7.a.17. Where two or more people have an expense sharing arrangement whereby common expenses are paid from a shared bank account, is there an entity (eg: an unincorporated association of persons or a partnership) that has to register for GST?

For source of ATO view, refer to:

• Part 3 of GSTR 2006/9 – Goods and services tax: supplies
• MT 2006/1 – The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number.

In most cases, each person in an expense sharing arrangement as outlined above,will need to be separately registered for GST.

The circumstances where an unincorporated association of persons will be considered to be carrying on an enterprise are discussed in Miscellaneous Taxation Ruling MT 2006/1.

Paragraph 50 of MT 2006/1 details some of the characteristics of an unincorporated association. An example of a model train club satisfying these characteristics is detailed in paragraphs 55-56.

By contrast, paragraphs 57-58 of MT 2006/1 provide an example of an expense sharing arrangement that does not amount to an unincorporated association of persons. It is understood that in most cases a contractual arrangement exists between the persons in the expense sharing arrangement. There is not a separate entity that has a continuing identity separate to that of the individual members. Therefore an unincorporated association will not exist. Each of the persons in the expense sharing arrangement will need to be separately registered for GST purposes where the necessary registration requirements are satisfied.

This means that where expenses are paid from a shared bank account but the parties to the account do not meet the requirements of a partnership, the input tax credits are generally claimed in proportion to the liability of those expenses. Where only one party to the account has a liability to pay the expense, that person is entitled to the input tax credits.

For example:

• two doctors (A and B) have an expense sharing contract/agreement
• both are individually registered for GST
• the business premise is leased by A from the building owner
• all tax invoices in relation to the lease are made out to A, and
• expenses are paid through a shared bank account.

In this situation, A makes the creditable acquisition of the premises from the lessor and is entitled to claim all the input tax credits on the lease payments. A simultaneously makes a taxable supply of the premises to B.

Normal attribution rules apply in relation to the taxable supply (from A to B) and the creditable acquisition (by B from A). If B is entitled to the input tax credits in relation to the acquisition of part of the premises from A, subject to the normal rules that B must hold a tax invoice (from A).