ATO Interpretative Decision

ATO ID 2007/17 (Withdrawn)

Goods and Services Tax

GST and right to a share of net profit in return for a contribution of money - not a supply of money
FOI status: may be released

This ATO ID is withdrawn, as it is no longer necessary. The ATO view expressed in this ATO ID is a straight application of the law and does not contain an interpretative decision. Guidance on the view contained in this ATO ID can be found in GSTR 2006/9 Goods and services tax: Supplies and GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is an entity making a supply of money, that is provided as consideration for a supply of money for the purposes of subsection 9-10(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it contributes an amount to another entity's business in return for a right to a share of the net profit from the other entity's business?

Decision

No. The entity is not making a supply of money, that is provided as consideration for a supply of money for the purposes of subsection 9-10(4) of the GST Act, when it contributes an amount to another entity's business in return for a right to a share of the net profit from the other entity's business.

Facts

The entity enters into an arrangement with another entity (the enterprise operator). Under the terms of the arrangement, the entity agrees to contribute an amount of money as consideration for the right to receive a share of the net revenue of the enterprise operator's business, at a certain rate up to the extent of the contribution amount, and thereafter, at a lesser rate.

The entity is registered for goods and services tax (GST) and the arrangement entered into is connected with Australia.

Reasons for Decision

Subsection 9-10(4) of the GST Act provides that a supply does not include a supply of money, unless the money is provided as consideration for a supply that is a supply of money. In circumstances where subsection 9-10(4) of the GST Act applies, both of the supplies of money are supplies for GST purposes, and each side of the transaction needs to be examined to determine the GST character of the supplies.

In this case, the amount contributed by the entity is not provided as consideration for a supply that is a supply of money. The amount contributed is consideration for the supply of a right to receive a share of the net revenue of the enterprise operator's business, at a certain rate up to the extent of the contribution amount, and thereafter, at a lesser rate. Furthermore, the share of the net revenue that the entity receives as a consequence of the supply of that right is not consideration for the contribution amount.

The arrangement between the entity and the enterprise operator therefore does not involve a supply of 'money for money' to which subsection 9-10(4) of the GST Act applies.

Date of decision: 22 December 2006

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
subsection 9-10(4)

Related ATO Interpretative Decisions
ATO ID 2007/15
ATO ID 2007/16
ATO ID 2007/18

Keywords
Goods and services tax
GST regulations
GST supplies & acquisitions
GST supply

Siebel/TDMS Reference Number: 5135312

Business Line: Indirect Tax

Date of publication: 25 January 2007

ISSN: 1445-2782

history

	Date:	Version:
	22 December 2006	Original statement
You are here	5 May 2022	Archived

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