ATO Interpretative Decision

ATO ID 2003/919

Goods and Services Tax

• This ATO ID contains references to provisions of the A New Tax System (Goods and Services Tax) Regulations 1999, which have been replaced by the A New Tax System (Goods and Services Tax) Regulations 2019. This ATO ID continues to apply in relation to the remade Regulations.

  A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available.

  This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010.

Issue

Does entity D, a partnership, satisfy the regulatory membership requirements of a GST group for the purposes of subparagraph 48-10(1)(a)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) with any of the partnerships in an existing GST group, where:

•

entity D consists of Individual M and Individual Z, and

•

the existing GST group consists of:

-

entity A, a partnership consisting of Individual M, Individual Y and Individual Z,

-

entity B, a partnership consisting of Individual Y and Individual Z, and

-

entity C, a partnership consisting of Family Trust M and Company Z?

Decision

Yes, entity D satisfies the regulatory membership requirements of a GST group for the purposes of subparagraph 48-10(1)(a)(ii) of the GST Act with either entity A or entity C.

Facts

Entity D consists of two partners: Individual M and Individual Z.

Entities A, B and C are partnerships that are members of an existing GST group.

Entity A consists of three partners: Individual M, Individual Y and Individual Z.

Entity B consists of two partners: Individual Y and Individual Z.

Entity C consists of two partners: Family Trust M and Company Z. Family Trust M is a family trust (paragraph 48-10.02(6)(a) of the GST Regulations for the definition of the term 'family trust') of Individual M and Company Z is a family company (paragraph 48-10.02(6)(b) of the GST Regulations for the definition of the term 'family company') of Individual Z.

Entity D is a partnership registered for goods and services tax (GST) and has the same tax periods that apply to entities A, B and C. These four entities also account for GST on the same basis. Entity D does not belong to any other GST group and does not have any branches that are registered under Division 54 of the GST Act.

Reasons for Decision

Section 48-10 of the GST Act sets out the membership requirements of a GST group. In relation to partnerships, each entity must:

•

satisfy the requirements specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

•

be registered for GST

•

have the same tax periods applying to it as the tax periods applying to all the other members of the GST group

•

account on the same basis as all the other members of the GST group

•

not be a member of any other GST group, and

•

not have any branch that is registered under Division 54 of the GST Act.

Entity D is registered for GST, has the same tax periods and accounts on the same basis as the GST group members, is not a member of another GST group and has no branches registered separately for GST. Therefore, entity D will satisfy the membership requirements of section 48-10 of the GST Act, if it satisfies the requirements specified in the GST Regulations.

Regulatory membership requirements

Regulation 48-10.02 of the GST Regulations specifies the requirements that must be satisfied for a partnership to be a member of a GST group.

Subregulation 48-10.02(2A) of the GST Regulations states:

If the GST group consists only of partnerships:

there are no further requirements for one of the partnerships; and

each other partnership must satisfy the requirements of subregulation (5).

Entities A, B and C met the grouping requirements and had formed a GST group. That is, one of those entities is a member partnership because of the operation of paragraph 48-10.02(2A)(a) of the GST Regulations and the other entities satisfied the application or repeated application of subregulation 48-10.02(5) of the GST Regulations.

Entity D must satisfy all of the requirements of subregulation 48-10.02(5) of the GST Regulations to consider grouping with any other partnership. In this regard, the requirements centre on a particular partnership being the partnership on which the relationships are tested - namely the candidate partnership. Generally, any of the partnerships can be regarded as either the member partnership or the candidate partnership. However, in this case it is more appropriate to consider entity D as the candidate partnership. The following tests are applied with entity D as the candidate partnership.

Paragraph 48-10.02(5)(a) of the GST Regulations

This paragraph is satisfied if the member partnership is a member of the group because of either:

•

the operation of paragraph 48-10.02(2A)(a) or subregulations 48-10.02(3), 48-10.02(3A) or 48-10.02(4) of the GST Regulations, or

•

the application, or repeated application, of subregulation 48-10.02(5) of the GST Regulations.

Entities A, B and C are member partnerships of the GST group because each entity has already satisfied either subregulation 48-10.02(2A) and subparagraph 48-10.02(5)(a)(i) or subparagraph 48-10.02(5)(a)(ii) of the GST Regulations. Therefore paragraph 48-10.02(5)(a) of the GST Regulations is satisfied.

Paragraph 48-10.02(5)(b) of the GST Regulations

This paragraph requires that each partner in the candidate partnership (entity D) is an individual, a family trust of an individual or a family company of an individual.

The partners in entity D are two individuals and this requirement is satisfied.

Paragraph 48-10.02(5)(c) of the GST Regulations

To meet this requirement, for each partner in the candidate partnership, there must be a partner in the member partnership that is listed in this provision.

In this case, this requirement is met through more than one membership partnership:

Entity A

•

Individual M is a partner in both entity D, the candidate partnership, and entity A, a member partnership

•

Individual Z is a partner in both entity D, the candidate partnership, and in entity A, a member partnership

As Individuals M and Z (the only partners of entity D) are common to both entity D and entity A, paragraph 48-10.02(5)(c) of the GST Regulations is satisfied through entity A.

Entity C

•

Individual M is a partner in entity D, the candidate partnership. Family Trust M is a partner in entity C, a member partnership. Family Trust M is the family trust of Individual M;

•

Individual Z is a partner in entity D, the candidate partnership. Company Z is a partner in entity C, a member partnership. Company Z is the family company of Individual Z.

Family Trust M is the family trust of Individual M and Company Z is the family company of Individual Z. That is, each of the partners of entity D is represented by an entity of the type listed in paragraph 48-10.02(5)(c) of the GST Regulations as a partner in entity C. Therefore paragraph 48-10.02(5)(c) of the GST Regulations is also satisfied through entity C.

The requirement in paragraph 48-10.02(5)(c) of the GST Regulations is not met for entity B because Individual M of entity D is not represented by either of the entity B partners.

On this basis, either entity A or entity C could be the member partnership for the purposes of entity D satisfying paragraph 48-10.02(5)(c) of the GST Regulations.

Entity B is no longer considered as the member partnership for the reason stated above.

Paragraph 48-10.02(5)(d) of the GST Regulations

To meet this requirement, at least two of the partners in the candidate partnership must satisfy paragraph 48-10.02(5)(c) of the GST Regulations through different partners in the member partnership. That is, the partners in entity D, Individual M and Individual Z, must satisfy paragraph 48-10.02(5)(c) of the GST Regulations through different partners in the member partnership (entity A or entity C).

In relation to member partnership entity A:

Individual M satisfies this requirement through being a partner in entity A, whereas Individual Z satisfies this through also being a partner in entity A. That is, they have both satisfied this through different partners in entity A.

In relation to membership partnership entity C:

Individual M satisfies this through Family Trust M, whereas Individual Z satisfies this through Company Z. That is, they have both satisfied this through different partners in entity C.

Paragraph 48-10.02(5)(d) of the GST Regulations is satisfied.

Therefore, the candidate partnership, entity D, satisfies the requirements of subregulation 48-10.02(5) of the GST Regulations when either entity A or entity C is the member partnership. As such, regulation 48-10.02 of the GST Regulations is satisfied.

Entity D fulfils the membership requirements of the GST group under section 48-10 of the GST Act. As it is joining an already established GST group, there is no further need to discuss the other members' satisfaction of their membership requirements.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 48-10
   subparagraph 48-10(1)(a)(ii)
   Division 54

Keywords
Goods and services tax
GST special rules
GST branches
GST groups
GST regulations
GST tax periods

Siebel/TDMS Reference Number:  3583320

Business Line:  Indirect Tax

Date of publication:  17 October 2003

ISSN: 1445-2782