CTA3 2024 - CS4 : GST

• As of 15 May 2024, the acquisition has not been completed.
• Power's Board is now contemplating acquiring the assets of SStore, including those held by Asset and Secret, instead of acquiring shares.

1. GST-Free Going Concern: Can Battery acquire the assets of SStore, Asset, and Secret as a GST-free going concern?
2. GST Treatment if Not GST-Free: What is the GST treatment if the acquisition cannot be treated as a GST-free going concern?
3. ITC and RITC Claims: How will the change in transaction structure affect the eligibility to claim ITCs and RITCs on incurred costs, including Accumin’s, Clover’s, and CarneRock’s expenses?

1. Compliance with Tax Agent Services Act 2009 (Cth): What specific issues does this scenario present for the adviser under the Tax Agent Services Act 2009?
2. Consequences of Non-Compliance: What are the potential consequences for the adviser failing to observe the provisions of the Act, and which are likely to apply in this case?

1. GST-Free Going Concern:
   • Battery can acquire the assets of SStore, Asset, and Secret as a GST-free going concern if all necessary components for continued operation are transferred, and each supply meets the GST-free criteria.
2. GST Treatment if Not GST-Free:
   • If the acquisition cannot be treated as a GST-free going concern, it will be considered a taxable supply.
3. ITC and RITC Claims:
   • Battery: Can now claim ITCs on acquisitions related to the asset purchase since it will be for a fully creditable purpose.
   • Power’s Expenses: Adjustments may be necessary if the use of previously acquired services changes due to the revised structure. Specific advice:
     • Accumin’s Structuring Advice: No change in ITC/RITC recovery.
     • Accumin’s Financial Modelling and Due Diligence: ITCs fully recoverable; advice applicable to the asset acquisition.
     • Clover’s Legal Due Diligence: ITCs fully recoverable; advice applicable to the asset acquisition.
     • Clover’s Share Purchase Agreement Drafting: ITCs not recoverable; specific to share acquisition.
     • CarneRock’s Success Fee: Partial reapportionment possible; impact depends on services provided.
   • FAT Model: Generally not recalculated for prior periods; adjustments affect future periods.

Power Australia Pty Limited (Power)

Battery Holdings Pty Limited (Battery)

Guide to Implementation Steps

For Power Australia Pty Limited (Power)

1. Review and Reassess GST Claims
   • Action: Reassess ITC and RITC claims based on the final transaction structure.
   • Steps:
     1. Review Previous Claims: Analyze ITC and RITC claims made before the change in transaction structure.
     2. Determine Final Structure: Confirm whether the acquisition is structured as a GST-free going concern or a taxable supply.
     3. Adjust Claims: Adjust ITC/RITC claims as necessary, reflecting the final transaction structure and any re-applied services.
2. Evaluate Impact of Transaction Structure Change
   • Action: Determine if any adjustments are needed due to the change in transaction structure.
   • Steps:
     1. Assess Each Service: Identify if services were originally intended for a share sale or an asset sale.
     2. Check for Adjustments: Determine if Division 129 adjustments apply based on any changes in the use of services.
     3. Consult Relevant Regulations: Review GSTD 2012/313 for guidance on changes in creditable purpose.
3. No Recalculation of FAT Required
   • Action: Avoid recalculating the FAT for prior periods unless specifically required.
   • Steps:
     1. Confirm Period: Validate that changes in transaction structure should not necessitate recalculations for previous tax periods.
     2. Focus on Current Period: Apply changes to FAT calculations moving forward.
4. Documentation and Reporting
   • Action: Document all changes and adjustments made for compliance and reporting purposes.
   • Steps:
     1. Prepare Documentation: Collect and prepare documentation of all adjustments and new claims.
     2. Update BAS: Ensure adjustments are reflected in Power’s April 2024 BAS due 21 May.

For Battery Holdings Pty Limited (Battery)

1. Confirm GST-Free Status
   • Action: Determine if the acquisition of assets can be treated as a GST-free going concern.
   • Steps:
     1. Review Supply Criteria: Verify that each component (assets, intellectual property) meets the GST-free going concern criteria.
     2. Check Assignments: Ensure that Asset Pty Ltd and Secret Pty Ltd assign leases and licenses to Battery as required.
2. Assess ITC Claims Based on GST-Free Status
   • Action: Evaluate and claim ITCs if the acquisition qualifies as a GST-free going concern.
   • Steps:
     1. Identify Creditable Acquisitions: Confirm that services related to the GST-free going concern are creditable.
     2. Claim ITCs: Ensure that ITCs are claimed for eligible services acquired for the asset purchase.
3. Review GST Treatment for Non-GST-Free Scenarios
   • Action: If the acquisition is not GST-free, ensure correct GST treatment and ITC claims.
   • Steps:
     1. Determine Taxable Status: If assets cannot be treated as a GST-free going concern, apply the taxable supply rules.
     2. Adjust ITC Claims: Adjust ITC claims according to the taxable status of the acquisition.
4. Documentation and Reporting
   • Action: Ensure proper documentation and reporting of the GST treatment and ITC claims.
   • Steps:
     1. Prepare Documentation: Gather and maintain records of GST-free or taxable status determinations and related ITC claims.
     2. Update Records: Ensure all changes are reflected in Battery’s GST reporting.

General Steps for Both Entities:

1. Consult Tax Advisors: Engage with tax advisors to validate interpretations and ensure compliance with current regulations.
2. Update Financial Records: Make necessary adjustments to financial records and tax reports based on new GST treatments.
3. Maintain Communication: Keep open lines of communication between entities to ensure alignment and address any ongoing issues or updates related to the transaction structure.

This guide provides a structured approach for implementing necessary steps based on the final transaction structure and its impact on GST claims and reporting.