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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1051575790547

Date of advice: 25 September 2019

Ruling

Subject: Investor directed portfolio services

Question - 1

Is the IDPS an entity for the purposes of section 184-1 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer - 1

Yes. It is the Commissioners' view that the IDPS is an entity for the purposes of section 184-1 of the A New Tax System (Goods and Services Tax) Act 1999 as explained in issue number 13.3 ofGoods and Services Tax Industry Issues, Financial Services: Questions and Answers (13.3).

When considering the constitution of the IDPS it is our view that the following elements of a trust relationship as outlined in 13.3 exist between an investor and the trustee/responsible entity. They are:

·        there is an intention to create a trust

·        there is beneficiary

·        there is a trustee

·        there is property capable of being held on trust, and

·        there is a person obligation on the trustee annexed to particular property.

As stated in 13.3, from a structural perspective, an IDPS can be viewed as a collection of individual trusts that is considered as an entity for GST purposes.

Question - 2

Is the IDPS carrying on an enterprise for the purpose of section 9-20 of the GST Act?

Answer - 2

Yes. It is the Commissioners' view thatthe IDPS iscarrying on an enterprise for the purpose of section 9-20 of the GST Actas explained in issue number 13.4 of Goods and Services Tax Industry Issues, Financial Services: Questions and Answers (13.4).

As stated in 13.4, where an IDPS is considered as an entity for GST purposes, the Commissioner considers that the activities performed by an operator of the IDPS to have a distinct commercial flavour that permits a view that they constitute activities carried on in the form of a business.

Relevant facts and circumstances

·        The IDPS is an IDPS-like managed investment scheme for the purposes of Australian Securities and Investment Commission (ASIC) regulations.

·        The IDPS was established by Constitution and has operated a managed investment scheme (MIS) since it was registered as a MIS.

·        The IDPS uses a comprehensive investment administration platform delivering a broad range of tailored investment solutions for all investor risk profiles.

·        An investor who decides to invest in the IDPS, is required to send a printed and signed application form together with any necessary identification documents in order to open an account.

·        Once an application is accepted an account in the IDPS is opened.

·        There are various ways in which an investor can invest in the IDPS.

Responsible entity

·        Upon registration as a MIS, the trustee was appointed as the responsible entity (RE) of the IDPS.

·        The RE is licensed by ASIC and is an Australian entity and has been registered for GST.

·        Under the constitution, the RE is appointed to act as trustee of each trust established under the constitution.

·        A trust is constituted when the RE establishes a members' account (which can comprise both the self-directed investments and model portfolios) for a member in accordance with the constitution.

·        Under the constitution the RE declares that the assets of each trust are vested in and held by or for the RE on behalf of the member for whom the trust has been established on the terms of the constitution.

·        The RE may appoint an agent, custodian or other person to acquire, hold title to dispose of or otherwise deal with any of the assets of a trust on behalf of the trustee.

·        The RE receives a fee for acting as the trustee for the IDPS.

·        The RE incurs costs on behalf of the IDPS including investment management fees, administration fees, advisory fees, audit fees, marketing fees and others.

Custodian

·        The custodian will be the registered owner of the investments. All investments are held indirectly through the IDPS rather than being held directly under the investors' name.

·        The custodian will accept instructions with respect to underlying investments from the trustee/responsible entity and will not accept any instructions from investors.

Relevant legislative provisions

Section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999

Section 184-1 of the A New Tax System (Goods and Services Tax) Act 1999

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