Edited version of private ruling

Authorisation Number: 1011760654176

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Ruling

Subject: GST registration

Question

Is the liquidator for a company (in liquidation) required to register for goods and services tax (GST)?

Answer: No.

Relevant facts:

You act in the capacity as a liquidator for a company (in liquidation).

When you were appointed as a liquidator for the company (in liquidation) earlier, you registered for GST as the liquidator for company (in liquidation) because it was registered for GST.

You wound up the company's (in liquidation) business and cancelled the company's (in liquidation) and your GST registration as the liquidator for the company (in liquidation).

You advised the Australian Security and Investment Commission (ASIC) to deregister the company (in liquidation) because the company had been wound up.

The company was deregistered by ASIC and it was not carrying on an enterprise.

Your role as the liquidator for the company (in liquidation) was also cancelled.

The company remained unregistered (by ASIC) for some time.

Recently you were advised that the company was entitled to receive cash dividends from another entity.

You subsequently applied to the court which then issued a court order instructing ASIC to reinstate the company's registration, backdating to the time of the deregistration (with ASIC).

The court order also gave instruction that you be restored to the office of the liquidator for the company (in liquidation) backdating to the time of deregistration. The court order instruction stated that all things done by you in the capacity as the liquidator for the company (in liquidation) after deregistration and before the reinstatement of the registration of the company, be valid and effective as they would have been had the deregistration never occurred.

You advised that you would not expect the company (in liquidation) to carry on any business activities other than receiving the dividends.

The dividends would be paid in cash and deposited into a bank account set up by the company and controlled by you. You would determine the company's (in liquidation) creditors' entitlement to the share in the company's (in liquidation) net assets and distribute the funds accordingly.

Reasons for decision

Section 58-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) outlines the relationship between the incapacitated entity and their representative for GST purposes and is applicable to your relationship in your capacity as the liquidator and the company (in liquidation).

Subsection 58-5(1) of the GST Act states:

Subject to this Division [58 of the GST Act], 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

* is a defined term in the GST Act.

Under section 58-20 of the GST Act; a representative of an incapacitated entity is required to be registered in that capacity if the incapacitated entity is registered or required to be registered. This section has effect despite section 23-5 of the GST Act which is about who is required to be registered for GST.

When you were appointed as a liquidator earlier, you registered for GST as the representative of the company (in liquidation) because the company (in liquidation) was registered for GST. However after you have wound up the company's (in liquidation) business activities, you cancelled the company's (in liquidation) GST registration and your GST registration in the capacity as the liquidator for the company (in liquidation). The company (in liquidation) was subsequently deregistered by ASIC.

After deregistration (by ASIC), you received advice that the company was entitled to receive dividends from another entity. You subsequently applied to the court which then issued a court order instructing ASIC to reinstate the company's registration, backdating to the time of the deregistration (with ASIC).

The court order also gave instruction that you be restored to the office of the liquidator for the company (in liquidation) backdating to the time of deregistration. The court order instruction stated that all things done by you in the capacity as the liquidator for the company (in liquidation) after deregistration and before the reinstatement of the registration of the company, be valid and effective as they would have been had the deregistration never occurred.

GST registration

As indicated above, section 58-20 of the GST Act requires a representative of an incapacitated entity to register for GST capacity if the incapacitated entity is registered or required to be registered for GST. In this case, after liquidating the company's (in liquidation) assets, you wound the company's (liquidation) business, cancelled its GST registration (and your GST registration) and deregistered the company (in ASIC). Therefore, the issue to consider is whether the company (in liquidation) is required to register for GST after the reinstatement of the company's registration with ASIC

Section 23-5 of the GST Act provides that an entity is required to register for GST where:

· it is carrying on an enterprise, and

· its GST turnover meets the registration turnover threshold.

Therefore the first issue to consider is whether the company (in liquidation) after the reinstatement of registration by ASIC is carrying on an enterprise. The Australian Taxation Office's (ATO) view on the meaning of an entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number is provided in Miscellaneous Taxation Ruling MT 2006/1. Paragraphs 140 to 148 of MT 2006/1 provide information on the termination of an enterprise. Paragraphs 140 and 141 of MT 2006/1 state:

140. Carrying on an enterprise includes doing anything in the course of the termination of the enterprise. An enterprise terminates when the activities related to that enterprise cease. Ordinarily, that occurs when all assets are disposed of or converted to another purpose or use and all obligations are satisfied. Disposal of assets may include the sale, scrapping, or other disposal of the assets.

141. In the course of terminating an enterprise, a number of obligations may need to be finalised. These include finalising accounts, paying creditors, repaying loans, cancelling licences and business registrations.

Based on the information provided, we consider that the company (in liquidation) is carrying on an enterprise. The court has ordered the reinstatement of the company's (in liquidation) registration with ASIC, backdated to the time as if the deregistration has never occurred. The intention of the court order is to reinstate the company's (liquidation) registration with ASIC so that the liquidator could continue to wind up the company's enterprise.

Although you do not expect the company (in liquidation) to be carrying on any business activities, the company (in liquidation) would be receiving cash dividends from another entity and you, as the liquidator for the company (in liquidation) would be required to distribute the funds to the company's (in liquidation) creditors. Therefore, the company (in liquidation) is carrying on an enterprise for the purpose of section 23-5 of the GST Act when it carries out activities to finalise its obligation to the creditors.

GST turnover

The term GST turnover is defined in section 195-1 of the GST Act and it refers to subsection 188-10(1) of the GST Act in the context of the GST turnover meeting a turnover threshold.

In this case the relevant turnover threshold is the GST registration turnover threshold. Regulation 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 provides that registration turnover threshold for an entity (other than a non-profit body) is $75,000.

Section 188-10(1) of the GST Act provides that an entity's GST turnover meets the GST registration turnover threshold if:

· its current GST turnover is at or above the registration turnover threshold and the Commissioner is not satisfied that its projected annual turnover is below the turnover threshold, or

· its projected annual turnover is at or above the registration turnover threshold.

The meanings of current GST turnover and projected GST turnover are explained in Goods and Service Tax Ruling GSTR 2001/7. Paragraphs 11 to 12 and 14 of GSTR 2001/7 state:

11. Section 188-15 defines 'current GST turnover'. Subject to the exclusions listed in paragraph 14, 'current GST turnover' at any time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during the current month and the preceding 11 months.

12. Section 188-20 defines 'projected GST turnover'. Subject to the exclusions listed in paragraph 14, 'projected GST turnover' at a time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during that month and the next 11 months.

14. The following supplies are excluded from the calculation of current GST turnover and projected GST turnover:

· supplies that are input taxed;

· supplies that are not for consideration (and are not taxable supplies under section 72-5);

· supplies not made in connection with an enterprise that you carry on;

· supplies that are not connected with Australia;

· supplies that are connected with Australia because of paragraph 9-25(5)(c);

· supplies (other than those mentioned in the immediately preceding two dot points) of a right or option to use commercial accommodation in Australia where the supplies are not made in Australia and are made through an enterprise that the supplier does not carry on in Australia; and

· supplies made from one member of a GST group to another member of that GST group.

You have advised that you do not expect the company (in liquidation) to carry on any business activities other than receiving the cash dividends for distribution to the creditors. You have also confirmed that the dividends would be paid in cash and deposited into a bank account set up by the company (controlled by you). You would be distributing the cash dividends to the company's (in liquidation) creditors.

Based on the information provided we consider that the company's (in liquidation) current and projected GST turnover are less than the GST registration turnover threshold and therefore its GST turnover would not meet the GST registration turnover threshold. The company (in liquidation) is not expected to make any supplies which could contribute to its GST turnover. (Please note: subsection 9-10(4) of the GST Act provides the definition of "supply" for GST purposes does not include a supply of money.)

Therefore, as the company's (in liquidation) GST turnover does not exceed the GST registration threshold, the company (in liquidation) is not required to register for GST under section 23-5 of the GST Act. It then follows that where the company (in liquidation) is not registered for GST and is also not required to register for GST, you as a liquidator for the company (in liquidation) are therefore not required to register GST under section 58-20 of the GST Act.

Please note:

The company (in liquidation) may choose to register for GST under section 23-10 of the GST Act, to claim GST credits (if any) in relation to expenses that may incur during the termination of its enterprise. If the company (in liquidation) chooses to register for GST, you must, in your capacity as the liquidator for the company (in liquidation) register for GST under section 58-20 of the GST Act.