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Edited version of your written advice

Authorisation Number: 1013009362131

Date of advice: 17 May 2016

Ruling

Subject: GST and sale by mortgagee

Question

Was the sale of the vacant land by the mortgagee in possession a taxable supply under section 105-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Relevant facts and circumstances

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 105-5.

Reasons for decision

Division 105 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with supplies made by creditors of property belonging to a debtor where the supply is made in satisfaction of a debt owed to the creditor. Section 105-5 of the GST Act provides that a supply made by a creditor in satisfaction of a debt is a taxable supply if:

However, pursuant to subsection 105-5(3) of the GST Act, the supply of a debtor's property by a mortgagee in possession is not a taxable supply if:

In this case, Entity A has defaulted on the loan repayments. The property of the debtor is sold to a third party purchaser by Entity B as mortgagee in possession in satisfaction of a debt owed by the debtor to the creditor.

Subsection 105-5(3) of the GST Act is not satisfied as the Entity B has not been able to obtain either of the following:

Therefore, as the supply of vacant land is neither GST-free nor input taxed, the supply of the land by the creditor is a taxable supply under section 105-5 of the GST Act. The creditor is liable for the GST payable on the supply of the debtor's property.


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