This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.
You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.
Authorisation Number: 1051247115369
Date of advice: 05 July 2017
Subject: GST and the sale of property by a court appointed trustee
Is the sale of the Property by the Trustees a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?
Relevant facts and circumstances
You were appointed Trustees for Sale of the Property pursuant to an order of the Supreme Court of NSW under section 66G of the Conveyancing Act 1919 (NSW) (the Order).
The Trustees (You) registered for GST.
The Property was valued and listed for auction on ddmmyyyy and sold.
In 19XX Entity B purchased the Property as tenant in common as to one half with Entity C as tenants in common as to the other half.
Entity B and Entity C purchased the Property as a hobby farm. They have never used the land for any business purpose or derived any income from it.
Entity C grew vegetables on a portion of the Property, occasionally selling produce.
Entity B and Entity C have never personally been registered for GST.
In 20XX Entity C applied to the Supreme Court of NSW under section 66G of the Conveyancing Act 1919 (NSW) (Conveyancing Act) for orders appointing a trustee for sale due to a dispute between owners on the sale of the Property.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 23-5
A New Tax System (Goods and Services Tax) Act 1999 Division 184, and
A New Tax System (Goods and Services Tax) Act 1999 section 188-25.
Reasons for decision
In this reasoning, please note:
● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
● all reference materials referred to are available on the Australian Taxation Office (ATO) website ato.gov.au
● all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.
You are liable for goods and services tax (GST) on any taxable supply that you make.
Section 9-5 provides that you make a taxable supply if:
a) you make the supply for consideration
b) the supply is made in the course or furtherance of an enterprise that you carry on
c) the supply is connected with the indirect tax zone (Australia), and
d) you are registered, or required to be registered, for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
In this situation, the relevant factor is whether you, the Trustees supplied the Property in the course or furtherance of your enterprise, which on the facts of the case consists of your activities of providing professional 'Trustee’ services pursuant to the court orders.
You, the Trustees were appointed Statutory Trustees for sale of the Property pursuant to an order of the Supreme Court of NSW under section 66G of the Conveyancing Act. The Property was vested in The Trustees, to be held on statutory trust for sale.
We need to consider in what capacity you, the Trustees sold the Property and whether you are carrying on an enterprise in that capacity in relation to the Property.
Division 184 explains the meaning of entity which includes, amongst others, a trust (paragraph 184-1(1)(g)). In relation to trusts, subsection 184(2) provides the trustee of a trust is taken to be an entity consisting of the person who is the trustee, or the persons who are the trustees, at any given time. Subsection 184(3) further explains that a legal person can have a number of different capacities in which the person does things. In each of those capacities, the person can be taken to be a different entity.
When you, as Statutory Trustees, performed activities in accordance with the court orders, you acted in a different capacity and were taken to be a separate entity from that of the professional trustee services entity.
In accordance with the court orders, you, the Trustees were empowered to appoint agents, valuers, solicitors and/or conveyancers as required to sell the Property. You arranged the sale of the Property and transfer of title in accordance with the requirements of the court orders.
Prior to your appointment as Trustees the Property was used by one of the owners to grow vegetables on a portion of the Property, occasionally selling produce. This owner was not registered or required to be registered for GST, neither were the other owners in relation to any other activities or their passive ownership of the property.
The question of whether a party, or parties, appointed pursuant to section 66G of the Conveyancing Act as trustees for the sale of land, are carrying on an enterprise for GST purposes was considered in Toyama Pty Ltd v Landmark Building Developments Pty Ltd  NSWSC 83 (Toyama).
This situation differs from that considered in Toyama as in that case the trustees were appointed to wind up the venture on which Toyama and Landmark had engaged when they fell out, being activities in the nature of a business done for profit. In Toyama, Justice White at 76 stated:
…Whilst I accept that the trustees were engaged in a separate activity from the joint venturers, Landmark and Toyama, it was nonetheless a related activity. The trustees were appointed to wind up the venture on which Toyama and Landmark had engaged when they fell out. In my view, the mere appointment of a trustee to take the place of someone involved in activities which amounted to the carrying on of an enterprise, would not alter the characterisation of those activities. Clearly the activities conducted by the joint venturers, Toyama and Landmark, were activities in the nature of a business done for profit. The activities of the trustees, although a different enterprise, because carried on by different entities, had a business or commercial character because they brought the activities of the joint venturers to fruition. Moreover, the trustees were themselves acting in business, as professional persons who would charge fees for the work done in selling the site for the profit of the joint venturers.
Based on the findings of Justice White we would acknowledge that although your activities as Trustees were separate activities to the activities of the owners they are related to the Property on which the owners activities took place.
In this case, the Property was not used by the owners in an enterprise registered or required to be registered for GST.
Clearly the owners except for Entity C were passive landholders and the vegetable growing activities did not require them to be registered for GST.
We consider that neither your activities nor the activities of the owners changed the asset from a capital asset.
Section 23-5 only requires an entity to be registered for GST if it is carrying on an enterprise and the GST turnover of the entity is at or above the registration turnover threshold (currently $75,000).
As the GST turnover of the activities of the owners did not exceed $75,000 and pursuant to section 188-25 the transfer of the property, a capital asset, is disregarded when calculating GST turnover, the owners were not required to be registered for GST, and the activities of the owners or your activities in selling the Property did not require you to be registered for GST.
Therefore, the sale of the Property by you, the Trustees did not satisfy the requirements of a taxable supply under section 9-5.