Edited version of private advice

Authorisation Number: 1052411001642

Date of advice: 23 June 2025

Ruling

Subject: GST and financial supplies - mergers and acquisition

Question 1

Is Company A carrying on an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

Question 2

Is the cost (Company B's fee) paid by Company A made in the course or furtherance of carrying on its enterprise under section 11-15(1) of the GST Act?

Answer

Yes

Question 3

Is Company's B fee paid by Company A relating to an input taxed supply under paragraph 11-15(2)(a) of the GST Act?

Answer

No

Question 4

Is Company A making a taxable supply to its shareholders under section 9-5 of the GST Act?

Answer

No

Relevant facts and circumstances

   • Company A (You) are registered for GST and is the ultimate parent company of a group of subsidiaries.

   • You provide management services to your subsidiaries and do not receive any consideration for your services provided.

   • You do not make any input taxed supplies and do not exceed the financial acquisitions threshold (FAT).

   • Your shareholding consists of multiple shareholders with all shares having equal rights.

   • There are no shareholders that would be a "controlling entity", as they are not in a position to case, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting.

   • You entered into an Agreement with Company C, which would acquire 100% of your shares by way of a Court-approved scheme of arrangement (scheme).

   • You entered a contract with Company B (contract) under which you acquired corporate, legal and tax advice in relating to the scheme.

   • Under the contract, upon successful completion of the scheme you agreed to pay Company B a success fee (also referred to as Company B's fee).

   • You did not invoice shareholders regarding Company B's fees and did not pass on any relevant costs to shareholders.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 40-5

A New Tax System (Goods and Services Tax) Act 1999 Division 72

A New Tax System (Goods and Services Tax) Regulations 2019 subsection 40-5.09(3)

Income Tax Assessment Act 1936 section 318

Reasons for decision

Question 1

Is Company A carrying on an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Summary

Yes, Company A is carrying on an enterprise under section 9-20 of the GST Act.

Reason for decision

The term 'carrying on an enterprise' is defined in the GST Act.

Section 9-20 of the GST Act provides that an enterprise includes:

   (a) an activity or series of activities done in the form of a business (paragraph 9-20(1)(a));

   (b) an adventure or concern in the nature of trade (paragraph 9-20(1)(b)); or

   (c) an activity or series of activities done on a regular or continuous basis in the form of a lease, licence, or other grant of an interest in property (paragraph 9-20(1)(c)).

Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number (MT 2006/1) contains the Commissioner's view on what constitutes an enterprise for the purpose of eligibility for an Australian business number.

Of relevance is paragraph 200 to 204 in MT 2006/1 which provides the following guidance for holding companies. Specifically, paragraph 200 states:

200. From this range of cases the following indicators may give some useful guidance when deciding whether a holding entity is carrying on an enterprise:

   • Active involvement in the management of subsidiaries.

   • Providing loans, guarantees or indemnities to subsidiaries.

   • Providing equipment, premises or rights to intellectual property to subsidiaries.

   • Providing specific management services to its group such as secretarial, financial, legal, taxation, information technology or recruitment and human resources expertise.

Consistent with the view above, we consider Company A is carrying on an enterprise in the form of activity or series of activities done in a form of a business. Company A is a holding company which provides management services with an underlying commercial basis to its subsidiaries. Consequently, it satisfies the requirement of section 9-20 of the GST Act.

Question 2

Is the cost (Company B's fee) paid by Company A made in the course or furtherance of carrying on its enterprise under section 11-15(1) of the GST Act?

Summary

Yes, Company B's fee (i.e. the success fee) paid by Company A in respect of Company A's acquisition of services under the engagement contract (contract), was made in the course or furtherance of carrying on its enterprise under section 11-15(1) of the GST Act.

Reason for decision

Section 11-15 of the GST Act provides when something is acquired for a creditable purpose. The section states (in part):

   (1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

   (2) However, you do not acquire the thing for a creditable purpose to the extent that:

      (a) the acquisition relates to making supplies that would be input taxed; or

      (b) the acquisition is of a private or domestic nature.

Following on from Question 1, we are satisfied that Company A is carrying on an enterprise. As such, the next issue to be considered is whether the consideration paid for Company B's services, being the Company B's fee, was in respect of an acquisition by Company A in the course of carrying on its enterprise for the purposes of 11-15(1) of the GST Act.

Goods and Services Tax Ruling GSTR 2008/1 Goods and services tax: when do you acquire anything or import goods solely or partly for a creditable purpose? (GSTR 2008/1) provides at paragraph 64 that whether something is acquired in carrying on an enterprise requires a connection or link between the thing acquired and the enterprise.

Paragraphs 69 and 70 of GSTR 2008/1 states:

   69. The Commissioner considers that in the GST context it is necessary to make an objective assessment as to whether there is a connection between the thing acquired and the enterprise, based on all the facts and circumstances. Although the subjective purpose of the entity making the acquisition is relevant, it is not determinative.

   70. Whether an acquisition is acquired in carrying on an enterprise is a question of fact and degree, making it impractical to provide an exhaustive list of all the factors that may be relevant to determining whether an acquisition is made in carrying on an enterprise. However, some factors that would suggest that an acquisition is made in carrying on an enterprise include that:

      • the acquisition is incidental or relevant to the commencement, continuance or termination of the enterprise;

      • the thing acquired is used by the enterprise in making supplies;

      • the acquisition secures a real benefit or advantage for the commencement, continuance or termination of the enterprise;

      • the acquisition is one which an ordinary business person in the position of the recipient would be likely to make for the enterprise;

      • the acquisition does not meet the personal needs of individuals such as partners or directors;

      • the acquisition helps to protect or preserve the enterprise entity, structure or organisation; and

      • the acquisition is made by the entity in accordance with, or to satisfy, a statutory requirement imposed on the enterprise.

The services supplied by Company B to Company A as per the contract provides they were engaged by Company A and there were no other services provided to another entity. The services extended (but not limited) to works related to the implementation of the Court-approved scheme of arrangement (scheme). The costs incurred was for the provision of general advice and assistance to Company A, including investor presentations, ASX releases and financial modelling.

Company A acquired the services provided by Company B to achieve returns as per its key performance indicators and maximise value for its shareholders. In this instance the Company's B fee was incurred for the purpose of, amongst other things, advising Company A on the efficacy of the scheme.

On an objective assessment of the facts and circumstances in this case, it is accepted Company B's fee under the contract, are made in the course or furtherance of its enterprise pursuant to subsection 11-15(1) of the GST Act.

Question 3

Is Company B's fee paid by Company A relating to an input taxed supply under paragraph 11-15(2)(a) of the GST Act?

Summary

Company B's fee paid by Company A is not related to an input taxed supply under paragraph 11-15(2)(a) of the GST Act.

Reason for decision

In determining whether paragraph 11-15(2)(a) of the GST Act is satisfied it must be established whether the relevant acquisitions relate to supplies that would be input taxed.

In this case, the supplies in question are the sale of shares in Company A by its shareholders to Company C, under the scheme Implementation Agreement (SIA). The sale of shares will be a financial supply if it satisfies the requirements of section 40-5.09 of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). Financial supplies are input taxed as per section 40-5 of the GST Act.

Before considering if section 40-5.09 of the GST Regulations is applicable to these facts, it's necessary to first establish whether paragraph 11-15(2)(a) of the GST Act requires the 'supplies that would be input taxed' to only be made by the acquirer of the acquisition, or can the supplies be made by another entity.

Paragraphs 101 to 106 of GSTR 2008/1 explain the requirements of paragraph 11-15(2)(a) of the GST Act in more detail and state:

Part B - Determining a connection between an acquisition and the making of supplies that would be input taxed

   101. In this section we explain the Commissioner's approach to determining whether an acquisition relates to the making of supplies that would be input taxed. If it is established that an acquisition is made in carrying on an enterprise, paragraph 11-15(2)(a) will preclude it being for a creditable purpose to the extent that it 'relates to' making supplies that would be input taxed. In this section of the ruling, all of the examples assume that the acquisitions have been made in carrying on an enterprise.

   102. Subject to paragraph 103 of this Ruling, if an entity does not make, has never made, and does not intend to make, supplies that would be input taxed, there is no need to consider whether paragraph 11-15(2)(a) applies. Instead, to establish whether an acquisition is for a creditable purpose, it is only necessary to ascertain whether the acquisition is made in carrying on the enterprise (see Part A at paragraph 54 of this Ruling).

   103. If an entity makes, has made, or intends to make, input taxed supplies, it needs to consider whether paragraph 11-15(2)(a) applies to its acquisitions. Consideration of paragraph 11-15(2)(a) is also required if an entity acquires residential premises as defined in section 195-1 subject to an existing lease. Paragraph 11-15(2)(a) applies if acquisitions relate solely or partly to supplies that would be input taxed.

   104. Unlike subsection 11-15(1), paragraph 11-15(2)(a) specifically focuses on the relationship between an acquisition and the making of supplies. The purpose of subsection 11-15(2) can be ascertained by its relationship with the other provisions of the GST Act. When viewed in the context of the adjustment provisions such as Division 129, it can be seen that the purpose of subsection 11-15(2) is to focus on the intended usage of an acquisition in so far as the acquisition relates to supplies that are to be made in the future.

   105. If the acquisition relates to supplies that would be input taxed, paragraph 11-15(2)(a) precludes it from being for a creditable purpose. Division 129 then focuses on the actual usage of the acquisition and adjusts accordingly, depending on whether the actual usage relates to input taxed supplies.

   106. Paragraph 11-15(2)(a) does not require tracing to a specific supply. Nevertheless, unlike subsection 11-15(1), it requires some form of connection to the supplies that the entity makes, made or intends to make.

Consistent with the above discussion in GSTR 2008/1, paragraph 11-15(2)(a) of the GST Act requires Company A to be the entity that makes the supply that 'would be input taxed'.

In this case the acquisition of Company B's services was made by Company A in relation to the Assignment under the contract, which is the sale of Company A's shares held by its shareholders. As such, it is the shareholders that are the ones making the supply of the shares.

Company A does not make supplies that are input taxed and does not exceed the financial acquisitions threshold, therefore, on this basis the acquisition of Company B's services does not relate to making supplies that would be input taxed, pursuant to paragraph 11-15(2)(a) of the GST Act.

Question 4

Is Company A making a taxable supply to its shareholders under section 9-5 of the GST Act?

Summary

Company A is not making a taxable supply to its shareholders under section 9-5 of the GST Act.

Reason for decision

Section 9-40 of the GST Act provides that goods and services tax (GST) is payable on taxable supplies.

Section 9-5 of the GST Act states:

You make a taxable supplyif:

   (a)       you make the supply for *consideration; and

   (b)       the supply is made in the course or furtherance of an enterprise that you carry on; and

   (c)        the supply is connected with the indirect tax zone; and

   (d)       you are registered, or *required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed

The meaning of 'supply' is set out in section 9-10 of the GST Act which states:

   (1) A supply is any form of supply whatsoever.

   (2) Without limiting subsection (1), supply includes any of these:

      (a) a supply of goods;

      (b) a supply of services;

      (c) a provision of advice or information;

      (d) a grant, assignment or surrender of real property;

      (e) a creation, grant, transfer, assignment or surrender of any right;

      (f) a financial supply;

      (g) an entry into, or release from, an obligation:

         (i) to do anything;

         (ii) to refrain from an act;

         (iii) to tolerate an act or situation;

      (h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

Subsection 9-10(2) of the GST Act does not limit subsection 9-10(1). Something that is not listed in subsection 9-10(2) but falls within subsection 9-10(1) will be a supply.

Based on the facts provided, information was passed on to the shareholders such that a supply within the meaning of subsection 9-10(2)(c) of the GST Act arises. However, where supplies are made to an associate for no consideration or inadequate consideration, the special rules in Division 72 of the GST Act may bring such supplies within the GST system.

Relevantly, subdivision 72-A of the GST Act refers to supplies without consideration. Subsections 72-5(1) and (2) state:

   (1) The fact that a supply to your *associate is without *consideration, does not stop the supply being a *taxable supply if:

      (a) your associate is not *registered or *required to be registered; or

      (b) your associate acquires the thing supplied otherwise than solely for a *creditable purpose.

   (2) This section has effect despite paragraphs 9-5(a) and 84-5(1)(a) (which would otherwise require a taxable supply to be for consideration).

The term associate is defined in section 195-1 of the GST Act as having the meaning given by section 318 of the Income Tax Assessment Act 1936 (ITAA 1936). Of relevance to companies is subsection 318(2).

Subsection 318(6) of the ITAA 1936 provides interpretation for some of the expressions used in subsection 318(2) of the ITAA 1936:

   ...

   (b) a company is sufficiently influenced by an entity or entities if the company, or its directors, are accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the entity or entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and

   (c) an entity or entities hold a majority voting interest in a company if the entity or entities are in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company.

Based on the information provided, Company A's shareholders are not associates of Company A under subsection 318 of the ITAA 1936.

Therefore, as the shareholders are not associates of Company A, we consider that Company A is not making a taxable supply to its shareholders as not all the requirements under section 9-5 of the GST Act are met.

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