Edited version of your private ruling

Authorisation number: 1012569095385

Ruling

Subject: GST group and gambling supplies

Question 1

For the purposes of Divisions 48 and 126 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), in determining the GST payable to be reported for gambling supplies made by various members of a GST group, are you, as the representative member of that GST group, required to calculate one single global GST amount taking into account the total amounts wagered with each of the GST group members and deducting the sum of the total monetary prizes paid by each of the group members?

Answer

No, each member of the GST group that makes gambling supplies calculates its global GST amount under section 126-10 of the GST Act. Under Division 48 of the GST Act, the GST group representative member calculates the GST payable, on behalf of the group.

Relevant facts and circumstances

You carry on an Australian-based bookmaking business, and provide wagering opportunities to customers situated both in Australia and overseas.

You are registered for GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 48

A New Tax System (Goods and Services Tax) Act 1999 Division 126

Reasons for decision

All legislative references in this ruling are to the GST Act unless otherwise stated.

Section 45-1 is an explanatory section for Chapter 4. It provides that the special rules apply only in particular circumstances, and are generally quite limited in their scope. They modify the application of the basic rules for GST in Chapter 2. Section 45-5 provides that the provisions of Chapter 4 override those of Chapter 2, but only to the extent of any inconsistency.

GST group treated as a single entity

Subsection 48-40(1) provides that the GST payable on any taxable supply that an entity makes and that is attributable to a tax period during which the entity is a member of a GST group is payable by the representative member and is not payable by the entity that made it (unless the entity is the representative member). The GST must be first payable by the entity to have this provision apply to it. The provision does not deem the supply to be that of the representative member, nor does it deem there to be, for GST purposes, one entity.

Additionally, Subsection 48-40(3) provides that the section has effect despite section 9-40. This is directed at the member making the supply. The liability moves to the representative member but does not make the supply that of the representative member.

Likewise, subsection 48-45(1) provides that if an entity makes a creditable acquisition, the GST credit that is attributable to a tax period during which the entity is a member of a GST group is an entitlement of the representative member. The entity making the acquisition is not entitled to the GST credit on the acquisition (unless the entity is the representative member).

Subsection 48-45(2) provides that, in deciding for subsection (1), whether an acquisition by an entity is a creditable acquisition, the acquisition is treated as being for a creditable purpose if, and only if, it would be so treated if the GST group was treated as a single entity, and not treated as a number of entities corresponding to the members of the GST group.

Goods and Services Tax Ruling GSTR 2013/1 which is about GST and tax invoices states at paragraphs 99 and 100:

99. Where the supplier is a member of a GST group, section 48-40 makes the representative member liable to pay the GST. However, the member is the entity that makes the taxable supply…

100. Similarly, the representative member is entitled to the input tax credit under section 48-45, although a member of the group is the entity that makes the creditable acquisition….

It is the group member that makes the taxable supply or creditable acquisition. A GST group member is required to determine their GST payable and their GST credits, even though the GST is payable by the representative member and it is the representative member that is entitled to the GST credits.

Sections 48-45 and 48-55 both provide that for certain purposes, a GST group is treated as a single entity. However it is clear in these sections that this is only for 'certain purposes' and the group is not treated as a single entity for all purposes of the GST Act.

In particular, subsection 48-55(1) provides that a GST group is treated as a single entity for the purposes of working out:

· the amounts of input tax credits to which the representative member is entitled

· whether the representative member has any adjustments, and

· the amounts of any such adjustments.

It is evident that the single entity approach also does not apply to other provisions of the GST Act. It is the entity that makes the taxable supply that is responsible for issuing the tax invoice. Likewise, the tax invoice for a creditable acquisition generally needs to have enough information to clearly ascertain the identity or ABN of the recipient of the supply, with a specific provision in section 48-57 required to modify the general rule in relation to this.

Additionally, the following comments were made in the Administrative Appeals Tribunal [2010] AATA 497 at paragraph 32 regarding GST groups:

32. ….The GST system does not have a single entity style rule of the kind provided for in part 3-90 of the Income Tax Assessment Act 1997 (Cth). Particular, and it might be observed, piecemeal, provision is made in the GST Act for dealing with, or ignoring, some, but not all, transactions that occur within a GST group. These provisions, and the effect they produce, can be described in the terms referred to in the Explanatory Memorandum. These references in the Explanatory Memorandum are not a warrant for advancing a single entity concept that would allow the term "your acquisition" to be construed as an acquisition by another entity…

Gambling supplies and Division 126

There is no provision in Division 48 that provides that a 'carried forward loss' under section 126-15, of a member in the GST group, can be added to the total monetary prizes of another member of the GST group. There is also no provision to provide that members in a GST group can add together their 'total amounts wagered' to arrive at a 'global GST amount'.

As GST groups are only treated as a single entity where specifically provided for, such as, in section 48-45, then it needs to be considered how the gambling provisions in Division 126 apply where a gambling supply is made by a member of a GST group.

Basic rules

GST is payable on taxable supplies and entitlements to input tax credits arise on creditable acquisitions. Amounts of GST and amounts of input tax credits are set off against each other to produce a net amount for a tax period. The net amount for a tax period is the amount that the entity must pay to the Commonwealth, or the Commonwealth must refund to the entity, in respect of a tax period.

Sections 9-40 and 11-20 state:

You must pay the GST payable on any *taxable supply that you make.

and

You are entitled to the input tax credit for any *creditable acquisition that you make.

(* Asterisked terms are defined in the Dictionary in section 195-1).

Section 195-1 states the following in relation to 'you':

you: if a provision of this Act uses the expression you, it applies to entities generally, unless its application is expressly limited.

Under section 17-5 the net amount for a tax period is GST minus input tax credits.

Section 17-15 provides for working out net amounts using approved forms. Paragraph 6.26 of the Explanatory Memorandum to the Indirect Tax Legislation Amendment Bill 2000 states:

6.26 A GST registered entity must give to the Commissioner a GST return for each tax period. This return must, among other things, be in the approved form and show the entity's net amount for the tax period.

It is each entity that has a net amount.

If an entity is registered it must give to the Commissioner a GST return for each tax period whether or not:

· its net amount is zero, or

· it is liable for GST on any taxable supplies that are attributable to the tax period.

However, section 48-60 provides that if an entity is a member of a GST group during the whole of a tax period, it is not required to give the Commissioner a GST return for that tax period, unless it is the representative member of the group during that period.

Special rules - taxable supplies involving gambling

Under section 126-35 a gambling supply is a taxable supply.

Section 126-1 states:

126-1 What this Division is about

Gambling is dealt with under the GST by using a global accounting system that provides for an alternative way of working out your net amounts by incorporating your net profits from taxable supplies involving gambling.

Subsection 126-5(1) refers to 'if you are liable for GST on a gambling supply' and under section 126-35, gambling supply is a taxable supply involving the supply of a ticket, acceptance of a bet etc. It is the entity that supplies the ticket or accepts the bet that is making the gambling supply. Nothing in Division 126 suggests that the representative member of a GST group takes on these actions and nothing in Division 48 suggests that the representative member of the GST group takes on the transactions (supplies) of a member.

Subsections 126-10(1) and (2) state:

126-10 Global GST amounts

(1) Your global GST amount for a tax period is as follows:

(Total amount wagered -- Total monetary prizes) x 1/11

where:

total amounts wagered is the sum of the *consideration for all of your *gambling supplies that are attributable to that tax period.

total monetary prizes is the sum of:

(a) the *monetary prizes you are liable to pay, during the tax period, on the outcome of gambling events (whether or not any of those gambling events, or the *gambling supplies to which the monetary prizes relate, take place during the tax period); and

(b) any amounts of *money you are liable to pay, during the tax period, under agreements between you and *recipients of your gambling supplies, to repay to them a proportion of their losses relating to those supplies (whether or not the supplies take place during the tax period).

For the basic rules on what is attributable to a particular period, see Division 29.

(2) However, your global GST amount is zero for any tax period in which total monetary prizes exceeds total amounts wagered.

…

(4) Your global GST amount for a tax period may be affected by sections 126-15 and 126-20.

Sections 126-15 and 126-20 deal with the effect of losses carried forward and bad debts, in relation to total monetary prizes. The effect is not a reduction directly of an amount of GST payable but an amount added to an entity's total monetary prizes for the next tax period. It is only then that 1/11^th, that is an amount of GST payable, can be the subject of Subdivision 48-B.

Unless the representative member of a GST group itself makes taxable supplies involving gambling then it doesn't have:

· gambling supplies to calculate 'total amounts wagered'

· 'total monetary prizes' - it doesn't have monetary prizes that it is liable to pay on the outcome of gambling events or money that it is liable to pay under agreements between it and recipients of gambling supplies, and

· a 'global GST amount'.

The 'global GST amount' is effectively the amount of GST payable by an entity on its gambling supplies.

When an entity is liable for GST on a gambling supply, its net amount for the tax period is its 'global GST amount' plus other GST (section 9-40) minus input tax credits (section 11-20).

Section 126-5 has effect despite section 17-5.

An entity that makes gambling supplies calculates its GST liability for those gambling supplies using the formula contained in section 126-10. It then calculates its net amount under section 126-5 which requires a calculation of other GST payable (on taxable supplies other than gambling supplies) and entitlements to input tax credits.

Group members are not treated as a single entity for the purposes of Division 126. Therefore, the formula to calculate GST payable on gambling supplies in section 126-10 applies at the member level. Each group member that makes gambling supplies is required to calculate the GST payable on those supplies by using section 126-10.

It is the member entity that:

· makes gambling supplies under section 126-35

· receives consideration for those gambling supplies under section 126-10

· has a global GST amount under section 126-10

· may have losses to carry forward under section 126-15, and

· is not required to issue a tax invoice for its taxable supplies that are gambling supplies under section 126-33.

Each member is also required to calculate the GST payable on other taxable supplies and the input tax credits to which it would be entitled.

There is no basis for an entity, other than the entity that makes gambling supplies, to factor in the losses forward of another entity in determining the GST payable that becomes GST payable by the representative member of a GST group.

The GST group representative is merely responsible for paying the GST for the group and lodges the GST return on behalf of the GST group.

Further information

Generally a supply made by a member of a GST group to another member is treated as if it is not a taxable supply. Paragraph 48-40(2)(a) states:

(2) However:

(a) a supply that an entity makes to another *member of the same *GST group is treated as if it were not a *taxable supply, unless:

(i) it is a taxable supply because of Division 84 (which is about offshore supplies other than goods or real property); or

(ii) the entity is a participant in a *GST joint venture and acquired the thing supplied from the *joint venture operator for the joint venture; and

Where there is a gambling supply between two entities that are not members of a GST group then that supply is calculated under Division 126. However, where the two entities are members of the same GST group then the gambling supply is treated as if it was not a taxable supply. It is therefore, not included in the calculation of the global GST amount.

The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

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