1011588988924 | Legal database

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Edited version of private ruling

Authorisation Number: 1011588988924

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Ruling

Subject: GST and supply of an asset by a Court

Question 1

Is the entity required to remit goods and services tax (GST) on the supply by way of sale of an asset where the asset has not been entered for home consumption within the meaning of the Customs Act 1901?

Answer

No.

Relevant facts and circumstances

You are an officer of the Court.

You are an employee of the Court and as such your actions as an employee are performed on behalf of the Court.

Any supplies or acquisitions that you make in carrying on your functions and duties are made on behalf of the Court.

The Court is registered for GST.

You are required in your capacity as an officer of the Court under a judicial sale to dispose of an asset.

The asset has not yet been entered for home consumption and may never be.

It is currently under Custom's control.

The Court ordered the asset to be sold to satisfy a judgment debt.

The sale of the debtor's asset is to be made for consideration.

The asset is to be sold by you.

A further order of the Court orders that you will arrange the sale of the asset 'as is, where is' by tender.

It is envisaged that the asset will be sold either at public auction, private treaty or tender to maximise interest and ultimately the sale price.

You are not acting as an agent for either the creditor or debtor.

You are not a representative of an incapacitated entity under Division 58 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant legislative provisions

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999

Section 9-25 of the A New Tax System (Goods and Services Tax) Act 1999

Division 105 of the A New Tax System (Goods and Services Tax) Act 1999

Division 58 of the A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision

These reasons for decision accompany the Notice of private ruling for the Court.

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

Summary

The Court is not required to remit GST on the supply of the asset as it is not a taxable supply as one of the positive elements of section 9-5 of the GST Act is not satisfied, namely the supply is not connected with Australia.

Detailed reasoning

In selling the debtor's property, you are not acting as an agent of either the creditor or the debtor.

While you are selling the debtor's property, to a third party, the judgment debt is not a debt owed to you. Your role is to enforce payment of the amount, which is due to the creditor under the judgment, by selling the asset.

You are an employee of the Court. Therefore, the sale of the asset is not in satisfaction of a debt that the debtor owes to the Court and as such, section 105-5 of the GST Act does not apply to the sale and the rules in Division 9 of the GST Act must be considered.

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.

However a supply is not taxable to the extent that it is GST-free or input taxed.

All of the elements of section 9-5 need to be satisfied for the supply to be taxable.

There are no provisions in the GST Act or any other Act that would make the supply of the asset by the Court input taxed or GST-free.

You advise that you are an employee of the Court and that you are organising the sale of the asset.

You are not acting as an agent for the creditors or debtors. You are not a representative of an incapacitated entity under Division 58 of the GST Act. It follows that the Court is supplying the asset.

Section 9-20 of the GST Act defines enterprise to include an activity or series of activities done by the Commonwealth, a State or a Territory. Therefore, the Court is supplying the asset in the course of an enterprise that it carries on.

The sale is for consideration and the Court is registered for GST.

The third requirement of section 9-5 of the GST Act is that the supply is connected with Australia.

Section 9-25 of the GST Act is about supplies connected with Australia.

Of relevance is subsection 9-25(3) of the GST Act which is about supplies of goods to Australia. It states:

A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either:

(a) imports the goods into Australia; or

(b) installs or assembles the goods in Australia.

Goods and Services Tax ruling GSTR 2000/31 explains the Australian Taxation Office's (ATO) view of the meaning of supplies connected with Australia.

Paragraphs 52 of GSTR 2000/31 state:

Supplies of goods to Australia

52. A supply of goods is connected with Australia if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia (paragraph 9-25(3)(a)) or installs or assembles the goods in Australia (paragraph 9-25(3)(b)). The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia.

53. This means that the supplier is either an exporter from outside Australia and importer into Australia, or an exporter from outside Australia and installer or assembler in Australia.

54. Paragraph 9-25(3)(a) does not apply to a supply of goods that involves goods being brought to Australia where the recipient imports the goods into Australia.

55. Under paragraph 9-25(3)(a) a supply of goods brought to Australia is connected with Australia if the supplier imports the goods regardless of whether or not the supplier engages a Customs broker to arrange customs clearance of the goods.

56. A supply that is connected with Australia under paragraph 9-25(3)(a) may give rise to a taxable supply and a taxable importation where the supplier imports the goods into Australia.

A key requirement is that the supplier of the goods imports the goods into Australia.

Goods and Services Tax Ruling GSTR 2003/15 explains the ATO's view on the importation of goods into Australia.

It explains that one of the requirements is that the supplier has entered the goods for home consumption within the meaning of the Customs Act 1901.

In the present case the Court has not entered the good for home consumption and therefore, the supply by way of sale is not connected with Australia for the purposes of subsection 9-25(3) of the GST Act.

Consequently as one of the positive elements of section 9-5 of the GST Act is not satisfied, the Court is not making a taxable supply when you sell the asset.

Therefore, the Court is not required to remit GST on the supply.

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