Special arrangements
GST group
A GST group lets closely related entities register as one for GST, with a single representative member lodging one BAS and dealings between members generally ignored for GST purposes.
A GST group is an arrangement where a set of closely related businesses are treated as a single entity for GST. Typically it is used by corporate groups, where a parent company and its subsidiaries want to simplify GST compliance. One member, called the representative member, accounts for GST on behalf of the whole group, lodges a single Business Activity Statement and pays or receives the net GST amount for everyone.
The main benefit is that supplies between the members of the group are generally disregarded for GST. This means no GST is charged when one member sells to another, no tax invoice is needed for those internal dealings, and no credits are claimed on them. For a group with a lot of internal charges, such as management fees or the transfer of stock between companies, this removes considerable paperwork and cash flow timing issues.
To form a GST group, the entities must meet eligibility conditions. Generally the members must be closely linked through common ownership, with a high level of control, usually at least 90 per cent. Each member must also be registered for GST, or be required to be, and they must all agree to the arrangement. The representative member applies to the ATO, and the group starts when the ATO accepts the application.
For the outside world, the group acts as one. When it buys from or sells to non-members, the normal GST rules apply, but the transactions are reported by the representative member. Invoices to customers should still comply with the tax invoice rules and show the details of the entity that made the supply. Credits can flow through to the group based on the total picture.
One important point is that members of a GST group are generally jointly and severally liable for the group GST liabilities. If the representative member fails to pay the GST owed, the ATO may recover from other members. That risk should be weighed against the admin saving, and it is worth discussing it with a professional adviser before you commit to a group structure.
Joining a group also changes the timing and the accounting. A member leaving the group must be dealt with, and a final adjustment may arise for amounts relating to the time it was a member. Group structures should also be revisited when ownership changes, because a company that no longer meets the ownership test may be removed from the group.
Smaller businesses often do not need a GST group, but some family structures with several companies might. This page is general information only, so confirm whether a GST group suits your situation with the ATO or a registered tax professional.
Worked example
A holding company and two subsidiaries form a GST group. During the quarter, Subsidiary A charges the holding company $55,000 in management fees including GST and sells goods to Subsidiary B. Neither dealing creates GST, so no GST is reported for them. The representative member reports only external sales and purchases, such as GST of $9,000 collected from customers and $4,500 in credits from suppliers, for a net amount of $4,500 payable.
Practical tips
- Remember that group members can be liable for each other's GST debts, so consider the risk as well as the saving.
- Review group membership whenever ownership changes, as a member might no longer meet the eligibility rules.
- Keep clear records of which entity made each external supply, so customer invoices show the right details.