ATO Interpretative Decision

ATO ID 2002/86

Goods and Services Tax

• See ATO Interpretative Decision 2012/7 for a view on the operation of Division 58 (which replaced Division 147).
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a representative of an incapacitated entity, liable for goods and services tax (GST) under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives consideration for a supply that was made by the incapacitated entity prior to its appointment?

Decision

No, the entity is not liable for GST under section 9-40 of the GST Act when it receives consideration for a supply that was made by the incapacitated entity prior to its appointment.

It is the incapacitated entity that is liable for GST under section 9-40 of the GST Act.

Facts

The entity is a representative of an incapacitated entity and is registered for GST.

The entity receives payments of accounts receivable for a supply that was made by the incapacitated entity, before it was appointed as representative.

The incapacitated entity is registered for GST and the supply made by the incapacitated entity is connected with Australia. The supply was made in the course of an enterprise that the incapacitated entity carried on.

Reasons for Decision

Under section 9-40 of the GST Act, an entity must pay the GST on any taxable supplies that it makes.

The effect of Division 147 of the GST Act is that the entity, as representative of an incapacitated entity is only liable for GST in respect of taxable supplies which the representative makes, in its capacity of representing the incapacitated entity. Therefore, it is necessary to determine who is making the taxable supply.

Section 9-5 of the GST Act states that the entity makes a taxable supply if:

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the entity makes the supply for consideration;

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the supply is made in the course or furtherance of an enterprise that the entity carries on;

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the supply is connected with Australia; and

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the entity is registered, or required to be registered for GST.

The incapacitated entity made the supply. The supply is made in the course of an enterprise that the incapacitated entity carried on, the supply is connected with Australia and the incapacitated entity is registered for GST. However, as payment for the supply was received after the representative entity was appointed, it is necessary to determine whether the supply was made for consideration.

Subsection 9-15(1) of the GST Act defines consideration to include:

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any payment, or act or forbearance, in connection with a supply of anything; and

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any payment, or act or forbearance, in response to or for the inducement of a supply of anything.

The payment made to the representative entity is in connection with a supply made by the incapacitated entity prior to the representative entity's appointment. Neither section 9-5 of the GST Act nor subsection 9-15(1) of the GST Act requires that consideration must be received by the supplier of the goods. Therefore, the supply was made for consideration, even though it was provided to another entity (the representative of the incapacitated entity).

Accordingly, it is the incapacitated entity that made a supply which meets the requirements of section 9-5 of the GST Act and is liable for GST under section 9-40 of the GST Act.

Therefore, the representative entity is not liable for GST under section 9-40 of the GST Act when it receives consideration for a taxable supply that was made by the incapacitated entity prior to its appointment.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   subsection 9-15(1)
   section 9-40
   Division 147

Keywords
Goods & services tax
GST special rules
Representative of incapacitated entities
GST supplies & acquisitions
Taxable supply

Business Line:  GST

Date of publication:  30 January 2002

ISSN: 1445-2782