• Service: Tax, Indirect Tax, Dispute Resolution
  • Type: Regulatory update
  • Date: 28/08/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Jeremy Geale

Jeremy Geale
Partner, Tax

+61 2 9335 8422

Using Indirect Tax Sharing Agreements to manage GST risk 

by Jeremy Geale, Tax Law Specialist

Most corporate groups use Goods and Services Tax (GST) grouping to streamline their GST compliance obligations and avoid adverse cash-flow consequences on inter-group transactions.

However, as one of the major consequences is that members are jointly and severally liable for the indirect tax liabilities of the GST group, most corporate groups are now using Indirect Tax Sharing Agreements (ITSA) to manage their risk. It is also common to see an ITSA raised as a condition precedent to extend financing. 

ITSAs operate in a similar way to tax sharing agreements by allowing members of a GST group or GST joint venture to limit their share of the indirect tax liabilities and allow members to exit clear of liabilities.

As a result, ITSAs are becoming increasingly sought after where a member:

  • may be acquired by another entity, as a way to limit indirect tax liabilities and extent of tax warranties and indemnities required
  • seeks financing, as lenders generally want a level of comfort that the member will not be exposed to other group liabilities
  • participates in a securitisation arrangement (such as a securitisation SPV established by a third party).

ITSAs are also widely used in GST joint ventures where the participants and operator are unrelated and “on the hook” for each other’s liabilities. 


In addition, a well drafted ITSA should also contain clauses that appropriately cover such matters as:


  • the entry and exit of members
  • the application of past and future ITSAs
  • obligations of the members to keep records and cooperate with the Commissioner of Taxation.

KPMG and KPMG Tax Law are happy to discuss the benefits of implementing an ITSA and funding agreement.


Our documents have been developed over time and incorporate our experience with managing tax disputes involving such agreements.


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