A Guide to the Law of Securitisation in Australia - Clayton Utz

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The Head Company can change this result by entering into a taxsharing agreement with one or more of the group members. Thetax sharing agreement would seek to determine tax liabilities ofgroup members so that, say, a securitisation trust was notburdened with the tax liabilities of other group members. A taxsharing agreement must make a reasonable allocation of grouptax liabilities. Regulations will be created that set out furtherrequirements (if any) for such an agreement. A tax sharingagreement will only be enforceable against the Commissioner ifthe agreement was not entered into for the purpose ofprejudicing the Commissioner’s recovery powers.Where a securitisation vehicle is not wholly owned then theconsolidation rules will not be relevant.5.8 Goods and services tax issues relevant to securitisation5.8.1 OverviewA goods and services tax (GST) was introduced into Australia on1 July 2000. GST is imposed on supplies including the provisionof goods, services, rights or information. A supply may be outsidethe scope of GST because the supply is not connected withAustralia or because the supply is made by an entity that is notregistered or required to be registered for GST purposes. Othersupplies may not give rise to a GST liability because the supplybelongs to a class of supply that is identified by the GST law asbeing excluded from the definition of “taxable supplies”.5.8.2 Input tax creditsAs is typical of GST and VAT systems, under the Australian GSTsystem, registered GST entities may claim a credit for the GSTincluded in the price paid for goods and services acquired for thebusiness purposes of that entity. Such credits are known as inputtax credits. No input tax credit may be claimed to the extent thatthe acquisition is made for a private or domestic purpose of theentity. As discussed below, further limitations exist on the abilityof an entity to claim input tax credits to the extent an acquisitionrelates to input taxed supplies (such as financial supplies) beingmade by the entity.5.8.3 Types of suppliesA number of different types of supplies are specifically identifiedin the Australian GST system. There are three principalcategories of supplies that are identified:• taxable supplies;• GST-free supplies; and• input taxed supplies.Taxable suppliesGST is payable by a registered GST entity on the taxable suppliesmade by that entity. A supply will constitute a taxable supply ifthe following requirements in section 9-5 of the A New TaxSystem (Goods and Services Tax) Act 1999 (the GST Act) aresatisfied:“(a) the supply is made for consideration;(b) the supply is made in the course or furtherance of anenterprise that the supplier carries on;(c) the supply is connected with Australia; and(d) the supplier is registered or required to be registered.”All such supplies will be taxable except to the extent that thesupply is identified by the GST law as either GST-free or inputtaxed.GST-free suppliesGST is not payable on supplies that are GST-free. Most suppliesin the context of securitisations will be supplies of “things” otherthan goods or real property. Such supplies would include servicesand most debt instruments (other than the mortgagesthemselves). Such supplies will be GST-free if the followingrequirements are satisfied:(a) the supply is made to a non-resident who is not “inAustralia” when the thing supplied is done, and either:(i) the supply is neither a supply of work physicallyperformed on goods situated in Australia when the workis done, nor a supply directly connected with real propertysituated in Australia; or(ii) the non-resident acquires the thing in carrying on itsenterprise, but is not registered or required to beregistered (refer Item 2 of section 38-190(1) of the GSTAct); or(b) the supply is made to a recipient who is not “in Australia”when the thing supplied is done and the effective use andenjoyment of the supply takes place outside Australia otherthan a supply directly connected with real property situatedin Australia (refer Item 3 of section 38-190(1) of the GSTAct).Therefore, a determination of whether or not an entity is “inAustralia” will be critical in determining wether or not a supply isto a non-resident will be GST-free. Detailed guidance of theAustralian Taxation Office’s views are set out in GST RulingGSTR 2004/7.37
Entities that make GST-free supplies will be entitled to input taxcredits for the GST components included in the cost of theiracquisitions that relate to the making of those supplies.Input taxed suppliesGST is not payable on supplies that are input taxed. Thedistinction between input taxed supplies and GST-free supplies(discussed above) is that an entity may be restricted in its abilityto claim input tax credits because of the input taxed suppliesmade by that entity.There are two main types of input taxed supplies, namely inputtaxed financial supplies and other input taxed supplies (such asthe leasing of residential premises). Generally, an entity will beunable to claim any input tax credits for acquisitions, to theextent they relate to the making of input taxed supplies.However, there are three important exceptions in relation toinput taxed financial supplies.First, a reduced input tax credit may be claimed for reduced creditacquisitions which relate to making financial supplies.The reduced input tax credit is a credit equal to 75 percent of theGST included in the consideration provided by the entity for thatacquisition. Reduced input tax credits are only available for thereduced credit acquisitions that are exhaustively listed in the GSTlaw.Secondly, an entity will not be precluded from claiming an inputtax credit for an acquisition to the extent the acquisition relatesto the making of financial supplies and the entity making theacquisition does not exceed the financial acquisitions threshold.An entity will exceed the financial acquisitions threshold ifeither:“(a) the amount of all input tax credits to which that entity wouldbe entitled for ‘financial acquisitions’ would exceed $50,000; or(b) the amount of input tax credits to which that entity would beentitled for ‘financial acquisitions’ would exceed 10% of thetotal amount of the input tax credits to which the entitywould be entitled for acquisitions and importations duringthat 12 month period.”Therefore, the question of whether or not an entity exceeds thefinancial acquisitions threshold turns not on the value of financialsupplies made by that entity but rather, the value of theacquisitions made by that entity that are attributable to thosefinancial supplies.Finally, an entity will not be denied an input tax credit foracquisitions that are made in the course of making a financialsupply consisting of a borrowing, provided that the borrowing isnot for the purpose of making input taxed financial supplies.Further, such acquisitions will not be counted in determiningwhether or not the entity making the acquisition exceeds thefinancial acquisitions threshold.Financial suppliesOf the categories of input taxed supplies, the most significant inthe context of securitisations are the input taxed financialsupplies. The Australian GST system only provides input taxedtreatment for financial supplies that involve the provision,acquisition or disposal of various interests. Services relating tothe making of financial supplies, such as arranging services, arenot provided with input taxed treatment and will generally betaxable.Regulation 40-5.09 of the A New Tax System (Goods andServices Tax) Regulations 1999 (the “GST Regulations”) definesthe scope of financial supplies. Pursuant to subparagraph (1) ofthat regulation, the provision, acquisition or disposal of aninterest mentioned in subparagraph (3) or (4) is a financial supplyif:“(a) the provision, acquisition or disposal [of the interest] is:(i) for consideration;(ii) in the course or furtherance of an enterprise; and(iii) connected with Australia; and(b) the supplier is:(i) registered or required to be registered; and(ii) a financial supply provider in relation to the supply of theinterest.”Because financial supplies are input taxed, entities that makefinancial supplies are not liable to remit GST on the value ofthose supplies. Subject to the exceptions identified above,entities will be restricted in their ability to claim input tax creditsfor acquisitions relating to the making of financial supplies.Regulation 40-5.12 of the GST Regulations sets out a table ofsupplies that are specifically identified as not being input taxedfinancial supplies. These supplies will be taxable provided thatthey are not incidental financial supplies (discussed below) andprovided that the general requirements of a taxable supply aresatisfied.In the event of any conflict between regulations 40-5.09 and 40-5.12, regulation 40-5.12 will prevail – that is, the supply not bean input taxed financial supply.38
Page 6: 12.7.3 Euroentitlements............
Page 9 and 10: 1 General overview of the nature of
Page 12: An interest in a managed investment
Page 15 and 16: 142.3.4 Provision of a financial se
Page 17 and 18: 3 The disclosure and civil liabilit
Page 19 and 20: 18The statutory source for this ste
Page 21 and 22: The implication of this approach in
Page 23 and 24: Interestingly, the majority then we
Page 25 and 26: 4 Stamp duty and securitisation244.
Page 27 and 28: 264.8 Relief for mortgage-backed se
Page 29 and 30: 4.10 ConclusionStamp duty is a very
Page 31 and 32: Despite the absence of an express a
Page 33 and 34: 32share of the profits of the compa
Page 35 and 36: (d) before the issue:(i) the compan
Page 37: 365.4 Debt/equity rulesDivision 974
Page 41 and 42: • “ enterprise” is defined in
Page 43 and 44: 6 The Consumer Credit Code andsecur
Page 45 and 46: 7 The regulation of the participati
Page 47 and 48: inclusion within the ELE depends on
Page 49 and 50: 8 Set-off and securitisation8.1 Int
Page 51 and 52: 50However, this result and the prin
Page 53 and 54: 9 Insolvency and securitisation529.
Page 55 and 56: 54• if the trustee has not limite
Page 57 and 58: Section 588FG provides a measure of
Page 59 and 60: 10 Issues relating to debt securiti
Page 61 and 62: 60indemnity existed) and had no han
Page 63 and 64: The effect of the decision has been
Page 65 and 66: the ASX has discretion to ask the e
Page 67 and 68: • Public Trustee Members - for pr
Page 69 and 70: When Austraclear receives notificat
Page 71 and 72: have been completed in relation to
Page 73 and 74: Some CMBS transactions allow the is
Page 75 and 76: 14.3 GamingIn the past, another con
Page 77 and 78: 16 Clayton UtzOur securitisation te

A Guide to the Law of Securitisation in Australia - Clayton Utz

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