATO ID 2003/920: GST and grouping of two fixed trusts from 1 April 2003
Date of decision: 17 June 2003
Business line: Indirect Tax

Issue
Do entity A and entity B, both fixed unit trusts, satisfy the regulatory membership requirement of a GST group for the purposes of section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where:

Decision
Yes, entity A and entity B satisfy the regulatory membership requirement of a GST group for the purposes of section 48-10 of the GST Act.

Facts
Entity A and entity B are fixed unit trusts. The trustee of entity A owns 90% of the issued units in entity B and has the right to receive 90% of any distribution of capital or income by entity B. Neither entity satisfies the requirements of subregulation 48-10.03(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). The entities are registered for Goods and Services Tax (GST), have the same tax periods and account for GST on the same basis. Neither entity belongs to any other GST groups nor do they have any branches that are registered under Division 54 of the GST Act.

Reasons for decision
Summary: The membership requirements of a GST group are set out in section 48-10 of the GST Act. In relation to trusts, each entity must: Entity A and entity B are registered for GST, have the same tax periods, account on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, the entities will satisfy the membership requirements, if they satisfy the requirements specified in the GST Regulations. Regulation 48-10.03 of the GST Regulations specifies the requirements that must be satisfied for a trust to be a member of a GST group. This regulation was amended with effect from 1 April 2003 to allow GST groups to consist solely of trusts. Paragraph 48-10.03(1)(a) of the GST Regulations provides that if the GST group consists only of fixed trusts, the requirements set out in either subregulation 48-10.03(2) of the GST Regulations or regulation 48-10.03A of the GST Regulations must be satisfied. Neither of the entities satisfy the requirements of subregulation 48-10.03(2) of the GST Regulations. Therefore, the group of fixed trusts must meet the requirements set out in regulation 48-10.03A of the GST Regulations to satisfy regulation 48-10.03 of the GST Regulations. Under regulation 48-10.03A of the GST Regulations, for a trust to be a member of a GST group consisting only of fixed trusts, it must be a member of the same 90% owned group as all the other fixed trusts in that group. For two fixed trusts to be members of the same 90% owned group, paragraph 48-10.03A(3)(a) of the GST Regulations requires the trustee of one fixed trust to have either: For a trustee of a fixed trust (the head trust) to have a stake of at least 90% in another fixed trust (the sub-trust), paragraph 48-10.03A(3)(b) of the GST Regulations requires the trustee of the head trust to: The trustee of entity A (head trust) owns 90% of the issued units of entity B (sub-trust) and has the right to receive 90% of any distribution of capital or income of entity B. Therefore, entity A has a 90% stake in entity B. As such, entities A and B are members of the same 90% owned group and both entity A and entity B satisfy the requirements of regulation 48-10.03 of the GST Regulations. Accordingly, entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subparagraph 48-10(1)(a)(ii) Division 54
Related ATO interpretative decisions: ATO ID 2003/921
Subject references: Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods