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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012468992725

Ruling

Subject: Entitlement to input tax credits of receivers - managers of an incapacitated entity

Question

Are you, Receivers and Managers of Entity X, entitled to input tax credits on the acquisition of development services by Entity X from Entity Y, prior to your appointment as the receivers and managers of Entity X?

Decision

No, you are not entitled to input tax credits on the acquisition of development services by Entity X from Entity Y, prior to your appointment as the receivers and managers of Entity X. Entity X is entitled to input tax credits on those acquisitions.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Performance of the DA

For the purposes of this private ruling request, the duties of Entity Y are grouped under the following three broad categories;

The acquisition of project management and construction services was wholly completed prior to your appointment as the receivers and managers of Entity X.

Marketing and selling services

Payments made to Entity Y for services supplied under the DA

All acquisitions relating to this private ruling were made by Entity X from Entity Y prior to your appointment.

Relevant legislative provisions

A New tax System (Goods and Services Tax) Act 1999 (GST Act) - section 9-5

A New tax System (Goods and Services Tax) Act 1999 (GST Act) - section 9-40

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

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

Reasons for the decision

Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make.

Section 11-5 of the GST Act states:

* Denotes a term defined in section 195-1 of the GST Act.

Subsection 58-10(1) of the GST Act refers to circumstances in which representatives have GST-related liabilities and entitlements and states:

Section 195-1 of the GST Act states:

representative means:

Therefore, for the purposes of the GST Act, Entity X is an 'incapacitated entity' and you, the receivers and managers of Entity X, are a 'representative' of Entity X.

Payments made by you for services supplied by JD2 prior to your appointment

As mentioned above, Entity X acquired development services from Entity Y prior to your appointment. For some of the residential units constructed by Entity Y prior to your appointment and settled after your appointment, as receivers and managers of Entity X, you have received DF invoices from the receivers and managers of Entity Y and paid the consideration to them. It is necessary to ascertain whether you became entitled to input tax credits on the consideration made to the receivers and managers of Entity Y, for the development services acquired by Entity X prior to your appointment.

ATO ID 2012/7

ATO Interpretative Decision 2012/7 (ATOID 2012/7) refers to the GST liability for a supply made by an incapacitated entity prior to the appointment of a representative.

As per the facts given in ATOID 2012/7, the incapacitated entity made the taxable supply prior to the appointment of the representative. As the supply was made by the incapacitated entity prior to the appointment of the representative, the making of the supply clearly did not fall within the representative's responsibility or authority for managing the affairs of the incapacitated entity, at the time the supply was made.

The mere subsequent receipt of the consideration by the representative does not have the effect of bringing the 'making' of the supply within the scope of the representative's responsibility or authority for managing the affairs of the incapacitated entity.

Conclusion

In this case, Entity X acquired all the development services under the DA from Entity Y prior to your appointment as receivers and managers of Entity X. Using the same logic as quoted in ATOID 2012/7, we consider that making of these acquisitions by Entity X did not fall within your scope of responsibility or authority for managing the affairs of Entity X.

The mere subsequent payment by you of the consideration for development services acquired prior to your appointment as representative does not have the effect of bringing those acquisitions within the scope of your responsibility or authority for managing the affairs of Entity X.

Accordingly, under subsection 58-10(1) of the GST Act, you are not entitled for input tax credits on the creditable acquisitions made by Entity X from Entity Y, despite the fact that you paid the consideration for the creditable acquisitions after your appointment.

Instead, under section 11-20 of the GST Act, Entity X may be entitled to the input tax credits.


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