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A NEW TAX SYSTEM (GOODS AND SERVICES TAX) AMENDMENT REGULATIONS 2000 (NO. 5) 2000 NO. 268

STATUTORY RULE 2000 No. 268

Issued by the Authority of the Treasurer

A New Tax System (Goods and Services Tax) Act 1999

A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 5)

The Governor-General may make regulations under section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 ('the Act') for the purposes of the Act.

The regulations amend the A New Tax System (Goods and Services Tax) Regulations 1999 ('the Regulations'). Section 48-10 of the Act provides that the Regulations may specify the requirements for individuals to be able to join a group for goods and services tax (GST) purposes.

Division 48 of the Act enables companies, partnerships, trusts and individuals to form GST groups if they meet certain eligibility criteria. When a GST group is formed, the group will effectively be treated as a single entity for GST purposes and transactions between group members will not be subject to GST.

Subparagraph 48-10 (1)(a)(ii) of the Act originally provided for the Regulations to specify the requirements for partnerships and trusts to be able to group for GST purposes. In the Indirect Tax Legislation Amendment Act 2000, this provision was amended so individuals could also become members of GST groups.

The purpose of the amendment regulations is to stipulate the requirements for individuals to be members of a GST group. The requirements for individuals that are specified in these amendment regulations follow the same principles as the requirements for partnerships and trusts. By enabling individuals to join GST groups, these regulations will help many sole traders to substantially reduce their compliance costs by removing the need to charge GST and claim input tax credits, as well as create tax invoices for supplies between related entities.

The amendment regulations will detail the relationships that an individual must satisfy in relation to another entity in a GST group in order to fulfil the membership requirements for that GST group (new regulation 48-10.04). The amendment regulations also make consequential changes to the grouping criteria for partnerships and trusts (new subregulations 4810.02(3A), 48-10.03(c) and 48-10.03(d)) and make some minor technical changes to ensure consistency throughout the Regulations.

A detailed explanation of the amendments is attached.

The Regulations commenced on gazettal.

ATTACHMENT

DETAILED NOTES OF THE AMENDING REGULATIONS

Name of Regulations

Regulation 1 provides that the amending regulations are called the A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 5).

Commencement

Regulation 2 provides that the regulations commence on gazettal.

Amendment

Regulation 3 provides that Schedule 1 amends the A New Tax System (Goods and Services Tax) Regulations 1999.

GST Groups

Schedule 1

Items 1 and 2 amend regulation 48-10.02, which specifies the membership requirements for partnerships. These amendments will allow a partnership to be a member of a GST group if the partners in that partnership consist of only an individual who is a member of a GST group and/or any family members of that individual - new subregulation 48-10.02(3A).

Items 3 and 4 amend regulation 48-10.03, which specifies the membership requirements for trusts. These amendments insert 2 new classes of permitted beneficiaries for the purposes of regulation 48-10.03 - an individual that is a member of a GST group and family members of that individual - new subregulations 48-10.03(c) and (d). This will ensure that a trust that is a member of a GST group by virtue of subregulation 48-10.03(2)(b) (that is, a trust that only makes distributions to permitted beneficiaries) can remain a member of a GST group if it makes distributions to these classes of beneficiary.

Item 5 inserts new regulation 48-10.04, specifying the requirements that individuals must satisfy to be a member of a GST group [new subregulation 48-10.04(1)].

New subregulation 48-10.04(2) stipulates that if an individual meets any of the following criteria, it will satisfy the requirements of the regulations:

*       in relation to a company that is a member of the GST group or proposed GST group, the individual holds at least a 90% stake in that company new subregulation 48-10.04(3) (a). Whether or not an individual holds a 90% stake is to be determined by reference to section 190-5 of the Act, as if the individual were the holding company referred to in that section; or

*       in relation to a company that is a member of the GST group or proposed GST group, the shareholders of the company consist only of the individual and/or family members of the individual - new subregulation 48-10.04(3)(b). Family members of the individual are defined by reference to section 272-95 of Schedule 2F to the Income Tax Assessment Act 1936 (see regulation 48-10.0 1). Family of an individual will include any parent, grandparent, brother, sister, nephew, niece, child, or child of a child of either the individual or the individual's spouse. Family also includes the individual's spouse and the spouses of any person mentioned in the previous sentence; or

*       in relation to a partnership that is a member of the GST group or proposed GST group, the partners of the partnership consist only of the individual and/or family members of the individual - new subregulation 48-10.04(4); or

*       in relation to a trust that is a member of the GST group or proposed GST group, the beneficiaries of that trust include the individual and/or family members of that individual and the trust only makes income or capital distributions to permitted beneficiaries (as described in regulation 48-10.03) - new subregulation 48-10.04(5).

Other amendments

Under current drafting conventions, the sentence construction of the phrase 'for the purposes of regulation X' is no longer used. This has been replaced by the construction 'for regulation X'.

Item 6 amends regulation 33-15.01, paragraph 33-15.06(1)(b) and subregulations 48-10.02(1) and 48-10.03(1) to remove the words 'the purposes of. This will ensure that consistent sentence construction throughout the Regulations.