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Edited version of private advice
Authorisation Number: 1051519924127
Date of advice: 23 May 2019
Ruling
Subject: GST input tax credits
Question 1 a
Can the company claim GST input tax credits on expenditure incurred in the sale of the company?
Answer
Yes. The expenditure incurred by the company was acquired for a creditable purpose as it was solely for the creditable purpose of carrying on the company's enterprise under sub-section 11-15(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and was not related to the company making input taxed supplies.
The sale of the shares in the company by the shareholders was a separate supply made by the shareholders and not a supply by the company.
Question 1 b
Does the company exceed the current financial acquisitions threshold under Division 189 (first and second limb tests) or does the company exceed the financial acquisitions threshold (Future Acquisitions) as per GSTR 2003/9 Goods and Services Tax: financial acquisitions threshold?
Answer
Due to the answer in 1 a - this question is no longer needing to be answered.
Question 2
Is the sale of the company shares and the associated transaction costs considered to be a financial supply for the purposes of Division 189?
Answer
Due to the answer in 1 a - this question is no longer needing to be answered.
Question 3
Please check that our calculations are accurate in this matter, including the timing of the 12 month period for the current acquisitions threshold.
Answer
As per the answer in Question 2 - this question is no longer needed to be answered as the financial acquisitions threshold is not relevant to this ruling.
This ruling applies for the following periods:
Commencing 1 January 2016
Ending 31 December 2017
Relevant facts and circumstances
The company incurred expenses to advisors regarding the sale of its shares (the Share Sale) as per invoices raised in XX and XX 20YY.
- Accountants
- Lawyers
- Business advisers
The company has not yet claimed the GST input tax credits as you are awaiting clarification from this ruling before you do so.
Before the share sale, the shareholders of Company ABC was the Family Trust. The Family Trust has been registered for GST continuously since 20XX.
Documents considered were the engagement letters for:
- Accountants
- Lawyers
- Business advisers
Share Sale and Purchase Deed prepared by legal advisers.
Parties to the agreement are:
- Family Trust (Seller)
- Overseas purchaser (Buyer)
- Individual taxpayer (Shareholder)
- Individual taxpayer (Shareholder)
Further issues to consider
There may be related issues that you should consider including whether Division 72 of the GST Act applies in this arrangement. Division 72 requires that supplies to associates be brought into the GST system (at market value) even if no consideration is provided.