Edited version of private ruling

Authorisation Number: 1011771703884

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Ruling

Subject: Goods and services tax (GST) payable on the supply of the property comprising a residential premise and an unused commercial premise

Question

Is Goods and services tax (GST) payable on the supply of the real property comprising the Residential premise and the Commercial premise?

Answer

You will be liable for GST on the portion of the supply that relates to the supply of the commercial premise. You may use any reasonable method to apportion the consideration between the Residential premise and the Commercial premise.

Relevant facts and circumstances

You were appointed a trustee in bankruptcy. Prior to your appointment the relevant state authority was trustee in bankruptcy.

The bankrupt acquired real property that was purchased as a going concern. The property has two buildings located on the lot. One of the buildings is a residential premise (the Residential premise) which was occupied by the bankrupt. The second building is an abandoned commercial premise (the Commercial premise). The Commercial premise had ceased operation prior to you becoming trustee. A caveat was lodged by the Official Trustee in Bankruptcy.

The bankrupt operated a Commercial premise and their businesses on the property. It was advised by the relevant government authority that they had ceased operations.

Australian business records indicate that the bankrupt stopped reporting their supplies some time ago and their registration was cancelled during 2011 for one of their ATO accounts, however one of their other ATO account is still active for their other business.

The property was sold by public auction.

Reasons for decision

Summary

When you supplied the property you were acting as trustee in bankruptcy and were required to be registered for GST in that capacity. The supply you made was a mixed supply of a residential premise which was not taxable and commercial premise which was taxable. You are required therefore to remit GST on the portion of the property that related to the sale of the commercial premise.

Detailed reasoning

Section 58-10 of the GST Act provides that a representative of an incapacitated entity is liable to pay any GST that the incapacitated entity would be liable to pay on a taxable supply to the extent that the making of the supply to which the GST relates is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs.

A representative is defined in the GST dictionary to include a trustee in bankruptcy and it further defines an 'incapacitated entity' to include an individual who is a bankrupt.

Under section 58-20 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a representative of an incapacitated entity is required to be registered for GST in that capacity if the incapacitated entity is registered or required to be registered.

In your case, the bankrupt was registered for GST and hence, you are required to be registered for GST.

The ATO website, dealing with Representatives of Incapacitated Entities, provides at Question 2-3 that:

For representatives that are trustees in bankruptcy

For trustee appointments under the Bankruptcy Act (this term includes trustees of bankrupt estates and controlling trustees under Part X), the trustee will need to apply for a separate ABN and register for GST, in the normal manner, in respect of each appointment as trustee under the Bankruptcy Act. This new ABN will be used for all matters arising under the administration.

Section 58-5 of the GST Act, provides that any supply by a representative of an incapacitated entity is considered for GST purposes to be a supply by the incapacitated entity.

Section 9-5 of the GST Act provides that an entity makes a taxable supply if:

· it makes the supply for consideration

· the supply is made in the course or furtherance of an enterprise that the entity carries on

· the supply is connected with Australia, and

· the entity is registered, or required to be registered for GST.

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

In your case you have made a single supply of a both a residential premise and commercial premise.

Do you have to remit GST on the sale of the Commercial premise?

In regards to the commercial premise there are no legislative provisions in the GST Act or any other Act that would make the supply of commercial premise GST-free or input taxed. Therefore as:

· The supply is within your scope of responsibility

· You are required to be registered for GST by section 58-20 of the GST Act

· you received consideration for the supply.

· The supply of the property was in the course or furtherance of the enterprise as it was in the termination of the enterprise, and

· It was connected with Australia

You are liable for GST on the portion of the property that relates to the commercial premise.

Do you have to remit GST on the sale of the residential premise?

In this case, the sale of residential premises is input taxed under section 40-65 of the GST Act provided the residential premises are not commercial or new residential premises.

In your case the residential premise does not meet the requirements to be commercial residential premises nor does it meet the requirements to be new residential premises.

Therefore the supply by you of the portion of the property that relates to the residential premise is input taxed and you do not have a GST liability in relation to that portion of the supply.

In your case you will be making a mixed supply of the Residential premise and the commercial premise therefore you will be required to apportion the consideration between the two by any reasonable method.