ATO Interpretative Decision
ATO ID 2004/693
Goods and Services Tax
GST and date of effect of revocation of approval of a GST group memberFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 liquidated company that had its approval to be a member of a GST group revoked, have the date of effect of that revocation as the beginning of a tax period after which it entered into liquidation?
Decision
No, under section 48-85 of the GST Act, the entity cannot have the date of effect of revocation of its approval to be a member of a GST group as the beginning of a tax period after which it entered into liquidation.
The date of effect of the revocation is the beginning of the tax period during which the entity entered into liquidation.
Facts
The entity is a liquidated company that has had its approval to be a member of a GST group revoked. The entity entered into liquidation on the last day of a tax period.
The entity is the only member of the GST group that entered into liquidation at that time.
Reasons for Decision
Section 48-85 of the GST Act sets out the date of effect of approval or revocation of approval of GST groups. Under subsection 48-85(1) of the GST Act, the Commissioner must decide the date of effect of any approval or revocation of approval 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) of the GST Act, the date of effect 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 the members have satisfied the requirements of a GST group.
Section 48-10 of the GST Act sets out the membership requirements that must all be satisfied for an entity to become, and remain, a member of a GST group. One of those requirements is that a group member must have the same tax periods applying to it as the tax periods applying to all the other members of the GST group (paragraph 48-10(1)(d) of the GST Act).
Paragraph 27-40(1)(b) of the GST Act provides that where an entity goes into liquidation or receivership or for any reason ceases to exist, the tax period applying to that entity is taken to have ceased at the end of the day before the liquidation.
As the entity entered into liquidation on the last day of a tax period, the entity's tax period is taken to have ceased the day before it entered into liquidation, which is two days before all of the other entities in the GST group (i.e. the last day of the tax period plus the day before). As the entity is the only member of the GST group that entered into liquidation at this time, it does not continue to have the same tax period applying to it as all the other members of the GST group. The tax period of the liquidated entity ended before the tax period of the other members of the GST group.
As the GST Act requires the date of effect of any revocation of approval to be the beginning of a tax period applying to the members of the GST group, the date of effect of the revocation is the beginning of the tax period during which it entered into liquidation.
The date of revocation cannot be the beginning of the tax period after which the entity entered into liquidation as the entity did not satisfy the membership requirements of the GST group for the whole of the tax period in question. 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.
Therefore, under section 48-85 of the GST Act, the entity cannot have the date of effect of revocation of its approval as a member of a GST group as the beginning of a tax period after which it entered into liquidation. The date of revocation is the beginning of the tax period in which it entered into liquidation.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
paragraph 27-40(1)(b)
section 48-10
paragraph 48-10(1)(d)
section 48-85
subsection 48-85(1)
subsection 48-85(2)
paragraph 48-85(3)(a)
Keywords
Goods and services tax
GST special rules
GST groups
GST tax periods
Concluding tax period
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 9 September 2003 | Original statement |
| 15 April 2011 | Archived |
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