Private ruling: GST grouping
Date of advice: 8 September 2016
Published: November 2016

Ruling: Q1: Will you satisfy subsections 48-7(3) and 48-7(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) by submitting a GST group - notification of forming, changing or cancelling form (notification form) by a certain date specifying the removal of entity A from your GST group? | A1: Yes, you will satisfy subsections 48-7(3) and 48-7(4) of the GST Act by submitting a notification form by a certain date. | Q2: Will the above notification form require the approval of the Commissioner under section 48-71 of the GST Act? | A2: No, the above notification will not require the approval of the Commissioner under section 48-71 of the GST Act. | Q3: Will subsection 48-40(2) of the GST Act apply to treat any supplies by your GST group members to entity A as not being taxable supplies? | A3: Yes, subsection 48-40(2) of the GST Act will apply to treat any supplies by your GST group members to entity A as not being taxable supplies.

Relevant facts and circumstances: You are registered for GST and are the representative member of the GST group of which entity A is a current member. Entity A will be sold and you intend to lodge a completed notification form to notify the Commissioner of entity A's removal from your GST group. The notification form will be lodged by a certain day which is within 21 days of the date of sale.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Subsection 48-7(3) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 48-7(4) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 48-40(2) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 48-70 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 48-71

Reasons for decision: Summary: Division 48 of the GST Act deals with the formation and membership of GST groups. Of relevance to this matter is subsection 48-7(2) of the GST Act which provides that a member cannot be a member of a GST group if it ceases to satisfy the membership requirements. The membership requirements are outlined in section 48-10 of the GST Act and includes the requirement that a company must be part of the same 90% owned group of companies as all of the other companies in the GST group. The term '90% owned group' is defined in section 190-1 of the GST Act and includes when one company has at least a 90% stake in the other company. Under section 190-5 of the GST Act, a company has 'at least a 90% stake' in another company when it controls (either directly or indirectly) at least 90% of the voting power and has the right to receive (either directly or indirectly) at least 90% of any dividends and any capital distributions. According to subsection 48-7(3) of the GST Act, if a member of a GST group no longer satisfies the membership requirements for that GST group, the representative member of the GST group is required to notify the Commissioner in the approved form. Also, in addition to this requirement, subsection 48-7(4) of the GST Act provides that this notice must be given within 21 days after the member no longer satisfies the membership requirements for the GST group. This notification form is an approved form for the purposes of subsection 48-7(3) of the GST Act and the certain date is within 21 days of the date of the sale. Therefore, on the basis of the information provided, if the notification form is lodged by the certain date it will be taken to satisfy the requirements in both subsections 48-7(3) and 48-7(4) of the GST Act, being to notify the Commissioner within 21 days. Section 48-71 of the GST Act deals with the approval by the Commissioner of an early day of effect for forming or changing the membership of GST groups and allows the Commissioner to either approve the nominated date of effect or to approve another date of effect, if considered appropriate. However, when removing a member from a GST group, section 48-70 of the GST Act must also be considered as it sets out the administrative requirements for changing the membership of GST groups. In particular, paragraphs 48-70(1)(d) and 48-70(2)(a) of the GST Act provide that the representative member of the GST group may remove a member by giving notice to the Commissioner in the approved form. Also, as explained in subsection 48-70(4) of the GST Act, it is only if the notification is made after the day the representative member is required to lodge a GST return for the tax period in which the change takes effect that approval by the Commissioner of the nominated date of effect is required. In other words, the Commissioner does not need to approve the nominated date of effect for the change if the notification is made on or before the due date for lodgment of the GST return for the tax period in which the change takes effect. Instead, self-assessment will apply to the change. Subsection 48-40(2) of the GST Act provides that a supply that an entity makes to another member of the same GST group is not treated as a taxable supply. Likewise, there is no entitlement to an input tax credit under subsection 48-45(3) of the GST Act for acquisitions acquired by a group member from another group member. According to subsection 48-70(3) of the GST Act, the removal of a member from the GST group takes effect from the start of the day specified in the notice regardless of whether that day is before, on or after the day on which the notice was given to the Commissioner. Consequently, any supplies by members of your GST group to entity A prior to the date of sale will not be taxable supplies.