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Ruling
Subject: GST and supplies of property
Question 1
Is the sale of property by you a taxable supply under Division 105 or Division 9 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
The sale of property by you is a taxable supply under Division 9 of the GST Act except for supplies that are input taxed or GST free.
Relevant facts and circumstances
You are registered for GST.
Your sale of the property is for consideration, is made in the course of an enterprise that you carry on and is connected with Australia.
You are not acting as a representative of an incapacitated entity for the purposes of Division 58 of the GST Act.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 105-5.
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 9-30
A New Tax System (Goods and Services Tax) Act 1999 Section 58-1
Reasons for decision
Subsection 105-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply made by a creditor in satisfaction of a debt is a taxable supply if:
· An entity supplies the property of the debtor to a third party in satisfaction of a debt that the debtor owes to the entity; and
· The supply to the third party would be a taxable supply if the debtor had made the supply.
We consider that Division 105 does not apply because you are not selling the property to satisfy a debt that is owed to you as creditor. Your tax agent contends that Division 105 of the GST Act applies because you make the supply of the property on behalf of the creditor by virtue of an agency relationship that exists between you and the creditor.
Our view is supported by Goods and Services Tax Ruling GSTR 2000/37: Goods and Services Tax: agency relationships and the application of the law.
Paragraphs 10 and 11 of GSTR 2000/37 discuss the primary characteristics of the agency relationship.
10. An intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent. The party who authorises the agent to act on their behalf is called the principal. For an insurance policy, the intermediary is often called an insurance broker. The party who authorises an insurance broker to act on their behalf is called the insured (the recipient of the supply). Also, if appropriately authorised, an insurance broker could act as an agent on behalf of the insurer.
11. For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.
Division 105 of the GST Act does not apply because you are not acting as an agent for the creditor. In addition, Division 58 of the GST Act does not apply because you are not acting as a representative of an incapacitated entity.
We will consider whether Division 9 of the GST Act applies in relation to the sale of the property.
Under section 9-5 of the GST Act, an entity makes a taxable supply if:
· it makes a supply for consideration
· the supply is made in the course or furtherance of an enterprise that it carries on
· the supply is connected with Australia, and
· the entity is registered or required to be registered for GST.
However the supply is not a taxable supply to the extent that it is GST free or input taxed.
For an entity to make a taxable supply, it must make a supply. The term 'supply' is broadly defined for GST purposes and is defined in subsection 9-10(1) of the GST Act to include 'any form of supply whatsoever'.
Paragraph 41 of Goods and Services Tax Ruling GSTR 2008/3 discusses legal title in considering the application of GST to bare trust arrangements. Although you are not in a bare trust arrangement GSTR 2008/3 confirms that there is no requirement in section 9-5 of the GST Act for the supplier of the property to have legal title in the property.
On the basis that you are making the supply and all other requirements under section 9-5 of the GST Act are met, the supply will be a taxable supply. In this case, the supply of the property by you is for consideration, is made in the course or furtherance of the enterprise you carry on, is connected with Australia and you are registered for GST. The supply will be a taxable supply unless the supplies are input taxed or GST free under the GST Act.