ATO Interpretative Decision
ATO ID 2002/489
Goods and Services Tax
GST and the representative of an incapacitated entity (controlling trustee of a composition)FOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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, the controlling trustee of a composition under Part X of the Bankruptcy Act 1966 (Bankruptcy Act), required to be registered in that capacity for goods and services tax (GST), under section 147-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Decision
Yes, the entity is required to be registered for GST under section 147-5 of the GST Act.
Facts
The entity is the controlling trustee of a debtor. The debtor has signed an authority under section 188 of the Bankruptcy Act as it is unable to pay its debts as and when they fall due. The authority enables the controlling trustee to call a meeting of the debtor's creditors and to take control of the debtor's property.
The joint and separate creditors of the debtor accept a composition under Part X of the Bankruptcy Act, upon which, the entity becomes the trustee of the composition.
A composition under Part X of the Bankruptcy Act is defined in subsection 187(1) of that Act as an arrangement by which the creditors of a debtor agree to:
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- accept payments of the debts due to them by instalments; or
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- accept, in full satisfaction of the debts due to them, less than the full amount of those debts, whether in the form of money or other property, and whether by instalments or otherwise.
The debtor is registered for GST.
The entity is currently registered for GST in its individual capacity.
Reasons for Decision
Section 147-5 of the GST Act provides that a representative of an incapacitated entity is required to be registered in that capacity if the incapacitated entity is registered or required to be registered. Therefore, it is necessary to determine whether the entity is a 'representative' of an 'incapacitated entity'.
The term 'representative' is defined in section 195-1 of the GST Act to mean:
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- a trustee in bankruptcy; or
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- a liquidator; or
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- a receiver; or
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- an administrator appointed to an entity under Division 2 of Part 5.3A of the Corporations Act 2001; or
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- a person appointed, or authorised, under an Australian law, to manage the affairs of an entity because it is unable to pay all its debts as and when they become due and payable; or
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- an administrator of a deed of company arrangement executed by the entity.
In this case, the debtor is not bankrupt, nor is it in liquidation or receivership. Furthermore, the entity is not an administrator appointed under Division 2 of Part 5.3A of the Corporations Act 2001 nor is it an administrator of a deed of company arrangement executed by the entity.
Therefore, the entity (the controlling trustee and trustee of the composition) can only be a 'representative' for GST purposes, if it is a person appointed or authorised, under an Australian law, to manage the affairs of another entity because that entity is unable to pay all its debts as and when they become due and payable.
As the controlling trustee and trustee under the composition, the entity is appointed and authorised under section 188 of the Bankruptcy Act, to deal with the property of the debtor. The debtor entered into this arrangement because it was unable to pay its debts as and when they fell due. Accordingly, the entity is considered to be the 'representative' of the debtor for GST purposes.
Under section 195-1 of the GST Act, the term 'incapacitated entity' means:
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- an individual who is bankrupt; or
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- an entity that is in liquidation or receivership; or
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- an entity that has a representative.
As the debtor has a 'representative', it is considered to be an 'incapacitated entity' for GST purposes. Therefore, the entity is the 'representative' of an 'incapacitated entity'.
Furthermore, the debtor (the incapacitated entity) is registered. As such, the entity (the representative of an incapacitated entity) is required to be registered in that capacity, under section 147-5 of the GST Act.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 147-5
section 195-1
Part X
subsection 187(1)
section 188 Corporations Act 2001
Part 5.3A Division 2
Keywords
Goods & services tax
GST special rules
Representative of incapacitated entity
ISSN: 1445-2782
| Date: | Version: | |
| You are here → | 13 November 2001 | Original statement |
| 3 May 2013 | Archived |
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