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Edited version of private advice
Authorisation Number: 1052130173654
Date of advice: 16 June 2023
Ruling
Subject:GST and taxable supplies
Question
Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for which the cash distribution, received from a liquidating entity, is the consideration?
Answer
No, you are not making a taxable supply under section 9-5 of the GST Act.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You received a cash payment as distribution from a liquidating entity.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-5
A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-10
A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-15
Reasons for decision
Section 9-40 of the GST Act provides that you are required to remit GST on any taxable supplies that you make.
Section 9-5 provides that you make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with the indirect tax zone; 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.
The term 'supply' is defined under subsection 9-10(1) of the GST Act in very wide terms as being any form of supply whatsoever. Without limiting subsection 9-10(1) of the GST Act, subsection (2) provides that a supply includes, among other things, an entry into, or release from, an obligation to do anything.
Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) examines the meaning of 'supply' in the GST Act, including 10 propositions that are considered relevant in analysing a transaction in relation to a supply.
However, these propositions are not universal as they may have exceptions or be qualified either by the operation of particular provisions of the GST Act, or by the facts and circumstances of a transaction. Transactions may also require consideration of the total fact situation.
Proposition 9 from paragraphs 102 to 103 of GSTR 2006/9 considers that where an agreement does not bind the parties in some way it will not be sufficient to establish a supply by one party to another. However, paragraph 108 of GSTR 2006/9 provides that there may still be a supply where there is no enforceable obligation provided there is something passing from the supplier to the recipient.
There is a mere expectation for you to use the cash distribution to continue to operate in your ordinary functions.
An expectation alone of how the funds would be utilised, without binding obligations or something being provided between you and the liquidating entity, is insufficient to indicate a supply has been made. As such, subsection 9-5(a) of the GST Act has not been met. GST is not payable on the cash distribution received from the liquidating entity.