ATO Interpretative Decision
ATO ID 2002/491
Goods and Services Tax
GST and purpose of a joint ventureFOI status: may be released
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This ATO ID has been amended due to changes to Division 51 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Do the entities, participants in a joint venture (Joint Venture 1), meet the requirements to become the participants in a GST joint venture under subsection 51-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the purpose of Joint Venture 1 is to treat a by-product created by a GST joint venture for mineral exploitation,(Joint Venture 2), so that it can be re-used by Joint Venture 2?
Decision
Yes, the entities meet the requirements to become the participants in a GST joint venture under subsection 51-5(1) of the GST Act where the purpose of Joint Venture 1 is to treat a by-product created by Joint Venture 2 ,so that it can be re-used by Joint Venture 2.
Facts
The entities are participants in Joint Venture 1. The purpose of Joint Venture 1 is to treat a by-product created by Joint Venture 2. Joint Venture 2 is a GST joint venture for the exploitation of mineral deposits.
Joint Venture 1 treats the by-product in order to extract a certain substance from it. Joint Venture 1 then supplies that substance back to Joint Venture 2 for re-use in Joint Venture 2's activities.
Joint Venture 1 is not a partnership and the entities satisfy the GST joint venture participation requirements in section 51-10 of the GST Act. The entities agreed in writing to the formation of a GST joint venture and nominated one of the entities to be the joint venture operator. The nominated joint venture operator notified the Commissioner in the approved form of the formation of the GST joint venture.
The entities are registered for goods and services tax (GST).
Reasons for Decision
Division 51 of the GST Act allows entities engaged in joint ventures to form a GST joint venture if they meet certain criteria. Subsection 51-5(1) of the GST Act provides that entities in a joint venture may become participants in a GST joint venture if:
- (a)
- the joint venture is a joint venture for the exploration or exploitation of mineral deposits, or for a purpose specified in the A New Tax System (Goods and Services Tax) Regulations 2019(GST Regulations); and
- (b)
- the joint venture is not a partnership; and
- (c)
- the entities jointly apply, in the approved form, for approval of the joint venture as a GST joint venture; and
- (d)
- each of those entities satisfies the participation requirements for that GST joint venture; and
- (e)
- each of those entities agrees in writing to the formation of the joint venture as a GST joint venture; and
- (ea)
- one of those entities, or another entity, is nominated, in that agreement, to be the joint venture operator of the joint venture; and
- (ea)
- the nominated joint venture operator notifies the Commissioner, in the approved form, of the formation of the joint venture as a GST joint venture; and
- (f)
- if the nominated joint venture operator is not a party to the joint venture agreement, it must still be registered for GST and account on the same basis as the participants.
The entities in Joint Venture 1 meet the requirements in paragraphs (b) to (f). Therefore, it needs to be determined whether Joint Venture 1 is for the exploration or exploitation of mineral deposits, or for a purpose specified in the GST Regulations.
The by-product treated by Joint Venture 1 and the substance that Joint Venture 1 extracts from that by-product are not minerals. Therefore, it could be considered that Joint Venture 1 is not for the exploration or exploitation of mineral deposits. However, Joint Venture 1 is treating a by-product (that is created by Joint Venture 2 in the exploitation of mineral deposits) in order to extract a valuable substance that will be used again by Joint Venture 2 in its exploitation of mineral deposits.
Therefore, the activities carried out by Joint Venture 1 are integrally linked to the exploitation of mineral deposits that is carried out by Joint Venture 2. As such, Joint Venture 1 is also considered to be for the exploitation of mineral deposits and the requirement in paragraph (a) is satisfied.
The entities in Joint Venture 1 meet all of the requirements to become participants in a GST joint venture under subsection 51-5(1) of the GST Act where the purpose of Joint Venture 1 is to treat a by-product created by Joint Venture 2 so that it can be re-used by Joint Venture 2.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 9 April 2019 | Throughout | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019. |
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
Division 51
subsection 51-5(1)
section 51-10
The Regulations
Keywords
Goods & services tax
GST joint ventures
ISSN: 1445-2782