| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012788706043
Ruling
Subject: GST and notice to transfer assets, rights and liabilities
Question
Is the transfer of assets and liabilities from Entity A to Entity B made pursuant to the Notice of Transfer, a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?
Answer
No
Relevant facts and circumstances
The relevant industry is being restructured which involves major policy changes.
To facilitate the restructure of the industry, legislation has been enacted which allows assets, rights and liabilities to be transferred between State-owned entities.
Entity A is a State-owned entity that is registered for GST.
Entity B is a State-owned entity that is registered for GST.
Pursuant to legislation and under the Minister's Direction a notice of transfer (Transfer Notice) is made to transfer certain assets and liabilities from Entity A to Entity B.
This private ruling concerns the assets and liabilities that are transferred by Entity A to Entity B pursuant to the Transfer Notice.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 9-5
A New Tax System (Goods and Services Tax) Act 1999 9-10
Reasons for decision
Section 9-5 of the GST Act sets out the requirements for a taxable supply and paragraph 9-5(a) of the GST Act provides the first requirements being that 'you make the supply for consideration'.
The term supply is defined in section 9-10 of the GST Act and subsection 9-10(1) states that 'a supply is any form of supply whatsoever'.
In this case what needs to be determined is whether the transfer of the assets and liabilities by Entity A to Entity B pursuant to the relevant Transfer Notice is a supply for the purposes of section 9-10 of the GST Act.
It has been submitted that the transfer of the assets and liabilities which occur pursuant to the Transfer Notice are not taxable supplies for the purposes of the GST Act. In support of your submission you refer to the ATO publication 'GST and machinery of government (MOG) changes', which considers when functions from one government organisation (the losing agency) are transferred to another government organisation (the gaining agency). Relevantly this publication states that:
Where the losing agency has not taken any action to cause the assets and liabilities to be transferred to the gaining agency, there are no GST consequences if those assets or liabilities are transferred as a result of MOG changes.
On this basis you consider that there are no GST consequences in respect of the relevant transfer by Entity A to Entity B.
We agree with this submission.
Proposition 5 in Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) explains that to 'make a supply' an entity must do something. Further at paragraph 72 of GSTR 2006/9 it notes the comments made by Underwood J in Shaw v. Director of Housing and State of Tasmania (No. 2) and states:
… His Honour was of the view that GST only applies where the 'supplier' makes a voluntary supply and not where a supply occurs without any action by the entity that would be the 'supplier' had there been a supply…
Consistent with the above, we consider the use of the word 'make' in the phrase 'you make the supply' in paragraph 9-5(a) requires the supplier to take some actions to cause a supply to be made by it to a recipient. This means that Entity A (as the transferor entity) must undertake some action or do something in making a supply to Entity B (as the transferee).
Pursuant to the relevant Transfer Notice, notice was given of the transfer of assets and liabilities of Entity A to Entity B. Accordingly, subject to the terms of the relevant transfer notice the assets vested in Entity B without any action being taken by Entity A.
On this basis we accept that the transfer of assets and liabilities pursuant to the Transfer Notice is not a taxable supply under section 9-5 of the GST Act.