Issue
Is the entity, a supplier of shares that is not registered or required to be registered for goods and services tax (GST), making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells shares?
Decision
No, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act when it sells shares.
Facts
The entity is a supplier of shares that is not registered or required to be registered for GST. The entity sells shares. The shares were the property of the entity immediately before the supply.
The shares are sold using a contract of sale, not via a stock exchange. The supply is for consideration, is in the course of the entity's enterprise and is connected with Australia.
Reasons for Decision
Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 45-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).
Subregulation 40-5.09(1) of the GST Regulations, provides that a supply is a financial supply if it is the provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) and: (a) the provision, acquisition or disposal is: - for consideration; - in the course or furtherance of an enterprise; - connected with Australia; and (b) the supplier is: - registered or required to be registered for GST; and - a financial supply provider in relation to the supply of the interest.
Item 10 in the table in subregulation 40-5.09(3) of the GST Regulations lists securities. 'Securities' is defined in the Dictionary to the GST Regulations (Regulation 3 of the Regulations) as having the meaning given by subsection 92(1) of the Corporations Act 2001. Subsection 92(1) of the Corporations Act includes shares in the definition of securities.
In this case, the entity is selling the shares. This is a disposal of the entity's interest in the shares. Therefore, the entity is disposing of an interest that is mentioned in subregulation 40-5.09(3) of the GST Regulations.
In addition the disposal is for consideration, in the course of the entity's enterprise and is connected with Australia. As such, the requirements in paragraph (a) are met.
However, the first requirement of paragraph (b) is that the supplier of the interest is registered or required to be registered for GST. The entity is not registered or required to be registered for GST and, therefore, the requirements in paragraph (b) are not met.
The disposal of the interest in the shares, by the entity does not fulfil all of the requirements in regulation 40-5.09 of the GST Regulations and is not a financial supply. Therefore, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act when it sells shares.