Issue
Does entity A, a partnership, 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), when it applies to form a GST group solely with entity B, another partnership?
Decision
No, entity A does not satisfy the membership requirements of a GST group under section 48-10 of the GST Act, when it applies to form a GST group solely with entity B, another partnership.
Facts
Entity A is an Australian resident partnership that is registered for goods and services tax (GST). Entity A plans to form a GST group with entity B (also an Australian resident partnership registered for GST).
The same tax periods are applied to entity A and entity B and both account for GST on the same basis.
Entity A and entity B have jointly applied to the Commissioner, in the approved form, for approval as a GST group. In their application, entity A is nominated as the representative member for the group. Neither entity A nor entity B belong to any other GST group; nor do they have any branches that are registered under Division 54 of the GST Act.
Reasons for Decision
Subsection 48-5(1) of the GST Act sets out the requirements that must be satisfied for the Commissioner to approve two or more entities as a GST group. Paragraph 48-5(1)(b) of the GST Act requires that each of the entities satisfies the membership requirements for that GST Group.
The general membership requirements of a GST group are outlined in section 48-10 of the GST Act, which provides that an entity must: • be registered for GST; and • 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; and • account on the same basis as all the other members of the GST group or proposed GST group; and • not have any branch that is registered under Division 54 of the GST Act.
From the facts, it is considered that entity A satisfies these general membership requirements. However, entity A is a partnership and subparagraph 48-10(1)(a)(ii) of the GST Act further provides that a partnership will only satisfy the membership requirements of a GST group if it further satisfies the specific requirements listed in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations).
In order for a partnership to be a member of a GST group, regulation 48-10.02 of the Regulations requires the partnership to have a specific type of relationship with either a company; an individual; or a trust that is also a member of the proposed GST group. In this case, the only other proposed member of the GST group is another partnership. As such, entity A is unable to have the requisite relationship with a company; an individual; or a trust and does not satisfy the specific membership requirements for a partnership (as outlined in regulation 48-10.02 of the Regulations). Therefore, entity A does not satisfy the membership requirements of a GST group listed in section 48-10 of the GST Act. [NOTE: Based upon the same reasoning, entity B also would not satisfy the specific membership requirements outlined in regulation 48-10.02 of the Regulations as the only other proposed member of the GST group is another partnership.]