ATO ID 2002/995: GST and grouping of two trusts
Date of decision: 5 March 2002
Business line: Indirect Tax

Issue
Do the entities, unit trust A and unit trust B, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when they apply to form a GST group?

Decision
No, unit trust A and unit trust B do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act when they apply to form a GST group.

Facts
Unit trust A and unit trust B are Australian resident unit trusts. Both entities have jointly applied to the Commissioner, in the approved form, for approval as a GST group. Both unit trust A and unit trust B have the same beneficiaries, a company and an individual, to whom the respective trustees of both unit trusts will be making distributions of income and/or capital. Neither beneficiary is a proposed member of the GST group. Neither beneficiary is a charitable institution, a trustee of charitable fund, or a gift-deductible entity.

Reasons for decision
Summary: Section 48-5 of the GST Act sets out the conditions that must be satisfied for the Commissioner to approve two or more entities as a GST group. In particular, paragraph 48-5(1)(b) of the GST Act requires that each of the entities applying to be part of the GST group must satisfy the membership requirements for that GST group. The general membership requirements of a GST group are set out in section 48-10 of the GST Act. For a trust to meet the membership requirements of a GST group, subparagraph 48-10(1)(a)(ii) of the GST Act provides that the trust must also satisfy the conditions listed in regulation 48-10.03 of the GST Regulations. Subregulation 48-10.03(2) of the GST Regulations provides that for a trust to be a member of a GST group, the trustee: There are no companies in the proposed GST group, only unit trusts A and B. Therefore, the first limb of subregulation 48-10.03(2) of the GST Regulations does not apply. Accordingly, it is necessary to consider whether unit trust A and unit trust B satisfy the membership requirement under the second limb of subregulation 48-10.03(2) of the GST Regulations. For the purposes of the second limb of subregulation 48-10.03(2) of the GST Regulations, subregulation 48-10.03(3) of the GST Regulations provides that each of the following is a permitted beneficiary: Both unit trust A and unit trust B have the same beneficiaries, a company and an individual, to whom the respective trustees of both unit trusts will be making distributions of income and/or capital. Neither the company nor the individual are members of the proposed GST group, a charitable institution, a trustee of a charitable fund, a gift-deductible entity, or a family member of an individual who is a member of the GST group (as the GST group members are both unit trusts). Therefore, unit trust A and unit trust B do not satisfy the membership requirement under the second limb of subregulation 48-10.03(2) of the GST Regulations because the respective trustees of both unit trusts will be making distributions to beneficiaries that are not permitted beneficiaries. As neither unit trust A nor unit trust B satisfy the conditions listed in regulation 48-10.03 of the GST Regulations, they do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act when they apply to form a GST group.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 48-5 paragraph 48-5(1)(b) section 48-10 subparagraph 48-10(1)(a)(ii)
Subject references: Goods & services tax GST special rules GST groups