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Edited version of your written advice
Authorisation Number: 1012723571902
Ruling
Subject: GST grouping
Question
Do you and the unit trusts satisfy the membership requirements in paragraph 48-10(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, you and the unit trusts do satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act.
Relevant facts and circumstances
You are an Australian resident company registered for goods and services tax (GST).
You have more than two shareholders and the unit holders of unit trust A are also your shareholders. All of the other unit trusts are 100% owned by unit trust A.
Not all of the unit trusts are currently registered for GST.
You are aware that most of the membership requirements set out in paragraphs 48-10(1)(c) to (g) of the GST Act are not yet satisfied by either yourself or the unit trusts but, at this stage, you just want confirmation that the membership requirements in paragraph 48-10(1)(a) of the GST Act are satisfied.
At this stage, neither you nor the unit trusts have agreed in writing to the formation of a GST group as required by section 48-5 of the GST Act.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 paragraph 48-10(1)(a)
A New Tax System (Goods and Services Tax) Act 1999 subsection 48-10(3)
A New Tax System (Goods and Services Tax) Act 1999 subparagraph 48-15(1)(e)(iia)
A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 48-10.03(2)(b)
A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 48-10.03(3)(e)
A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 48-10.03(4)(b)
Reasons for decision
Summary
Based on the information provided, you and the unit trusts satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act because the requirements in both section 48-15 of the GST Act and regulation 48-10.03 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) have been met.
However, you will not be eligible to form a GST group with the unit trusts unless the membership requirements in paragraphs 48-10(1)(c) to (g) of the GST Act are also satisfied and you and the unit trusts agree in writing to the formation of a GST group.
Detailed reasoning
GST grouping, as outlined in Division 48 of the GST Act, enables a nominated group representative to undertake the GST obligations for a group of entities that are linked through common ownership.
Common ownership is one of the membership requirements that must be satisfied to form a GST group and is specifically outlined in paragraph 48-10(1)(a) of the GST Act. This paragraph states:
(1) An entity satisfies the membership requirements of a *GST group, or a proposed GST group, if the entity:
(a) is:
(i) a *company; or
(ii) a *partnership, trust or individual that satisfies the requirements specified in the regulations; and
…
(An asterisk denotes a defined term in the GST Act).
Also, of relevance to this case is subsection 48-10(3) of the GST Act which states:
(3) A *company does not satisfy the membership requirements of a *GST group, or a proposed GST group, if:
(a) one or more other members of the GST group or proposed GST group are not companies; and
(b) none of the members of the GST group or proposed GST group that are companies satisfy section 48-15.
In this case, the entities that are to be members of the proposed GST group are a company and unit trusts. Therefore, to satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act the requirements in both section 48-15 of the GST Act and regulation 48-10.03 of the GST Regulations need to be met.
Section 48-15 of the GST Act deals with the relationship between companies and non-companies in a GST group and provides that a company that is a member of a proposed GST group satisfies this section if for a trust that is a member of the proposed GST group one of the requirements in paragraph 48-15(1)(e) of the GST Act is satisfied.
Based on the facts provided, you satisfy subparagraph 48-15(1)(e)(iia) of the GST Act (including subsection 48-15(1A) of the GST Act) because distributions of income or capital of unit trust A are only made to your members (shareholders) and at least two of your members are beneficiaries of unit trust A.
The membership requirements for trusts are outlined in regulation 48-10.03 of the GST Regulations.
Unit trust A satisfies paragraph 48-10.03(2)(b) of the GST Regulations because distributions of income or capital are only made to beneficiaries that are permitted beneficiaries. That is, paragraph 48-10.03(4)(b) of the GST Regulations provides that for a company that is a member of the GST group, each representative of a shareholder of the company is also a permitted beneficiary if, for a company with more than one shareholder, the beneficiaries of the trust include at least two beneficiaries who are representatives of different shareholders. In this case, every beneficiary of unit trust A will be one of your shareholders and therefore, the requirements of paragraph 48-10.03(4)(b) of the GST Regulations are satisfied.
In relation to the other unit trusts, they also satisfy paragraph 48-10.03(2)(b) of the GST Regulations because, as they are wholly owned by unit trust A, distributions of income or capital are only made to unit trust A which is a permitted beneficiary under paragraph 48-10.03(3)(e) of the GST Regulations.
Therefore, you and the unit trusts satisfy the membership requirements in paragraph 48-10(1)(a) of the GST Act.
Consequently, if you and the unit trusts also satisfy the membership requirements in paragraphs 48-10(1)(c) to (g) of the GST Act and enter into a written agreement, you will be eligible to apply in the approved form to form a GST group with the unit trusts.