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Edited version of your written advice
Authorisation Number: 1012830427591
Date of advice: 26 June 2015
Ruling
Subject: GST and reduced credit acquisitions
Question 1
Is the entity making a reduced credit acquisition under section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 when it pays an amount under the Memorandum of Understanding?
Answer
Yes, the entity is making a reduced credit acquisition.
Question 2
Is the entity making a reduced credit acquisition under section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 when it pays an amount under the Memorandum of Understanding?
Answer
No, the entity is not making a reduced credit acquisition.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 70-5
A New Tax System (Goods and Services Tax) Regulations 1999 subregulation 70-5.02(2)
Reasons for decision
Question 1
Section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that certain specified kinds of acquisitions (reduced credit acquisitions) which relate to making financial supplies give rise to a reduced input tax credit. The table in subregulation 70-5.02(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) provides a list of reduced credit acquisitions.
Item 9 of the table in subregulation 70-5.02(2) of the GST Regulations provides that an acquisition of the arrangement by a financial supply facilitator of the provision, acquisition or disposal of an interest in a security is a reduced credit acquisition.
Consequently, the acquisition fits within Item 9 of the table in subregulation 70-5.02(2) of the GST Regulations. The entity is therefore, making a reduced credit acquisition under section 70-5 of the GST Act.
Question 2
As there are items in the table in subregulation 70-5.02(2) of the GST Regulations for which the payment appears to be consideration, the entity is not making a reduced credit acquisition under section 70-5 of the GST Act.