ATO Interpretative Decision

ATO ID 2001/777 (Withdrawn)

Goods and Services Tax

GST and a supply made by a mortgagee in possession in satisfaction of a debt
FOI status: may be released

This ATO ID does not contain an interpretative decision.

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

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a mortgagee in possession, making a taxable supply under subsection 105-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells the real property of a registered debtor in satisfaction of a debt?

Decision

Yes, the entity is making a taxable supply under subsection 105-5(1) of the GST Act when it sells the real property of a registered debtor in satisfaction of a debt.

Facts

The entity is a mortgagee in possession (a creditor) who is selling a debtor's property to a third party. The entity is selling the debtor's property to satisfy a debt that the debtor owes to the entity. The entity is not registered for goods and services tax (GST).

The debtor is a property developer who is registered for GST and the supply of the real property is the supply of new residential premises. The supply satisfies the requirements of section 9-5 of the GST Act and would be a taxable supply if the debtor sold the property.

Reasons for Decision

Subsection 105-5(1) of the GST Act provides that a supply made by a creditor in satisfaction of a debt is a taxable supply if:

•: the entity supplies the property of the debtor to a third party in satisfaction of a debt that the debtor owes to the entity; and
•: the supply, to the third party, would be a taxable supply if the debtor had made the supply.

In this case, the entity is selling a debtor's property, to a third party, to satisfy a debt that the debtor owes to the entity. In addition, the debtor is registered for GST and the supply satisfies the other requirements of section 9-5 of the GST Act. As such, the supply of the real property would be a taxable supply if the debtor made the supply.

Therefore, as the requirements of subsection 105-5(1) of the GST Act are satisfied, the entity is making a taxable supply when it sells the real property of a debtor in satisfaction of a debt.

[Note: Although the entity is making a taxable supply under subsection 105-5(1) of the GST Act, in this instance, the entity is not registered or required to be registered for GST.

Paragraph 105-5(2)(b) of the GST Act provides that where the requirements of subsection 105-5(1) of the GST Act are satisfied, it does not matter whether the creditor is registered or required to be registered for GST when it makes a supply in satisfaction of a debt. It is only the GST status of the debtor that is relevant.]

Date of decision: 10 May 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   subsection 105-5(1)
   paragraph 105-5(2)(b)

Related ATO Interpretative Decisions
ATO ID 2001/112
ATO ID 2001/466

Keywords
Goods & services tax
GST supplies in satisfaction of debt
GST supplies & acquisitions
taxable supply

Business Line: GST

Date of publication: 21 December 2001

ISSN: 1445-2782

history

	Date:	Version:
	10 May 2001	Original statement
You are here	14 October 2005	Archived

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