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Edited version of your written advice
Authorisation Number: 1012877449799
Date of advice: 11 September 2015
Ruling
Subject: GST and cancellation of registration
Question 1
Are you entitled to cancel your GST registration?
Answer
Yes
Question 2
Will either the act of registering for GST or the subsequent cancellation of your GST registration trigger the anti-avoidance provisions (Division 165 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act))?
Answer
No
Relevant facts and circumstances
You are a Trust registered for GST.
The Trustees are X and Y.
You purchased a management rights business as a GST-free going concern.
The arrangement included the purchase of a residential unit within the complex subject to the management rights business.
The residential unit was purchased by X and Y and was under a separate contract to the contract for the purchase of the management rights business. The unit was acquired as an input taxed supply
The residential unit was not acquired by X and Y in their capacity as trustees for the Trust. The unit is under the joint names and used as the main residence of X and Y.
Your annual turnover from management rights business less than $75,000.
You do not carry on any other enterprise.
You intend to cancel your GST registration.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 25-5
Section 25-55
Section 38-325
Paragraph 38-325(1)(c)
Division 138
Division 165
Reasons for decision
Note: In this reasoning, unless otherwise stated,
• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au
Question 1
Section 25-55 provides that the Commissioner must cancel your GST registration if:
• you have requested/applied for cancellation of your registration;
• you have been registered for at least 12 months; and
• the Commissioner is satisfied that you are not required to be registered for GST.
In this case you registered for GST more than 12 months ago. Furthermore, you are not required to be registered for GST as your GST turnover is less than the registration threshold of $75,000.
Therefore the Commissioner must cancel your GST registration upon your request.
Question 2
Following on from Question 1 where it has been confirmed that you are able to cancel your registration, you have asked whether the cancellation of the registration will trigger the anti-avoidance provisions of Division 165.
Division 165 is aimed at artificial or contrived schemes that are designed to obtain a GST benefit by taking advantage of a GST law in circumstances other than that intended by the GST law.
The facts provided are that you applied to be registered under section 25-5 and were registered at the time of purchasing the management rights business.
The purchase of the management rights business was treated as a supply of a going concern in accordance with section 38-325. As a GST-free supply of a going concern there was no requirement for the seller to report any GST payable and no entitlement for you to claim an input tax credit.
Paragraph 38-325(1)(c) specifically allows the supplier and the recipient to enter into an agreement in writing in respect of the supply being a supply of a going concern. The GST benefit, i.e. that the supply is a going concern and therefore GST-free, arises from this agreement, and therefore Division 165 will have no application in your choice to register for GST.
Similarly, as per Question 1, there is no Division 165 application where the GST law operates to allow you to cancel the registration when your GST turnover is less than the registration threshold.
Other relevant comments
Where input tax credits have been claimed and the GST registration has been cancelled, Division 138 operates to adjust the amount of input tax credits in certain circumstances. Based on the facts provided there was no input tax credits claimed by you, as the purchase of the management rights business was a supply of a going concern. However, if you have acquired (and claimed ITCs) in regard to any other assets in carrying on your business, and you still hold those assets when you cancel your registration, you will have an adjustment as per Division 138.