ATO Interpretative Decision

ATO ID 2001/466

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a mortgagee in possession, making a taxable supply under section 105-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells the real property of a mortgagor that is not registered for goods and services tax (GST)?

Decision

No, the entity is not making a taxable supply under section 105-5 of the GST Act when it sells real property of a mortgagor that is not registered for GST?

Facts

The entity is a mortgagee in possession (creditor). The entity makes a supply of real property.

The entity is aware that the mortgagor (debtor) is neither registered nor required to be registered for GST. The mortgagor did not provide written notice that if it had made a supply of the real property it would not have been a taxable supply.

The entity makes the supply in the course of its enterprise in Australia. The entity is registered for GST.

Reasons for Decision

Division 105 of the GST Act deals with supplies made by creditors of property belonging to a debtor, where the supply is in satisfaction of a debt owed to the creditor. In these circumstances, the supply is a taxable supply if, had the debtor made the supply, it would have been a taxable supply. The creditor is liable for any GST payable on the supply of the debtor's property. It does not matter if the supply is made in the course of the creditor's enterprise, or if the creditor is registered, or required to be registered for GST.

However, subsection 105-5(3) provides that the supply is not a taxable supply if:

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the debtor has given the entity a written notice stating that the supply would not be a taxable supply if the debtor were to make it, and stating fully the reasons why the supply would not be a taxable supply; or

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if the entity cannot obtain such a notice - the entity believes on the basis of reasonable information that the supply would not be a taxable supply if the debtor were to make it.

In this case, the mortgagor did not provide written notice that the supply is not a taxable supply. Therefore, the issue is whether the entity has reasonable information to form a belief that the supply would not be a taxable supply if the debtor were to make it.

Section 9-5 of the GST Act must be considered in order to establish if the supply of the real property would have been a taxable supply, had the mortgagors (debtor) made the supply. The debtor would have made a taxable supply of real property if:

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it made the supply for consideration; and

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it made the supply in the course or furtherance of an enterprise that it carried on; and

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the supply is connected with Australia and

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the debtor is registered or required to be registered for GST.

In this case, the mortgagor (debtor) is neither registered nor required to be registered for GST. Therefore, had the debtor made the supply of real property, it would not have met all the requirements of a taxable supply under section 9-5 of the GST Act.

Accordingly, as there is reasonable information available for the entity to form a belief that the supply would not be a taxable supply if the debtor had made it, the supply of real property by the entity is not a taxable supply under section 105-5 of the GST Act.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 105
   section 105-5
   subsection 105-5(3)

Keywords
Goods & services tax
Taxable supply
GST supplies in satisfaction of a debt

Business Line:  GST

Date of publication:  17 October 2001

ISSN: 1445-2782