On Friday the Commissioner published ATO ID 2012/66 ‘GST and redemption of redeemable preference shares’ where he confirmed that an entity makes a financial supply when it redeems redeemable preference shares from its shareholders.

The view in the ATOID does not appear controversial.  The basis for the view is that redeemable preference shares are “securities” for the purposes of Item 10 in the table under sub regulation 40-5.09(3) of the GST Regulations so that the acquisition of an interest in redeemable preference shares (an acquisition-supply) is a financial supply.  Further, the ATOID considers that the GST Regulations do not require that, following the acquisition, the interest must be enduring and it is not relevant that the entity cancels the shares after it acquires them.