ATO ID 2003/1016: GST and grouping of two or more companies where some of the companies are owned by a holding company
Date of decision: 4 July 2003
Business line: Indirect Tax

Issue
Do entities A, B, C, D, E and F, all companies, satisfy the membership requirements under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the formation of a GST group where:

Decision
No, none of the entities satisfy the membership requirements of a GST group under section 48-10 of the GST Act as they do not belong to the same 90% owned group, they do not account on the same basis and they are not all registered for GST.

Facts
Entities A, B, E and F are registered for GST. Entities C and D are not. Entities B, E and F account for GST on a different basis from entity A. The ownership structure of the entities is shown in the following diagram: Entity A has an individual as the only member (shareholder). Entity A is the only member of entity B and entity C. Entity B owns a 67% membership (shareholding) in entity D and a 50% membership in entity E. Entity F has as its only members two individuals and so is not related to any of the other companies.

Reasons for decision
Summary: The membership requirements of entities proposing to form a GST group are set out in section 48-10 of the GST Act. In relation to companies, each entity must: Same 90% owned group Section 190-1 of the GST Act provides that two companies are members of the same 90% owned group if one of the companies has, at least, a 90% stake in the other company or a third company has, at least, a 90% stake in each of the two companies. Section 190-5 of the GST Act provides that a company (the holding company) has, at least, a 90% stake in another company (the subsidiary company) when it: In this case, entity A (the holding company) owns 100% of both entity B and entity C. Therefore entities A, B and C are members of the same 90% owned group and satisfy this membership requirement. Entity A also owns 67% of entity D and 50% of entity E indirectly through entity B. However this does not represent a 90% stake and entities A, D and E cannot be part of the same 90% owned group. Entity F is wholly owned by two individuals and, as such, cannot be part of the same 90% owned group of companies as entities A, B, C, D, and E. The only entities that potentially could be members of the same GST group are entities A, B and C. GST Registration Entity C is not registered for GST and cannot be a member of a GST group. Entities A and B are registered for GST and can be members of the same 90% owned group. They meet the first two membership requirements of a GST group. Accounting Basis Entities A and B do not account for GST on the same basis as each other and cannot be members of the same GST group. As such, none of the entities satisfy the membership requirements of a GST group under section 48-10 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 48-10 Division 54 section 190-1 section 190-5
Related ATO interpretative decisions: ATO ID 2002/492 | ATO ID 2003/1019
Subject references: Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods