ATO ID 2001/465: GST and company amalgamations
Date of decision: 9 August 2001
Business line: Indirect Tax

Issue
Is the merging of entity A and entity B, bodies corporate, to become entity C an amalgamation under section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision
Yes, the merging of entity A and entity B to become entity C is an amalgamation under section 195-1 of the GST Act.

Facts
Entity A and entity B are bodies corporate. Entity C is the new entity formed by the merger of entity A and entity B. Entity C is a company. Following the merger, entity A and entity B will cease to exist and the bodies corporate will be integrated into the one company with a newly constituted Board and management structure. The merger of entity A and entity B is governed by Australian legislation.

Reasons for decision
Summary: 'Amalgamation' is defined in section 195-1 of the GST Act, which states that ' amalgamation means any procedure, under an *Australian law or a *foreign law, by which 2 or more *companies amalgamate and continue as one company.' The term 'procedure' is not defined in the GST Act, and therefore, it is given its ordinary meaning. The Macquarie Dictionary 1997 defines 'procedure' as: '1. the act or manner of proceeding in any action or process; conduct. 2. a particular course or mode of action. 3. mode of conducting legal, parliamentary, or other business, especially litigation and judicial proceedings.' In this case, the ordinary meaning of 'procedure' is met as the merging of entity A and entity B into entity C and the subsequent dissolution of entity A and entity B are particular courses of action. 'Australian law' is defined in section 195-1 of the GST Act as having the meaning given by section 995-1 of Income Tax Assessment Act 1997 , which provides that Australian law means a Commonwealth law, a State law or a Territory law. As the merger of entity A and entity B is governed by Australian legislation , the procedure will be one under an Australian law. 'Company' is defined in section 195-1 of the GST Act to include a body corporate. As entity A and entity B are bodies corporate, they both satisfy the definition of a company. The term 'amalgamate' is not defined in the GST Act and therefore it should take its ordinary meaning. The Macquarie Dictionary 1997 defines 'amalgamate' as '1. to mix so as to make a combination; blend; unite; combine: to amalgamate two companies.' The Butterworths Australian Legal Dictionary defines an 'amalgamation' as 'a joining, merging or union of two separate things to create a new thing.' The merger of entity A and entity B to form entity C is a 'combination', 'joining, merging or union'. The definition of amalgamation in the GST Act, stated above, requires that the amalgamated companies 'continue as one company'. Following the amalgamation, entity A and entity B cease to exist and both companies will be integrated into the one company with a newly constituted Board and management structure, being entity C. Thus, the amalgamated companies will continue as one company. In conclusion, the merger of entity A and entity B to form entity C will come about through a procedure under an Australian State law whereby two existing companies will be merged and will continue as one company. The merger of entity A and entity B to form entity C merger is an 'amalgamation' under section 195-1 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 195-1
Other references: The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales; and Butterworths Australian Legal Dictionary, 1997, Butterworths
Subject references: Goods & services tax GST company amalgamations