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

Incidental financial suppliesPursuant to regulation 40-5.10 of the GST Regulations, even if asupply is not a financial supply pursuant to regulation 40-5.12, itmay be input taxed as an incidental financial supply where it issupplied directly in connection with a financial supply.In order for a taxable supply to be supplied directly in connectionwith a financial supply, the taxable supply must be:• incidental to the financial supply;• supplied, at or about the same time as the financial supply,but not for separate consideration; and• usually supplied together with the financial supply in theordinary course of the supplier’s enterprise.The Australian Taxation Office has provided detailed guidance onits views on many issues relating to financial supplies in a publicruling, GSTR 2002/2, including:• those supplies that will be input taxed financial supplies;• those supplies that will be excluded from being input taxedfinancial supplies under regulation 40-5.12;• those acquisitions that will be reduced credit acquisitions;and• the requirements for a supply to be an incidental financialsupply.5.8.4 Reverse chargingIn most cases, it is the entity making the supply that will be liableto remit any GST payable on that supply. However, the GST lawprovides that in some cases the recipient may choose to assumethe supplier’s GST liability and in other cases, the GST lawimposes a liability to remit GST on the recipient. The latter caseis particularly relevant for securitisations in which services areprovided from entities outside Australia. Under Division 84 of theGST Act, an entity that is registered for GST purposes inAustralia may be liable to remit GST on supplies that it receiveswhere:• the supply that is made to that entity is not connected withAustralia; and• the supply would not have been GST-free or input taxed if ithad been connected with Australia; and• the entity acquires the supply solely or partly for the purposeof an enterprise that it carries on in Australia, but not solelyfor a creditable purpose; and• the supply is for consideration.Where these conditions are met, the recipient will be liable toGST equal to 10 percent of the amount paid for the relevantacquisition.Notably, this liability may also be imposed on transfers (notamounting to supplies) between branches of the same entity –such as the provision of broking services to an Australian branchby a branch of the same entity in another country.5.8.5 Registration under the GST ActIn order for an entity to make taxable supplies, financial suppliesand creditable acquisitions, the entity must be registered orrequired to be registered under the GST Act. Pursuant to section23-5 of the GST Act, an entity is required to be registered if itmakes supplies which are connected with Australia in the courseof carrying on its enterprise and its annual turnover as defined insection 188-10(1) of the GST Act, is or exceeds the registrationturnover threshold of $50,000.However, notably the value of any input taxed supplies made bythe entity are excluded from its turnover for the purposes of thiscalculation.Provided that an entity is carrying on an enterprise, it may electto register if its turnover is below the mandatory registrationthreshold. Failure to register an entity within 21 days of theentity becoming required to be registered is an offence, liable toan administrative penalty under section 228-40 of Schedule 1 tothe Taxation Administration Act .Relevant definitionsThere are a number of important definitions to be considered indetermining whether or not an entity is entitled to be registeredunder the GST Act:• “ connected with Australia” is specifically defined in section 9-25 of the GST Act and depends on whether the supply is ofgoods, real property or anything else (eg. a supply of anythingother than goods or real property is connected with Australiaif either the thing is done in Australia, or the supplier makesthe supply through an enterprise that the supplier carries onin Australia);• “ entity” is defined in section 184-1 of the GST Act andincludes all kinds of legal persons, as well as legal constructssuch as trusts and partnerships;• “ carrying on” an enterprise is defined in section 195-1 of theGST Act to include the doing of anything in the course of thecommencement or termination of the enterprise;39