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Ruling

Subject: GST and the supply of real property by a representative.

Question

Are you, in your capacity as Liquidator for the Entity (in Liquidation), liable to report and remit the GST payable on the supply of the property located in Australia?

Answer

Yes, you are liable to report and remit the GST payable on the supply of the property located in Australia.

Relevant facts and circumstances

In 200X, a trustee company (entity) acquired property, and commenced construction of a commercial building.

The entity, borrowed money from a Bank to purchase the property. The Bank mortgaged the property by a fixed and floating charge with a registered charge number over all the assets and undertaking of the Mortgagor in favour of the Bank.

In March 200Y, the property was taken to auction and contracts were exchanged with a related party, for the sale of the property.

Your agent supplied a copy of the sale contract, which listed the vendor as the entity.

Australian Securities & Investment Commission (ASIC) records show that in July 200Y, you were appointed as Administrator. The appointment over the entity ceased shortly after that day.

ASIC records also show that on the day the Administrator ceased in their role over the entity they were appointed Liquidator (Creditors Voluntary Winding Up) of the entity.

In August 200Y, the Bank instructed their lawyers to appoint Receivers and Managers to the trustee company with respect to the property for which they had a security interest.

Later that month the Receivers and Managers were appointed by the Bank in relation to the property.

The deed of appointment of the Receivers and Managers set out that:

The mortgagor has committed monetary and non-monetary defaults.

The Bank wishes to enforce the Charge and appoint the Receivers and Managers of the Charged property.

The Receivers and Managers, advised you that:

· .they were appointed Receivers and Managers of the Company on ddmmyyyy pursuant to the provisions contained in a registered debenture charge created by the Company in favour of the Bank.

· As a consequence of the appointment we will take full responsibility for the management and operations of the company and control of all assets.

Following the appointment of the Recievers and Managers, it was ultimately resolved that the original sale of the property to the related party was the most viable method of extinguishing the debt.

The contract for the sale of the property was settled on a specified date. The settlement statement recorded that the sale was between the trustee and the related party.

You advised that the Receivers and Managers ceased their role as representatives prior to settlement.

The final ASIC statement lodged by the Bank appointed Receivers and Managers showed that they were in control from August 200Y to the settlement date. The statement also showed:

That when they were appointed the amount outstanding on the charge n was $X.XX and at the end of their appointment the amount outstanding was $X.XX plus interest.

The settlement statement you supplied showed that a portion of the sale proceeds from the sale of the property was paid to the Bank.

You lodged documents with ASIC showing that you received $X.XX from the related party for the sale of the property and that you paid out the same amount to the Bank.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 58.

Reasons for decision

The GST payable on taxable supplies made by a representative during their term of appointment is dealt with under Division 58 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

A representative is defined in the GST Act to include a liquidator or a receiver.

Section 58-5 of the GST Act provides that, while you are the representative and making supplies, those supplies are taken to be supplies made by the incapacitated entity (IE).

An incapacitated entity is defined in the GST Act to include an entity over which a representative is appointed.

Section 58-10 of the GST Act provides amongst other things that a representative of an IE is liable to pay any GST that the IE would, but for section 58-10 or section 48-40, be liable to pay on the taxable supply, to the extent that the making of the supply is within the scope or authority of the representative for managing the IE's affairs.

The effect of Division 58 of the GST Act is that a representative of an IE, is liable for GST in respect of taxable supplies which are taken to have been made by the IE during the course of their appointment, as representative of the IE. Therefore we need to look at whether you were a representative of the trustee Company when the sale of the property settled.

Your agent contended that:

· the Bank is responsible for the GST payable on the sale of the property under Division 105 of the GST ACT as the Bank was the controller and therefore the representative.

· when the Bank enforced the charge over the property and appointed the Receivers and Managers, they met the definition of controller pursuant to section 9 of the Corporations Act (2001).

· as the Bank became a mortgagee in possession, Division 105 of the GST Act applies to this transaction, rather than Division 58 of the GST ACT.

Section 9 of the Corporations Act (2001) provides that:

"controller" , in relation to 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 a meaning affected by paragraph 434F(b) (which deals with 2 or more persons appointed as controllers).

We agree that when the Receivers and Managers were appointed by the Bank they became a controller/representative. However, for a representative to be liable for the GST payable on a transaction, they must be in control of the transaction at the time it occurred.

In this case

· the entity entered into a standard land contract for the sale of the property.

· you were appointed Liquidator of the entity and took control of the activities of the entity.

Before you made a decision on the sale of the Property, Receivers and Managers were appointed to the company by the bank in respect of the property. In a letter the Receivers and Managers advised you that:

as a consequence of the appointment we will take full responsibility for the management and operations of the company and control of all assets

Following the appointment of the Receivers and Managers, it was ultimately resolved that the original sale of the property to the related party was the most viable way forward.

The Receivers and Managers Receivers and Managers ceased their role as Receivers and Managers prior to settlement, with control therefore reverting back to you.

ASIC records for the Receivers and Managers show that:

The Receivers and Managers' appointment ceased on the settlement date.

The charge on the property was still outstanding on the date of their cessation.

ASIC records show that you received the funds from the sale of the property and paid out various amounts including amounts to the Bank from the sale of the property.

Therefore the supply and settlement of the sale of this property occurred during your period of appointment and responsibility.

Accordingly you are liable for the GST on the supply of the Property, in your capacity as Liquidator of the trustee Company.