Edited version of private advice

Authorisation Number: 1051855938785

Date of advice: 23 June 2021

Ruling

Subject: GST and court orders

Question 1

Does the vesting of the Taxpayer's interests in the properties in the Trustees pursuant to Court Orders in the Court Proceedings constitute taxable supplies made by the Taxpayer which are subject to GST?

Answer

No.

Question 2

Do the transactions entered into by the Taxpayer pursuant to the Settlement Deed and Release constitute taxable supplies made by the Taxpayer which are subject to GST?

In particular:

•                    is the Taxpayer liable to pay GST on the properties Proceeds?

Answer

No.

Question 3

Is the Taxpayer liable to pay GST on the properties disclaimer proceeds?

Answer

No.

Relevant facts and circumstances

The Taxpayer is the executrix of the Deceased's estate and the sole beneficiary of the Deceased's estate.

The Court made a grant of probate of the will of the Deceased to the Taxpayer.

The Taxpayer was involved in legal disputes with various members of the Deceased's immediate family regarding interests of the Deceased in property held jointly with various family members, which was transferred to the Taxpayer pursuant to the Deceased's will. The legal disputes also involved interests of the Deceased's estate in other property or entities controlled by various members of the Deceased's family.

In settlement of the various disputes, the Taxpayer, various family members and their controlled entities entered into a Deed of Settlement and Release to pay the Taxpayer a total settlement sum. The total settlement sum was apportioned pursuant to a clause of the Settlement Deed in settlement of each claim.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) section 9-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(2

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-15(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

Reasons for decision

To determine whether or not the Taxpayer makes a supply to the trustees when the Properties vest in the trustees, it is necessary to consider whether the Taxpayer undertook any action to cause the Properties to vest in the trustees.

In this case the Taxpayer's interests in the properties vested in the Trustees pursuant to Court Orders in the Court Proceedings.

As such, we consider that there was not a supply made by the Taxpayer to the Trustees when the Properties vested in the Trustees.

Consequently, as there was no supply made by the Taxpayer to the Trustees there cannot be a taxable supply.

Section 9-5 0f the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides:

You make a taxable supply if:

(a) you make the supply for consideration;

(b) the supply is made in the course or furtherance of an enterprise that you carry on;

(c) the supply is connected with the indirect tax zone (Australia); and

(d) you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

For a supply to be taxable all the requirements of section 9-5 of the GST Act must be satisfied.

The activities carried on by the Taxpayer under the agreement are not in the nature of commercial transactions. We agree that the Taxpayer's interest as a result of the Court Orders would be a beneficial interest in the net proceeds held on trust by the Trustees, being an interest held for private purposes, and are not interests held by her in the conducting of any enterprise.

Therefore, based on the facts provided, it is our view that the Taxpayer was not carrying on an enterprise in relation to the properties. As not all the elements under section 9-5 of the GST Act has been satisfied the Taxpayer's supply of interests is not taxable.

In this case the Taxpayer is receiving the properties Disclaimer Proceeds in consideration of the Taxpayer surrendering any rights or claims relating to the properties. The surrendering of the Taxpayer's right was not related to an enterprise carried on by the Taxpayer.

For a supply to be taxable all the requirement under section 9-5(a) of the GST Act need to be satisfied. As the Taxpayer's supply was not made in the course or furtherance of an enterprise then section 9-5 was not satisfied. Consequently, the Taxpayer is not liable to pay GST.