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Capital raising costs – the wrong side of the mirror?


Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) grants registered businesses relief for the input tax cost of their business purchases. Relief is, however, not available for the costs of purchases which are related to making input taxed supplies, including “financial supplies”. The provision of an interest in or under a security is a financial supply. A security is defined to include a share in a company.

The Commissioner of Taxation has taken the view that, when a company raises capital by issuing shares in itself for subscription, the issuing of shares is a financial supply. This means that costs of acquisitions related to the share issue, such as share registry costs and the costs of underwriting the issue, do not qualify for input tax relief. In this paper, the author examines capital raising and the concept of input relief for associated costs, to discern whether the Commissioner has misunderstood some fundamentals of the operation of a valueadded tax and the modern approach to interpretation of the GST law that is required by the High Court.

Author profile

Michael Evans CTA
Michael Evans is in his 47th year of working in the Australian taxation system. His current roles include: • a Senior Fellow of University of Melbourne where he conducts a GST principles subject in the University’s Masters level tax courses; and • a member of the design and examinations panel of the Taxation Institute’s CTA3 panel; • The General Editor of the Australian GST journal. Over recent years, has provided advice and assistance on the design and legislation of indirect taxation systems, for: • The Australian and State Treasuries; • The International Taxation and Investment Centre’s missions in Myanmar; and • The Canadian Ministry of Finance - Current at 26 April 2017
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