Private ruling: Supply of shares
Published: May 2014

Ruling: Q1: Is the supply of shares by you a taxable supply? | A1: No, the supply of shares by you is not a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if you make a supply for consideration, the supply is made in the course or furtherance of an enterprise, it is connected with Australia and you are registered, or required to be registered for GST. Section 23-5 of the GST Act provides that you should be registered if your turnover exceeds the registration turnover threshold. However, section 188-20 of the GST Act provides that you can disregard supplies that are input taxed when calculating your GST turnover. Section 40-5 of the GST Act provides that financial supplies are input taxed, and that the term 'financial supply' is defined in the GST Regulations. Regulation 40-5.09 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) provides that the provision, disposal or acquisition of an interest is a financial supply, if the provision, acquisition or disposal is for consideration, it is in the course or furtherance of your enterprise, it is connected with Australia, and you are registered, or required to be registered for GST and you are a financial supply provider. As you are not registered nor required to be registered for GST, the supply of the shares by you to another entity would not be a taxable supply in accordance with section 9-5 of the GST Act. Therefore no GST will be payable on the supply. It will also not be a financial supply as the requirement of Regulation 40.5-09 is not met either. Note, if you were required to be registered for GST, the supply of the shares by you to the other entity would be an input taxed financial supply in accordance with the GST Regulations and therefore no GST would be payable on the supply.

Relevant facts and circumstances: You are not registered, nor is it required to be registered for GST. You irrevocably offered to sell all of the shares you owned in a related entity. The offer was made to an entity known as ABC Pty Ltd. Consideration was to be provided for the shares. ABC Pty Ltd also granted you a put option to sell all the shares you owned in the related entity for consideration. The share transaction and the put option were connected with a property transaction that took place between ABC Pty Ltd and another entity that is related to you. However, the property transaction has no bearing on the sale of the shares by you to ABC Pty Ltd, except that both transactions must be completed simultaneously. Upon acceptance of the offer or exercise of the put option, you and ABC Pty Ltd will enter into a Share Sale Deed. ABC Pty Ltd will provide the consideration to you upon completion of the sale.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Section 9-40 | Section 40-5 | A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 40-5.09