Private ruling: GST and Division 165 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
Published: December 2014

Ruling: Q1: Do the anti-avoidance provisions in Division 165 of the GST Act apply to the proposed arrangement? | A1: No | Q2: If the answer to question 1 is yes, would the Commissioner seek to make a declaration to negate a GST benefit under section 165-40 of the GST Act where the proposed arrangement was implemented? | A2: Not applicable

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. All legislative references in this ruling are to the GST Act unless otherwise stated. You carry on a business. You intend to implement a scheme. There are commercial benefits to the scheme, including financial and administrative savings.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999, Division 165

Reasons for decision: Summary: For Division 165 to apply, the following four elements are required: • One or more of the steps in the arrangement is a 'scheme' • An entity (the avoider) gets a GST benefit from the scheme • The GST benefit is not attributable to the making of a choice, election, application or agreement that is expressly provided for by the GST law, and • It is reasonable to conclude, taking account of the twelve matters in subsection 165-15(1) that either an entity entered into the scheme with the sole or dominant purpose of getting a GST benefit from the scheme, or the principal effect of the scheme is that the avoider gets a GST benefit from the scheme. | Detailed Reasoning - Scheme: Subsection 165-10(2) defines a 'scheme' as: a) any arrangement, agreement, understanding, promise or undertaking: (i) whether it is expressed or implied; and (ii) whether or not it is, or is intended to be, enforceable by legal proceedings; or b) any scheme plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. It is submitted that the arrangement would satisfy the broad definition of a scheme. | Detailed Reasoning - GST Benefit: An entity obtains a GST benefit from a scheme if an amount that is payable to the entity under the GST Act apart from this Division is, or could reasonably be expected to be, larger than it would be apart from the scheme or a part of the scheme: paragraph 165-10(1)(b). It is therefore necessary to predict what would have, or what could reasonably be expected to have, occurred had the relevant scheme not been entered into or carried out. This prediction is referred to as the counterfactual and it must be sufficiently reliable for it to be regarded as reasonable. On the information provided, the scheme gives rise to a GST benefit to you under paragraph 165-10(1)(d). | Detailed Reasoning - The exclusion: We do not consider that the GST benefit obtained from the scheme is attributable to the making, by any entity, of a choice, election, application or agreement that is expressly provided for by the GST law. The benefit is attributable to the sequence of steps that make up the relevant scheme. | Detailed Reasoning - Conclusion: Division 165 must be considered on a case by case basis to determine whether it would be concluded that the dominant purpose or principal effect of the scheme would be to get a GST benefit. This requires an objective assessment of the scheme against the twelve matters set out in subsection 165-15(1). You have provided significant commercial imperatives in support of the arrangement. Having considered the material provided in support of your ruling request, the Commissioner considers that given the unique factual circumstances outlined in the ruling request and the additional information provided to date, that the dominant purpose or principal effect of the scheme could not be said to be the obtaining of a GST benefit. Therefore, the anti-avoidance provisions in Division 165 do not apply to the proposed scheme.