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Do entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), from 1 April 2003 where: • entity A is a fixed trust in which the issued units are held by Individual X, and Individual Y, a family member of Individual X; and • entity B is a non-fixed trust of which the beneficiaries are Individual U, Individual V and Individual W, who are family members of Individual X?

Yes, both entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.

Entity A and entity B are Australian resident trusts that are registered for goods and services tax (GST). Both entity A and entity B have corporate trustees.

Entity A is a fixed trust with unit holders Individual X and Individual Y. For the purposes of a GST group, Individual Y is a family member of Individual X.

Entity B is a non-fixed trust of which the beneficiaries are Individual U, Individual V and Individual W who, for the purposes of a GST group, are family members of Individual X.

Entity A and entity B make distributions of income and capital only to these family members and not to the trustee of either trust. None of the beneficiaries are a charitable institution, a trustee of a charitable fund or a gift-deductible entity.

Entity A and entity B apply the same tax periods, account for GST on the same basis, are not members of any other GST group and do not have any branches which are registered under Division 54 of the Act.

The membership requirements of entities within a GST group are outlined in section 48-10 of the GST Act. In relation to trusts, each entity must: • satisfy the requirements specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) • be registered for GST • have the same tax periods applying to it as the tax periods applying to all the other members of the GST group or proposed GST group • account for GST on the same basis as all the other members of the GST group or proposed GST group • not be a member of any other GST group, and • not have any branch that is registered under Division 54 of the GST Act.

Entity A and entity B are registered for GST, have the same tax periods, account on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, each trust will satisfy the membership requirements if they satisfy the requirements specified in the GST Regulations.

Regulation 48-10.03 of the GST Regulations deals with the membership requirements that must be satisfied for a trust to be a member of a GST group.

Subregulation 48-10.03(1) of the GST Regulations provides that if the GST group does not consist only of fixed trusts the requirements set out in subregulation 48-10.03(2) must be satisfied for the trust to meet the regulatory requirements.

Subregulation 48-10.03(2) of the GST Regulations sets out four membership requirements. For the trust to be a member of a GST group, the trustee of a trust (the candidate trustee) must satisfy one of the requirements.

The candidate trustee has, at least, a 90% stake in a company that is a member of the GST group, worked out in accordance with section 190-5 of the GST Act as if the trustee were a company.

As there are no companies in the proposed GST group, the trustees do not satisfy this requirement.

The candidate trustee distributes any income or capital of the trust only to beneficiaries that are permitted beneficiaries, whether or not other distributions could lawfully be made.

The meaning of 'permitted beneficiary' is set out in subregulations 48-10.03(3), 48-10.03(4) and 48-10.03(5) of the GST Regulations. For a GST group that consists only of trusts, the relevant permitted beneficiaries are: • a charitable institution, a trustee of a charitable fund, or a gift-deductible entity, and • a trustee of a trust that is a member of the GST group,

Therefore, to meet this paragraph, the trustees of entity A and entity B can distribute income and capital only to these kinds of permitted beneficiaries.

As the trustees of entity A and entity B distribute income and capital only to individuals, namely Individual X, Individual Y, Individual U, Individual V and Individual W, this paragraph is not met by either trustee.

The candidate trustee is the sole beneficiary of any distribution of income or capital by the trustee of another trust that is a member of the GST group.

The trustee of entity A is not a beneficiary of any distribution of income or capital made by the trustee of entity B, and the trustee of entity B is not a beneficiary of any distribution of income or capital made by the trustee of entity A.

Therefore, the trustees do not satisfy this requirement.

The candidate trustee distributes income or capital of the trust, and the trustee of another trust that is a member of the GST group distributes income or capital of the other trust, only to persons who are all family members of the same individual, whether or not other distributions could lawfully be made. 'Family member' is defined in subsection 48-15(2) of the GST Act and section 272-95 of Schedule 2F to the Income Tax Assessment Act 1936 . Generally, a 'family member' includes a parent, grandparent, brother, sister, nephew, niece, child or children of an individual or the individual's spouse. Family also includes the partner's spouse and the spouses of any person mentioned in the previous sentence.

The trustees of entity A and entity B distribute their income or capital to Individuals X Y, U, V and W. Individuals Y, U, V and W are all family members of Individual X.

Therefore, the trustees satisfy this requirement.

As entity A and entity B satisfy the requirements of regulation 48-10.03 of the GST Regulations, both entities satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.