Private ruling: GST grouping
Published: November 2014

Ruling: Q1: Do you and the unit trusts satisfy the membership requirements in paragraph 48-10(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, you and the unit trusts do satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act.

Relevant facts and circumstances: You are an Australian resident company registered for goods and services tax (GST). You have more than two shareholders and the unit holders of unit trust A are also your shareholders. All of the other unit trusts are 100% owned by unit trust A. Not all of the unit trusts are currently registered for GST. You are aware that most of the membership requirements set out in paragraphs 48-10(1)(c) to (g) of the GST Act are not yet satisfied by either yourself or the unit trusts but, at this stage, you just want confirmation that the membership requirements in paragraph 48-10(1)(a) of the GST Act are satisfied. At this stage, neither you nor the unit trusts have agreed in writing to the formation of a GST group as required by section 48-5 of the GST Act.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 paragraph 48-10(1)(a) | A New Tax System (Goods and Services Tax) Act 1999 subsection 48-10(3) | A New Tax System (Goods and Services Tax) Act 1999 subparagraph 48-15(1)(e)(iia) | A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 48-10.03(2)(b) | A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 48-10.03(3)(e) | A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 48-10.03(4)(b)

Reasons for decision: Summary: Based on the information provided, you and the unit trusts satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act because the requirements in both section 48-15 of the GST Act and regulation 48-10.03 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) have been met. However, you will not be eligible to form a GST group with the unit trusts unless the membership requirements in paragraphs 48-10(1)(c) to (g) of the GST Act are also satisfied and you and the unit trusts agree in writing to the formation of a GST group. | Detailed Reasoning - Detailed reasoning: GST grouping, as outlined in Division 48 of the GST Act, enables a nominated group representative to undertake the GST obligations for a group of entities that are linked through common ownership. Common ownership is one of the membership requirements that must be satisfied to form a GST group and is specifically outlined in paragraph 48-10(1)(a) of the GST Act. This paragraph states: (1) An entity satisfies the membership requirements of a *GST group, or a proposed GST group, if the entity: (a) is: (i) a *company; or (ii) a *partnership, trust or individual that satisfies the requirements specified in the regulations; and … (An asterisk denotes a defined term in the GST Act). Also, of relevance to this case is subsection 48-10(3) of the GST Act which states: (3) A *company does not satisfy the membership requirements of a *GST group, or a proposed GST group, if: (a) one or more other members of the GST group or proposed GST group are not companies; and (b) none of the members of the GST group or proposed GST group that are companies satisfy section 48-15. In this case, the entities that are to be members of the proposed GST group are a company and unit trusts. Therefore, to satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act the requirements in both section 48-15 of the GST Act and regulation 48-10.03 of the GST Regulations need to be met. Section 48-15 of the GST Act deals with the relationship between companies and non-companies in a GST group and provides that a company that is a member of a proposed GST group satisfies this section if for a trust that is a member of the proposed GST group one of the requirements in paragraph 48-15(1)(e) of the GST Act is satisfied. Based on the facts provided, you satisfy subparagraph 48-15(1)(e)(iia) of the GST Act (including subsection 48-15(1A) of the GST Act) because distributions of income or capital of unit trust A are only made to your members (shareholders) and at least two of your members are beneficiaries of unit trust A. The membership requirements for trusts are outlined in regulation 48-10.03 of the GST Regulations. Unit trust A satisfies paragraph 48-10.03(2)(b) of the GST Regulations because distributions of income or capital are only made to beneficiaries that are permitted beneficiaries. That is, paragraph 48-10.03(4)(b) of the GST Regulations provides that for a company that is a member of the GST group, each representative of a shareholder of the company is also a permitted beneficiary if, for a company with more than one shareholder, the beneficiaries of the trust include at least two beneficiaries who are representatives of different shareholders. In this case, every beneficiary of unit trust A will be one of your shareholders and therefore, the requirements of paragraph 48-10.03(4)(b) of the GST Regulations are satisfied. In relation to the other unit trusts, they also satisfy paragraph 48-10.03(2)(b) of the GST Regulations because, as they are wholly owned by unit trust A, distributions of income or capital are only made to unit trust A which is a permitted beneficiary under paragraph 48-10.03(3)(e) of the GST Regulations. Therefore, you and the unit trusts satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act. Consequently, if you and the unit trusts also satisfy the membership requirements in paragraphs 48-10(1)(c) to (g) of the GST Act and enter into a written agreement, you will be eligible to apply in the approved form to form a GST group with the unit trusts.