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Edited version of private advice
Authorisation Number: 1012658755383
Ruling
Subject: GST and the sale of real property by a liquidator
Question
How much GST are the liquidators of a company liable to pay under section 58-10 of the A New Tax System (Goods and Services Tax) Act 1999?
Answer
The liquidators are liable to pay the GST amount of 1/11th of the consideration they received under section 58-10 of the A New Tax System (Goods and Services Tax) Act 1999.
Relevant facts and circumstances
The company owns a commercial property which consisted of retail shops.
Shops 1, 2 and 3 of the property were leased to entity A (the Purchaser) and shops 4 and 5 were leased to a third party.
In a particular year, the company entered into a contract with the Purchaser for the sale of the property. The sale price was stated as an amount plus any GST. The Purchaser paid a deposit.
The lease to the third party ended and shops 4 and 5 were vacated.
The liquidators were appointed to the company after the contract for the sale of the property entered into but before the sale was settled.
The Purchaser paid the liquidators the purchase price less the deposit paid by the Purchasers to the company before the company went into liquidation.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Division 58.
A New Tax System (Goods and Services Tax) Act 1999 paragraph 58-10(2)(a).
Reasons for decision
Division 58 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) operates so that all supplies, acquisitions and adjustments undertaken during the course of an appointment of a representative to an incapacitated entity are deemed to be done by the incapacitated entity. Division 58 then provides that the representative of an incapacitated entity is liable to pay the GST on taxable supplies made during the course of the appointment.
The sale of the property settled in the relevant year and, for GST purposes, the Commissioner considers that the supply is made at settlement as this is when the purchaser obtains unconditional possession of a registrable instrument of transfer; or an instrument of transfer that would be registrable once stamped.
The company supplied the property and that sale was a taxable supply under section 9-5 of the GST Act because:
• the supply was for consideration (ie payment);
• the supply was made in the course or furtherance of an enterprise
• the supply was connected with Australia; and
• the company was registered, or required to be registered for GST.
Generally the amount of GST payable on a taxable supply is 1/11th of the price (ie the deposit plus the amount paid at settlement).
However, paragraph 58-10(2)(a) of the GST Act specifically states that the representative is not liable to pay the GST to the extent that 'the incapacitated entity received the consideration for the supply before the representative became a representative of the incapacitated entity'. Therefore, the liquidators are not liable to pay the GST on the supply to the extent that the consideration was paid to the company prior their appointment. That is, the liquidators are not liable to pay the GST in relation to the deposit.
Consequently, the liquidators are liable to pay the GST amount of 1/11th of the consideration they received. The company remains liable to pay the GST amount which relates to the deposit paid.