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Ruling

Subject: GST and supply of property by receivers

Question 1

Will the Receivers for the Company be liable under Division 58 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for any GST payable on the supply of the Property?

Answer

Yes.

Question 2

Will the Receivers for the Company be liable under Division 105 of the GST Act for any GST payable on the supply of the Property?

Answer

No.

Relevant facts and circumstances

You have enclosed copies of the following documents for our reference:

· registered mortgage given by the registered owner in favour of the Bank over the Property (Mortgage)

· standard terms document, which is incorporated into the Mortgage (Mortgage Terms)

· the deed of appointment under which the Receivers were appointed as receivers and managers of the Property (Deed of Appointment)

You note the definition of 'Receiver' in the Mortgage Terms includes a 'receiver and manager'. Accordingly, by the Mortgage Terms, the Bank is entitled to appoint receivers and managers to the Property once the Mortgage has become enforceable.

By the Deed of Appointment, the Bank did in fact appoint the Receivers to be the receiver and manager of [the Property]. Accordingly, the 'arrangement' between the Bank and the Receivers is that the Bank has appointed the Receivers as receivers and managers of the Property.

The Receivers' appointment makes them the agents of the registered owner of property, not the Bank. This position is confirmed by:

· the Mortgage Terms, which provides that the Receivers are the registered owner's agents, and that the registered owner is solely responsible for anything done or not done by the Receivers; and

· the Deed of Appointment, which provides that the Receivers 'shall be deemed to be the agent of the Mortgagor'.

The position of a receiver and manager as agent of the mortgagor is clearly established in a line of judicial decisions (see for example, Re Leslie Homes (Aust) Pty Ltd (1984) 8 ACLR 1020, Bufalo Corp Pty Ltd v Leone (2001) 40 ACSR 327 and Geneva Finance Ltd, Re; Quigley v Cook (1992) 7 WAR 496). It is also consistent with the legislative provisions relating to the appointment of receivers and managers (see for example, section 92(2) of the Property Law Act 1974 (QId) and section 420 of the Corporations Act 2001 (Cth)).

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999. section 195-1

A New Tax System (Goods and Services Tax) Act 1999. section 58-5

A New Tax System (Goods and Services Tax) Act 1999. section 58-10

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

Corporations Act 2001 section 9

Reasons for decision

Question 1

Summary

The Receivers will be liable under Division 58 of the GST Act for any GST payable on the supply of the Property.

Detailed reasoning

A representative of an incapacitated entity is defined in section 195-1 of the GST Act as:

(a) a trustee in bankruptcy; or

(b) a *liquidator; or

(c) a receiver; or

(ca) a controller (within the meaning of section 9 of the Corporations Act 2001); or

(d) an administrator appointed to an entity under Division 2 of Part 5.3A of the Corporations Act 2001; or

(e) 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

(f) an administrator of a deed of company arrangement executed by the entity.

* denotes a term defined in the Dictionary, starting at section 195-1 of the GST Act.

Paragraph (ca) of the definition of a 'representative' includes a 'controller (within the meaning of section 9 of the Corporations Act 2001)'.

Section 9 of the Corporations Act 2001 defines a 'controller' as follows:

controller, in relation to the property of a corporation, means:

(a) a receiver, or receiver and manager, of that property; or

(b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a charge;

and has the meaning affected by paragraph 434F(b) (which deals with 2 or more persons appointed as controllers).

A receiver and manager of the property of a corporation falls within paragraph (a) of the definition of a 'controller', it follows that the Receivers are controllers and therefore a representative of an incapacitated entity for GST purposes.

Division 58 of the GST Act sets out the application of GST law to transactions made within the ambit of a representative's responsibilities. In most cases GST related liabilities and entitlements are allocated to the representative for any transaction within the scope of the representative's authority. Subsection 58-5(1) of the GST Act gives effect to this principle:

(1) Subject to this Division, any supply, acquisition or importation by an entity in the capacity of a representative of another entity that is an incapacitated entity is taken to be a supply, acquisition or importation by the other entity.

Subsection 58-10 sets out the general rule for GST liabilities and entitlements:

(1) A *representative of an *incapacitated entity:

a) is liable to pay any GST that the incapacitated entity would, but for this section or section 48-40, be liable to pay on a *taxable supply or a *taxable importation; and

b) is entitled to any input tax credit that the incapacitated entity would, but for this section or section 48-45, be entitled to for a *creditable acquisition or a *creditable importation; and

c) has any *adjustment that the incapacitated entity would, but for this section or section 48-50, have;

to the extent that the making of the supply, importation or acquisition to which the GST, input tax credit or adjustment relates is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs.

* denotes a term defined in the Dictionary, starting at section 195-1 of the GST Act.

There are exceptions to this general rule that are invoked where there is grouping, reverse charging and certain supplies of vouchers; these exceptions are not present in the current case. As such the Receivers are responsible for any supply of the Property under Division 58 of the GST Act.

Question 2

Summary

Division 105 of the GST Act does not apply in this case as a creditor is not making a supply of a debtor's property in satisfaction of a debt owed to it.

Detailed reasoning

It is the Commissioner's view that where Division 105 of the GST Act is applicable, it operates to the exclusion of Division 58 of the GST Act. Division 105 of the GST Act is a very specific provision. It ensures that a creditor's supply of a debtor's property to a third entity in satisfaction of the debtor's debt to creditor is:

· treated as if the supply was made by the debtor; and

· accounted for by the creditor.

The Receivers have been appointed as agents for the Company rather than the Bank. In these circumstances, supplies of the Property cannot be made in accordance with the requirements of Division 105 of the GST Act.

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