Indirect Tax Sharing And Funding Agreement


When developing an ITSA, it is important to think carefully. However, an ITSA similar to an ASD must be specifically developed to reflect the functioning of registered indirect taxation. As a result, the allocation methods will undoubtedly be different from the methods of allowanceing income tax. As a result, an Indirect Tax Financing Agreement (ITFA) may allow the directors of each member of the GST group/joint venture, and the Australian GST Act was recently amended effective July 1, 2010 to allow members of a GST group or participants in a registered joint venture to enter into an Indirect Tax Sharing Agreement (ITSA). An AIC is similar to a consolidated income tax-sharing agreement and allows group members or joint venture participants to limit their liability for indirect taxation of the GST/joint venture group, i.e. GST, fuel tax, wine equalization tax and luxury tax (indirect taxes). As noted above, members of a GST group are jointly responsible for the indirect tax burdens of their representative member. However, there is no joint and several liability to GST (or commercial activity declarations) due for tax periods from July 1, 2010 if an IDI is closed before the GST refund due date. As part of an AIC, the group`s total indirect tax commitments are distributed among gst members. Where the allocation among members is appropriate and the other requirements of the AIC are met, the member`s liability is limited to the amount (or amount of the contribution) thus set.

At the end of the day, the question is whether there is a reasonable assignment that is left to the courts. In the McGrath-Ors case as liquidator of HIH Insurance Ltd [2009] NSWSC 1244, Justice Barrett of the Nsw Supreme Court addressed the issue of adequacy in the context of a tax participation agreement. His honour was as follows: participants are satisfied that the representative is able to finance the indirect tax commitments of the GST/joint venture group as soon as they expire. In the absence of ITFA, the representative may be obliged to pay the indirect tax debts of the entire GST/joint venture participant, without formal agreement with the other members of the participating GST/joint venture group, so that he can be compensated (or paid in advance) by these members of the GST/co-joint venture group for their share of indirect tax. The ITFA may also provide payments from the representative to a member of the GST group/participant in the joint venture whose upstream tax credits reduce the amount of indirect tax of the GST/joint ventures group. As of July 1, 2010, GST group members and GST joint venture participants may limit their exposure to shared and multi-responsibility liability for all GST liabilities of the group or joint venture. This can be done through the conclusion of an agreement known as „indirect tax sharing“ (ITSA). With respect to indirect taxation, an AIC should meet a purpose similar to that of an income tax-related tax participation agreement (TSA).

Based on the experience of the TSA, we expect all GST groups to complete an ITSA. In order to ensure maximum coverage, an ITSA must be completed before the group`s first BAS is filed after July 1, 2010 – august 20, 2010 for monthly transfers. However, it may be advisable to enter into an indirect tax financing agreement (ITFA) at the same time as an ITSA. Given existing accounting methods for financing income tax liabilities for consolidated tax groups, GST Group Accounters can expect an ITFA to be concluded to determine how group members/joint venture participants finance the atO payment of the GST/GST-Joint-Venture indirect tax obligations by the member/joint venture member member/joint venture member member/member joint venture.