Edited version of private ruling

Authorisation Number: 1011585968639

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and the sale of sale of a commercial property under a Court Order

Question 1

Are you making a taxable supply as a result of selling the Property as required by the Court Order?

Answer

Yes.

Relevant facts and circumstances

This year, some individuals were appointed Trustees (you) under a Court Order (issued by a State Court of Australia) to oversee the supply, by way of sale, of a property.

You are not registered for GST.

You were not appointed to be the representative of an incapacitated entity.

The property (herein known as the Property) is located in Australia.

The Property was used as a commercial property by a partnership.

The Applicant and Respondent listed in the Court Order are the partners of the partnership that is registered for GST.

The Court Order was made to resolve a dispute between the partners.

The Property's sale contract has recently settled with GST being paid by the buyer. This GST amount is currently in a trust account.

The sale price of the Property exceeded $75,000.

You were not an agent of either partner in relation to the sale of the Property.

You are not a creditor of the partners or partnership.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 9-5

Section 23-5

Section 23-15

Section 25-50

Division 58

Division 105

Division 188

Section 188-10

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

You are required to register for GST and remit the GST resulting from the sale of the Property.

Detailed reasoning

As a result of a Court Order, some individuals were appointed as Trustees to oversee the sale of the Property and to distribute the proceeds from the sale. This Court Order was made to resolve a dispute between the partners of a partnership. You were not acting as agents of either partner in relation to the sale.

The sale of the Property is therefore not in satisfaction of a debt owed to you by a partner (or partners) and as such, Division 105 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) does not apply in this case. You were also not appointed as a representative of an incapacitated entity and therefore Division 58 of the GST Act is also not applicable.

The effect of the Court Order was to vest the Property in you with the owners' interests in the Property being converted into a right to compel due performance of the Trust. Hence, it follows that you are supplying the Property and as such, the legislative provisions provided in Division 9 of the GST Act (taxable supply) must be applied.

Taxable supply

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

§ it makes a supply for consideration

§ the supply is made in the course or furtherance of an enterprise that it carries on

§ the supply is connected with Australia, and

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

The supply is not taxable to the extent that it is GST-free or input taxed, however, in this case there are no provisions in the GST Act or any other Act that would allow the sale of the Property to be GST-free or input taxed.

You sold the Property for consideration and in the furtherance of your enterprise (your enterprise being the sale of the Property as directed by the Court Order). The sale is connected with Australia as the Property is located in Australia and in accordance with section 23-5 and section 188-10 of the GST Act you were required to be registered for GST from 14 April 2010 (given your projected GST turnover at this date exceeded the registration turnover threshold of $75,000). Please refer to GSTR 2001/7, available from the Tax Office website www.ato.gov.au for more information on the registration threshold and projected GST turnover.

As all the requirements of section 9-5 of the GST Act are satisfied, you made a taxable supply when you sold the Property.

What you need to do

You need to apply for an Australian business number (ABN) and register for GST, backdating your registration to 14 April 2010.

You can apply for the registration:

§ online via the Australian Business Register at www.abr.gov.au

§ through your tax agent, or

§ by completing an Application for ABN registration for companies, partnerships, trusts or other organisations (NAT 2939).

You can order a paper copy of the application form:

§ through online ordering, or

§ by phoning 1300 720 092 24 hours a day, 7 days a week.

A fact sheet on this is enclosed.

You must then remit the GST payable on the sale of the Property. Please note that GST becomes payable under a standard land contract in the tax period in which settlement occurs. Please refer to GSTR 2000/28, available from the Tax Office website for more information on GST and standard land contracts.

Tax invoice

You must also provide a tax invoice to the buyer of the Property if so requested by them. You are also entitled to claim an input tax credit on any acquisition you made in relation to selling the Property provided you have been issued with a tax invoice from the supply (please note that a tax invoice is not required for an acquisition not exceeding $82.50 GST inclusive).

Cancelling your ABN and GST registration

You must cancel your ABN and GST registrations once your enterprise ceases or your projected GST turnover does not exceed $75,000. More information on this is available from the fact sheet Leaving the GST System, available from the Tax Office website.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).