GST and grouping of two individuals

Do entity A and entity B, both individuals, 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)?

No, entity A and entity B do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act, as a GST group cannot consist solely of individuals.

Entity A and entity B are Australian resident individuals who are registered for goods and services tax (GST).

Entity A and entity B have the same tax periods and account for GST on the same basis. Neither entity belongs to any other GST group nor do they have any branches that are registered under Division 54 of the GST Act.

Section 48-10 of the GST Act sets out the membership requirements of a GST group. In relation to an individual, they 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 for GST on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, entity A and entity B will satisfy the membership requirements, if they each satisfy the requirements specified in the GST Regulations.

Regulation 48-10.04 of the GST Regulations specifies the membership requirements that must be satisfied for an individual to be a member of a GST group. It provides that an individual may be a member of a GST group where it satisfies one of the following requirements: • for one company or more that is a member of the GST group: - the individual has, at least, a 90% stake in the company (worked out in accordance with section 190-5 of the GST Act as if the individual were a company), or - each shareholder of the company is either the individual or a family member of the individual, or • for, at least, one partnership that is a member of the GST group, the partners of the partnership are either or both of the individual and family members of the individual, or • for, at least, one trust that is a member of the GST group: - the beneficiaries of the trust include either or both of the individual and family members of the individual, and - the trustee of the trust distributes income or capital of the trust only to permitted beneficiaries, as described in regulation 48-10.03 of the GST Regulations.

It is clear from this that, for an individual to be a member of a GST group, the group must have at least one member that is a company, a partnership or a trust. The proposed GST group will consist of only entity A and entity B who are individuals. There are no members of the proposed GST group that are a company, partnership or trust. Therefore, entity A and entity B do not satisfy the requirements under regulation 48-10.04 of the GST Regulations.

Accordingly, entity A and entity B do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act. [Note: Division 48 of the GST Act was amended with effect from tax periods starting on or after 1 July 2010. Prior to the amendments, entities were required to apply to the Commissioner for approval to form a GST group. As a result of these amendments, references to the Commissioner approving the formation of a GST group have been removed from this ATO ID.]