ATO Interpretative Decision
ATO ID 2004/692
Goods and Services Tax
GST and date of effect of revocation of GST group membership approval when member sold one minute before midnight on the last day of a tax period applying to all group membersFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Under section 48-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), can the entity, a company that is a member of a GST group, have the date of effect of revocation of its GST group membership approval as the beginning of the tax period following the tax period in which it is sold, when the sale takes place one minute before midnight on the last day of a tax period applying to all group members?
Decision
Yes, under section 48-85 of the GST Act, the entity can have the date of effect of revocation of its GST group membership approval as the beginning of the tax period following the tax period in which it is sold.
Facts
The entity is a company that is a member of a GST group. The entity is being sold one minute before midnight on the last day of a tax period that applies to all GST group members.
After the sale, the entity will cease to satisfy the membership requirements of a GST group in section 48-10 of the GST Act. The representative member of the GST group has applied to the Commissioner, in the approved form, to revoke the approval of the entity as a member of the group from the beginning of the tax period following the entity's sale.
Reasons for Decision
Under subsection 48-85(1) of the GST Act, the Commissioner must decide the date of effect of any revocation under Division 48 of the GST Act. Subsection 48-85(2) of the GST Act provides that the date of effect may be the day of the decision, or a day before or after that day. However, under paragraph 48-85(3)(a), it must be the beginning of a tax period applying to the members of the GST group in question.
A tax period that applies to a GST group is the first tax period commencing on or after all of the members have satisfied the requirements of a GST group. Therefore, for the date of effect of revocation to be the beginning of a tax period following the period in which a group member is sold, the group member must satisfy the requirements of a GST group at that time and for the whole period of the previous tax period.
If a GST group member is sold during or at the end of a tax period, the date of effect of revocation would be the beginning of that tax period and not the following one. However, if the GST group member satisfies the membership requirements of a GST group until the end of the last day of the tax period, the Commissioner will allow the date of effect to be the beginning of the tax period following the GST group member's sale. If a GST group member fails to satisfy the membership requirements of a GST group for even one day in a tax period, then it cannot group for the whole of that tax period.
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd NSW defines 'day' as 'a period reckoned from midnight to midnight'. Butterworths Australian Legal Dictionary 1997 states that 'A day is normally 24 hours in length of time, and commences at midnight'. Other dictionaries give similar definitions of a day, all being one that starts at midnight and ends at a minute before midnight.
The entity is being sold one minute before midnight on the last day of a tax period that applies to all group members. While the entity will cease to satisfy the membership requirements of a GST group after the sale, the sale of the entity does not occur until the end of the last day of the tax period and as such, the entity satisfies the membership requirements of a GST group for the full tax period.
Therefore, under section 48-85 of the GST Act, the entity can have the date of effect of revocation of its GST group membership approval as the beginning of the tax period following the tax period in which it is sold, when the sale takes place one minute before midnight on the last day of a tax period that applies to all group members.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
Division 48
section 48-10
section 48-85
subsection 48-85(1)
subsection 48-85(2)
paragraph 48-85(3)(a)
Other References:
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd NSW
Butterworths Australian Legal Dictionary, 1997, Sydney
Keywords
Goods and services tax
GST registration
GST groups
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 21 March 2002 | Original statement |
| 6 August 2010 | Archived |