Edited version of your written advice

Authorisation Number: 1051303229691

Date of advice: 6 November 2017

Ruling

Subject: GST and the obligations of a representative.

Question

Are you, the Receivers and Managers liable for GST on any supplies in relation to your appointment over the assets of the Trust which were previously held by a partnership (the Partnership), pursuant to Division 58 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes

Relevant facts and circumstances

On 1 July 2000, Entity A and B registered for GST as a partnership (the Partnership). They operated in a relevant industry and acquired a number of assets in the process of that enterprise. The partnership used two trading names.

Some or all of the assets of the Partnership were secured with a Bank (Mortgagee).

The Partnership entered into two business mortgages with the Mortgagee set out in two separate mortgages in the names of the two trading names. Clause X of the Business Mortgage provided details that the security over the Partnerships Assets.

Schedules listed the secured assets.

On ddmmyyyy a Family Court order provided that the secured assets (were to be assigned to an entity solely controlled or owned by Entity A.

Titles to the assets were transferred to a Trust controlled by entity A.

The Mortgagee did not release the transferred assets from the securities they held when they were transferred to the Trust nor enter into any new finance agreements with the Trust in relation to any of the transferred assets over and above the securities already in place.

On ddmmyyyy you were appointed as Receivers and Managers to the assets of the Partnership (the assets having been transferred to the Trust.

The property, rights and powers and security the Receivers were appointed over are set out in the schedules of their Deed of appointment.

The Background of the appointment sets out that:

● The Mortgagee holds the security interests over various assets set out in the Schedules to the appointment.

● The Mortgagor is in default and the security has become enforceable and

● The Mortgagee is entitled to appoint a Receiver Manager to the property of the Mortgagor, the subject of the security.

The operative provisions of the appointment provide that:

● The Mortgagee appoints the Receivers, jointly and severally as Receiver Managers of the undertaking, property and assets of the mortgagor specified in the Schedules and to exercise the rights and powers set out in the Schedules.

Schedule 1 provides relevantly that the receivers were appointed over the following property.

● All of the assets of the undertakings and assets of the partnership and

● Any right, undertaking or property the subject of the security.

As Receivers and Managers, appointed over the assets you:

● employed staff to prepare the assets now held by the Trust for sale (the transferred assets)

● Engaged an auctioneer to sell the transferred assets of the Trust and

● Set aside from the sale proceeds an amount equivalent to the GST liability on the sale of the transferred assets in trust.

The Auctioneer’s website for the sale stated that the sale was under instructions from Receivers & Managers.

You will register for GST where you are found to be a representative of the Trust.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5,

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

Corporations Act 2001 Section 9.

Reasons for decision

Division 58 sets out how to ascribe activities of a representative of an incapacitated entity between the representative and the incapacitated entity for GST purposes. Section 195-1 provides that a representative relevantly includes a receiver and the Corporations Act includes in the definition of receiver, a receiver manager.

You, are Receivers and Managers of specified assets. Therefore you meet the definition of representative.

An incapacitated entity is defined to mean an entity that has a representative

You were appointed as a representative over the assets previously held by a partnership entity and then held by the Trust. Therefore at the time of your appointment over the assets held by the Trust it became an incapacitated entity.

Section 58-20 provides that a representative of an incapacitated entity is required to be registered in that capacity if the incapacitated entity is registered or required to be registered for GST. The Trust was registered for GST (and was required to be registered) at the time of your appointment and at the time you took possession and control of the assets. Therefore, you are required to be registered for GST.

Section 58-10 provides that a representative of an incapacitated entity is liable to pay any GST that the incapacitated entity would, but for this section or section 48-40, be liable to pay on a taxable supply to the extent that the making of the supply or acquisition to which the GST or input tax credit is within the scope of the representatives responsibility or authority for managing the incapacitated entities affairs.

Prior to your appointment, all of the assets of the Partnership had been transferred to the Trust in compliance with the Family Court Order.

The supplies of the auctioned transferred assets meet the definition of a taxable supply. Therefore you are liable to pay the GST on the supplies of the transferred assets as the Trust would have been liable for the GST but for section 58-10.

Therefore, pursuant to 58-10 you are liable for the GST on those supplies.

The ATO accepts that, to satisfy your reporting obligations, you may register an additional Client Account Centre (CAC) account on the ABN of the Trust.

Where you have reported any of these supplies or associated acquisitions under a CAC on the Partnership you will be required to correct that position and report these obligations under the new CAC account of the Trust.

Where, as representative of the Trust, you incurred costs and but for the operation of Division 58, those costs would be creditable acquisitions of the trust, you are entitled to claim those GST credits in this additional CAC.