The ATO recently issued an amended GST assessment reducing GST claims in
relation to a prominent breeding industry player.
The GST credits at issue were
in relation to the cost of buying into a Stallion Syndicate that fell within
the Managed Investment Scheme ("MIS”) regime. On consideration of the issue and
its strategic importance in terms of the after-tax cost of these assets,
Carrazzo Consulting was approached to raise a formal objection to the amended
assessment.
The ATO disallowed approximately $50,000 of GST refunds on the purchase of more than half a million dollars’ worth of stallion syndicate shares. The reason provided for the decision at first instance was that the purchase of shares was a ‘financial supply’ as the syndicate was a Managed Investment Scheme (‘MIS’). Entry into the MIS regime for stallion syndicates is almost universal in the Australian commercial Stallion industry.
Carrazzo Consulting duly undertook and lodged a formal objection to this decision.
This decision was in the best interests of our client but also had wider implications for key industry stakeholders. The stud farms selling stallion shares to their client base and investors would all be impacted by a change in the ATO position on these issues.
The MIS regime is complex both from a corporate compliance and tax perspective.
The firm weighed this complexity and the uncertainty of an adverse decision at objection along with the best interests of our client.
Our team, led by new partner Bill Mavropoulos, decided to proceed with the objection and was able to secure meetings with high level ATO staff to work through the many complex issues involved. Through close collaboration with the ATO the client’s objection was successful and the GST was ultimately able to be claimed by the breeder.
The ATO was understanding and engaged with us professionally. They administered the decision fairly and in accordance with the tax law.
But there’s more..
The ATO recognised that this issue and the way Stallion syndicates and breeding rights are taxed/administered is not the subject of official ATO pronouncements at present.
The industry based rulings and guidance issued by them have focused on the horse breeding and racing characterisation of activities rather than the broader issues raised by investment in these products.
In collaboration with the ATO a formal request for the ATO to explore the issues and release a special Class Ruling on these matters was made by our office.
The ATO, on reading this submission, decided that the issues were better addressed by a wider reaching consultative process that would end with a binding public ruling or other broader authoritative guidance.
The ATO has recognised the need for Carrazzo Consulting to lead this engagement and for us, in time, to access and arrange the appropriate industry input required.
Current state of play – our view
Given the lack of authoritative ATO pronouncements, in this area of tax law (both from a GST perspective and income tax) this area is fraught with tax risk at present.
The set up and administration of these syndicates should be undertaken with the help of specialist legal and tax advisors until the binding public guidance is released by the ATO.
Should similar issues arise for investors in these schemes we encourage them to reach out to us prior to the release of any ATO guidance – industry input is crucial to the relevance and integrity of any ATO public ruling. If you would like us to expand upon or clarify any issue mentioned in this release, please do not hesitate to contact our office.
The ATO disallowed approximately $50,000 of GST refunds on the purchase of more than half a million dollars’ worth of stallion syndicate shares. The reason provided for the decision at first instance was that the purchase of shares was a ‘financial supply’ as the syndicate was a Managed Investment Scheme (‘MIS’). Entry into the MIS regime for stallion syndicates is almost universal in the Australian commercial Stallion industry.
Carrazzo Consulting duly undertook and lodged a formal objection to this decision.
This decision was in the best interests of our client but also had wider implications for key industry stakeholders. The stud farms selling stallion shares to their client base and investors would all be impacted by a change in the ATO position on these issues.
The MIS regime is complex both from a corporate compliance and tax perspective.
The firm weighed this complexity and the uncertainty of an adverse decision at objection along with the best interests of our client.
Our team, led by new partner Bill Mavropoulos, decided to proceed with the objection and was able to secure meetings with high level ATO staff to work through the many complex issues involved. Through close collaboration with the ATO the client’s objection was successful and the GST was ultimately able to be claimed by the breeder.
The ATO was understanding and engaged with us professionally. They administered the decision fairly and in accordance with the tax law.
But there’s more..
The ATO recognised that this issue and the way Stallion syndicates and breeding rights are taxed/administered is not the subject of official ATO pronouncements at present.
The industry based rulings and guidance issued by them have focused on the horse breeding and racing characterisation of activities rather than the broader issues raised by investment in these products.
In collaboration with the ATO a formal request for the ATO to explore the issues and release a special Class Ruling on these matters was made by our office.
The ATO, on reading this submission, decided that the issues were better addressed by a wider reaching consultative process that would end with a binding public ruling or other broader authoritative guidance.
The ATO has recognised the need for Carrazzo Consulting to lead this engagement and for us, in time, to access and arrange the appropriate industry input required.
Current state of play – our view
Given the lack of authoritative ATO pronouncements, in this area of tax law (both from a GST perspective and income tax) this area is fraught with tax risk at present.
The set up and administration of these syndicates should be undertaken with the help of specialist legal and tax advisors until the binding public guidance is released by the ATO.
Should similar issues arise for investors in these schemes we encourage them to reach out to us prior to the release of any ATO guidance – industry input is crucial to the relevance and integrity of any ATO public ruling. If you would like us to expand upon or clarify any issue mentioned in this release, please do not hesitate to contact our office.
BILL MAVROPOULOS CA
CARRAZZO CONSULTING CPAs
801 Glenferrie Road, Hawthorn, VIC, 3122
TEL: (03) 9982 1000
FAX: (03) 9329 8355
MOB: 0417 549 347
E-mail: bill@carrazzo.com.au or paul.carrazzo@carrazzo.com.au
Web Site: www.carrazzo.com.au
