• Chapter 13: Joint ventures


    During the registration process for ABNs and GST, some potential registrants were unsure as to whether joint ventures could be registered as 'unincorporated associations' included in the meaning of an entity under the ABN Act. Furthermore, confusion has arisen in respect of GST joint ventures and the activities that must be undertaken to meet the participation provisions stated in the legislation.


    Can businesses engaging in electronic commerce activities form a joint venture, or form a GST joint venture?

    Non-interpretative - straight application of the law


    Subsection 51-5(1) of the GST Act states that two or more entities may become participants in a GST joint venture if all of the following apply:

    • the joint venture is for the exploration or exploitation of mineral deposits as defined, or for a purpose specified in the regulations
    • the joint venture is not a partnership
    • each entity satisfies the participation requirements
    • each entity agrees in writing to the formation of the joint venture as a GST joint venture
    • one of the entities is nominated in the agreement to be the joint venture operator
    • the nominated joint venture operator notifies the Commissioner of the formation of the GST joint venture, and
    • if the joint venture operator is not a party to the joint venture agreement, the joint venture operator must nevertheless be registered for GST purposes and account for GST on the same basis as the participants in the joint venture.

    Regulation 51-5.01 of A New Tax System (Goods and Services Tax) Regulations Act 1999 (GST regulations) specifies the additional 'purposes' that may become a GST joint venture. These purposes are:

    • research and development
    • the provision of insurance, other than life insurance
    • fishing
    • agriculture
    • cultivation, or exploitation of timber
    • design, or building, or maintenance, of residential or commercial premises
    • civil engineering, including the design, construction and maintenance of roads, railways, bridges, canals, dams, ports, harbours, airports and similar installations
    • generation, or transmission, or distribution, of electricity
    • transmission, or distribution, of water
    • receipt, or storage, or distribution, of oil and gas products
    • refining, or processing, of oil and gas products
    • beneficiation of minerals and primary metal production, including alloy production
    • charitable activities
    • transportation.

    In addition, each of the entities must satisfy the GST joint venture participation requirements. These requirements are:

    • it must participate, or intend to participate, in the joint venture
    • it must be a party to the joint venture agreement with all the other participants or intended participants
    • it must be registered for GST purposes, and
    • it must account on the same basis as the other participants.

    It is not necessary that the entity be resident in Australia, however, the entity must be registered for GST to satisfy the participation requirements.

    The main effects of having a GST joint venture are:

    • if the joint venture operator makes a supply or acquisition on behalf of a participant in connection with venture activities, the operator is liable to pay the GST and is entitled to the input tax credit (GST Act, sections 51-30; 51-35). It also assumes the effect of any subsequent GST adjustments in relation to those transactions (GST Act, section 51-40)
    • if the joint venture operator makes a supply to a participant in connection with venture activities, that is not a taxable supply and GST will not apply (GST Act, subsection 51-30(2)), and
    • the joint venture operator makes GST returns on behalf of the venture participants (GST Act section 51-50) and makes GST payments or receives refunds of the GST joint venture's net GST amount for each period (GST Act section 51-60). If the representative member does not pay the tax, the ATO can claim it from any of the participants (Taxation Administration Act 1953, section 444-80 of Schedule 1).
    Where a joint entity venture is formed for purposes other than those specified above or the entities do not satisfy the participation requirements, this venture is not considered a GST joint venture and GST must be accounted for by the individual entities within the venture.
    Given the nature of activities that occur over the internet, it is unlikely that entities engaging in electronic commerce activities would currently meet the eligibility requirements specified in the GST Act or the GST regulations to qualify as a GST joint venture.
    Further information

    For more information on joint ventures, refer to:

    End of further information
      Last modified: 12 Jun 2012QC 16385