Issue
Is an acquisition made by the entity, a company that is a member of a GST group making only input taxed supplies, an acquisition that 'relates to business finance' for the purposes of Division 129 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the entity leaves the GST group and makes taxable supplies?
Decision
Yes, the entity's acquisition is an acquisition that 'relates to business finance' for the purposes of Division 129 of the GST Act.
Facts
The entity is a company that was a member of a GST group. The GST group made only input taxed financial supplies and exceeded the financial acquisition threshold.
While a member of the GST group, the entity only made supplies to other members of the GST group.
The entity has ceased to be a member of the GST group and does not belong to any other GST group. The entity makes only taxable supplies and is registered for goods and services tax (GST).
Reasons for Decision
Under Division 129 of the GST Act an entity may have an adjustment when the extent of creditable purpose of an acquisition changes. Whether the entity has an adjustment is affected by the GST exclusive value of the acquisition and whether there are any adjustment periods remaining for the acquisition.
To determine whether an adjustment arises or the number of adjustment periods, it is necessary to establish whether the acquisition 'relates to business finance'.
Subsection 129-10(3) of the GST Act provides that an acquisition 'relates to business finance' if, at the time of the acquisition, it related solely or partly to making financial supplies and was not solely or partly of a private or domestic nature.
At the time of the acquisition the entity was a member of the GST group and the acquisition related solely to the GST-group making financial supplies (subsection 48-45(2) of the GST Act). The entity's acquisition 'relates to business finance' notwithstanding that the entity is no longer a member of the GST group.
Therefore, the entity's acquisition is an acquisition that 'relates to business finance' for the purposes of Division 129 of the GST Act. Note: 1. Subdivision 48-D of the GST Act provides rules in relation to adjustments when an entity ceases to be a member of a GST group. However, no provision in Subdivision 48-D of the GST Act alters the definition of 'relates to business finance' in subsection 129-10(3) of the GST Act. 2. For details on calculating an adjustment under Division 129 of the GST Act refer to Goods and Services Tax Ruling GSTR 2000/24.